Month: December 2012

The following is an excerpt from the latest issue of Private Wealth Advisory. In it I outline the relationship between the Fed’s commitment to low interest rates, the scramble for high grade collateral driving the sovereign bond markets, and how the whole mess will eventually come crashing down.

Private Wealth Advisory is a bi-weekly market advisory service, providing its readers with expert insights into the global economy and the driving forces behind the financial markets’ moves. To learn more about Private Wealth Advisory… Click Here Now!

The US Fed is committed to keeping interest rates low for the simple fact that if interest rates were to rise then the payments on the debt would send the US into an EU-syle debt crisis along with the commensurate intense austerity measures being implemented.

Unfortunately for the Fed, the bond markets may indeed force this in spite of the Fed’s efforts.

Weimar Germany, like most historic episodes of hyperinflation, occurred when Germany’s Central Bank began monetizing its debts. This worked until the country lost credibility in the international bond markets at which point the Central Bank was forced to monetize everything resulting in a currency collapse and one of the worst episodes of hyperinflation in history.

The US has been moving increasingly down this path which each new QE program. The two reasons the US has not yet entered an inflationary death spiral are:

1)   The fact that the US continues to maintain its credibility in the bond markets (at least compared to Europe and Japan).

2)   Large financial institutions’ needs for high-grade sovereign bond collateral.

Regarding #1, the US has never defaulted on its debt. Compared to Germany (another safe haven), which has defaulted on its debts twice in the last 100 years, the US remains one of the most credible governments in the world, regardless of how bad the country’s finances are becoming (for now at least).

Regarding the collateral situation, as I’ve explained in recent articles one of the most critical issues in the financial system is the shortage of high grade collateral to backstop the $700 trillion derivatives market.

With France and the ESM bailout fund recently losing their AAA status this issue is only getting worse. The US, despite losing its AAA rated status is still consider high grade due to its having never defaulted on its debt. With that in mind, the Fed decision to take US Treasuries at a time when more and more countries are losing their AAA rated status means that even less high grade collateral will be in the system.

Indeed, as I’ve noted before, because so much of the US debt market is already held by government controlled entities, the Treasuries shortage is even worse than the below article indicates.

Clearinghouses, run by firms such as Chicago-based CME Group (CME) and London-based LCH.Clearnet Group, make traders provide collateral, including government bonds, that can be seized and easily converted into cash to cover defaults. Traders may need from $2 trillion to $4 trillion in extra collateral to meet the new requirements, according to Timothy Keaney, chief executive officer of BNY Mellon Asset Servicing.

The trouble is finding all that high-grade debt. The U.S. had $10.8 trillion in Treasuries outstanding at the end of August. Other countries, including Japan and European nations rated AAA or AA, had about $24 trillion of debt in the second quarter of 2011, according to an April report by the International Monetary Fund. Those government securities are already in heavy demand from central banks and investors.

The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards, in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” The maneuver allows investors who don’t have assets that meet a clearinghouse’s standards to pledge corporate bonds or mortgage-linked securities to a bank in exchange for a loan of Treasuries. The investor then posts the Treasuries—the transformed collateral—to the clearinghouse. The bank earns fees plus interest, and the investor is obliged at some point to return the Treasuries. In effect, the collateral is being rented…

JPMorgan Chase (JPM) and Bank of America (BAC) are already marketing their new collateral-transformation desks, executives at the companies say. Other banks confirmed they’re planning to offer the service too, including Bank of New York Mellon (BK), Barclays (BCS), Deutsche Bank (DB), and State Street (STT).

http://www.businessweek.com/articles/2012-09-20/a-shortage-of-bonds-to-back-derivatives-bets

Here’s the actual amount of Treasuries available to the banks:

Total US Sovereign Debt	$16 trillion
Foreign Nation holdings	$5.4 trillion
Intergovernmental holdings	$4.8 trillion
US Federal Reserve	$1.5 trillion
Remaining	$4.3 trillion

Indeed, as the below article reveals, the search for high quality collateral is one of the primary items holding up the Treasury market. The Treasury’s latest information reveals that:

Foreign ownership of U.S. Treasury securities rose to a record level in October, a sign that overseas investors remain confident in U.S. debt despite a potential budget crisis.

Total foreign holdings of U.S. Treasurys rose to $5.48 trillion in October, the Treasury Department said Monday. That was up 0.1 percent from September. Still, the increase of $6 billion was the weakest since total holdings fell in December 2011.

China, the largest holder of U.S. government debt, increased its holdings slightly to $1.16 trillion. Japan, the second-largest holder, boosted its holdings by a smaller amount to $1.13 trillion. Brazil, the country with the third-largest holdings, increased its total to $255.2 billion.

http://hosted.ap.org/dynamic/stories/U/US_FOREIGN_HOLDINGS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-12-17-09-44-48

My point with all of this is that the search for collateral will drive yields lower… until the bond markets truly begin to spin out of control. In the meantime, the US Fed is playing a very dangerous game by purchasing as many Treasuries as it is. But that game can last much longer than anticipated.

How precisely these issues will finally play out is a mystery. But the consequences will be tremendous. And enormous fortunes will be made by those who get it right. The first key clues will be when Bunds and Treasuries begin to nose dive in a big way.

