Gold and Silver have emerged in the last 12 months as the dominant asset group. They led the entire 2000 decade, still gathering disrespect. They do not require respect from the Wall Street and London crowd. They serve as effective protection during the slow motion crumbling process to the global monetary system. The sovereign bond crisis has circled the peripheral nations, rendered its wreckage, and is working toward the center where the USTBond and UKGilt reside (worried). Italy and Spain are squarely in the crosshairs for financial assaults, but France and the United States lie closer to the core of Western nation sacred debt territory, soon to become sacred burial grounds. That must sound drastic and melodramatic, but just wait. Other calls of an insolvent US banking system, calls of a chronic housing bear market also once sounded extreme. They came true. So did $1000 gold and Canadian Dollar parity calls made in 2005. Again they came true. Dismissal of Green Shoots, Jobless Recovery, Exit Strategy, and No QE sounded bombastic and pedagogical, but they were also correct calls. In fact, very easy calls. The ruin of the USTreasury Bond debt security is a long drawn out process like a cancer victim. Weakness is followed by emaciation, then organ damage, circulatory problems, finally a bedridden state, and lastly the inevitable death. Analogies to each can be made with USTBonds nowadays, like the foreign central banks withdrawing from the process evident in low Indirect Bids, like dependence upon debt monetization.
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The banker index is finally under stress. They have benefited greatly from the fantasy of phony accounting practices. They have also benefited from a staged controlled USTreasury Carry Trade. But their losses continue to mount in great volume. Their exposure to Europe sovereign debt, the US housing market, and mortgage bond investor lawsuits combine to make renewed risk. These insolvent zombies are due for a death experience, if only the markets were fair.
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Mining stocks are not keeping pace with the bullion metal. The ultimate problem is paper securities and the trust held in them. Persistent stories about well supplied hedge funds shorting mining stocks, stories of naked shorting of small mining stocks (see Alpha Group), and other sponsored spread trades to support bullion metal over the mining stocks have all contributed to the decline in shares. The distrust in all things paper, as in financial securities, at a time when trust in sovereign debt is on the wane, when financial sector insolvency is argued, when bond fraud has gone unprosecuted, has created a hostile climate for investments. The shortage of credit and capital to anything except USTreasury debt has exacerbated the condition. The HUI index of mining stocks has not done well versus the basic precious metal, the gold bullion, since the spring months. The threat of USEconomic recession will only make the situation worse, certain to lead to more whacks to the equity markets. Gold bullion has no counter-party risk, no paper dependence. Stay clear of the fraudulent custodians and their GLD & SLV fraud-strewn funds for lazy investors who do no research. They will be separated from their metal claims, handed cash in redemption, and sent away. One point of fraud proof is that GLD & SLV have a discount to the metal, while legitimate funds like the Sprott Trust and Central Exchange Fund include a premium price to the metal.
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