Obamacare and Your Investments

June 29, 2012

By now everyone knows that the Supreme Court upheld President Obama’s healthcare program, known to many as Obamacare.

This story dominated the news yesterday, which is why we decided to take a step back and wait a day before commenting.

Our interest in Obamacare on these pages is strictly on the basis of its impact on the US economy and financial markets.

Some of that impact is unknowable at this time, but not all of it. We know that Obamacare will fundamentally transform the role of government in the everyday lives of every American. That requires infrastructure. Infrastructure requires people, i.e. bureaucracy.

And therein lies the biggest worry when it comes to Obamacare for investors across America: it’s truly profound fiscal impact on America’s already bleak fiscal condition.

The biggest fundamental factor likely to effect the US investment markets going forward is our huge national debt and ongoing deficits.

As of this writing, according to the National Debt Clock, the US National Debt is closing in on $16 trillion. And each year’s federal budget deficit adds another $1 trillion or more.

These are unsustainable figures. There is simply no way that the US can service this debt without resorting to the printing presses to pay off the debt with dollars cheapened by inflation. The future of the dollar is cooked into the books by our debt situation. The world is already awash in dollars. Printing more will continue to undermine its value.

Obamacare will add immensely to this debt burden. Estimates of the cost of Obamacare since it was conceived to today have gone from less than $700 billion to over $900 billion to now over $1 trillion. Obamacare won’t just transform the role of government in our everyday lives, it will transform our nation’s fiscal condition in ways totally unforeseen until it was dreamt up.

In other words, Obamacare means a much weaker dollar and future high inflation. As a result, investors must deploy assets into investment categories that actually benefit from high inflation and a weaker dollar. Gold is the ideal investment for such a scenario.


Investors seek the safety of gold as deja vu sets in ahead of European summit

June 27, 2012

Starting tomorrow, Thursday, the European Union will start a summit that will be the latest episode in the “save Europe from financial armageddon” saga.

Given the disappointing outcomes of previous summits it is no surprise that investors moved back into gold today, seeking a safe haven from the fallout of what ever the European policymakers are likely to come up with this time.

The market was rather subdued, with gold only rising $4.70 per ounce, but the key is to look to the longer-term pattern.

What generally happens is that the world looks upon these summits with great hope as they begin.

Then, at the end of the summit, the attendees make a grand announcement about the wonderful agreement they’ve reached to solve Europe’s debt, economic and financial woes.

The markets breathe a sigh of relief…

…and then, inevitably, reality catches up and the summit agreement ends up being smoke and mirrors and, as a result, the markets despair yet again.

It’s much wiser to accumulate your gold investments now, before the inevitable happens yet again.


Gold Soars as Stocks Come Down

June 26, 2012

Worries about came back to haunt stock markets on Monday as the price of gold soared due to safe haven buying.

Fresh concerns that the economic and financial situation in Europe is deteriorating slammed world stock markets on Monday. Stock markets in China, Japan, Germany and London were all down sharply. The Euro Stoxx 50, an index of European blue chips, fell by 2.6% during the day’s session.

The carnage washed up on American shores as well. The Dow Jones Industrial Average fell 138 points, or 1.1%, the Standard & Poor’s 500 finished 21 points lower, or 1.6% and the NASDAQ was down 56 points, or a full 2%, at the close.

Gold was decidedly higher amidst all the chaos, rising more than $15 per ounce to $1,588.00.

This was classic safe haven buying of gold. Despite the fact that the dollar was higher against the euro, one of its chief rivals, and despite the fact that one of the key indicators of inflation, the price of oil, has been declining precipitously, gold still rallied.

When investors have seemingly no place to turn, gold always stands out as the clear choice.

This vividly demonstrates the true independence of the gold market, and why gold has been considered a safe haven for 5,000 years. Against the continued backdrop of uncertainty and crisis in Europe, gold is once again providing vital security, rising while stocks are falling.