If you’re an individual investor looking for the means of profiting from all of this… particularly the US going over the fiscal cliff, then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 78 out of our last 97 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m just alerted Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 78 out of 97 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

 

 

On December 12, the US Federal Reserve surprised yet again by announcing QE 4: a program through which it would purchase $45 billion of US Treasuries every month.

Between this program and the Fed’s QE 3 Program announced in September, the Fed will be monetizing $85 billion worth of assets every month ($40 billion worth of Treasuries and $45 billion worth of Mortgage Backed Securities) ad infinitum.

Indeed, the Fed’s new policies are anchored to its goal of getting employment down to 6.5%. This means the Fed will buy these assets non-stop until employment gets down to 6.5%.

I’ve spoken to a number of people in the financial community as well as outside investors and no one seem to grasp the significance of this announcement.

First and foremost, QE does not create jobs. The UK has announced QE efforts equal to an amount greater than 20% of its GDP and has not seen any meaningful job growth. Similarly, Japan has announced nine rounds of QE for a combined effort equal to 20% of its GDP over the last 20 years and job growth remains dismal there.

Based on this, the Fed’s decision to anchor its QE efforts to employment is a bit hard to swallow. Indeed, I would argue that the Fed’s moves have very little to do with employment and instead are meant to address the following:

1)   The US economy is nose-diving again and the Fed is acting preemptively.

2)   The Fed is trying to provide increased liquidity going into the fiscal cliff.

3)   The Fed is funding the US’s Government massive deficits.

Regarding #1, the November ISM report indicates the US economy is again contracting. Looking at the chart, you can sense why Bernanke and the Fed are getting concerned: the similarities between the recent downturn of the last few years and that going from 2004- 2008 are striking. It’s obvious helicopter Ben doesn’t want us breaking into the mid’40s range.

Similarly, the ECRI, which has proven a far better judge of the onset of US recessions than the NBER, has stated that the US likely slipped back into recession in September. Bernanke and the Fed have close ties to the ECRI. I believe they’re moving preemptively based on this announcement.
We get additional indication of things worsening in the US economy from the NFIB’s Small Business Optimism Index. This measure has entered an absolute free-fall, posting its single largest drop in over 30 years. To put this into perspective, this indicates that Small Business Owners are becoming less optimistic about the future of the economy faster now than they were after Lehman failed.

In additional to this, small business earnings are have rolled over sharply since the beginning of 2012. Small businesses account for 70% of jobs. To see both small business owner optimism and as well as small business earnings cratering is a bad sign for the US economy.

Bernanke firmly believes that the single biggest reason the Great Depression lasted as long as it did was because the Federal Reserve didn’t do enough to fight it at the time. This is the driving thesis behind his life’s work and his tenure at the Fed.

With the above information making it clear that things started to get quite ugly in September, QE 4 should be seen as his attempt to act preemptively to stop another 2008-type economic plunge.

In addition to this, we know that Bernanke has stated point blank that the Fed does not have the tools to deal with the fiscal cliff.

The U.S. economy is already being hurt by the “fiscal cliff” standoff in Washington, Federal Reserve Chairman Ben Bernanke said Wednesday. But Bernanke said the Fed believes the crisis will be resolved without significant long-term damage.

The steep tax increases and spending cuts can be avoided with a successful budget deal, Bernanke said during a news conference after the Fed’s final meeting of the year. The Fed’s latest forecasts for stronger economic growth next year and slightly lower unemployment assume that happens…

Bernanke repeated his belief that if the scheduled tax hikes and spending cuts do take effect in January, they will have a significantly adverse effect on the economy, regardless of what the Fed might do.

“We cannot offset the full impact of the fiscal cliff. It’s just too big,” Bernanke said.

http://news.yahoo.com/bernanke-says-fiscal-cliff-already-hurting-economy-201018687–finance.html

Given Bernanke’s extensive connections on capital hill, the move to implement QE 4 should also be seen as a warning that we will very likely be going over the fiscal cliff; not having the tools to deal with the aftermath of this mess, the Fed is moving preemptively to prepare the system for what’s coming.

Finally, and most critically, the Fed’s implementation of QE 4 represents the Fed’s full commitment to finance the US’s deficits.

In 2011, the Fed bought over 70% of US debt issuance. Based on the projections for QE 4, the Fed will buy upwards of $480 billion of the $918 billion in new US debt to be issued next year: roughly 52% of all new debt issuance.

Between this and the Fed’s monthly monetization of $45 billion worth of Mortgage Backed Securities, the Fed will be soaking up 90% of all net new dollar-denominated fixed-income assets next year.

There are several implications to this.

1)   The US will be lurching ever closer to an EU-style debt crisis.

2)   There will be an even greater shortage of high quality collateral in the financial system going forward.

3)   Inflation will continue to rise.

Regarding #1, by soaking up so much of the US’s new debt issuance, the Fed is permitting the US Government to continue overspending at a time when the bond market would normally begin raising interest rates.

Last year the US paid $454 billion in interest payments on its debt. This was at a time when the average interest rate was only slightly above 2%.

During the same year, the US only took in about $2.3 trillion in tax revenue.  So, even with interest rates at historic lows, we’re spending about 20% of tax receipts on interest payments.

Now let’s suppose that interest rates rise to an average of 4%. At that rate, the US would owe nearly $900 billion in interest payments: enough to soak up nearly 40% of all US tax receipts. And this is assuming tax receipts don’t fall as the economy contracts (historically taxes do fall during times of contraction).

