October 17, 2021 

Gold Enters Major Bull Market


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 By bluejay

07/31/2008  10:07PM

The following is an article that was published in the Financial Times and submitted to jsmineset.com by Monty Guild with a brief comment:

Here is an important article from FT.com that we felt our readers would like.

By Joseph Stiglitz
Published: July 24 2008 18:25

Much has been made in recent years of private/public partnerships. The US government is about to embark on another example of such a partnership, in which the private sector takes the profits and the public sector bears the risk. The proposed bail-out of Fannie Mae and Freddie Mac entails the socialisation of risk - with all the long-term adverse implications for moral hazard - from an administration supposedly committed to free-market principles.

Defenders of the bail-out argue that these institutions are too big to be allowed to fail. If that is the case, the government had a responsibility to regulate them so that they would not fail. No insurance company would provide fire insurance without demanding adequate sprinklers; none would leave it to "self-regulation". But that is what we have done with the financial system.

Even if they are too big to fail, they are not too big to be reorganised. In effect, the administration is indeed proposing a form of financial reorganisation, but one that does not meet the basic tenets of what should constitute such a publicly sponsored scheme.

First, it should be fully transparent, with taxpayers knowing the risks they have assumed and how much has been given to the shareholders and bondholders being bailed out.

Second, there should be full accountability. Those who are responsible for the mistakes - management, shareholders and bondholders - should all bear the consequences. Taxpayers should not be asked to pony up a penny while shareholders are being protected.

Finally, taxpayers should be com¬pensated for the risks they face. The greater the risks, the greater the compensation.

All of these principles were violated in the Bear Stearns bail-out. Shareholders walked away with more than $1bn (€635m, £500m), while taxpayers still do not know the size of the risks they bear. From what can be seen, taxpayers are not receiving a cent for all this risk-bearing. Hidden in the Federal Reserve-collateralised loans to ¬JPMorgan that enabled it to take over Bear Stearns were almost surely interest rate and credit options worth billions of dollars. It would have been easy to design a restructuring that was more transparent and protected taxpayers' interests better, giving some compensation for their risk-bearing.

But the proposed bail-out of Fannie Mae and Freddie Mac makes that of Bear Stearns look like a model of good governance. It sets an example for other countries of what not to do. The same administration that failed to regulate, then seemed enthusiastic about the Bear Stearns bail-out, is now asking the American people to write a blank cheque. They say: "Trust us." Yes, we can trust the administration - to give the taxpayers another raw deal.

Something has to be done; on that everyone is agreed. We should begin with the core of the problem, the fact that millions of Americans were made loans beyond their ability to pay. We need to help them stay in their homes, including by converting the home mortgage deduction into a cashable tax credit and creating a homeowners' Chapter 11, an expedited way to restructure their liabilities. This will bring clarity to the capital markets - reducing uncertainty about the size of the hole in Fannie Mae's and Freddie Mac's balance sheets.

The government should set a limit to the size of the bail-out, at the same time making it clear that, while it will not allow Fannie Mae and Freddie Mac to fail, neither will it be extending a blank cheque. There may need to be a drastic reorganisation. There should be a charge for the "credit line" (any private firm would do as much) and, given the risk, it should be at a higher than normal rate.

The private sector knows how to protect its interests; the government should do no less. As long as the credit line is extended, no dividends should be paid. To ensure that the government is not simply bailing out creditors who failed in due diligence, at least, say, 25 per cent of any notes, loans or bonds coming due that are not lent again should be set aside in an escrow account, to be paid only after it is established that taxpayers are not at risk. Any government loans should be cumulative preferred debt: the taxpayers get paid before any other creditors receive a dime. To discourage moral hazard the interest rate should be at a penalty rate and, reflecting the rising risk, increase with the amount borrowed. Finally, the government should participate in the upside potential as well as the downside risk: for instance, by taking shares (which it might later sell) or, as it did in the Chrysler bail-out, warrants.

We should not be worried about shareholders losing their investments. In earlier years, they were amply rewarded. The management remuneration packages that they approved were designed to encourage excessive risk-taking. They got what they asked for. Nor should we be worried about creditors losing their money. Their lack of supervision fuelled the housing bubble and we are now all paying the price. We should worry about whether there is a supply of liquidity to the housing market, so that those who wish to buy a home can get a loan. This proposal provides the necessary liquidity.

