Dante's Peak

I'm somewhat of a movie buff. Recently I saw Dante's Peak with Pierce Brosnan. He was a volcano expert called in to investigate a possible eruption of Dante's Peak. He saw a number of clues that would indicate a possible eruption and destruction of the nearby town. At first, he did not want to alarm anyone, but wanted more evidence to determine the possibility. As the evidence grew, he met with the city council to put the town on alert. Then his boss showed up and cautioned them against false alarms and the damage that it could do to their businesses. Of course conflict arose as his boss and he disagreed. For a week they did more tests with nothing to indicate an eruption. Then, just before the team pulled out to leave, the mountain started waking up and showing imminent signs of eruption.

Well, the lesson here is the same. This week, the US dollar index rebounded slightly to close at 75.79. Gold dropped to $785.40 per ounce from its high of over $840. Silver also dropped to $14.43 per ounce from over $15.50. This is a normal retracement, or market direction change of a trend. A trend does not continue in a straight line, but usually zigzags on its way. This is a very normal lull in the market as it 'catches it's breath'. This may continue for a week or two before continuing the current trend.

We are not looking at an eruption, but an implosion of the economy resulting from many factors. The sub prime crash is only one indicator. The declining real estate market, the eroding value of the dollar, the rising prices of more intrinsic precious metals are climbing such as gold and silver, and the continued rising price of oil. All of these are signs.

Now, to fast forward some. When you factor in Social Security facing insolvency within the next decade; and add in the imminent failure of MediCare and MediCaid coupled with the rising number of baby boomers retiring (or trying to), and inflation rising. All of these indicators are leading up to a 'perfect storm' developing. Never before have all of these factors come together at once.

He said to the crowd: "When you see a cloud rising in the west, immediately you say, 'It's going to rain,' and it does. And when the south wind blows, you say, 'It's going to be hot,' and it is. Hypocrites! You know how to interpret the appearance of the earth and the sky. How is it that you don't know how to interpret this present time? Luke 12:54-56 (NIV)

Next week, more will be discussed about the effects of inflation and its impact on growing wealth. Stay tuned ...