October 7, 2010
By Paul Mladjenovic
Copyright 2010 Paul Mladjenovic. All rights reserved.
Yesterday (Oct. 6th) gold hit an all-time high of $1,349 (spot price) while silver hit a 30-year high of $23.19. Today, Gold and silver are pulling back from these record highs as profit-taking is occurring.
In recent years, you and I have constantly heard about the problems with precious metals. We have seen and heard much about the corrections and bearish forecasts. When a particularly strong pull-back occurs, the critics tell us “the bubble has popped” or “the bull market in gold and silver is over”.
I have heard from students and readers about their worries about gold plummeting or how the price of silver cratered. We all remember the second half of 2008. Gold held up well but silver was massacred! Silver was over $20 during the spring of 2008 but massive panic selling forced the price of silver to a mind-boggling low of $9.17 by November 2008 (using the data at Kitco).
In 2008, Silver started the year at $14.93 and ended at a dismal $10.79 for a disheartening plunge for the full year of about 28%. However, as of yesterday, silver over the past 24 months had risen by 120%. Of course, you know gold’s performance during that time. The precious metals had proven their “mettle”. Those that were buyers (especially in bullion and quality mining stocks and ETFs) in recent years and stayed the course were rewarded with strong gains. Short-term speculators were hammered but long-term investors prospered.
In 2008, Gold was one of the few investments that ended up. It started the year at $846.75 and ended the year at $869.75 for a gain of about 3%. In a normal year that is nothing to crow about but don’t forget how bad that year was; most investments were down by double-digit percentages. Many stocks ended up in the graveyard of forgotten securities like Bear Stearns and other financial firms (R.I.P.).
How many investors panicked and sold their quality holdings at the bottom of the plunge? Investing means that you choose wisely and logically and then have the discipline to stay the course.
A student of mine was quite disheartened when she bought a silver stock at $14 during the first half of 2008 only to see it lose over 50% of its value in the subsequent months. During that horrific period, the best stocks joined the worst stocks in a terrifying plunge. However, when the recovery took place, the best stocks regained their footing while bad stocks stayed down for the count.
Fortunately, that student did not panic and her silver stock is up 80% since she acquired it. yes…discipline can be profitable.
For us, the lessons are clear. In recent years, precious metals have been a good place to put our money. If you choose good investments, they will make it through the market storms that occur. Unfortunately, the market storms have gotten very strong in recent years and the volatility and tumultuous activity will continue and probably get worse. For investors, that means not only diversification and patience (and aspirin) but also discipline.
This does not mean being complacent and hands-off with your investments. It just means that you monitor them and see if they still make sense as the market goes through its roller-coaster path. It the investment has strong fundamentals and nothing is a direct threat to it, in due course it will do well.
What is the outlook for precious metals and their related securities (stocks and ETFs)? The fact that the economy is still very shaky and the central banks of the world will continue to pump up their money supplies bodes well for gold and silver. Yes… they will continue to have un-nerving corrections.
As I tell always tell my students, bull markets zig-zag upward while bear markets zig-zag downward. Precious metals (along with commodities in general) are in a long-term, historic bull market. Their fundamentals have been strong in recent years and that strength should continue.
The wise investor uses the corrections in a bull market to accumulate more positions. In the end, the disciplined and patient investor wins.
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Thursday, October 7, 2010
Thursday, September 16, 2010
Government vs. Gold
By Paul Mladjenovic
September 16, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.
Some recent headlines look ominous…
“Healthcare bill reveals hidden tax for precious metals transactions”
“Congress starts hearings on gold”
When I wrote the book Precious Metals Investing for Dummies, I included a chapter on the treatment of certain assets as “strategic assets” that garner the attention and involvement of both our government and governments abroad. Gold is certainly in the category of “strategic asset”. Oil is another example of a “strategic asset”.
What do I mean when I write “strategic asset”. It is an asset that goes beyond mere economics. Most “things” have some type of economic value certainly. Grains, copper, zinc, lumber and thousands of other useful resources certainly have economic value. But some assets—such as gold, oil and even silver—tend to have a higher profile and are more intertwined with the destinies of governments. Certainly these assets tend to be “strategic” since having enough of this asset gives a nation some clout as it interacts with other nations. As nations compete on the world stage, some assets take on a value given certain conditions and events.
A good example of what I am talking about is oil. During the late 1970s, an energy crisis hit the West. The U.S. and other countries became exceptionally dependent on foreign oil. The lion’s share of oil rested with Saudi Arabia and other members of the Oil Producing & Exporting Countries (OPEC). Very quickly, OPEC had power on the world stage. Oil was indeed a great economic asset but it became a “strategic asset” when it was used to leverage and influence conditions and events with the non-OPEC world.
I think that oil is still a strategic asset and in the next few years will regain its strength as a strategic asset. Right now, gold is very quickly becoming widely-acknowledged as a strategic asset.
Don’t get me wrong…I think that throughout history, gold usually had a prominent spot and recognition as a strategic asset but sometimes it burns very brightly in that spot to the world-at-large. Why?
In general, governments—specifically central banks—see gold in a negative light. Sometimes, it sees gold as a threat. In today’s world, gold is indeed a “threat” to many in the world of government. That brings us back to those headlines at the beginning of this essay.
For many governments (including ours), they see gold as a “competitor” to their chosen currencies. They don’t like this and this is why there have been so many incidents in world history when governments sought to push gold into obscurity or to ban or outlaw the metal.
A good example is Zimbabwe. A few years ago the government banned citizens from owning gold. That was done at a time when they were hyper-inflating their currency into oblivion. Basically, the citizens couldn’t own something that held its value…they were forced to trade in a currency that was losing value literally by the day (and even hour!).
Most certainly you will see more anti-gold actions by governments across the globe since most of the governments of the world are busy growing their money supplies to cope (according to their logic) with burgeoning debt and fiscal problems. It’s as if government acted liked a spoiled kid saying “if you can’t play with our toys (fiat currencies) then we will take away what you have (gold)”.
Right now, many citizens are turning to gold because it is a good way to diversify oneself when “paper assets” such as bonds, stocks, mortgages and …yes…currencies…are growing more suspect. But when government encroaches on the world of precious metals, what should one do?
Points to consider:
* Keep buying gold. But be diversified when you buy it. get some bullion coins (such as gold eagles and gold maple leafs), but now may be a good time to also consider gold numismatic coins as well. Why? Because modern governments tend to leave collectibles alone since they usually target bullion coins and bars. I don’t have the space to give further details but one can find more detailed assistance on these matters in places.
* I would certainly suggest that you get very familiar with the writings and works of reliable pros such as David Morgan, Jay Taylor, James Turk, Roger Wiegand, Peter Grandich, Jeff Christian, James Dines, Howard Ruff and many others that write at this website and related ones. Their insights and guidance are great!
* I am usually very hesitant to mention numismatic coins because they do REQUIRE more diligence when buying. When you buy numismatic coins you have to be very aware of matters such as authenticity, condition, rarity and so on. Organizations such as the American Numismatic Association can also offer guidance.
* Lastly, please make your views known to your representatives in Congress. Americans and others should be able to buy and sell gold and silver and other precious metals with little interference from politicians and bureaucrats. Write them…call them…visit them! Just let them know that precious metals are an important part of a person’s ability to prosper in the age of financial uncertainty and chaos.
------------------------------------
Find out more about how to protect your wealth and financial security.
My latest audio ebook, “Financial Firewall: How to Protect your Money and investments in the age of Financial Chaos” is at
www.RavingCapitalist.com.
September 16, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.
Some recent headlines look ominous…
“Healthcare bill reveals hidden tax for precious metals transactions”
“Congress starts hearings on gold”
When I wrote the book Precious Metals Investing for Dummies, I included a chapter on the treatment of certain assets as “strategic assets” that garner the attention and involvement of both our government and governments abroad. Gold is certainly in the category of “strategic asset”. Oil is another example of a “strategic asset”.
What do I mean when I write “strategic asset”. It is an asset that goes beyond mere economics. Most “things” have some type of economic value certainly. Grains, copper, zinc, lumber and thousands of other useful resources certainly have economic value. But some assets—such as gold, oil and even silver—tend to have a higher profile and are more intertwined with the destinies of governments. Certainly these assets tend to be “strategic” since having enough of this asset gives a nation some clout as it interacts with other nations. As nations compete on the world stage, some assets take on a value given certain conditions and events.