A basic law of economics holds that there is no such thing as a free lunch. Those in the financial market have had a sumptuous feast and the administration is now asking the taxpayer to pick up a part of the tab. We should simply say No.

The writer, 2001 recipient of the Nobel Prize for economics, is university professor at Columbia University. He is co-author with Linda Bilmes of The Three Trillion ¬Dollar War: the True Cost of the Iraq Conflict


The article says it all.
 By Hans Kummerow

07/30/2008  4:42PM

Money Supply M3 declining in US$ and Euro-Areas

After the M3-Reports for the US$-Area were discontinued in 2006 by the Bush-Administration other "Watchdogs" have stepped in to monitor M3-growth. For details go to http://www.shadowstats.com/alternate_data

M3-Money supply has decreased sharply in the US$-Area in 2008 due to more restrictive lending practises by the banking sector. It is now growing annually at about 16% per year.

M3-Money supply has decreased slightly in the Euro-Area as well. Figures are published monthly by the European Bank Statistics Department. Euro money supply is growing annually at a rate of about 10%.

The declining M3-Supply should result in lower prices for many goods, just like lower prices for real estate.

The fundamental problem, eroding public trust in the value of the US$ is the excessive growth of public debt and/or public guarantees. 30 billion US$ for the rescue of Bear Stearns, 3000 billion for the factual garantee of all obligations of Fannie Mae and Freddie Mac with more aggressive lending by both comanies on the horizon.

This sort of garanteeing for everybody and every amount is raising eye-brows around the globe.

Therefore, gold will probably fetch high US-Dollar prices for a relativly long period of time. From a Euro- or Yen-Point of view the price-increase in gold looks quite moderate due to the sharp decline in the foreign value of the US-Dollar.
 By bluejay

07/30/2008  9:05AM

" A Tale Of Two Cities"

The anti-gold miscreants are jumping up and down with gold's eighth day of weakness, currenting selling at $899.50 and the Chinese are jumping up and down with a higher dollar and a lower gold prices as they sell and buy in vast quantities.

If history is any guide, the fools selling gold are the ones that will be sorry.

Concerning gold and silver stocks, the Gold XAU Ratio is currently at 5.47 which over the past four years has been about the best time to buy these stocks. This has been an excellent baromemeter of timing for buying and selling over the years.

The general rule is: buy the stocks when the ratio is in excess of the 5.0 level and for intermediate trading sell the stocks when the Index is under 3.0.

Gold is in a generational bull market and until it changes, all sizable declines should be bought.

If you don't have your gold yet, this could be your day.

"Time and tide waits for no man."
 By bluejay

07/29/2008  2:36PM

Check out this article in relationship to the banking industry. Who's hiding what?

 By bluejay

07/29/2008  9:41AM

Gold $917.50 off $12.70
Silver $17.08 off $0.31
Gold/XAU Ratio 5.35
Gold/Silver Ratio 53.40
Crude Oil $120.55 off $4.18

I thought I would mention that there is a circulating story going around that crude oil will be taken down to the $50 level where gasoline prices will drop to $2.50 a gallon. The basis for the idea is to financially decimate Iran. There are comments along with the story that state there are secretly held very large unreported oil discoveries in and around Prudhoe Bay, Alaska along with coming news of gigantic unreported oil reserves in north Russia and in Indonesia.

The truth concerning these extremely large unreported oil pools remains to be reported. The inference was made that news of these finds will correlate near to presidential elections and the following months.

Also there was mention of massive oil deposits that could be brought to market from the states of Montana, Idaho and Utah that were staggering. The bottom line is according to the source that there is no oil shortage and that it has all been a total fabrication by the powers to be.

The circulating idea may be taking its toll on crude oil prices as of late but still, all this remains to be substantiated.

The financial sector continues to melt down and concern people and this story, whether real or planted, appears to be holding up the stock market, somewhat.

Last Friday the National Australian Bank wrote down by 90% all its OTC derivatives associated with the real estate market loans in this country and stated, "they have no more exposure to it." The news of this move was basically a vote of no confidence in our continuing troubles at the Fed where they a running here and there putting out insolvency fires. Congress just voted for a rescue plan for Fannie Mae and Freddie Mac that will insure that more printing presses will have to be ordered or some extra zeros will have to be printed on a new bills after calling in the old ones. Take your pick.

This is the second week that the powers to be have been dumping paper gold in the commodities markets. Now physical gold, that's another matter.

