Life is full of things we trust. We trust our mates, kids, banks, cars, structures, forecasts, investments, religious beliefs, and of course ourselves. A new Vanity Fair article examines Bernie Madoff’s scam in detail. It was written by his long time secretary, and it is very interesting. Here was total trust in this man by thousands of true believers. They thrust their dollars on him, and got a check every month in interest or return on supposed investments. Or so they thought. It all came crashing down when, as all Ponzi schemes must, the new recruits’ input, can’t equal the expected payouts of the already captured investors’ dollars. Madoff had an expensive life style, offices and a trading room manned by a staff of traders, but the secretary didn’t know what they were ’trading.’ Madoff was ’Mr. Personality’ personified. He became famous for his returns on investments, even though for years, experts had warned that the whole thing was a ripoff and Ponzi scheme. $60 billion went down the drain. Trust misplaced, even though it appeared sound and trustworthy.
In the stock market or ’dot com’ crash, it is estimated that $7 trillion was lost. Stock buyers figured that the boom would go on forever. When something is working well, the thought of failure never even enters the mind, a-la Madoff. Trust. When you are driving your car down the road and it is just humming along beautifully, the thought of a blowout, overheating, or mechanical failure is the furthest from your mind. Trust. I am currently reading a very long book on Andrew Carnegie. In 1873 there was a huge depression. Everyone was getting laid off, wages cut, businesses were failing, and all progress had come to a shuddering halt. Bankruptcies were everywhere as well as failures of previously well thought of businesses, railroads, and iron mills. Carnegie himself had to sell most of his stocks and holdings to keep from going under himself. Throughout history, there have been waves of prosperity as well as corrections. Depressions are nothing new. In 1873, that depression solved itself, as ours would, if there were no government interference or ’help,’ which prolongs recovery and makes it more difficult. In 1873, salaries were cut, expansion halted, and everyone buckled down.
In 1929, fortunes were lost, because millions put their trust in stocks, which many thought were so strong that a new age had dawned, and eternal prosperity was at hand. A few sages warned that it was a bubble, and sold everything they had. Since ’those who won’t learn from history are doomed to repeat it,’ what in the world can one put their trust it today, as an example? Real estate? Millions bought homes, lied about their incomes, and took out mortgages on homes which everyone knew would continue to go up. People were buying homes and flipping them at unheard of profits. Appraisers and mortgage brokers were lying through their teeth to get deals consummated, and all looked so rosy, that life indeed was going to continue on with unabashed happiness. Trust us. Oh sure.
Maybe it would be considered a truism if I said that, ’when things seem too good to be true, they mostly aren’t.’ Trust is an extremely important part of life, and if you can’t trust a thing or person, life can be extremely sad. Lots of people put trust in what I consider to be so silly that I can’t understand their trust in the first place. Remember the Jim Jones sect and those characters who thought they were going to heaven or outer space on the Halley comet? I think they got what they had coming to them.
The thing we all need to trust in is our method of staying alive. Be it health or money, both are necessary to continue living. We need what money buys, such as food, housing, and transport. We need health to continue life, and good health will make our lives last longer and with greater pleasure. That’s why I take a lot of vitamins and minerals, don’t smoke, have never done drugs, and have a bit of alcohol a few times a week. My health at 75, is virtually perfect. As far as economics are concerned, trust is paramount. I have few dollars, and lots of gold and silver. I must admit that buying gold and silver in 1979 and early 1980, was similar to buying stocks at the peak of the ’dot com’ boom, or in early 1929. They were a classic bubble, waiting to burst.
Gold and silver a ’bubble?’ Absolutely, and I was doing then, what I am doing now. I was making people really angry by telling them that I thought things were out of hand, and I was advising not to buy. “You’re supposed to be selling gold and silver and you’re telling me not to buy it?” “No, I am merely saying that I think the prices are too high, and there may be a huge correction. Gold has gone from $40 and silver from $4.50 to $750 and $45 pretty fast, that’s all.” Most bought anyway. Why was there a bubble in gold and silver? We had the hostages in Iraq, Jimmy Carter was President, we were giving away the Panama Canal, the prime rate was 13% and mortgages were 21% interest. Everyone was scared and turning to gold and silver for safety. Couldn’t blame them! Then in November, Ronnie Reagan got elected and things began to turn around. When he took office, they really turned around, and prices corrected. The bubble had burst, and prices have been going up practically ever since.
Will there be another bubble in gold and silver like there was in real estate and stocks? Maybe, if certain things are present, which are similar to early 1980. I’ll let you know, but certainly not now. Remember, gold and silver have been true money for thousands of years, through all governments, dictatorships, monarchies, wars, ruination, floods, fires, earthquakes, and myriad disasters. Gold and silver, throughout all these historic happenings, and even in the 1980’s, had a ratio of 16 to 1. Now it is 64 to 1, and I know of no earthly reason not to expect it to return to 16 to 1 eventually. If the ratio were 16 to 1 today, silver would be $60 an ounce, not $15. Trust me. That ratio will eventually resume.
Another item of trust: I think that if you look through history, the majority have always been wrong. Literally. Now what does the majority put their trust in today? Stocks, bonds and dollars. The dollar has lost 98% of its value, stocks are still a third of their former bubble glory and I think will go far lower. Bond holders are in such bad shape, that nothing need be said about them here. Stop following the majority who are placing their trust in all the wrong things. Be a smart minority and place your trust in historic money.
Gold and silver are not dependent on a political party, government, laws, rules, promises, paperwork, or anything to give them value, any more than does any tangible thing, such as a piece of steel, tree in the woods, or a dozen eggs. Tangible things stand alone in their value, regardless of which party is in power. While their prices will invariably go up as the currency which they are bought with goes down in value due to inflation, the eggs, steel, tree, and gold and silver remain exactly the same. Only their prices go up as money loses value due to endless printing of it. So does it make more sense to store surplus assets in tangible things, or what is used to buy them? Eggs will spoil, steel will rust, etc, but gold and silver are the most easily bought, stored, and sold of any tangible, and besides they are absolutely beautiful! I guess it all boils down to get out of dollars, which are a shrinking measurement. They don’t rust either!
One other thing. Since the election of Obama; guns, bullets, gold, and silver have been in great demand, and rightfully so. This has brought on a wave of TV commercials with pitchmen urging buying gold from this outfit or that one, none of which are of good character. Ask yourself: Who pays for all these commercials, which certainly aren’t cheap? The answer obviously, is those who do business with these nocturnal airlines, which phrase can be translated into: ’fly by night.’ Make one phone call to them, and you’re on their list and you’ll never get rid of their incessant telephone harassments. Just a word to the wise. When someone calls you, they’re trying to sell you something on which they’ll make a lot of money or commission. When you call someone such as us, you want something, and we are delighted to serve you, and we will never, ever call or bother you.