Wednesday, November 24, 2010

Absolute Advice For Relatives

If you're like The Turd, you will most likely get peppered tomorrow with questions from pseudo-intellectual relatives regarding the current world/market environment. Your over-educated yet under-informed cousin or brother-in-law will seek out your current "wisdom" on investing, politics, etc. He or she will then feign interest while you speak but you will feel certain that, in the end, they just don't "get it" as your absolute conviction overwhelms their status quo mindset. You could probably talk for hours about the failure of Keynesianism, Quantitative Easing, the criminal political class, the fallacy of TBTF, POMO and the PDs, the infallibility of gold, etc...but why even try? Your cousin's husband doesn't understand any of this anyway and your show of intellect will only make him feel threatened. He'll quickly tune you out and run off to the family room to watch the Cowboys.

So what do you talk about tomorrow when someone asks? What kind of simple advice can give someone to prepare them for what is certain to be a very challenging year ahead? I plan to dial it back a bit and talk about one thing...inflation. And not just any old, run-of-the mill 3% inflation but serious inflation. I'm talking 20-30% inflation. Milk to $5/gallon kind of stuff. That is what's coming and its a topic most folks can actually get their arms around. Even the fuzzy-headed new boyfriend of your divorcee sister understands inflation and he might even be able to understand why its coming if you explain it well. (This is a chance for you to show off some of your worldly knowledge, too.)

Most folks with a high school-level understanding of economics (this includes your Fed governors) only understand and recognize demand-pull inflation. This is the classic demand side, Phillips Curve inflation that says rising wages, employment and wealth cause economic expansion which leads to more money chasing a static amount of goods. New, excess demand "pulls" prices up and the result is price inflation. Pretty simple stuff. What is coming in 2011, however, is the forgotten beast of cost-push inflation. This type of price inflation is caused by producers and merchants being forced to pass along through higher prices the rising cost of inputs to their products. Consumers, particularly the lower-and-middle income, bear the brunt of the pain.  Your income isn't rising to keep pace with rising expenses and you get squeezed. Hard. And its not luxury items that are going up in price, its the staples. Bread, milk, gasoline, clothes, eggs, meat...the basics that no one can realistically live without. It's going to hurt and 2011 is going to be a mean year.

Why will input costs go up? Simple, they are all dollar-dominated and with our Fed now engaging in their final policy option, "QE to Infinity", all dollar-dominated assets are going up in price. Significantly. Your crazy uncle Henry may never take your advice to sell his stocks and buy precious metals but he just might take your advice to stock up now on essentials, before the prices skyrocket. Tell him that if he's going out to buy a new pair of pants, he should buy two. Tell your sister that instead of just buying her kids' winter coats for this year, she should buy coats for next year, too. Tell your cousin that instead of buying groceries every week to, instead, buy a whole dressed-out cow and put it in the freezer along with all the other dried and canned goods she can store.

Still, most crazy relatives won't listen but at least, come next Thanksgiving, they'll remember that you were right. One down side, however. Because you'll end up being the only member of the family that will have prepared and, most likely, the only one with affordable food to eat, you'll probably have to host everyone at your house next Thanksgiving. Oh well, there's a cure for that, too. Wine. Lots and lots of wine. Keep a couple of good Pinots on reserve and you'll be able to handle just about anybody.

Lastly, as expected, gold and silver are wrapping up an uneventful day. Barring any Korean craziness, Friday should be quiet, too. I'll check in again after the close on Friday to report on the status of the weekly chart and its implication for the weeks ahead. I still expect next week to be quite exciting as $36B in POMO is just over the horizon.

HAPPY THANKSGIVING (in the US) !!! Turd out.

32 comments:

  1. Lucky for me my mother actually took my advice and gave me money to buy her some gold & silver. I just wish she had listened to me sooner.

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  2. Great blog TF! Thanks to Mrs. Ferguson for her encouragement for you to indulge us. Nothing stops the cocktail party chatter quicker than saying, "Well, you KNOW what Turd Ferguson said was happening with gold next?" Has my husband in giggles every time. Then some VP of this or that will whisper, "who is Ferguson?"

    Happy Thanksgiving to you and your family.

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  3. LOL this is hilarious because a few weeks ago I spent some time with relatives and this EXACT thing happened to me. It was both my cousin's husband and brother in law. Happy Thanksgiving, Turd.

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  4. Thanks for writing, always a great read. Additionally, I have added a couple friends to start reading to spread the word. Your time is invaluable to all of us!

