Profit Confidential editors have been critics of the U.S.’s inability to reign-in government spending. Based on the White House’s own figures, the national debt will reach $20 trillion by the end of this decade—about 140% of our current Gross Domestic Product. If the economy falls back into a recession, government debt could run higher and GDP could fall, making the situation worse. In our studies of history, countries who have incurred considerable debt, countries that have experienced a consistent national debt to GDP multiple of 120% or more have experienced inflation, currency devaluation and eventually higher interest rates. At Profit Confidential, we regularly monitor the U.S. deficit in our economic analysis as we believe unless the government gets the U.S. deficit under control, other aspects our financial system will suffer.

With the monthly jobs reports out in various countries, the news that the U.S. created only 120,000 new jobs in March was certainly less than expected; especially when you consider the trillions spent by the government trying to “stimulate” the economy. All we have left is a massive U.S. deficit. But in some countries there have been big job gains—Canada is one of these countries. Last month, the Canadian economy created over 82,000 jobs. With a population approximately 1/10th the size of the U.S., it would be the equivalent of the American economy creating 820,000 new jobs in March!

This situation already has my attention, as do investments based in the Canadian dollar. The Canadian dollar has already strengthened from a low of CAD$1.0657 to buy one U.S. dollar in October 2011 down to only CAD$0.9976 to buy one U.S. dollar. With the U.S. deficit pegged to hit and possibly exceed $1.3 trillion this year, this can’t help the U.S. dollar. In fact, I think this push to lower the value of the dollar is the explicit policy of the administration and this will help the Canadian dollar. How? Additional monetary stimulus (money printing) has devalued the U.S. dollar and pushed up commodity prices before and will do so again. Canada sells commodities, tons of them; from oil, to gold, to wheat and almost everything in between. The higher commodities go, the higher the Canadian dollar goes. This is combined with the fact that the Canadian government is very well managed financially, with some estimating that the Canadian budget deficit for this year will only be $20.0 billion. Their government stated that they expect a surplus by 2015-16. How long until the U.S. budget deficit disappears? Honestly, it could be decades, as I don’t see any political will to change the direction and with it we will see the U.S. deficit continue to soar.

With the U.S. deficit still deep in the red, more investors are going to flee the currency and look towards safe countries with very attractive investments like the Canadian dollar. Not only is it very easy for an American to invest in assets backed by the Canadian dollar, but also the country has everything the world needs for the next century. Unless you really believe we won’t be eating anymore food or using oil and gas to heat our homes and drive our cars. Investments based in the Canadian dollar look very attractive.

Chart courtesy of www.StockCharts.com

For those who want some exposure to the currency, but don’t want to trade the spot Canadian dollar, there is the Currency Shares Canadian Dollar Trust (ETF/FXC). The FXC moves inversely to spot USD/CAD, meaning a move up in FXC will occur when the Canadian dollar strengthens. As we can see, the move up in the Canadian dollar from the October lows has hit a plateau level. Obviously the Canadian government doesn’t want a massively overvalued Canadian dollar; but remember that the Bank of Canada has only one mandate: price stability. Bank of Canada Governor Mark Carney has been a strong voice in letting the markets know that inflation will not be tolerated. With inflation rates creeping higher, we will most certainly get a rate hike in Canada sooner than in the U.S., which should help move the Canadian dollar higher. That most likely won’t happen over the next couple of months. If we look out several years, I see no end in sight to the sky-high U.S. deficit and a country—Canada—that is close to raising interest rates and expected to have a budget surplus in a couple of years. Having some investments based in the Canadian dollar makes a lot of sense to me.

Happy New Year!

In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.

The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.

I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.

For 2012, my market view is cautious to start the year based on the high global risk.

The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.

This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.

My market view is that we need to see leadership from such areas as the banks and technology. However, there was recent evidence of slowing from large-cap technology companies.

It definitely will be a tricky year, albeit Wall Street is again estimating that stocks will advance over 10% in 2012. I’m not sure, but if the situation in Europe improves and China does not have a hard landing, then achieving a gain of 10% is reasonable…and the gain would actually likely be higher.

Again as I said at the start of 2011, if all goes well, my market view is that the S&P 500 could test 1,400 this year. How much the index rises will be dependent on the global and U.S. economies. My top areas for aggressive growth continue to be technology and small-cap stocks. Areas in technology that look promising include Internet and wireless.

