fml is no laughing matter, page-25

Hello All,

Those reading this that do not understand what I am saying may miss the thought, care and truth in the following words - so it may be unappreciated.

It might even be interpreted by some as waffle :-)

I am with Pinto and I also see that what Choo is saying is correct at least for now. A truth is that Joan will be able to sell a few shares down the track, not too far, and go to the auctions and buy her 4x4 nice and cheap.

I see it this way - as Pinto states - it is different this time. An interest rate and sovereign default crisis is a very different animal to GFC1, slow and cumbersome however more deadly. You can see it coming and there is nothing that can be done to avoid it. This is the inevitable debt crisis that we had to have after building the largest debt bubble in history.

Wild currency gyrations will accompany justified sovereign liquidity concerns and gold will rise because it is the only currency safe from this. At first we have this short period of selling anything to cover debts including margin loans. This is a liquidity driven sell off and the opportunity of a lifetime.

Then we get endless bailouts and more spin (instead of fiscal responsibility). Bailouts which require printing of more and more paper money. If they tip the scales too far we lose total confidence and we get hyperinflation. If they don't then we get a continued rise in doubt, fear and gold along with the quantitative easing.

The slower more insidious nature of GFC2 will confound investors that are selling their gold stocks here. This time the banks will need bailing out again but more orderly and indirect this time. This is a vital difference between GFC1 and GFC2.

Printing money by Governments to cover their junk paper (TBills) results in the banks getting their money back through the front door this time. Remember they (banks) buy most of the TBills because they are zero risk weighted assets (no reserve requirements and guaranteed returns).

The falls in markets will not be so sharp and gold will be bid this time.

The lack of liquidity in the system will be bad for economic activity and raising rates will hit housing and SME's hard once the defaults kick in. I have been attacked here for warning about this but it is sadly true. Asset values have to fall as rates rise or there can be no debt servicing and no game for the Govt and banks - simple. It wont matter how much of a shortage there is in housing when this hits.

Distress funds are being set up to take advantage - by those who can amass sufficient capital and have the know how to do so. The velocity of money in the global banking system is slowing too, a function of tightening credit.

Jim Sinclair is worth a visit on this one he saw the last gold bull from start to finish as an informed professional and believes the conditions are very similar now. GFC1 was different so don't get shaken - provided you can afford to cover your debt with higher interest rates.

I will keep buying quality, low geared un-hedged gold stocks and metal to the limit of my financial ability.
FML fits this scenario perfectly as the AUD will keep falling in stages. I have written here and elsewhere that this would happen and it is.

Falling AUD and rising gold is brilliant for earning money if you are an un-hedged Aussie producer. Debt free is a bonus. Now to get rid of the RUST - the Rudd's Unworkable Super Tax and Rudd too if necessary. This is a time to protect your wealth, however large or small it may be.

Don't get me wrong the guy has his heart in the right place on many issues and I agree with that. We have to survive the economic turmoil in front of us and miners will be providing essential employment and knock on effects.

I have an email from a Canadian gold company here telling me their funding disappeared when the RUST was announced so their listing plans are in jeopardy. There goes a heap of jobs - see what I am talking about?

DYOR
Cheers,
CW