GALLUP: Unemployment rate at 8.3%…

December 6, 2012

The US economy is NOT getting better. This has serious implications for the US dollar and the financial markets. NOW is the time to stock up on hard assets as a form of financial insurance. Coin Trader can advise you on the best hard asset investments for your personal goals and needs.

U.S. Unadjusted Unemployment Shoots Back Up

U.S. unemployment, as measured by Gallup without seasonal adjustment, was 7.8% for the month of November, up significantly from 7.0% for October. Gallup’s seasonally adjusted unemployment rate is 8.3%, nearly a one-point increase over October’s rate.

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http://www.gallup.com/poll/159104/unadjusted-unemployment-shoots-back.aspx

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The Fiscal Cliff: An Economic “Heart Attack”

December 4, 2012

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Bank of America/Merrill Lynch economist Ethan Harris is warning that the game politicians in Washington are playing ahead of the “fiscal cliff,” is dangerous and could amount to an “economic heart attack.”

Letting the country careen over the fiscal cliff as part of a bargaining strategy to push through fiscal reforms would serve as a dangerous game politicians would be playing with the economy, said Bank of America Merrill Lynch economist Ethan Harris.

At the end of this year, tax hikes are scheduled to kick in at the same time government spending cuts take effect, a combination known as a fiscal cliff that could tip the economy into a recession next year if left unchecked by Congress and the White House.

Some lawmakers have suggested Jan. 1 can come and go without a deal and address the issue by putting one another’s feet to the fire or punting on deadlines as tax hikes and spending cuts take root.

Even talk of such strategy can damage the economy.

“One of the most dangerous ideas circulating in Washington is that it is okay to go over the cliff temporarily,” Harris said a note to clients, according to CNBC.

“Threatening or actually going over the cliff will likely do serious damage to economic and market confidence. What some people are calling a ‘bungee jump’ could cause an economic heart attack.”

Investors, meanwhile, are growing increasingly nervous.

“The clock is ticking,” said Quincy Krosby, market strategist for Prudential Financial, Bloomberg added.

“The focus is on what goes on in Washington. The market will be volatile. You’ve got to be very well-hedged given that the market is so much headline-driven.”

The best hedge against uncertainty in the stock market has historically been gold.

 

 


No Laughing Matter

November 29, 2012

The Weekly Standard reports that Senate Minority Leader Mitch McConnell burst into laughter while he was attending a briefing by Treasury Secretary Timothy Geithner on the administration’s plan to avert the impending “fiscal cliff” that threatens the US economy and financial markets.

http://www.weeklystandard.com/blogs/mcconnell-burst-laughter-geithner-outlined-obamas-plan_664210.html

It’s disheartening for investors to hear that the two political parties are so far apart with this unprecedented set of circumstances set to converge in just one month’s time.

This is certainly no laughing matter for investors. Not only might large amounts of our wealth be taken away by higher tax rates and closures of so-called tax “loopholes,” but we are also threatened by fiscal policies that could continue the devaluation of the US dollar and even accelerate what many see as inevitable high inflation. What may be even worse is that the impact could send the US economy into another recession in the process.

That combination of recession and high inflation is called “stagflation,” a phenomenon that we have written about from time to time. The last time the US was inflicted with serious stagflation in the mid-1970s, the stock market fell 45% in 21 months, the price of gold tripled and a broad index of rare coins appreciated by some 1,000%


REPORT: Nuclear Iran would ‘double’ oil prices, cost millions of U.S. jobs…

October 10, 2012

Part of what we try to do at Coin Trader and on the Mind Your Money blog is to provide advance warning of external factors that may not seem to be investment-related at first glance, but which are in fact absolutely vital for investors.

One of the issues that we are following closely is the simmering conflict over Iran’s nuclear program.

We do not examine this conflict from a political standpoint, but rather strictly from an economic and investment standpoint. No matter what your view of Iran, its nuclear program, Israel or a possible US response, you MUST NOT ignore the possibility that a crisis could erupt over Iran’s uranium enrichment activity.

That means you must prepare ahead of time by diversifying into gold investments, something we deal with regularly.

But what types of conditions are likely to result from a crisis involving Iran?

Obviously, no one has a crystal ball, but a new report issued by a bipartisan association of national security and economic experts predicts extremely chaotic conditions. Here are a few of the highlights:

• The price of a gallon of gasoline in the USA could climb by an additional $2.75 per gallon

Inflation would increase to 5%, far above current levels.

• The US would be plunged into a recession, with 5 million jobs being lost.

In other words, an Iran armed with nuclear weapons would touch off a bout of 1970s-style stagflation.

Investors must be aware that in the 197os stagflation, the price of gold tripled and the stock market plunged by 45%.

http://freebeacon.com/the-economic-consequences-of-iranian-nukes/


IMF Warns of ‘Alarmingly High’ Risk of Deeper Global Slump

October 9, 2012

The International Monetary Fund is back issuing warnings about the global economy and investors best heed those warnings. The IMF may be controversial in many ways, but when it comes to the individual investor’s perspective, they don’t really have an axe to grind.

The IMF cut its global growth forecasts as the euro area’s debt crisis intensifies. This comes as a bit of a shock to many observers since the European crisis has been pushed to the back burner by the US presidential election and Middle East issues. This is a stark warning that Europe is still sick and not in recovery.

“Confidence in the global financial system remains exceptionally fragile,” the IMF said. “Bank lending has remained sluggish across advanced economies.”

What all this means to investors is that the global economy is fragile and when the economy is fragile, the financial markets are under duress as well.

