2012 Investing

Survive 2012 Financially

The Current Recession

How does one protect their 401 (k) or is it too late? How does one keep their jobs or can we assure everyone of work? What’s one to do in such an economic climate? To say that being debt free and that cash is king while truth, may not be realistic for most, is still valid.

Will we see Dow 5,000 before Dow 25,000 or are either possible?

What does appear obvious is that we’re going to see both deflation (now) and inflation (later). We’ve see a glut of oil that dropped a barrel from $147 to $33. we’re seeing the infamous Big Three having to shut down plants because there’s no room left to set cars since they’re not selling.

Indicative of deflation is a glut of goods that no one wants. Falling prices (wheat 60% and real estate 25%, as well as oil 75%) is soon followed by lowered prices causing people to hold off buying thinking that things will become even less expensive in the future. As an example Costco dropped prices on all their TV’s by 20% in October of 2008, sold 20% more than October 2007, and yet the total volume was still below 2007.

The massive bailouts, seven hundred billion rescue of the financial institutions, another seven hundred billion tax rebate, and God knows how many other “off balance sheet” deals means that money is being flooded into the market place chasing goods which can’t be caught very quickly. Many retirees are having to come out of retirement to survive and more than that are having to delay retirement- if at all.

The result? Massive inflation down the road!

Paradoxically speaking is the fact that deflation is the ultimate cause of inflation. Increasing the money supply to fight deflation will eventually cause rising prices. So, the strategy going forward, for those that can is to “Invest in inflation”. What’s that mean?

How To Invest

For those that can, buy gold (coins, and maybe stocks once the market has hit bottom- but not now) which should hit $1,500 minimally and maybe $2,500 before it’s all over. Gold was a steal five years ago at $300 and it will be seen as a steal at $750-$800 three years from now.

Silver is an even better opportunity because it is used in manufacturing. Silver in the $10-$11 range (coins again or blocks since you have the volume –weight problem with silver that you don’t have with gold. We will see $25-$30 silver down the road and sooner than later.

When it is safe to go back into the stock market, my top three segments of the economy would be in uranium stocks (There are 35 nuclear plants under construction or on the drawing board, and there is only half enough uranium above ground to meet their needs), water stocks, and stocks related to energy. Picking the right stocks with honest management is never an easy thing.

And then there’s real estate. If you can buy anything 50% on the dollar and the houses are out there, do it! Foreclosures are everywhere. God isn’t making any more land. Homes that sold for $200,000 a year ago, selling for $150,000 now, will be worth $350,000 in 3-5 years.

Will the US dollar be replaced? Most probably!

As a recap, the current state of the economy isn’t close to bottom. Unemployment will keep on increasing, wages will fall, interest rates are still falling, money is being printed as fast as they printers can go, some entire industries will cease to exist, and w will see serious economic reverberations from other nations who simply cannot weather the storms as well as the U.S. can.

Then there’s the more serious religious and political problems.

Can West and East reconcile? Can Islam and Christianity make peace? Will Israel be able to survive without war? Is Putin going to try and take over Eastern Europe? How long before China rules the world? Can American write off South America and turn it over the the far left socialists? Do we have a choice?

I am sure that Obama will be tested on many fronts and there’s no bigger test than the Middle East and Israel. We are facing many events that could lead to massive unintended consequences. Our world is a tightly knit one wherein one domino, one link in the chain, is critical to the whole econ system- global warming not withstanding.

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