In Jim Cook's Archive



You’ve read and heard about the decline in home prices. Recently an investment company president, Richard Benson, reported, “Prices are already down 8-20 percent on average across the country….the housing price drop is almost certain to take 2 to 3 years before it hits bottom.” Newsletter author, Richard Russell comments, “The housing boom topped around August 2005. Historically, it takes about two years after a housing top before the big trouble hits. This suggests that we’ll see the housing agony hit around mid-2007.”

The Phoenix newspaper reports, “For-sale signs in some new subdivisions are so common that Janet L. Yellen, the president of the Federal Reserve Bank of San Francisco, recently described them as ‘the new ghost towns of the West.’” As far as investing in real estate goes, it would appear that silver offers a far more attractive outcome.

The same thing could also apply to stocks versus silver. A bad housing bust would likely cause a recession that the stock market couldn’t tolerate. Richard Russell comments, “I think the top-out in housing is beginning to affect the spending of the mass of American people. To put it bluntly, I think we’re seeing the beginning of a recession in consumer spending. And I emphasize the word ‘beginning.’ By mid-2007 I expect the bear market in housing to be in high gear, and I expect the U.S. to be in a nation-wide recession.” Stocks have always headed down when a recession threatens. One thing will be different in the next downturn. The rest of the world may now be in a position to shake off a recession in the U.S. That means silver demand in China and India would continue to be strong. Diversifying out of stocks and mutual funds into silver seems to make sense.

What happens if housing declines more than anybody now expects? Investment consultant Stephen J. Church claims the only thing that could mitigate a housing market implosion is a real inflation level near 8%. Higher inflation may be inevitable and silver has done the best in an inflationary environment. Dan Amoss, writing in The Daily Reckoning, tells us, “Upon the first hint of ‘deflationary’ fears, global central banks tasked with destroying paper money at a ‘measurable’ pace will unleash their next campaign of rate cuts and liquidity injections. At that point, the ‘good’ inflation in the stock and real estate markets can quickly morph into the ‘bad’ inflation of rising CPI levels, gold, and commodities.” Newsletter author, Michael Nystrom warns about a stock market bust. “When it has run its course, the rally will most certainly meet the same fate as NASDAQ 2000 and the greatest shorting opportunity of a lifetime will be upon us.”

Richard Russell confirms, “Once the seriousness of the situation breaks out into the open, I expect Bernanke and the Feds will panic. The dreaded specter of deflation will enter Ben’s consciousness. His worst nightmare will materialize – deflation. Ben will open the monetary spigots and start the process of lowering the Fed Funds rate. With declining interest rates, the dollar will first sag, then plunge.”

In virtually all these scenarios – good times or bad – a strong argument can be made that silver will be the best performer among all the available options. You may think the economy is healthy, and the future rosy. Okay, then silver looks great. But, I’m here to tell you that dry rot eats at the bowels of the ship of state. Runaway spending and deficits papered over with newly created money promise an eventual economic disaster that will make the dirty thirties look like a stroll in the park. The number of people bellied up to the government trough is a national disgrace. The sheer number of subsidized persons suggests that the rugged individualists who made America an industrial powerhouse are nearly extinct.

Somewhere down the line awaits a hyperinflationary depression. With it will come a financial panic and a collapse. No one can fully comprehend a worthless dollar, a shrinking economy, a collapsing stock market and a bankrupt government. I pray it doesn’t happen during the remainder of my life, but the devil of it is it can happen at any time. Ted Butler says buy silver for the huge profit potential. I say also buy it just in case all hell breaks loose.

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