December 8, 2005

Of Carnival Barkers, Cannibals, Stocks and Gold
by Black Blade (12/8/05; 03:15:53MT - usagold.com msg#: 138927)

The Carnival Barkers on CNBC are a bit frightened lately as they watch Gold push through $500/oz. Yesterday Joe Kernan "squawked" about all the email he gets from "Goldbugs" waiting for the apocalypse. Personally I doubt that "Goldbugs" are anxiously hoping for end-of-the-world scenarios but apparently Joe buys into the stereotype.

The reason the POG has rocketed has not been because of the flat-lining US Dollar ­ although that is a small part of it, nor has it been on inflation concerns. Note that the POG has risen in spite of the US Dollar gaining against all other currencies and the government agencies releasing "data" suggesting "benign" inflation. That Gold is rising against a supposedly "strong" dollar really has the Carnival Barkers bummed. True, all currencies are weak and getting weaker. The US Dollar is gaining against even weaker currencies. So what!

No, the reason that Gold is rising is because of very strong physical demand from China, India, and the Middle East, and now even here in the west more and more investors are looking for other hard assets including precious metals now that the real estate bubble is deflating. China has liberalized laws governing personal gold ownership. A rapidly emerging middle class in India with more wealth and an affinity toward savings in Gold. Petrodollars looking for a home in the Middle East where the culture here too favors Gold.

Miners have yet to make much headway in exploration efforts and to get new mines into production. Obviously demand will outstrip supply for many years. What the Carnival Barkers do not understand are the most basic principles of "demand and supply". We can forgive them though as nearly all of CNBC's Carnival Barkers have degrees in journalism (or biochemistry in the case of Joe Kernan). These people are not "experts" but simply salesmen pitching stocks and stock market cheerleaders. The last thing they want to see is Gold rise to fair market value and compete against stocks and bonds for consumer dollars.

I always get a good chuckle when they say Gold is in a bear market and has not recovered to the temporary spike to $850/oz in 1980. Joe Kernan did say that Gold was a bad investment because it did not recover to $800/oz. Well that's nice, but all that tells me is that we have at least another $300/oz to the upside and perhaps another $800/oz beyond that adjusted for inflation. The argument Joe makes is utterly meaningless. Gold was also held down as mega-hedgers conspired with bullion banks to drive competitors out of business. Today I get a good laugh as mega-hedgers Barrick and Placer Dome argue over the cost of a merger. To me that is like two cannibals on a deserted island arguing over who to have for dinner!

Heck, the Nasdaq has not recovered to its high of about 5050. I mean the Nasdaq is over 55% off its high! Using Joe's reasoning, the last thing you would want to invest in are stocks! They have been horrible investments since March 2000! The DOW is still quite a bit off its high as well. The DOW wallows at 10811, well off its all time high of 11,908.50 on January 14, 2000. That is still over 9.2% off its high. Not bad for an index of a mere 30 stocks but still a loser. Then there is the S&P 500 closing at 1257, just 18% off its all time high of 1527 in March 2000! Yessirree, the stock indices have been horrible investments since the crash 6 years ago. Of course many people lost their retirements, hopes and dreams back then. Those who bailed out of techs, dot.bombs, and tele.gones and turned to precious metals and energy like many of us did very well. Those who remained as Joe Kernan and his fellow Carnival Barkers directed lost everything. Oh yeah ­ "booyah"!

Yep, the Carnival Barkers are running scared as they watch Gold and Silver streak higher, and they are also wetting themselves as they watch energy prices defy gravity. Yet these clowns tell us "all is well" and the economy is doing just fine. In the same breath they tremble with fear as the prices of hard assets rise and stocks look weak once again. Another amusing point is that they always trott out some alleged investing "expert" who predicts some higher sticker price for the DOW by year-end. I admit that I was amused that the DOW has been trickling down for several days now.

No, all the CNBC Carnival Barkers whining about the Gold price have done nothing but point out that Gold remains grossly under-valued. This secular bull has a long way to go. We are still in the early stages of a long-term secular bull market for precious metals and energy. So cheer up. We can expect a couple of minor corrections with each leg up but the trend is our friend!