A good example of what I am talking about is oil. During the late 1970s, an energy crisis hit the West. The U.S. and other countries became exceptionally dependent on foreign oil. The lion’s share of oil rested with Saudi Arabia and other members of the Oil Producing & Exporting Countries (OPEC). Very quickly, OPEC had power on the world stage. Oil was indeed a great economic asset but it became a “strategic asset” when it was used to leverage and influence conditions and events with the non-OPEC world.
I think that oil is still a strategic asset and in the next few years will regain its strength as a strategic asset. Right now, gold is very quickly becoming widely-acknowledged as a strategic asset.
Don’t get me wrong…I think that throughout history, gold usually had a prominent spot and recognition as a strategic asset but sometimes it burns very brightly in that spot to the world-at-large. Why?
In general, governments—specifically central banks—see gold in a negative light. Sometimes, it sees gold as a threat. In today’s world, gold is indeed a “threat” to many in the world of government. That brings us back to those headlines at the beginning of this essay.
For many governments (including ours), they see gold as a “competitor” to their chosen currencies. They don’t like this and this is why there have been so many incidents in world history when governments sought to push gold into obscurity or to ban or outlaw the metal.
A good example is Zimbabwe. A few years ago the government banned citizens from owning gold. That was done at a time when they were hyper-inflating their currency into oblivion. Basically, the citizens couldn’t own something that held its value…they were forced to trade in a currency that was losing value literally by the day (and even hour!).
Most certainly you will see more anti-gold actions by governments across the globe since most of the governments of the world are busy growing their money supplies to cope (according to their logic) with burgeoning debt and fiscal problems. It’s as if government acted liked a spoiled kid saying “if you can’t play with our toys (fiat currencies) then we will take away what you have (gold)”.
Right now, many citizens are turning to gold because it is a good way to diversify oneself when “paper assets” such as bonds, stocks, mortgages and …yes…currencies…are growing more suspect. But when government encroaches on the world of precious metals, what should one do?
Points to consider:
* Keep buying gold. But be diversified when you buy it. get some bullion coins (such as gold eagles and gold maple leafs), but now may be a good time to also consider gold numismatic coins as well. Why? Because modern governments tend to leave collectibles alone since they usually target bullion coins and bars. I don’t have the space to give further details but one can find more detailed assistance on these matters in places.
* I would certainly suggest that you get very familiar with the writings and works of reliable pros such as David Morgan, Jay Taylor, James Turk, Roger Wiegand, Peter Grandich, Jeff Christian, James Dines, Howard Ruff and many others that write at this website and related ones. Their insights and guidance are great!
* I am usually very hesitant to mention numismatic coins because they do REQUIRE more diligence when buying. When you buy numismatic coins you have to be very aware of matters such as authenticity, condition, rarity and so on. Organizations such as the American Numismatic Association can also offer guidance.
* Lastly, please make your views known to your representatives in Congress. Americans and others should be able to buy and sell gold and silver and other precious metals with little interference from politicians and bureaucrats. Write them…call them…visit them! Just let them know that precious metals are an important part of a person’s ability to prosper in the age of financial uncertainty and chaos.
------------------------------------
Find out more about how to protect your wealth and financial security.
My latest audio ebook, “Financial Firewall: How to Protect your Money and investments in the age of Financial Chaos” is at
www.RavingCapitalist.com.
Wednesday, August 25, 2010
Headlines Sound the Alarm about Deeper Economic Problems
by Paul Mladjenovic
August 25, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.
The following three headlines are alarming symptoms of the economic insanity unfolding before our eyes:
1. “Philly requiring bloggers to pay $300 for a business license”
2. “LA unveils $578-Million school, costliest in the nation”
3. “Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash”
Yes, those are actual headlines. They may seem like random and disjointed stories but really they are connected to the same economic and financial crisis that is here now and threatens to get much worse.
Philadelphia is forcing bloggers that make little or no money cough up $300 for what is annoyingly labeled a “Business Priviledge Tax”. The struggling city is searching for new revenue to pay for their over-spending. This silly tax may yield some modest revenue for the city but the unintended consequence will be to chase away budding entrepreneurs. In other words, they will get much less revenue than they think. This is at a time when they desperately need to attract and encourage entrepreneurs.
Many politicians and pundits forget that “demand and supply” is a reference to “consumption and production”. Our country is awash with people that consume and “demand”. However, those that supply us with goods and services (production…meaning ”entrepreneurs and businesses”) are struggling. We need to encourage production as much as possible since this is THE major path to greater economic strength and stability.
History tells us that skyrocketing demand (especially by the public sector) and stagnating or shrinking supply (a private sector that keeps diminishing) is a recipe for economic disaster. That disaster is unfolding right now. Anyway, let me continue…
The second headline is also galling. The Los Angeles school district is spending eye-popping amounts of taxpayer money while the school district and the city itself is drowning in a severe fiscal crisis. To add insult to injury, this particular school system is among the worst performing in the country in terms of student performance and drop-out rates. The politicians and bureaucrats in that once-great city just don’t get it.
The third headline tells us that a record number of folks are strapped for cash and dipping into their 401K retirement accounts. This tells us that the private sector is indeed hurting. I am sure that they realize that taking money out will possibly mean tax penalties in the short-term and a smaller nest egg longer-term. I am sure that they are not doing it because it is a good idea; they are doing it because they need the money.
There are many, many more stories like these across the country. The forecasts that many of you have read from my prior essays months and even years ago are now reality. Very sad! These stories and reports are symptomatic of the deep economic crisis that we have in our midst today. They are also blaring reminders that government is oblivious not only to its own excesses but also to the pain that is being felt by those that support it.
Hundreds of local and state governments are spending lavishly and irresponsibly billions. The federal government is lavishly and irresponsibly spending trillions. Why not? It’s not their money…it is (was!) the money of hard-working and struggling taxpayers. The same taxpayers that tightening their belts…and removing money from accounts that were meant for the future. That future is now looking more uncertain.
Unfortunately for all of us, these are not short-term developments. Many states and municipal governments are pushing themselves (and their tax-paying citizens) toward economic crisis. Many of those collectively responsible for this massive and painful nonsense will only realize “the error of their ways” when it is too late.
To my readers, I say that we may not be able to save the world or change the future but we can do what it takes to protect ourselves and our loved ones. Some points to keep in mind:
Keep striving toward financial safety and economic self-sufficiency. If you are dependent on a third-party (a company or government agency), it would serve you well to…
• Keep accruing cash & precious metals like gold and silver
• Generally avoid municipal bonds or (at the very least) consider only AAA-rated municipal bonds.
• Find new ways to generate income in your spare time.
• Review your investments with those that are familiar with today’s economic problems.
Build your “Financial Firewall” as soon as possible because coming events will be unkind to the unprepared.
---------------------------------------------------------------
Paul Mladjenovic is the author of “Financial Firewall: How to Protect your Money and Investments in the Age of Financial Chaos” and his website is RavingCapitalist.com. He is the author of “Precious Metals Investing for Dummies” and he edits the free financial ezine, Prosperity Alert.
August 25, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.
The following three headlines are alarming symptoms of the economic insanity unfolding before our eyes:
1. “Philly requiring bloggers to pay $300 for a business license”
2. “LA unveils $578-Million school, costliest in the nation”
3. “Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash”
Yes, those are actual headlines. They may seem like random and disjointed stories but really they are connected to the same economic and financial crisis that is here now and threatens to get much worse.
Philadelphia is forcing bloggers that make little or no money cough up $300 for what is annoyingly labeled a “Business Priviledge Tax”. The struggling city is searching for new revenue to pay for their over-spending. This silly tax may yield some modest revenue for the city but the unintended consequence will be to chase away budding entrepreneurs. In other words, they will get much less revenue than they think. This is at a time when they desperately need to attract and encourage entrepreneurs.
Many politicians and pundits forget that “demand and supply” is a reference to “consumption and production”. Our country is awash with people that consume and “demand”. However, those that supply us with goods and services (production…meaning ”entrepreneurs and businesses”) are struggling. We need to encourage production as much as possible since this is THE major path to greater economic strength and stability.
History tells us that skyrocketing demand (especially by the public sector) and stagnating or shrinking supply (a private sector that keeps diminishing) is a recipe for economic disaster. That disaster is unfolding right now. Anyway, let me continue…
The second headline is also galling. The Los Angeles school district is spending eye-popping amounts of taxpayer money while the school district and the city itself is drowning in a severe fiscal crisis. To add insult to injury, this particular school system is among the worst performing in the country in terms of student performance and drop-out rates. The politicians and bureaucrats in that once-great city just don’t get it.