I also like the big banks as the balance sheets strengthen and loans increase.

Gold and silver look good, especially the junior gold miners.

Outside the U.S., I continue to favor Chinese stocks.

While my market view is concerned with is the debt and growth situation in Europe, don’t forget the $15.0 trillion in U.S. debt and mounting U.S. deficit scenario domestically.

And then there are the high unemployment rate and declining wealth from falling home prices driven by home foreclosures and short sales. These factors need to improve to give us any hope for a better 2012; otherwise, things could play out similarly to how they did last year.

Read my view on the dire situation in Europe that needs to be remedied in European Union: Resolution Up in the Air Means Continued Risk.

The market chaos continues to grip the stock markets. We have the European debt crisis and a concerted effort to fix it, albeit it will be extremely difficult and take years.

The European Central Bank (ECB) cut the eurozone’s interest rate by 25 basis points to one percent—the second cut in five weeks. However, keep in mind that the ECB increased rates two times prior to the cuts. The cut will have little impact on the effort to revive the region and avoid another recession given the debt crisis. The ECB should have cut interest rates to below one percent as we did in the U.S. and as the U.K. did. The concern was that inflation in Europe is three percent, so the fear was that lower rates could drive up inflationary pressures.

President Mario Draghi, President of the ECB, admitted that the eurozone may be set for a mild recession. If so, a 25-basis-point rate cut is not exactly a remedy. In addition, there appears to be no plans for a fund for bond buying after speculation on Wednesday that the G20 was looking at a $600-billion International Monetary Fund lending program in the eurozone.

The problem remains the possible S&P credit cuts in the eurozone and the muted economic renewal. I still consider the market risk to be quite high.

Also keep a close watch on China. The country’s economy is stalling as exports for cheap Chinese goods decline due to lower demand from Europe and the U.S. Gross domestic product (GDP) could plummet to 6.8% in 2012 from 9.1% if Europe and the U.S. falter, according to the Asian Development Bank. This is a valid concern that is causing some stir amongst traders.

And don’t forget the crippling U.S. debt levels and U.S. deficits. The powerful U.S. economic engine continues to show breaks and is stalling at this most critical time.

With all of this uncertainty that I feel could worsen as we head into 2012, gold continues to be the place you need to have capital.

The December Gold is edging higher at above $1,740 and its 50-day moving average (MA) of $1,700. The golden cross on the chart remains, with the 50-day MA above the 200-day MA of $1,606.

Michael Purves, gold bull and chief market strategist at BGC Partners, believes that gold could trade at $2,000 an ounce by March 2012.

Lombardi Financial initially turned bullish in 2002-2003 and has remained so ever since. Although at times the bullion has had a rough ride, prices have turned around significantly after first breaking above $400.00 and we believe the spot price of gold will take a run at $2,000 by 2012 should the global economies and risk continue.

The simple truth is that gold is a trustworthy and realistic investment instrument that should be in every investor’s portfolio. Gold’s traditional role as a safe haven has made it the underdog in the world markets. It is an investment that people turn to only when stock or bond markets aren’t performing well, or when monetary policies are running amok. Yet, there is a sense that gold may be increasingly seen as a credible and realistic investment vehicle and not just as a safe haven instrument to park capital.

In the current climate, gold represents the best bet, while silver continues to be a trading commodity based on the economic recovery and demand for electronics and industrial applications.

My advice to you is to buy a mixture of exploration-stage miners along with small to large producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large producers.

One of my top areas at this time is the junior miners, which you can read about in Mining for Riches: Great Metals Stocks to Check Out. See what companies I like.

If you want to know what I think is one of the top gold plays available, read Newmont: A Class Act in Gold.

The upside potential is limited at this time. The problems are global in nature.

You have the massive debt crisis in Europe and the U.S., along with deepening U.S. deficit situations. We are seeing state governments take days off here and there in order to save a few extra bucks. But this is merely a loose bandage strategy and not a remedy for the ailing U.S. economy.

President Obama and the Fed realize the extent of the hurt. Obama introduced a $447-billion plan to drive job creation, but whether it will work or not is up in the air. It’s not going to be easy and everyone realizes this. The unemployment rate is over nine percent and we are seeing muted jobs growth. All eyes will be on the non-farm payrolls this Friday. The Fed feels that jobs will be an ongoing issue going forward with the unemployment rate holding at around nine percent for the short to medium term.

