Closing A Real Estate Deal In A Down Market

When the housing market slumps, it's often best to take your home off the market and wait it out - but not everyone has that luxury. Many people are forced to go through with a sale because of a job transfer or a personal liquidity crisis. But even if you're selling in a very bad market, there are things you can do to make the best of a raw deal. Read on for the top tips on how to close a real estate deal in a down market. (For related reading, see Selling Your Home In A Down Market.)

Tip No.1: Sweeten the Deal
In declining markets it is extremely important to be cognizant of comparable properties in the surrounding area and to price your home at a level that will entice potential buyers to view it and ultimately bid on it. In other words, the seller must reject the temptation to hold out for top dollar or to price the home at the upper end of what the market will bear.

There are three easy steps you can take that will give you sense of what similar homes are selling for:

* Attend open houses
* Peruse the newspaper for local listings
* Ask a real estate agent to print up comparable listings on the multiple listing service (MLS)

Tip No. 2: Keep It Simple
In a down market, buyers have a lot to choose from, so it's important that you try not to give them a reason to turn down your property. Therefore, you should eliminate or reduce the number of "contingencies" that you may have otherwise insisted be in the contract. In other words, be flexible and don't make the sale contingent upon any factor that isn't absolutely essential. Make your conditions as simple and straightforward for the buyer as possible and you'll find that they'll be more apt to sign on the dotted line. (To learn what buyers are looking for, read Buying A House In A Down Market.)

Tip No.3: Throw Some Bones
Let's face it - there is a lot of competition out there when it comes to selling a home. In fact, at any one time, there are literally millions of homes for sale throughout the country! In order to make your home stand out from the crowd, you may have to take some extraordinary measures. These extras don't have to cost you a lot of money - you just need to give an interested buyer that extra push toward choosing your house over another.

For example:

* Compensate the buyer for any points he or she might have to pay in order to obtain a mortgage. You can do this by reducing the price. (Read more in Mortgage Points – What's The Point?)
* Offer to pay for any attorney's fees the buyer might incur with the sale. (See The Benefits Of Using A Real Estate Attorney for the advantages of consulting these professionals.)
* Be more flexible with regard to the buyer's requests. More specifically, if the buyer requests that a window be replaced or a room be painted, consider satisfying that request. (Read more about which home improvement projects are the most valuable come resale time in Fix It And Flip It: The Value Of Remodeling.)

Remember, in a down market it's the little things that will help close the deal. Also remember that if you are not accommodating in this type of market, a buyer will simply move on.

Tip No.4: Hire a Professional
Real estate agents often charge commissions that can range up to 6% of the sale price of the home. That's expensive! And it is a major reason why so many individuals decide to place a "For Sale By Owner" (FSBO) sign on their front lawn and try to go it alone. (Read about the advantages of selling your house yourself in Cut Commissions With "For Sale By Owner" Sales.)

The problem with FSBOs is that they often fail to draw traffic. In fact, very few people ever see the sign on the seller's front lawn or the tiny postage-stamp-sized advertisement they've placed in the local paper. Real estate agents, on the other hand, are motivated by a commission, and will aggressively contact potential buyers and direct them to your home. Plus, they offer multiple listing services, which makes your listing accessible to anyone who's looking to buy.

There are no guarantees that a real estate agent will ultimately be successful at selling a home, but hiring a good real estate agent tends to increase the likelihood that a qualified buyer will come out to see your house, making an offer more likely. (Read more in Do You Need A Real Estate Agent?)

Tip No. 5: Get Out of Town
Before an individual buys a car, he or she typically wants to sit in the vehicle and test drive it to see if it "fits". The same is true for a home. In fact, would-be buyers want to walk through a home and take their time exploring every nook and cranny to make sure that they are making a wise choice.

Open houses are designated points in time when potential buyers can walk through a home and ask questions. They can be a very valuable tool when it comes to marketing a home - especially when they are held by a real estate agent. Folks shopping for a home don't feel comfortable opening up closets and drawers and talking with their spouses about what they like and don't like in front of the homeowner - they want adequate time and freedom while doing their due diligence.

The seller should also be prepared to place a key box on the home's front door so that the home will be accessible to real estate agents at all times. The advantage of having a key box is to make sure that would-be buyers will have the ability to walk through the house when you are at work or out running errands. Nobody wants a seller lurking nearby while they peruse the home - it's uncomfortable.

Tip No.6: Raise the Bar
In a buyer's market, the onus is on the seller to make the home as attractive as possible and to make it stand out from the pack. That is why many sellers retain home stagers to help them sell their home. A home stager is a consultant who will recommend cosmetic changes so that the home is more attractive to would-be buyers. Typical recommendations include removing clutter from a room, rearranging furniture, painting or adding more appealing décor. Your home should also be spotlessly clean. (Read more in 12 Worst First-Time Homeseller Mistakes.)

Stagers' fees vary, but they usually range from a couple of hundred dollars to just over $1,000, depending on the services provided. If you think you have a keen eye for detail, you could also take this task on yourself.

Tip No. 7: Don't Be Cheap
In order to make sure that real estate agents pay attention to your property and are eager to show the home to prospective buyers, sellers must provide incentive. That is, they must be willing to pony up the full 6% commission to the broker who sells their home. You can negotiate, of course, but remember that the idea is to give the broker/agent an adequate incentive to market your home ahead of others that he or she maintains in inventory. (For tips on successfully navigating any negotiation, read Getting What You Want.)

If you want to negotiate your agent's commission, consider establishing "breakpoints" in the listing agreement. In other words, establish terms so that the agent of record will receive 6% if, for example, the home sells within the first 60 days. If the home sells within 60-90 days, a 5% commission might be agreed upon, and so forth. Again, the idea is to persuade the agent and the listing firm to give your property as much attention as possible.

Bottom Line
Sellers looking to unload their homes in a down market must be flexible with regard to both price and contingencies. They should also be prepared to enlist the help of an agent or broker to help them better market the home. For those who follow the above tips, it is possible to sell your house successfully, even in a faltering real estate market.

source:
http://investopedia.com/

China's New Gold Rush

By Matt Badiali

When the Chinese government decides to get behind an industry, it goes all in.

Consider what happened with the Chinese power industry. In 1979, the government rigidly controlled electric power production. Only 60% of the country's small towns and villages had electricity – leaving 400 million people in pre-industrial conditions.

For the next two decades, the government focused on a massive electric-infrastructure program. Even so, by 1998, 14,000 villages and more than 8.8 million households were still without electricity.

Finally, in 2002, the government broke the national power company into five government-backed companies. The Chinese government decentralized the power industry and allowed the market to set the price of electricity.

Jim Rogers, in his book A Bull in China, calls that decision a watershed moment for China's power industry. The five resulting companies, China Power Investment, China Huaneng Group, China Guodian, China Datang, and China Huadian were huge successes. By 2005, more than 99% of the country's small towns and villages had electricity.

Investors made a killing, too. Investors in Huadian Power International, a public subsidiary of China Huadian, made 560%. Investors in Datang International Power Generation, a subsidiary of China Datang, earned 1,160% on their investment in just seven years.

The massive growth in electrical capacity also fueled an explosion in the coal industry. Coal supplies the fuel for 70% of China's electricity generation. Chinese coal stocks roared higher... In 2001, you could have bought Yanzhou Coal (YZC), China's only publicly traded coal company, for around $2. By late 2007, you'd have made more than 1,000%.

Now's not the time to invest in China's coal or power sectors. The opportunity for astronomical gains there is gone. But that same kind of growth is showing up in China's mining industry.

In the 1950s and 1960s, the Chinese government explored the country for mineral resources. But it lacked the technical expertise to extract what it found. It wasn't until the late '70s that it began the slow process of modernizing its economy. One of the first areas the government focused on was mining...

In 1979, China opened up two autonomous regions to foreign companies for exploration. China's government knew that was the only way to gain access to foreign capital, expertise, and equipment.

