Dave usually doesn’t have much trouble coming up with something to write about. It’s what Dave does. Ever since that debt ceiling-FED rate fixing-S&P downgrading-stock market High Frequency trading -SocGen French bank raiding fiasco I must admit I’ve been a little off kilter. Like Warren Buffet, I did made the call at 2:50 p.m. on Monday (http://tradewithdave.com/?p=7689) to double down on the DOW… that was good thing, but I must admit a scary thing at the time. Dave doesn’t make calls lightly or very often as that was only the fourth call in over two years. I also made the call to sell gold and buy oil. So far everything is working out except the gold and that’s created uhhh… a “situation with Dave.”
I have written many times here on the blog that I expect gold to go to $5,000 and maybe even $10,000 or much higher if you follow the writings of a fellow who goes by the handle FOFOA (do a google search). It’s just that Dave felt like gold’s natural level right now, in this situation was around $1,500 and that there’s just a little bit of froth left over from the debt ceiling-FED rate fixing-S&P downgrading-stock market High Frequency trading -SocGen French bank raiding fiasco that I mentioned earlier. Be that as it may, Dave’s going to stand by his near-term price target and with the most recent announcement that Hugo Chavez is nationalizing the gold resources of Venezuela it will put upward pressure on gold for a moment but also remind everyone that gold is the money of kings and those who control countries and weapons systems and that it can be taken from those who do not control such things.
Now to get back to the situation with Dave. Since Dave has been in business dating back to when he was fourteen years old and hired the first kids in the neighborhood to help him mow lawns, he’s been operating on the right hand side of the number line – you know, the positive side. I’m not saying that Dave hasn’t ever lost money because he has lost plenty. It’s just that Dave has always been operating under the premise that value creation was connected with money creation and that value destruction was linked to money destruction…. seems obvious right? Well not anymore.
That’s why Dave has been struggling to come up with something to write about. If there’s one thing Dave prides himself on it is flexibility… adjusting to the reality of the marketplace. If I didn’t adjust, I certainly wouldn’t be blogging regularly and well on the way to attracting a million reads of the blog over the next year. Adjusting to the environment, or the situation is Dave’s speciality. I’ll never forget that Wharton professor who said that marketing is nothing more than going to the market, listening to what people want that they can’t get, and then taking that very thing back to the market. He was right and it works everytime… at least it used to… but not anymore.
You see, after Dave’s better than thirty years in business, we’ve moved off of the right-hand side of the number line and onto the left-hand side of the number line into the abstract numbers. You can show somebody what one ounce of gold looks like, but you can hardly show them what a negative ounce of gold looks like. It looks the same as zero ounces of gold, but with a simple accounting entry you can experience a negative ounce of gold, or silver. That’s how they run the exchange traded funds such as the COMEX and their SLV silver shorts where paper provides the acceptable substitute for a silver purchase with the simply entry of one ounce of “owed” silver signified by the entry -1.
It may have taken two or three days for Dave to get the hang of this “making money by losing money” thing, but it’s awesome and let me tell you something, it’s big business. Some of the biggest names in the business are making big dollars off of losing dollars, let me tell you. Just check out this list.
A. Bank of New York/Mellon – Nearly everyone knows by now that the largest custodial banking institution in the country is charging its biggest customers for their deposits. That’s right. Companies deposit money into BONY and they get an invoice from BONY for the privilege of having their deposits at the bank. http://www.bloomberg.com/news/2011-08-04/bny-mellon-sets-13-basis-point-charge-on-clients-excess-cash-deposits.html
B. The Federal Reserve is paying banks not to lend out money by paying them interest on their excess reserves. So if you’re a commercial lender and wonder why you’re not making any loans it’s because your bank gets paid not to make loans and that means you get paid not to work. http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8
C. Ben Bernanke locks in Grandma’s savings rates for two years at near zero while Mervyn King of the Bank of England declares that inflation will likely run closer to 5% http://www.independent.co.uk/news/business/news/inflation-rate-set-to-rise-2338084.html . That means that Grandma is not only paying the bank to hold her money, she’s also paying the U.S. Treasury for the privilege of holding it in U.S. dollars.
