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Odor out of Chaos

Ruben T. Varela
Feb 20, 2008

"We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do."

- Karl Rove

The Hegelian Dialectic
Georg Wilhem Friedrich Hegel [1770-1831] was a 19th century German philosopher and theologist who wrote the Science of Logic in 1812.

The Hegelian dialectic is the framework for something that rulers and elitists have perpetrated against their citizenry since the beginning of time - that is guiding our thoughts and actions into conflicts that lead us to a predetermined solution. Today, it is better known today as "Problem-Reaction-Solution".

It works like this; Create a crises, use the media to incessantly dramatize the situation or event, thus creating a demand for change - then offer the solution which was the intended goal in the first place. For example:

1. Problem: Bungle [I'm being generous here] an election in Florida.

2. Reaction: Concentrate media coverage on the fiasco so that change is demanded.

3. Solution: Offer "Help America Vote Act", providing billions to county and state election officials to install easily hacked electronic voting machines with no paper receipt, and no auditing capabilities.

It is important to understand how the Hegelian dialectic manifests itself in our daily lives within the corporate controlled media environment, and how it shapes our perceptions of the world, so that we may recognize when we are assisting or hindering to implement a vision for the future we have not chosen for ourselves.

The "S" word
Seems the financial media is finally coming around to acknowledging the possibility of a recession - something our charts have been saying now for over two years. In fact, even the dreaded word "stagflation" is reluctantly being muttered by main street analysts who can no longer spin reality without losing all credibility.

Reuters: Bleak Economic Reports Signal Recession
http://www.reuters.com/article/ousiv/idUSN1556555920080215

Stagflation is a combination of rising prices and a slowing economy, the worst of all worlds if you are a central banker, but the perfect ingredients of generational bull markets in precious metals:

Rising prices

Slowing economy

Of course, the Federal Reserve was quite aware of the situation when they lowered interest rates by 125 basis points in the span of eight days earlier this year. That certainly has the look and smell of - if not "teen spirit" - a jolt of fear down the spine of some folks at the Federal Reserve and Dept. of Treasury.

It's almost amusing to think this kind of monetary response has been tried hundreds of times over thousands of years of history and has a perfect record of failure. What can our monetary alchemists be thinking is different this time? Can multiple wars and prosperity suddenly be funded by borrowing and printing paper money out of thin air? Have they finally figured out how to spin lead into gold?

"In the end the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality, was tacitly denied by their philosophy. The heresy of heresies was common sense."
- George Orwell, "1984"

Perhaps I am wrong after all. Today, the "Preznit" says War is good for the economy and creates jobs! -- YouTube video

Can't wait to get that government check so the economy will finally turn around... how about you?

LA Times: Already planning their spending [Editor's note: You will have to register as a member with LA Times in order to view this story]
http://www.latimes.com/business/la-fi-impact25jan25,1,6358349,print.story?ctrack=7&cset=true

[or try this link:]
http://www.latimes.com/business/la-fi-impact25jan25,1,7538901.story

Ordo Ab Chao

"War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent."

- George Orwell, "1984"

Now, I know the chicken-neck, Skull & Bones member, Tri-Lateral leaning, CFR-loving, Bilderberger-eating, Ivy-League types in DC and New York aren't STUPID enough to think that deficit funded war is good for the economy! They know somebody has to get stuck with the bill, right?

Therefore, I can only surmise that the dollar, our savings, the value of our labor, and our standard of living are all being destroyed by design. Could it be to affect the kind of change Americans would never agree to - the end of U.S. sovereignty and surreptitious roll into a North American Union? When the same entities behind the dollar collapse step forward as our saviors to give us the "Amero" - another controlled "fiat" currency - it will be too late, my fellow Americans.

Politicians, Wall Street fat-cats, and international corporatists love trade agreements as they bring in more cheap labor and control over everything we buy, sell and produce. That's how it all started so innocently in forming the European Union, as it has here with NAFTA and CAFTA:

Vicente Fox hints at a North American Union
http://www.youtube.com/watch?v=gYGrn0hZlCQ

Lou Dobbs speaks out
http://www.youtube.com/watch?v=14Li0Wa5rc0

Some rare honesty on CNBC [Europe of course].
http://www.youtube.com/watch?v=-yMfthzho-A&feature=related

Vicente Fox promotes NAU and says "Americans are selfish".
http://www.youtube.com/watch?v=5AasdjfbdTM&eurl=http://www.jonesreport.com/article/02_08/150208_
fox.html

Of course, Mexico has quadruple the natural resources the U.S. has and turns out more billionaires than any country on earth, yet still has the widest gap between the rich and poor. Is this what we have to look forward to? As a second generation Hispanic American whose father, uncles, and cousins have fought to preserve this nation - I sincerely hope not.