This story reminds me of the ones that surfaced saying that there was a process to increase gold supplies by processing all the available sands of the world. Then there was another media story about how bad gold was an an investment because it never kept up with inflation. I wonder why?

The gold bulls have there own stories as well. There was a gold options expiration last Friday that would require the producing of physical gold and gold was suppose to rally strongly starting on Monday of this week but big sellers appeared. I wonder who they were and continue to be?

I wonder what the Chinese are thinking by holding $1.3 trillion in dollar reserves? Are they going for the bait of this story which contends that there is no energy crisis or are they in the market exchnging dollars for gold and silver during these past few days of weakness? You tell me.

It is my humble opinion that the Fed and the Treasury have no real idea on how to stop the financial melting down process that will significantly effect us all and they are scared like crazy.

What ever happens, holding gold over the years has been the way to maintain your buying power, your wealth and your families security.

The scary part for all of us should be, what are they not telling us concerning the nation's financial health as a direct result of all the created OTC derivatives floating around on and off the books of American corporations, especially in the banking industry.

The National Australian Bank must have known something to take such a heavy financial hit. It's quite obvious what the thoughts of the bank were, jumping off a sinking ship is better than going down with it.

Prepare yourselves. Do you have your gold?
 By colby

07/22/2008  9:00AM

any word on when some new bars will be for sale on this site?
 By bluejay

07/21/2008  6:04PM

The head of China's economic department in the Party's policy office is advocating using their hoard of U.S. dollars in exchange for natural resources and mines abroad. Humm, maybe they'll show up in Alleghany. Maybe, the Board should give them a call with a joint venture proposal.

China urged to spend FX on mines, resources

Mon Jul 21, 2008 1:49am BST
Reporting by Zhou Xin; Editing by Alan Wheatley

BEIJING, July 21 (Reuters) - China should invest more of its $1.8 trillion of official reserves in natural resources abroad, a Communist party researcher said in remarks reported on Monday.

Buying tangible assets, from mines to farms, would not only help China's foreign exchange reserve management but also ease domestic inflation, Li Lianzhong was quoted by the official China Securities Journal as saying.

Chinese companies have been busy buying into natural resource producers, notably in Australia and Africa, but the only reported investments bought with the central bank's reserves are small stakes in oil producers BP Plc and Total SA.

Li, who heads the economic department in the Party's policy research office, called China "the biggest victim" of a falling dollar and said the government must do something to turn its stockpile of reserves, the world's largest, into "sources of wealth creation".
 By Michael Miller

07/21/2008  3:12PM

Speculation about gold price has been with us since gold sales were allowed to float freely in 1975 in the good old USA. Pundits and many not so pundits jumped into the gold excitement with newsletters, books or other ways to help, sway or just profit from people looking at gold. A few remain in business today and a fresh crop of pundits and want-to-be-pundits sprouted. I know most by reputation and a dozen or so from conversations. Personally, their opinions have little effect on the Sixteen to One. But not for the reason you may suspect.

Americans are spenders not savers. Gold as an investment or for financial speculation requires disposable income, savings or the sale of an already owned asset. Tomorrow, when you encounter friends, acquaintances or total strangers, ask them if they own gold or have any position in gold, such as a corporate equity. Keep a tally of how many you ask and how many have any gold under their control. Let me know the results. You cannot ask someone that you know has or does not have gold. I think you will find that the tally will be ten percent or smaller for those with some form of gold (personal jewelry does not count in this survey). This is a significant fact for future speculative beliefs.

Having said this, I do not suggest that a discussion like the one under this topic is meaningless. Quite the opposite! I read this topic regularly because not only the writers have something to say but also Bluejay, specifically, offers us views of pundits and others. There are too many items that influence the gold price. Has anyone written about the declining production in South Africa? Do pundits write about how the permit process in Nevada, a very important supplier of gold, will influence future gold production? If the US congress puts a royalty on gold mined from public lands, will that affect exploration? As India becomes more affluent, will that decrease or increase the Indians interest in gold?

Like Rick, I find gold in the streams, buy gold and own Sixteen to One shares as well as shares in other companies and have for thirty years. The market provides us an exit option when we choose to change our gold position into something else. Pundits and non pundits practicing in the gold sector influence future gold activity, no doubt; however I believe their value for predicting usable pricing trends and stock plays has little value for me. I do believe it is important for persons considering gold to develop a well-rounded background in the global Gold Sector to be successful. I believe this web site should be included as a source of information.

