Something very foul is in the air. I can sense it. While it seems as if the fragile economic system of ours can be propped up, duct-taped, manipulated and held together for an indeterminate period of time, I believe things could get ugly… very quickly.
Now, I am not 100% sure of my intuition on this one, but if you look around long enough and take some examples from the past, we are heading into some really serious trouble due to the fact that the folks on MSM have lobotomized the investing public.
I wanted to take this time today to communicate one-on-one with many of those who have been reading my work for years as well as those who have happen to come across this site more recently. This reminds me of a past experience I had when I went to see George Carlin at concert in Las Vegas several years ago.
My wife knew I was a big fan of Carlin, so one day she surprised me by getting tickets to see him while we were visiting some family in the area. I remember sitting in the audience when after 10-15 minutes of Carlin’s routine, people started to get up and walk out. There weren’t many… maybe a dozen or so.
However, George took a pause from his act and said, “Do you notice the people walking out of here… they didn’t know what they were getting into did they? (audience laughs)” He goes on to say that he had three kinds of fans, those who have been listening to him for years, those who followed him years ago but haven’t seen him perform until more recently… and then those who got free tickets from the hotel or casino, and are now walking out the door… (audience laughs again).”
Here is a link to that video clip what Carlin thinks of “The American Dream.” (Warning: there is foul language)
You see, George Carlin’s act was filthy, crude, full of cuss words and down right nasty at times, but the man spoke the truth so bluntly, only a few could really appreciate his genius. One of my favorite lines from his HBO Comedy Specials was, “Folks…. there’s a lot of BS out there and it ain’t good for you.”
There is so much BS in the world, and especially the U.S. that I am amazed we have kept it all together this long. The U.S. economy should have died years ago, except those in charge of the fiat monetary regime figured out how to export our inflation while transforming our domestic manufacturing economy to a pathetic service one.
YOU BETTER UNDERSTAND ENERGY…..
Many economists and investors don’t realize that our transition to a service economy wasn’t a choice… it was done to keep the illusion that we still had a functional economy. The Falling EROI- Energy Returned on Invested forced the United States to ship manufacturing overseas where it was cheaper so we could continue spreading our domestic economy: THE SUBURBAN DREAM.
Our whole economic suburban system was built on a HIGH EROI oil & gas of say 15-20/1… which means 15 to 20 barrels of oil from 1 barrel of cost. Thus we had a great deal of energy profits to spend in building the great Inter-State Highway System, water-sewer infrastructure, electric grid, commercial-residential real estate and the huge retail-strip mall-big box business model.
Then, the U.S. peaked in oil production in 1970 and had to import that HIGH EROI oil from the Middle East by exchanging FIAT PAPER MONEY for PHYSICAL OIL & GOODS… a very successful enterprise over the past 4 decades.
Unfortunately, all good things come to and end, and now that the world has been in an oil production plateau since 2005, the oil industry has been forced to extract the LOW EROI OIL to make it seem like we can continue “Business as Usual.” Shale oil has an EROI of approximately 5/1. So even though we are currently pumping a great deal of this oil from the Bakken & Eagle Ford Shales in the United States, its low EROI ratio does not return enough “Profitable Barrels” to support our economic LEACH & SPEND ECONOMY. We probably need somewhere near 10-12/1+ EROI of oil & gas to support our present economy.
So, it really doesn’t matter if there are billions or trillions of barrels of shale oil or oil shale resources in the United States, if the energy profits (2-5/1 EROI) are too low to pay for the suburban economy huge energy debts (10-12/1 EROI). Simply, it all comes down to basic mathematics that a 1st grader can understand.
This is the very reason why the Porter Stansberry’s of the world (who promote the wonders of shale energy) have totally misguided their readers and investors. Even though some shale energy companies may earn profits, the industry as a whole, will be short-lived.
ENERGY & THE PRECIOUS METALS
One of my biggest challenges in writing articles for the SRSrocco Report, is to incorporate energy into the mix. I have been writing for quite a while and I know exactly what sells, is read or listened to. If I posted an article with a picture of Jamie Dimon mooning a bunch of precious metal investors with a silver dollar sticking out of his tuckus, I would receive tens of thousands of hits-reads.
However, if I insert the word “ENERGY” into my precious metal articles… well then the readers just dry up and blow away. This is indeed the problem with the precious metal community. I know exactly what they want to read or hear…. “Their gold and silver will make them rich and they will be able to buy and do whatever want in the future.” Anything else becomes increasingly BORING.
That being said, it is extremely important that the typical investor and even the precious metal enthusiast needs to understand energy to know where we are going from here. Why? Because… ENERGY is the DRIVER of the economy, and GOLD & SILVER are the BATTERIES that stores this economic energy.