The third headline tells us that a record number of folks are strapped for cash and dipping into their 401K retirement accounts. This tells us that the private sector is indeed hurting. I am sure that they realize that taking money out will possibly mean tax penalties in the short-term and a smaller nest egg longer-term. I am sure that they are not doing it because it is a good idea; they are doing it because they need the money.
There are many, many more stories like these across the country. The forecasts that many of you have read from my prior essays months and even years ago are now reality. Very sad! These stories and reports are symptomatic of the deep economic crisis that we have in our midst today. They are also blaring reminders that government is oblivious not only to its own excesses but also to the pain that is being felt by those that support it.
Hundreds of local and state governments are spending lavishly and irresponsibly billions. The federal government is lavishly and irresponsibly spending trillions. Why not? It’s not their money…it is (was!) the money of hard-working and struggling taxpayers. The same taxpayers that tightening their belts…and removing money from accounts that were meant for the future. That future is now looking more uncertain.
Unfortunately for all of us, these are not short-term developments. Many states and municipal governments are pushing themselves (and their tax-paying citizens) toward economic crisis. Many of those collectively responsible for this massive and painful nonsense will only realize “the error of their ways” when it is too late.
To my readers, I say that we may not be able to save the world or change the future but we can do what it takes to protect ourselves and our loved ones. Some points to keep in mind:
Keep striving toward financial safety and economic self-sufficiency. If you are dependent on a third-party (a company or government agency), it would serve you well to…
• Keep accruing cash & precious metals like gold and silver
• Generally avoid municipal bonds or (at the very least) consider only AAA-rated municipal bonds.
• Find new ways to generate income in your spare time.
• Review your investments with those that are familiar with today’s economic problems.
Build your “Financial Firewall” as soon as possible because coming events will be unkind to the unprepared.
---------------------------------------------------------------
Paul Mladjenovic is the author of “Financial Firewall: How to Protect your Money and Investments in the Age of Financial Chaos” and his website is RavingCapitalist.com. He is the author of “Precious Metals Investing for Dummies” and he edits the free financial ezine, Prosperity Alert.
Friday, August 13, 2010
Inflationary Depression Forecast Revisited…We are Half-Way There
Going back a few years ago, I made a forecast that America would be heading toward an inflationary depression. I made that forecast during 2007 and early 2008 when the federal government’s policies were very bad.
Today in 2010, the federal government has replaced the bad policies of a few years ago with much, much worse policies today. It is mind-boggling how bad these policies are and it is astonishing that most politicians and many economists don’t see the obvious dangers.
A forecast of an inflationary depression is actually two forecasts since a “depression” and “inflation” are technically two separate events. Therefore, I have to make clear that we are talking about two separate forecasts.
It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss.
PART 1 OF MY TWO-PART FORECAST: DEPRESSION
I believe that my forecast of a “depression” is accomplished. If you think that our experience of 2008-2009 was a garden-variety recession, I would ask you to re-consider that. The trillion-dollar spending policies enacted during the late Bush yeas and now the Obama years are extraordinarily dangerous. The federal government (and the state & local governments, too) are spending beyond our means as well as theirs. Bankruptcies, foreclosures, business contraction and unemployment are certainly at depression-level. Talk of a recovery is wishful thinking since the effects of still more bad policies are on the horizon. Look at what we have right now:
1. Unemployment is at 17%. I am not talking about the much reported yet highly inaccurate “official unemployment rate” which is a sham; I am talking about what is called the “U-6” employment rate that the Bureau of Labor Statistics compiles. It is a much less reported yet more accurate measure of unemployment. This statistic includes those counted in the “official unemployment rate” and adds in those that dropped out of the job search; the so-called “discouraged” unemployed. U-6 also includes those that are “under-employed” which means those that want full employment but have had to settle for part-time employment.
2. Foreclosures are at all-time highs.
3. Bankruptcies are at all-time highs.
4. Personal debt is still at record levels.
5. Government debt is at a mind-boggling all-time high and still soaring.
Then couple the above list with what is coming:
1. The tax-cuts enacted in the past decade are set to expire by January 2011. If this goes as planned, the effect is a tax increase that would deliver a body-blow to an already weak economy. A tax increase is nothing more than money taken by force by the government from the private economy. Basically that would mean less income and less invest-able capital for the private sector as the government forcibly siphons these resources and redirects it to a bureaucracy that is already the biggest in American history.
2. Congress and the president’s economic team have made noise about a “Value-Added-Tax” which is dumb during good economic times and quite stupid during bad economic times. Even the name is idiotic since taxes don’t add “value”…it merely increases the price or cost of that particular product or service.
3. The same folks are still considering pushing through what is called “Cap-and-Trade” legislation that would raise energy costs greatly since the legislation is nothing more than a huge hidden tax on energy usage. This legislation would do little (nothing?) for the environment but it would do much harm to our economy.
Therefore, consider the depression here and now. If taxes, regulations and other burdens and risks are not decreased immediately and substantially, then this depression will continue.
PART TWO OF MY FORECAST: INFLATION
Some readers have asked about the prospects for inflation. I am on record that I think that inflation is not an “if” but a “when”. As the federal reserve keeps creating trillions of dollars out of thin air, there will be consequences. Technically, they are indulging in “monetary inflation” but of course most people think of inflation by its symptom which is “price inflation”. Since many observers don’t see price inflation, they assume that deflation is winning the day and will be here for the foreseeable future. This is wrong.
If you have read my prior essays on inflation, I point out that inflation will become evident when two conditions occur:
1. The excessive creation of money (again, this is “monetary inflation”)
2. …When this money circulates through the economy (also referred to as “velocity”)
If the government creates trillions of dollars and these dollars do not circulate, then velocity will not occur. But just keep in mind that “velocity” occurs where there is DEMAND. This is a key reason why I am a long-term bull on commodities in general and “human need” commodities in particular. I believe that this is such an important consideration for investors that I even did a national seminar on commodities investing.
There are many areas where there is simply no substantial demand (such as housing and autos). Money will not flow there in this economic environment. However, money does flow to areas of “human need”.
For example, a recent report has shown that the price of wheat has gone up 71% during the past 12 months. I think that similar price movements (or higher!) are in store for many essentials. Commodities tied to “human need” will definitely see their prices continue to zig-zag upward.
I also believe that gold and other precious metals such as silver will continue their bull market. Why?
I consider gold and silver to be “human need” essentials in today’s economic environment. As inflation unfolds among essential commodities, people will need a “store of value” as the world’s major currencies keep on being over-produced. When people start to see that the dollars they hold (or other currency) start to lose value as the government over-produces it, they will then see that having cash is not a “safe harbor”; inflation will erode its value.
They will then seek to replace currencies that are “depreciating” or losing value and shifting their resources to that which holds value…gold and silver.
In fact, as people world-wide see the problems with fiat currencies (dollar, euro, etc.) and with paper assets (stocks, bonds, etc.), they will migrate into those things that will hold value or appreciate over time. The flight will be from “paper” to “stuff”. “Stuff” like precious metals, food, water and other essentials.
THERE WILL BE LITTLE OR NO INFLATION
IN THOSE THINGS THAT PEOPLE DO NOT NEED.
The corollary to that (and this goes back to my forecast) is this…
THERE WILL BE SEVERE INFLATION (EVEN HYPERINFLATION)
IN THOSE THINGS THAT PEOPLE DO NEED.
We have a huge world population and their needs will be addressed. When you couple this demand with expanding money supplies across the globe, rising prices will be the result.
The stage is being set for historic price inflation…in those commodities that are “essential”. Investors need to prepare.
Investors can learn about investing in human need from Paul Mladjenovic’s audio seminar “Cash in on the Commodities Super Bull Market”. He is the author of Stock Investing for Dummies and you can get his free financial newsletter, the Prosperity Alert at www.RavingCapitalist.com.
Today in 2010, the federal government has replaced the bad policies of a few years ago with much, much worse policies today. It is mind-boggling how bad these policies are and it is astonishing that most politicians and many economists don’t see the obvious dangers.
A forecast of an inflationary depression is actually two forecasts since a “depression” and “inflation” are technically two separate events. Therefore, I have to make clear that we are talking about two separate forecasts.