This is why the Fed is committed to keeping interest rates low: if interest rates were to rise then the payments on the debt would send the US into an EU-style debt crisis along with the commensurate intense austerity measures being implemented.

Having said that, the bond market may force the Fed’s hands, at which point it’s Checkmate for Bernanke.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff, then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 78 out of our last 97 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m just alerted Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 78 out of 97 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

Tonight between 7:30-9:30PM, the House will vote on Boehner’s “Plan B” for the fiscal cliff.

At this point the entire exercise is one of looking busy for appearance’s sake: it wouldn’t bode well if the US were to go over the fiscal cliff because members of Congress were already on vacation. So the political class needs to appear to be working on this problem even if no one is actually incentivized to come up with an actual solution.

My point is that the likelihood of an actual solution being presented and worked through at this point is less than 1%. The various plans that have been put on the table all propose items like reducing the deficit by $1 trillion over multiple years. This doesn’t really accomplish much when you consider that we’ve run a $1+ trillion deficit for four years now.

The fact remains, if we want to balance the budget, we need spending cuts and tax raises that add up to over $1 trillion. That’s simple math, but neither side of the political aisle is going to propose anything resembling this because it would be political suicide.

After all, what incentive is there to solve anything? US political leaders must have noticed that Greece, a country whose economy is only 2% that of the US’s, has managed to draw out its problems for over two years and the proposed “solutions” there remain as absurd as getting the country’s Debt to GDP levels down to 120% by 2022.

If this is what a country as small as Greece can get away with, why can’t the US, the single largest economy and owner of the world’s reserve currency draw out its fiscal problems far longer, must be the thinking process for Washington.

And why not? The US Federal Reserve has committed to fund the US’s bloated deficits. The Fed will buy 50% of new debt issuance next year. And interest rates will be kept at next to nothing for the foreseeable future.

There’s a reason for this: roughly half of the US’s debt outstanding matures in less than a year or so. Every point increase in interest rates means another $150 billion in interest payments. So Bernanke has to keep us at ZIRP forever.

This will “work” until it doesn’t. The problem is that when it doesn’t work anymore, the financial system will implode. Until then, there are little to no incentives for the political class to address the US’s financial problems. The Fed’s giving them a free lunch.

Unfortunately, these folks are ignoring the human toll Greece has had on its citizens. Today, 20% of Greek households are living below the poverty line. Five Greek children at hospitalized for malnutrition every week. This is the real cost of the crisis in Greece. And it’s the situation most analysis ignores.

Which is why the US is playing a dangerous game by hemming and hawing about the fiscal cliff: numbers wise the situation may not look apocalyptic, but with incomes down and the cost of living rising in the US, there will be a lot of suffering going forward.

So buckle up because we’re going over the cliff. And unlike the debt ceiling talks of 2011, the Fed is already pumping money into the system (in 2011, there was no official QE program in place when the debt ceiling talks took place).

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff, then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 76 out of our last 90 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 76 out of 90 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

The markets in Europe continue to rally hard despite the fact that Europe’s financial system is totally insolvent.

At the center of this mess is Spain, which now barely functions as a country. Spanish pharmacies, owed $500 million by the government, are running out of medicine in Valencia. Strikes have resulted in trash not being collected for 20 days in Jerez. Over 2.2 million children live in poverty in Spain (the countries entire population is just 47 million). In the region of Andalusia some government workers haven’t been paid in eight months and are working for free while begging for food.

The banking system is in even worse shape. Having experienced a housing boom that made the US’s look small in comparison, Spain’s banks are packed to the brim with garbage debts which are worsening by the month.

Spanish housing prices saw their biggest quarterly drop since the crisis began, falling an average of 15% in the third quarter. Spain’s number of bad loans has hit a new record, moving up at the fastest pace since June 2012 when the entire Spanish system almost imploded. The default rate on real estate loans is an astounding 30%.

The Spanish Government’s response during the crisis has been to merge one totally insolvent regional bank or caja with another. Bankia, the large bank that had to be nationalized last June was in fact the product of a merger of seven bankrupt cajas.

Spanish banks are drawing over €365 billion from the ECB to keep the system afloat. The entire market cap of the Spanish banking system is only a little over €100 billion. We’re talking about an entire banking system that is bust and on life support from the ECB.

And yet, somehow, the investment world is convinced that there is a way out of this mess. Spanish yields are falling. The Spanish Ibex rallies. Spanish bank stocks are up over 10% in the last month and a half. Why? Because of more money from the ECB and EU? Short-covering? Who knows. But there is absolutely no fundamental improvement to Spain’s finances, its economy, or its banking system.

And sometime down the road, this whole mess will come crashing down.

If you’re looking for someone who can help protect yourself from this mess and even profit from it, I can show you how. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

All told, 77 out of our last 93 trades have made money. In fact we just closed our 77th this morning: a 6% gain in just TWO DAYS. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 4% in the last week.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

Do you find the Fed’s announcement of QE 4 confusing? After all, why would the Fed engage in more QE when it just announced QE 3 three months ago? In this excerpt from my latest issue of Private Wealth Advisory I outline the real reasons the Fed announced more QE (virtually no one I’ve spoken to understands this).

I also explain which investments will profit from this monetary madness and how to best go about preparing for 2013.

To find out more about Private Wealth Advisory as well as its incredible track record (76 of out last 92 trades made money)…

Click Here Now!!!