The program's success caused the government to open 11 new mineral-exploration areas in 1986, and 10 premier precious-metals regions in 1997.

Welcoming foreign mining expertise has completely reinvented the nation's mineral industry. In 1997, China produced just 45.8 million ounces of silver. In 2007 (the most recent data available), it produced 160 million ounces. Its gold production rose 134% over that same period.

In other words, the country went from practically no silver or gold production to become the third-largest silver producer and the largest gold producer in the world in less than 20 years – thanks to the government's push.

The thing to remember is, while these mining regions have been open to foreign exploration for more than a decade, most of China's enormous wealth of metal is still in the ground.

Mines don't appear overnight. Exploration and mine development take years. China's decades-old decision to open its mineral resources to foreign mining companies is just now coming to fruition.

And now, China's government is providing an enormous boost to its mining industry: In April, the country's Foreign-Exchange Agency announced the purchase of 16 million ounces of gold for state coffers. It wants to diversify its reserves, replacing some of its U.S. dollars with something tangible – like gold.

China has a lot of money to spend... nearly $2 trillion. I expect a lot of that money to flow to national mining efforts – and investors who buy in today. In other words, investing in China's gold mining industry today is like investing in Chinese coal miners in 2001.

About a dozen publicly traded companies are mining or exploring for China's massive gold and silver deposits. Many of them are plenty risky... and some are complete duds. But with the right few miners, you could be celebrating quadruple-digit returns in a few years' time.

Good investing,

Matt Badiali.

How to Get 20% a Year Out of Your Property

By Tom Dyson

"Of all of our travels, the Seven Sisters Inn is by far the best we have seen," says a guest.
The Seven Sisters Inn was built in 1888, using Victorian architecture...
Bonnie Morehardt and her husband Ken Oden restored the inn in 1986. They did such a fine job, the Florida Trust Historic Preservation Society judged the Seven Sisters the "Best Restoration Project" and listed it on the National Register of Historic Places.

The Seven Sisters Inn is in Ocala, Florida. It has eight guest rooms and an office. The rooms have different themes... There's an Argentina room, an Egypt room, and a China room, for example. Bonnie Morehardt and her husband were pilots. For 20 years, they traveled the world collecting Egyptian-themed art, custom armoires, and Oriental rugs to decorate each of their rooms.

"I hand-picked everything for each room," Morehardt said. The rooms rent for around $200 a night.

Today, the Seven Sisters Inn is famous across the country as one of the finest bed and breakfasts in America. Here's the thing: The owners weren't able to cover their mortgage costs... and this week, the bank will sell the Seven Sisters Inn in an online auction.

The auction started two weeks ago. It ends in two days. As I write, the current bid for the Seven Sisters is $117,500. You can also bid on the contents of the inn. For example, the current bid on an antique desk is $55. There's an oil painting going for $25.

You can follow the auction of the Seven Sisters Inn and its contents here.

Right now, as a result of the housing collapse and recession, banks are selling thousands of properties through auction all around the country. I noticed three new auction announcements for property in my town last week. And a local hotel held an estate auction yesterday.

These auctions are loaded with bargain properties. One of the properties up for auction where I live is only nine years old, in great condition, and in a very desirable location. I asked the owner of a property-management company about it... He told me it would generate $30,000 a year in rental income. The current bid for this property is $152,500. That's a 20% rental yield at current prices.

To earn a 20% yield from the Seven Sisters Inn, at $200 per room, you'd only have to host 118 guests a year.

If you're interested in property investment... or even if you're thinking about moving house, I suggest you check out your local property auctions. With a quick search online, you'll find thousands of property auctions taking place each month all around the country. You'll find some absolute bargains. Check your local newspaper. Or check these sites. They are the largest property auctioneers in America: www.marknetalliance.com, www.hudsonandmarshall.com, www.williamsauction.com, www.auction.com.

When homeowners default on Fannie Mae and Freddie Mac mortgages, the government assumes ownership of the house. The government does not want to be a landlord, so it sells these houses at big discounts to market prices. You can search Fannie Mae properties for sale by going to www.fanniemae.com and then clicking on "Homes for Sale." You can browse property for sale from Freddie Mac at www.homesteps.com.

The United States Department of Housing and Urban Development (HUD) also makes loans to homeowners. If these homeowners default on their loans, HUD assumes ownership and auctions them on its website. Prices average two-thirds of appraised value. You can browse HUD homes for sale at www.hud.gov/homes.

Finally, many federal agencies auction confiscated and surplus property. You can find residential, commercial, and raw land here. Check out propertydisposal.gsa.gov for the full listings in your state.

As the year progresses, my town will likely see more and more property auctions... Yours probably will, too. Property prices may stay low for awhile, but right now, there are incredible bargains to be had.

Good investing,

Tom.

Commodity Trading Tips

Commodities	Comment
Gold	Buy on dips towards 957 targeting 966. S/L below 954.
Silver	Buy at the break of 14.05 targeting 14.20. S/L below 13.95.
Oil	Buy at the break of 69 targeting 70. S/L below 68.50.

Weekly Commodity Update - Oil The big Squeeze.

Judging by the previous weeks trading in WTI Crude, there appears to be no end to the strength of prices. It is very hard to see that this is driven on anything else than market sentiment, and I see this as a short squeeze before we move back lower.

Gold and silver have both reached the top of the daily ranges, with all eyes firmly pegged against the US dollar. At present levels (EURUSD = 1.4250), we should get ready to see some directional change. If the US dollar begins to see new lows, we should see some upside in Gold and Silver and vice versa if the dollar finds strength.

In general the commodity complex seems to splitting into different directions. Bumper crops in agricultural is sending Corn, Wheat and Soybeans towards new lows. Especially prices on Corn are looking particularly ominous, as the recent USDA (US Department of Agriculture) data is forecasting its second largest crop since 1945. This has put a drag on Wheat and Soybeans, with losses this quarter of approximately 20% on both, although not to the same extent as corn, which is down a colossal 30%.

Agricultural products are not down on purely the prospect of oversupply, though. Demand conditions are also very different. Like WTI Crude Oil, analysts have been raising the voices to the tight supply versus growing demand scenario facing us in the past few years. It seems to be quite the reverse, for now at least, as countries like China have already begun to signal that purchasing for their inventory stockpiling is likely to slow.

The reaction that the grains have had to supply and demand is quite natural. In simple terms, lower demand plus higher supply is equal to lower prices, which we have seen. This is unlike that of WTI Crude, where the forces of supply and demand simply do not reflect the current market direction. However, unlike that of the grains, china does still appear to be purchasing Oil, in order to fuel their expansion plans. The prices we have seen this year have, and still are, a lot lower than that of last year.

The purchasing power of China and their ability to instill uncertainty in markets takes its toll on prices, although I am not convinced that any single one economy can dominate well established markets on a global scale for longer periods of time.

The steady rally in equities also seems to be other catalyst for the rally in Crude Oil, as both markets appear to be holding hands on their way.

I can, however, only believe that they will do the same on the way down. It is very hard to estimate how far a squeeze in the market can reach, simply because it is not based on rational investor behavior. However, if Crude Oil manages to sustain a break below $66.00, it will be a good area to get short again setting up for a test of 58.50 again.

Don't Trust the New Rally Until You See This Signal

By Tom Dyson

The bull market is back on... almost.

The S&P 500, the most important stock index in the world, is racing to new highs. Two weeks ago, I was ready to proclaim the bear market rally "dead." Then the market whipsawed. It broke to new nine-month highs last week and is now closing in on the 1,000 milestone...



But wait... what about Russia?

To help me keep track of the major trends in the market, I maintain a list of 87 exchange-traded funds (ETFs). These ETFs represent every major stock sector, currency, commodity, and country index. I calculate the three-month performance of each ETF and then order them first to last. By analyzing this list, I can immediately tell which sectors the money's flowing into and which sectors it's leaving.