It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss.
PART 1 OF MY TWO-PART FORECAST: DEPRESSION
I believe that my forecast of a “depression” is accomplished. If you think that our experience of 2008-2009 was a garden-variety recession, I would ask you to re-consider that. The trillion-dollar spending policies enacted during the late Bush yeas and now the Obama years are extraordinarily dangerous. The federal government (and the state & local governments, too) are spending beyond our means as well as theirs. Bankruptcies, foreclosures, business contraction and unemployment are certainly at depression-level. Talk of a recovery is wishful thinking since the effects of still more bad policies are on the horizon. Look at what we have right now:
1. Unemployment is at 17%. I am not talking about the much reported yet highly inaccurate “official unemployment rate” which is a sham; I am talking about what is called the “U-6” employment rate that the Bureau of Labor Statistics compiles. It is a much less reported yet more accurate measure of unemployment. This statistic includes those counted in the “official unemployment rate” and adds in those that dropped out of the job search; the so-called “discouraged” unemployed. U-6 also includes those that are “under-employed” which means those that want full employment but have had to settle for part-time employment.
2. Foreclosures are at all-time highs.
3. Bankruptcies are at all-time highs.
4. Personal debt is still at record levels.
5. Government debt is at a mind-boggling all-time high and still soaring.
Then couple the above list with what is coming:
1. The tax-cuts enacted in the past decade are set to expire by January 2011. If this goes as planned, the effect is a tax increase that would deliver a body-blow to an already weak economy. A tax increase is nothing more than money taken by force by the government from the private economy. Basically that would mean less income and less invest-able capital for the private sector as the government forcibly siphons these resources and redirects it to a bureaucracy that is already the biggest in American history.
2. Congress and the president’s economic team have made noise about a “Value-Added-Tax” which is dumb during good economic times and quite stupid during bad economic times. Even the name is idiotic since taxes don’t add “value”…it merely increases the price or cost of that particular product or service.
3. The same folks are still considering pushing through what is called “Cap-and-Trade” legislation that would raise energy costs greatly since the legislation is nothing more than a huge hidden tax on energy usage. This legislation would do little (nothing?) for the environment but it would do much harm to our economy.
Therefore, consider the depression here and now. If taxes, regulations and other burdens and risks are not decreased immediately and substantially, then this depression will continue.
PART TWO OF MY FORECAST: INFLATION
Some readers have asked about the prospects for inflation. I am on record that I think that inflation is not an “if” but a “when”. As the federal reserve keeps creating trillions of dollars out of thin air, there will be consequences. Technically, they are indulging in “monetary inflation” but of course most people think of inflation by its symptom which is “price inflation”. Since many observers don’t see price inflation, they assume that deflation is winning the day and will be here for the foreseeable future. This is wrong.
If you have read my prior essays on inflation, I point out that inflation will become evident when two conditions occur:
1. The excessive creation of money (again, this is “monetary inflation”)
2. …When this money circulates through the economy (also referred to as “velocity”)
If the government creates trillions of dollars and these dollars do not circulate, then velocity will not occur. But just keep in mind that “velocity” occurs where there is DEMAND. This is a key reason why I am a long-term bull on commodities in general and “human need” commodities in particular. I believe that this is such an important consideration for investors that I even did a national seminar on commodities investing.
There are many areas where there is simply no substantial demand (such as housing and autos). Money will not flow there in this economic environment. However, money does flow to areas of “human need”.
For example, a recent report has shown that the price of wheat has gone up 71% during the past 12 months. I think that similar price movements (or higher!) are in store for many essentials. Commodities tied to “human need” will definitely see their prices continue to zig-zag upward.
I also believe that gold and other precious metals such as silver will continue their bull market. Why?
I consider gold and silver to be “human need” essentials in today’s economic environment. As inflation unfolds among essential commodities, people will need a “store of value” as the world’s major currencies keep on being over-produced. When people start to see that the dollars they hold (or other currency) start to lose value as the government over-produces it, they will then see that having cash is not a “safe harbor”; inflation will erode its value.
They will then seek to replace currencies that are “depreciating” or losing value and shifting their resources to that which holds value…gold and silver.
In fact, as people world-wide see the problems with fiat currencies (dollar, euro, etc.) and with paper assets (stocks, bonds, etc.), they will migrate into those things that will hold value or appreciate over time. The flight will be from “paper” to “stuff”. “Stuff” like precious metals, food, water and other essentials.
THERE WILL BE LITTLE OR NO INFLATION
IN THOSE THINGS THAT PEOPLE DO NOT NEED.
The corollary to that (and this goes back to my forecast) is this…
THERE WILL BE SEVERE INFLATION (EVEN HYPERINFLATION)
IN THOSE THINGS THAT PEOPLE DO NEED.
We have a huge world population and their needs will be addressed. When you couple this demand with expanding money supplies across the globe, rising prices will be the result.
The stage is being set for historic price inflation…in those commodities that are “essential”. Investors need to prepare.
Investors can learn about investing in human need from Paul Mladjenovic’s audio seminar “Cash in on the Commodities Super Bull Market”. He is the author of Stock Investing for Dummies and you can get his free financial newsletter, the Prosperity Alert at www.RavingCapitalist.com.
Wednesday, July 21, 2010
Job Creation versus Job Destruction
Copyright 2010. Paul Mladjenovic. All rights reserved.
We all want to see more jobs. As soon as possible and for everyone that wants a job. And even though I have touched on this subject before, it is an important topic that needs further attention.
At both the public and private levels, the talk is about “jobs” and doing “everything we can to create jobs” but the great tragedy is that federal economic policy makers (and many state level economic policy makers) simply don’t understand how to create jobs and are in fact enacting policies that destroy jobs. The reason why these policy makers are harming job creation and spurring on job destruction is really quite simple:
1. They have never run a business.
2. They have never met or managed a payroll.
3. They have never worked in the private sector.
4. They have never created goods or services.
5. They were educated by people with no business experience or knowledge.
6. Many are ideologues that understand politics but not real economics.
In addition, these same decision-makers don’t understand (or don’t care to know) the difference between “private jobs (VERY necessary) and “public jobs” (funded by private jobs!).
With that said, let’s try to clear the air about how jobs get created and how they get destroyed.
Point#1: Understand why “private jobs” are more necessary than “public jobs”.
Many politicians and bureaucrats crow about how government allegedly “creates jobs”. But the ONLY jobs created by government are public jobs and the ONLY way these public jobs are created is by destroying (inadvertently I will add) private jobs. Private jobs provide tax revenues that help to fund public jobs. \
When the government adds a “public job” (such as an administrator, fireman, teacher, policeman, soldier and so on), it must first get the resources from the private sector (via taxes or government debt). This, in turn, crowds out the resources to create a private sector job (retail, manufacturing, etc.). As private jobs shrink due to government growth and public jobs increase due to more spending by government, you set into motion a dangerous dynamic that is unsustainable long-term.
The bottom line is that more private jobs are necessary if we are serious about a healthy economy and a sustainable government budget. So how are private jobs created?
Point# 2: the first and most important job is the entrepreneur.
The first and most important job (from an economic policy point of view) is the entrepreneur. This is a small business person that is the starting point of all business. The entrepreneur is a risk-taker that is seeking profit by providing (or hoping to provide) goods and services for a profit. Profit is CRUCIAL for business start-up and expansion. Without profit, there is no incentive to start and grow a business. For those that vilify the idea of profit, they miss this point entirely and forget that Profit is the key to a healthy, growing economy that ultimately creates the private jobs that are necessary for a healthy and sustainable government sector.
When an entrepreneur reaches profitability, then job creation becomes necessary for the enterprise to keep growing. In the world of supply and demand which many policy makers keep ignoring, the entrepreneur is the visible and necessary engine of “supply”(production). We must remember that supply and demand are embodied in the functions of “production and consumption”.
Consumption (demand) is VERY easy since all of us have wants and needs. We all want more stuff! The trick is…production (supply). Production is very, VERY hard. Don’t believe it? Become an entrepreneur and start a business from scratch! You will quickly find out that it is both risky and hard work. When I teach my home business seminars, I usually advice my students to start part-time from home if possible.
When the entrepreneur succeeds, the hard work and risk does not end. Managing an ongoing business in today’s economy (mostly devastated by short-sighted, blunderous trillion-dollar government policies!) is a risky and difficult endeavor. Getting and keeping employees while satisfying customers and government rules, regulations, mandates and a plethora of business and payroll taxes is VERY difficult.