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  5. Happy Thankgiving dear Turd!!!!
    Many thanks!!

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  6. It looks like you have readers on the "institutional" side -- this chart looks eerily like the one from 'Moron Silver'
    http://etfdailynews.com/blog/2010/11/23/a-stunning-silver-forecast-comes-true-what-next-slv-sivr-agq-dbs-zsl-usv-sil/

    Happy feasting, thanks for your thoughts.

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  7. Thanks for the link, CD. Interesting stuff.
    My only point of disagreement is in trying to ascribe technical analysis to what is a dramatic change of fundos in silver. To me, the move from August to now is solely based upon the physical squeeze on the Comex. As the squeeze gets tighter and tighter, the angle of silver ascent will get steeper and steeper.
    Thanks for playing along here. Have a great Thanksgiving!

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  8. Happy Thanksgiving. And thanks for the great blog. It is truly one of the most valuable sources I have come across. I feel much more secure about my investments reading your insights through-out the days. Keep up the great work.

    -Rich-

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  9. Turd, Happy Thanksgiving to you and thank you very much for your calm, educated and thoughtful analyses!

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  10. Notice how in the day we don't have POMO we have a "major" rally? Go figure. Silver holding it's ground. Happy Thanksgiving Turd. Can't wait until next week.

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  11. Elizabeth: I never got the chance to work for EF Hutton. Instead, I have become EF Hutton :)
    Thanks, you made my day! TF

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  12. Bubbles: We don't have to have POMO for a rally but POMO can certainly cause one or, more significantly, minimize a selloff.
    I think today was just a "relief rally" that WW3 didn't start overnight.

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  13. Hi Turd, have a good one and be nice to Niall.

    Print this out for everyone at the table...

    http://www.independent.co.uk/opinion/the-daily-cartoon-760940.html?ino=3

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  14. wishing you, yours & your many readers here a peaceful turkey day TFerg. . .
    I have a couple of birthdays to honour over the next few days, they'll be getting their first silver eagles, together with a few words about why they might want to add to their store of value - I thank you for the wise words here, and to the others who post, adding to the knowledge I can now pass along. . . buy silver, crash the banksters!

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  15. Happy Thanksgiving, Turd. Am enjoying the Blog.

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  16. Wishing you all a happy Thanksgiving weekend.

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  17. Thanks for the great blog Turd. Which you had started it a little early I would have held my SLW shares a lot longer.

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  18. I've been hearing about silver in China selling for a massive premium to spot, something like $37/oz in total price. How does this square with the paper markets and how long can this disparity exist? It seems like it has to explode to the upside to catch up with the demand side of the equation, JP Morgan be damned.

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  19. lol great post turd

    thanks for the continued effort and updates, have a great thanksgiving!

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  20. Thanks for your comments, Turd. In the midst of Turkey Day there is nobody asking my advice about anything -- thank goodness. I'm enjoying a quiet holiday and hope you are doing the same.

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  21. how do you think the USD rally will affect silver?

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  22. European version of Blythe is as active as it can get today. We have to concede pretty successful so far.

    But what caught my mind ... is Blythe also behind the equity weakness, the Dollar-Strength, Euro weakness etc. - is Blythe rigging all markets at the same time???

    Just wondering and thinkin' out loud.

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  23. Euro fears,Korean fears,Chinese commodity margins hike,strong dollar.....very nice stage for a Blythe attack.Strange scarity pf pm metals positive news,I hope some pn positive news surface very soon,it has been mostly negative lately.

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  24. I think theres some nice support at 1352 for gold..

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  25. No, hamster, Blythe isn't rigging all the markets. However, as predicted, she's certainly helping along this morning, trying to paint that H&S top.
    Frank is right, lots of support between 1350-55. None of this selling is significant until/unless we break 1330 and then 1320. Until then, have some leftovers and watch football.

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  26. TF, does the dollar index breakout affect your opinions? It does nothing to reduce the squeeze on physicals, but obviously it has an effect, and already has had. Would your time frames be pushed back?

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  27. I mean effect on the market, not on the squeeze.

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  28. EURUSD & Gold have a pretty good correlation... I expect the EURUSD to go down and gold up... Doesnt really work though does it?!

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  29. Harvey Organ: "Silver Remains Explosive."

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  30. These margin hikes are no different than price controls and they will have the exact same effect. The supply will become even more constricted leading to extreme scarcity and even higher prices. Megalomaniac government goons never learn from history.

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