Here’s a letter from a Dear Reader:
“It is about five years since I first read the DR and agreed with your recommended ‘trade of the decade.’ At that time it was clear to anyone who saw the busts of 1974, 1991 and 2001 that the next one was imminent, even though politicians, ratings agencies, financial services and real estate company directors and mainstream financial journalists were all ‘asleep at the wheel.’
“But were they? Maybe they saw it too but it did not suit them to take measures to prepare for the bust. After all, those in positions of power and influence are using other peoples’ money to feed their ambitions and egos, and would probably have made very different calls had their own money been at risk on such a huge scale.
“Fortunately, with my conviction stiffened by your comments in the DR, I sold down all the holdings in my family property investment company in the UK between 2004 and 2007, repaying £18m of bank debt in the process. 50% of the proceeds went into gold and silver. We have not made any money in the last year but this strategy has resulted in no loss in the credit crunch…yet!
“So well done, Bill, on giving the baby boomer generation a lifeline in the form of sound common sense comment – and as you remind us, it is free!
“Keep up the good work. I still await Gold:Dow – 1:1 although I may not live that long!”
Ah, there’s the rub…we may not live long enough…
Surely the Dow will trade at a p/e below 8… And gold will trade at one times the Dow.
As we told the group in Vancouver, it will happen…but there could be a whole lot of depression before it happens. Depression could drive down gold prices…and discourage gold bulls. It could ruin stock portfolios…bankrupt pension and insurance funds…and put millions more people out of work.
We don’t doubt that the feds have the power to destroy the currency and create inflation. We doubt that they can do it in a controlled, gentle way. As the depression worsens and lingers…they’ll become more and more desperate to raise inflation rates. They buy more bonds. They increase the money supply. They’ll become more and more reckless as prices fail to reaction.
Then…inflation rates won’t go up gradually…they’ll go up all of a sudden…surprising almost everyone. Holders of dollar bonds – notably the Chinese and Japanese – will panic and sell. All Hell will break loose.
Will it happen in our lifetimes? Depends on how long we live…
Until next time,
for Markets and Money