WEDNESDAY, AUGUST 30, 2006

MID WEEK READING

THE INTERNATIONAL FORECASTER

AUGUST 2006 (#2) Vol. 10 No. 8-2

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

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US MARKETS

You don’t have to be a genius to figure out that the best way to destroy our capitalist system is to debauch our currency. This is done by implementing a continuing process of inflation. By this method, government by stealth can confiscate, secretly, an important part of the wealth of its citizens. In the end inflation brings impoverishment to most.

Today our economy, which passed the point of no return four years ago, has begun the process of stagnation and inflation, better known as stagflation. We began bringing this to your attention over a year ago and since that time, it has progressed. Increasing interest rates have put downward pressure on some assets, such as real estate and at the same time it has increased the cost of business, which in turn has put pressure on employment as wages rise due to inflation. For business that creates a profit squeeze and that will be translated into lower stock prices.

Inflation, low interests rates and easy credit have magnified what Thorstein Veblen called conspicuous consumption. Many Americans are borrowing to maintain their elevated lifestyle. It is our opinion, contrary to official government figures that stagnation has already begun and it will be exacerbated by the fall in housing prices. It will also cause a fall in stocks as profits erode. Those living on a fixed income, such as Social Security and perhaps a small pension, will be impoverished. This is what we see already emerging and most Americans do not understand that it’s happening and it’s going to get worse. This is why on almost every radio program we have been on and almost every issue we have pleaded with listeners and readers to reduce or eliminate debt.

We could have a replay of the Weimer Republics financial collapse in Germany in the early 1920s, but let’s not take the worst case scenario for the next five years. We could see real estate fall 40 to 70 percent. We could see the Dow fall 70% to 4,000 on the Dow. That could easily bring social chaos, especially because we have 30 million illegal aliens in America, most of whom will be without work. It could open the door to revolution and dictatorial government as it did in Germany, which allowed Adolph Hitler’s rise to power. The implications are endless. All we know is very tough times are on the way, we called the top in the housing market in October 1988; the top in Treasuries at 8-3/8% in 1994; the bull market in 1995; the end of the bull market in April 2000; the beginning of the bull market in gold and silver in June 2000; the top of the real estate market in June 2005, and numerous mega winners in stocks, commodities and interest rates. The chances of us being correct again are excellent. Thus, you should take heed and get your financial house in order. Get out of debt as much as possible, get out of stocks, bonds and real estate and have most of your wealth in gold and silver related assets. Inflation is insidious; it sneaks up on you and destroys your assets before you realize they have been depreciated. Inflation is caused by monetary profligacy. Our privately owned Federal Reserve will inflate until it simply cannot inflate anymore. Then the unstoppable deflation begins and wreaks its terrible consequences.

We have been involved with economics, finances and social and political issues, and gold and silver related assets, for 47 years and there are only a few alive with such credentials. You are getting the distillation of years of hard work and research. Today the case for gold and silver is fundamentally overwhelming and this is why your government, Wall Street and corporate America wants to keep this information from you. Appreciation of gold and silver assets triggers a negative response in fiat paper markets, such as stocks, bonds and real estate. The appreciation of gold and silver set off alarm bells throughout the system, signaling something is wrong in the world of fiat currencies. That is because gold is real money. The value of gold has defied time. It is as valuable today as it was 3,000 years ago. It is rare and portable and when everything else loses value, people flock to gold. Gold is an insurance policy against collapsing currencies and economic upheaval. Gold and silver prices are driven by all things you are seeing right now and will see in the next few years - a collapsing dollar and other currencies versus gold, which has been underway for some time. Inflation, stagflation, higher interest rates, falling stock, bond and real estate prices and escalating wars created to cover the failure of the financial system.

Gold is still in stage one of a three to five stage bull market along with silver. This should end up being the biggest bull market in history. If you are not participating in the bull market we urge you to do so. You cannot protect yourself and you cannot be a winner if you are not in the game...

GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS

 

            More than 50 gold mines will be built within the next five years and some30 will be constructed this year. Most of these mines are small. A new major mine hasn’t been constructed for some years. The majors have not and are not spending the money on exploration that they should and so they are forced to buyout successful exploration projects brought on stream by these small companies. Production is not being replaced so it must be purchased. That also means prices being paid for developed or developing mines are too high. Now that hedge funds are investing in major metals companies they want mergers and buyouts and they want cash as a result and more often than not that doesn’t happen. The hedge funds want a quick buck and could care less about the miner and the industry. The cost of mining like everything else is relentlessly moving higher and that will continue. Due to punitive legislation you will see less mining activity in countries such a Mongolia, the CIS states and Russia, in parts of Africa and particularly in Zimbabwe and South Africa. Then there are shortfalls and shortages, which have to lead to higher prices in the entire metals complex.

 

            Silver remains strong and like nickel, copper and zinc is a market leader. Last year silver rose 29% against the dollar, 47% versus the yen, 48% versus the euro and 49% versus the Swiss franc. This definitely shows that in an inflationary environment silver is a store of value.

 

            Between January 1980 and February 2006 silver fell 93% from $49.95 to $3.55. It then spent 23 years in the doghouse. Gold has broken out of its 50% retracement and it did it like $512 didn’t exist, nor did $425 seem formidable at all. Silver popped thru $7.10 and $14.20 showing all the indications of a master mega bull market. $25.00 is the next target for silver and when it arrives there it too will be easily surmounted. As we have said before if gold hits $1,700 to $2,100 an ounce, silver should hit $100 to $115 an ounce. These figures are not out of line. Remember, we were buying silver in 1964 at $1.29 and on its first run saw it go to $2.50. We finally gained some credibility after being one of only 10 voices in the wilderness. Yes, we were collecting all the silver coins we could afford in the 1964 to 1968 era when they were still held by the public. We used to have a field day in Las Vegas in those days. Due to that we gained a following and had many show managers, captains and Maitre-D’s as clients. That way we were able to see all the big shows up front. We must have seen Elvis and Wayne Newton 50 times each. All we can add is we are in the biggest bull market in history in gold and silver and if you do not participate you have no one to blame but yourself...

-- Posted Thursday, 31 August 2006 | Digg This Article

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