a different view on investing



In this section you can read about some of the dreams we have had in the past, and a review of their outcomes. The more recent dreams are provided along with the current edition (maybe after reading this section, you will be inspired to join us).

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2.  Dream: THE SPARKLY SILVER SHOES - 18th February 2006:

On the night of 17th/18th February 2006, the II dreamed of being outside in a gathering of people, one of whom was a woman wearing sparkly silver shoes.

On Friday, 17th February, the II had been reading an intriguing tale recounted by Hugh Hendry, the manager of The Eclectica Fund, a hedge fund operated from London. He wrote that Niall Ferguson, a historian, had claimed that the Wizard of Oz had been written as an allegory of the deflation taking place at the time, 1890. The cry from much of the agrarian Mid West was for the US to leave the gold standard, which was held responsible for constricting the money supply unduly. Hendry continues:

"The easy-money crowd, Bernanke's great grandfathers perhaps, argued that the sole responsibility for the economy's woes lay with an insufficient monetary response. The gold market, settled in far away London, had a scarcity that choked the US economy into serfdom. Instead, the Democrats' manifesto called for the re-admission of more plentiful silver coinage into the system; the silver price had slumped as several nations dropped their bimetallic standard in favour of gold. The silver-to-gold ratio had fallen to 1:40, a point captured by Dorothy's silver slippers as she skipped along the yellow brick road (the gold standard). Print more money and remove us from penury. Note that the silver/gold ratio is even more extended today at 1:50; silver is one of the cheapest asset classes of the 21st century."

Hum ho. While imaginative, that interpretation seems to be a little too intellectual. Our guess is that Dorothy's silver shoes simply represented future prosperity which would allow her to skip along the yellow brick road, as indeed the US economy would do in another fifty years time. Still, it struck us that things can't be all that bad when a hedge fund manager relays in his monthly newsletter a symbolic interpretation of a work of fiction.

Interpretation (as in the newsletter at the time of the dream): Now, there are no certainties in dream prediction, but, when taken in combination with the Eclectica newsletter, it would be reasonable to assume that the silver shoes represent a further skipping along Precious Metal Road.

Enactment to date: Silver is clearly the second precious metal choice. Whereas gold is the prime means of monetary transaction, and the object in which we believe investors are likely to seek shelter when the going gets considerably rougher than it is at present (21st July 2008), silver is also a safe haven in troubled times.

Its price is more complex than that of gold. Firstly, silver is less plentiful, and hence less liquid in trading terms. Secondly, silver has many more industrial applications than gold, and its industrial usage can influence the price much more than the jewellery trade affects the price of gold. Still, with very difficult economic times awaiting us, silver is a good second best.

On 17th February 2006, silver was quoted at USD 9.46/oz. On 21st July 2008, it stood at USD 18.35/oz, representing an increase of 94%.

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