Socratic wisdom of the day

A lovely little thinker but a bugger when he's pissed

After the post yesterday that quoted Jeremy Grantham, I received a mail from a regular reader who is let's just say "an industry professional", as we're not into blowing covers round here. Here's the whole mail re-printed; well worth sharing this chunk of wisdom on a day such as today:

Otto, I liked your note on Grantham, which reminds me of a quote I keep from Socrates on fiat money:

- I note that your bronze coin has an inscription that ensures your king will pay its face value, says Socrates.

- That is correct, answers the merchant.

- And with what will he pay? asks Socrates.

- He is the King, for God’s sake! And besides you are a wise man, responds the phoenician.

- Well then, I shall buy those good quality papyrus you bring from Byblos, I need them for my writings. Can I pay you with your bronze coin?

- No your lordship, with gold, I am also a wise man, said the merchant.

Just goes to show that plus ça change, plus c'est la même chose.

Spare a thought for John Lee, CFA

And that thought should be.........

Ever since I read these words written by Lee in February this year;

We can't regulate the patient who wants to overdose on painkillers. We shouldn’t over burden all banks with piles of rules designed to prevent a few outlaw borrowers either. Remove the government as the safety net and return the responsibility back to the people. Let the careless and the weak fall, isn’t that what capitalism, evolution, and free markets are all about? Until then, dollar will continue to lose value and gold and oil will continue to rise in dollar terms.

.....I've thought, "hey, that's just the kind of person the world doesn't need as a financial advisor". So I can now only assume Mr. Lee is supremely underwater thanks to his...

Gold up to $893: Finally, the Wait is Over

....call on September 18th that included such classics as, "I have been VERY careful in not calling a bottom, however I am confident now that the bottom is in, and things can unravel quickly if short stops are taken out, creating a squeeze."

I'm not normally a vindictive person, but this time I am. There are many people out there that have followed the erroneous advice of Lee and other tunnel-visioned goldbug heroes that have now lost a lot. I've been saddened to read bullboards recently where people say they've lost their homes, they've separated from their spouses, things of that ilk because of the losses they've incurred in gold stocks.

Ever since this blog started in March this year I've banged on the drum of capital preservation. I own gold. I own silver. I have a long-term portfolio. I have been in cash (not gold...cash) for weeks and weeks. That's what capital preservation means. Many of the goldbug folk hero writers preach their own variety of capital preservation of course, but none (or perhaps i should say very very few*) of them ever include "hold cash" as part of that capital preservation. That's because the dollar is fiat junk and evil and other such soapbox rubbish.

If you think their analysis is logical and maybe even true in the long-run, well that's fine. But look at where people like Lee have led you. Look carefully. Look again. And once you have, join me in a rousing chorus of "Shut the F*** Up One time, Will Ya?".


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*Offhand i can think on Ron Rosen, though there may be others. I'd include Gary from Biiwii but i'd be doing him a great disservice because he's not a guru and doesn't want to be one. Also he's not a goldbug writer anyway. He's made the case for holding T-bills many a time. He's someone who I truly respect.

How to confuse a group of silverbugs

We'll do this as a step-by-step bullet point thing, otherwise they might find it difficult to follow:

1) Show them a 1923 Silver Dollar (I have one right here).

2) Ask them how much silver is contained in the coin.

3) Congratulate the first one that says 24 grams (precisely it's 26.7g and 90% pure silver = 24.03g).

4) Ask them how much the contained silver is worth today (making sure you're not talking about its collector's value; my example has been valued at around U$300, but a truly perfect mint example of the "freedom dollar" can go into the thousands).

5) Congratulate the first one that says "over ten dollars" (in fact, using today's $13.76 London silver fix and doing the necessary calculations, it works out at U$10.63).

6) Ask them how much it seems the silver in that dollar has risen in dollar value in the 85 years since it was minted.

7) Congratulate the first one that says "over 90%" (90.6% if my quick math is correct, but there are a couple of variables), and then go on to say that apparently, and according to the pretty empirical evidence shown by that silver coin, it sure looks like the dollar has lost 90% of its value in the last 85 years.

8) Ask them to look around. Check the room, the street where they're standing, the city and the people. Ask them whether there has been a general improvement in the standard of living in the last 85 years, considering the economy, healthcare, education and any other measurement by which we tend to gauge that thing called "progress".

9) Ask them why they think the financial system will collapse if the hated fiat dollar loses another 90% of its worth in the next 85 years.

10) After a few minutes, I will guarantee that you need to tell one of them, "No, it's not a trick question."