Coping: With Gold and Relative Value

Allow me to begin your week with a discussion of what really matters in this life:

Relative Value.

Remember last Thursday?  I headlined “Gold Heads Toward $1000.”

As is often the case, just a few days later it was like every pundit in the world had picked up on gold’s pending weakness…

It came back this morning, too:  Down to about $1,105 on some quotes I’ve been watching.

Not that it is anything to worry about, but it is terribly interesting on the theory side.

As you know, the U.S. currency has failed several times in our nation’s illustrious past.  We’ve seen the Continentals, the Greenbacks, the Silver Certificates, and the current Federal Reserve Notes, to name some of the major currency swaps.

In more normal times, Gold would not be in decline.  The U.S. Dollar, as you know, has been denuded of purchasing power to an embarrassing degree. More than 95% in fact, since 1913.

Yet, public confidence in the Dollar remains relatively unchanged.  Masses of ill-informed people and constantly repeated jingoisms, I’m afraid.

A look at the Gold chart at FinViz, which looks at futures pricing – not spot – is even more depressing for gold bugs.  It reveals a spike low today of $1,080 and that seems likely to fail, as well.  Just maybe not today.

How To Get Ahead?

The social conveyor belt is in a heap-o-trouble.

Inflation is dead.  With it, the social conveyor has seized up. 

Things are so bad right now, that should inflation return, the US debt monster would implode, collapsing the country in Greek-like fashion.

Used to be if a person wanted to move up the economic food-chain, the simplest thing to do would be well-timed buying of a home.  Since real estate used to be somewhat reliable on an 11-12 year cycle basis, buying low and selling high made sense.

You can see it in present times, as we saw a bottom in housing prices circa 2009-2010.  But what made this cycle harder to play was all the changes in loan processes.  At the peak, it was almost “free money” (e.g. no doc loans) and at the bottom  we had multiple income verifications and so on. 

Gold, our focus this morning, hasn’t followed real estate.  Once upon a time it did – loosely.

Gold was buoyed by inflation expectations, just like housing was.  Yet, in today’s world, that’s not happening. 

Inflation has been killed and dumped out back.

My deflationary pal Jas Jain still thinks the 10-year Treasuries will get down to under one percent.  Right now, they’re a little over 2%.  2.35% as of Friday, but likely to drop in today’s trading.

The bond pricing is driven by the strong dollar.

With the rest of the world, or at least the Russia, Europe, and Chinese part all suffering from economic woes, the U.S. Dollar seems to be a guiding light and it’s drawing in investors like crazy.

As it does, the demand for dollars going up has resulted in the amount of interest we have to pay collapsing.

Looking at a long-term chart, like the one over here (zoomed out to Max.) you can see what the picture has been since 1962.  What’s more, it is the clearest view you can get with one click of how the Long Wave in economics works.

Interest rates are the big driver in the economy…the bond market is bigger.  The stock market is a kind of piddling afterthought in comparison. 

Think of it as a symptom, not the disease.

Looking at the long-term chart makes getting ahead very achievable when you’re a young person:  Simply buy all the house you can afford and wait for the magic of time to grow a decent return for you.

That takes a lot of faith, though, since many of the touchstones of previous eras have been rotted away.   Among them:

• Honest government has faded.  Not only have lobbyists taken over Washington but worse, I think, the government has decided to save all its pals.  In  doing so, what used to be honest (and large) corrections from economic displacement that were really gigantic opportunities for small investors, have all but disappeared.  Today, everything gets bailed out and with it, economic opportunity for the little guys disappears.

Let me tell you a short story…one of Life’s few major regrets for Ures truly.

I was news director of KOL in Seattle, and later KMPS.  In the early 1970s, Boeing had been vying to build the supersonic transport – the SST.

Never happened.

Instead, there was a real flat-spot in global airplane orders.  Boeing layoffs began in earnest.

Local unemployment soared, food banks opened, things were ugly.

Things got so bad that signs cropped up along major highways reading “Will the last person to leave Seattle please turn out the lights?”

Still, I was doing well professionally – youngest news director in the city, yada, yada – and my income was really good.

I was also between marriages – and free to explore all kinds of things with no permissions or discussions needed.

Since I wanted a nice home of my own, there were two I got really interested in.

One was in the Seattle neighborhood called Lawtonwood.  It was a four-bedroom house with an unfinished basement that would have resulted in 3,680 feet of living space, or thereabout.  East side of the old Fort Lawton which is now Discovery Park in Seattle.