Last week the US Federal Reserve surprised yet again by announcing QE 4: a program through which it would purchase $45 billion of US Treasuries every month.

Between this program and the Fed’s QE 3 Program announced in September, the Fed will be monetizing $85 billion worth of assets every month ($40 billion worth of Treasuries and $45 billion worth of Mortgage Backed Securities) ad infinitum.

Indeed, the Fed’s new policies are anchored to its goal of getting employment down to 6.5%. This means the Fed will buy these assets non-stop until employment gets down to 6.5%.

I’ve spoken to a number of people in the financial community as well as outside investors and no one seem to grasp the significance of this announcement.

First and foremost, QE does not create jobs. The UK has announced QE efforts equal to an amount greater than 20% of its GDP and has not seen any meaningful job growth. Similarly, Japan has announced nine rounds of QE for a combined effort equal to 20% of its GDP over the last 20 years and job growth remains dismal there.

Based on this, the Fed’s decision to anchor its QE efforts to employment is a bit hard to swallow. Indeed, I would argue that the Fed’s moves have very little to do with employment and instead are meant to address the following.

1. The US economy is nose-diving again and the Fed is acting preemptively.
2. The Fed is trying to provide increased liquidity going into the fiscal cliff.
3. The Fed is funding the US’s Government massive deficits.

To continue reading this… you need to take out a trial subscription to Private Wealth Advisory: my bi-weekly investment  newsletter designed specifically to help individual investors cut through the noise and profit from the market’s gyrations.

Indeed, 76 out of our last 92 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 82% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 76 out of 92 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

Now that Obama has been re-elected, the BLS and other Government entities have begun to revise all of the positive data from before the November election downward. New jobless claims are back over 400,000. The amazing new home sales of 389,00 from October has been revised back down to 369,000. And a new record has been set for food stamp usage.

Things are only going to get worse for the following reasons:

1)   Increased taxes

2)   Increased regulation

Both of these items will result in people parking their cash rather than investing in the economy. Case in point, last week $132 BILLION was suddenly parked in bank savings accounts. That’s $132 billion (nearly 1% of US GDP) leaving the US economy and plunking into savings accounts

To put this number into perspective, this is more than the amount of money that fled to the safety of savings accounts when LEHMAN FAILED.

In simple terms capital is going into hibernation. Without the investment of capital, the US economy will continue to weaken. Between this, the fiscal cliff, the earnings disaster for corporations and more, the market is set for a truly horrendous 2013.

Economic bell-weathers such as Caterpillar (green), Fed EX (red) and McDonalds (purple) are already discounting this in a big way.

However, we’re not quite there yet. Unless things come unhinged sooner due to some event in Europe, it will probably be the end of December (when the fiscal cliff will be hitting) before things really get messy in the markets.

I want to alert you to all of this in advance because I believe 2013 will be the year in which the BIG Collapse happens. As I’ve explained in earlier articles, it almost hit last summer. It was only through the ECB and Fed promising to buy everything that the system held together. But now even the Fed has stated outright that it cannot contain the impact of the fiscal cliff.

Please prepare well in advance. What’s coming next year will be worse than 2008. There is literally nothing positive I have to say about what I see. At the very least, we’ll face an economic slowdown on par with that of 2008 accompanied by a market crash. And this will happen at a time in which Central Banks will be totally out of ammo.

We get additional signs that those in charge are out of ideas in Europe. There the latest proposal for Greece is a debt buyback plan through which Greece would use €10 billion to buy some €30 billion worth of debt. Greece doesn’t have €10 billion lying around so it would likely tap a bailout fund (the EFSF or ESM) to do this. This means Greece would need (you guessed it) another bailout in order to buy its own debt.

It would also need to convince Greek bondholders to sell their stakes, which was a huge issue during the Second Greek bailout earlier this year.

So once again, we have yet another non-solution (the goal of this plan is to help Greece get its Debt to GDP to 120% by 2020) which will require a great deal of arm-twisting and political machinations to accomplish almost nothing.

The same idiocy is playing out in Spain. The latest plan there is for the country to cut the balance sheets of three nationalized banks by 50% sometime in the next five years. How will they do this? By dumping their toxic property assets into a “bad bank.”

The idea here is that somehow someone will want to buy this stuff. Spain already had to postpone the launch of the bad bank by a month because no one wanted to participate in it (despite the mainstream media claiming that the idea was popular which is untrue).

So, here we have Spain proposing that it can somehow unload a ton of garbage debts onto “someone” even though there is no “someone” to buy them. And the whole point of this exercise is to meet conditions so that Spain would qualify for another €40 billion in aid.

€40 billion in aid.

On an annualized basis, Spain has experienced portfolio and investment outflows of more than €700 billion. And the latest plan to address this situation (as well as the implosion of the Spanish banking system) is to dump toxic bank assets into a bad bank to free up €40 billion in aid.

Oh, and Spain needs to issue over €200 billion in debt next year.

Again, a non-solution which doesn’t fix anything.

As I mentioned before, without a doubt 2013 will be a disastrous year for the global economy and for the financial markets. Things could get ugly before then due to any number of issues that are boiling just beneath the surface… but barring any sudden developments, most of the key players will try to hold things together into year end.

