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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

American's Striving to be Free

Commodities / Gold & Silver 2009 Aug 24, 2009 - 12:21 PM GMT

By: David_Vaughn


Best Financial Markets Analysis ArticleWell, 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?"

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."

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.”

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.”

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.”, 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.

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David Vaughn

The future legacy of the United States will be the refined art of financial leverage.

© Copyright 2009, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2008, Gold Letter Inc.

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