A Tale of Paper and Metal Money
Thursday, July 27th, 2006
By Michael Lombardi, MBA for Profit Confidential
Let’s take a quick look at what’s happening economically in the world… the big picture:
— China is the fastest growing economy. And that fast growth has brought many American dollars into China. I expect China to soon sit on $1 trillion U.S. dollars because of its enormous trade surplus with the remainder of the world.
— Europe has growth and contraction pockets within it. The euro, once thought to be the only alternative to the U.S. dollars, isn’t there yet. Too many inter-country issues, Britain still with the pound, non-constitutional acceptance of the euro and other issues, I believe, work to quietly plague the euro.
— America itself is, for lack of a better term, bankrupt. Consumer and government debt is at record levels. The U.S. Federal Government spends about $1 to $1.5 billion more a day than it has coming in. But in the case of the government, through the Federal Reserve, it has unlimited access to dollars. Essentially, more money is simply printed as needed.
World investors are in a tough position in that the Chinese yuan is still not widely acceptable as a “world” currency, while the euro hasn’t taken off either. Foreigners are also cautious about investing with more U.S. dollars because the world seems to be awash in them. What will China do with its trillion U.S. dollars? Too much supply of any item eventually leads to lower prices, and the U.S. dollar could be a prime example.
My dear readers are all too aware of my fondness for gold. Gold bullion and gold shares have been amongst the biggest investment winners of the past several years.
After rebounding from a sharp price correction that sent speculators in gold marching home, gold has been slowly building a base, for what I believe, will be the next phase of its bull market. Patience, my friend, patience. It could take some time for gold to consolidate a strong base from which to accent to new price highs. But it could also happen quickly.
With no real “paper” money alternatives, investors may find the flight to yellow metal a sudden one. Hence, the best I can suggest is to sit tight with your gold holdings, ready for the flight to gold. We don’t know when it will happen. Could be soon, could be a year from now. But, in investing, patience is the friend of the investor and enemy of the speculator. Patience pays off when well planned.
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
