Markets are going berserk!
Suddenly, everything we’ve been warning you about for months is exploding at virtually the same time.
Interest rates are jumping. Gold is blasting off. Copper and other commodities are flying. The dollar and the Dow are falling. Oil is rebounding, headed for brand new highs.
The primary, fundamental force that’s driving it all?
I can assure you it’s not Hurricane Katrina or Hurricane Rita. Nor is it the supposedly “strong” economy. The main reason everything is popping now is the fact that …
The United States Is
Effectively Bankrupt
America’s finances are in shambles. So to borrow money, the United States must pay its creditors a higher rate to compensate for the loan risk — just like any other individual or corporate borrower whose financial position is shaky.
Consider the facts:
The National Debt is now $7.92 TRILLION, rising $541 billion in the past year. That’s an increase of $1.48 billion per day.
Total unfunded government liabilities are over $44 TRILLION.
The federal budget deficit is about to blow right out of the can and soar to new record highs over $550 billion, due partially — but not entirely — to Katrina.
Even the Pension Benefits Guarantee Corporation (PBGC) — the agency that’s supposed to insure the pensions of Northwest, Delta, Ford, GM and others — is facing a deficit of $87 billion over the next 10 years.
And that’s just the public sector. On the private sector side …
Personal savings is at the lowest level ever. As Martin recently pointed out, this year, Americans have saved a meager two pennies out of every $10 earned! Meanwhile …
* Their liabilities, as a percentage of disposable income, are at a 60-year high.
* Homeowners’ principal and interest payments now equal nearly 14% of after-tax income — a record high — and double what it was 15 years ago. And that’s DESPITE some of the lowest rates in decades AND despite some of the greatest appreciation in home values.
Put another way, household liabilities are growing faster than the appreciation of household assets, including real estate.
A shaky balance sheet ultimately brings inflation and higher rates. It brings a weak dollar. It drives commodities higher. Nearly everything you see happening right now is, in substance, primarily a symptom of the shaky financial picture of America.
But There’s One Big Difference between
the Private Sector and the Government …
The U.S. Government can effectively print its way out of its debt, and it will: By inflating it away. By “promising” to pay it back with cheaper dollars in the future.
On the other hand, private businesses and private citizens — don’t have the same privilege.
For most, the piper will eventually have to be paid — by selling off assets like crazy, including stocks, bonds, and real estate.
But as Martin recently pointed out, the smart money — the savers — they’ll be fine. Especially if they’ve taken appropriate safeguards to protect against the government’s ability to print “Monopoly money” at will, and inflation!
Speaking of which …
Savvy Investors
Are Flocking
Into Gold!
Smart, savvy, big money is buying gold. That’s the principal reason gold is soaring — up more than $36 this month … nearly $190 an ounce since 2001 … or a 68% increase.
Some recent stats on gold demand from the World Gold Council tell the story …
- First half of this year: Gold demand rose 29% in dollar terms and 21% in terms of tonnage, compared to the first half of 2004.
- Gold jewelry demand was 17% higher in tonnage terms and 24% higher in dollar terms.
- Investment demand soared 66% compared to the first half of last year!
That’s a huge uptick in investment demand. Some of the strongest investment markets for gold: India, demand up 47% … Saudi Arabia, up 67% … China, up 53%.
And guess what! To all those who said gold can’t go up when interest rates are rising — well, the Fed’s jacked up rates 11 times in a row now, and gold is up nearly 70% during the same time period.
It’s rising for principally the same reason interest rates are rising: It doesn’t like the shaky balance sheets of the U.S. … or those of many other countries for that matter. And it thrives in times of uncertainty.
That’s why savvy investors own gold as a hedge and to protect the purchasing power of their assets.
So where’s gold headed now?
It’s just hit my latest target, the $470 – $475 level. Once it closes above $479 — just a few dollars away — that’s your confirmation signal gold is heading to $540 an ounce.
It will also be your signal that the Fed’s printing presses are working overtime.