There were two things that made this house “special.” 

One was that it was on the west side of the Ship Canal on the salt water side of the Hiram Chittenden locks.  It had something like 150-feet of well bulkheaded waterfront.  Clams at the back door at low tide and davits for a small runabout.

The second spectacular thing about this house, other than the phenomenal view of passing boat traffic going up to the Locks, was the price.

$54,000.

A couple of years ago, I looked up the house – quite by accident – when I was considering moving back to Seattle.  At $3.3 million, it quickly went in the “could have, should have, would have…” pile.  It was $3-million more than I was willing to spend.

Here lately, with the New Yorker piece on the possibility of as “full rip 9.0+ earthquake” up in the Northwest, I don’t feel so bad.

But this house, and another one (which went for the high 40’s on half an acre of land, bigger house, and across the river from the Sammamish River Trail just down river from Bothell,  showed me that I needed to sharpen up my futuring skills and deal-hunting abilities.  I’ve been working on them ever since.

But real estate is sliding off the table.  Unless you want to run a string of rentals, but even this is becoming problematic as the socialists in government are out to protect deadbeats from owners who want nothing more than fair rent.

I can’t tell you how many times I’ve seen disaster stories in rentals.  Tenants will often get glowing reports from an existing landlord, just so’s they can move them out of their property and turn them into someone else’s problem.

Oh, and smeared fecal matter around rental houses isn’t that uncommon, either, which is why land lording is not my cuppa tea.

So What’s Got Relative Value?

Your health and organic food seem like good bets to me. 

We fled long ago to the country to stay away from large groups of people.  Perhaps it was an over-reaction, but governments of the world have gone quite thoroughly manic since World War II.

It doesn’t matter who started the practice of holding entire civilian populations hostage – the U.S. did it with the Dresden fire bombings and the Germans fired V2’s willy-nilly into England, and for the whole of my adult life, the training to “Duck and cover!” has eaten at my soul.

Who wants to be around  let-alone live a nuclear target area?

I did a lot of research, once upon a time, late in the Cold War, as to what cities and locales would be prime, #1 first-strike material.  Big cities were “it.”  Although, in fairness, a lot of military targets popped up, too.

Problem was, with the fireball from multi-megatons being what it is,  most military bases are fairly close to big cities.

An  interesting side discussion:  In a world war now, there is no industry to speak of left in the US.  All a real enemy would have to take out would be a handful of refineries, a couple of airplane outfits, and one or two major population centers for good measure and the country would implode.

The novel “One Second After” gets into what life in the post EMP would be like, although I see things even darker than that.

Given government’s pernicious (perpetually rising) tax regimens and major world powers willing to sacrifice their civilian population centers, few talk about what a huge pressure-cooker this is for “normal” people to deal with.

Those that are rational (my friend down in Ecuador comes to mind) move out.

I like modern conveniences and, being too lazy to learn Spanish, have opted to remain in Texas.  Given how the glad-hander and law-twister in Chief is going, Spanish is sure to become the major language here, too.  But by then I may be old enough to be dead.

In case I’m not, though, our next major project on the Peoplenomics site which we will do Part 1 of Wednesday, will be how to turn a large deck into a high production food unit.

We volunteered to reduce our lifestyle when we moved out to the sticks.  As gold comes down and deflation rears its head again in coming years, I think the name of the game will be to have a “survival platform.”

Somewhere that has enough tools and resources to check out of the game for a year or three.  Independent food, energy, and power, which we’ve invested in.  Hobbies that will provide communications and here lately, I’ve been considering an EMT course for us.

Retooling the septic system is on tap for the fall.  I’m partial to engineered wetlands and it’s not like we don’t have room for it.

But it’s an interesting question to wake up to on a Monday:  What are the important things and what are the required things?

It’s all got relative value and we all “pays our money and takes our chances.”

But opting out – not wanting to live between  a nuclear first-strike zone on one side and governments going bankrupt both literally and figuratively, on the other – seems to be making a slow, incremental increase in relative value.

It has been warm out here in East Texas this weekend – high 90’s now and low 100’s next week.

Got to playing around with our mister system where we have it set up between two large trees that partially shade the house and the shop.

Keep things comfortably cool, though a big damp at times, depending on the wind.

Still, makes it possible to be outside with a lemonade even if the air conditioning is off or power fails.

Until this weekend I hadn’t thought much about misters being a prepping item, but there we were.  Cool amidst hot…no electricity needed, and enjoying the analysis of relative values.

Write when you break-even,

George   george@ure.net