C. The Federal Government provides food for people who cannot afford it. It’s logical to think that there is a connection between rising unemployment and the use of food stamps. Dave’s going to make the theoretical leap that if the U.S. government wanted more people to work that they would not have sent the $16 trillion in bailout money (http://tradewithdave.com/?p=7433) to foreign banks. I know it’s a stretch, but bear with me. http://www.dailykos.com/story/2011/08/03/1002681/-More-Americans-using-food-stamps-than-ever-before:-458-million
There’s more. This isn’t just situational ethics, this is situational economics literally and it involves “The Situation.” I have spent most of the summer at the beach and the other night I’m walking down the street and there is this huge line of people waiting to get into this club. Girls are running down the street in their sandals trying to get in line and everyone seem super excited. I’m thinking to myself, maybe Lady Gaga or Bruce Springsteen (is he still popular?) are performing at this club. So I asked a group of excited teenagers what’s going on tonight? They say in unison “It’s The Situation, from the Jersey Shore, he’s here tonight.” Dave says “Who’s the situation?” The excited teens say “He’s from the Jersey Shore!… the TV Show! He’s going to be here tonight!” So like any guy who had a lawn mowing business over thirty years ago would say, Dave says “Does he sing or entertain? What does he do? Is he in a band?” The group looks offended as the excitement simultaneously falls from their faces and they attempt to look away from me, but now it’s too late because Dave wants answers. “He’s just gonna be here… clubbin’…. you know…dancin,” one of the group responded as they all turned away from the old guy embarrased to be speaking to someone who doesn’t understand their situation any better than that.
Then today when Dave is at the end of his rope and is hitting zero on the number line for blog posts and has no idea of where to turn, it hits me as I hear the news out of the home office. I realize you CAN go below zero. It just takes a willingness to accept the abstract… the negative number…. and like Tiger Woods, you’ve got to “be the minus.” The answer to all my problems comes over me like a wave as I read the official press release from the home office of the official wardrobe supplier of Summer 2011… Abercrombie & Fitch.
It seems that Abercrombie & Fitch wants to pay The Situation from the TV show The Jersey Shore to stop wearing their clothes. Evidently Mr. Situation is not enhancing the brand image of Abercrombie and they don’t want him gracing the TV screen while wearing their duds. It’s the product placement version of literally putting on and taking off “The Bernanke Put”.
That’s when it all comes together for Dave and I breath a huge sigh of relief. This is like crossing over into the other side of a black hole in the outer galaxies, or like a trip to Carl Sagan’s Flatland (http://www.youtube.com/watch?v=fVXV8XB-GPo), or like passing through the double slit of classical Newtonian physics and emerging on the side of quantum mechanics. Dave gets that. This is about losing money to make money. This is about doing what Dave learned when he was a lifeguard; if you have to drown your victim a little to save them, then do it. This is what Jeremy Rifkin was talking about when he wrote that book titled The End of Work.
I get it. If we’re going to pull the entire Eurozone under with us and hold them there long enough to get the new Western currency SDR model (http://tradewithdave.com/?p=7114) around their neck, then that’s exactly what we’ll have to do. It’s all about appeasement and “An appeaser is one who feeds a crocodile – hoping it will eat him last,” as Winston Churchill taught us.
So, if the situation is feeling negative to you, it is, but don’t be discouraged. We can all learn something from The Situation. If they’re paying you NOT to do something, you might want to take a second look at what they’re paying you with. If it’s dollars and you’re not doing anything for them except clubbin’, then that is your first clue as to what those dollars are going to be worth. If you want Dave to stop bloggin’ then pay him to stop. Send him some bitcoins and once the value of the bitcoins reaches the value of never working again, I promise to quit.
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