Therefore, if legislators and government policy makers are truly serious about “getting the economy back on track” and “job creation”, they must make every effort for business start-up, growth and expansion (again, this is production) as EASY AS POSSIBLE. Lower the costs and barriers of entrepreneurship and business expansion!
This includes (but is not limited to) tax cuts, regulatory reform and cutting the red tape, paperwork and bureaucratic hurdles that usually stymie business start-up and development. Cutting (or better yet abolishing) corporate taxes would be a huge boost for business expansion and private job creation.
Unfortunately, government at this moment is unwittingly (purposely??) enacting job destruction policies. Right now, public employees are paid far more than private employees for comparable work and if you do the math, you will see that every 2 public jobs created destroys at least 3-4 private sector jobs. Whether we like it or not, the bottom line is that government (rightly or wrongly) siphons money, jobs and resources from the private economy. Should taxes go up in 2011 (as scheduled), this will only shrink the private economy and accelerate private job destruction.
Point# 3: Private jobs lost today end up with public jobs lost later on.
As the private economy shrinks, this, in turn, will mean less tax revenue for the federal and state governments. Also, as the unemployment ranks swell, that means more government spending on unemployment benefits and public assistance. That results in growing government budget deficits and expanded government borrowing. If and when this continues, this will inevitably be unsustainable and will result in a painful economic crisis.
Those “public jobs” that were created earlier will then start disappearing as well. The resulting scenario will end up being very similar to what has happened throughout history (Greece is only the latest example).
What readers should consider:
The more self-sufficient you are the better. I tell all my readers, clients and students that a business (easily done in your spare time from home) should be considered an economic necessity. It is also why I am self-employed and why I teach about starting a home business. Whether you are unemployed or not, you should launch a business in your spare time. The current economic situation is warning you about this right now!
------------------------------------
For a resource that will help you earn money easily from home,
SEE BELOW....
------------------------------------
ZERO-COST INCOME FROM HOME:
Make Real Money in Your Spare Time
with a No-Cost Low-Risk, High-Profit
Internet Business!
The economy is frightening and job security is everyone’s concern. No one is safe from a bad economy…not even the government! It is time to become more self-sufficient and more financially secure. Don’t just wait for your
financial concerns to go away…gain greater prosperity RIGHT NOW!
This brand new, information-packed audio seminar program can help you earn more money immediately. Paul Mladjenovic, the best-selling author, home-based entrepreneur and national seminar leader can help you start your own spare-time business from the comfort of home. He has helped hundreds of thousands over the past 25 years. You can gain his valuable strategies and resources instantly and for less than the cost of a single meal!
His latest seminar … ZERO-COST INCOME FROM HOME packs a lot of information and easy-to-do strategies for making more money at home…in your spare time!
You will learn…
• How to start a money-making website or blog… within a few hours..free!
• Where to find profitable products and services
• How to do your business with little risk and NO COST!
• How to easily sell other people’s products and services with no hassle
• How to make money on the internet…even when you are asleep or on vacation!
• Zero-cost marketing strategies that Paul has used for years
• Search engine and traffic generating strategies that are free
• Case studies of actual students that made six-figures…a month!
TO GET THE PROGRAM INSTANTLY, CLICK HERE
This information (and more!) are packed in my full 2 ½ hour live seminar (instantly downloadable). But I won’t stop there. I WANT YOU TO SUCCEED. Here are the free bonuses I have added for you…
Free bonus #1:
The classic MAIL ORDER BUSINESS ON THE INTERNET seminar! This is nearly 3 hours of timeless business-building information and guidance that has helped thousands for nearly 20 years! Use the money-making concepts and strategies along with your ZERO-COST INCOME FROM HOME audio.
Free Bonus #2:
A suite of money-making & money-saving Internet Business ebooks, reports and resources to help you A-to-Z with blogs, websites, affiliate programs, traffic generation and much more. Thousands have made great money just from these powerful resources alone!
Free Bonus #3:
MAKE MONEY WITH ME! After you get this full program, you will get a special report on how to make money with me personally on the Internet. I will share with you my private affiliate program along with an action plan to help you make money with me immediately! Think about it…there are millions that need information and resources to help them prosper and you can profit by helping them.
All in all, you get over 5 ½ hours of information, guidance and resources on audio with a treasure trove of money-making bonuses. Top it off with an instant affiliate business with my company! This is a fun and inexpensive way to build your personal prosperity.
Is the economy bad? Yes...but you can do something about immediately and in your spare time.
To order and download your copy of ZERO-COST INCOME FROM HOME and the free bonuses… CLICK HERE.
We all want to see more jobs. As soon as possible and for everyone that wants a job. And even though I have touched on this subject before, it is an important topic that needs further attention.
At both the public and private levels, the talk is about “jobs” and doing “everything we can to create jobs” but the great tragedy is that federal economic policy makers (and many state level economic policy makers) simply don’t understand how to create jobs and are in fact enacting policies that destroy jobs. The reason why these policy makers are harming job creation and spurring on job destruction is really quite simple:
1. They have never run a business.
2. They have never met or managed a payroll.
3. They have never worked in the private sector.
4. They have never created goods or services.
5. They were educated by people with no business experience or knowledge.
6. Many are ideologues that understand politics but not real economics.
In addition, these same decision-makers don’t understand (or don’t care to know) the difference between “private jobs (VERY necessary) and “public jobs” (funded by private jobs!).
With that said, let’s try to clear the air about how jobs get created and how they get destroyed.
Point#1: Understand why “private jobs” are more necessary than “public jobs”.
Many politicians and bureaucrats crow about how government allegedly “creates jobs”. But the ONLY jobs created by government are public jobs and the ONLY way these public jobs are created is by destroying (inadvertently I will add) private jobs. Private jobs provide tax revenues that help to fund public jobs. \
When the government adds a “public job” (such as an administrator, fireman, teacher, policeman, soldier and so on), it must first get the resources from the private sector (via taxes or government debt). This, in turn, crowds out the resources to create a private sector job (retail, manufacturing, etc.). As private jobs shrink due to government growth and public jobs increase due to more spending by government, you set into motion a dangerous dynamic that is unsustainable long-term.
The bottom line is that more private jobs are necessary if we are serious about a healthy economy and a sustainable government budget. So how are private jobs created?
Point# 2: the first and most important job is the entrepreneur.
The first and most important job (from an economic policy point of view) is the entrepreneur. This is a small business person that is the starting point of all business. The entrepreneur is a risk-taker that is seeking profit by providing (or hoping to provide) goods and services for a profit. Profit is CRUCIAL for business start-up and expansion. Without profit, there is no incentive to start and grow a business. For those that vilify the idea of profit, they miss this point entirely and forget that Profit is the key to a healthy, growing economy that ultimately creates the private jobs that are necessary for a healthy and sustainable government sector.
When an entrepreneur reaches profitability, then job creation becomes necessary for the enterprise to keep growing. In the world of supply and demand which many policy makers keep ignoring, the entrepreneur is the visible and necessary engine of “supply”(production). We must remember that supply and demand are embodied in the functions of “production and consumption”.
Consumption (demand) is VERY easy since all of us have wants and needs. We all want more stuff! The trick is…production (supply). Production is very, VERY hard. Don’t believe it? Become an entrepreneur and start a business from scratch! You will quickly find out that it is both risky and hard work. When I teach my home business seminars, I usually advice my students to start part-time from home if possible.
When the entrepreneur succeeds, the hard work and risk does not end. Managing an ongoing business in today’s economy (mostly devastated by short-sighted, blunderous trillion-dollar government policies!) is a risky and difficult endeavor. Getting and keeping employees while satisfying customers and government rules, regulations, mandates and a plethora of business and payroll taxes is VERY difficult.
Therefore, if legislators and government policy makers are truly serious about “getting the economy back on track” and “job creation”, they must make every effort for business start-up, growth and expansion (again, this is production) as EASY AS POSSIBLE. Lower the costs and barriers of entrepreneurship and business expansion!
This includes (but is not limited to) tax cuts, regulatory reform and cutting the red tape, paperwork and bureaucratic hurdles that usually stymie business start-up and development. Cutting (or better yet abolishing) corporate taxes would be a huge boost for business expansion and private job creation.