Russia represents everything stock-market bulls are in love with: Growth in third-world consumption, scarce commodities, global trade, and cheap labor.

Russia topped my ETF performance list from the moment the stock market started rallying in March... until it topped out in June. If Russian stocks aren't soaring, there's a problem.

Below is a chart of Russian stocks, as measured by the Market Vectors Russia ETF (RSX). They made new bull market highs in May, pulled back during June, and started rising again in July. Unlike the S&P 500, Russia has not made new highs.



As Jesse Livermore, the original and most famous trend trader used to say, "As the leaders go, so goes the entire market."

Besides Russia, financials, homebuilding, and Indian stocks led the recent market rally. All those charts look a lot like the one above.

Until you see these sectors make new highs, you should remain skeptical of the current rally in the S&P… even though it's enticing.

When I see these sectors make new highs, I'll be ready to issue the "all clear." Until then, I recommend you keep your powder dry...

Good investing,

Tom.

Forex Market Update

USD and JPY flailing for support as markets line up at the risk punch bowl for another round. Are consumers as confident as the market?

Big week for US treasury auctions with $115 billion on the block this week. Is weak USD trade getting crowded?

MAJOR HEADLINES – PREVIOUS SESSION

* UK Jul. Hometrack Housing Survey out at -7.7% YoY vs. -8.7% in Jun.
* Japan Jun. Corporate Service Prices out at -3.2% YoY vs. -3.3% expected
* Germany Jun. Import Prices rose 0.4% MoM vs. 0.7% expected
* Germany Aug. Consumer Confidence rose 3.5 vs. 2.9 expected
* Sweden Jun. Trade Balance out at 17.3B vs. 9.0B expected
* Hungary Central Bank lowered rates 100 bps to 8.50% vs. 9.00% expected

THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

* US Jun. New Home Sales (1400)
* US Jul. Dallas Fed Manufacturing Activity (1430)
* US Fed's Bernanke at recorded town hall meeting (2200)
* New Zealand Jun. Trade Balance (2245)
* Australia Q2 NAB Business Confidence (0130)
* Australia RBA's Stevens to Speak (0300)

Market Comments:

The signs of a bullish reversal that materialized late last week failed to find confirmation and here we are again seeing the USD challenge the low of the multi-month range again as equities have bulled up to highs once again in the one-way express higher (the hottest two-week streak since 2003!). EURUSD was within 40 pips of its high for the year today, and USDCAD dipped its feet in the waters below 1.0800 again, testing the lowest levels since October of last year. AUD is also testing its highest level vs. the greenback since the Lehman catastrophe. A contrarian would note that the CFTC was out reporting that net USD shorts are at near record levels. EUR longs are at the highest level since July 2008 (that was the month of the 1.6000 top just before EURUSD tanked). There can hardly be much fuel left in the EUR rally from these levels.

The US and China begin a series of talks today. The usual items are on the agenda, and the US will expend considerable effort trying to assuage China's fears about the values of its US debt holdings. Meanwhile, the most important factor in global currency markets will likely be virtually ignored: China's overvalued currency and how its unwillingness to allow the Yuan to appreciate is turning other currencies into safety valves. The pressure in the system is enormous, but China's ability to keep the global imbalances on track with its myopic weak-Yuan policy seems to be even larger now. Should the pathetic European economy feature an ever-strengthening currency now? China's reserve diversification is a key driver in this market. The recent massive increase in their reserves coincided with a move weaker in the USD - much of this was likely due to diversification pressures on capital flows rather than trade flows, which show a rapidly unwinding of trade imbalances. A return to risk aversion combined

Bloomberg leads with an article this morning indicating that equity analysts are bullish on a net basis and expect earnings growth to hit 25% next year - which if it came to pass would be the biggest earnings increase since 1995. This challenges our view that end demand will remain extremely weak as the final deleveraging that must take place as we move forward is in the private balance sheet. This process has only just begun. Many have pointed out that the better than expected results for some companies in Q2 is coming from efficiency gains and cost cutting rather than from more healthy sales growth. The paradox of saving will quickly eliminate any earnings growth from austerity.

This week's data schedule is not particularly heavy. Tomorrow's US Consumer Confidence number will again be very interesting to contrast with the optimism (if that's what it is) in the markets. US Q2 GDP is out on Friday. Besides the numbers, we will of course have our eyes glued to the wires for the results of the US treasury auctions this week, as the Treasury tries to unload a record amount of debt for a week. The auctions may go well considering that the debt is for two-, five- and seven-year notes, a bit more comfortable for the bidder who is concerned about inflation materializing down the road with their relatively short duration... Another item to keep an eye on that we discussed last week is the high-frequency-trading (HFT) issue, which has started getting a lot of press recently. Senator Charles Schumer of New York is getting involved and has proposed prohibiting an order type that makes the shops able to manipulate. Any policy effort that shows the potential to disrupt these HFT operations could change the market system in one fell swoop. While the HFT players are nasty parasites in the market, they are a very important part of the ecosystem nonetheless and a disrupt could cause massive volatility. This is an important issue for all asset classes.

Chart: EURUSD
EURUSD - the persistent fake-outs continue, as EURUSD touches to a new local high today, only to dive back down into the range. Technical trading has been frustrated at almost every turn lately as we await a bigger expansion in volatility and move out of the range before trying to draw a bead on the technicals. Important tactical downside confirmation level for a possible bigger move lower comes in around 1.4200/1.4180. Otherwise, the 1.4338 looms as the obvious upside barrier for now.

Brian Hunt's Market Notes

AN IMPORTANT LINE IN THE GOLD MARKET

Coming soon to a market near you: The next skirmish in the "battle for $1,000" gold.

As I detailed last month,$1,000 per ounce marks a big battleground between the buyers and sellers of gold. In the past 18 months, gold buyers have made four attempts to breach the level... and have been turned back each time by the sellers. It's a classic "trench warfare" back and forth action.

We encourage DailyWealth readers to view gold not so much as a trading or investing vehicle, but as a form of financial insurance. Gold is real, tangible money. It can't be printed and debased by a gang of bureaucrats. It's climbed higher every single year for the past eight years, which gives it the strongest uptrend of any financial instrument anywhere in the world. There's no need for gold owners to get worked up over short-term movements.

But we're watching the $1,000-an-ounce line closely simply because thousands upon thousands of market players watch it closely. If the buyers of gold go "over the top" and take the line, it could bring in a flood of new interest from people waiting on the sidelines. We're long. And we're rooting for the buyers.

This Precious Metal Is a Great Buy Right Now

By Dr. David Eifrig, M.D.

In 51 countries, the words for silver and money are identical.

Silver has been used as money for longer and in more parts of the world than gold. And silver was money long before the idea of paper and electronic currencies.

With the government creating an unprecedented amount of paper and electronic money, you could find yourself much poorer if you don't own something that holds value through chaotic times. That's why metals like gold and silver make sense in times like this. They have intrinsic value, and they can't be created on a whim... There's only so much gold and silver to go around.

For now, gold is more popular with investors. That's the problem... Lots of people are turning to gold as an investment. They've pushed gold prices up to $950. Gold hit its all-time high in March 2008 at $1,004, and I expect it'll get there again soon.

But silver at about $13 is not even close to its all-time highs in the $50s (or inflation-adjusted highs above $1,000). As a result, gold is overvalued relative to silver (I'll explain this more in a moment).

Think about it this way: We've all seen ads from companies offering to pay you cash if you mail in your gold jewelry (don't go anywhere near those sharks, by the way). Have you seen any for silver? Me neither.

Right now, you would need 71 ounces of silver to buy one ounce of gold. This difference in value is wildly out of step with centuries past. And it's not going to stay that way...

The U.S. Congress established its monetary system in 1792 and agreed to mint coins using both gold and silver. At the time, you needed 15 ounces of silver to buy one ounce of gold. (In other words, what we call the "silver-to-gold ratio" was 15:1.)