Martin, companies in production with proven reserves have forward sold gold for years. In a rising market it isn’t the smartest thing to do. My question has always been, “If Barrick, Newmont and other forward sellers can mine at such great cost to price ratios, how come they sell forward? The simplest answer is because they think they will get more dollars. Every time a company uses someone else’s money, a price must be paid. I am negotiating with some foreigners the right to buy bullion from future production at a price ten percent below the spot price at the time of sale. I have warmed up to the idea over the past two weeks since it was presented to me and fine it an attractive way for us to get the working capital to increase mining.
 By martin newkom

07/19/2008  4:21PM

we might want to entice our own
member of the BOD who is a very
successful cartoonist to insert
some subtle info about the 16-1
ie Odds Bodkins at the Sixteen
to One, etc.
 By martin newkom

07/19/2008  4:16PM

If Southwest airlines can re-
main viable by hedging fuel, ie
buying futures contracts, the 16-1 might want to look into
some sort of plan or scheme that enables the company to do like-wise.
 By Rick

07/18/2008  8:50PM

All the gold I own I found myself. It's not much, but it is certainly sitting over there in my box. The next best thing to finding gold myself is having confidence in entities I've selected to find it themselves and own stock in the potential.

This is why I know how what Bluejay suggests is the wise course of action.

And of course, concentrating potential. Our Sixteen to One Mine has the most potential and reward in the small cap investment potential.

As I get older I recognize that it becomes more and more difficult to find my own gold; it also isn't much of a hedge (since it's so little...yet the life-quality fun-factor is worth the endeavor), so I continue to have faith in OAu potential.

Bluejay's analysis can be condensed into this: buy gold; or buy interest in those who will actually find it. I'll add this...find some yourself if you can.
 By bluejay

07/18/2008  11:41AM

Here's a primer to the wise words of Howard Ruff and a case on why you must own gold.

The article was sent to me via Email without credit being given to its author.


