Did you ever have an ant farm when you were a kid? If not, let me describe them. They were a sort of aquarium type of thing, with dirt, plants, moisture, rocks, etc, and all sealed up so there would be no escape. There was a colony of ants in this affair, and the kid could watch them live, eat, sleep, multiply, and in general do what ants do. Sort of fascinating. Their own little world, all sealed up and operating. Gradually, the ant population grew, and it was a miniature little world, all sealed up in this aquarium.
I liken the ant farm to the financial world of today. All the little ants scurry about, doing their thing in that little aquarium, and all the little financial advisors, CNBC, stock brokers, Bloomberg, various funds, trades, gains, losses, and daily life. Just like the ant farm. Wall Street and DC are the centers of action. Wall Street stocks are bought and sold by the billions every day. Hedge funds and mutual funds by the thousands all partake in this porridge, just like the ants digging holes, making nests, eating and doing their thing.
The ants go nowhere. They are all wrapped up in their little world, and think that is the whole world. They work hard, maintaining their life in the aquarium, even though they will never go to Europe, retire, or become rich. The financial world of today, is just like that ant farm. For seven years now, the stock market has gone nowhere, other than when it went up and then collapsed, costing it is estimated, five trillion dollars in losses. Maybe that was like an ant hill collapsing in the ant farm? The ants all eat the same things, and the stock and bond salesmen all deal in dollars. Everyone measures their wealth in dollars, and they all go around in their little areas, just like the ants.
“Oh the Dow went up 25 points today, and bonds fell.” Really? Who cares? It’s all just like the ant farm. All going around in the aquarium, dealing in dollars and stocks that pay little if anything as far as dividends are concerned. Everyone buys stocks, the mutual funds buy stocks, and the hedge funds buy stocks, sell stocks, go short, long, or buy futures even. They buy treasury bills, treasury bonds, and treasury this and that. They buy municipal bonds, tax free bonds, puts calls, or a hundred different ways of acting like the ant farm occupants. All using dollars. All measuring their wealth in dollars. All holding dollars, commonly known as “cash.” “Cash,” which is losing value every day, but no one knows it, because they are all caught up in their little circles, and dealing in dollars, dollars, dollars. They buy, sell, trade and arbitrage dollars, francs, pesos, o marks, or yuan, or things denominated in them. All day long. Everyone knows what happens to the markets in stocks in all nations. Many are riveted to them all day long, and get nervous breakdowns over the figures. Just like an ant, who can’t carry a twig it wants to move, perhaps.
Every day, people around the world say the same thing, in all languages. Know what it is? “PRICES ARE GOING UP.” Really? Well, butter was $1.25 a pound a few years ago, and now it’s $4. Homes that were $100,000 a few years ago, are now $500,000. Cars that were $1500 25 years ago, are now $20,000. Yup. Prices surely have gone up. No question about that. Or has the dollar, peso, franc, and pound gone down? Isn’t the butter the same stuff? Isn’t that house the same house? They haven’t changed. Only the value of the money has changed. Uniformly, around the world, the printing presses are churning out un-backed paper currencies by the truck loads, and the more they print for the government’s benefit, of course the less they are worth, and the less they will buy. Gee! It’s so simple. Why doesn’t everyone realize it? I don’t know.
So here are the ants scurrying around all day and maybe even nights, doing their thing. The financial world never stops except on Sundays. All around the world, those stocks are traded, funds are buying and selling, or loaning to various governments. It never stops except on Sundays. The ants are very busy doing their thing and getting nowhere. It’s laughable to me, watching the prophets and analysts which goes on after a market closes or before it opens. “GM is bankrupt, and Pfizer lost its lawsuit.” “NASDAQ will probably suffer because Joe Blow’s technicals were off.” Or whatever. “Oh look at that ant digging a hole.” “Look at than ant eating the other ant.” “Oil futures went up today.” “T-Bills are paying three points higher today.” Boring. Pointless. Absurd.
The average P/E ratio in stocks is far too high, they mostly pay no dividends, and for years have stayed about where they are now. Ho Hum. Of course the centers of activity, namely New York and Washington DC are busy. DC spends a lot more than it takes in, and has an estimated 50 trillion dollars in debts that it is impossible to ever be paid. If you have debts and can’t pay them, and you are a government, what do you do? Simple! You print your way out of debt, by issuing more and more worthless currency. Not just in the US, but in every single land on earth, is this happening. No exceptions. All currencies are decaying like ice on a sidewalk, in any month you choose, depending on the currency. Some are failing faster than others, but all are failing, because all are being printed as if there is no tomorrow. Oh dear! What am I to do?
Funny you should ask. My answer is that if you are getting shafted, stolen from, and watching your net worth increase in dollars, but going down in purchasing power, why not get OUT OF THEM? If the boat’s sinking, abandon it! Get into a lifeboat, put a life preserver around your neck, and radio SOS to the nearest ship. If the building’s on fire GET OUT! If the dollar’s going down, GET OUT! Is that plain enough? Doesn’t require a college degree to realize that if something is going down, GET OUT. Well how to do that? Simple again. Switch denominations. Not religious ones, but any other one you can think of. Gallons? Tons? Square feet? Acres? Ounces? Yeah; ounces. Ounces of what? Ounces of iodine, grass seed, motor oil, or actually ounces of anything. I deal in gold and silver. Why ounces of gold and silver? Because they require no refrigeration, assaying, huge storage space, or maintenance. Square feet is bad because the housing bubble is in the process of bursting. Tons of coal, cement, or gravel will go up with everything else, but the storage and delivery problems can be quite steep. Groceries can spoil or need refrigeration, but some canned goods might be a good idea, in case the times get rough. Gasoline takes a lot of storage, and acres of land might just be like the housing bubble. Antiques aren’t bad if you have a need of them, and a place to put them, but often they are difficult to sell. Guns aren’t bad, and everyone should have a few unregistered ones. They can sometimes be sold for more than one paid for them.
Gold and silver are simple to buy, easy to sell, and require no huge storage places. They are a true “hedge” against inflation. Inflation is exactly what the dictionary says, and that is an increase in the currency supply, and boy is it increasing! Confiscation? Not likely. Go to the end of this piece and click on past columns, and read the one on confiscation. That should relieve your mind of that worry. If they were going to attempt to confiscate it, wouldn’t they stop selling it first? Seize the mines? How would government know who has a few Krugerrands? Why didn’t they try to seize it in 1980 when it was $850? Lots to consider? I think not. Just get out of dollars and into gold and silver with your surplus assets. No surplus assets? Well, at least you can dream.
Just because you can’t remember the dollar collapsing, or can’t imagine it, is no reason to stay in them. They are going down, which is the true way of saying “prices are going up.” Everything goes up when the presses roll, except those things which were over-priced anyway. Such as real estate. It will go down, because it is already over-priced. I consider the stock market over-priced too, with no dividends to speak of, and too high P/E ratios. I think that real estate and stocks will go down, and everything else will go up in dollar prices. I’m betting on it. How? By stocking up on gold and silver as often as I can, and having few dollars. I do practice what I preach! – Protect yourself.