This will contain several thoughts, none of which is long enough for a complete column, but all pertinent.
NICKELS
When one is at an advanced age, as I am, one can’t help but remembering one’s childhood, teens, and even early adulthood. I do not remember what made me think of it, but what a nickel bought when I was young, actually startled me upon recollecting the times.
“Pepsi Cola hits the spot, twelve full ounces, that’s a lot, twice as much for a nickel too, Pepsi Cola is the drink for you.” Everyone was singing that jingle many years ago. There was “Pepsi Pete,” the Pepsi Cola cop, etc, but I won’t bore you.
There were nickel public phone calls, nickel cups of coffee, nickel White Castle hamburgers, nickel operated pinball machines, nickel ice cream cones (small), nickel subway rides in New York, nickel parking meters, nickel candy bars, nickel chewing gum, nickel cigars. Of course gobs of penny candy, and penny scales, which gave you your weight and fortune. In my neighborhood, there was a pinball machine which played for a penny, but wouldn’t give free games.
If you smoke, in my Dad’s drug store, cigarettes were 13 cents, and two packs for a quarter. The trolley cars, which ran by his door, cost a dime to ride, or three tokens for a quarter, with free transfers. For a dollar, one could buy a weekly pass, and ride as many times as you wanted, for a whole week.
Have prices gone up? Of course not! The dollar and related coins have gone down. This is an extremely difficult pill for most younger adults to swallow. However, it is totally true. Neither cokes, phone calls, ice cream cones or pinball machines have changed. They are the same. Only the currency needed to buy them has changed in value. I still have a difficult time paying those huge prices for Starbucks coffee, but they’re doing well, so I might be in the minority. Understanding this paragraph, is key to why smart people protect themselves with gold and silver, since Pepsi, phone calls, trolley rides, and candy bars don’t store too well. If they did, they would be hedges against inflation, just like gold and silver are.
FUTURES CONTRACTS
They are only for those who love gambling. It is said that 95% of futures players lose, just like gamblers in Las Vegas. Take the recent drop in metals prices, just as an example. Are there manipulators in everything? Damned right! The stock markets are manipulated, the metals markets are manipulated, as is real estate, and anything one can think of or imagine. Who does it? The moneybags and corporations who can afford to do it, in any field. They can afford to short, or do anything in their particular field, to manipulate markets to make themselves even richer. There are rich people who can buy, as an example, a hundred silver futures contracts, and if it goes down a dime or more, as has recently happened, there is enough money in their account to weather the storm, and as a result of the margin calls being met, they are in at even lower prices. I am not rich enough to do that! The real estate guys can buy hundreds or thousands of acres, and develop them, and make a fortune. Of course there are potential loss possibilities, and those are what makes Donald Trump probably bankrupt, even though he won’t admit it. Is there a Plunge Protection Team, which manipulates the stock market? I think so. Believe me, there is nothing as great a feeling as having a home free and clear, cars the same, and gold and silver in one’s safe, which is all paid for and beautiful. When prices drop, it’s merely a buying opportunity, not calls to meet margins.
MANIPULATION
As I said above, the metals markets are indeed being manipulated. No question about it. However, I honestly believe that those who manipulate anything, can have success only for a limited amount of time. Remember, the manipulators were desperately trying to keep gold below $375, and silver under $4.50. Then, they were exerting every effort to keep gold below $400, and silver below $5.00, etc. They succeeded initially, but failed ultimately. They had to eventually fail, because the laws of economics, supply, demand, etc, must not be denied, and cannot be violated for too long a time. The same with the stock market, automobiles, real estate, and any field you wish to examine.
The fake appraisals, low interest, and the like have made real estate into a first class bubble, and the manipulators have suckered millions into investing into it. They keep buying, but the prices are all out of whack, due to it, and the manipulations will fail, and take thousands with it. Smart people aren’t buying real estate now, any more than they were buying the NASDAQ when it got to the level that real estate is now. As proof, the May 4th Denver Post, has a headline which reads, “RISE IN HOME VALUES COOLS OFF.” Sub Headline reads, “Denver increase lowest since 1991.” Copy says the increase in Denver’s home prices in 2004, is virtually zero, vs. 19.5% increase in 2003, and 30.9% increase in 2001. If this doesn’t mean housing will decline everywhere, pretty soon, I have missed my guess.
In order to fuel sagging auto sales a few years ago, the auto companies offered zero percent financing to boost sales, which weren’t there under normal conditions. They manipulated the sales by offering zero percent interest, and created sales to people who didn’t need a car, and didn’t even contemplate buying one. The manipulation created sales, and now GM and Ford are on the very brink of bankruptcy. Had they not attempted to create sales, when there wouldn’t normally have been some, which was manipulating the market, they would simply have concentrated on building quality rather than volume, and might be in the same cubicle as the Toyotas and Nissans. The manipulating didn’t succeed. For someone who bought a $35,000 car for 5 years, at zero percent interest, it takes four years to break even. The interest free loan’s balance will decline $7,000 a year for five years, meaning that at the end of one year, $28,000 is owed, 2nd year, $21,000, third year, $14,000, and at the end of the fourth year, $7,000, which is about what a four year old $35,000 car will bring. The auto manufacturer loaned at zero percent, so they didn’t make any money on that. The buyer thought it was a great deal, but it wasn’t.
All the short selling and manipulating in the gold and silver markets will work for a while. They have their day when prices go down, and futures guys get caught short, but after the prices go down briefly, they will go up again, till another plateau has been reached. $500 gold and $10 silver? Of course. Just buy when you get a few bucks, and don’t worry. It’ll come your way!
STOCKS
Stocks are a sorry way to get rich. Look at the newspapers and see what dividends one can get. Caterpillar will get you a dollar a year or so in dividends, for a $90 investment. Thousands of stocks pay no dividends, because they are over-priced. Look at the P/E ratios. They are on average about 25 to 1, meaning they are 2.5 times overpriced.
The way to profit from the manipulations, is to accrue what you know will have true value in the future, just as it has in the past. In this case, in the past for thousands of years, and that is gold and silver. Skip those pieces of paper with ink on them, which promise the moon. They have no access to the moon, believe me. Protect yourself.