The Madness of Men

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(January 2013)

 

dollars-in-gold

William H. Gross (manages the largest bond fund in the world – PIMCO) has much to say about Quantitative Easing and money printing. His latest article, Money For Nothin’ Writing Checks For Free, discusses Quantitative Easing (printing money) and the inevitable consequences. He notes that central banks have printed over six trillion dollars in the last few years. This begs the question, “Why not print even more?” Mr. Gross and many others have suggested that central banks should be hesitant with money printing schemes since they tend to end badly. He also quotes Sir Isaac Newton regarding the temporary success (and subsequent crash) of the English government’s money printing in the early 1700s South Seas bubble, “I can calculate the movement of the stars but not the madness of men.

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What about the madness of men? Do YOU really believe the following are true?

    • Congress can NOT reduce spending! (Would the deficit be eliminated if members of congress lost their salary and benefits every year the government overspent revenues?)

 

    • We can solve an excess debt crisis by creating more debt! (Will vodka also cure alcoholism?)

 

    • Printing money (QE4Ever) will create economic prosperity! (It creates wealth for banks, but not for the economy.)

 

    • More government, at much more cost, will improve the economy!

 

    • 47,000,000 Americans on food stamps (SNAP) indicates a recovering economy!

 

    • Paper money will always have value and will always be accepted in payment for real goods! (History indicates otherwise.)

 

  • Loaning money to an insolvent government at about 3% per year for 30 years is a good investment when the government has assured us that it will devalue the dollars used to repay the loan!

What about the sanity of men? Is it more sensible to believe the following?

    • YOU can control your finances, wealth, and retirement.

 

    • Gold is real money.

 

    • Physical assets are safer than paper assets or digital “money” on a computer server. Avoid the train wreck.

 

    • Gold will retain its value, dollars will not.

 

    • If you own physical assets, you have less need to trust the safety of the stock market or the bond market.

 

  • Physical assets are much less vulnerable to the actions of central banks, the “Plunge Protection Team,” High Frequency Trading, and other market manipulations.

Conclusion

“A man sees what he wants to see and disregards the rest.” Simon & Garfunkel

If the government needs money for excessive expenditures, it sees loans and a central bank that “prints money” and disregards the inevitable inflation.

If a bank sees huge unrealized losses on mortgages, derivatives, and mortgage-backed securities, it sees bailouts from the Federal Reserve along with lobbyists purchasing favorable legislation and disregards the economic cost to the nation.

If an aware individual sees unbacked paper money being printed in quantity, he buys physical assets such as gold and silver and disregards the continual media noise and nonsense.

Avoid the madness of men, and seek the safety and sanity of gold and silver. We have been warned.

 

GE Christenson
aka Deviant Investor

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I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice.

Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle.

There are many parallels between surviving in the arctic and investing for substantial gains in today’s market. For example:

– Preparation for surviving arctic weather is critical, just as preparation is essential when investing.

– There is little room for delusional thinking when you are subjected to a 40 degrees below zero blizzard while facing 30 mph of wind. Similarly, dangerous markets will punish delusional thinking.

– There is much to learn about survival in the arctic, considerably more than just “wear more clothes.” Markets appear less complicated and easier to understand than they actually are. Underestimating either arctic conditions or the complexity of markets can be deadly.

– Temperatures in the arctic gradually move from dreadfully cold to mildly warm. Markets seem chaotic in the short term but gradually move up and down in long cycles.

– One can experience the “midnight sun” for several months in the arctic. During that time, it seems like the sun will last forever. It does not, and several months later you will live through two months of darkness. Bull markets feel like they will rally forever. They do not and are followed by bear markets, regardless of what the Wall Street cheerleaders wish us to believe.

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