You May Not Like It, But It Cometh

You May Not Like It, But It Cometh

You May Not Like It, But It Cometh

When a correction comes, it will be time to throw money at gold and the other precious metals.

Gold, silver, platinum and palladium have had a barn-burning rally since the lows in January. The gold mining indexes are up even higher. Since January, the XAU rocketed higher from 38.37 to 93.66 for a 144% increase in a little over three months. The HUI blasted from 99.19 to 236.23 for a 138% advance during the same short period.

I see a nice correction starting soon and when it completes, it will be time to throw money at the metals. That tiny group of investors who understand contrarian investing have already snapped up the really easy money. But the smart and safest investing time frame is coming our way soon.

I started writing about commodities in general being at 5000-year lows in November. Nothing in the world has changed, we still need steel, we still need coffee, and we still need soybeans. But as I say in my new best selling book,Nobody Knows Anything, investors go from being wildly optimistic to absurdly pessimistic and back. In short, the bigger the bear, the bigger the bull.

There are a host of very practical reasons to want to own the metals in a safe and secure way. Canada finally bit the bullet and in this year’s budget, allowed for bank bail-ins. This is Canada folks; the country that the World Economic Forum declared has the soundest banking system in the world for the eighth year in a row. Canada is preparing for banks to fail.

The reason is simple; this isn’t like Daniel reading the writing on the wall at the feast of Belshazzar. God had weighed him and found him wanting. Canadian banks aren’t in danger because they have been found wanting, they are in danger because they are banks.

Think of it for just a minute. What do banks do? You go in and deposit your paycheck in a checking account and hopefully have some kind of interest bearing savings account. Prudent banks then loan that money out to eligible and needy corporations. They also make long-term mortgages for homeowners. It’s not your money any longer; you are just a creditor of the bank.

All banks profit by borrowing short and lending long. We know as reasonably educated investors that the world’s financial system is awash in debt and there is a good chance a lot of banks in the world will soon go belly up.

But why would a bank failure in Germany or Spain affect banks in Canada? That’s way too simple. Because Canada has banks. A loss of confidence in German banks or Spanish banks will spill over to Canadian banks. Any bank can be brought to its knees when confidence is lost because they borrow short and lend long. Any bank, no matter how well run, can be closed if there is a run on banks.

The act by Canadian government regulators should be thought of as a giant gong being hit by a hammer. It’s not writing on the wall but it’s not necessary for history to repeat as long as it’s pretty much in rhyme.

Gold and silver are up a little as are all commodities including sugar, soybeans and oil. The easiest money has been made by the true contrarians who understood that when commodities are at a 5000 year low, you would be profitable 100% of the time over 5000 years by being a buyer. But the safest money is made when it’s clear that a market has bottomed, it rockets higher and then corrects much of the initial up move. Look for that and when you see it, take action if you want to profit. Buy the dips.

Since we have heard the sound of the gong when even Canada succumbed to the siren call of currency controls. Governments all realize they are functionally bankrupt. Since all debts get paid, either by the borrower or the lender, they are shifting the burden onto the back of the account holders of the banks. You may not like it, but this way it cometh.

Own some gold, own some silver and keep it somewhere safe. In Nobody Knows Anything I show a simple gold/silver trade based on the ratio of one metal to the other that has always been profitable. You need not guess the direction of a move, only recognize that at a ratio of 80-1 you should be buying silver and selling gold. At a ratio of 45-1 you should reverse the trade and sell the silver to buy gold. Over the last 20 years you could have made a trade every 2.5 years or so and made 30-35% every time.

With investing, you not only need to know what to do, you need to know what not to do. I cover a variety of subjects inNobody Knows Anything that I have never read another financial writer write about.

Gold Bullion

Robert Moriarty

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