The E.T.F. Report
Lawrence Sarsoun
321-259-4729
sarsoun@hotmail.com
Week of January 3, 2011.
Happy New Year! And best wishes for all, success to you now and forever. I wish I was the bearer of good news, but to be perfectly honest, I don’t see it. However, we still see good stuff to buy, like inverse ETFs. We watch (and post daily recommendations) on over 50 ETFs, covering forex, grains, the stock indices, many inverse
Stock ETFs, energy, softs, metals, and even an emerging market. It costs you nothing to receive a daily email copy (we won’t mind if you wish to make a contribution). All we ask is that you consider trading through us. We have a small following of clients that we trade for on a simple 90-10% basis. We, at one time, were on the floor of the International Monetary Market where, one year, we went from $80 in the trading account, to $100,000. Not bad for those days.
At any rate, I have decided to come out of retirement and am now Editor/Publisher of “The ETF Report”. And some of my commodity trading buddies from Chicago asked me to trade their accounts in this new arena of ETFs. The Report, therefore, is inclined toward ETFs in the Futures area. We use mainly options because we never cared for trying to use stops. With options, we know what our risk is, and we can sleep most times.
Now, why our dreary outlook for the country and markets? For one, the powers that be have completely divorced the currency from any semblance of calculable value. Now, for those of limited understanding, that simply means that there is no intelligible way to tell what the currency is worth. To appreciate this concept, we have to go back to the good old days when we first came to have commodity money.
How did we decide to use something like silver or gold, as money? Well, first of all, something, like silver, is somewhat rare. It is precious, because you can’t necessarily find it easily, it is somewhat scarce. Point two, it is pretty. You can make pretty things out of it, like jewelry or coins. Later, it was found to be somewhat useful in industrial goods. And it is malleable and fungible. So we can imagine, early on, people realized that instead of bartering, something like a coin of silver would work well as a medium of exchange, to facilitate commerce. Point three, it is stored labor, it represents an expenditure of labor and probably capital. Canned value. Indeed, in the early days of our Republic, when we were deciding what would be our standard for measuring values, we chose 371 ¼ grains of silver, 9/10ths fine, as our standard of value, and we gave it a name, “dollar”. The current paper currency, the Federal Reserve Note, has no standard; all we can say of it is, the more they print of it, the less it is worth. In my speaking engagements, I frequently try to explain the concept through a simple story.
A few teenagers have gotten together to play a board game, Monopoly, at Bob’s. There are 4 of them, Bob, Tim, Joe, and Pete. But unknown to them, Pete slipped in money from his own Monopoly game. So whereas there would be a finite number of Monopoly “dollars” to purchase a property, with Pete’s Monopoly money, the game’s “money supply” has been inflated, with the result that prices will rise in price in terms of this “money”, and values measured in this currency can be expected to rise through the duration of the game. Boardwalk and Park Place (as well as all the others) can be expected to trade at higher than usual “prices”.
So we are in the same situation. When I suggest “playing” with Federal Reserve Notes, we are in a position where “it’s the only game in town”. Realize that when we “make” money in FRNs, we must quickly redeem, convert any “profits” to hard assets, things that are going to hold their value and not lose purchasing power. That is one of the key things of real money, it must retain its “store of value” characteristic. FRNs are not “store of value”, whereas gold and silver money have kept their “store of value”.
I remember, years ago, when one of the first tax protestors told this story. He noted that in 1920, you could have bought a new car for 800 dollars (you know, the silver coin). Years later, you could have bought a new car with 800 silver dollars (converting the silver coins to FRNs would have given you the thousands of Federal Reserve Note funds to purchase a new car). So while the FRNs had depreciated, the silver money had retained its value. As this “crime of the century” becomes understood, people will flee our currency (and our stock market). As soon as people see rising prices leading to higher interest rates, the stock market will tube as people will have to liquidate just to live, to eat. Already as we speak, we are starting to see a repudiation of debt instruments, meaning higher interest rates are on the horizon.
No, it doesn’t look like a happy New Year.
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