The Moneychanger
Daily Commentary
Monday, 5 December a.d. 2011 Browse the commentary archive

To my chagrin I have neglected a subject, I just discovered last night. Oh, I knew it was going on, & always suspected that your wonderful government would pull it on y'all's pension funds and IRAs, etc., but today it has drawn one step fearfully closer.

I'm talking about government confiscating pension funds -- y'all's pension funds -- to dig out of their debt swamp. Argentina did it a few years ago, Hungary last year, and Ireland is eyeing 24 bn euros in their National Pension Reserve fund right now.

US government debt = $15 trillion. US pension fund assets = $16 trillion. Y'all see any similarity there? Anything click in your mind?

Add to other precedents Portugal today, which transferred 5.6 bn euros of private pension funds to itself to meet its budget deficit.

And somebody explain to me, in the face of all this precedents, how the US government (ever trustworthy) would not do the same? All that time folks have wasted worrying about gold being seized as it was in 1934 have been watching the front door of the house while the burglars were unloading the furniture thru the back door.

Y'all know I am no alarmist, and I reserve my most lip-curling contempt for all those Internet Chicken Littles who every day see the sky falling.

This warning is nothing new with me. The government seized gold in 1934 for the same reason that Willie Sutton robbed banks: that's where the money was. In 2011 the money isn't there, it's in pension assets, IRAs, 401(k)s, pensions, all the rest.

For years when people have asked me what they should do with their IRAs, my threshold remark has been, "First, you have to decide if you want to continue in a partnership with the US government. Ownership has two parts, title and control. With your IRA or 401(k), you have title, but they have control. Yes, you will pay a penalty & tax to withdraw it, but how much is control, in your own hands, worth to you?"

From long experience I know that not 1 out of 80 will choose to cash out his IRA, so powerful is the APPEARANCE that all the money is yours. ME, I don't want any part of any partnership with the yankee government. I'll take my licks AND my money, thank you very much.

But I am nothing but a paranoid natural born fool from Tennessee. I will not, however, stand in the middle of the railroad tracks when an express train is barrelling down on me, driven by a maniac.

Now y'all can put that IRA into silver & gold, but it is still in an IRA, and a trustee holds it, not you. If you simply MUST keep your IRA, then put it into physical silver or gold. But you ought to consider most earnestly, together with your spouse, which is more important, mere title to the IRA, or control.

Sarcophagus of France and Ferkel of Germany met today and after lunch announced a list of recommendations for changes to the euro treaty, namely, automatic sanctions against deficit violating countries, debt limits written into member constitutions, and no more haircuts for creditors (save those holding Greek paper).

Look deeply into it: this will established centralized budget oversight in Brussels. This is the nightmare turn, and most of all IT CONTAINS NO SOLUTION TO THE ALREADY UNPAYABLE DEBT. No solution, that is, except inflating it away, but thru the ECB rather than individual nations. Don't let all those German protestations about not making the ECB lender of last resort. If they are going to pay all that unpayable Himalaya of debt, they can only inflate it away. All other explanations are mere carpeting for the barnyard.

The European announcement shaved 79 basis points off the spread between Italian and German debt almost immediately. That indicates that a lot of investors took the bait. I remind you that even if all power is centralized in Brussels, the debt remains still too large to be paid. Investors have been suckered.

Dow today gained 78.14 points (0.65%) to close at 12,097.83. Maybe that's a case of buy the rumor, sell the news. S&P 500 closed up 12.8 (1.03%) at 1,257.08.

My upper limit on the Dow is about 12,200. It's at that wall now. I doubt it will climb it, but if y'all can't accept that, then keep on trying to draw to that inside strait and keep holding those stocks.

US Dollar index today went sideways, up 3.8 basis points, but important thing is that it remained above 78.50. Currency traders weren't buying good news out of Europe. Euro gained 0.4% to 1.399, while the Yen closed up 0.19% at 128.54c/Y100 (Y77.8/$1).

SILVER & GOLD took the biggest hit on the European news. Gold dropped $16.30 (0.9%) to $1,730.70 on Comex, while silver dropped 31.5c (1%) to close 3230.6c.