At that point, there’s really not anything to look forward to (compared to this year when many pinned their hopes on the US elections or on more intervention from the Central banks). And that’s when things will get really ugly.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US debt bubble bursting, then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 76 out of our last 90 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 76 out of 90 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

Today the US Federal Reserve announced that it would be implementing QE 4: a policy of spending $45 billion per month buying Treasuries on the long-end of the yield curve until employment falls to 6.5%.

So between this and QE 3 which was announced just two and a half months ago, the Fed will be printing $85 billion per month.

First and foremost there is no evidence that QE creates jobs. Consider the case of the UK.

Since the crisis began, the Bank of England (BoE) has announced QE efforts equal to $598 billion in the UK. The UK’s GDP is $2.43 trillion. So the BoE has engaged in QE equal to over 20% of the UK’s GDP.

Despite this massive amount of QE, 2.53 million people are out of work today in the UK, up from 2 million at the start of the Great Crisis in 2007. Similarly, the UK’s GDP remains well below its peak.

In simple terms, QE fails to generate economic growth or jobs. End of story. The BoE spent 20% of the UK’s GDP on QE (a truly staggering amount) and more people are unemployed now than when it started. And GDP has yet to get even close to its pre-Crisis highs.

The same can be said of Japan which has implemented QE over 20% of its GDP. There, as has been the case in the UK, there is no evidence that QE has created jobs or even economic growth.

So the Fed is flat out lying in its claim that QE will create jobs. There is no evidence that this QE does this. So the Fed is announcing this new program for a different reason.

Regardless of the reasons, Ben’s got a major problem on his hands. That problem is the fact that Treasuries are on the verge of breaking their upward sloping trendline. If Treasuries begin to collapse at a time when the Fed is buying up over 70% of debt issuance, then the Great Treasury Bubble is finally about the burst:

If we take out this line when the Fed is buying as much Treasuries as it is, then it’s game set and match for the Fed. Take out this line and you’re on your way to ending the 30+ year bull market in bonds.

Which means:

1)   Interest rates will be soaring

2)   The $700 trillion derivatives market most of which is based on interest rates will suffer some systemic events

3)   The Fed’s interventions are finished

We’ll have to wait to see how this plays out, but we’re getting dangerously close to a US debt crisis that will make 2008 look small in comparison.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US debt bubble bursting, then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 76 out of our last 90 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the US debt implosion picks up steam in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 76 out of 90 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

Ever since the EU Crisis began in earnest in January 2010, EU leaders have maintained the following strategy:

1)   Engage in endless meetings/ discussions, none of which resolve anything.

2)   Announce that the situation is resolved.

3)   Wait for the world to realize nothing has been fixed.

4)   Repeat.

The prime example is Greece. There have been no less than 30 “Greece is saved” press releases/ announcements, accompanied by market rallies only to discover that Greece is not saved and in fact is worsening by the week.

We’ve now had two formal Greece bailouts. We’re currently working on a third/ debt buyback program, the stated goal of which is to get Greece’s Debt to GDP ratio to 120% by 2020.

Again, the goal for the current proposal is to get Greece to the point at which it will still be totally broke in eight years. It’s amazing no one laughs out loud at EU meetings.

Actually they did… the below came from a recent Q&A session with Jean-Claude Juncker, current Prime Minister of Luxembourg.

Question: Is the goal still to get Greece’s debt to 120%?

Juncker: The fact is that the target of 120% will remain, but the target as far as the time frame is concerned has been postponed to 2022.

[Laughter in the room]

Juncker: That was not a joke!

            Source: ZeroHedge

The reality is that no politician wants to implement actual solutions (total default, wipe out of all bad debt, and massive economic structural changes) because all of them are 100% politically toxic.

Meanwhile Greek unemployment worsens while its GDP continues to collapse. Indeed, from peak to today, Greek GDP has fallen nearly 20%. This collapse is equal to that of Argentina in 2001, when it had a full-scale systemic implosion.

Again, this is the country that political leaders and financial luminaries claim has been “saved” dozens of times.

US leaders see that this strategy has worked for EU leaders (those who went along with it are still in office, those who didn’t have been kicked out). And so they are now adopting a similar strategy with discussions on the fiscal cliff.

President Obama is out campaigning the notion that we need to increase taxes on those who earn more than $250K per year.  According to the Congressional Budget Office, Obama’s current proposal would raise an additional $83 billion in taxes per year.

The US budget deficit is over $1 trillion. It has been ever since Obama took office. So his proposal would not even cover one month of deficit spending. And this is supposed to represent a “solution.”

Mathematically, the only way to cut the Federal deficit would be to either raise an additional $1.2 trillion in taxes (politically impossible, no one would go for it) or cut Federal Spending by $1.2 trillion (again, politically impossible).

Indeed, the US’s fiscal problems are so great that tackling them would require truly impossible measures. For instance, consider that the top 1% of income earners (the very folks Obama is targeting) paid $318 billion in income taxes according to the most recent data.

So, even if we doubled their taxes, we’d only raise enough money to cover about six months of the US deficit.

So, in order for us to close the deficit in the US, we’d have to both double the taxes paid by the top 1% AND cut spending by $600 BILLION. Now imagine trying to get the American people to go along with this.

My point with all of this is that the US budget talks are really just an American version of the various EU crisis talks we’ve seen over the last two years: a lot of discussion over phony “solutions” all of which fail to address the try size of the problem.