Most people are oblivious to what’s going on in America. They don’t"get it." You may not either. If so, I’m going to give it to youstraight. It’s time for a wake-up call. It’s time for you to "getit." If you don’t "get it", your financial
future is dim.Last week I was talking with my 72-year old corporate counsel, who is planningto retire. I told him he couldn’t afford to retire. "You only have amillion dollars," I said. "Subtract a $100,000 a year for inflation.In nine years you have the purchasing power of $100,000. You’ll be greetingpeople at Wal-Mart." I was only guessing about his net worth. Perhapshe’s got $2 million or more. I continued, "You’ve got guys managingyour money who don’t "get it.". You’ve got these establishmentguys with conventional investments in stocks and bonds, and they don’t seethe big pictures. They could wipe you out." "I suppose," hemumbled.My lawyer doesn’t "get it," doesn’t want to "get it." Iunderstand that because almost nobody "gets it." It’s over for theAmerica we’ve known. We’re on the down escalator. The assets we’ve reliedon to keep us secure are now
riskier than ever.In the fall of 1999 I wrote a newsletter that warned about a pending crash inthe stock market. The NASDAQ collapsed a month later. Subsequently, I wrote anewsletter about a coming crash in residential real estate. In 1999 I wrote anovel about gold rising to $1,000, people losing their homes, high inflationand a bad economy. It was right on the money. I’m not bragging, I’m makinga point. How did I write such accurate forecasts? I learned the economics ofsound money and free markets. There are incontrovertible truths in economicsand when they are violated, the outcome is easy to predict. It’s noparticular brilliance on my part, only common sense conclusions that anyunbiased reader would arrive at.Eighty years ago, in 1928, Babe Ruth, the greatest baseball player of all time,made $50,000 a year. Alex Rodriguez, a Yankee star of today, makes $28 million.The Babe made
1/5 of 1% of Rodriguez’s salary. That’s .002. In a way, youcould say the money of 1928 has become virtually worthless.Let’s go back 40 years – half way to 1928. In 1968 Willie Mays was votedthe most valuable player in the All-Star game. He made $120,000 that year. Doyou "get it"? $50,000 - $120,000 - $28,000,000. The rate ofdepreciation of the dollar is increasing exponentially (the bigger it gets, thefaster it grows). Somewhere in America today (or in South America), a two yearold kid tosses around a rubber ball. In less than 30 years he will earnone-billion dollars a year to play baseball.In 1934 the politicians gained control of the money. The free market haddetermined that gold and silver were money. (Remember, the free market is theclearinghouse for the buying choices of the citizens. In the free market theconsumer is king, not the government. The consumers decide who succeeds
and whofails through their buying choices. The free market is the essential componentof liberty.) I’m not stumping for a return to the gold standard. Thereisn’t enough silver available to be money on Wake Island and gold would haveto be $40,000 to $50,000 an ounce. However, the one thing to remember about thegold standard is that politicians couldn’t create it out of thin air. That’swhy it was good, and that’s why they got rid of it.When government gained the monopoly on money, abolished the gold standard andallowed politicians to gain control over spending and money creation, the diewas cast. It opened the door to ever-expanding social programs, wars anddeficits. Before long, money and credit creation were used to stimulate theeconomy. Artificially low interest rates (not free market rates) spawned boomsthat invariably turned into recessions when the money growth slowed or
interestrates rose. Today’s bubbles are created by excessive money and credit. Wecurrently have bubbles in farmland, commercial real estate, art, antiques andcollectors items. It’s the consequence of inflationary money and credit. In1928, the national debt was $17 billion, in 1968 $347 billion, in 2008 $9trillion. You see it’s running away.Wall Street doesn’t "get it," the public doesn’t "getit," the politicians and bureaucrats most certainly don’t "getit" and, it seems that even the Federal Reserve doesn’t "getit." They just keep spending, borrowing and printing more money.Government liabilities may now exceed $60 trillion and the astronomicalexpenses from government social programs are going ballistic. Furthermore, thecurrent crisis is calling for billions to finance bailouts and otherguarantees. There’s no possibility of paying for all this without debasingthe currency.
Washington claims the inflation rate is under 4% and Wall Street,Main Street and the media buy it hook, line and sinker. Truly they don’t"get it."The high inflation of today ruins the plans of retirees and throws many of theminto poverty. Our inflation rate of 15% (my estimate) also acts as a hidden tax.It impacts the poor, low income workers and those on fixed incomes at exactlythe same rate as the rich who can better afford it. This cruel tax, brought tous exclusively by the government, makes poorer those who can least afford it.No person, rich or poor, escapes this terrible depreciation of their money andthe subtraction of their purchasing power.That’s not all. Historically, inflation stokes hatred towards businesspersons and free enterprise. It elevates left-wing demagogues who promiseredistribution. It encourages a bigger nanny state, more lobbying, politicalcorruption and loud
demonstrations by subsidized activist group. Ultimately,runaway inflation leads to enormous social unrest, civil disobedience, riots,strikes, radical politics and other destabilizing upheavals.In the history of severe inflations (including the Weimar Republic and two fiatmoney episodes in 18th century France) only a few nimble investors andspeculators survived and prospered. The vast majority of people lost theirshirt. Most of them didn’t know or understand what was happening. Theydidn’t "get it." There was much speculation gambling, debt andleverage, but in the end, all was lost.Figure it out for yourself. Stocks are down 20% and inflation is 15%(Shadowstats.com says inflation is 12%). That means many investors are out 1/3,and if inflation stays at this level, in twelve months they will be down 50%.Virtually everyone will argue with this viewpoint. That’s because theydon’t "get
it." Eventually they face ruin.Savers and bondholders are also taking a shellacking. Back in 1980 there was anelderly currency analyst by the name of Franz Pick who spoke at monetaryconferences. He was fond of saying, "Bonds are certificates of guaranteedconfiscation." He may have been premature in 1980, but no longer. In 2000I bought an old Superman comic book. This high-grade 1941 copy has more thandoubled. So far in this century comic books have been better than governmentbonds.The secret to financial survival now and in your retirement is to own tangibleassets that will appreciate at a level that exceeds the rate of inflation.Convert depreciating paper assets into tangible assets. Make sure they are notin a bubble, and still promise appreciation. Don’t use leverage. Never try tomake a killing. Be patient. Do not wind up on the financial scrap heap with thevast army of
inflation-ravaged investors who didn’t "get it." Mostinvestors are going to get killed. Be one of the select few who "getsit." Remember that in every big inflation those who listened to governmentspokesmen were ruined.I don’t want to terrify you, but there is one more thing I see happening. Itcould happen soon or it could be a long way off. Pray it’s the latter.Foreigners who hold trillions of U.S. dollars are losing billions as the dollarsinks. The Asians could have losses approaching $2 trillion. Chinese exports tothe U.S. amounted to only 2.1% of their rapidly growing economy last year. Theworld doesn’t need our business as they once did. The stronger the worldeconomy outside of the U.S., the less they’re going to be willing to holddepreciating dollars. Plus, many countries would like to stick it to us.If too many countries abandon the dollar as the world’s reserve currency,
andif a few large Asian countries are unwilling to buy our bonds, our governmentwould soon be insolvent. The dollar would be next to worthless and a paralyzinghyperinflationary depression would lay the U.S. low. Don’t think it’simpossible. We can’t live beyond our means for decades, bury ourselves indebt, and consume more than we produce without a day of reckoning. That sad dayis coming, I promise you.
 By bluejay