Faced with limited choices at its disposal, the Fed will try to influence the longer-term financing rate by shifting its bond holdings via its “Operation Twist.” So far, it appears that long-term mortgages are coming down, but I doubt it will be sufficient to help boost the U.S. housing market out of its cesspool. Foreclosures continue to drive housing.

I’m not convinced that any of the plans will work and feel that the economy will continue to face hurdles.

The U.S. could possibly move into another recession. Investment guru George Soros believes that the U.S. is already in a double-dip recession. In addition, the global economies are also at risk, especially in the damaged European economies with their massive debt. Greece will default if it cannot convince lenders to advance it a second round of capital.

Citigroup just cut global growth for the second time since September 6, 2010.

The National Association for Business Economics made a downward revision to the U.S. gross domestic product (GDP) to 1.7% for this year, down from 2.8% in May. For 2012, GDP is estimated to expand 2.3%, well down from the 3.2% in May.

Another U.S. recession is coming, according to the Economic Cycle Research Institute.

There is also news that China’s manufacturing sector stalled for the third straight month in September, which is causing concerns of slowing not only for China, but also its customers around the world. There are also worries about a potential property market correction in China given the inflated prices and tighter restrictions on lending. A property collapse would prove damaging to global markets. The Chinese economy is estimated to expand 8.7% in 2012, which is down from the current levels, according to Citigroup.

And, lastly, don’t forget about the debt and growth issues in the eurozone. Germany has approved revised lending requirements for Greece, but it will continue to be difficult for Greece to get out of its financial mess. Perhaps letting Greece default makes more sense, and then you can deal with the situation at that time. Moreover, Ireland and Portugal continue to struggle with muted growth and massive debt. Spain may be needing help.

Metals are under selling pressure, but I feel that the selling has been overdone. Use the current weakness to buy, but be careful, as metals are extremely volatile at this time.

The reality is that the global climate continues to be favorable for metals given the U.S. deficit and the debt crisis in Europe (and the U.S.).

Yes, metals have been in correction mode, but I do not see this as fear. I smell opportunities, especially in the miners, which have lagged behind the gold and silver rally.

I like the smaller mining companies, especially those with a massive reserve of metals in the ground waiting to be developed.

The October Gold is hovering around the $1,600 level on oversold buying, but remains below its key 50-day moving average (MA) on weak Relative Strength. The golden cross on the chart remains, with the 50-day MA of $1,742 above the 200-day MA of $1,524.

Gold is extremely oversold. I feel that gold prices will hold and edge higher if the U.S. economy falters and another recession surfaces.

The SPDR Gold Shares (GLD) exchange-traded fund (ETF) is worth a look. For added risk and potential gains, take a look at the Direxion Daily Gold Miners Bull 2X Shrs (NASDAQ/NUGT)—an aggressive trade aimed at capitalizing on surges in gold at twice the normal rate.

The December Silver is around $30.00, but is facing selling. The next target is the 200-day MA at $36.05. The 50-day MA is at $39.95. The near-term view is bearish, but the chart is holding on to the bullish golden cross. With the selling, silver is extremely oversold.

While the downside risk is high, there are some opportunities. To play a bounce in silver, take a look at the iShares Silver Trust (NYSE/SLV).

If you want to play the small miners, there are hundreds of plays. I have listed several below that look interesting for the speculative trader.

Keegan Resources Inc. (AMEX/KGN, TSX/KGN) recently reported positive feasibility results.

In the mining area, Canada-based Taseko Mines Limited (AMEX/TGB) mines for copper and gold in Canada. The small-cap has a market-cap of $680 million and is profitable, with above-average price appreciation potential. The stock is interesting, as it is trading just above its 52-week low and well below its 52-week high of $7.23.

Take a look at small-cap Golden Star Resources Ltd. (AMEX/GSS). The gold company has operating mines in western Ghana and southwest Ghana, along with exploration properties in Ghana, Sierra Leone, Burkina Faso, Niger, Cote d’Ivoire, and Brazil. Trading at 8.05X its 2012 earnings per share, I like the valuation and potential for long-term gains.

In non-precious metals, take a look at Thompson Creek Metals Company Inc. (NYSE/TC), a miner of molybdenum—a metal used for creating stainless steel and other applications, including the production of rare earth used in electronics.

My advice to you is to buy a mixture of exploration-stage gold miners and small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers. Please note that the investments mentioned in this article are not specific recommendations, but are meant to serve as examples.