• Gold: 1,520.28 4.21
  • Silver: 18.47 0.52
  • Euro: 1.098 -0.003
  • USDX: 98.672 0.159
  • Oil: 58.27 -0.18

K.I.S.S. Strategy – Part One

Gary Christenson
|
Wednesday, August 14th

KISS is an acronym for Keep It Simple, Stupid. But in these politically correct days, think of K.I.S.S. as Keep ISuper Simple. For silver relevant versions of KISS, see below.

What should be kept simple?

Ignore the mainstream diversions, forget the silly distractions caused by the Dems and Repubs, don’t worry about the latest tweet, and ignore the supposed conflict between the President and the Federal Reserve.

Focus on “big picture” information and trends.

WHAT WE KNOW FOR CERTAIN:

  • The U.S. economy is slowing. Look at housing sales, auto sales, Cass Freight Index, inverted yield curve, leading economic index, residential construction, freight shipments, retail store closures, large truck orders, bankruptcies, and many more.
  • Official U.S. national debt exceeds $22 trillion and increases almost 9% per year, regardless of which political party mismanages distractions and payoffs.
  • “Fake” dollars enter the system to keep the economic Ponzi rolling. Prices increase. Compare your present-day costs for food, beer, tuition, health insurance, a new truck, and rent to your costs for those same items five, ten, and twenty years ago. Prices will increase as long as debt expands.
  • Congress, a legion of lobbyists, the military-industrial-security complex, Big Pharma, Big Ag and Wall Street support the status quo—ever increasing debt. Change will come slowly and against great resistance. Expect higher prices and declining purchasing power for the once mighty dollar, now a mini dollar.
  • The “recovery,” as measured by the stock market, is doing well. Stock indices hit all-time highs… again. Central bank liquidity powers the speculators on Wall Street but does little for the lower 90%.
  • Those in charge in the U.S. don’t care about the lower 90% of Americans who often live with stagnant incomes, large mortgages, massive medical bills, expensive health insurance, and soul-crushing student loan debt. The status quo benefits the political and financial elite.
  • Higher consumer prices and more debt are inevitable.
  • Interest rates on $15 trillion in global sovereign debt are negative. Argentina issued 100-year bonds. Others have reported that many junk bonds now sell with negative interest rates. This is craziness and smells like desperation during “end-of-cycle” insanity.
  • Our sitting President wants reelection. Expect him to do everything possible to prevent a recession, avoid increasing unemployment, reduce interest rates, expand credit and feed currency units into the economy.
  • The next recession, like 2008, will see more government expenditures and diminished revenues. Hence deficits will rocket higher and debt will increase even faster.
  • Or we can trust that Wall Street, the Federal Reserve and irresponsible governments will guide and protect us as we transition into a world of continual prosperity with no recessions. The Easter Bunny, Tooth Fairy, and Bigfoot frolic in that world.

SUMMARY:

  • Government spending is “out of control,” deficits will increase until something breaks, prices will rise in good and bad times, and the political distractions will continue.

We see early indications of expanding credit and higher prices in gold and silver. Gold closed at a six-year high of $1,513 on August 7. Silver closed at $17.19 on August 7 from $14.32 in May. Gold is selling at all-time highs in many foreign currencies.

However, silver traded at $17 for much of 2008 and sold for over $48 (too high) in April 2011 before the “powers-that-be” crushed silver and gold prices. Higher gold prices indicate a loss of confidence in central banks and governments. Most of the western “powers-that-be” prefer higher prices for stocks and lower prices for gold. The game can thrive for years, but then stocks will crash. (Yes, really, they can crash.) Gold and silver prices will spike higher.

K.I.S.S.—an Alternate Interpretation:

We need a strategy that improves financial security and protects us from the destructive actions of government, central banks, “out-of-control” spending and economic craziness. I propose K.I.S.S.:

Keep Investing in Stacked Silver, or

Keep Insuring with Stacked Silver.

Why Silver?

Silver sold for $1.39 in 1971 when President Nixon closed the “gold window.” His action, supported by central bankers, allowed debt and dollars in circulation to rocket higher.

Today silver sells for over $17.00. The price for silver, an essential industrial metal, must increase as dollars devalue. Further, exploding investor demand will boost prices as people lose confidence in stocks, managed markets, inflation statistics, and guidance from central banks.

An empirical model for silver prices, as described here, shows that silver is undervalued (at $17) by over 30%, which is consistent with low ratios for silver to gold and silver to debt.

Silver is inexpensive compared to gold. Historically, a low silver to gold ratio has been a good (long-term) buy signal for both gold and silver.

Examine these graphs:

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These graphs show the triumph of hope and nonsense over hard experience.

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The above graphs show:

  1. The silver to gold ratio is about 0.11, historically low, and primed to correct higher. This ratio provides long-term guidance for silver purchases.
  2. The population adjusted national debt rises about 7.7% per year. National debt rises almost 9% per year. These trends began when congress created the Federal Reserve in 1913. The U.S. economy and wealth transfer to the elite depend upon increasing debt, which will rise until a reset occurs.
  3. Total U.S. debt is unsustainable except at zero or near zero interest rates.
  4. Silver compared to national debt shows that silver prices are low, as they were in 1991 (silver low was $3.51), 2001 (silver low was $4.01), and 2019 (silver low was $14.32). Higher prices will come again.

CONCLUSIONS:

K.I.S.S. tells us to INSURE our purchasing power and savings by investing in stacked silver—not the paper stuff that can “evaporate.”

History shows that debt will increase until the system resets. Increasing debt creates more currency in circulation and higher prices as the dollar devalues. Read “The Three D’s of Doom.”

History and the empirical price model show that silver prices are too low. Expect higher prices for several years. Read “Silver Price Forecast.”

Trusting politicians will spend, central bankers will devalue, consumer prices will rise, and silver prices will be multiples higher in 2025…

Gary Christenson, the Deviant Investor

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