07/18/2008  9:53AM


Thanks for the perspective concerning some financial writers at johntreed.com/bestseller.html.
 By Dick Davis

07/15/2008  10:47PM

Looks like Howard isn’t writing a new book but recycling the old.

I can recall when Howard jumped out of gold on the way up. (I'm an old guy too.) So I Googled. The original 1980’s version, How to Prosper During the Coming Bad Years, is available used on abebooks.com, goes for $1.

28 years…. My friend Dr. Everett tells me, “Even a blind squirrel occasionally finds a nut.”

Google also turned up:

John T. Reed’s web site mentions the author of How to Prosper During the Coming Bad Years, Howard Ruff, declared bankruptcy.

See: http://www.johntreed.com/bestseller.html
 By bluejay

07/15/2008  7:38PM

Our financial system appears to be melting down. What can you do to protect yourself? The following article may be of some help, especially with inflation heating up.

Jul 15 2008 11:56AM

Can Anything Stop It?

For weeks, I’ve been doing talk-radio interviews to help me sell my book, How to Prosper During the Coming Bad Years in the 21st Century. It’s déjà vu all over again, and I’m enjoying success.

But often I’ve been asked: “What advice would you give to the presidential candidates to head off the coming hyperinflationary depression?”

My answer is two-fold:

“I would tell them to stop lying to us. They are all making promises no president can keep. Our president is not an emperor or an absolute ruler; many promises being made can only be kept by Congress. No president can keep all those promises, and in many cases, even he if could, he shouldn’t.”

“I’m not in the business of curing national problems; I’m not smart enough to do that. I’m trying to help middle-class Americans who aren’t economists and are less concerned with solving the national problems than protecting themselves. My role is to help them know what to do with the money they have. Many of them have never “invested” before, and certainly not on Wall Street. But the average American is making investment decisions whether he knows it or not.”
We all have earned a certain amount of money by performing our jobs. We have to decide what to do with that money, so my advice is two-fold:

It is defensive. The real problem is not a depression like the 30s coming back. That’s not likely. That depression was deflationary in nature. 25 percent of the people were out of work and had no income, but you could buy a loaf of bread for a nickel. In the inflation we face, the cost of a loaf of bread will be measured in dollars, perhaps many of them. It’s a different problem entirely. We face runaway inflation, which has already started. My job is to teach you how to cope with the fact that during hyperinflation, commerce becomes undependable. Every store depends on trucks which roll up to their back doors every day and restock the shelves which were attacked by buyers the day before.

In an inflationary environment, the cost of fuel soars. Independent truckers, especially, cannot afford to drive their trucks because of the cost of fuel. Strikes become endemic. Although there will always be some commerce, it will not be as dependable as you would like. You may not be able to buy what you want when you want it, at a price you can afford.

My defensive advice is really simple; when you buy anything, don’t just buy one. Buy five or six for storage. You will pay today’s prices and consume them at tomorrow’s higher prices. That’s a fine investment.

The storage program is described in detail in my new book (you can buy it on my website www.rufftimes.com or at www.amazon.com). It doesn’t require some kind of national calamity to make sense, but we will have a national calamity – hyperinflation.

When you have cash to invest, don’t invest in anything denominated in dollars because dollars will become worth less and less (including most stocks, bonds and cash).
The dollar is supposed to be a means of exchange and a store of value. It is still a means of exchange and will continue to be for some time, but it has long ago ceased to be a store of value.

One common question from the radio hosts has been “what proof do you have that you are right about a runaway inflation?”

