Monday, October 27, 2008


It's everywhere. Two examples from the past 24 hours (though I know there are many more) are astounding to me.

First courtesy of (, the headline:

G7 warns against 'excessive' yen volatility

LONDON (MarketWatch) -- A warning by the Group of Seven industrialized nations against "excessive volatility" in the Japanese yen Monday did little to quell safe-haven flows, but could set the stage for coordinated intervention aimed at arresting the currency's ongoing rise, strategists said.

''We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability,'' G-7 finance ministers and central bank chiefs said, in a joint statement. "We will continue to monitor markets closely, and cooperate as appropriate."

Below is a chart of the Japanese Yen with my comments:

Where is the "excessive" volatility relative to the historical price action shown in this chart? Japan wants to help "cooperate" (i.e. intervention by policy makers of different countries into supposedly free markets) to make its currency weaker, which will punish all its citizens who hold cash as a store of value or who are on fixed incomes.

Next up, home sales data compliments of Yahoo! Finance (

September new home sales rise by 2.7 percent

New home sales post unexpected increase as prices fall to lowest level in 4 years

WASHINGTON (AP) -- Sales of new homes recorded an unexpected increase in September as median home prices dropped to the lowest level in four years, the Commerce Department reported Monday.
Sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes, Commerce said. Economists had expected sales would drop from the August level…

After the headline and lead paragraphs, the following appears in this article: "The surprising increase in September sales still left them 33.1 percent below the level of a year ago as the country is battered by the worst slump in housing in decades."

Let's take a look at housing in chart form, shall we? The chart below is stolen from the Paper Economy real estate blog (, a great site.

Housing comparisons are ALWAYS done on a year-over-year comparison basis due to normal seasonal variation that makes adjacent month-to-month comparisons dubious at best. Yet, every month without fail since the housing crash has started, mainstream journalists report a little ray of sunshine by having a headline completely opposed to reality. The latest numbers are ATROCIOUS and downright scary! A 33% drop from the previous year is a devastating decline and indicates housing ain't even close to bottoming out.

What is my point with all this? Listening to mainstream media or our government for information about markets and trying to make investment decisions based on this information is the worst possible thing you can do. In fact, you're much better off assuming the exact OPPOSITE of what is printed or said to be true. George Orwell would be so proud of the "1984" society we have created.

If information is printed or stated again and again enough times, people start to believe it. It seeps into their subconscious and affects their decision-making processes. "Buy and hold for the long term" is a great example of false information and even the great Warren Buffet is about to learn that this isn't such a great idea all the time.

We have been on a fake, Monopoly money system for so long that people think it's safe and normal. Nothing could be further from the truth. The long-term chart of the Dow-to-gold ratio is telling us that we are headed for a long-term breakdown of trust in paper assets, which is clearly well underway but also has much further to go.

Gold is a SAFE place to park your money during this financial storm, gold miners are now (i.e. now that the correction in gold stocks has ended) the best way to profit in this ongoing storm that has much further to go, and no one in the mainstream media will tell you this until it is TOO LATE!

Gold is laughed at despite its 3000+ year history of serving as a currency and store of value and despite the fact that EVERY FIAT CURRENCY SYSTEM IN HISTORY HAS FAILED. Every single one, and believe me, there have been many. The current downturn in global stock markets and asset prices will not end until people wake up and repudiate the lack of a gold (or other hard asset) backing for their money. We are quite a ways off from this event. The world has been awash in paper Monopoly money backed by nothing but the hollow promises of politicians. We have had both the good (i.e. stocks and real estate go up) and the bad (gasoline and food go up) effects of the subsequent inflations due to excessive money printing.

Now we are in a deflationary storm that will resist all efforts to "print our way out of it," but the political hubris to try anyway will persist long after it is appropriate and create serious long-term damage to the fragile confidence in our system of paper promises. Gold will hold its value through this storm and the companies who dig the precious metal out of the ground will now outshine every other asset class for at least the next 2-3 years.

Wikinvest Wire