As I have mentioned before many investors, the clowns on Wall Street and CNBC believe that finance runs the world’s economies. It doesn’t. Try to shove an interest rate swap contract into a haul truck’s fuel tank at a gold mine, and see how far it can move that 300 tonnes of ore.
The only reason why the Fiat Monetary System based on Compound Interest and Fractional Reserve (term from Mike Ruppert) has worked up until now is due to the fact that the world has had a growing oil supply. Fiat means DEBT. A growing energy supply pays the interest on FIAT DEBT. When the energy supply peaks and declines… so will the Grand Fiat Monetary System.
Don’t worry, this event isn’t years away… it’s taking place right now… right in front of our eyes. A good percentage of the energy that we presently consume in the United States, the public cannot afford. Thus, the huge increase in debts and monetary printing.
There are many details to the ENERGY EQUATION that needs to be addressed. I have not been writing much on energy at my site because I don’t want to be the “Old Guy in the Cartoon with Long Hair holding a sign saying THE END IS NEAR” standing on a street corner with no one really listening.
So, here is a warning to all my readers and those who link my work to their sites. I will be including more posts and articles on energy as it is extremely important factor that will impact GOLD, SILVER, THE MINERS and the overall ECONOMY.
GOLD & SILVER: SOME OF THE BEST QUALITY FUTURE INVESTMENTS
Part of the inspiration for this post was due to some of the replies and comments I have received from readers and members of the site. Furthermore, I want to take this time to thank everyone for their comments and to let the other more active members know how much I appreciate their insights to the many different aspects of the market. Yes… you know who you are.
I have been known to make some mistakes and lousy assumptions even though I try to focus on the facts and the data. Some members (here or from other sites) have challenged me by presenting conflicting information to one of my articles or positions. While it hurts to be wrong… if I want to be truthful to myself and to those who are reading my material… I have to digest this information and see if I need to correct a mistake or reconfigure my position. Again, I appreciate that feedback as much as the positive reinforcement.
One thing that has been brought to my attention is that “I SHOULD STICK TO PROVIDING ANALYSIS AND LESS TO PUSHING THE ONE-SIDED BULLISH HYPE.” I thoroughly agree with this assessment. While I realize there is indeed a great deal of back stroking, back slapping, bullish regurgitating and hopium coming from many of the more popular precious metal websites, at least they are on the right side of the equation.
Yeah… I could say that they are being a bit frothy in the tooth when it comes to gold and silver, but there are so many more important things to focus on, I just tend to tune it out… and move onto the next looming disaster on the horizon…LOL.
Getting back to gold and silver. I have been writing some articles that may seem a bit “BULLISH” on gold and silver. Yes, I have…. and yes I am receiving a great deal of hits-reads. However, I am not doing it just to get the traffic, I actually believe it.
Hear me out. The reason why I believe gold and silver are going to increase in value substantially from here is due to the fact that most other assets are going to decline in value due to the present and future energy constraints. If we look at the chart below of Citigroup, we can see how things can change very quickly.
I have used this chart several times in other articles to show how a company-stock can disintegrate due to fundamentals even though the nitwits on the financial main-stream-media (MSM) didn’t see it coming for miles.
This is exactly how is see the values of gold and silver unfolding in the future… but in the opposite manner by heading up much higher. I am not HOPING for this to occur, rather I see it the same way Peter Schiff did when he was on Fox Business & CNBC from 2004-2007, warning about the upcoming housing and banking collapse.
When the public really understands the future energy situation, they will realize that one of the best and safest investments will be the precious metals. Because, in a declining energy environment, most other assets will fall in value. More about this in future articles.
THE MAJORITY OF ANALYSTS ARE LIKE A DEAD FISH….
Most of the analysts out there are like a dead fish… rotting from the head down. Yes, I have said that before, but it is still true today and sometimes its fun to repeat these terms for the newer readers. The majority of analysts miss the whole picture because they base their analysis and forecasts on superficial and manipulated data. Their failure comes from not getting to the ROOT OF THE PROBLEM.
I learned about looking at the root cause of problems and events from a chance encounter I had with a retired NASA engineer several decades ago. It’s actually a very interesting story for another time.
However, you really can’t be a successful analyst anymore unless you understand energy. To forecast future silver production or to give price guidelines due to supply and demand factors in say 3-10 years becomes increasingly impossible when energy constraints are part of the picture.
There are several organizations out there that are still putting out forecasts on how future supply and demand forces of silver will impact its price. I say… you can’t rely upon that information anymore (to a larger degree) because the world is heading into a future that is nothing like the past…. mainly due to energy issues.