All right, I'm going to crawl out on that limb. I think today's drop in silver & gold was a mere reaction to the last few days' highs, & that the bottom boundary of the triangle for silver (3150c) and of the trading channel for gold ($1,690 - $1,700) will hold. Plainly, if they break those supports, they will tank, but I think they will hold. At least, they did today, with silver posting a low at 3185c & gold at 1,717.67 (protecting that $1,720 support).

But up or down, I have run my nose slam up against that wall again: what else can I trust but silver & gold? Government promises? The stock market, locked in a bear trend? Banks??! Banks, who'd as soon throw you out of the lifeboat into a swarm of chummed sharks as I would step on a bug?

Mercy! I reckon I'll take my chances with the silver & gold, and even if they drop 20 or 40%, I'll still have 'em where I can rub on 'em to console myself.

Y'all do what seemeth good to you, but I smell a trap, and I'm not going to wait around to make sure I've identified the right stench.

On 5 December 1913 Great Britain outlawed sending arms to Ireland. Now why do you reckon the nice Imperial government would do that?

On 5 December 1861 the Gatling gun, prototype machine gun, was patented. It brought a new era of bloodletting in warfare never before imaginable.

On 5 December 1876 Daniel Stillson patented the Stillson Wrench, the first practical pipe wrench. We build monuments and statues to generals & presidents, but why not to really USEFUL people like Stillson?

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

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Market Snapshot See more charts and market data
5-Dec-11 Price Change % Change
Gold, $/oz 1,730.70 -16.30 -0.9
Silver, $/oz 32.31 -0.32 -1.0
Gold/Silver Ratio 53.572 0.018 0.0
Silver/Gold Ratio 0.0187 -0.0000 -0.0
Platinum 1,520.70 -27.00 -1.7
Palladium 631.85 -10.65 -1.7
S&P 500 1,257.08 12.80 1.0
Dow 12,097.83 78.41 0.7
Dow in GOLD $s 144.50 2.29 1.6
Dow in GOLD oz 6.99 0.11 1.6
Dow in SILVER oz 374.48 6.02 1.6
US Dollar Index 78.61 0.04 0.0
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SPOT GOLD: 1,721.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,764.44 1,780.44 1,780.44
1/2 AE 0.50 869.31 903.74 1,807.47
1/4 AE 0.25 438.96 456.17 1,824.68
1/10 AE 0.10 182.47 191.08 1,910.75
Aust. 100 corona 0.98 1,675.51 1,690.51 1,724.65
British sovereign 0.24 405.22 412.22 1,751.14
French 20 franc 0.19 321.39 328.39 1,758.89
Krugerrand 1.00 1,728.29 1,744.29 1,744.29
Maple Leaf 1.00 1,733.40 1,754.40 1,754.40
1/2 Maple Leaf 0.50 852.09 895.13 1,790.26
1/4 Maple Leaf 0.25 426.05 456.17 1,824.68
1/10 Maple Leaf 0.10 170.42 185.91 1,859.11
Mexican 50 peso 1.21 2,060.79 2,077.79 1,723.31
.9999 bar 1.00 1,727.42 1,738.42 1,738.42
SPOT SILVER: 32.01      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25,756.53 27,256.53 35.63
VG+ Peace dollar 0.77 25,256.53 28,800.00 37.65
90% silver coin bags 0.72 22,136.40 22,486.40 31.45
US 40% silver 1/2s 0.30 8,852.95 9,152.95 31.03
100 oz .999 bar 100.00 3,226.00 3,286.00 32.86
10 oz .999 bar 10.00 320.10 326.10 32.61
1 oz .999 round 1.00 32.11 32.86 32.86
Am Eagle, 200 oz Min 1.00 33.76 34.26 34.26
SPOT PLATINUM: 1,520.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,520.70 1,620.70 1,620.70
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Warnings and Disclaimers

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 trend is up, targeting 16:1 gold/silver ratio or $195.66; stock's primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 16 ounces of silver. US$ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

Be advised and warned:

  • Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short-term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
  • NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
  • NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
  • NOR do I recommend buying gold and silver on margin or with debt.
  • What DO I recommend? Physical gold and silver coins and bars in your own hands. For additional information, please see our Ten Commandments for Buying Gold and Silver.
  • One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Explanation of Terms

The US DOLLAR INDEX is the average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.

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, and 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.

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