Haven’t you been looking? It’s all around you! It’s already started. Look at the price of gasoline, wheat and corn. Eggs are up 30 percent. The major factor in the increase of a barrel of oil is not that oil is becoming scarce or more valuable. There is enough oil in the United States to meet demands for the next 60 years. There is more oil in the shale in Utah and Colorado than there is in Saudi Arabia. There is no real actual shortage, although it is a function of price and politics.

As oil becomes more expensive, it becomes more useful to consider the oil shale in the Rockies. It is approaching a price where exploiting oil shale is profitable. We know the oil is there.

What causes the increase in the oil price? Inflation, pure and simple. Oil is denominated in dollars, and the value of a dollar is shrinking, so producers want more dollars for a barrel of oil. The oil price simply reflects of the decreasing value of the dollar.

Oil is not the only sensitive indicator of the value of the dollar. The dollar is now in its twilight years; it is rapidly diminishing in value. You once could buy the best suit of clothes in town with two pairs of pants from the best tailor around, for one American gold piece. You can still buy the best suit of clothes with two pairs of pants from the best tailor in town with the value of one American gold piece. The price of gold also reflects the loss of value in the dollar.

There are really two things to watch, the price of oil and the prices of gold and silver.

Will Rogers once said, “Invest in inflation; it’s the only thing that’s going up.” That’s pretty funny, but it is also a profound truth. There are ways to invest in inflation. Stop buying most investments which are denominated in dollars. The stock market is denominated in dollars, although certain stocks are the same as investing in inflation.

I like uranium stocks because we will be building many nuclear plants, and there is only half enough uranium above ground to fuel them, so Uranium Mining Stocks will do very well over the years.

I like Oil Service Stocks – companies that build and service oil rigs.

I like Mining Stocks, not just for gold and silver, but for basic metals like copper because of the soaring demands of an exploding population in China and India which will lead to more and more construction. They will need raw materials. So we are now in an age of basic raw materials, and we must look beyond America to see what’s happening in the rest of the world.

Doing these interviews has caused me to think far more broadly about the roots of the problems we face, especially if it is denominated in shrinking dollars.

It’s very simple. You should get rid of your dollars by investing in inflation. What is the alternative? Not foreign currencies, which is what Wall Street would like you to do, because inflation is contagious and will affect every currency in the world. You must base your future portfolio in gold and silver and their derivatives because the world is changing; the lead article in this newsletter explains how you have to make occasional market changes in how you approach these metals.

The fundamentals are changing, and your outlook must change also. Hidden behind these problems is a glowing opportunity. Perhaps once in a lifetime we face a change as fundamental as this, allowing us to invest early in the game and turn small amounts of paper dollars into genuine wealth. That is what The Ruff Times is devoted to.

The Collapse of the Dollar?

I’ve received several emails and letters from subscribers asking “what will happen to gold and silver denominated in dollars if there is a collapse of the dollar and it becomes worthless.”

The term worthless is a combination of two words – “worth” and “less.” I’m of the opinion that the dollar will not become worthless, it will just become worth less. If we have runaway inflation, the dollar still exists and has some value, it just won’t have as much value as it has now, and it will take more dollars to buy stuff.

Currency is supposed to be a means of exchange and a store of value. The dollar today is a means of exchange and will continue to be a means of exchange as long as it is in existence. But it has ceased to be a store of value. Consequently, this argues that one of the worst long-term holdings is cash in the bank. It sounds prudent to have a lot of cash, but that assumes that the dollar is stable and continues to maintain its value. That is not the case now and will be the case less and less as years go on.

So gold and silver will retain their value. Denominated in dollars the nominal value will multiply many times over.

A similar question is, “what will happen to gold and silver if the stock market collapses.”

The price of gold and silver has nothing to do with the stock market. It is an international phenomenon. If the dollar becomes useless as an everyday currency, you can bet that gold and silver will become valuable as currency. It has happened several times throughout history, ever since the invention of the printing press. When a currency becomes less valuable, gold and silver becomes more valuable.

I remember during the metals’ bull market of the 1970s when we were worried about gas rising to $1.50 a gallon, some enterprising gas stations put up signs selling gas for a dime a gallon. Of course, they wanted pre-1964, 90-percent silver dimes which had value in excess of a gallon of gas. If you were smart, you didn’t fall for it. You were better off keeping the coins to yourself.