That ratio was well established. In fact, 15 ounces of silver had roughly equaled an ounce of gold for the previous four centuries (at least according to my 1932 edition of the U.S. Geological Survey Minerals Yearbook).

But then, in the early 20th century, governments around the world (notably ours) stopped backing their money with gold. People started hoarding gold, driving up its value, and the ratio went haywire, first cracking 71:1 during the Great Depression.

A variety of political and economic factors calmed the gold market and the ratio narrowed (though not to pre-Depression levels). It eventually bottomed out at 20:1 in the 1960s... when the U.S. stopped backing its currency with silver. Soon after, people bought up silver coins, driving the price of silver higher relative to gold.

Silver is Incredibly Cheap Relative to Gold



Guess what? Right now, enthusiasm for gold has pushed the ratio back to its 15-year high of 71:1... exactly where it was in the last Depression, when people were crazy for gold. If the ratio dropped back to 15:1, silver would sell for around $60... a 369% increase from current prices of $13.

I believe you will make a lot more money in silver over the next few years than you can holding ordinary stocks or mutual funds. And it's a no-brainer to hold silver versus gold.

Will the silver-to-gold ratio drop back to the pre-Depression ratio of 15:1? No one knows. But given the reasons for precious metals to rise, it's smarter to own the metal near its all-time low rather than the one near its all-time high. And I think the recent run in silver is just the beginning.

Here's to our health, wealth, and a great retirement,

Doc Eifrig.

Silver Chart Of the Week

SILVER IS CHEAP

Another reason to consider silver as a chaos hedge: It's cheap relative to gold, its precious-metal cousin.

As you can see from our chart of the week, silver and gold trade in a "band" relative to each other. This band is called the gold/silver ratio.

Generally speaking, silver is expensive relative to gold when the ratio sinks below 50. This is a reading that typically occurs after silver has enjoyed a huge run higher. Silver is cheap relative to gold when the ratio is above 70.

Right now, the gold/silver ratio is around 70... which leaves silver in the "cheap" category.

– Brian Hunt

Two Shocking Silver Charts

By Dr. David Eifrig, editor, Retirement Millionaire

If you've ever considering buying silver, I recommend you do it soon.

I just urged my readers to buy the metal with a unique U.S government-backed vehicle the average investor has never considered. More on this later. First, I want to tell you why I believe it's a great idea to buy silver right now...

Man has used silver as money for thousands of years. It's easily divisible. It's easy to carry around. It has intrinsic value in jewelry and industrial applications. Heck, the British "pound" gets its name from the weight of silver used for trade in the early ninth century (a so-called troy pound). Silver as money is even mentioned in the Bible (it's how Judas was paid off for turning in Jesus).

However, in the early 20th century, governments around the globe abandoned silver as money. They decided it was easier to expand a nation's credit with fiat paper money than to mine more silver. Over time, governments sold off their silver stockpiles to industry and investors.

At first, much of this silver was used up in industrial manufacturing and processes like photography. That silver is gone forever. Then, starting around 1997, silver quietly started flowing into private hands. Individual folks concerned with wars, investment bubbles, and mismanaged economies were buying it up. They turned to silver as a safe form of savings that can't be debased by a gang of spend-happy politicians.

Buying silver back then was a smart move. The metal is up 150% over the last 12 years... while stocks and real estate have struggled to do anything... while paper currencies have depreciated in value.

More people are catching onto this move. Have a look at the chart below. It shows how silver keeps moving into private hands:



Now here's another one. It shows the sales volume of the U.S. Mint's popular Silver Eagle coins. Note the huge volume spike on the right-hand side:

Primary Sales of
Silver Eagle Bullion Coins



As you can see, there's a modern-day "silver rush" happening right now.

Many people in the advisory business would take this opportunity to tell you Silver is going to soar in the next few months... Inflation is set to destroy the value of the U.S. dollar. Place your bets on gold and silver.

I'm not going to do that. I don't think inflation will be a problem for years. There's simply too much excess debt, unused industrial capacity, and bloated asset prices that need to be worked through before inflation becomes a problem.

What I can tell you is something much more important: Governments around the world are behaving absolutely stupidly right now. Our vice president just said with a straight face that the government has to spend more money in order to save the nation from bankruptcy. That's crazy... but it passes for conventional wisdom these days. In my 30 years of investing, I've never seen so many risks in the financial system. That kind of "patriarchal thinking" is producing those risks.

That's why it's a good idea to keep a portion of your assets in "chaos hedges" like gold and silver. Think of it as insurance against calamity, not a bet on increased inflation.

I can't recommend owning silver as a bet on inflation, because the facts don't support it. But I do recommend owning it as a safe store of wealth. And as I've just showed you, many people are catching onto this line of thinking. Buy your silver before this new interest becomes front-page headlines.

Here's to our health, wealth, and a great retirement,

Doc Eifrig.

When Small Investors Buy, Big Investors Sell

By Steve McDonald

There is an unofficial rule in the stock business called the “Odd Lot Theory”. It states that when small investors buy into a stock it’s a sell signal. A “small investor” is defined as someone who buys small lots (hundred share orders rather than thousands of shares) or odd lots (less than one hundred shares).

The reasoning is that the small investor is consistently wrong about when and what to buy, so if the little guy is buying, it’s time to sell. This unofficial rule has been painfully accurate during my 25 years in the markets.

The small investor consistently takes too little risk or too much risk or buys in after the market or an individual stock runs up. These are the only consistent qualities of this class of investor and they always result in losses.

Take a look at what the small investor has been doing lately.

A recent Wall Street Journal article, “A Taste for Risk-Again,” listed the activity of mutual fund buyers, the favorite of small investors, since last year’s sell off. Purchases in emerging markets, China, and junk bond funds, sectors that have already seen big run ups and that are considered high risk compared to domestic large cap funds, have sky rocketed.

Investors in the first five months of 2009 have poured $4.9 billion into diversified emerging market funds compared to pulling out $2.6 billion in the same funds last year. Investments in the riskier junk bond funds are up 10 times over last year.

At the same time, large cap U.S. stock funds have had $11.2 billion withdrawn in ’09 in addition to the $52 billion withdrawn last year.

What’s the explanation for this surge? Small investors are trying to recoup their losses from last year by jumping in late on higher risk investments. See the pattern? Too much risk, too late.

At the other end of the risk spectrum, the risk adverse small investors who took their losses and ran from the market last fall have been hoarding cash. The savings rate in the U.S. is up from 0% of after tax income in 2008, to 7% in 2009. The cash sitting on the sidelines is gigantic and all of it is generating an after tax and inflation loss.

Despite the run up in the market since March of this year, the best companies in the world are still available for pennies on the dollar and are offering huge dividends. As always, the small investor wants nothing to do with these high quality, lower risk investments.

Merck for example is off about 55% from its January 2008 high. It has a dividend of about 5.7%, that alone is almost three times money market or savings rates, and it’s literally one of the best companies on the exchange.

Merck, and a hundred others just like it, is appropriate for just about everyone and could be a core holding in almost anyone’s portfolio. At a 55% discount it is essential.

Large cap, dividend paying stocks are one of the best places for small investors. It gives them income and stability they can’t get in any other investment and a risk level that is perfect for all but the most risk adverse. But, as usual, the small investor is 180 degrees out of sync with what he should be doing.

The small investor historically will not be interested in a stock like Merck until it is at or near its 52-week high and the dividend is in the one to two percent area, exactly where you should be taking profits.

The Odd Lot Theory works. Use it to change how you are managing your money rather than being a victim of it.

Good luck.

Steve.

You Won't Believe This Bear Market Is Almost Over

By Dr. Steve Sjuggerud

You might not admit it yourself. But it's probably true...

Three years ago, you probably believed "you can't lose money in real estate."

It's OK... just about everyone believed that. But once everyone believes that about an investment, it's time to sell!

Today, just about everyone believes bad times for real estate will never end. Once everyone believes that, it's time to buy... or close to it.

