For a new investor in gold and silver, here is the most lucid piece of advice I can offer. Identifying severe undervaluation points in gold and silver, buying gold and silver assets during these times, and not worrying about interim short-term volatility, even if the immediate volatility is downward, is much more likely to impact your accumulation of wealth in a positive manner than trying to perfectly time market tops and bottoms in the highly manipulated gold and silver game. I am posting this article today to help all gold and silver investors, especially those new to the game, to frame their perspectives about gold and silver price behavior in the proper manner. I hope this article helps gold and silver investors so stand firm and maintain their faith in the face of anti-gold, anti-silver banker propaganda and that it helps investors to identify significant corrections in gold and silver as huge buying opportunities, and not as times of despair, that do not require perfect timing to yield very significantly rewards. During the last week of 2011 and the first couple of weeks of 2012, I posted two articles on our blog that I felt would be critical to investment success this year.
Did Bankers Deliberately Crash MF Global to Crash Gold and Silver Prices?
Gold & Silver Banker-Cartel Prolonged Price Suppression Has Set the Foundation for an Explosive Move Higher in 2012
In the first article, “Did Bankers Deliberately Crash MF Global to Crash Gold and Silver Prices?” I discussed two crucial points that are important to anyone that keeps any amount of digital savings in a bank (due to the fractional reserve system, the majority of the global currency in circulation today exists in digital form only). One, bankers deliberately invented paper markets in gold and silver to kill the influence that the physical demand and supply determinants of gold and silver have over prices. Two, bankers have historically rapidly contracted and expanded paper gold and paper silver contracts (that are backed with nothing but air) to introduce volatile movements in gold and silver with the express intent of scaring people away from real money (physical gold and physical silver) and keeping people invested in their bogus paper and mostly digital money (Euros, USD, Yuan, Yen, Pounds Sterling, etc.).
In relation to the MF Global debacle, we released private messages to our members that warned them that the MF Global liquidation and theft of client assets provided hard direct proof and critical legal precedent, that in the event of a bankruptcy of a major financial firm, clients had zero rights and property theft was now being sanctioned by and approved of by the State. There are still millions of people today that don’t understand the very dangerous precedent that MF Global set for future bankruptcies of financial firms that WILL HAPPEN in coming years.
If you have not been keeping up-to-date with the MF Global dispute over hundreds of millions of dollars of client money, then I highly urge you to read these three articles below:
MF Global Clients May Lose in $700 Million Bankruptcy Fight
SW Minnesota Farmer Testifies in Commodity Scam
How JP Morgan And George Soros Ended Up With MF Global Customer Money
The first MF Global article shows you that it is still a strong possibility that clients will lose $700+ million of their money they had with MF Global before it declared their bankruptcy. That is not a sum to sneeze at by any means.
The second MF Global article is in regard to a Minnesota farmer that has not been able to recover $253,000 he held at MF Global. The farmer claimed, “This money was real money in real banks. It wasn’t under somebody’s mattress,” a statement that underscores the lack of understanding about our monetary system that exists among the masses. In fact, the opposite of what the farmer stated is becoming true today. The vast majority of money that is used in global financial transactions today exists only in digital form, not even in paper form, so paper money stored under one’s mattress is more “real” than any digital bytes on a computer at your bank. Secondly, real money is not fiat digital or paper currency but real money is physical gold and physical silver, NOT paper gold and paper silver as those that bought gold futures contracts with MF Global, hoping to take delivery of physical gold with their paper contracts, sadly discovered.
The third MF Global article, emphasizes, just as the US & many EU countries demonstrated during the 2008 free fall of financial stocks, that lawmakers and regulators are in the back pockets of bankers and will always change the laws at their whim to benefit the bankers and to defraud the people. In 2008 to prevent bank stocks from plummeting that were deservedly plummeting, lawmakers in the EU and the US forced a short squeeze higher in financial stocks by arbitrarily changing the laws and banning any short sale of any bank stocks. Even though MF Global was clearly operating as a commodities firm, they applied for and were granted, the right to be dissolved as an equities firm. In this case, everyone from the legal system and the trustee of MF Global are merely ignoring the law to profit the bankers and defraud the clients.
“Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts ‘disappeared’. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line.”