Whether you accept it or not, besides wealth protection - investing in gold & silver is PATRIOTIC in support of liberty, and true economic and political freedom. Without economic freedom, there is no such thing as political freedom - as one system defines the other.

Recent generations have forgotten that the existence of a "middle class" is unique in human history. Ninety-nine percent of mankind's time on earth has consisted of dirt-eating servitude under a myriad of inbred dynasties, kingdoms, and dictatorships. Individual sovereignty and freedom is the rarest form and most precious jewel of all - representing a mere speck of time in human history - from its inception it has been and will forever be under attack by those who would abuse their elected or appointed power to enslave us socially, economically, and politically - simply to perpetuate their own power and control. The difference today is the use of technology and communication systems to distract and condition us on a mass scale into accepting the loss or "regulation" of our God-given liberties in a new and improved form of "Democracy Lite".

"Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather, the citizenry, infused with fear and blinded by patriotism, will offer up all of their rights unto the leader and gladly so. How do I know? For this is what I have done. And I am Caesar."

-- Julius Caesar

GOLD
Gold remains in an "impulsive" phase, characterized by:

1. A bullish market - the 50-day [10-wk] EMA is above the 200-day [40-wk] EMA.
2. Selloffs continue to be supported by the 50-day [10-wk] EMA.

The Gold weekly-chart is a perfect example.

Gold - Weekly Chart

As long as gold remains in "impulsive" condition, surprises will most likely be to the upside, so it is best to be long, or in cash - but not short. In the meantime, consolidation can be a good thing - it allows us an opportunity to redeploy funds at a lower cost basis and builds the energy required to sustain the next move up.

SILVER
Silver still has some catching up to do if is going to keep up with all other commodities including Gold. The chart below illustrates how commodities and Gold have broken above their upper channel resistance. There is no fundamental reason why Silver shouldn't also attend to its upper channel. Of course, there are no guarantees but this would indicate an approximate target of $23 - 25/oz. Since mid-December Silver is up over 25%, and over the past two weeks Silver has outperformed Gold +2.45% vs. 1.85% and -0.43% vs. -2.03%.

Silver's weekly chart remains bullish and the intermediate Fibonacci target of $18.20-18.70 and longer term target of $24-25 remain in play. Of course, Silver is a "madman" when it comes to volatility - so we must always be mentally, emotionally, and financially prepared to see sudden, sharp selloffs to the 10-week EMA [green line], now at about $15.94/oz.

Silver - Weekly Chart

Gold vs. Silver
Below is a ratio chart of Gold vs. Silver. When the ratio is rising, Gold is outperforming Silver, and as the ratio falls, Silver is outperforming Gold. Observing recent history we see last year that Gold broke out of downward Trendline Resistance, reversing a 4-year trend where Silver outperformed Gold. It is interesting to note that the 4-year period of outperformance by Silver was immediately preceded by a 4-year trend of Gold outperforming Silver. This symmetrical nature is often found in classic Head & Shoulder formations - this one 9 years in the making.

Logically, since the Silver market is so much smaller than the Gold market, it stands to reason that the same amount of buying power applied to both markets during a manic, "blow-off" phase will impact Silver to a much greater degree than Gold. This ratio chart deserves continued monitoring since completion of this Silver-bullish Head & Shoulders pattern would signal the possibility of an enormous spike in Silver against Gold.

Ruben T. Varela
email: rvarela@socal.rr.com

Ruben Varela is an independent trader. Ruben attended California State University - Long Beach, majoring in Economics and Information Systems. After a successful 15-year career in commercial and investment real estate, Ruben's trading success led him to retire from real estate in January 2006 in order to trade full time. Ruben is presently in the process of launching a website [www.thegoldenbull.net, not live yet] focusing on trading the Precious Metals sector. Look for the website launch and additional insight from Ruben in the coming weeks. In the interim, please feel free to contact Ruben at: rvarela@socal.rr.com.

321gold Ltd