In today’s daily, there are two long-winded articles from our friend, Andy Hoffman. Andy is working overtime these days. He has a lot to say and it is very worthwhile. As I have mentioned in the past, Andy’s take on the precious metals market and the global economy mesh closely with Miles Franklin’s views. I will be meeting with Andy in Denver a week from Friday to discuss the precious metals markets. In the first of his two articles, Too Many Topics for a Comprehensive Title, he presents a very compelling case that the gold market is manipulated by the Gold Cartel. He lays out, day-by-day for a month, examples of how the manipulation takes place. For those of you who doubt that the gold market is controlled by JPMorgan, Goldman Sachs, HSBC and a few other bullion banks, along with the central banks, check out his work today. It is hard to deny what you see with your own eyes. Good job Andy!
I haven’t mentioned Back Woods Jack lately – because he hasn’t had much to say, but we spoke this morning and Back Woods said, “Third quarter profits should be strong and even stronger in the fourth quarter.” To Back Woods, that is “proof” that everything is getting better.
I told Back Woods, “It is possible that a handful of large multi-national Fortune Five Hundred companies could show decent profits, but just what does that do for the overall economy? It is the hundreds of thousands of small businesses that create most of the jobs, not a handful of conglomerates. The problem is that the profitable corporations are not hiring. Why should they when people are spending less. Less people are employed every month and demand is flat to falling, and this is not the environment in which these firms will use their profits to expand.”
I gave Back Woods a simple analogy to make my point. I said, “Suppose you make $200,000 a year but everyone else in the neighborhood are struggling to make ends meet or are unemployed. How does YOUR success change anything for the neighborhood? How does a strong profit from a handful of firms change the outlook of the American economy? It doesn’t!”
Big firms aren’t hiring, and banks aren’t lending – in general. That is the problem. It is the “pushing on a string” theory that maintains the Fed can give the banks money but you can’t make them lend it and you can’t make people borrow it. The Fed keeps on doing what it does best – it prints more money and gives it to the banks. And nothing happens. QE1 and QE2 did not turn the economy around, although they may have slowed down the collapse. And next comes QE3 and then QE to infinity. I’ll tell you what QE does do – it moves markets! When QE is announced, the stock markets and the metals rise. When it is removed the markets pull back. The current drop in the stock market and the precious metals markets are a direct result of the cessation of QE2 without another announced round of QE3. The minute Bernanke (and the EU) announce that in order to keep the economy from contracting they are easing again, up go the metals. If the strong showing by gold, silver, platinum and palladium on Wednesday continues, then the market is telling you that QE is not far off. QE may not work, but it works wonders for your gold and silver portfolio because it debases the dollar. Keep your nose to the wind and see what the Fed is proposing. As Jim Sinclair says, they have no choice and it is QE to infinity!
Recently, I wrote about the difficulties I had in getting a mortgage for our new condo in Aventura. I pointed out that I have perfect credit, strong earnings, a solid net worth and yet I had to literally jump through hoops to get a loan after I had put up 50% in cash. Well, a close friend who spends the winter in Naples, Florida told my wife that a close friend of theirs who is the CEO of one of the largest insurance companies in America tried to get a $4 million loan for a home down the street from where they live. He ran into the same problems that I did. The banks made it so difficult for him to get a loan that it nearly drove him crazy. This is the CEO of one of the largest insurance companies in America and he is a very wealthy man. Is it any wonder that the real estate market is comatose?