In laymen’s terms, the unfolding debacle regarding MF Global also has critical repercussions and implications regarding the implied safety of any money you have in a money market account or savings account at a bank. Remember MF Global clients believed that their money was being held in “segregated” accounts that protected their assets in the event of a bankruptcy. If you don’t believe that the MF Global bankruptcy proceedings has affected how banks view their clients’ deposits, then you are hugely mistaken. At the end of last year, Bloomberg ran a story titled “BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit.” In this article, the journalist stated, “The bank doesn’t believe regulatory approval is needed”. ZeroHedge explained why BofA was making this move in their article “Bank Of America Forces Depositors To Backstop Its $53 Trillion Derivative Book To Prevent A Few Clients From Departing The Bank”:
“it shifted anywhere up to the total of $53 trillion of the total derivatives it held as of June 30 (as Zero Hedge previously reported) on its books at Q2 from the Holding Company, which was downgraded last by Moody’s from A2 to Baa1 (the third-lowest investment grade rating) to its retail bank, which was downgraded to the far more palatable A2 (from Aa3). The reason for the transfer? Bank customers who were uneasy with the fact that suddenly the collateral backstoping the operating entity handling their counterparty risk was downgraded to just above junk, demanded that said counterparty risk be mitigated by the bank’s $1 trillon in deposits.”
The MF Global case has clearly demonstrated that any insurance of banking accounts up to $100,000 or $250,000, no matter what country in which you reside, is simply MEANINGLESS if
(1) the insurance company insuring the aggregate deposits in your country is severely underfunded;
(2) the ruling corporatocracy allows financial firms to steal your property in the event of a bankruptcy; and
(3) banks are using customer deposits as collateral against the riskiest of their junk assets
All three of the above have already been proven to be the case inside the United States and will likely be the case in countries around the world as well. From the US Federal Deposit Insurance Corporation’s (FDIC) own website, you can find this statement: “On July 21, 2010, the President signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) into law. The Dodd-Frank Act established a minimum designated reserve ratio (DRR) of 1.35% of estimated insured deposits, [and] mandates that the FDIC adopt a restoration plan should the fund balance fall below 1.35 percent.”
As recently as March, 2009 the US Deposit Insurance Fund had as little as $13 billion to insure nearly $4.83 trillion of deposits in US banks. By mid-2009, five US banks, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo, held about 39% of all deposits in the US and in 2012, that figure is almost certainly higher given the large number of US bank failures since mid-2009 until the present day, including very large US banks like Washington Mutual (which yours truly predicted in advance). It doesn’t take a math genius to understand that should just one of these top US banks fail,
(1) the Deposit Insurance Fund would be completely wiped out, thus rendering the $250,000 guarantee of bank deposits worthless and meaningless; or
(2) necessitate the creation of trillions of new money to maintain the guarantee, thus severely degrading the value of all existing money, thereby making the guarantee worthless once again.
Should a large US bank or European bank go bankrupt, a highly likely event in the future that can only be prevented by excessive monetary creation (which in essence is admission that the bank is bankrupt), then once can refer to the recent MF Global debacle to understand that no one will have any rights in recouping any money that is lost during a bank’s bankruptcy. If push truly comes to shove during a bankruptcy of a financial firm, and a decision must be made to either make the clients whole or the creditors of the bank whole, we all know that the clients (us) will lose the battle.
These critical talking points lead nicely into our second blog article, “Gold & Silver Banker-Cartel Prolonged Price Suppression Has Set the Foundation for an Explosive Move Higher in 2012.” As we stated in that article, sentiment was the lowest in nearly three years regarding gold & silver mining stocks at the end of 2011 and that entering 2012, bankers were still heavily distributing propaganda that silver was going to crash to $20 an ounce and gold was going to crash to about $850 to $1,000 an ounce. I made it clear in that article that strong fundamentals in the gold & mining sector combined with super low bullish sentiment in the mining sector produced a super strong buying opportunity and fantastic valuation for gold & silver mining stocks. In this article, I stated:
“there are still many reasons to expect a stellar next couple of years from gold and silver performance, including the mining stocks. From a technical standpoint, gold and silver appear to be on the verge of making a very significant run higher. I’m not saying that this will happen tomorrow, but it does look very probable within a short-time period. From a manipulation factor standpoint, gold and silver also look poised for a run higher too.”
and
“we see 2011 as nothing more than a temporary setback in gold/silver mining stocks…from a technical standpoint, gold and silver appear to be on the verge of making a very significant run higher. I’m not saying that this will happen tomorrow, but it does look very probable within a short-time period.”
Given the severe undervaluation of gold and silver and the fact that nobody should ever trust paper gold and paper silver futures as a means of taking delivery of real physical gold and real physical silver ever again. We believe that the divergences between paper gold and silver futures and spot prices and real physical gold and silver prices will eventually become enormous, as we first started predicting would happen in 2008, with premiums in the price of physical gold and physical silver eventually rising so high above the paper prices that the paper gold and paper silver markets will either
(1) eventually be ignored for purposes of price discovery; or
(2) eventually implode into its own current cesspool of lies, fraud and deceit.