As a result, we’re likely going to experience something very similar to the debt ceiling talks in July-August 2011: a lot of talks which fail to go anywhere followed by a market collapse.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

Last week I outlined the reason why we are very likely going over the fiscal cliff: there are little if any political incentives for the GOP or Dems to fix the problem; the best option politically is to let us go over the cliff and then offer targeted tax breaks in late 2013 early 2014 as part of their 2014 Congressional campaigns.

With that in mind, corporations are now rushing out special dividends to shareholders in an effort to beat the coming tax hikes on dividends.

Between Nov. 1 and Dec. 5, 349 companies moved up their dividends or paid special dividends, according to Silverblatt. That is higher than the 314 irregular dividends paid last year in all of November and December. Silverblatt expects the pace of early dividends to pick up if Washington keeps dawdling.

Many companies go beyond moving up ordinary payments. They are declaring special, one-time dividends to take advantage of the lower tax rate while it lasts.

http://www.lasvegassun.com/news/2012/dec/10/us-wall-street-week-ahead/

This is a serious red flag for the US economy’s future: all of the capital being paid out to shareholders will not be going into corporate expansions or hiring. This, when taken along with the recent rush of capital into savings accounts ($150 billion was shifted into savings accounts following Obama’s re-election), indicates that big money is either going into hibernation or being paid out to shareholders.

In simple terms: none of these funds will be used to grow the US economy or create jobs. Which means the US economy will be taking an even sharper nose-dive than expected in 2013.

On the other side of the pond, the EU as a whole is in recession. However, recent data coming from Germany indicates things are going to be getting significantly worse.

Month over month, German industrial production fell 2.6% in October. It fell 1.3% the month before. This contraction has resulted in the Bundesbank lowering its 2013 GDP growth projection to just 0.4%.

The entire EU bailout process has been based on the notion that Germany will write the check to fund various bailouts/ interventions. If Germany enters a recession then politically it will be much harder for German politicians to push for additional aid to the rest of the EU.

Remember, Chancellor Angela Merkel is up for re-election next year. So she will be turning her attention increasingly towards her campaign. And running on the idea of more bailouts when the German economy is contracting is political suicide.

Thus, we have something of a capital freeze occurring in the US at the very same time that the primary pillar of EU stability (Germany) will very likely begin to pull back from providing additional aid (case in point, Greece is still waiting on receiving proposed aid from six months ago).

All of these items point towards what will be a particularly ugly 2013.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

The market continues to track the same pattern it performed going into the failed debt ceiling talks of July 2011. As you’ll recall, then as is the case now, US politicians failed to reach a credible solution to the US’s debt problems. What followed was a credit rating downgrade and a market collapse:

Here’s the S&P 500’s recent action:

Here’s the S&P 500’s action going into the failed debt ceiling talks of 2011:

Here’s what followed:

Be forewarned. As noted earlier this week there are no political incentives for the GOP or Democrats to propose a real solution to the fiscal cliff. So it is highly likely we will be going over the cliff.

Another item holding up the market is hype and hope of more QE from the Federal Reserve at its December 10-11 meeting. I have to admit, I find this proposal completely baffling. Macroeconomics 101 dictates that it takes a full six months or more before a change in monetary policy by the Fed will be fully digested by the system. The Fed just announced a new program three months ago. So the academics at the Fed aren’t even drinking their own Kool-Aid anymore.

Since the Great Crisis began, the Fed has on average funneled some $40+billion per month into the system (even when no official program was in place the Fed was still juicing the markets this much, typically during options expiration weeks).

QE 3, which may as well be called QE infinite because it is open ended (will never end), combined with the Fed’s Operation Twist 2 program has the Fed currently putting $85 billion into the system every month. On an annualized basis this is over $1 trillion. This means that at this pace, by the end of 2013 the Fed’s balance sheet would be $4 trillion. The entire US banking system is $13 trillion.

And somehow pumping more money would work?

At some point some group in the political class needs to actually ask the Fed the following: “You’ve had four years of implementing any policy you like without political consequence. Four years. During that time you’ve spent well over $2 trillion.  And the Crisis has not been fixed. Why on earth should we give you more time or money?”

I believe this will happen in 2013. As the US economy takes a nose-dive and the Sovereign Crisis moves into hyperdrive, the triumvirate of the financial system (the Fed, Wall Street, and Washington DC) will begin to increasingly point fingers at one another to divert blame for the fact that we’ve spent trillions of Dollars and things haven’t really improved.

This process has already begun with the Fed firing the first shots: it has sued Goldman Sachs while Bernanke has told Congress that it’s their fault the US is so indebted and facing fiscal ruin.

This process will accelerate next year. At that point I expect Congress and Wall Street to enter the fray more aggressively targeting the Fed. And that’s when things could get very ugly.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

The primary market forces remain in play.

The markets are holding up on hopes of additional stimulus from the Central Banks. Some bulls are even calling for QE 4 at the upcoming Fed meeting, despite the fact that QE 3 was launched a mere three months ago and was open-ended (meaning it would not end until the Fed deemed it time).

This is extraordinary and proves point blank my concern that we’d reach the point at which additional monetary stimulus would no longer having a significant impact. This was always the End Game for the Fed’s response to the financial crisis: that by intervening as much as it did, eventually we’d get to the point that even extreme interventions had little if any impact.

Given that the Fed has been the primary driver of stocks for the last four years (even the NY Fed admits the S&P 500 would be at 600 without Fed intervention) this is a major red flag that we could be due for a sharp correction to the downside.

