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Well,
our world is definitely in the throes of wild and wooly change.
The
United States has begun losing its dreams. It doesn’t even know how to
dream anymore. Its only goal is getting rich in the next bubble. Its only
hope is winning 1 million dollars by retirement. Doesn’t want to
make anything. Doesn’t want to produce anything. Walla!
Its dreams are being answered. All the jobs are south and east. So, with no
worry over the difficult task of employment the US can concentrate on its
hope of prosperity without producing anything.
Passed
by an old European style café on the way to the coffee shop. A
Dutch restaurant with a German cook. Excellent soups all made from old
European and Dutch recipes. It’s the small things in life that often
bring sanctity for the soul. The days now are getting shorter. End of the
summer season. Can you believe it’s been close to a year since all the
banks received their trillion dollar “stimulus package?”
The
total accumulated national debt stands now at almost 12 trillion dollars -
plus. The annual budget deficit by itself is expected soon to pass 2
trillion. This is four times higher than last year. Well, we’ve
definitely entered a new era. Mind you…not moving toward, but
quickly losing all the ground accomplished for these past 20 years.
A
number of years ago noted conservative analyst Robert Shiller predicted the
housing market would be the last sand castle to be washed away. Robert,
bravely and confidently predicted at the beginning of this decade that the
once golden and ever climbing higher real estate market would crash. At the
time he was considered crazy and a prophet of doom. An alarmist. But
those who listened to his advice and got out of debt are glad they took his
advice seriously.
"A
reasonable case could be made," he says, "that even though past
depression scares have proven to be unwarranted, this time it might be
different." Robert Schiller
The
White House is finally admitting that there is a substantial and extensive
gap between its earlier rosy economic forecast and reality. What? Higher
unemployment rates and higher deficits all around. A nightmare brewing?
Unemployment is headed to double digit figures and add to that the fact that
unemployment benefits are rapidly coming to an end for the vast majority of
those unemployed. The administration apologizes for its earlier inaccurate
forecast and blames it on incorrect information submitted by analysts.
“America,
do you still dream great dreams? Do you still believe in yourself? Are you
ready for a great national
challenge?" usatoday.com/tech/science/space/2009-07-19-apollo-crew
It seems those dreams are
quickly fading away. Are we ready for a great national challenge? How about a
challenge that will determine whether we will go bankrupt as a nation. Can it
really happen? Just ask California Governor Arnold Schwarzenegger.
Arnold has even begun issuing “IOU”s instead of real money to its
state employees. Remember all the talk years ago that the 401K was the road
to great riches and wealth? Just invest yearly in that 401K and
you’ll be set for life.
“Sorrenti, who built
homes that sold for up to $500,000, went from putting up five houses a
year…to building none…” “His plans for a
comfortable retirement have crumbled. He and his wife of 28 years have lost
more than a third of their 401(k) retirement savings in the
recession” "We were doing it right. ... I wasn't going to be
a burden to anybody," he says. "It turned out nothing like we've
been
planning." usatoday.com/money/economy/2009-07-20-gmtown_N.htm
Did you catch that last
statement? He and his wife were doing everything according to the cable
financial sites. And every bit of advice he listened to has cost him a third
of his life savings. Many financial analysts are predicting that the United
States is headed to significant inflation maybe starting in 2010. The huge
growing national debt demands it. Inflation could easily hit double digits
down the road. Gold is always the best investment during an inflationary era.
The town on San Pablo Bay
just north of San Francisco filed bankruptcy as plunging property taxes
crippled the town's coffers and left the city unable to make good on union
labor contracts. Lear Corp., which manufactures car seats and electronics,
filed for Chapter 11 bankruptcy in July with $1.3 billion worth of assets and
a whopping $4.5 billion in debt.
What is the next crisis
bearing down on us? The next bust to come?
Almost 700,000 Americans are
soon to use up all of their unemployment benefits. The national unemployment
rate now hovers just under 10%. Sounds like a looming crisis to me. What
happens when the last dollar disappears? I have relatives myself who
have lost their jobs and their home has depreciated by 40%. This is happening
all across the country. Around 4.5 million people will lose all their
unemployment benefits. What comes next? Selling apples on the street?
Increased soup kitchens across Middle America?
“Jim Rogers, retired
chairman of Vancouver-based Rogers Group Financial, says advisors often
suggest clients take a 5% or 10% position in precious metals as
insurance…” “He says "a trillion dollar stimulus has
to be inflationary…” “Since the future is unpredictable,
I'd argue investors should be exposed to all of stocks, gold, real estate or
REITs, cash and both nominal and inflation-linked bonds, as I am myself. How
much of each can be decided after consulting with a trusted financial
advisor.” nationalpost.com/scripts/story.html?id=1794873
It is estimated that true
year to year inflation is 7%. As the years move forward we may see
inflation as we experienced in the 1970s. No, this world crisis is far
from over but continues to build up steam if only under the surface. In this
long term environment gold and gold related investments will always prove to
be the better longer term investments. Today, do not consider the short term
events, but continue to prepare yourself for the longer term events
pending.
When investing always
consider well where the longer term direction of the economy and current
events are heading. You’ll hold on to your money longer if you think
this way. Warren Buffet is the master in determining long term events. I'll
give a plus here also for Wells Fargo Bank. During the real estate boom Wells
Fargo refused to provide sub prime loans. And when the real estate bull
crashed they were sitting on a lump of cash and calmly proceeded to purchase
Wachovia Bank. A long term disciplined approach is always the key to where to
place your money.
“Claymore Investments
Inc. has raised $400-million for its new gold bullion fund -- an amount that
could swell to $460-million, making it the largest structured product
offering and one of the largest initial public offerings in at least two
years.” “The fund, which includes a number of novel
features, including a hedge against the U. S. dollar, capitalizes on
seemingly unquenchable thirst for the metal amid growing concern over
inflation and the outlook for the greenback.” “Claymore's
deal is another example of the continuing love affair between investors and
gold.” financialpost.com/story
It is not the short term
fluctuations to worry over. Keep your eyes focused on coming events.
The longer term fundamentals are still eroding. Every where I turn I
continue to see homes foreclosed. Even half a million dollar homes.
Tremendously successful and wealthy developers are going bust and one in
particular I know has just lost his home to foreclosure. And I remember
this fellow used to carry around a minimum of 10 grand in cash in his pocket.
Unfortunately, he gambled heavily and lost his last gamble in a crashed real
estate bust.
Dennis Gartman continues to
be the premier investment analyst to continue to listen to and to follow.
Gartman became a buyer of gold in late June 2009. So far this year government
regulators have closed 72 federally insured banks because of a weak economy
and increasing loan losses.
“Junior gold miners win
respect again” “Major comeback…”
“Many other junior golds are also trading around their highest
levels in months (if not ever)…” "It's tied to the
fact that I think people are starting to see beyond the credit crisis…"
“I think for those juniors that have good assets and have cash, there
is a growing audience." “…for the juniors that have projects
that are well-financed and are either in production or likely to be in the
future, the enthusiasm is back.” “While funds are putting
cash back into the junior gold sector, they are also being selective about
where it goes. Details like resource potential and political risk actually
matter again, which was not always the case in the heady days of 2004 to
early 2008.” nationalpost.com/scripts/story.html?id, 6-10-2009
Now just may be the best time
to take an evaluation of your family’s needs and begin planning for
continuing erosion of our economic sector. Striving to be free? You will be
free if you can continue to support yourself and not rely on a trillion
dollar stimulus package.
David Vaughn
Editor,
Gold Letter, Inc.
www.goldletterdv.com
All
articles by David Vaughn
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