So, let me guess. You thought I was going to give you a price chart of the movement of oil, gold or interest rates. I don’t need to show you charts on them…you’ve been reading on these pages for months that they will continue to rise.
The most important chart for investors is about a transfer of economic power. It is about investors and foreigners leaving the U.S. dollar. It is about the repercussions that America will feel during its quiet devaluation of the greenback. It’s simply about America no longer being number one.
Somewhat of an economic history buff, I’ve come to learn that history does repeat itself. Only the places and people change. Countries gain economic power and world dominance, they get spoiled and lose their way, and then they lose the economic power.
By the end of World War II, the U.S. industrial revolution solidified the position of the U.S. as the world’s leading and largest economy. We became a creditor nation. We did more trade with foreign countries than anyone else. Investors the world over wanted American-made goods and U.S. dollars. In fact, we were so strong as an economic power that we were able to convince world central banks that they can sell their gold and replace their reserve currency with U.S. dollars. (Likely to be eventually recognized by historians as the biggest global financial scam of the 1900s.)
Just over half a century later, we became a debtor country that started importing more goods than we exported. Commerce-hungry foreign countries seized the opportunity to make goods cheaper and cheaper than we ever could. Now, I know I will get e-mails today telling me that the American manufacturing base is still strong. But the facts are the facts. We’ve gone from being a huge net exporter to a huge net importer in about three decades’ time.
In 1962, a man from Arkansas figured he could bring in goods from Asia and sell them to Americans at a savings they would enjoy. Today, Wal-Mart accounts for about 10% of all retail sales in the U.S. Along the way, other entrepreneurial American corporations figured they could open plants in Mexico, Indonesia, China, Taiwan, India and other low-wage countries and import goods to the American people.
The chart linked to below shows what all this American ingenuity has done for our currency: the greenback has been devastated. There is a very real risk that our currency will soon fall to a record low against a basket of other well-known world currencies. When that happens, our interest rates will rise, stock markets will fall and gold bullion will enter phase three of its bull market.
Whatever your portfolio consists of, whatever you would like to leave to your family or children, ensure your portfolio is properly structured to benefit from, or at least be protected from, the repercussions of your assets and investments being denominated in a second-tier currency.
Michael’s Personal Notes:
It’s December 1999 and I’m in a real estate closing. The two real estate brokers, who I didn’t know knew anything about stocks, are on the phone with their stockbrokers buying shares of Internet companies with no revenue. They are paying about $200.00 a share, because the IPO is almost sold out. I see this as investor euphoria, also known as investor panic buying on the upside. The NASDAQ is trading at 5,000 in December 1999.
Twelve years after the bubble burst, it is still down 44%.
It’s December 2005 and I’m in a restaurant in Miami, Florida. The waiter has just told me this is his last week working as a waiter, as he just got his real estate sales license. He tells me that condos in Miami will double in price by 2007. There is a new financing vehicle called a “No Income Validation” mortgage that is making it easy for consumers, investors and speculators to own multiple homes. By 2011, we will still be in the biggest real estate crash in American history with no bottom to the market in sight. Home prices in the U.S. have fallen an average of 30% since 2005.
The above are two true stories.
It’s December 2015 and the price of gold bullion has just surpassed $3,000 an ounce. Any company calling itself a gold miner is having no problem raising money for its IPO. In fact, investors are throwing money at the companies even though all they have is mineral rights to unproven properties. The shares of Barrick, Goldcorp, Newmont…they are all trading well above $100.00. Everyone wants in on the gold action.
The above story will become a reality, hence why you need to act and position yourself BEFORE the crowd moves.
Where the Market Stands; Where it is Headed:
The Dow Jones Industrial Average starts this final trading day of the week up 5.9% for 2011. I’m still of the opinion that the bear market in stocks that started in March of 2009 is still intact. Yesterday’s surprise 191-point advance by the Dow Jones Industrials confirms this opinion.
What He Said:
“For the economy, the message from retail stocks is quite clear: Consumer spending, which accounts for roughly 70% of U.S. GDP, is in jeopardy. After having spent like ‘drunkards’ during the real estate boom years, consumer spending is taking the same trend as housing prices, slowing down faster than most analysts and economists had predicted. As news of the recession continues to make headlines in the popular media, the psychological spending mood of consumers will continue to deteriorate, lowering earnings at most high-end retailers and bringing their stock prices down even further.” Michael Lombardi in PROFIT CONFIDENTIAL, January 28, 2008. According to the Dow Jones Retail Index, retail stocks fell 39% from January 2008 through November 2008.