Saturday, August 20, 2011
Gold versus Market Gambling
Gold has run up several hundred dollars as the stock markets have run down. What's going on? Will it continue? What to do?
First: understand what is happening.
The Stock Market is a form of gambling.
Gambling can be an addiction just like drugs, or sex, or video games. Each addiction is different. In gambling, unlike drugging, there is certainly an array of skill levels that give the illusion of control over the addiction. But all addictions are similar in the element that comes to own you: the thrill of the risk of loss and the rush of gain.
If you're addicted you will constantly raise the risk level to achieve the thrill. And once addicted the PUSHERS will find ways of constantly raising the risk levels to keep you coming back until you're soaked dry.
The STOCK MARKET is a institutionalized gambling parlor catering to a nation of addicts.
Yes, IN THEORY it's a valid way for companies that employ people and create products to raise money. Yes, it's an investment in those companies. IN THEORY.
And according to this theory, the companies listed on the stock exchange should form the industrial base of the economy, and as the economy grows at say 4% the stock in those companies should keep pace and also grow at about 4% per year. And once upon a time this was considered a good sound investment. And once upon a time this was the basis of capitalism: the efficient use of capital as directed through public markets.
But where's the thrill in making 4 percent?
And how does it make sense when the MONEY used to buy and sell the stocks is losing value at a rate greater than 4 percent a year?
If you understand this single point, you understand why, over time, the markets will keep diving until everyone loses everything - except the PUSHERS who are operating the game.
Let me repeat: The MONEY used to buy and sell stocks is owned and printed by the HOUSE. It's funny money that retains it's value only through the frequency it's turned over in the Gambling Parlors/markets.
It's printed in enormous quantities and then "LOANED" to the public so that they can keep gambling in the markets. The game goes on until enough people are soaked by the House that they lose confidence in the game.
And when that happens they also lose confidence in the funny Money printed by the house.
We are now on the irreversible downward slide towards that point.
At what point did this country become a nation of thrill seeking gamblers? In about 1980 restrictions and regulations were lifted off the markets so that real smart guys who used to go work for the industrial base realized they could turn the markets into a legalized casino. But that's an essay for another time. (See the last post it: gives a thumb nail chronicle.)
And sure, there were always gamblers gaming the markets. The most famous gambler in the early 1900's was Jesse Livermore who wrote the seminal "Confessions of a Stock Operator." He is widely considered the greatest stock gambler of his era. He died by shooting himself in the head after going broke for the third time.
And even now there are MATH GENIUSES with tremendous gambling instincts, great historical economic education and tremendous financial skills willing to work 24 hours a day for years on end who can game the markets and make billions. Think George Soros.
But is that you? If not, you're just the shlub who will give all your money to the House. There is no in between. So if you still have assets, get out now before you lose them all.
And where does GOLD fit in?
Gold is real money. It is sound money. It can not be printed. And it has been so for 5000 years of recorded human history. Maybe that seems arbitrary. Maybe that seems odd. Get over it. Because when paper loses it's value, gold goes up in proportion. And when people lose confidence in paper they naturally flock to gold.
This will continue until the gambling addiction is wrung from the system. I don't know when that will be. But generally speaking a vicious addiction is not cured until then addict hits rock bottom.
We're not there yet.