Against this backdrop of hopes for more intervention, the ugly fundamentals continue to worsen. As I indicated in yesterday’s missive, there is little if any political incentive for the Democrats or the GOP to address the fiscal cliff. Consequently we are very likely going over it.

In Europe, the great banking crisis continues to worsen. The EU has definitively lost one of its primary AAA supports when France was downgraded. Moreover, the mega-bailout fund, the ESM, has been downgraded as well.

The implications of this are mainly pertinent to the banks. Sovereign bonds are the primary collateral backstopping hundreds of trillions of Euros worth of trades at the large EU banks. With France no longer AAA and the ESM losing a rating as well, a scramble for AAA collateral is underway. This will be beneficial to Treasuries, bunds, and other high-grade bonds (high grade relative to non-AAA rated collateral). It will be bad for low-grade collateral bonds (Spanish, Greek, Italian, etc.).

Thus, stocks continue to seesaw. The fundamentals want to pull stocks down while the hope of more intervention from Central Banks pushes stocks up.

The one thing that trumps this is the fiscal cliff. Since there is little likelihood of a solution, we are likely to see heavy selling from institutions in the coming weeks (see Apple’s recent action) as they close out positions before the tax increases.

This will put selling pressure on the markets. Combined with the ongoing EU debacle, this makes for a potentially very ugly sell-off into year-end.

After that, we’ll see… but 2013 is shaping up to be an absolutely hellacious year. We have:

1. The EU’s banking crisis.
2. A global economic contraction.
3. The implosion in corporate profits.
4. Heightened inflation from the Fed’s money printing.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

I’m going to lay out everything you need to know about the fiscal cliff negotiations. After reading this, you can ignore all of the media’s coverage of this topic as well as various politicians’ announcements pertaining to this subject.

All you need to know consists of just one sentence.

Politicians are in charge of this issue.

These are the same folks who haven’t even produced a budget in four years. The same folks who have run $1+ trillion deficits for four years. The same folks who rarely if ever leave office as a result of their fiscal mistakes.

In simple terms, none of the people in this group will likely suffer any consequences if we do go over the cliff. Indeed, as far as options go, their best option would be for us to go over the cliff and then implement some targeted tax breaks in late 2013 early 2014 as they go into the 2014 Congressional elections.

Let’s take the side of the Democrats.

Obama was largely re-elected based a solid turnout for the Democrats and a lack of voter turnout for the GOP. If you want to argue about voter fraud the fact remains that if there was widespread voter fraud the GOP let the Democrats get away with it. So for simplicity’s sake, Obama won based on a strong turnout while the GOP lost based on a weak turnout (Romney took less votes that McCain!).

With this in mind, Obama and the Democrats can easily argue that they have the mandate of the people for their policies. If the GOP proves unwilling to go along with their proposals, Obama and the Dems can simply take us over the cliff, increase taxes on the wealthy (which would appease their voting base) and blame the failure to reach a solution as well as the ensuing economic mess on the Republicans (much as the Dems and Obama have blamed the terrible economy on Bush).

So, truth be told, Obama and the Dems really have very little to gain politically from solving the fiscal cliff.

On the GOP side, there is little incentive to solve the fiscal cliff either. If they kowtow to Obama’s wishes, they’ll infuriate their base. And there’s no chance that they’ll convince Obama and the Dems to meet their demands of cutting spending (they sure haven’t done anything of this nature in the last two years). So the best thing they can do is simply refuse to address the problem, go off the cliff and then maintain a “we fought the best we could against insurmountable odds” stance.

So… neither the Dems nor the GOP are incentivized to solve the fiscal cliff.  Both parties are best off from a political standpoint having us go over the cliff and then fighting for some kind of tax breaks/ tax relief for their bases sometime in late 2013/ early 2014.

With that in mind, we’re very likely going over the cliff in a month’s time. The whole situation has echoes of the failed debt ceiling talks and subsequent market collapse of 2011.

Indeed, the market’s action today looks virtually identical to its moves going into the Debt Ceiling talks in July/August 2011.

Here’s the S&P 500’s recent action:

Here’s what the market looked like going into the Debt Ceiling talks of 2011.

Here’s what followed:

I highly suggest preparing in advance.

If you’re an active investor looking for investment ideas on how to play this, I’ve recently unveiled a number of special investments to Private Wealth Advisory subscribers designed to produce outsized gains when we go over the fiscal cliff.

These are the exact same investments we used to lock in gains of 14%. 16%, even 18% in a matter of days during the Debt Ceiling debacle in 2011.I believe we’ll see even larger gains this time around.

To find out more about Private Wealth Advisory (a bi-weekly investment advisory that focuses on the global economy and outlines which investments will do best in various environments)… and learn more about my fiscal cliff trades…

Click Here Now!

Best Regards

Graham Summers

 

During the its first term, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.

Now that Obama’s won a second term, there is no indication that this trend will end. We must recall that regardless of what is said, it was Obama who re-appointed Ben Bernanke as Fed Chairman. And it was under Obama’s watch that QE lite, QE 2, Operation Twist 2, and now QE 3 were launched. It was also under Obama’s watch that the US reached a Debt to GDP ratio of over 100%.

Indeed, at no point in history has the US had this much debt during peacetime. And the fact that we’re overspending by this amount at the exact time that other countries are showing signs of shunning US Treasuries is a formula for disaster.

