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(s)Elections See other (s)Elections Articles Title: Latest from the Looney Bin -- Mark to Market Listen to the latest from the Looney Bin. I've been hearing the whining & whinging about the terrible bank-burdening accounting rule called "mark to the market." They're blubbering that if it weren't for the mean-old mark to market rule, they wouldn't have balance sheet problems. Now mark to the market is an accounting rule that says, "What you paid for it doesn't matter, what you think it's worth doesn't matter, only what somebody is actually willing to pay today." Otherwise, how could you ever know what a business is worth? What are the banks saying? "We have rotten MBS that we paid 100 cents for. Nobody wants the stuff so today it's only worth 15 cents on the dollar, but we want to value it on our balance sheet at 100 cents." Think about this. Abandoning mark to the market means you can never know what a bank is really worth. It is the accounting equivalent of running naked through the woods with your thumb in your mouth, blind running drunk. And the powers -- the SEC & the Fed & the Treasury -- are seriously talking about junking mark to market. No, I'm not drunk & I'm not joking. These are not serious people. Well, passing from the contemptible to the somewhat less contemptible, let's look at what the Nice Government Men accomplished today, but first, a lesson in manipulation. Say the Plunge Protection Team doesn't like the Dow dropping 777 points in one day. So the next day even before the market opens they go into the futures market and buy Dow futures & S&P futures. Traders see those futures rising & assume the market will rise, & so buy stocks. Arbitrageurs also sell the futures & buy the underlying stocks to profit from the value divergence, raising the Dow & S&P in the process. And since it wouldn't do for the price of gold to blast through US$1,000 while a financial crisis loometh, the NGM must also control price of gold. How to do that best, easiest, cheapest? Sell platinum & silver, or better yet, platinum & silver futures (so you don't need to own any actual metal) to drive those markets down. Traders see them falling & assume gold will fall as well. Bingo! Manipulation accomplished. In the outcome, the Dow rose 485 points to 10,850.66, "on the expectation the bailout plan will pass." Right. Gold came under attack & lost US $14 to close at 874.20 while silver dropped 75 cents to 1223.10. But those were just the futures markets spot month closes. In the aftermarket gold traded as low as 865, silver as low as 1170. So what happened? The wholesale premium on US 90% silver coin rose from 185 cents an ounce over spot to 280 cents over spot by day's end. In other words, the paper price dropped while the physical price rose. The fix ain't working. NGM aren't taking any prisoners here, so y'all will have to play the man. I told y'all volatility would increase, & that the NGM would attack silver & gold. However, this will pass, just as the bailout will pass in a couple more days. Don't expect any silver/gold correction to last more than 4-5 days, and I doubt it will go lower than this. Today marked a double bottom with silver's last low in paper prices, but in physical prices it was a higher low. Silver & gold remain in a bull market. Keep on buying on every dip. Get out of stocks & US dollars. Y'all know probably that Abraham Lincoln stole his Gettysburg address line -- "government of the people, by the people, for the people" -- from John Wycliffe (d. 1385). Now we are finally free of the quotation & the notion, because now we have a government of the banks, by the banks, and for the banks. Argentum et aurum comparenda sunt -- To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. Footnotes: The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ depicts the Primary (20 year) Trend of stocks against gold. When the DiG$ is dropping, gold is gaining value against stocks in a trend that should last 15 - 20 years. The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896. Because it shows the primary trend ("tide") of gold against stocks, for investors it is the single most important financial chart in the world today. Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80 - G$20 (4 - 1 oz. of gold will buy the whole Dow). The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow. The DiSoz is trending down with a target of under 36 ounces. The GOLD/SILVER RATIO is the gold price divided by the silver price, & shows how many ounces of silver it takes to buy one ounce of gold. The Ratio shows us the Primary (20 year) Trend of gold's value against silver. When the Ratio's trend is dropping, silver is gaining value against gold. This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5 - 10 years. That implies that silver will massively, vastly outperform gold before this bull market ends. When both metals are rallying, the ratio often (but not always) drops, confirming the rally. 30-Sep-08 Price Change CLOSES Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 4.
#3. To: DeaconBenjamin (#0)
"Get out of stocks & US dollars" I agree with getting out of cash and bonds, but why get out of stocks? Are you forgetting that the Dow goes up with inflation?
Do the increases in stock valuation outpace the dollar's loss in value? Certainly they have not since 2000.
#5. To: DeaconBenjamin (#4)
The DJIA would have to be around 20,000 to have just kept up with inflation from its 2000 value.
In the long run, yes. Check out this story about the Zimbabwe stock market last year. I'm just saying that like gold, stocks are a hedge against inflation (as long as companies can make a profit).
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