Unfortunately, government at this moment is unwittingly (purposely??) enacting job destruction policies. Right now, public employees are paid far more than private employees for comparable work and if you do the math, you will see that every 2 public jobs created destroys at least 3-4 private sector jobs. Whether we like it or not, the bottom line is that government (rightly or wrongly) siphons money, jobs and resources from the private economy. Should taxes go up in 2011 (as scheduled), this will only shrink the private economy and accelerate private job destruction.
Point# 3: Private jobs lost today end up with public jobs lost later on.
As the private economy shrinks, this, in turn, will mean less tax revenue for the federal and state governments. Also, as the unemployment ranks swell, that means more government spending on unemployment benefits and public assistance. That results in growing government budget deficits and expanded government borrowing. If and when this continues, this will inevitably be unsustainable and will result in a painful economic crisis.
Those “public jobs” that were created earlier will then start disappearing as well. The resulting scenario will end up being very similar to what has happened throughout history (Greece is only the latest example).
What readers should consider:
The more self-sufficient you are the better. I tell all my readers, clients and students that a business (easily done in your spare time from home) should be considered an economic necessity. It is also why I am self-employed and why I teach about starting a home business. Whether you are unemployed or not, you should launch a business in your spare time. The current economic situation is warning you about this right now!
------------------------------------
For a resource that will help you earn money easily from home,
SEE BELOW....
------------------------------------
ZERO-COST INCOME FROM HOME:
Make Real Money in Your Spare Time
with a No-Cost Low-Risk, High-Profit
Internet Business!
The economy is frightening and job security is everyone’s concern. No one is safe from a bad economy…not even the government! It is time to become more self-sufficient and more financially secure. Don’t just wait for your
financial concerns to go away…gain greater prosperity RIGHT NOW!
This brand new, information-packed audio seminar program can help you earn more money immediately. Paul Mladjenovic, the best-selling author, home-based entrepreneur and national seminar leader can help you start your own spare-time business from the comfort of home. He has helped hundreds of thousands over the past 25 years. You can gain his valuable strategies and resources instantly and for less than the cost of a single meal!
His latest seminar … ZERO-COST INCOME FROM HOME packs a lot of information and easy-to-do strategies for making more money at home…in your spare time!
You will learn…
• How to start a money-making website or blog… within a few hours..free!
• Where to find profitable products and services
• How to do your business with little risk and NO COST!
• How to easily sell other people’s products and services with no hassle
• How to make money on the internet…even when you are asleep or on vacation!
• Zero-cost marketing strategies that Paul has used for years
• Search engine and traffic generating strategies that are free
• Case studies of actual students that made six-figures…a month!
TO GET THE PROGRAM INSTANTLY, CLICK HERE
This information (and more!) are packed in my full 2 ½ hour live seminar (instantly downloadable). But I won’t stop there. I WANT YOU TO SUCCEED. Here are the free bonuses I have added for you…
Free bonus #1:
The classic MAIL ORDER BUSINESS ON THE INTERNET seminar! This is nearly 3 hours of timeless business-building information and guidance that has helped thousands for nearly 20 years! Use the money-making concepts and strategies along with your ZERO-COST INCOME FROM HOME audio.
Free Bonus #2:
A suite of money-making & money-saving Internet Business ebooks, reports and resources to help you A-to-Z with blogs, websites, affiliate programs, traffic generation and much more. Thousands have made great money just from these powerful resources alone!
Free Bonus #3:
MAKE MONEY WITH ME! After you get this full program, you will get a special report on how to make money with me personally on the Internet. I will share with you my private affiliate program along with an action plan to help you make money with me immediately! Think about it…there are millions that need information and resources to help them prosper and you can profit by helping them.
All in all, you get over 5 ½ hours of information, guidance and resources on audio with a treasure trove of money-making bonuses. Top it off with an instant affiliate business with my company! This is a fun and inexpensive way to build your personal prosperity.
Is the economy bad? Yes...but you can do something about immediately and in your spare time.
To order and download your copy of ZERO-COST INCOME FROM HOME and the free bonuses… CLICK HERE.
Thursday, July 15, 2010
Forecasts for the Economy and Financial Markets 2010-2012
by Paul Mladjenovic
Copyright July 2010. Paul Mladjenovic.
All rights reserved.
----------------------------------------
Good or bad, everyone likes a forecast. Usually, forecasters like to issue them at the end or the beginning of the year but I thought that now would be a good time to review past forecasts and issue some new or updated ones.
Entering the fray with forecasting can be a dicey pursuit. No matter how confident you are about the outcome of your prognosticating, the unknown variables can pop up at any time. As much as possible, I embark on forecasts that I believe are not an “if”…but a “when”. I may get it wrong in the short-term but the final outcome is in the long-term.
One of my first essays with forecasts was in the Spring of 2004. In that piece, I had seven specific forecasts. What were they and how have those forecasts fared? Here they are along with my commentary (keep in mind that they were made March 2004).
1. The Dow will go below 6,000.
As of July 2010, this one was wrong. Or was it? The Dow hit a low of 6,500 in March 2009. Not quite 6,000 but this was “close enough”. It was very dicey to forecast the Dow since I believe (along with many others) that the Federal Reserve and the Treasury have been known to intervene in attempts to “manage” this widely-watched barometer. When I made the forecast in 2004, the Dow was much higher and few expected it to fall that drastically. In the world of hand grenades and horse shoe tosses, this one was close enough.
2. The dollar will drop at least another 25%.
This one came true by early 2008.
3. Gold will hit $1,000 an ounce.
This also came true in early 2008.
4. Silver will hit $50 an ounce.
I was way off on this one but I will consider this forecast as a “work in progress” since I ultimately expect it to hit (and exceed) $50. I think that it should have already passed $50 but I am sure that if you have followed the great research by Ted Butler and David Morgan, you will understand that the silver market has been greatly hampered and that has caused silver to be grossly undervalued. In any case, After six long years, this forecast will have to be officially considered a miss (for now!).
5. The real estate/ mortgage bubble will pop.
This is a “big hit”. I even did seminars in 2005 about what to do to avoid the troubles (or profit from) the popping of the biggest real estate bubble in history. The wreckage from this major event sent shockwaves through Wall street and many financial markets worldwide. The real estate market will not have a healthy recovery for at least a few years.
6. We will have a severe recession.
This is also a hit; the recession that became termed “the Great Recession” actually started in December of 2007 and was not considered technically done until 2009.
7. We will surpass 2 million bankruptcies & foreclosures.
This forecast was also a “hit” as we passed 2 million bankruptcies and foreclosures in 2007.
Of the 7 forecasts, 5 were very accurate, one was very close and one was not. All things considered, not a bad forecasting record. When you add in the public forecasts from my national seminars (such as the sub-prime crisis and the commodities bull market), the accuracy rate is actually much higher.
In 2008, I did another forecast article and provided 6 forecasts; here they are again:
1. You will see an inflationary depression that will be evident by 2010-11.
2. Unemployment in the private sector will soar into double-digits by 2010.
3. State and municipal governments will be federal bailout candidates during 2010-2011.
4. Commodities will start the next leg of their long-term bull market starting in 2009.
5. We will see oil hit $200 as Peak oil becomes obvious to all during 2009-2012.
6. International conflicts over natural resources will hit the headlines during 2009-12.
As you can see, most of the forecasts made in 2008 are still “a work in progress”.
Forecast #1 is halfway here; the depression is here and the second part of the forecast (inflation) will be coming with a vengeance. Stay tuned.
On Forecast #2, the official unemployment rate did hit 10% but it recently fell to 9.5% due to statistical shenanigans. Keep in mind that another (more accurate) unemployment rate (the so-called U-6 rate issued by the Bureau of Labor Statistics) is still in the neighborhood of 17%. That is definitely depression-level!
For Forecast #3, this is coming to pass right in front of our eyes. States like California and Illinois are fighting off bankruptcy and hundreds (thousands?) of cities, towns and counties are struggling with solvency issues. Many of these municipal governments have received federal “stimulus money” but technically consider this as “bailout money”. Consider this forecast (at this point) a “hit”.
In Forecast #4, I predicted that commodities would turn around in 2009 after the drubbing they took in late 2008 and this forecast is generally a hit. Commodities may pull back in the short term and do lots of zig-zaging but the bottom line is that fundamentals are solid and the long-term bull market is intact. Seeing this market turn into a mania is a matter of time.
