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Like a Rock!
(Market Update 7-5)
by Edgar J. Steele

March 16, 2007

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My name is Edgar J. Steele. 

That's how the dollar finished off the week.  Dropping like a rock!

It fell through 83.0 by the end of today's trading, ending up at 82.94, which is where it will sit until Sunday afternoon when the Asian markets open.  So, is this to be the new floor-at-any-cost level I spoke of earlier this week?  Perhaps.

One thing about which I am sure, however, is that they will heave back into the market to shore up the dollar and keep it from going further than 82.0 if this is one of the stair-step transition phases I described.  Probably 83.0.  Maybe 84.0 again, though their failure to intercede today, as they usually do on Fridays, implies a decision to let it ratchet down a bit, as they have been doing now for months and months.

Not too long ago, many forecast the end of the world if the dollar ever dropped below 85.0.  Well, that is the new reality, isn't it?  Remember when the dollar actually traded above 100, not so long ago?  (By the way, the generally-quoted figure to which I keep referring is a composite of six foreign currencies, designed to reflect the relative strength of the dollar on the world stage.)

Notice that I have set things up so that I can be right, no matter which way the dollar goes.  I love being right.  Call it a weakness. 

Either they defend the dollar next week and we get another golden silver buying opportunity as its spot price plunges through $12.25 per ounce (silver closed at 13.10 bid today), like I hoped for earlier this week, or the dollar steps down a notch and silver takes out $15, enroute to $18, just as I described a month and a half ago.

Maybe it is just wishful thinking that makes me hope for another shot at $12 silver.  In the fullness of time, $13 silver will look dirt cheap, believe me, just as I said, less than two years ago, that $8 silver was going to look really cheap (and it does already, doesn't it?). 

When silver hits 18, I'll be talking about an impending retracement below $16 and hoping for $14 buying opportunities again.  I could write that summer column right now.

Do you see the pattern at work?  If so, good, but don't try to short-term trade it, folks.  That's the way to lose money, believe me.  This is a bull market for silver; indeed, for any commodity.  Buy and hold.  Accumulate on the dips as you can afford it from current income but never sell on the rallies - not until we see silver above $100 an ounce, anyway. 

Don't sell at highs called by those who presume to foretell market movements (including me!), intending to buy back in at the trough of the next dip.  You might get lucky a time or two, but the train will rush right past you much sooner than you think.  That's one of the real advantages of buying and holding physical silver.  The price has to surmount the 50- to 75-cent commission per ounce you paid for you even to break even.  The bulk and the hassle keep you from day trading.

For example, when silver dropped $2 and dipped below 12.80 two weeks ago, I went and bought as many silver rounds as I could afford right then (not many, believe me, probably just like you) from my guy Steve Baldwin of Spokane Coin, then stashed them in a well-armed Sheriff's deputy friend's private vault on the way back from Spokane (I don't keep them at home for obvious reasons). 

If silver then went below $12, I planned to max out credit cards with advances and buy about $15,000 in silver with the proceeds.  I was all set to then take out a $50,000 home equity loan if silver went below $11, so as to pay off the credit cards and buy more, but that looks less and less likely now. 

Do not try this at home, boys and girls!  I do NOT recommend that anybody go into debt to invest, just because I am dumb enough to do so.  The scenario i just described looks less likely since they failed to defend the dollar today.  Who knows, though?  Maybe they're just giving us a head feint and will push the dollar above 85.0 next week (and silver down into a buy range for me), in which case I'll file those home-equity loan papers with the bank.

You watch.  I'll be talking just like this later this summer, but with 3 or 4 dollars added to all the per-ounce costs described today.  Ah, for the day when I speculate as to whether they will be defending the .50 dollar because that might then push silver down into the $45-per ounce buy range!

And don't forget that I think it is high time to sell those ETF shares, such as SLV and GLD, and put the proceeds into the real thing.  There is mounting evidence that the ETF managers are using your funds to acquire gold and silver that they then lease to others, with the effect that your shares actually help depress the price of silver and gold! 

Fractional-reserve silver and gold!  Who'd a thunk it?  But, then, that is what presents us with the buying opportunities we have been getting, isn't it?  This is like musical chairs, except lots more than just one chair was removed at the last intermission.  The last few ETF shareholders will be left standing out in the cold when the music finally comes to a stop, as stop it inevitably must.

Please tell me you are not one of those still holding equities of any sort, not even in well-established mining companies.  I don't even want to discuss how you are losing money to inflation in this government-gridlocked stock market.

My name is Edgar J. Steele.  Please visit my web site, www.ConspiracyPenPal.com, for other messages just like this one.

-ed

Copyright 2007, Edgar J. Steele

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