My friend, you might not believe it... But the terrible market in housing is almost over. It really is almost time to buy residential real estate. Let me show you why...

I track three main indicators to tell me the "health" of the residential housing market. They're all pretty simple to understand... and two out of three are incredibly good in their timing (the third is a good judge of value). Let's look at 'em, one by one...

First up: The number of new homes started by builders. After "housing starts" hit a bottom, home prices tend to bottom six months to a year later. Importantly... Housing starts are at a record low right now.



Builders start too many homes (when the blue line goes above 2,000) in good times. Prices peak soon after. In bad times, builders start too few homes (when the blue line goes below 1,000). A bottom in home prices follows.

Based on this chart, housing prices could bottom soon... possibly in the next 12 months.

Second: The supply of homes available for sale. This indicator is typically called "months supply." But it's really a ratio of the number of houses available for sale divided by the current rate of sales per month.



A high supply of new homes on the market causes prices to fall. (It's simple supply and demand.) Once the supply of new homes peaks and starts to come down, home prices bottom and start to rise.

Today, the supply of new homes is near a record peak, and it's coming down. So a bottom should come within the next 12 months.

Lastly: Housing "affordability." People buy homes when they're affordable. In technical terms, homes are "affordable" when the median family's income can afford the mortgage payment on the median home at current mortgage rates.

Right now, homes are more affordable than ever, based on this ratio.



Since houses have fallen so quickly in price and mortgage rates have fallen to record lows, housing affordability is at record levels. This is a great "value" indicator for housing... and value is great now.

Housing is not like the stock market. Cycles in housing move slowly. So we can wait on an uptrend to "confirm" the housing market is back before we move in.

We're lucky here... we have a few good "leading" indicators, with good track records. Of course, my indicators could deteriorate from here. But right now, they're at record levels and showing signs of improving.

It's not time to buy residential real estate... yet. But the time is darn close.

Good investing,

Steve.

Why I Would Manipulate Silver

Why I Would Manipulate Silver
(IF I were a central bank!)

Silver Stock Report
by Jason Hommel, July 8th, 2009

Goldman Sachs has admitted that they have a computer program that can be used to manipulate markets.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_6d.tyNe1KQ

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,”

For over ten years, www.GATA.org has gathered information and admissions from central bankers and major bullion banks that the price of gold on the world market is manipulated lower than it should be. Well, one more admission is close enough for me to be counted as one more proof.

Many people are paid to deny such manipulation of course, because the people who are doing the manipulating are earning a lot of money from their ability to print money at will, without it showing up in a rising gold price.

One of the more preposterous denials of manipulation is that keeping silver down in a rising market would simply cost too much, as nobody could afford the losses.

That's just propaganda, of course. Losses on bad trades, such as being short the silver market, must be taken by somebody.

But my strength lies in running the numbers, using estimates, and exaggerations, to prove the point.

At the most, I've seen the silver market with a total open interest of up to 800 million ounces. This is a rare top, of course, but it can be used to determine a hypothetical maximum of "total losses" for being short silver during the entire bull market.

Silver has moved from a low of about $4.15/oz. in early 2003. Since then, silver topped out at about $21/oz. in the spring of 2008.

Using those three figures can give us a maximum total estimate of COMEX paper silver losses, assuming 5 unreasonable and exaggerated things.

1. That the short position was all put on, and initiated, entirely, at $4.15 -- which it wasn't, it was put on starting at the former top in 1980 of $50/oz, and major bullion banks have always been short, ever since.

2. That the short position was completely covered at the top of $21 -- which it wasn't, and it got much bigger at the top, and again, after that top, around $16/oz, as the banks sold 41 times more paper silver as was purchased by physical silver investors in a month, which helped to push the price down to $8/oz, which was very profitable for part of their position.

See: A Tribute to 7th Grade Math August 31, 2008
http://silverstockreport.com/2008/7thgrade.html

3. That the short position was one size, and held the entire time with no trading -- which it wasn't.

4. That the short position was always held by entirely one entity -- which it wasn't.

5. That the short position was always a maximum of 800 million oz. -- which it wasn't.

So, given the real facts, the losses on the short position would have been much smaller, but we are not interested in the smallest possible cost, but the largest possible cost, to utterly refute and ridicule the notion that it would be "too expensive" to manipulate the silver market in a rising market.

So, the difference between $21 and $4.15 = $16.85

The loss of $16.85 x 800 million oz. = $13.48 billion

Even with all the exaggerated figures, exaggerated in 5 ways, still brings the total losses in silver manipulation to a theoretical maximum of $13.5 billion. Clearly, the real loss, being short on silver at the COMEX, must have been much less.

But I would guess that they might even have profited along the way, instead of taking losses, for several reasons.

First, they have those "manipulation trading programs" admitted by Goldman Sachs at the start of this article.

Second, their positions are so large, that those who are short, ARE the market, and I'm sure they use their computer programs to only sell "just enough" to move the market price nearly at will.

Third, they know their own clients' books, and stop losses, and can run the price of silver to trigger those stop losses to take over client long positions, so their clients lose money.

Fourth, the COMEX positions are smaller than their OTC positions, which are a much bigger liability.

Fifth, rigging the silver price aids the rigging of the gold price, and both allow the continued existence of a falsely strong U.S. dollar, which they have printed up over $1 trillion of this year, with no new "inflation" showing up in the prices of gold and silver.

And that fifth reason is so profitable, that a $13 billion loss in COMEX trading is just "the cost of doing business", and anyone who can't see that, is either blind, or paid off, and you don't need a sophisticated computer program to realize that, but only the willingness to perform 7th grade math on 3 numbers, as I just went over.

The reason for me doing this simple math exercise is to show by comparison how that maximum figure of $13 billion, is so very miniscule, so very tiny, compared to that other figure listed as my fourth reason above, a very important figure, the BIS OTC silver numbers.

The BIS (Bank of International Settlements) publishes a list of the notional value of outstanding OTC (Over the Counter) commodity derivatives. The category of interest is "Other precious metals", which is mostly all silver. The amount in Jan. 2008, was $190 billion.

That consisted of $86 billion in forwards and swaps, and $104 billion in options.

http://www.bis.org/statistics/otcder/dt21c22a.pdf

In Jan. 2008, the silver price was about $16/oz. Thus, we can see that the number of ounces short in that "OTC" market was $190 billion / $16 = 11,875 million ounces.

This comparison is extremely important, because the OTC market is much bigger than the COMEX, which had reported short positions of a maximum of only about 800 million ounces of silver.

Currently, COMEX silver open interest is 133,000 contracts for 5000 oz. each, which is 665 million oz.

http://news.silverseek.com/COT/1246909610.php

Clearly, a loss of $16.85/oz., during the entire bull market in silver from 2003, over 11,875 million ounces in the OTC market, would be a much bigger loss, as it would be $200 billion!

Yes, in "OTC Bullion Accounts", world bankers have a potential loss of about $200 billion, if they could even deliver 11,875 million ounces that clearly doesn't exist in their vaults, and doesn't exist in the world even to buy!

It is also extremely important to note at this point that the world's silver mines only produce about 600 million ounces, and world physical investment demand is only about 100 million ounces, or about $1.3 billion at the current $13/oz.!

So, if you were one of those bankers, and you had a potential loss of $200 billion wouldn't you rather lose $13 billion trading at the COMEX to save the $200 billion loss in the OTC market? I would.

That must be very near to how they rationalize it.

After all, if you can control the reported price on the open markets, then your losses in the "over the counter" market is much smaller.

And it's a great scam, as long as people continue to be convinced to hold paper silver other than real silver, which they are, as the numbers prove it.

With only $1.5 billion going towards the purchase of actual physical silver in a year, while $200 billion is sitting in OTC "other precious metal" accounts, it goes to show that the vast majority of people who own silver, or about 99% of assets in "silver" are really paper silver, most of which could not possibly exist as real silver.