That requires action, specifically acquiring investment assets that can provide a hedge against turmoil. Hard assets, particularly gold investments, are ideally suited for that purpose. And when it comes to gold investments, rare gold coins offer a unique combination of performance and security benefits.

http://www.bloomberg.com/news/print/2012-10-08/imf-sees-alarmingly-high-risk-of-deeper-global-slump.html


Wall Street Journal Market Watch: Stagflation is back, ready or not

August 16, 2012

One topic that we cover on Mind Your Money frequently is stagflation, simply because stagflation is the perfect storm for investors.

It is terribly damaging to stocks and equally toxic for bonds. Gold investments, on the other hand, have historically performed very well during periods of stagflation.

That’s why when a mainstream financial news outlet like The Wall Street Journal covers stagflation, we draw attention to it. When someone tells you that stagflation is coming, what they’re really telling you is to prepare for a bear market in stocks and bonds and a bull market in gold investments…

Stagflation is back, ready or not

Commentary: U.S. revisiting economic woes of 1970s

PORT WASHINGTON, N.Y. (MarketWatch) — The dreaded combination of stagnation and inflation has returned, bringing with it new challenges for policy makers, investors, business people and consumers.

As far as policy goes, it is tough enough to reduce unemployment. It is also no picnic to keep inflation at bay.

But it is a real challenge to deal with both at the same time, which is what policy makers must do when confronted with stagflation. This is because fighting one problem risks exacerbating the other.

While neither unemployment nor inflation is uncommon, every so often, both rise together to alarmingly high levels. Take the period from 1973 through 1975, for example.

The economy entered into a recession in November 1973 and did not stop falling until March 1975 — a period of 16 months, which at that time was the longest downturn since the 1930s.

Meanwhile, inflation, which had risen from 3.6% at the beginning of 1973, to 8.3% when the recession began, continued to rise throughout 1974, peaking at an annual rate of 12.3% in December of that year.

This double-digit inflation was caused by rapid money growth in the wake of the quadrupling of oil prices in late 1973, which led to a sharp rise in inflation expectations, especially through cost-of-living-clauses in private and public contracts.

However, the combination of sharply rising prices and interest rates depleted buying power, causing business to cut back. Layoffs rose, sending the unemployment rate from 4.9% in the fourth quarter of 1973 to a high of 8.7% by the second quarter of 1975.

President Ford’s WIN (Whip Inflation Now) policy was futile; so were President Carter’s wage-price guidelines.

It took Paul Volcker to vanquish inflation. The Fed chief’s policy of tight money and record-high interest rates produced a double-dip recession from 1980-82 — but sent inflation tumbling from an annual rate of 15% in early 1980 to only 2.5% by the middle of 1983.

On the surface, today’s economy looks like just a case of stagnation. After all, it’s the unemployment rate that’s high at 8.3%; the reported rate of inflation has been below 2% for the past few months.

But here is the rub: While some prices, such as fuel, are up noticeably, today’s inflation seems to be very low, probably a result of giving less for the same price.

For example, in the supermarket, you now find 10 mini-bagels for the price of 12, and 21 garbage bags for the price of 25.

Summer camps are now giving your children seven weeks away for the price of eight. And how many of you have noticed new menus at your favorite restaurant with new (higher) prices?

Now the government’s surveyors are supposed to pick this up, but they are usually late to the party until it’s called to their attention, as we are doing here.

More (visible) inflation lies ahead. The drought has already sent grain prices soaring. Cattle will soon follow. Besides food, prices are already rising across the board for such staples as cars, clothing, and shelter — and, of course, medical care.

If the Fed eases further, reported inflation is bound to rise. If fiscal policy tightens, the economy will probably slide back into recession.

Since both seem likely to happen, you might as well add stagflation to your list of concerns.

http://www.marketwatch.com/Story/story/print?guid=388A3B4C-E5B5-11E1-A54F-002128049AD6


More Evidence of Stagflation

August 9, 2012

There have been several significant news stories in the financial world during the first week or so of August which are worth taking note of.

Despite the fact that gold has traded mostly sideways for some time now, there is a great deal of evidence to indicate that conditions are percolating below the surface that could lead to conditions that would be decidedly negative for the US dollar and financial assets and thus positive for gold investments.

For instance, the CEO of PIMCO, which is the parent of America’s largest bond fund, has warned that the world is headed for a severe recession not unlike the one that ended in 2009:

http://www.bloomberg.com/news/print/2012-08-02/pimco-s-el-erian-says-world-in-serious-slowdown.html

Readers will recall that the recession that ended in 2009 came about after a financial crisis which almost saw the meltdown of the US financial system. Readers should also recall that in the beginning of that episode gold languished as investors liquidated gold positions to cover losses elsewhere. Nevertheless, gold rebounded sharply and ended higher in both 2008 and 2009. Meanwhile, the stock market experienced its worst bear market in almost a decade.

Do not assume that gold investments only rise during periods of high inflation. That is one of the most common misconceptions surrounding gold investing. Historically, gold has provided financial insurance and profits during a variety of economic conditions, such as the severe recession of 2008-2009.

Speaking of inflation, it is true that gold tends to react favorably to high inflation. One of the chief components of wholesale and retail inflation is food. We are seeing more and more reports in the news that indicate that drought conditions will lead to higher food prices going forward:

http://www.euronews.com/2012/08/06/drought-threatens-world-food-price-rises/

Couple these two reports–the threat of recession and the threat of inflation–and you get something called stagflation, a condition we have covered on Mind Your Money to a great extent.

The last time the US economy experienced stagflation was in the 1973-75 time frame. During that period the price of gold tripled and the stock market fell 45%.

This creates a potential scenario in which investors should accumulate gold investments to protect their wealth from any of 3 possible threats:

1. Recession

2. Inflation

3. Both Recession and Inflation–Stagflation