The Moneychanger
Daily Commentary
Monday, 15 July a.d. 2013 Browse the commentary archive

In the Lunatic Asylum called the United States, here's an example of what passes for sanity. One Senator Kay Hagan, a North Carolina Democrat, has sponsored legislation that would dissolve Fannie Mae & Freddie Mac, the government sponsored entities that cornered the market on making mortgages and added jet fuel to the real estate bubble. If it just stopped there, who would complain? But that would be sound reasoning & sanity, which have no place in America & certainly not in the US congress. Her bill would also found a new "Federal Mortgage Insurance Corporation" like the Federal Deposit Insurance Corporation, only to insure banks against their losses in mortgages.

The reasoning runs something like this: government entities have been SOOO successful in the mortgage field, that we need another, even bigger one to bail out the banks in case of another mortgage bubble.

Is there not even a single pea-brain in Washington who can see that the CAUSE of bubbles is government meddling in the economy?

Never mind, that's not the real point of this legislation. The real point is the "Garbage Can." You can count on a natural born fool from Tennessee not to church up & sugar coat what's really going on. It's simple: follow the money. Cui bono? Who benefits? Whose palm is greased?

Remember the Savings & Loan Crisis back in the early 1990s? The government applied the "Garbage Can" solution: create a garbage can where you can dump all the worthless securities, let them ferment & fester a while, & maybe some of 'em will make good. Meanwhile, you've gotten them off the banks' balance sheet & charged up the banks for the next bubble.

What's most incredible is that Bernanke has turned the Fed into the Garbage Can for the mortgage bubble. Think -- what's he buying? Mortgage Backed Securities. What was rotting fastest in the mortgage bubble's wake? Mortgage Backed Securities. Hagan's plan to scrap Freddie & Fannie & create a federal mortgage insurer no doubt belongs to a plan to bail the Fed out of all that bad paper, creating a new Garbage Can.

Shucks! I left out the best part: the point of the garbage can is always to dump all the losses where they belong, on the taxpayers' backs.

Finally, for folks who don't even have as much sense as a natural born Tennessee fool, what evidence CLINCHES my conspiracy theory? Who's backing Hagan's plan? Why, the NC banking, credit union, & realtor associations, as well as the National Assn. of Home Builders. Folks, where that many hogs are gathered, there's bound to be a trough somewhere.

There's more. 5 Republicans & 3 other democrats on the banking committee favor this. "Bipartisan" is virtually a synonym for "the banks want it."

How long are y'all gonna stand for this?

In today's markets not a whole lot happened. Stocks rose a smidge, silver & gold rose, dollar rose, but nothing rose enough to cross any milestones. Yet.

Stocks managed a face saving rise. Dow added 19.96 (0.13%) to 15,484.26. S&P edged up 2.31 (0.14%) to 1,682.50. They are fulfilling a gigantic head & shoulders top that stretcheth back to 1997, which itself fulfills a 300 year wave in stocks. The break will bring more pain that we can imagine -- but not yet. Not just yet. Will need higher highs to generate even more one-sided mania.

In spite of new nominal highs in stock indices today, the Dow in gold & Dow in silver actually dropped. Dow in gold ended at G$249.33 gold dollars (12.061 oz), down 0.34%. Dow in silver swayed 0.85 ounce (-0.11%) to end at 781.01 oz. They still appear to be rolling over gravity-ward.

US dollar index also saved face today by climbing back above 83. Ended up 15 basis point (0.19%) at 83.081. Euro barely moved, down 0.03% to $1.3064. Yen dropped 0.63% and damaged its infant uptrend, but not fatally. Dollar's rise is not over.

Gold gained six paper dollars (0.47%) to $1,283.80 while silver gained 4.7 cents (0.24%) to 1982.6c.

Listen, y'all, ponds can stagnate but markets can't. They never stay flat for long. Floating along here below $1,300 resistance is not positive for gold. It looks stalled.

In gold's favor, it has now closed three days above its 20 day moving average ($1,272.43) and it stands above its downtrend line from the April highs. Yet it has not yet climbed above the downward upper channel line it has formed since the May high. Nor has it blasted through $1,300/$1,325 resistance. If gold lounges here too long, it will fall off the couch.

Silver hath also three days closed above its 20 DMA (now 1975c), but has not yet thrown a leg over its downtrend line from the April high.

Yep, I know I sound like a carper, but the plunges beginning in April have done lots of damage to the metals. Twill take lots of work to repair that damage.

Oh, nothing has changed long term. Silver & gold remain in a primary uptrend (bull market), & the best is yet to come. They just have to rumble over this rough spot.

On 15 July 1870 Georgia became the last Confederate state to be re-admitted to the Union. Wonder how they fell about that now?

About the most miserable thing in the world is itching, & nothing itches like chiggers or poison ivy, but I have found relief: lavender oil. Just rub the lavender oil in to the site and in about three minutes the itching will disappear. Lasts 8 - 12 hours (yes, it does).

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
15-Jul-13 Price Change % Change
Gold, $/oz 1,283.80 6.00 0.47%
Silver, $/oz 19.83 0.05 0.24%
Gold/Silver Ratio 64.753 0.149 0.23%
Silver/Gold Ratio 0.0154 -0.0000 -0.23%
Platinum 1,422.50 12.90 0.92%
Palladium 731.05 9.45 1.31%
S&P 500 1,682.50 2.31 0.14%
Dow 15,484.26 19.96 0.13%
Dow in GOLD $s 249.33 -0.85 -0.34%
Dow in GOLD oz 12.06 -0.04 -0.34%
Dow in SILVER oz 781.01 -0.85 -0.11%
US Dollar Index 83.08 0.15 0.18%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,282.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,316.82 1,323.87 1,323.87
1/2 AE 0.50 653.41 675.40 1,350.80
1/4 AE 0.25 326.71 344.11 1,376.44
1/10 AE 0.10 134.53 140.40 1,404.01
Aust. 100 corona 0.98 1,248.01 1,259.01 1,284.45
British sovereign 0.24 303.64 315.64 1,340.87
French 20 franc 0.19 239.39 246.39 1,319.69
Krugerrand 1.00 1,298.87 1,310.87 1,310.87
Maple Leaf 1.00 1,297.20 1,312.20 1,312.20
1/2 Maple Leaf 0.50 737.27 673.16 1,346.31
1/4 Maple Leaf 0.25 326.96 342.99 1,371.95
1/10 Maple Leaf 0.10 135.91 139.76 1,397.60
Mexican 50 peso 1.21 1,538.09 1,548.95 1,284.69
.9999 bar 1.00 1,286.69 1,297.69 1,297.69
SPOT SILVER: 19.85      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.00 29.00 37.91
VG+ Peace dollar 0.77 24.00 27.00 35.29
90% silver coin bags 0.72 16,155.43 16,655.43 23.29
US 40% silver 1/2s 0.30 5,662.53 5,812.53 19.70
100 oz .999 bar 100.00 1,974.50 2,054.50 20.55
10 oz .999 bar 10.00 203.45 204.45 20.45
1 oz .999 round 1.00 19.95 20.75 20.75
Am Eagle, 200 oz Min 1.00 21.10 22.65 22.65
SPOT PLATINUM: 1,422.50      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,447.50 1,487.50 1,487.50
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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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