To learn more about the benefits of owning gold, contact Coin Trader today at (866) 603-1938.


German Finance Minister Calls Out Obama

June 25, 2012

President Obama and members of his administration have been quite vocal lately about admonishing the European Union to resolve its fiscal, economic and financial crisis.

Solving the crisis is, of course, much easier said than done.

In the early stages of the crisis, investors and traders alike have vacated the euro in favor of the dollar. But today Germany’s finance minister rebuked President Obama’s public advice for the Europeans by admonishing the president to quit worrying about offering advice to Germany and the rest of Europe and start concentrating on solving America’s fiscal problems.

The German has a point and this very issue is why the dollar cannot be a safe haven for a collapse of the euro over the long-term.

Europe certainly has fiscal woes, but America’s national debt and ongoing annual deficits dwarf those of the European Union nations. Moreover, that national debt is the very reason why the dollar cannot sustain strength beyond the very short-term.

As a result, investors must diversify into assets that have historically been negatively correlated with the US dollar. Gold is just such an asset. Historically, when the dollar has been weak, gold has usually been strong.

But there are many different ways to invest in gold. For a complete explanation of all the available options, contact Coin Trader today.


Wall of Worry Extends from the USA to Europe

June 22, 2012

In the wake of yesterday’s serial downgrading of the world’s biggest banks, it is clear that the world economy and financial markets are entering a dangerous period for which investors must seek the protection and security of gold.

But we might add this morning that there are other items in the news that investors need to pay attention to. And these additional news items extend around the globe as well.

Starting right here in the USA, we have a news article about the bleak real estate market, which remains in a depression. (Yes, a depression.) We have been hearing from some real estate pundits for some time now that the real estate market is going to make a comeback. So far, there is no sign of it. In fact, as the article below mentions, the housing market just hit a fresh 15-year low. It seems to us that before the market can recover it must stop falling first.

http://blogs.smartmoney.com/advice/2012/06/21/5-housing-markets-where-renting-beats-owning/

There was a time when real estate was considered a suitable alternative investment for investors seeking diversification from stocks, bonds and cash. That just isn’t so any more. Real estate not only fell right along with the stock market back in the 2008 financial crisis, but it played a role in causing the bear market in stocks.

Investors seeking alternative assets need to look to true independent markets, such as rare coins and precious metals, which have historically had a low or even negative correlation with stocks.

Switching to conditions across the Atlantic Ocean, we have two news items which, while not pleasant, are issues that investors in the US ignore at their peril. Readers may recall that the markets breathed a sigh of relief at the results of the Greek elections last weekend. Greece often seems at the edge of the abyss, but also always seems to pull back at the last moment. Nevertheless, Greece is in anything but good condition. How bad are things in Greece?

Thousands of Greeks are lining up for food handouts in a scene reminiscent of the Great Depression:

http://www.dailymail.co.uk/news/article-2161651/Starving-Greeks-food-thousands-politicians-finally-form-coalition-government–long-last.html

It does very little good for the European Union to bail out the Greek government if the underlying economy in Greece is so bad that the people cannot feed themselves. The situation is not sustainable and is symbolic of the fact that, at the end of the day, no one really knows what to do to solve this building crisis. (Fortunately, there is something that individual investors can do and that’s to own gold. For centuries gold has endured every crisis known to man.)

To elaborate on the European theme, we were all greeted this morning with a stark warning from Italy, the next country in line with a debt crisis problem. Italy’s Prime Minister, Mario Monti says that there is only one week left to save the euro.

http://www.guardian.co.uk/business/2012/jun/22/mario-monti-week-save-eurozone

Every time it seems that policymakers claim that they have gotten their arms around the crisis in Europe, a new near-death experience comes along. Investors should have no confidence at all that there will be a positive outcome from all of this maneuvering. And don’t assume that America is insulated from the fallout. After all, yesterday, the biggest investment banks downgraded by Moody’s were American firms–all because of perceived vulnerability to the outcome of the European crisis.