As I have mentioned before, one of the biggest problems with the precious metal analysts is their failure to understand the energy market. I will get into this in more detail in the future, but I wanted to focus on one analyst as he happens to be the week-end guest on King World News.
James Dines is one of the first precious metal analysts who saw gold and silver as great investments in the 1970’s. I have a lot of respect for the man as he thinks outside the box and he understands the psychological nature of the markets. However, there is one huge disagreement I have with him. And that is on the subject of uranium and nuclear power.
Dines has been a big promoter of uranium and uranium stocks. He lets the audience know during his interviews that he was the “Original Uranium Bug.” Furthermore, I believe he also has stated that he was the original gold, silver and rare earth bug as well. I might be exaggerating a bit, but I have heard him say he was the “original so-and-so bug” on many occasions.
Regardless, Dines as well as other analysts are still big promoters of uranium. I would like to remind the reader that the Fukushima multi-plant meltdown is still a huge nightmare for the world and its only going to get worse from here. Dines states that the problem with Fukushima is not uranium’s fault, but rather one due to mankind using the technology incorrectly. Well, isn’t that the case with just about anything that mankind screws up?
I am not going to get into details here, but we as a human species have proven time and time again that we rather screw each other over for a buck including cutting back on maintenance of nuclear power plants to show a profitable balance sheet than do what is prudent and right. Does Dines actually think the morons who are in charge now are going to finally get religion and build PROPER NUKE PLANTS that are safe?
Moreover, the United States is so far in debt that we may not have the resources in the future to properly decommission all or a fraction of the damn nuclear plants we have running currently. Then of course we have the HOPIUM that these so-called mini-nuke plants such as the Toshiba 4S can be buried 40-50 feet underground and work for 30 years, safely.
Folks the problem with Fukushima is that 3 of the reactors have more than likely melted all the way down into the ground and are contaminating the ground water. Why on earth would you want to bury a nuclear power plant 40-50 feet underground in the same place where our ground water supply is located??? Have we gone completely insane?
I don’t care how safe and cheap these mini-nukes are touted as being, I learned my lesson from the Nuclear Industry that bragged in the 1950’s that it would provide safe and cheap energy.. that was TOO CHEAP TO METER…. oh really.
Anyhow, Dines needs to wake up and drop the whole URANIUM BUG BULL MARKET PROPAGANDA. Furthermore, the world needs to band together and form some kind of international agency to fix the nightmare called Fukushima, or we are going to be in serious trouble.
THE COMING ECONOMIC COLLAPSE
There are two different collapses taking place at the same time. One is a the Fiat Monetary-Derivative-Paper collapse and the other is the Physical Collapse. Even though these are two different methods of collapse, they are both interrelated. Jim Willie does an excellent job focusing on the paper-manipulated collapse, while I like to concentrate on the physical aspect… which stems from the energy issue.
I will be writing a great deal more about this in detail, but I need to wrap up this post so I can get outside and spend some time tending to our 5 acre property.
FUTURE PLANS FOR THE SRSROCCO REPORT
Originally I had the intention to have a public blog and a membership service that provided monthly reports for a fee. Currently with precious metal sentiment in the toilet (up a bit in the past week), subscription services in the industry are down significantly. Furthermore, it takes a great deal of time for me to put out original work and I don’t want to be forced to put out mediocre material each month just to publish a report and collect a lousy buck.
I have been contacted by several people requesting information on my membership service so I have come up with a good compromise. I will be offering “Single Paid Reports” with a great deal of detailed information on the different aspects of the precious metals, mining, energy and overall economy.
The intent of the SRSrocco Report was to provide as much original information and data as possible on the precious metals, mining, energy and economy that you really can’t find in one place anywhere else on the internet. As you all probably are aware, it takes a great deal of time and effort to provide this sort of analysis as well as run an internet blog.
I know Turd at TFmetalsReport went to a subscription service for his personal analysis on the site. So, if anyone wants to read or be apart of the discussion, they have to pay a small monthly fee. While I realize this may not seem fair to some individuals, I can totally understand his reason to do so.
That being said, I still will be providing what I believe as important analysis, information and data on the SRSrocco Report to the public as I have been in the past. However, I will be focusing more time researching and writing these single paid reports to generate some income to justify what my wife calls as an INSANELY AMOUNT OF TIME ON THE DAMN COMPUTER….LOL.
Lastly, it looks like I will be speaking at the 2013 SILVER SUMMIT this fall in Washington State. David Morgan was kind enough to put in a good word which earned me a 30 minute spot at the conference. It’s going to be fun. I will be able to really speak BLUNTLY as I see things unfold in the silver market.