Shenandoah

by John Galt

October 3, 2007

With the news breaking tonight of Bear Stearns and Merrill firing folks left and right because of the ongoing mortgage fiasco, one has to ask, when does the market, the world and reality start to set in. The screams from our Minister of Information that “all is well” and “it’s contained” have become almost as comical as our old friend “Baghdad Bob’s” proclamations that the Americans were never even close to him as bullets whizzed by. There is a ton of fear in the markets and sadly, thousands of Americans who do not read, listen or pay attention to reality unless it involves a bimbo eruption by a hollyweird star, are allowing their financial managers to destroy their lives. The ARM resets are less than 30% complete yet the Bubblevisionistas proudly proclaim “it’s contained” and the “crisis is over” and beg you to buy their pump and dump stock selection.

Be scared, very scared.

There are a ton of reasons historically to be terrified of what we are witnessing. The implosion of the U.S. Dollar is the first and most alarming indicator. There has been a dead cat bounce the last few days, but everyone must keep in mind that the ChiComs are on vacation this week thus all the action is flowing through Hong Kong, not Shanghai. This also means that any surreptitious moves against our currency by the Chinese Communists now have the ring of “plausible deniability” as they quietly liquidate their flailing positions in U.S. investments. When all is said and done, I fear we will wake up one morning to a new kind of debacle, the worst kind, with the U.S. Dollar index crashing through 76 and the Dow rallying on the back of the Fed’s back door dealings.

This will not hold nor work for the long term.

The fallacy of dumping money into a black hole will eventually catch up to the Fed. They will continue to dump cash into the market in the prayer of keeping the dollar, the Dow and the dummies in DC afloat. All will fail. Until we see the capitulation move, any move upwards will only intensify the violence and depths of the coming crash. That is why I still think we could see Dow 15,000 but that will be a result of a more dramatic Fed intervention to fix the banking crisis or solvency crisis of the day.

The only logical reaction is to actually contain and control your losses by protecting your assets. Personally speaking, I’m loading up on silver, as much as I can afford, as fast as I can. It has a lot more leg room to accelerate to the highest returns and folks, I’m just warning you now, that with Cramer pumping gold tonight, start envisioning a return to the more traditional 20-1 plus ratio. The unemployment report on Friday will be a blatantly false number as the layoffs conducted by Wall Street, the mortgage markets and the construction industry will, as usual, be underestimated. I think that regardless of what the reports say, PIMCO has it spot on and the Fed will continue to cut interest rates. This triggers the flight out of U.S. Treasuries and the rally of the century in precious metals.

This could easily be the month where we see $800 gold and $20 silver. If not, it will happen by Christmas, so be patient, get your preps and beware of guys on the street corner screaming “Merry Christmas, IT’S CONTAINED”……