We have had 2 1/2 trading days since the Fannie/Freddie announcement. Monday was up, yesterday was down, today is up. Breadth was poor Monday, everything was slaughtered yesterday, and breadth is suspect again today. It looks like Lehman Brothers is toast. They may be able to cut a better deal than Bear Stearns did because they are one of the shareholders of the Federal Reserve. It also looks like Washington Mutual will go upside down soon. This past week they were put on "double secret probation" by the FDIC over the weekend.
OK, the banking and financial system is unraveling at the seams. Gold and Silver have been smashed pricewise to "block the exits". If the current financial situation was known 6 months or a year ago, 99.99% of those asked would have responded "I would want to be in metals as a safe haven". The metals have been forced down to display that they are not the "exit or safe haven" that they have always been. At the same time, those wishing to buy the metals, REAL METALS, can't. The physical metal does not exist for purchase. It does not matter what price the metals trade at in the paper markets. THIS IS VERY IMPORTANT TO UNDERSTAND. Right now, price does not matter! Price does not matter because the owners of the casino are setting the price. The only way to buy metals right now is through the paper markets. This is similar to the pawn broker telling you that your flawless diamond is made of glass. He gives you a stupidly low bid, and if you sell, shame on you. If you sell, he will not put it back in the showcase for sale because he knows there is a shortage currently, if he waits 6 months to a year he makes a killing.
Another way to look at the current situation is this. If you knew the banking system was going to close, would you not withdraw your money ahead of time? Of course you would. If you also knew that your government had no other choice but to print currency to pay its bills, wouldn't you change your currency to another, safer currency? If you knew that all paper currencies were on that same ship called Titanic wouldn't you try to get into a lifeboat ahead of time? OK OK, all dumb questions.
This is not a dumb question however. If someone told you 15 months ago that: the biggest US private mortgage company would fail, the US government's 2 mortgage companies would fail, real estate nationwide would fall 20+%, the auto industry would ask for a $50 Billion bailout, the #3 and 4 brokers would fail, that credit default swaps on US treasuries would forecast a better chance of US bankruptcy than 9 other nations, that the largest US savings and loan would be on the verge of bankruptcy, that the financial health of the largest insurance company would be in question, WOULD YOU HAVE BELIEVED IT????? No way! It couldn't happen here. NEVER. The government would not allow it to happen. NEVER.
Well, all of this has happened in 15 months. We are all FROGS. Yes frogs, frogs in a pot of water with the burner on full blast. The public has become so numb to what is and has been happening for years now. None of these failings has shocked the public yet.
I have never seen a frog in a pot before, but I would bet that once the water got to the right right temperature a frog would panic for it's life and try to jump out. This is what they don't want you to do, they don't want you to opt out of Dollars. Hang tough, hold tight to your metals positions, the paper prices are not representative to market clearing prices. There is a worldwide shortage of metals! Price doesn't matter if there is none for sale!
[3:54 PM
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