Friday, August 19, 2011

Double Dip Recession

Class Warfare

This morning I discussed a PBS documentary that looked at the Land Of The Poor.  The following video is a more humorous look at class warfare through the eyes of Jon Stewart.

The focus of his discussion is on where we should increase taxes.  I am of the view that our country faces a spending problem first and that taxes should be discussed after the main cancer has been cured.

However, the following provides another glimpse at the important divide growing in America.

Michael Maloney: Why Gold?

People ask me what prompted me to begin purchasing and recommending gold and silver back in 2005. The answer is that I began studying finance in late 2004 and read through every maintstream finance book available. Most were informative, but one really shook me up and completely altered my view of the world.

It was called "Rich Dad Poor Dad," by Robert Kiyosaki.

I immediately read through all his books and purchased his online video teaching service which at the time was $9.95 per month; a large purchase for me.

One of the videos was a guest speaker named Michael Maloney who was discussing debt, the money supply, financial history, and something called gold and silver.

From there I consumed myself in study to learn more and try to confirm his facts and theory about what was coming for the global financial system.  That opened the door to a whole new world, leading me to authors such as Peter Schiff and the a study of Austrian economics.

I had a chance to meet Michael Maloney in 2006 at a real estate seminar in New York City.  He had a booth set up that was selling and talking about gold and silver coins in the corner of a huge showroom.  There was no one at this booth.  All the attendees were swarming the products that taught you how to flip homes and become a millionaire.

I had the chance to talk with him for about 25 minutes about everything I was studying and what he thought was coming for the world.  I told him I was 100% invested in silver and that it was his fault.  He laughed.

Fast forward 5 years later and Maloney is now a phenom.  He has written a best selling book "Guide To Investing In Gold And Silver," and he is now the keynote speaker at investment conferences while the real estate booths sit empty.

The following is a recent presentation he gave to a large audience showing the potential for precious metals.  The most important piece of the segment comes 20 minutes in when he discusses how the current monetary system works.  It is about 10 minutes long.

If you can understand this concept alone it will have a life changing impact on how you invest for the rest of your life. (Including after the gold and silver bubbles burst when it is time to purchase stocks and real estate)

He then goes on to discuss debt, stock values, real estate, and where we go from here.

Land Of The Poor

Looking back throughout history you can find that an empire has always collapsed for the same two reasons.  Ironically, they are both due to a country destroying itself from within, like a cancer, not due to a new power taking over by force.

1. Their growth in military and social spending becomes too large to maintain creating a debt crisis

The United States spends close to 80% of our $3.7 trillion annual spending on military and social programs like social security and medicare.

2. The wealth distribution in the country shifts heavily toward a small rich few and away from an enormous group of poor. 

The following video by PBS discusses the second factor taking place in the twilight of the current United States empire. 

Watch the full episode. See more PBS NewsHour.

As an investor you just need to understand that the world will be changing soon.  Politicians will keep the train going 130 miles per hour over the cliff until it hits the ravine and explodes.  There is no stopping the force that is in place.

Things will soon be far worse than they are today.  With a small amount of preparation you will be well ahead of the majority that are caught off guard.

Thursday, August 18, 2011

Gold Vs. Treasuries

I had some drinks with one of my oldest friends last night who was in town from New York on business.  He had another business associate with him and conversation came up about the economy and investing.  He mentioned that he knew someone who was invested in gold, excitedly saying that he was "killing it."

Of interest to me was that he himself was not invested in gold, and that it was just one person he knew who was investing in the metal.

For most of the 2000's, gold in general moved in lock step with stocks as part of the "risk on" trade. Recently gold has stepped away from that group and become part of the "risk off" trade which is normally occupied by US treasury bonds.

The following graph shows this recent correlation:

It is my belief that treasuries are in the late stages of a bubble, and that gold is in the 5th or 6th inning of a secular bull market. (I believe gold and silver have at least one large correction ahead)

At some point investors will care not just about the return of the paper assets they hold, but how much purchasing power that paper provides them.

Then gold and silver will move into an asset class of their own in the final stages of their secular bull market: the mania blow off.

Tuesday, August 16, 2011

CNBC: Jim Rickards

One of the most intelligent and well-spoken minds in the world of finance, Jim Rickards, took some time to speak with CNBC this week.

The clip begins about 3 minutes in...

Ignoring Ron Paul

Monday, August 15, 2011

Bretton Woods: 40 Year Anniversary

40 years ago today, on August 15, 1971, President Nixon made the historic announcement that the United States would be removed from the gold standard.

For the first time in world history all currencies globally were backed by nothing, and their values were now based on the exchange rate in the open market.

With the dollar unpegged as the reserve currency of the world, it allowed the United States to run unlimited deficits, which were once checked based on the amount of gold backing the currency.

The average currency system throughout history last about 40 years before something new takes its place.  Our current experiment with a global fiat currency system is now in its final, terminal, stage with the suffocating debt laced throughout the entire world at every level.

It will end in spectacular fashion, with the central banks trying everything in their power to keep the current system in place.

The historic announcement that rocked the world 40 years ago: