Wednesday, September 16, 2009

Fantasy World Feels Great

Once again I find myself having to devote the majority of my time here having to separate the fantasy world from the real world. In fantasy world things are looking pretty fantastic right now:

Ben Bernanke announced two days ago that statistically the United States is now out of recession. The same comments have been echoed from Barack Obama and Treasury Secretary Tim Geithner. These three men have spend the summer touring and speaking to let the everyone know that they have saved the country from recession.

Behind one of the speeches I thought I saw a large mob of angry protesters that were there to let Obama know their thoughts on his reckless policies. I must have been mistaken though, because that was not covered on national television.



Why was it not covered? That's the real world. What else is going on in that world? I'm glad you asked.

Over the past two weeks insider shareholder selling for American stocks has risen an astounding 85% from the already high number. They purchased a total of 4.6 MM and sold a total of 471 MM. Insiders are the people that run the companies, look at the actual balance sheets, and can make the best decisions on the direction of American business.

But wait, stocks are soaring right now. Going back into fantasy world, I turned on the news and hear interviews from people who sell stocks for a living telling me this is one of the best times in history to take advantage of "cheap" stocks.

Martha Stewart was asked this morning on CNBC if the American consumer would ever come back. "Of course they will," was her response. "Because people want to buy things."

Ahhh, now I understand. Back to the real world:

Bank of America and Citigroup announced record defaults on their credit card debt this past month. It has taken about two full years but the process has come full circle. Americans took out loans on their homes to pay for their expenses in the early part of this decade. When that credit went dry they turned to their credit cards to cover the difference in fantasy life vs. the real world. Now we have reached the point of maximum debt.

Meanwhile the commercial real estate market is in free fall. The asset values are disintegrating as the banks do everything in their power to keep the loans from defaulting and recognizing the losses. Everyone prays for a real estate boom to save them as the debt drowns everything around them.

The boom seems to be happening elsewhere, however, and people are starting to take note.

Central banks announced this month that they will become net buyers of gold and silver for the first time since 1988. They have been able to sell their metal over the past twenty years in an effort to keep the prices low. However, we are now nearing the breaking point and its become every man for himself as we move toward the collapse of the American dollar.

China has become even more aggressive.

In a recent interview with a national gold and silver dealer, he said that he is trying to set up direct relationships with the silver mines to purchase the metal out of the ground as it comes available. He is doing this to be prepared for the coming rush of demand on its way.

Unfortunately, he said he is running into problems with this strategy. Why? China is already in line in front of him. As they move around the world and purchase gold mines, they are setting up relationships with the silver mines to be first in line to purchase.

Just like the central banks, they are positioning themselves for what is coming.

That is the government strategy. On the ground level, they have just allowed silver to be purchased by the public as an investment alternative.



These strategies are a comprehensive move across the board to diversify the country out of United States currency.

But that is just the real world. Its more fun to talk about fantasy. Obama is working toward free health care for everyone, all jobs provided by the government, and coming soon to a mail box near you: more free checks in the mail.

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