Let’s make sure we don’t throw words around carelessly, like “worthless.” I am not suggesting the dollar will become “worthless;” it will become worth less in terms of its utility in buying every-day commodities.

The value of the dollar is measured in two ways:

its value relative to foreign currencies like, for example, it will cost you considerably more to go to Europe because the Euro has increased in value relative to the dollar, and everything will be more expensive;
It is also a measure of what the dollar will buy in America, which is an entirely different matter. In either case, gold and silver are historically the best answers.
By Howard Ruff
The Ruff Times
 By bluejay

07/11/2008  11:20AM

Gold $960.90 +$14.50
Silver $18.74 +$.45
Gold/Silver Ratio 51.13
Gold/XAU Ratio 4.93


I went down the driveway this morning to retrieve our morning paper(The Press Democrat out of Santa Rosa, California) and read on the front page, "It's A Bear Market Out There" superimposed on a chart showing a drop-off.

The fact of the matter is the paper, owned by the New York Times, is using a misnomer for an event that has not happened.

The Dow Jones Averages(DOW have been in a bull market since 1983 and that has not changed, at least not yet. I find that newspapers and TV commentators do an inferior job of reporting the facts as they relate to markets on a consistent basis.

How many times have I mentioned here that papers around the country have been telling their readers that gold was a bad investment over the years? Sure, the papers are influenced by our keepers but we have to know better what the markets are saying.

The DOW is off today over 200 points at just above 11,000. I would suspect that the "Plunge Protection Team" will try and steady things at or around the 11,000 level.

In 2002 the bull market almost ended but it righted itself around 7,000 and continued moving higher.

Personally, I am letting fundamentals weight 50% with my thinking in relation to a bear market analysis of the current DOW with all the debt problems and the failing contra-sides of the OTC derivatives. Basically, to my mind, we are already in a bear market without technical proof being presented just because of all the financial problems that currently exist. If you want to fail, just keep piling on the debt.

If the DOW goes below 10,700 and stays below that level for a period of weeks, then we are officially in a bear market and IF the 10,000 area fails later, WATCH OUT!

I do not own one share of anything outside of my precious metals and precious metal related companies and I sleep well at night.
 By bluejay

07/10/2008  1:46PM


The big picture of the primary bull trend in any market gives you the confidence to buy into, sometimes, severe sell-offs.

The reverse of this is to sell into rallies in a bear market. The Dow Jones Averages(DOW) are currently in an intermediate bear market. I think I mentioned the entry to this event in my observations somewhere page on these pages.

Whether the DOW enters a primary bear market which it may or may not, remains to be seen. Within stock groups in the general market some financials are in a primary bear market and are absolutely getting pounded.This is what people need to be on the watch for to avoid the destruction of their wealth.

Just pull up some on them at bigcharts.com and see the historical decimation. A few are MER, BAC and FNM along with others.

Never be afraid to buy a sell-off in a primary bull market. Learn to control your fear emotion.
 By Rick

07/07/2008  7:38PM

One more thing....when we read about gold being lower at $914+/oz it is time to remember the big bigger picture, eh?
 By Rick

07/07/2008  7:10PM

Blue-jay, thanks. Perhaps I'll become 1/3 of a winner if I only jump 1/3 of the way from securities into gold...later to find out how I should have perhaps been 4/3 in gold or not.

Long ago I took your advice for accessing kitco.com and it is my very first go-to page. Everyone reading this should do the same.

I'll take your recent advice and inform myself further with your direction.

Thanks, Bluejay
 By bluejay

07/07/2008  8:58AM


I have been thinking about your question this morning.

Jim Sinclair once said that if anything happened to him he would recommend his children turn over their funds to Monty Guild to watch for them at Guild Investments in West Los Angeles. Monty lives in Malibu so he gets a good amount of fresh salt air which is, in my opinion, quite conducive to reasonable thinking.

If you want to go it alone on your decision making concerning gold I would strongly suggest following Alf Field's analysis of the trading cycles of gold.

Alf knows his business and is almost, in my opinion in a league by himself, excluding Sinclair and a few others. You can access his free commentaries at kitco.com concerning how he does it in the commentaries section when they appear. If you check there now I believe there is current commentary available.

Gold is lower today at $916.30 and has made its intermediate bottom already at $845 or so and reamins in a major bull market. No better time to buy it than on sell-offs.

Hope this will be productive for you as Americans are in store for one hell of a shock with their money and wealth in the many months to follow.

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