With that in mind, it is highly likely that the US will enter at the very minimum a debt crisis and quite possibly a currency crisis during Obama’s second term. In preparation for this, investors will want to focus on the following investment themes:

1)   Inflation hedges based on continued spending and money printing.

2)   Gold and Silver as an alternate currency based on the US Dollar falling further.

3)   Productive assets (foreign real estate, apartments in specific markets, businesses, essentially anything that produces cash).

4)   Preparing for an eventual US Debt Default.

Regarding #1, there are several areas to consider. They are:

1)   Precious metals (bullion)

2)   Natural resources, particularly timber

3)   (last and least) Blue chip businesses or companies with pricing power that can maintain profits during periods of inflation

As far as precious metals go, you need to:

1)   Own Bullion

2)   Store it yourself (not in a bank)

I do not recommend owning a paper gold-based ETF because frankly the custodial risk is high (that is, there’s no telling if the Gold is even there or who would get it if the ETF is liquidated).

In comparison, physical bullion, stored outside a bank, is literally money in hand. You know where it is and you can find out what it’s worth. Compare that to a Gold ETF in which you’re hoping that the bank actually has the Gold and that it could actually send it to you if you requested (fat chance).

In terms of actual gold coins, there are three coins that comprise the bulk of the bullion market. They are Kruggerands, Canadian Maple Leafs, and American Gold Eagles. I’ve been told to avoid Maple Leafs by both a trader and a bullion dealer as they can easily be scratched which damages the gold and reduces the coin’s value.

In terms of silver, the easiest way to get it is via pre-1965 coins (often termed “junk” silver). You can also get silver one-ounce rounds (coin-like medallions) and 10-ounce bars. Or you can buy Silver Eagles coins.

I cannot tell you which dealer to go with, but look for someone who’s been dealing for years (not a newbie).  You should always ask for references from the dealer (former clients you can talk to about their purchases/ experiences).

Some warning signs to avoid are dealers who try to store your bullion. Never, I repeat, never store your bullion with someone else. Always store it yourself. Also, be sure to talk to the dealer for some time and ask him or her numerous questions about the industry, the coins, etc. (feel free to test him or her on the information I’ve provided you with e.g. the three most liquid Gold coins, etc.). If they can answer everything you ask in a knowledgeable fashion, their references check out, and you verify everything they say with a 3^rd party, you should be OK.

In terms of other natural resources, the best assets to own are the actual resources themselves. However, not everyone can go out and buy timberland or a lead mine. So this means looking at various commodity and natural resource ETFs.

As far as stocks go, I suggest looking at large cap blue chips stocks that are able to pass on rising costs to consumers (at least in part). I’m talking about well-defined brands that offer goods and services which consumers are willing to pay more for as prices rise due to increase operational costs and commodity prices.

This inevitably leads to defensive non-cyclical industries: tobacco, beverages, medicine, energy, etc. In the large-cap space, the following are worth consideration.

Company	Symbol	Industry	Price to Cash Flow	Dividend Yield
Kraft Foods	KRFT	Food	10	N/A
Nestle	NSRGY	Food	15	2.6%
Coke	KO	Beverage	17	2.6%
McDonalds	MCD	Fast Food	13	2.9%
Exxon Mobil	XOM	Oil	8	2.2%
Clorox	CLX	Cleaning Supplies	16	3.2%
Colgate-Palmolive	CL	Oral Health	18	2.2%

Smaller companies I would consider if you need to remain long in the stock market are:

Company	Symbol	Industry	Price to Cash Flow	Dividend Yield
Smith and Wesson	SWHC	Guns	10	N/A
Sturm, Ruger & Company	RGR	Guns	14	2.3%
WD 40	WDFC	Lubricant	22	2.2%
Hormel	HRL	Spam	17	1.9%

I want to stress that even though these companies all have considerable pricing power, during an inflationary collapse all companies will be hit as costs rise. This is why stocks are listed as the last inflation hedges from our list at the beginning of this issue: they do not offer the same protection against inflation as bullion, and natural resources assets/ companies do.

I am not recommending any of these companies here. But if you need to have exposure to stocks to the long side, these are some of the companies I would consider. As always be sure to do your own diligence before investing in anything

Now more than ever, investors need to get access to high quality guidance and insights. There sheer magnitude of the issues the global financial system is facing is enormous!

So if you’re looking for someone to help you navigate the markets and protect your wealth from Obama’s various fiscal nightmare policies, I can help with my bi-weekly investment service, Private Wealth Advisory.

To whit, my clients made money in 2008. And during the Euro Crisis, we outperformed the S&P 500 by over 12%.

And now, with Obama set for a second term, we’re setting ourselves up to profit handsomely from his policies of higher taxes, greater spending, and inflation.

We’re doing this with a handful of carefully picked inflation hedges, a unique investment that could double when the US debt implosion begins, and my targeted Crisis trades which explode higher whenever the markets collapse.

To find out about these investment strategies, all you need to do is take out a trial subscription to Private Wealth Advisory.

You’ll immediately be given access to all of my premium investment analysis. You’ll also start receiving my real time buy and sell alerts telling you the minute it’s time to buy or sell an investment to maximize your gains.

All of this for just $299 per year. All in all we’re talking about over 500 pages of research per year, and an average of 40+ trades with a success rate of over 70%.

To find out more about Private Wealth Advisory…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

 

 

 

 

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