Prepare ahead of time by accumulating a diversified portfolio of gold investments. Contact Coin Trader today.


MARKETS HIT HARD BY MOODY’S BANK DOWNGRADES

June 21, 2012

Today the financial markets were hit hard by the announcement that Moody’s Investors Service had downgraded its ratings of 15 major investment banks, including all of the world’s top 10 investment banks.

Household names like Bank of America, Citigroup, J.P. Morgan Chase, Goldman Sachs and Morgan Stanley were among the financial institutions downgraded because Moody’s sees them as vulnerable to downturns in global investment markets and the world economy.

It was no surprise the US stock markets took the news hard, falling over 2% on the day, but many investors are no doubt bewildered by gold’s reaction to the news, since the yellow metal fell as well.

Gold’s reaction was actually in keeping with its cyclical role in such crises. Often at the outset of a financial crisis, the price of gold will fall as investors use their gold holdings as a certain source of liquidity to cover losses in other parts of their portfolio. This is exactly what happened in 2008 when the US financial system nearly melted down. Gold fell at first, but eventually rebounded sharply and finished the year in positive territory, while the Dow was down 33% for the year.

We expect a similar reaction this time and recommend that our clients view current levels as exceptional buying opportunities for physical gold investments of all types.


Goldman Sachs: The Fed is about to restart the money pump

June 20, 2012

Goldman Sachs is a lot of things to a lot of people. The Wall Street firm is certainly not without controversy.

But one thing critics and fans alike will admit about Goldman Sachs is that the firm has insider knowledge of the Federal Reserve. That’s because for years there has been a revolving door between Goldman Sachs and the Treasury Department.

Employees go back and forth between the Wall Street firm and government service at the Treasury Department in general and the Federal Reserve in particular.

That’s why when Goldman Sachs makes a statement about Federal Reserve monetary policy, investors need to listen carefully.

This week Goldman Sachs has issued an advisory forecasting that the Federal Reserve will soon resume an accommodative monetary policy designed to spur economic activity. The method Goldman Sachs says the Fed will use to do this will be to go out in the open market and buy US Treasuries as well as US mortgage-backed securities, such as bonds issues by GNMA, FNMA and Freddie Mac.

The idea is to inject cash into the economy and attempt to keep interest rates on Treasury and mortgage-backed issues down.

It is a theory that looks good on paper, but one which has not really worked all that well in practice. The Fed has been priming its money pump over and over for some time now and yet the US economy has remained anemic.

These types of monetary policy moves are much more likely to undermine the value of the US dollar and create new bubbles than they are to actually stimulate real economic activity.

The world is already awash in dollars. Adding more dollars at this point should meet squarely with the law of diminishing returns. All injecting more dollars into the system will do at this point is further undermine the value of the existing dollars.

It is simple supply and demand at work. If the supply of an item is increased with no corresponding increase in demand for that item, the value of that item falls.

And make no mistake, there is no increasing demand for dollars. If there was, the Fed wouldn’t have to go out on the open market and buy US Treasuries in the first place. If demand for US Treasuries was already robust, the Fed would be seeking other means to stimulate economic activity.

No doubt the markets will cheer this move by the Fed because more money swashing around in the system over the short term means more money available to invest in the stock market. And low interest rates on Treasuries means that there is less competition for those stocks from what were formerly thought of as “risk-free” government bonds. (Is it any wonder why S&P downgraded the USA‘s credit rating 10 months ago?)

But the real play here is gold. Because gold will not only benefit from the low interest rate policies over the short-term, but, unlike stocks, will also benefit from the undermining of our dollar over the long-term.

Gold serves as a counterweight to the US dollar because the US dollar is the world’s reserve currency of choice and also because gold is priced in dollars. Any decrease in the value of the dollar is usually met with an increase in the price of gold.

This week, at least according to Goldman Sachs, the Federal Reserve is planting the seeds for rising gold prices down the road.

Get your gold now while the price is still low.