WHEN ARE PRICES GOING UP?
Of all the questions I am asked, practically on a daily basis, the most common one is, "When are prices of gold and silver going to go up?" It's a logical question. After all, we gold and silver enthusiasts have been predicting a radical rise in paper money prices for precious metals for quite a while now, and our predictions don't seem to come true. Are we Chicken Littles, bellowing a false hope? Are we predicting vast returns on an investment, which may never come true? After all, gold and silver don't pay interest, do they? No. "Well then, why should I buy gold and silver, which my stock broker says are worthless, and out of favor?" Isn't your stock broker the character who insisted that when the NASDAQ crossed the 5,000 mark, that it would go on to 10,000? Isn't he the one who said everything was rosy? Isn't he the one who urged you to take a second mortgage on your home, to buy more Cisco? Isn't he the one who told you that gold stocks were like investing in the Hindenberg? Isn't he the one who said that the state of the economy was never better, and that 1987 and 1929 could never happen again? Wasn't that him on CNBC, who said that there indeed was pie in the sky, and here in America too?
They were wrong, as we on GOLD-EAGLE were predicting. We scribblers of screed on this site had been saying for the past few years, that the stock market was doomed to plunge, the P.E. ratios were absurd, it was 1987 writ large, consumer debt was enormous, day traders should have kept their jobs, there was a negative saving rate, the money supply was growing like Topsy, and it was going to crash. When? We couldn't predict tomorrow. Myself, as well as others of my ilk, could only look at the facts. The facts of the stock market were dire indeed. Not only are the majority usually wrong, but when things happen suddenly, it is usually without warning. Why did the stock market wait till it did to fall out of bed? Why not a month later or earlier? It waited until enough stock holders got edgy at one time. It waited till there were more sellers than buyers. It waited till enough people became leery and distrustful of the wild run-up, and decided to get out while they could. I believe there is some invisible something that inhabits the atmosphere that is unexplainable. There has to be some mysterious trigger that causes the masses to rise up, revolt, sell, buy, or do any other action that suddenly happens, as if there were a sign from the heavens, or some inert influence that invades millions of minds…suddenly. There is no scientific study to prove this thesis, but doesn't it seem reasonable?
The facts of the stock market crash have lot of interesting parallels to gold and silver going up in funny money. Just as surely as the market had to drop, so do gold and silver have to rise like the Phoenix Bird, and for the same reasons. The stocks were overpriced, and the metals are underpriced. The majority were hocking their homes, borrowing, and doing all sorts of stupid things to glom onto more stocks, which had no profits, and no hope of profits. Conversely, it is the minority who realize the true value of silver and gold, compared to the cost of mining, milling, smelting, and production. It is the minority who gave no credence to billions of stocks being printed like confetti, flooding the market, and being snatched up like an ant eater stumbling on a termite mound. It is the minority who know the historic value of silver and gold for thousands of years.
Maybe we are like Noah, who went around telling everyone that it was going to "rain." He was building this silly thing he called an "ark," and said God told him to do it. Then he started gathering animals. Nut case! Who ever heard of such a thing? It had never "rained," and what in the world was that "Ark" thing he was building supposed to do? What does that word "float" mean? Maybe we are like Edison, who tried over and over to find the proper "filament" for his "light bulb." Who ever heard of such a thing anyway? What's the matter with gas lights, kerosene lamps and candles? Crazy man. And that Bell guy with his wires strung up. He thinks he is going to talk to someone out of hearing range. Crackpots by the dozen. Then there are those bicycle builders from Ohio. Talk about crazy brothers! They actually think they are going to fly! Ad nauseum, ad infinitum, ad continuum.
So to you who ask, "when?" I say, "I don't know, but it will happen." Why did everyone suddenly want "Snapple?" And then stop wanting it. Why did everyone think those Plymouth PT Cruisers (which look like a 1937 Ford) were the cat's pajamas, and then the urge died down? These are certainly not like actual money that has been used, approved, treasured, and sought after for thousands of years. Historic, tangible, beautiful wealth does not die down like Snapple or PT Cruisers. The overwhelming array of facts say gold and silver are vastly under priced. Markets cannot be thwarted and manipulated forever. Truth will out. Like the stock market died suddenly, I believe that gold and silver will take off suddenly, when some strange force, which no one has ever been able to pinpoint, says, "now," and everyone obeys. Americans lost many trillions of dollars when the market crashed without warning…except of course there were many warnings. Like 1929, and 1987, those who looked at the signs, got out, maybe not at the top, but they saved themselves. No one can predict the immediate future. Long term future can be predicted, I firmly believe. All we can do is look at the facts, and act accordingly. Contrarians always act exactly the opposite of the majority, and usually come out on top. There was no time to go short when the market crashed, as it happened too suddenly. The same may be true with precious metals. That mysterious force will invade, and as in 1979-80, all hell will break loose. I have a client in California who says it will be like a person is cons…No Stuart, I cannot say that! Those left in the lurch, will be exactly like those who should have sold their stocks before the crash, but didn't heed common sense. They wish they had sold at a NASDAQ price of 4,500, and missed the 5,500…correct? That would be far better than the 2,000 it now is. When gold and silver go…and I know not when…$275 and $4.35 will be like the NASDAQ at 1500.
Do gold and silver pay interest? Nope, but then no one asks for your Social Security number either, any more than when you buy a new sofa or antique dresser. Gold and silver have no deed or title, and are what is known as "fungible." You look it up, lazy. I know what it means! But by all means look at history, either in the immediate past, or ancient, and gold and silver will look pretty desirable. Protect yourself!
June 27, 2001
Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com
Also by Don Stott