GoldVestor Report - February 2010

Quote of the Month - “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Ludwig von Mises

With both Gold and Silver falling throughout the month, January 2010 proved to be a time that was much needed in the metals industry, a month for dealers to catch up with a market that has been raging almost uncontrollably for nearly a decade now. We needed the rest!

Now that January is past us, and precious metals like Gold and Silver seem poised for another run, it is important to take some time before the run up, not after, to see what your investment plan is going to be for 2010 and which portion you plan on allocating to your Gold and Silver purchases.

Buy the Dips!
It’s amazing to us here in the industry how swayed investors are by the daily and/or weekly changes in Gold and Silver. It seems as if that when Gold and Silver are trailblazing to higher levels we hardly have time to answer call ins, but when Gold and Silver fall, it gets really quite, really quickly. In reality, it should be exactly the opposite.

In January Gold corrected about 7% and Silver corrected more than 10%. Its times like these when you should be buying and taking advantage of an asset that is clearly a bargain at current levels. Don’t follow the herd and wait for prices to go back up before you buy, break away from that mentality, and your percentage gained will prove to be much better.

The Evidence is Clear
Below you will find the articles of the month for the month of January 2010. In them you will find that the SEC recently ruled that your legal right to redeem your money market funds can be denied – make sure to read that again – your legal right to redeem your money market funds can be denied!

You will also see that in December of 2009 the United States was within three days of defaulting on its foreign debt and that if Congress had not called a special session to raise the debt limit, it would have been highly likely that the United States credit rating could have been downgraded producing disastrous results. December was round one, many are expecting that Congress will again have to raise the debt limits, possibly as soon as March. We also included two powerful commentaries on Silver that is a must read for anyone who either doesn’t have any Silver, or for someone who wishes to add more.

The collage of articles below also includes what I feel as the most important that I have ever sent out in the ‘Best of the Austin Report’. The article is entitled – A Global Fiasco is brewing in Japan. The article illustrates the ever growing deficits of Japan and the United States, and how, if left unchecked, they could lead to hyperinflation, spelling disaster for the world economy that is already on the brink. The author refers to a historical model called “Monetary Regimes and Inflation” aka “The Bernholz Range” and in it he describes how there have only been 5 times in history that budget deficits compared to government expenditures have reached the levels recently seen in the United States and Japan, and each of the 5 instances that this happened in history – a savings wrecking hyperinflationary period followed. So, to be clear, historically speaking, countries that ran budget deficits comparable to those currently seen in the United States and Japan, 100% of the time, without exception, saw their currencies, livelihoods and savings utterly destroyed through hyperinflation. Why would we be so intellectually lazy to think that this time it’s going to be any different? Grab a cup of coffee, have a seat, and make sure that you read “A Global Fiasco is Brewing in Japan.”

Alarmists or Realists? You be the Judge.
In closing, I want to make one point clear – we at the Austin Report are in the business of selling Gold, so one could almost expect that we would want to harp on issues like inflation and the like. However, the truth is exactly the opposite. I for one do not enjoy talking or writing about hyperinflation. Why? Because it makes us sound like alarmists. In fact, had it not been mentioned in the press by so many prominent economists we probably would have never mentioned the term hyperinflation at all, but I want to leave you with this one thought:

We have a client who is a hedge fund owner and successful billionaire, a client of such importance that he was testifying on Capitol Hill recently in a banking committee hearing. At the first of the year, his Gold Specialist, who happens to be our Chief Operating Officer, sent him an email asking him what his outlook was for 2010. His response was short and to the point – HYPERINFLATION 12-18 MONTHS!

Contrary to the conventional wisdom in Washington, we cannot spend ourselves to prosperity. Do yourselves a favor and prepare for what is and what could be to come – it might be worse than any of us ever imagined. Make sure to call your representatives so that he/she can review your holdings and make a recommendation that fits into your game plan.

And don’t forget the wise words from Ludwig Von Mises - “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Thanks as always for your business, I look forward to your calls and emails.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. This sites content shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author.