Wednesday, September 21, 2011

Here's What I'd do

Here's some of the latest post from Franklin Sanders today. Particularly look at the three points about what you might do to prepare for the next wee while.

I hope you enjoy this, Franklin is witty and funny, but a highly experienced trader in gold and silver.

Daily Silver and Gold Price Comemntary by Franklin Sanders:

"Y'all know already that trying to find information on the Internet resembles trying to drink out of a fire hose. But that's nothing new, it's always been that way, trying to pick the important events & causes from the middling-piddling ones. Great traders, I've heard, find a few very reliable indicators & stick with those, & don't vex themselves trying to find out everything about everything.

Now I'm nothing but a natural born fool from Tennessee & don't claim to be anything more, but even I can see that some things are causes, and some effects. If you can spot those CAUSES, then 'tain't too taxing to forecast the effects.

For instance, an Obama speech is not a cause. Shucks, it ain't even an effect. It's just bloviating, whistling, skizzing, steaming, and smoking, & don't mean as much as a wasp buzzing in a jug. Sounds fierce, but can't hurt nor help nobody.

On th'other hand, the sovereign debt crisis over in Europe is a CAUSE (well, actually it's an EFFECT of central banking, but here lately it's assumed the size of a cause). Last week, S&P announced it was downgrading the credit ratings of two of the biggest French banks because of their exposure to Greek sovereign debt, and it was eyeing with jaundice another big one, BNP. Not only that, it was squinting with suspicion at the big German banks. Just to mix things up real special, the Eurocrats announced they wouldn't give Greece its promised next dose of bail out if Greece didn't get on the stick & fire a hundred thousand or so government "workers" & kiss the dirt and kowtow more earnestly. That provoked the appearance of the NEXT cause.

Five central banks -- the ECB, Fed, Bank o'England, Bank o'Japan, & Swiss National Bank -- announced they were opening the 2nd story window & flinging out dollars for the banks to pick up, seeing as they needed 'em so bad. And they'd make it easy with "repurchase agreement."

Think of it this way: you have a really sorry old Ford car, & you need money really bad. You don't just go down to the car title lender with that thing dusty and dirty. No, first you detail that rascal, to make it look like something. But then you get there, & lo an behold! That usurious scoundrel at the title discount shop just beams and smiles like you had driven up in a new BMW, & he's happy as a beaver in bark to loan you something on your sorry old Ford, but you have to pay him back in 90 days.

In a repurchase agreement, the central banks agree to loan dollars for whatever "collateral" -- sorry Greek debt, rotten Portuguese debt, bad stinking mortgage-backed securities -- the banks want to put up, but at the end of 3 months, the Central Banks get back their US dollars, & the banks get back their sorry paper.

What signifieth this moiling hugger-mugger? Just this: central banks have only two weapons in a crisis, BLARNEY & LIQUIDITY. This re-purchase offer is the liquidity cannon firing. A panic is brewing with a flight to US dollars, so the central banks will temporarily flood the market with dollars to meet the crisis, then soak them back up in 90 days to minimize the damage -- or so they think.

The repurchase offer, complete with public and publicized co-operation among five central banks (the blarney cannon a-blazing away) shouts, screams, & outright hollers that a big panic is loose, & the central banks are desperate to stanch the flow of liquidity out of the system.

Now you can sit there calmly sipping on your High Fructose Corn Syrup drenched fizzy drink if you want, but this leaves me somewhat less than optimistic about the state of the financial system. For me, here's what I'd do:

1. Reduce bank balances to the absolute minimum needed for the next three months.

2. Get at least three months' cash needs in currency. If it costs you $3,000 a month to live, get $9,000 and put it someplace you can reach it 24 hours a day.

3. Put unused cash balances into gold. It may go down, but at least I can get my hands on it, whereas those balances in banks? Well, maybe we'll let you have it, and maybe we won't, if we need it worse than you. Maybe we'll let you have just a little drab and drib of it, with limited withdrawals. & remember, we're the banks, & we've got the government to back us up.

Don't y'all ever forget this: a bank is a thirty-horse, multi-action, sharp-knived, steam-powered threshing machine, & when it gets finished with you, there won't be enough scrimpshions left to cover a pin head with.

But you all go on enjoying your HFCS drink, & don't pay me no mind. I'm just a natural born fool anyway."

Gold in New Zealand dollars: $2189.22 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $48.29 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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The Anglo-Far East Company
The Original Private Gold and Silver Bullion Custodian
Your reference: an-001
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