And that still does not include all the other paper markets!

For example, another paper market is the silver certificates issued by Canadian banks, that the Banks are no longer redeeming. The refusal and inability to redeem Canadian silver certificates has continued without much notice, and no official reports or admission. It's like a silent bankruptcy, not even getting any press or much blog coverage, because, still, so few people even attempt to redeem them. But my point is that I have no idea of the size of that paper market, it could be in the billions, too.

And those BIS numbers also don't include the LBMA accounts that trade up to 30 billion ounces of silver per year, which is about 120 million ounces of silver per day, on a base of 75 million ounces of physical silver, which is another absurdity, of course! Those numbers were reported in the CPM Group's annual silver book for 2008.

And those BIS numbers don't include the ETFs either, since the ETFs are not an "over the counter" market, but a transparent one, and also don't likely have any silver, since the custodian is JP Morgan, who has also been identified as the key bank that is short in the silver market on the COMEX.

So, perhaps much less than 1% of people who think they have silver, actually have any physical silver.

Furthermore, those people who are blissfully happy to let their assets sit in "paper silver" accounts are nearly guaranteed to not make any significant money in silver, if only because when silver does soar past $100/oz., there's no way that those bankers would pay out $100 x 11,875 million ounces = $1,187 billion dollars to those paper silver holders.

And of course, 11,875 million ounces of silver does not exist in the world for them to buy, cover, and pay out, in any event!

Instead, the banks will do as they always do, and merely change the rules, or force a cash settlement (which is a quasi-"bankruptcy") at much lower silver prices. They will simply default, which means that they will fail to deliver silver that they don't have, of course.

Their danger, of course, in doing even that, is that people might begin to wake up, and demand real silver if they can't have paper silver.

After all, paper silver serves its purpose to manipulate silver prices downwards, only if it serves as an alternative to prevent people from buying real silver.

Here's an additional cost of the manipulation. Manipulation only works if they can actually deliver real silver, at lower than market prices. I have heard of offers to miners of up to 4% over spot for access to all of their silver. Isn't that kind of offer evidence that the "spot" price is manipulated lower than the real cost of real silver?

So, let's calculate the maximum potential cost of that. Suppose the world bankers bought 100% of world production this way, at 4% over spot, from the miners and refiners, and then turned it around, to sell it at what becomes "spot", for 4% less, at a manipulated "loss", a loss to manipulate the markets. With 600 million oz. of world mining production, at $13/oz., x 4% is a mere $312 million, a tiny cost of "doing business" to keep manipulation going, and to continue the COMEX rigging, and to prevent the bankruptcy and loss of $200 billion in the OTC markets!



And even that $312 million "loss" could be mitigated, by moving the price of silver lower, at will, on the "spot" futures market, precisely on those days that miners or refiners sell to the bankers "at 4% spot". I've always wondered why miners always seem to report sales prices lower than average for the quarter, while often claiming to be using some sort of price protecting hedges to get "above market" prices. That must explain it, in part.

And so, that's why I would manipulate silver, and gold, if I were a blood-sucking vampire of a central banker, who had no conscience, and no knowledge of the importance of honest dealings.

One of my goals is to fight such wickedness in high places, as I strive to expose those evil ones to the light of truth to end their evil oppression.

I believe the manipulation can end suddenly, at virtually any time, as any one of nearly 1000 billionaires, funds, or nations, could decide to buy silver at any time, causing delivery defaults, and market failures, and major price dislocations.

I believe the manipulation usually ends when they run out of silver to deliver, and then, people begin to stop trusting in paper promises, such as happened to gold in 1933 and 1971. If the failure to redeem Canadian silver certificates is any indication, the world is scraping the bottom of barrel for silver.

I believe that when the manipulation ends, with delivery defaults, precious metals prices will rise with shocking speed, and even my own re-supply sources will likely dry up, and you might not be able to buy silver at any price, for an extended time, until the market price is much, much higher.


Sincerely,

Jason Hommel

$1,000 Will Be The Floor For Gold Prices

Gold Will Blast Above $1,000 Per Ounce Within 100 Days!And a Few Savvy Investors Will Profit Dramatically

By Ted Peroulakis

It’s just a matter of time before $1,000 becomes the floor for gold. Once gold breaks out above the $1,000 per ounce psychological resistance level, the sky is the limit. Gold could easily hit $1,200 or even $1,300 per ounce by year end. But you must act fast, because you may never see gold under $1,000 per ounce again. Investors that position themselves correctly today will have the opportunity to make 100% or more gains in the months ahead. Let me explain why…

Inflation and a lower valued dollar is just one of the reasons to buy gold. The U.S. government is on track to spend $1.8 trillion more this year than it brings in. America’s national debt is well over $11 trillion. This is the largest debt ever accumulated in the history of man.

It’s unlikely that America can continue to borrow $3.7 billion per day. Eventually, overseas investors will stop supporting our lavish spending habits and cut us off. The U.S. government will have no choice but to print up new currency to pay off this crushing debt load, setting up higher price inflation and a devalued dollar.

Gold is priced in dollars, therefore when the U.S. dollar goes down – gold prices go up. Gold is a hard-asset which historically holds its purchasing power and performs well in inflationary times.

China holds trillions in U.S. government debt and they are becoming alarmed with America’s out-of-control debt. A leading Chinese government official recently implied that China plans to dump U.S. Treasuries and buy gold.

China recently stated that since 2003 it had silently enlarged its holdings in gold from 600 to 1,054 metric tonnes. And, China could start buying a lot more gold in the future, which would boost demand and push gold prices well over $1,000 per ounce.

China currently holds foreign reserves of $2 trillion. If China decides to move just 25% of these reserves into gold it would need to buy more than 16,780 metric tonnes. That is more than 7 times the world’s annual gold production.

Just a small pickup in demand in gold could send prices soaring. Gold is already is short supply. Accord­ing to the World Gold Coun­cil, the average annual global demand for gold was 3,674 metric tons from 2003-2007. And, annual new production of gold for that period of time was about 2,209 metric tons. That’s a 1,465 metric ton shortfall. This shortfall is made up by central bank sales and recycling, but the banks are running out of gold to sell… or are becoming more reluctant to get rid of it in a rising gold market.

It simple economics, when demand greatly exceeds supply, prices rise. And, gold supply is falling off, gold mine output last year dropped to a 12-year low, even though gold prices are higher. All, these events are setting up a huge bull market in gold.

Plus, gold has seasonal patterns in its price movement. Historically over the last 35-years of data, gold tends to run higher just after the summer months. Consequently, you want to position yourself to profit now.

And, finally gold looks very strong from a technical perspective. You will notice on the chart below that gold’s resistance is just under the $1,000 level. And, gold is in a confirmed uptrend (see up-trendline). These form an ascending continuation triangle chart pattern. The ascending triangle is seen as bullish formation that indicates accumulation. The up-trendline has a tendency to push gold above resistance. Once gold trades above resistance around $1,000 per ounce, then $1,000 will become support and gold can blast higher. You must act now! Profits are to be made in gold.




Bottom Line: Make sure you own gold. If you have a greater appetite for risk, you can buy stock options on superlative gold mining companies and target 100% gains or more in gold’s next leg up. But the options I’m looking at will not be this low priced for very long. You have to buy them now.

This gold miner has vast proven and probable gold ore reserves of 2,330 metric tonnes! As gold prices go up so does the value of the company’s gold reserves, which leads to an increase in earnings. The stock price could skyrocket with just a small rise in gold prices.

Best Wishes,

Ted Peroulakis, MBA

Housing's Still Overvalued & Silver's Still Cheap

Housing's Still Overvalued & Silver's Still Cheap
(Sell your House and Buy Silver!)

