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Don’t Fight the Fed (Revisited)
The old saying goes “Don’t fight the Fed.” In other words, when you invest you should ride their coat tails and let their policy “help” your performance. This strategy didn’t work out so well last decade as both stocks and real estate were slaughtered throughout 2008-09 as the Fed pumped furiously to reflate a system that was crashing. As this decade started, the Fed doubled down several times and not only finally got the stock market stabilized but has pushed it to highs (in nominal terms). Real estate? Well, not so much… There is a small problem however, they cannot stop pumping. They cannot even slow down!
So you don’t want to fight the Fed? Buy gold and silver as they are saying AND doing everything in their power to debase the dollar. They will probably be successful and a debased dollar is exactly what we will have which means it will take more dollars to purchase anything and everything real from a cup of coffee to an ounce of gold. But what if it doesn’t work? What if the Fed cannot put money into the system as fast or faster than it is being destroyed through defaults? First off, perish the thought! Were this to happen we will be back to living like cavemen within a week or two but… gold will still be gold and you will still have wealth.
What we have been through over the last 6 months in precious metals has been entirely a “Wag the Dog” production made to herd the sheeple back in line. The Fed is actively trying to get people to spend their money. Spend it on stuff, spend it on stocks, spend it on real estate… SPEND IT on anything… except gold or it’s little sister silver. They absolutely must get velocity (remember the chart I shared a couple of weeks back) turning higher because they cannot create new money as fast as it’s going into hiding and being destroyed. The problem as I mentioned is that once velocity actually does turn upward, they may (will) have a situation where a “run OUT” of the dollar begins which cannot be stopped. This is hyperinflation.
The Fed is in a situation where no matter what the final result (inflation or a deflationary implosion) gold will be left standing as money, real money, core money, TRUSTED money! I know that people are wringing their hands and questioning their sanity; you don’t need to do this! Every single day that the Fed creates 3 billion (new) dollars and sprinkles it over the system like fairy dust… your gold becomes worth more. But… but… but “it’s going down?” As I wrote about as early as the Spring of 2007, we will one day have 2 markets for gold and silver. The “paper” market and the physical market. This reality showed its face back in late 2008 when paper silver traded to $9 per ounce yet none could be actually had for under $15. This is again happening as the paper price of Silver is $27 or so yet good luck procuring any for less than $30-31.
My point is this, relax, unless you need to use your capital right now then who cares what “they” tell you it is worth on the paper markets. The Fed is telling you that they will destroy their own product (the dollar) so believe them, don’t fight them. Just don’t let them herd you into a corner with everyone else. Just know that when all is said and done people will not count their net worth in dollars, they will count ounces. You are “riding their coat tails” by exiting dollars and “front running” where all the obliging sheeple will eventually arrive at… real money. You are not insane, psychotic or stupid. No, you are simply waiting at the finish line for everyone to finally figure it out and catch up!
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2013-04-11 14:00:20
Source: http://blog.milesfranklin.com/dont-fight-the-fed-revisited
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