In Forecast #5, I made the call some years ago that oil would hit $200 but it had peaked at $147 in the summer of 2008 before plummeting to about $32 during late 2008-early 2009. It has since recovered and (as of early July 2010) it is in the $75-$79 range. This forecast was a “miss” in 2008 but I consider this new forecast to be a “work in progress” as I expect world-wide oil demand (and geo-political factors) to push the price of oil to $200 by 2012. Stay tuned on this one.
In the last forecast (#6), wars over natural resources have not officially broken out…yet. but a struggling world-wide economy coupled with belligerence from hostile governments ranging from Venezuela and Iran to Russia and other countries is a potent and dangerous state of affairs. As the world population continues to sky-rocket and natural resources continue to dwindle, a major conflict will come about sooner or later. Again, stay tuned.
Here is a partial list of my forecasts (the full list appeared in this month’s Prosperity Alert newsletter):
1. Gold will head to $2,000 and beyond during the next three years
2. Silver will hit $25 during the next 12 months and soar to $100 by 2012
3. Oil will be $100 by 2011 and onward to $200 by 2012-2013.
4. IF THE TAX CUTS EXPIRE…we will have a “greater depression” start by 2011.
5. The Federal deficit will hit $2 TRILLION during 2011-2013.
Can these forecasts be wrong? Sure. Anything is possible. However, I try to stick to events that have a near-certainty of happening (again, events that I believe are a “when”…not an “if”). It is not a case of wishing any of these things. We don’t wish for hurricanes but they will happen and you do have to ready for them.
What should people do to give themselves greater financial safety in the coming months and years? Keeping this in mind, I did a new audio program entitled “Financial Firewall”. There are many things that you can do to either protect your money (or even profit) from the events that are unfolding now or are coming. Start preparing before the next crisis hits.
Paul Mladjenovic is a CFP, national seminar leader and the author of “Stock Investing for Dummies” and his website is www.RavingCapitalist.com. He is the editor of the free newsletter Prosperity Alert and his newest audio-book is “Financial Firewall: How to Protect your Money & Investments in the Age of Financial Chaos”.
Copyright July 2010. Paul Mladjenovic.
All rights reserved.
----------------------------------------
Good or bad, everyone likes a forecast. Usually, forecasters like to issue them at the end or the beginning of the year but I thought that now would be a good time to review past forecasts and issue some new or updated ones.
Entering the fray with forecasting can be a dicey pursuit. No matter how confident you are about the outcome of your prognosticating, the unknown variables can pop up at any time. As much as possible, I embark on forecasts that I believe are not an “if”…but a “when”. I may get it wrong in the short-term but the final outcome is in the long-term.
One of my first essays with forecasts was in the Spring of 2004. In that piece, I had seven specific forecasts. What were they and how have those forecasts fared? Here they are along with my commentary (keep in mind that they were made March 2004).
1. The Dow will go below 6,000.
As of July 2010, this one was wrong. Or was it? The Dow hit a low of 6,500 in March 2009. Not quite 6,000 but this was “close enough”. It was very dicey to forecast the Dow since I believe (along with many others) that the Federal Reserve and the Treasury have been known to intervene in attempts to “manage” this widely-watched barometer. When I made the forecast in 2004, the Dow was much higher and few expected it to fall that drastically. In the world of hand grenades and horse shoe tosses, this one was close enough.
2. The dollar will drop at least another 25%.
This one came true by early 2008.
3. Gold will hit $1,000 an ounce.
This also came true in early 2008.
4. Silver will hit $50 an ounce.
I was way off on this one but I will consider this forecast as a “work in progress” since I ultimately expect it to hit (and exceed) $50. I think that it should have already passed $50 but I am sure that if you have followed the great research by Ted Butler and David Morgan, you will understand that the silver market has been greatly hampered and that has caused silver to be grossly undervalued. In any case, After six long years, this forecast will have to be officially considered a miss (for now!).
5. The real estate/ mortgage bubble will pop.
This is a “big hit”. I even did seminars in 2005 about what to do to avoid the troubles (or profit from) the popping of the biggest real estate bubble in history. The wreckage from this major event sent shockwaves through Wall street and many financial markets worldwide. The real estate market will not have a healthy recovery for at least a few years.
6. We will have a severe recession.
This is also a hit; the recession that became termed “the Great Recession” actually started in December of 2007 and was not considered technically done until 2009.
7. We will surpass 2 million bankruptcies & foreclosures.
This forecast was also a “hit” as we passed 2 million bankruptcies and foreclosures in 2007.
Of the 7 forecasts, 5 were very accurate, one was very close and one was not. All things considered, not a bad forecasting record. When you add in the public forecasts from my national seminars (such as the sub-prime crisis and the commodities bull market), the accuracy rate is actually much higher.
In 2008, I did another forecast article and provided 6 forecasts; here they are again:
1. You will see an inflationary depression that will be evident by 2010-11.
2. Unemployment in the private sector will soar into double-digits by 2010.
3. State and municipal governments will be federal bailout candidates during 2010-2011.
4. Commodities will start the next leg of their long-term bull market starting in 2009.
5. We will see oil hit $200 as Peak oil becomes obvious to all during 2009-2012.
6. International conflicts over natural resources will hit the headlines during 2009-12.
As you can see, most of the forecasts made in 2008 are still “a work in progress”.
Forecast #1 is halfway here; the depression is here and the second part of the forecast (inflation) will be coming with a vengeance. Stay tuned.
On Forecast #2, the official unemployment rate did hit 10% but it recently fell to 9.5% due to statistical shenanigans. Keep in mind that another (more accurate) unemployment rate (the so-called U-6 rate issued by the Bureau of Labor Statistics) is still in the neighborhood of 17%. That is definitely depression-level!
For Forecast #3, this is coming to pass right in front of our eyes. States like California and Illinois are fighting off bankruptcy and hundreds (thousands?) of cities, towns and counties are struggling with solvency issues. Many of these municipal governments have received federal “stimulus money” but technically consider this as “bailout money”. Consider this forecast (at this point) a “hit”.
In Forecast #4, I predicted that commodities would turn around in 2009 after the drubbing they took in late 2008 and this forecast is generally a hit. Commodities may pull back in the short term and do lots of zig-zaging but the bottom line is that fundamentals are solid and the long-term bull market is intact. Seeing this market turn into a mania is a matter of time.
In Forecast #5, I made the call some years ago that oil would hit $200 but it had peaked at $147 in the summer of 2008 before plummeting to about $32 during late 2008-early 2009. It has since recovered and (as of early July 2010) it is in the $75-$79 range. This forecast was a “miss” in 2008 but I consider this new forecast to be a “work in progress” as I expect world-wide oil demand (and geo-political factors) to push the price of oil to $200 by 2012. Stay tuned on this one.
In the last forecast (#6), wars over natural resources have not officially broken out…yet. but a struggling world-wide economy coupled with belligerence from hostile governments ranging from Venezuela and Iran to Russia and other countries is a potent and dangerous state of affairs. As the world population continues to sky-rocket and natural resources continue to dwindle, a major conflict will come about sooner or later. Again, stay tuned.
Here is a partial list of my forecasts (the full list appeared in this month’s Prosperity Alert newsletter):
1. Gold will head to $2,000 and beyond during the next three years
2. Silver will hit $25 during the next 12 months and soar to $100 by 2012
3. Oil will be $100 by 2011 and onward to $200 by 2012-2013.
4. IF THE TAX CUTS EXPIRE…we will have a “greater depression” start by 2011.
5. The Federal deficit will hit $2 TRILLION during 2011-2013.
Can these forecasts be wrong? Sure. Anything is possible. However, I try to stick to events that have a near-certainty of happening (again, events that I believe are a “when”…not an “if”). It is not a case of wishing any of these things. We don’t wish for hurricanes but they will happen and you do have to ready for them.
What should people do to give themselves greater financial safety in the coming months and years? Keeping this in mind, I did a new audio program entitled “Financial Firewall”. There are many things that you can do to either protect your money (or even profit) from the events that are unfolding now or are coming. Start preparing before the next crisis hits.
Paul Mladjenovic is a CFP, national seminar leader and the author of “Stock Investing for Dummies” and his website is www.RavingCapitalist.com. He is the editor of the free newsletter Prosperity Alert and his newest audio-book is “Financial Firewall: How to Protect your Money & Investments in the Age of Financial Chaos”.
Wednesday, June 2, 2010
The Economic Impact of the Horrific Oil Spill
June 2, 2010. By Paul Mladjenovic.