So far, out of 80,000 readers, nobody has asked me when the housing collapse will end. Funny. I might be regarded as knowing something about that, since I called it in advance, well before the peak, 5 years ago:

Overvalued Housing, Bonds & Stocks July 2, 2004

The lack of questions is a sign that the housing collapse has a long way to go, because, generally, people are still in the first stage of mourning the death of the housing boom: denial. Nobody can ask "When will the housing collapse end?" if they can't admit the phrase "housing collapse".

After Denial, next in the stages of mourning comes Guilt. Then Anger. Then Depression. Then Acceptance.

Unfortunately, people don't start asking questions until they get to the anger phase, and they don't start doing anything about it until the acceptance phase.

Let me help you get there more quickly.

Denial: Wake up! Housing prices will NOT soon stop going down, since in many locations, 10% of all properties are 90 days past due on their mortgages, and those foreclosures have not yet hit the market, and they will.

Guilt: You should have known! Government intervention into the economy always creates distortions, and government sponsored home loans through Fannie Mae and Freddie Mac and corruption at all levels gave everyone with a pulse and the ability to lie to qualify for a home loan, that extra and excessive buying power created the top, and this was easy for anyone to see. Why didn't you see it? Were you asleep?

Anger: But good intentioned democrats who wanted to help their poor constituents achive "the American Dream" of home ownership did nothing of the sort, they helped enslave poor people into debt, not true ownership, due to government meddling. It's the government's fault!

Depression: But what can you do about it? Nothing! No matter how much you work on your yard or keep your neighbors mowing their lawns, or no matter how much you write your congressman, and regardless of electing Obama, home values will continue to go down, and there's nothing you can do about it.

Acceptance: Well, there is one thing you can do. Sell your house! Get out of the way of this oncoming train wreck in motion.

The government is doing everything they can to stop it, but they will fail.

Everyone should know by now that the government is buying up the "toxic assets" of the banks, meaning, the mortgages that are worth more than the homes are worth. Government bought at the top, and they bought the worst of the "assets".

The housing crash will end when the government finally sells all of their housing, and "exits" the market.

That's what marked the bottom of the gold market. When the governments of the world were hell-bent on selling as much gold as possible, back in 1999-2001, when gold bottomed at $250/oz. They are still selling gold, but not as much, since they are running out of gold to sell.

Government intervention always distorts markets.

Housing topped, because of excessive government-backed loans. See, government was really buying housing on the way up, creating the top. The continued government buying, through bailouts, means we are still at the top.

Government buying created the top.

Therefore, government selling will create the bottom.

Tell me when the government, or Fed, will sell all their "toxic" mortgages, or forclose and sell the houses that back them, and I'll tell you when the housing market will bottom out.

Government dumping of all mortgages and housing could be a long way off--perhaps decades.

If we are fortunate, housing prices will drop 50-75% in 4-8 years, and it will be over quickly. That is unlikely, and would require the election of somebody like Ron Paul as President.

More likely, due to continued government intervention, as is taking place, the housing collapse could last another 20-30 years.

Yes, 70% of home sales are either short sales or foreclosures. However, this only means that some banks are selling. Most of the government mortgages are not being sold, and most of the homes owned by people are owned with mortgages, meaning, on leverage, and these are not yet being sold either. Just wait until the public starts dumping homes, AND the government starts dumping at the same time. Then, you will really see a housing crash.

A "normal" housing market will have most homes selling for far LESS than construction costs. After all, homes deteriorate, and a 20 year old faucet is not nearly as nice, or functional, as a new one. People know how to "write off the depreciation" of a home on their taxes, but this generation does not yet seem to understand that real homes, do, in actual fact, depreciate, as a normal function of real life!

If a new car can lose 20-30% of the value the moment it "drives off the lot", why is that not also applicable with homes? It should be the norm. When it's not, it's a bubble. Housing is still a bubble. Grossly overvalued.


I've been reading and writing about silver for 10 years now. Sometimes, it's hard to "come up with something new" about silver, and so, sometimes I touch on real estate, or oil. But I think I have an new and important insight to share.

My education about silver has mostly come from other men who are writing today, who have 20 to 60 years of experience in precious metals, and it comes from my reading of history, and, of course, from my readers.

The historical perspective is important, but sometimes, things get forgotten by historical writers as people forget over time, and yet, knowldge is gained over time as humanity advances.

Back in the depression in the 1930's, silver was valued at around 29 cents per ounce, yet that silver was turned into U.S. silver coinage that was valued at around $1.40 per ounce! That silver thus formed the "backing" for the currency; as it was the currency, but it also formed the backing for the paper currency. In other words, paper could be "redeemed" or "exchanged" for silver currency, and thus, it was said that silver "backed" the currency.

Unfortunately, writers in the metals community lost some perspective on that by 1964, and I believe that negatively influenced my thinking for years.

They wrote statements like this, and see if you can see the inconsistency with the facts above:
"After 1964, 90% silver coins were no longer issued, and silver no longer backed the currency. Thus, without any possibility of redemption, people were forced to hold unbacked paper money, or trade their dollars for other fiat paper currencies, as there was no safe haven."

Or they would write:

"After 1964, 90% silver coins were no longer issued, and silver no longer backed the currency. After that, paper money could be exchanged to buy silver only at excessive premiums which discourage trade. See, when silver was money, you could exchange a $1 of paper, for a silver dollar, at zero cost, paying no premiums."

BUt silver was not valued at $1.40/oz. the entire time that silver was used as currency in dimes, quarters and half dollars for 173 years or so, but as low as $.29/oz! The silver that you could get, when turning in your paper, was up to 400% overvalued, as $0.29 x 5 = $1.45!

These days, we all know a bit more about silver premiums, which is the extra price you pay, over spot, to buy silver. In the last year, premiums for silver coins and bars have ranged from about 50% down to about 5% over spot.

My math tells me that 5-50% is much less than 400%. Wouldn't you agree?

Thus, silver has a much lower premium today, than when "silver was US coinage".

I've written on this before, but here's the insight.

If silver, at 400% overvalued, can "back" the currency, then don't we have a de-facto "private" backing of the currency if you can actually buy silver from private dealers for much less, ranging from 5% to 50% over spot?

Yes, we do. Interesting thought, isn't it?

Here's something else. Over 100 years ago, before the founding of the Federal Reserve which issues all paper money, there were privately issued paper money called dollars. But who issued them? Various banks. Each bank would issue paper dollars that said it was issued by each bank, like the First Bank of Iowa, or some place. Other banks would redeem those dollars, at varying discounts, depending on how far away the issuing bank was from the redeeming bank, and also depending on the reputation of the bank. After all, a redeeming bank would have to trust the issuing bank could deliver the gold or silver upon redemption.

Our markets works shockingly similarly, even today.

Today, coin shops and bullion dealers will redeem Federal Reserve Notes (dollars) at varying discounts, depending on the volume of trade, and also, depending on their supply sources, such as mints, major wholesalers, or public selling. Some of those supply sources tap directly into the large bullion banks that are the owners of the Federal Reserve and/or who have enormous short positions at the COMEX or in over the counter derivatives, and/or are custodians for the bullion ETFs.

Our markets are so free, that we actually have a de facto private precious metals backing for the current paper dollar. By "de facto" I mean "in practice but not necessarily ordained by law".

My main point is that anyone can exchange their paper money, for silver or gold, on much better terms today, at much less premiums today, than during the vast majority of the time that silver "officially" backed the currency!

The fallacy of thought was that silver could be bought for "zero premium" when it was money, while today, you have to pay an "unfair 5-10%". The truth is that when silver was money, government distortions and monopoly pricing created 400% premiums, also called "seniorage".

http://en.wikipedia.org/wiki/Seniorage

Implications? I don't mean that all of our currency is backed by silver. The relative amounts are so different, it's shocking. Dollars in the banks now exceeds $14 trillion, or $14,000 billion, but the amount of money going into physical silver per year, world wide, is only about $1 billion.

I can see the criticism now. People will say that I'm just trying to justify selling silver at up to 10% over spot when other dealers may have it offered at 5% over spot

Of course I am! Every business does that. Quality goods typically cost more.

