The Ratio of Housing
to Precious Metals Sentiment
By Dr. Jeffrey Lewis
The last time housing market sentiment and
precious metals prices lined up this way, we were on the cusp of massive
volatility and collapse. Housing had reached the end of its long great credit
driven rope. At the same time, defaults began to create tremors deep below the
house of cards. Silver and gold had recently been pummeled in the same
not-for-profit manner that has riddled these markets for more than 40 years in
the modern era (and perhaps much longer throughout the history of the monetary
At that time, the market was coming to terms
with the reality that markets - especially ones fueled by credit expansion and
massive subsidy - do not go in one direction forever. Emergency measures were
reigniting the same false sense of security and prosperity we are witnessing in
the equity market and extending to major metro centers. This is being hailed as
the great return by the mainstream media. Despite this, we are on the cusp of
yet another wake-up call.
As many will recall, the housing bubble was
re-inflated with mark to market accounting changes, the direct bailout of
government sponsored entities, and financial intuitions. All of this was to get
us back to where we were without correcting any of the imbalances that led to
the original fragility. Renters and savers were punished, while the political
class cheered the efforts of the monetary masters.
In contrast, gold and silver were deemed
bubble each time they ascended from lows celebrated and ridiculed by the
mainstream financial press.
Housing and precious metals are once again so
far away from each other that they practically rhyme with very recent history.
The last time precious metals fell to such
poor sentiment levels the financial system, along with the underlying economy,
nearly fell to its knees. Then, like today, there appeared to be enough
political wiggle room to let loose with more experimental monetary policy.
To make matters more precarious, the FED
continues to operate under emergency measures, tapering slightly ahead of the
next crack up boom. It is bizarre that history might be repeating itself this
Price performance makes market commentary and
analysis; and it is the tail that wags the dog in every market.
News and information travels like the speed of
light. Something happens and we turn immediately to a myriad of outlets -
whether from the mainstream news circus or even what most would consider
"deeper" via the lonely existence of social media.
Imagine the conversation we need to have in
order to explain to an outsider how and why silver prices trade the way they do.
It's a monumental task - even for those “inclined” to the market in some way.
Each layer of the onion is followed by another layer of complexity.
It's like bicycles, it's an old technology. On the outside, it doesn't look like
much has changed. Yet the nuance is endless the deeper you go in.
To the outsider it's just riding a bike. And as with most things, when you are
not 'up' on it, you tend to be down on it.
This is especially true regarding precious metals.
Most investors don't see the need or associate the need with disaster - like
“Mad Max” scenarios. Then they rationalize the avoidance by lamenting the
difficulty of storage, security, or lack of a dividend.
The fact is that so much of the so called wealth is generated via the growth of
the financial system. Additionally, it is supported by promises that cannot be
kept and, thus, will be destroyed much faster than anyone can imagine.
Paralysis by Analysis
Analysis is based on performance and not
value. Fundamentals are justification for performance instead of the other way
round - in which performance would be a ‘pricing in’ of what the market
discovers in terms of reality. But you can play with that reality; mask, hide,
or re-write it in real time. This is the unconscious effect of using price
performance to gauge value.
This is why it will be looked upon as such an
atrocious mistake; nature is unable carry out its course and purge debt from the
One problem is the convergence between how quickly that could happen and the
time before impending monetary crisis. That is, if we get the scramble for hard
assets that many expect we will.
Silver, along with everything real will be bid - considering the sheer enormity
of paper out there and the expression of negative exponential growth.
Housing, on the other hand, has intrinsic
value of its own – a place to live. Unfortunately, homes were co-opted and price
inflated into an unrecognizable quasi-investment asset. Now, Wall Street has
become the landlord of last resort in the so-called recovery.
Overall, gold and silver are (by definition)
precious. This is due to all the central bank buying and non-selling, massive
industrial transformation in silver over the last 100 years, trillions upon
trillions of never before imagined amounts of untethered promises, and blatant
manipulation. And despite all the taboo, they are money.
For more articles like this, including
thoughtful precious metals analysis beyond the mainstream propaganda and
basically everything you need to know about silver, short of outlandish fiat
price predictions, check out