Gotta love it when Bernanke opens his mouth

Related posts:
FOMC: This Is The Beginning Of "The Big Print" - Unlimited QE [Dave in Denver]
QE To Infinity [Turd Ferguson]
The Punchline In His Own Words: Bernanke Advocates Blowing Asset Bubbles As The Antidote To Depression [Tyler Durden]
Gold Chart: The 'Cup' Has Formed As Confidence Continues to Erode [Jesse]
The Fed and the ECB determine to Destroy the Middle Class [Trader Dan]

My Deepest Apologies

I've been remiss in my precious metals musings of late. Last week, when the silver/gold ratio was bouncing between 31-33, I should have said to swap a portion of your silver for gold. Alas, it's now too late, as the ratio is back up in the mid-40s.

I have not yet missed the opportunity, however, to encourage you all to take every piece of worthless paper you can spare and buy gold or silver all the way down until it bottoms out. This is not a bursting bubble, folks. This is a short-term correction. How short, I can't predict, but I can say with as much certainty as possible that these prices cannot persist as long as the Fed continues to dilute the value of their Monopoly money.

Silver not done yet

Today, the price of silver in worthless paper dollars is sitting at $40.91, about a 4% gain over yesterday's London PM fix. Silver is now up 44% since February 1. Here's today's chart, courtesy of Kitco:

Silver mining stocks are running up as well, particularly the junior stocks. Since February 1, Revett Minerals is up 40%, US Silver is up 53%, Canadian Zinc is now up 73%, and a new one I've recently added to my portfolio, Tinka Resources, is up 129%. If one had invested $5000 on February 1 in a balanced portfolio of silver and these four stocks, it would now be worth $8390, a 68% growth. Try getting a return like that in any instrument your bank offers. As I've said before, if you're not getting a 10% return, you're losing to inflation.

Gold As The Economic Reference Point

Friend of Friend of Another posted an excellent article the other day about gold as an economic reference point. It's a long read, but by the time you're finished, you'll hopefully understand why I encourage everyone to trade their worthless paper dollars for physical gold bullion as soon as possible, and at any cost. This is the only way to permanently capture the economic value, or purchasing power, of those worthless paper dollars. As I have stated before, gold (and silver, to a lesser degree) should never be considered an investment. It's true savings.

Seriously: long-term savings absolutely should not be in the form of a bank account, stocks, bonds, money markets, mutual funds, or anything that can go to zero overnight (and the US Dollar can go to zero overnight). Long-term savings should be in the form of the precious metals I've mentioned before: gold, silver, iron*, or copper.

Gold/Silver Ratio, etc

Since March 7, 2011, the ratio between the prices of gold and silver has been below 41 every trading day but for three days. The ratio at current prices is at the lowest it's been all year (38.48). This means it takes a little less than 39 ounces of silver to purchase an ounce of gold.

On June 7, 2010, nine months ago, the ratio was 70. In other words, if you'd traded 2 ounces of gold then, it would have bought 140 ounces of silver. Today, you could trade that silver back into roughly 3.5 ounces of gold, a 75% gain in only 9 months. Zero leverage in two investments considered to be sterile, producing a true 75% return... after all, you started with only 2 1-ounce coins... now, you have 3 1-ounce coins and a half-ounce coin.

If You're Not Angry, You're Not Paying Attention

On Friday, in a federal trial, a United States Attorney claimed in court that Bernard von NotHaus is guilty of domestic terrorism. The jury deliberated less than two hours and found von NotHaus guilty of conspiracy against the government. The FBI, the Buncombe County Sheriff, and the Secret Service were all involved in taking down this dangerous terrorist. He's expected to get 25 years in prison.

So was von NotHaus a Muslim convert plotting to carry out jihad? Was he Hutaree or affiliated with those wackos in Fairbanks? Did he threaten judges or police officers? Did he shoot someone? Was he plotting to blow up a federal building?

Nope. He was bartering. With silver. You read that correctly. This vile terrorist needs to be sent to Gitmo ASAP.

Now think how many times the idea of another gold seizure is scoffed at.

Silver breakout cont'd

The price of silver in US dollars has now made a 25% gain since the first of February. As mentioned in my last post on the same subject, this has an even bigger impact on junior silver miners: in the same time period, Canadian Zinc is up 67%, and U. S. Silver is up 36%. The conservative silver bulls' predictions have already come to pass: silver is already trading well over $35 per ounce. A lot of other bulls are still targetting $45-$75 by the end of the year.

Always remember that precious metals should not be considered an investment. They only "grow" relative to the collapsing purchasing power of the dollar. In other words, precious metals retain their true value, and thus, they can inflation-proof your savings. As I've been saying for a long time: convert your dollars to something else now, before they lose even more purchasing power. Heck, go buy a half-dozen gas cans and fill them up with gasoline at the current low prices. Inflation is hitting us in a big way, despite what the talking heads on the idiot-box say, so every day they convince you to hold onto your worthless paper dollars, is another day you are losing money.

In the interest of full disclosure, I own silver bullion, CZICF, and USSIF and have no intention of selling any of them any time soon. I don't have gas cans full of gasoline, but I may soon.

Silver breakout

Silver broke through resistance around $31 yesterday and kept right on going today, almost hitting $33 before pulling back to $32.42. This represents a 7.5% gain in one week. Silver miners are doing even better, particularly some of the junior stocks: Canadian Zinc is up 27.7% and U. S. Silver is up 22.1%.

Where it goes from here is anyone's guess, but now that it's broken through, it's going to have to find a new high. Some of the silver bulls are predicting $35, $45, $50, or even $75 silver by the end of the year. They've been wrong before. On the other hand, they've been right before. I fondly recall buying silver at around $4 just ten years ago with PFD money. In another decade, will we fondly reminisce about the "good old days" when we could buy it for a paltry $35?

Charts from kitco.com.

In which I opine on the superiority of stocks...

First off, let me state that my philosophy of saving is quite abnormal. I don't believe in amassing a large fortune. If fortunes are given, one must carefully consider what the Scriptures and the Fathers say about wealth: how difficult it is for the wealthy to enter the kingdom of heaven (the Master); that one's excess belongs to the poor (Chrysostom); and that riches are fleeting (James). That said, one must manage one's wealth carefully, as it is a gift of God. My first responsibility is to my family, and in order to provide for them, saving is a necessity... living paycheck-to-paycheck won't pay for a roof replacement, and going into debt (aka slavery) for the same should be my last option. In addition, in my case, I must manage my children's money for them while they are still young. Therefore, it behooves me to carefully consider what constitutes a good investment versus a bad investment.

There are a number of things one can do with one's money. Here is my opinion of each.