My Recommendations
Be a saver first.
Pay down as much debt as possible.
SELL all speculative real estate.
Lock in low mortgage rates.
Exit nearly all stocks with the exception of appropriate inflation hedges and natural resource plays.
Stay out of long-term bonds. If you own any, get out now while rates are still low and the bond’s principal value is near its highs.
125% Inflation!
That’s what the Morgan Stanley Commodity Index has experienced over the last 30 months — a rise of 125%. That’s the biggest bull market in commodities in the last 45-odd years.
Moreover, as you can see on the chart, the trend is accelerating higher.
Everything is in place to see much higher commodity prices in the months and years ahead. The two chief reasons that you should stay focused on commodities …
First, as I already noted, the Fed will try to print its away out of its debt quagmire. That will weaken the dollar, and spark ever more commodity-price inflation.
Second, from a purely fundamental point of view, even if the U.S. and the global economy slow down, the demand growth for natural resources is vastly outpacing available supplies in virtually every commodity, from oil to gas to copper to lumber, to many agricultural crops.
That would be the case even without the rise of India and China.
Add in 2.3 billion people that want better lifestyles NOW, and you have a recipe for one of the natural resource bull markets of all time.
My Real Wealth Report:
Recommendations Surging
I launched my Real Wealth Report in May of last year and dedicated it to natural resources because I saw this coming …
The first phase of the natural resource boom was already confirmed, reducing the risk for investors. And I got them on board my favorite recommendations immediately.
Now, 16 months have gone by since my first issue of Real Wealth. And over that time period, subscribers have had the opportunity to bag gains of …
- 69% on Ionics
- 52% on Permian Basin Royalty Trust
- 76% on Evergreen Solar
- 36% on Knightsbridge Tanker
- 60% on McDermott Oil
- 15.5% on Yanzhou Coal Mining … 14% on Teekay Shipping … 18% on Anadarko Petroleum … and more.
The total dollar value of all of Real Wealth’s closed recommendations including bonus positions and special reports: Up to $19,986 (before broker commissions). That pays for a subscription to Real Wealth Report more than 200 times over.
And from all I can tell, it’s just the beginning. More gains are coming … (Call 1-800-604-3649 for further details.)
Rita Threatens To Tear Up
Oil Facilities That Katrina Missed
As I write this, Rita is past the Florida Straits and making a beeline from east to west across the Gulf of Mexico.
The worst tracks for Rita point to landfall between Freeport and Sabine Pass, Texas. It’s already a strong Cat 5, with winds at a devastating 165mph.
This could not come at a worse time. I fear another human disaster, and I only hope that the lessons from New Orleans have been well learned by all.
But for the oil and gas markets, it could be as close to a final day of reckoning as you’ll see in years.
As you see on the map to the left, most of the current tracks put Rita right up the middle of the western side of the Gulf’s rigs and platforms. (The purple path was Katrina). If Rita hits as expected, it will knock out the previously lightly damaged and untouched rigs that Katrina missed.
If it moves inland, an even worse scenario could unfold. Port Arthur and Beaumont are known as “refinery alley.” Some of the largest refineries in the country are situated there. If we lose refining capacity on top of production capacity, it could ultimately drive oil to near $100 a barrel. Gas could go up another buck a gallon.
I pray it doesn’t happen. But if it does, my Energy Options Alert subscribers will be ready. They’ve already bagged gains of 48% … 52% … 160% … 44% … and 103% — in as little as 11 days. Their open positions are jumping nicely as well.
The service is quickly selling out. There are only about 263 memberships left, about one for every 600 investors reading Money and Markets. To grab your membership, I suggest you act now.
Best wishes,
Larry Edelson, Editor
Real Wealth Report
Energy Options Alert
Gold Trader Hotline
About MONEY AND MARKETS
MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Michael Burnick, Beth Cain, Amber Dakar, Scot Galvin, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
© 2005 by Weiss Research, Inc. All rights reserved.
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