Many new investors to gold and silver investing always make the mistake of trying to time exact bottoms and also to repeatedly time exact tops and to exit and re-enter markets repeatedly during the year. Given the enormous amount of volatility that the global banking cartel has introduced into all paper gold and paper silver products, including mining stocks, we believe that this type of mentality is counter-productive when the long-term picture in gold and silver has been as clear as it has been for the past several years. For example, when silver dropped below $30 an ounce last year, it was entirely irrelevant to one’s long-term wealth whether one purchased silver at $30, $29 or $28 an ounce given the fact that the probability silver will eventually rise to triple-digit dollar prices is extremely high.
We have always told our members that is a mistake to try to time the absolute bottoms of these corrections. When tremendous value exists in a sector, as existed in mid-January in the mining sector, then we always tell all new members to our services to “go all in” in their buying strategies during these times and to not worry about any short-term downside volatility or any of the misinformation being spewed by the financial mass media during these times about collapsing gold and silver bubbles. Furthermore, when the US Federal Reserve announced recently on January 25, 2012 that they would be extending low-rates into late 2014 and jump-started a one-day 5%, 6%, 7%, 8% explosion in gold and silver stock, this underscores my point even further. When the global banker cartel slams gold & silver mining stocks by 10% or more as they did at the end of last year, taking an already undervalued sector to greatly undervalued status, if one understands fundamentals, one will always view this as nothing more than a buying opportunity and not as a time to panic.
The performance of our Crisis Investment Opportunities newsletter portfolio, in August of 2010, was flat YTD, but then piled on whopping +33% gains in the last four months of the year. In 2008, our portfolio gains of a nominal 3.21% gain was followed by explosive gains of +63.32% in 2009. Though last year was our most difficult year to date since we launched our newsletter in June of 2007, our cumulative gains from June, 2007 to December 31, 2011 of +135 .18% has still outperformed the S&P 500, the FTSE 100, the ASX 200 respectively by +153.12%. +152.37%, and +169.20%. Thus, our track record of outstanding performance over time backs up our strong belief that worrying about every rise and fall in gold and silver every year will do nothing but drive you crazy and merely prevent you from handling your investments properly and intelligently. It is impossible to predict every single global banking cartel smash down of gold and silver with perfect accuracy; however, as long as one can foresee enough of them, as our outperformance of the PHLX Gold/Silver index by +104.75% over the last 4-1/2 years proves, and maintain the nerve and confidence to stay invested in gold and silver even when the “pundits” are screaming at you to get out, as they were at the end of last year and the beginning of this year, then you will do quite fine in continuing to build wealth as the monetary crisis deepens.
If one understands the possibility that all digital credits in your bank and investment accounts could disappear given the failure or a major global bank (an inevitable event it seems right now), then one should clearly understand that owning physical gold and physical silver is NOT an option but a necessity if you are to survive the second phase of this global monetary crisis. Even if we are wrong about the failure of digital financial products and fraudulent paper derivatives in the future, we will still be right, as owning physical gold and physical silver will continue to protect the purchasing power of people’s money as this monetary crisis deepens. Remember, though many have been jumping on the gold and silver bandwagon this week, we, at maalamalama, have been publicly advocating gold (and) silver ownership since 2006, and privately, for years prior to 2006, for the same exact reasons we’re still advocating it today.
The global banking & monetary system is a fraud, a mess, and there is no turning back from US dollar & Euro destruction at this point.
Just click here to read our 2006 article “Gold’s Speculative Stigma is Unwarranted.” It’s taken about five years since we wrote that article for the public-at-large to understand that gold’s label as a speculative investment is not deserved and is mere banker propaganda. Within the next five years, the remaining skeptics will be forced to finally recognize that gold and silver are real money, and that Yen, Pounds, USD, and Euros are not.
Given the severe undervaluation of gold/silver mining stocks, junior mining stocks in particular, and the undervaluation of gold and silver right now, we believe now is an optimal time for new investors to gold and silver to begin their journey. To help all newbie investors to gold/silver begin their journey, we are currently cutting as much as 30% off of all our major services during a special, limited two-week sale that will run from January 26, 2012 to February 9, 2012. To receive the coupon codes for this sale, please visit us at www.maalamalama.com and please join our mailing list.
About the author: In 2006, fed up with the rampant immorality of Wall Street, JS Kim, walked away from his job with a Wall Street firm to found and become the Chief Investment Strategist of maalamalama, a fiercely independent investment research & consulting firm. Since then, JS has tirelessly campaigned to increase understanding about real money like gold and silver and about the fraudulent nature of fiat money.
