-- Published: Monday, 28 March 2016 | Print | Disqus
By: Bill Holter
"The rally you never sell"! This is a topic Jim and I have spoken of and just recently discussed in our latest recorded chat. This is also a topic very fitting to start off with for our "gold subscribers" because of where we are economically and financially on a global basis. Hopefully as you go through this missive, a light bulb will go on (if it has not already) and fully understand that "when and how" are not really relevant, the big question is "what", I'll explain.
We all know the system as a whole has hit "debt saturation" levels where even sovereign treasuries and central banks have been stretched. It is no longer just about the banks or financial institutions, the danger is now risen to the level of "countries". Please remember, the 2008 episode was aborted (saved) ONLY because sovereign treasuries and in particular central banks stepped in and flooded the world with liquidity. Since we now have negative rates permeating the financial world, it tells us central banks are approaching their greatest fear of "pushing on a string".
When looking at the real economy, we know from simple deduction and first hand views that the global economy is at best stagnant and most probably shrinking (especially if you look at trade numbers). We also know this stagnation or decline is occurring AFTER eight years of total monetary and fiscal ease. Call what has happened a period of "helicopter money" if you will because it is exactly what they've done ...yet we now run again into tightening liquidity conditions.
What do the above two paragraphs have to do with "the rally you never sell"? They both lay the groundwork or foundation for our final conclusion! The thought process has gone like this; the central banks have got the market's back and they will be able to tighten once "escape velocity" is reached ...tightening will ultimately be bad for gold and silver. That was the theory, the reality is quite different! As we have suggested all along, "printing" currency has never worked throughout history and would not work this time. Here we are with proof positive of a failed experiment, negative interest rates are your proof!
With the above as groundwork, if we saw gold move up to $1,700 and Silver up to $30 next month ...why shouldn't we take some profit and wait for a pullback? Remember we spoke of "when and how" early on. "When" do you sell and "how" (or why) did the rally occur to start you thinking of taking profits? I would submit that "what" is the most important question. What will you sell your gold for? Please do not confuse "what" in this question with "why would you sell your gold?".
Our question of "what" means for what will you trade your gold? For dollars? For euros, yen, pounds or any other currency? Do you see where this is going? I know many people made gold purchases "to make money", in reality this is a horribly wrong thought process! Since 2008 I have told people they should purchase gold or silver as a way to get OUT OF DOLLARS ...as a way to get capital OUT OF THE SYSTEM. Why in the world would you wake up one day with gold over $2,000 an ounce and "deposit" your capital back into they system? When writing "what" will you trade your gold for it was meant literally. Will you trade for currencies of countries that are already known to be mathematically bankrupt?
Before wrapping this up we need to look at one more area that is taken for granted but certainly should not be. The area is "contacts" specifically and the rule of law in general. Let's look at banking first. It used to be you deposited YOUR money INTO the bank, this has all changed. Now when you "deposit" money you are LENDING it to the bank and (bail in) legislation has already been written into law. Another area of course would be all the "paper" gold outstanding that can never perform. We already know that mathematically there are well over 100 ounces (over 300 on COMEX) of gold contractually obligated for every one real ounce available to deliver. I would ask you this, would you bet your net worth on a game of musical chairs with more than 100 contestants but only one chair??? Of course you wouldn't so why would consider an ETF or any other "promise" in lieu of real metal?
To finish, we believe this IS the rally in gold that should never be sold until there is some sort of currency with real backing that can be trusted. Only then can you trade your gold, when you can receive in return a trustworthy currency. This is all about credit seizing up and a systemic change occurring. The two biggest bears on gold, Harry Dent and Martin Armstrong say this almost exactly but come to the conclusion gold will collapse in price. This is simply laughable. Dent calls for credit collapse yet he believes the biggest debtor on the planet (the U.S.) will thrive ...and the IOU's from this deadbeat debtor will soar in value. Armstrong believes we face a societal collapse and possibly governmental collapse. Would you rather have gold buried in your back yard or electronic digits held in a banking institution where (bail in) legislation already exists to steal your balance? Armstrong makes no sense whatsoever when he says the IOU's (dollars in this case) of any collapsed government can appreciate in value versus gold or silver. A good illustration might be how many Confederate dollars does it take to purchase one ounce of gold today?
No Ponzi scheme can unwind slowly. When the current Ponzi scheme breaks you will have NO WARNING whatsoever. In our opinion, it will be completely over within 48 hours and the markets will be locked up and you "locked in" to whatever you have ... and "locked out" of whatever you don't have but would like to! Technical analysis will be worthless and of no help. In a world where ALL ASSETS are nothing more than promises, gold and silver will do what have for 5,000 years. They promise nothing as they need not promise anything but what they ARE, MONEY. REAL MONEY that will have real value when the current credit system collapses and greater real value whenever a new system gets up and running!
On a separate note, many of you know I have partnered with Jim Sinclair and had planned a "premium" site. Our site is now live as of today and can be found at JSMineset Gold Is Now Live! :: Jim Sinclair's Mineset . My work will largely in the future only be found through subscription though I will post one or two "public" articles per month. In addition Jim and I plan to "interview" each other once or twice per month and also interview a special guest once per month. If you have enjoyed and or learned via my writings in the past, please consider subscribing to continue following my work!
Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration.
Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.