Copyright 2010. Paul Mladjenovic. All rights reserved.
As I watch from a distance the great catastrophe in the Gulf of Mexico, I think with great concern what the impact will be above and beyond the monumental environmental impact for the immediate areas.
Beyond the corporate and governmental blunders, blaming and dithering, we have to recognize what must be done and also what we face as a society.
First of all, I think that all of us must heed the call to action by the governor of Louisiana. A massive mobilization of resources and manpower must take place immediately. Our Federal government should send the national guard and the navy to the Gulf of Mexico to help contain and mitigate this massive spill. We can not afford to hesitate. This oil spill is the worst in history and left unchecked, it would poison far, far more than the fishing industry in the Gulf of Mexico. It means far, far more than merely higher prices for gas or seafood.
This oil spill can easily decimate the ecology of the nearby bodies of water too. What would happen if the Mississippi river became toxic along with the Caribbean sea and the Atlantic ocean? Do you think it can’t happen? One engineer pointed out that as little as a quart of motor oil could poison 250,000 gallons of water. What would happen if millions and millions of barrels of oil seeped across the hemisphere’s many bodies of water?
The impact on ocean life (and those dependent on ocean life) is indeed horrific to think of. But the reality is unfolding right before our eyes. What will happen to agriculture? The world’s supply of clean drinkable water?
Yes…think about the logical after effects of this growing calamity.
At this point, all parties must be mobilized. All efforts must be enacted immediately. This is not just about British Petroleum and the White House. It is about all of us both in the United States and the neighboring countries getting immediately involved.
It is not just about placing blame, seeking punishment and passing laws and penalties. This is also about personal and economic survival. The Oil spill will have a significant effect on the entire economy. I don’t care if you live in Hawaii or in Oregon…you will be affected.
Among what you will see in the coming months are the obvious (such as rising prices for energy and seafood) but also…
• Rising unemployment. What will happen to businesses and jobs dependent on the Gulf of Mexico?
• Rising state deficits in the immediate region. The pool of taxpayers will shrink as the pool of dependents rise. What happens to, say, once-independent fishermen that can no longer fish?
• Rising federal deficit. The deficit can easily rise to $2 trillion from the economic fall-out from this horrific spill.
• Rising prices for corn, cotton, wheat, etc. General agriculture will be gravely impacted as water problems arise. The end result will be diminished supply coupled with ongoing demand.
• Higher taxes. The vicious cycle will keep growing as politicians use the occasion to agitate for more taxes on an already over-burdened economy.
• Indirectly, there is no positive impact on stocks and bonds but any that does materialize will certainly be negative.
• Many unintended consequences (inflation?) as yet unseen both here and internationally.
Calling your representatives to demand action (physical…not legislative) is the first step. If we are going to pay for bloated government then we might as well get some vital clean up services for the money!
In your personal strategy, some quick points…
• Buy storable food NOW. Yes…cans of tuna…you got it right. It will come in handy 6-12-18 months from now when you see what seafood (and food in general) will cost. That’s if you can get it!
• Do you have extra containers of water? You should always have a fresh supply on hand. Better safe than sorry (yes…I practice what I preach).
• If possible, have extra gasoline in a safe container tucked away in a safe spot if possible (check with local authorities about safety guidelines).
• Keep accumulating physical gold and silver. The US government will see to it that more dollars are printed up to deal with the added spending for the southern states.
• Commodities will keep zig-zagging up in price just as I had pointed out in my Commodities Super Boom seminar. With the oil spill, commodities prices will only strengthen more so as time goes on.
• Subscribe to my free newsletter (Prosperity Alert) at http://www.SuperMoneyLinks.com with strategies and resources on adding financial safety and new economic forecasts coming soon.
Right now I am completing a new audio seminar on financial safety (“the Financial Firewall program”) to help my students and readers learn how to keep their money and portfolios safe. The details will be available in the coming issues of the Prosperity Alert.
-------------------------------------
COMING SOON!
Paul Mladjenovic's new audio program, “Financial Firewall” which deals with financial & investing safety in the age of Chaos. Subscribers to the Prosperity Alert will be among the first to learn these proven, powerful financial strategies to protect your hard-earned money as economic risk and market volatility get worse. New subscribers will also get a free financial budgeting ebook.
Copyright 2010. Paul Mladjenovic. All rights reserved.
As I watch from a distance the great catastrophe in the Gulf of Mexico, I think with great concern what the impact will be above and beyond the monumental environmental impact for the immediate areas.
Beyond the corporate and governmental blunders, blaming and dithering, we have to recognize what must be done and also what we face as a society.
First of all, I think that all of us must heed the call to action by the governor of Louisiana. A massive mobilization of resources and manpower must take place immediately. Our Federal government should send the national guard and the navy to the Gulf of Mexico to help contain and mitigate this massive spill. We can not afford to hesitate. This oil spill is the worst in history and left unchecked, it would poison far, far more than the fishing industry in the Gulf of Mexico. It means far, far more than merely higher prices for gas or seafood.
This oil spill can easily decimate the ecology of the nearby bodies of water too. What would happen if the Mississippi river became toxic along with the Caribbean sea and the Atlantic ocean? Do you think it can’t happen? One engineer pointed out that as little as a quart of motor oil could poison 250,000 gallons of water. What would happen if millions and millions of barrels of oil seeped across the hemisphere’s many bodies of water?
The impact on ocean life (and those dependent on ocean life) is indeed horrific to think of. But the reality is unfolding right before our eyes. What will happen to agriculture? The world’s supply of clean drinkable water?
Yes…think about the logical after effects of this growing calamity.
At this point, all parties must be mobilized. All efforts must be enacted immediately. This is not just about British Petroleum and the White House. It is about all of us both in the United States and the neighboring countries getting immediately involved.
It is not just about placing blame, seeking punishment and passing laws and penalties. This is also about personal and economic survival. The Oil spill will have a significant effect on the entire economy. I don’t care if you live in Hawaii or in Oregon…you will be affected.
Among what you will see in the coming months are the obvious (such as rising prices for energy and seafood) but also…
• Rising unemployment. What will happen to businesses and jobs dependent on the Gulf of Mexico?
• Rising state deficits in the immediate region. The pool of taxpayers will shrink as the pool of dependents rise. What happens to, say, once-independent fishermen that can no longer fish?
• Rising federal deficit. The deficit can easily rise to $2 trillion from the economic fall-out from this horrific spill.
• Rising prices for corn, cotton, wheat, etc. General agriculture will be gravely impacted as water problems arise. The end result will be diminished supply coupled with ongoing demand.
• Higher taxes. The vicious cycle will keep growing as politicians use the occasion to agitate for more taxes on an already over-burdened economy.
• Indirectly, there is no positive impact on stocks and bonds but any that does materialize will certainly be negative.
• Many unintended consequences (inflation?) as yet unseen both here and internationally.
Calling your representatives to demand action (physical…not legislative) is the first step. If we are going to pay for bloated government then we might as well get some vital clean up services for the money!
In your personal strategy, some quick points…
• Buy storable food NOW. Yes…cans of tuna…you got it right. It will come in handy 6-12-18 months from now when you see what seafood (and food in general) will cost. That’s if you can get it!
• Do you have extra containers of water? You should always have a fresh supply on hand. Better safe than sorry (yes…I practice what I preach).
• If possible, have extra gasoline in a safe container tucked away in a safe spot if possible (check with local authorities about safety guidelines).
• Keep accumulating physical gold and silver. The US government will see to it that more dollars are printed up to deal with the added spending for the southern states.
• Commodities will keep zig-zagging up in price just as I had pointed out in my Commodities Super Boom seminar. With the oil spill, commodities prices will only strengthen more so as time goes on.
• Subscribe to my free newsletter (Prosperity Alert) at http://www.SuperMoneyLinks.com with strategies and resources on adding financial safety and new economic forecasts coming soon.
Right now I am completing a new audio seminar on financial safety (“the Financial Firewall program”) to help my students and readers learn how to keep their money and portfolios safe. The details will be available in the coming issues of the Prosperity Alert.
-------------------------------------
COMING SOON!
Paul Mladjenovic's new audio program, “Financial Firewall” which deals with financial & investing safety in the age of Chaos. Subscribers to the Prosperity Alert will be among the first to learn these proven, powerful financial strategies to protect your hard-earned money as economic risk and market volatility get worse. New subscribers will also get a free financial budgeting ebook.
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