But the point is that the free market in silver, or multiple sellers and suppliers (not just government currency), is creating the competition that leads to sometimes absurdly low prices, which is great for all silver buyers today.What quality do I offer? Speed & reliability, at a very low price!

You might be able to buy silver cheaper elsewhere than from me, but it may cost you more in terms of time, or you might lose it all in a default. Other dealers still have a 2-5 month delivery delay. Or the other dealers might default, because they might not have the silver, or might be in debt, or their suppliers might not have the silver.

What's worse is that some dealers are slower, less reliable, and more costly than I am!

I have 81,000 oz. of silver that I'm using to deal silver.

Thus, we have the goods, the real silver, ready to deliver upon demand, with zero default risk to you.

If you want to sell your home, and buy silver, you will be a very wise, and rare, customer.


Sincerely,

Jason Hommel

source
Silver Stock Report

China wants Gold (& verses against Usury)!

Foolish Christians practice usury; while wise Christians have silver

Here's a report from Dave and Janelle after taking silver and gold to sell at the first of a few gun shows as follows:

Great American Gun & Knife Show, June 27-28
Greene Co. Fairgrounds Expo Center
123 Fairground Circle
Greeneville, TN
http://mwxmarketing.com/Gun_home.html

4th of July, July 4-5
Downtown, Jefferson City, MO

C&E Gun Show, July 18-19
The Salem Civic Center
1001 Roanoke Boulevard.
Salem VA 24153-0886
http://www.cegunshows.com/ShowInformation/SalemVA/tabid/80/Default.aspx

The Nations Gun Show, July 24-26
Dulles Expo
Chantilly, VA.
http://www.thenationsgunshow.com/

As we travel across the country, the smiles keep getting bigger and bigger! We are really enjoying everyone we meet and the love of the Lord seems to be more prevalent the farther we go...

As different as we all are across the country, we all seem to agree on a couple things: God is incredible and Obama is a great gun and ammo salesman. But what will happen if we ever get to the point of needing those guns and ammo? At the gun shows in California we talked to people about investing in silver and gold. It was difficult to convince them because they have been brainwashed by our government into thinking that something that is printed on a piece of paper is more valuable than silver and gold. They feel that when society crumbles that their guns and ammo will get them what ever they want.

When you stop to think about paper, it really does have many beneficial uses. From major uses in bathroom facilities in your home and all across the country to starting a fire to warm your house. I know, some of us actually read from paper made products too! (Even while we are in the restroom!??) But seriously, God created gold and silver to be used for monetary purposes. Governments have horded it and released paper products in its place, stating that every piece is backed by gold and silver.

The show in Tennessee was very successful and very surprising. We knew the day was going to go well when, Ron, the promoter of the show led over 200 merchants in prayer just prior to opening the doors. It was wonderful to see the amount of knowledge the gun owners in Tennessee have regarding silver and gold. They all seem to agree with Jason's philosophy that one day we will need something other than paper money. There were a lot of people who were interested in buying silver from Jason and took information so that they may make purchases in the future. It was great to be able to provide this avenue for them.

Gather Silver with Both Hands

It is a matter of almost holy writ with us here in the Whiskey Bar that “the poor man’s gold” is something we should be buying with every spare non-silver dime we have. We believe! We believe!

We believe on fundamentals, technicals, and common sense.

We even believe all this in the face of the recent gyrations in the market.
In May silver shot up dramatically, so why is it falling dismally in June? Beats me, Babes, it truly does. By every standard I can devise silver is still the investment of choice:

*

For sixteen years straight mining has not kept up with demand.

* Almost all the gold ever mined is still in existence, barring bits that were hidden from various totalitarian governments and forgotten, or lost, or sunk beneath the briny sea transporting treasure from the New World to Spain.

* Silver is consumed, other than for jewelry and tableware; again, supply is unequal to demand.

* Silver has multitudinous industrial uses, even now that the vast amount once used for photographic film has been reduced to very little.

* Silver has been running less than half of the least classic ratio with gold and slightly over four times the highest one! That varies, historically, between 16:1 and 30:1. At recent levels of 65:1 silver is so wildly undervalued that it is almost insanity not to buy it.

* Only recently has silver become available at spot or close to it; last year those who had wouldn’t sell.

* Mints can’t keep up with demand.

* To really ice the cake, silver is down well over ten per cent below last month’s highs.

So...why did it fall again today? Quite frankly, I have no idea, and I don’t really care. I like $13.85 silver a lot better than I did $15.50 silver last month so long as I’m purchasing, as I expect to be for some years to come! I chortled happily today when I bought over eighty ounces at $10.85 or $11.32, depending upon whether the weight was in Troy or Avoirdupois. Either way, I did well. I picked up another forty-odd ounces for $500.

Those who are familiar with my “TOIS” (Traynham’s Own Investment System, pronounced “toys,” because that’s what I buy) know that I read the market via complex technical, psychological, and analytical market runes (otherwise known as Craig’s List and e-Bay.) The torrent of silver available through such markets has reached flood level as 20% joblessness (no matter what the government says) and a minimum of 6% inflation (again, no matter what Obama says) devastate the land.

The shortsighted are turning loose of family treasures and luxury items rather than tightening their belts, and they will regret it bitterly sometime in the next five years.

Never before has the market been so advantageous for the buyer of used vehicles, fine china and other luxury goods, farm machinery, and livestock. As I noted in yesterday’s article on Morning Whiskey, we just bought a pair of very fine horses for a quarter of what they would have cost last year. We want a diesel truck (for reasons covered in past articles), and made a short list quickly and easily of two dozen that would have done splendidly, the most expensive of which was $2,000. MDC (My Darling Charles) chose a Big Bubba that has been in use as a repo truck, meaning it comes with what is virtually a small crane and heavy chains worth a quarter of the price we’re paying.

This country is in big trouble economically from crashing stock and real estate prices. We expect the bond market and commercial real estate to totter next. Taxes are rising, income is falling, hours are being cut, the USA is averaging 625,000 lost jobs a month, and Congress intends to tax our cattle for emitting methane. BRIC is maneuvering to replace the dollar as the standard currency. Nobody more significant than Sri Lanka is discussing a gold standard. The far left is dismembering the carcass of business and distributing the bleeding hunks to favored voter blocks.

MDC and I spent our usual luxurious three hours sitting on the terrace watching the sun go down over the lake and laughing at the antics of the animals. We came up with one slight possibility of an explanation. Remember the Hunt Brothers? Back in the late Seventies they almost cornered the market in silver, and after that splendid idea failed went back to running one of the nation’s biggest trucking companies. It could just be that the increasing costs of trucking and the possibilities of a breakout in silver made surviving Hunts think May was a good time to turn loose of some of their glittering hoard. A look at volume for the year might be enlightening, along with speculation about whence came genuine Ag, although it may be the rise was promulgated through mining stocks. I still say it doesn’t matter, buy it when the price is advantageous.

I expect the day to come when I have to admit that I erred in not paying what silver cost when I had the chance at current levels. That has happened to far better than I. Silver is particularly vulnerable to this error because there is usually a limited amount of the physical metal to be had at any time. Don’t say that you weren’t warned that my gleeful hand rubbing today over buying at twenty and thirty per cent. under spot won’t give way to mourning that I didn’t buy much more even though it was $15-20/ounce.

I miss the good old days of the Eighties when I hunted for cyclicals and charted happily every day, but I think we have a better chance to make really big gains now than have been possible for ordinary, sensible people since the Great Depression. I love reading the market suggestions the big guns of Agora Financial offer us regularly, but day in and day out you can protect yourself and your future through small, common sense purchases. Food, fuel, trade goods, sterling you can hold in your hand, ammunition (if you can find it!), tobacco, alcohol, and soap...those will be the daily hard money in the future I see coming.

Why is silver falling? Who cares! Just go buy all you can get your hands on.

Warm regards and happy shopping,
Linda Brady Traynham