Where Europe Has Been, the U.S. Is Going

Wherever I travel in the U.S. these days, I see business picking up. There is less discussion about the possibility of a double-dip recession. The businesses that did survive the recession are slowly turning the corner.

The banks, while they may not be lending to small business, are posting strong profits. The tech companies, from Apple to Google, and it seems everything in between, continue to roll out the profits. Even the industrial companies are coming back. And, yes, the car companies are making money again.

But we are left with many serious problems in the economy. The jobless rate is high, national debt is out of control, and the economy continues to move so pathetically along that the Fed cannot raise interest rates.

It is becoming more and more apparent to me, as the days and years pass, that the U.S. is following the route of the old European countries. With our manufacturing base all but gone, the U.S. is slowly joining the ranks of European countries that saw their factories fade so many years ago.

Fewer jobs. Higher debt. The poor stay poor. The rich get richer. The middle class slowly deteriorates. Government gets bigger. That seems to be the fate of the United States.

I travel to Europe each year and I see America’s future. The talk of Great Depression II persists with some people in the U.S., especially those without jobs and those who lived through the Great Depression. But something more profound, something life-changing that will change the way the U.S. operates in the decades ahead is happening.

The great American dream of opening a business up to manufacture a product, like the widget business we were taught about in that economic class we took in high school, has passed future American generations by. We have moved from being a country that manufactures goods to becoming a service-oriented economy, very similar to so many European countries like Great Britain, Italy, and France.

And, with that, the U.S. has gone from being a creditor nation (a country that is owed money) to a debtor nation (a country that owes money to other countries) all in less than 50 years. The future does not look good for America.

But it is important for investors like us to remember that the major old countries of Europe still offer profit opportunities to investors. Investor opportunities do not disappear as an economy goes from being a producer of goods to a provider of services. They are just fewer and further between.

Michael’s Personal Notes:

The most common question this past July to me: “Michael, is it too late to buy into gold?”

There is a simple answer to that question, because I have answered it so many times before: It was not too late to get into gold when it was $600.00 an ounce and people were asking the same question. It was not too late to get into gold when it hit $1,000 an ounce. And, in my opinion, it is not too late to get into gold at $1,200 an ounce.

For those who say that gold is at a speculative top, that deflation will ravage gold, I strongly disagree. In my many years of studying market trends, I have never seen a chart look as beautiful as a gold price chart from 2002. The rise in gold prices, I remind the pundits, has been a slow, steady rise. Not a rise to match the NASDAQ euphoria of 1999 or the housing market of 2005.

Markets do not top when the majority of investors do not realize it is a bull market. And that is the present case with gold. Of the many investment newsletters we sell, our gold-stock-picking newsletter is the hardest sell. This experience tells me that the majority of retail investors do not believe in the gold bull market.

In 1999, with our NASDAQ stock-picking newsletter, we couldn’t print copies fast enough for investors. The opposite is true for our gold-stock-picking newsletter today. Investors do not want advice on picking gold stocks. This is a strong indication to me that the retail investor is out of the gold market — that means this gold bull market has a long, long way to go.

I’m sure when gold hits $1,500 an ounce, I will be asked the same question: “Michael, is it too late to buy gold?”

Where the Market Stands:

The Dow Jones Industrial Average opens this week up 2.2% for the year. In my opinion, the bear market rally that started in March 2009, while getting tired, continues.\

What He Said:

“Starting two years ago, I was writing how the housing boom would go bust and cause the U.S. economy to suffer sharply. That’s exactly what is happening today. From what I see happening in the U.S. economy, I’m keeping with the prediction I made earlier this year: By late 2007/early 2008, the U.S. will be in a homemade recession. Hence, I expect housing prices to continue declining, soft auto sales, soft consumer spending, and a lower stock market.” Michael Lombardi in PROFIT CONFIDENTIAL, August 15, 2007. You would have been hard-pressed to find another analyst predicting a U.S. recession in the summer of 2007. At the time, the stock market was roaring, with the Dow Jones Industrial Average hitting its all-time high of 14,164 in October 2007.