In December I pointed out Silver was the Best Investment of 2011. At the time Silver was around $28. In January it dropped a bit... into the $26s and then began to launch. So, if you bought in the $26-28 range is it time to run? Is Silver a bubble about to pop?
Check out these charts... the Dow vs. Silver
If you look at the chart to the right. Silver hit a 27 year support in 2007... and yet the biggest gains have been since.
And if you look at this chart you'll see after 2007 the ratio continued to drop.
These charts would suggest it might be time to start diversifying. And if you do believe in these charts I'd say you may want to take some off the table and stick it into something else that has tangible value (non-dollar denominated). But I'm not convinced because I believe in another chart much more.
The chart on the right shows the value of gold vs. the Dow since 1900.
It is generally accepted that fiat currencies always fail. In all of history they have and it's pretty clear nothing has changed. The USA adopted a fiat currency by Presidential decree in 1971. Who would have thought we would have let Richard Nixon make such an important decision and not question it...
Since 1913 we've had the Federal Reserve slowly devaluing the dollar, we've lost about 96% of it's value since. But it really got rolling in 1971. If you look at wages in anything other than paper... people's wages have dropped dramatically. Take gold,
For me, this one is very simple! Physical Silver! And to a lesser extent, Gold.
With the governments around the world teetering on collapse and in the US, numerous municipalities, states and even the federal government running head long into bankruptcy... this can only boost the run towards something safe. 2011 may be the year we see the end of the EU and the Euro. And with all the secret deals cut behind the scenes between the Fed and the European central bankers, it won't be long after that the US Dollar will also be in dire straights, even with the Chinese kicking in a trillion or two (I tend to believe that's more theatre than reality).
My gut feeling is by the end of 2011 or maybe the early part of 2012, one ounce of Gold will equal the Dow Industrials. Which means gold is either going to go way up or the stock market is going to sell off this Fed induced bubble. Although their doing everything they can to sell the idea the economy is growing and the Christmas season is booming... the January hangover is either going to reveal the forecasts were way too optimistic or the consumer just blew their last wad... in either case by March it will be obvious how bad the situation is. One must also weigh in new regulations (like the idiots at the FCC), the pending Obamacare debacle and the rising Bond interests rates, these all point to further erosion of confidence and hindrances to business growing. In addition, the budget cuts to state and local public services will only increase the drag on the economy... which means either more federal stimulus or QE3. More money printing!
The following graph shows how borrowing has lost its value to the economy... more borrowing is actually reducing output yet the government continues to borrow more!
In 2006 I was a regular part-time daytrader. I had a day job so I didn't make allot of trades but I did use a six figure margin account I had established with one of the well known brokerages. When 2007 rolled around, I got cold feet and got out. I likened my feeling to looking out over a bay... feeling a strong breeze from the West and seeing the sailboats with their sails unfurled ... sailing WEST! (the wrong direction) Something was wrong and I couldn't quite put my finger on it... but luckily for me... I knew enough.
At the time, I wasn't watching Al Jazeera English but there was a gentleman who had also noticed. Here's his report from May of 2007.
This is really scary stuff. And if your investments are in dollars... you may want to think very hard about what is being said.With 40 or so countries currently tied to the dollar the effects of the dollar aren't being seen at home but the edges are fraying overseas. These countries are in effect, holding the dollar up...
Ben Bernacke June 2009 "The Fed will not monetize the debt!"
What is even more scary is those in Congress who think it would be a good idea for China to allow it's currency to float. This would be unbelievably inflationary at the retail end since most of the products Americans buy come from China. This would set the stage for what the Federal Reserve says can't happen.... Stagflation. Prices rising as the economy continues to stall. But this is very possible since we are relying heavily on imports to keep product prices low. With the price of products increasing fast and being sent overseas this will only add to the sour economy.
