-- Published: Sunday, 23 February 2014 | Print | Disqus
By Larry LaBorde
Even if you are on the right track you can get run over by a train if you are not moving. Inaction can sometimes kill you. Most of the time you just don’t have the luxury of a crystal ball. Don’t wait until you have all the facts because you never will have them all. Just collect all the facts you can, digest them and make your best decision.
Consider just a few recent facts:
Christine Lagarde (head of the IMF) recently declared that we need, “a global currency reset”.
With the Federal Reserve’s ZIRP (zero interest rate policy) the real rate of interest is negative or below the rate of inflation. At least when you consider the inflation rate at www.shadowstats.com
The Food Index is peaking at an all time decade high. Studies have shown that when food costs exceed a certain percentage of income then riots will occur. This has been back tested in history and is a pretty good indicator for riots and revolutions. Empty stomachs are a sure fire way to get people off the couch and marching in the streets.
The US government is becoming more oppressive as each year passes. DHS, IRS and even the USPS are buying ammunition in large quantities that are unheard of for such departments. The militarization of our local police forces by the federal government is happening before our eyes with armored cars, police patrolling in BDUs, swat teams in every small town across the US and a much more aggressive form of policing that resembles the Marines in Iraq.
The US economy is contracting in spite of the GDP numbers put out by the Bureau of labor statistics. The US is not in a recovery and there is no nation in the world capable of (or even interested in) rescuing the United States.
The deindustrialization of the United States continues with our industrial sector gutted. International corporations have purchased our industry and shipped it overseas at a staggering never before seen rate over the last decade. A nation’s wealth is created in 3 ways: manufacturing, mining and agriculture. Our manufacturing has been decimated and what is left behind is sick. Detroit is a harbinger of things to come for other formerly industrial cities across the US.
Dr. Paul Craig Roberts (former Asst. Treasury Secretary) said of the Federal Reserve, “They don’t have any more gold. That’s why they can only give Germany 5 tons of their 1,500 tons.” He further said the Fed refused to return all Germany’s gold and said they would only return 300 tons over 7 years and have only made a pitiful attempt so far to do even that.
After the 2008 crisis and 5 trillion dollars or more has been wasted there has been no fundamental changes. Almost all the money has gone to the big banks to attempt to heal their balance sheets as a result of their gambling losses that we must pay for. Main Street has seen little or no help.
Hugo Salinas Price (Mexican billionaire and the “Sam Walton” of Mexico) said, “The US was the custodian of the gold cookie jar and the US government ate up all the cookies.”
The Breton Woods agreement is breaking up as China, Russia, Iran, Brazil, Australia and numerous other countries are trading directly with each other and bypassing the USD in world trade. The USD is slowly loosing its world reserve currency status by the day.
Obamacare is costing jobs in the US as small business refuses to hire additional workers due to health care costs. We are also finding out new more invasive rules every week hidden in the law that has nothing to do with health care.
Greece, Spain and Irish unemployment in the 18 to 25 year demographic is staggering. One of the largest exports in each of these countries is their children to other countries in search of better job opportunities.
The FDIC has only a very small miniscule amount of money to cover bank failures. Bail-ins are coming. If we are lucky they will only bail-in accounts over $200,000. The government is fostering class envy so as long as they keep it to accounts over $200K most people will figure that the “rich jerks” had it coming. Of course more bail-ins will come, as there is not enough money in bank accounts over $200K to do the job.
Government bonds are looking more and more like government certificates of return free risk. Default is the only way out. There is no way we can grow our way out of this mess. Our growth is going the wrong way with no hint of reversing course. Either outright default or gradual default through inflation or currency resets is the only answer.
The S&P 500 stock index is hitting record highs but sales are flat and profits are not rising nearly high enough to justify the increase in value. P/E ratios are getting into nosebleed territory. The Federal Reserve’s ZIRP is forcing savers into investments they are not comfortable with in an effort to obtain some type of yield on their investments.
All of the G20 countries have promised their citizens more benefits than they can deliver. The promises are simply mathematically impossible without some sort of fantastic technological breakthrough like the invention of the steam engine. In the US the baby boom generation is retiring and the largest demographic in our country’s history is now going onto the entitlement side of the ledger.
Just to end on a high note there is a bright side. Medical breakthroughs in life extension on a cellular level are right around the corner. It may soon be able for people to live active lives to 150 years of age in good health. Technology continues to march forward despite the government and not because of it. I firmly believe that in 10 years or so if we can get through this economic mess, we stand the chance of living in the most exciting times ever.
Make no mistake that an economic storm is headed this way. We need to take a few precautions. I have listed a few below for your consideration:
If you have a nice profit on your stock investments consider selling some and ringing your register. If you cannot bring yourself to sell then at least put a stop loss under your stocks at 85 to 90% of their current value to try to capture your profits in the event of a rapid correction. If their value continues to move up then congratulations but then continue to move up your stop loss triggers behind them.
Take care of your body. Your health is your wealth. Take time to exercise even if it is just a walk around the block. Sleep 8 hours a day. We are a sleep-deprived nation and sleep is so vital to health. Eat healthy and try to shed a few pounds.
Control expenses. Live modest and embrace a frugal lifestyle. Simply live below your means. Get out of debt and stay out if at all possible. Downsize everything and forget about keeping up with the Jones.
Continue to study and learn to stay valuable in the market place. The mental workout will also be good for your mind and body.
Stay abreast with new technology such as 3D printing and new health breakthroughs. Read and improve your mind.
If you own a business then watch your costs, careful with large capital purchases and be very careful with debt.
Save a few USD in spite of the fact that they will probably devalue one way or another. There is always a chance we may have deflation for a while until the inflation kicks in like a slow one – two punch.
Invest in endurables such as gold & silver, farmland, timberland, artwork or any valuable that will hold wealth through turbulent times. Even though gold and silver have dropped lately they are still available. There may come a time when the supply simply seizes up and they are no longer available in retail form.
But above all remember that we are only transients passing through this life and our true home is not of this world. Take care of your worldly goods while you are here but do not neglect you real long-term plans.
Knowledge only has value when it is acted upon.
Larry LaBorde
Larry LaBorde sells precious metals through Silver Trading Company LLC. Since 2001, Silver Trading Company has offered high volume sales of gold, silver, platinum and palladium to serious investors around the world. It also offers guidance about storage options for metals. Please visit Silver Trading Company’s new website at www.SilverTrading.net.
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-- Published: Sunday, 23 February 2014 | E-Mail | Print | Source: GoldSeek.com
