Ron Paul Makes It Official, Inflation in Airlines & Diapers? And Why I Might Be Wrong On Selling Silver

Well Ron Paul made it official on Hanity last night:

Texas Republican Rep. Ron Paul announced on Sean Hannity’s Fox News show Monday that he is creating an exploratory committee for a presidential run, a key step that likely indicates the unpredictable libertarian with diehard followers will run for president against President Obama in 2012.

While his chances of even winning the nomination are slim, I am hopeful an attitude change is coming in the majority of the public.  Caroline Baum lays it out precisely in her Bloomberg column today:

Americans have a fundamental philosophical dilemma over what we want from our government. In good times, we want an arms-length relationship. In bad times, we want a nanny looking out for us. We can’t have it both ways. This mind-set needs to change.

A change in mind-set is precisely what is coming and it can either happen the hard way (dollar crisis) or the easy way (stopping the non-stop spending and continual growth in government).

To push the point home a little more, here are a few more signs of prices rising. First is Delta Airways and U.S. Airways Group announcing higher fares to make up for higher fuel costs:

The two U.S. airlines reported smaller-than-expected losses on Tuesday and their share prices rose, with Delta up 11 percent, even as some analysts questioned how much longer consumers, paying more for gasoline and food, would tolerate higher air fares.
"We must fully recapture our costs on every flight every day to maintain and improve our earnings performance," Delta Chief Executive Richard Anderson told analysts on a conference call, adding that high fuel was "the new norm."

Blaming higher fuel costs should come as no surprise, but now Huggies?  From Yahoo! Finance:

DALLAS (AP) -- Kimberly-Clark Corp., the maker of Huggies and Kleenex, said Monday that it plans to raise prices, its third such announcement since the middle of March.
The company said it's merely passing along the higher prices that it has to pay for raw materials like oil and wood pulp. It also more than doubled its predictions for how much the prices for such commodities will increase.

Even if you claim inflation is not here, inflationary expectations surely are.

So yesterday, I made the claim to not begin selling silver with such high demand.  I also pointed out how the high demand has created a short-term shortage.  Well, a few articles may have proven me wrong today.  First is Simon Black over at Sovereign Man:

Silver’s rise (in US$ terms, at least) over the past several weeks has been nothing short of phenomenal. The chart has effectively “gone parabolic,” and people I’ve never met have started to e-mail me (in my capacity as a registered investment advisor) for advice on silver.

It doesn’t matter whether it’s silver, tech stocks, emerging markets currencies, or pork belly futures… any time these two events coincide (a parabolic chart pattern, and strangers asking me for advice), it sets off ALARM BELLS in my head.

Yes, silver's rise in recent weeks has been nothing short of daunting.  But the question is, are we due to see a correction?  Perhaps, more from Black on what investors do :

So, what do most of them do? They sell out for a small profit. That’s why it is said that bull markets are constantly climbing a “wall of worry.” And that’s why ALL markets have corrections. Corrections happen when enough people are FEARFUL of losing the gains they’ve made so far, and start to sell out in large enough numbers to temporarily reverse the trend.

So what to buy then if you fear losing your profits?

Long-term ETF positions are risky, but you may consider a short-term position in the ProShares UltraShort Silver ETF (ZSL on the New York Stock Exchange). This instrument is designed to move TWICE as much as silver bullion, but in the OPPOSITE direction.
For example, if silver falls 5% in a day, this security should GAIN 10%. Of course, it works both ways. If silver keeps on rising, then the price of ZSL will lose twice the amount silver rises by.
During this bull market, silver has already seen one “correction,” during the financial crisis, of more than 60%. That was an anomaly. But, a typical 10% or 20% correction would not be surprising to see at some stage — quite possibly soon.

Perhaps if I had more skin in the game, I would follow his advice.  On the thoughts of a silver in shortage, Bob Moriarty sets it straight:

There is no shortage of silver. There never has been a shortage of silver. Until the laws of supply and demand are repealed, there never will be a shortage of silver.

My question is, "If you were smart enough to buy 100 ounces of silver at $4 an ounce, a 5000-year low in real terms, how much profit have you made if silver goes to $50 or $100 or $300 and you never, never, ever sell? The answer, of course, and ignored by all the silver "GURUS" is that if you buy low and don't sell ever, you don't make any profit. That may be the dumbest investment advice I have ever heard.
Silver is a commodity like any other. If you are smart enough to buy it cheap and you are smart enough to sell it when it gets expensive, you will profit. If you want to buy at all time highs, good luck with that.

Despite APMEX being out of silver eagles till May 13th, if you really want silver, you should be able to find it.  There are a lot of rumors out there about silver, and some have merit.  I may be wrong on whether you should sell silver right now, but I won't be as wrong as this David Lereah. Here is just one pic:

Check out the post on The Big Picture to see some hilarious Amazon.com comments on the books.