October 26, 2012
While all of the attention seems focused on the USA due to our presidential election, the world economy may be what matters most–and nothing that the next president of the United States can do will necessarily save the entire world from itself.
Take Europe as an example. Europe has been careening toward crisis for two years now. The European Union has repeatedly applied band aids in attempts to correct the underlying problems, but those band aids have never been enough.
Now we are in a situation where two of Europe’s problem nations, Spain and Greece, both have unemployment at over 25%. These are simply depression levels. And even supposedly, relatively healthy Britain now has unemployment at record levels.
In today’s interconnected, globalized economic and financial system, there is simply no way that the acute problems in Europe can be limited to Europe. Make no mistake, their presence will be felt here in the US, in our financial markets. Many US companies are dependent on overseas markets for sales of their goods and services. Others are dependent on overseas markets for equity ownership stakes.
The continuing European crisis is one which investors cannot ignore. They must diversify into assets that have historically performed well when other assets suffer. Gold investments are ideal for that purpose.
Spain Joblessness Reaches 25%
Greek Unemployment Rises Above 25%
UK Unemployment Hits All-Time High
October 11, 2012
Just when many investors assumed that they could forget about Europe, news from across the Atlantic has cropped up again–and that news is not good.
The European Union has supposedly taken action to “solve” the fiscal, monetary and economic crises plaguing Spain and Greece, but the fact is, both countries are still in dire financial straits.
The unemployment report from Greece came in and fully 25% of Greece’s workforce is unemployed. There is only one word that can describe that sorry situation: DEPRESSION.
Meanwhile, in Spain, the news was no better.
Standard & Poor’s downgraded Spain’s credit rating two notches (again) to just one level above junk status. This will raise the cost of borrowing for Spain and is a reflection that past band aids put on by the European Union have not solved that nation’s problems.
What all this means to investors is that, though the financial world is oblivious now, it won’t be able to remain oblivious forever. And though right now investors are not seeking the safe haven of gold due to the European crisis, we can be sure that eventually they will.
It is best to accumulate safe havens BEFORE everyone else does!
September 27, 2012
The price of gold surged higher by over $25 per ounce to just under $1,780 on a double dose of news that the market regarded as bullish.
First came the news that China was further embarking on a monetary stimulus plan of its own to try to jump-start its slowing economy. With Europe, the US, China and Japan all printing money at the same time, traders are very bullish on the outlook for gold.
At the same time, Spain announced that it would meet budget deficit targets, an indication that perhaps the worst is over for the Spanish depression.
August 13, 2012
Germany‘s largest news magazine has just published an important story on what is seen as the impending collapse of the euro.
Investors need to examine what this means for their portfolio.
First of all, you should not assume that because the euro is a European currency that the side effects of its collapse would be limited to Europe. In today’s globalized, interconnected world, finance moves literally at the speed of light. What happens 10,000 miles away may as well be next door.
As we have seen in the periodic flare ups of the ongoing economic and financial crisis in Europe, the initial beneficiary of weakness in the euro has been the US dollar. Should the euro collapse, the initial reaction would probably be similar. But this would be short-lived for two reasons:
1. Historically, currency crises benefit gold, which is a counterweight to the US dollar.
2. Those who flee the euro for the dollar will soon realize that the systemic and fundamental debt problems that have led to the euro’s demise also exist in the US–only worse. As a result, investors need to find alternative safe havens.
There is no silver lining for this cloud in terms of world stock markets. A collapse of the euro would send shockwaves across the oceans.
This is all the more reason why investors should seek to accumulate gold investments now, before a euro collapse.
July 23, 2012
The US stock market fell sharply today, mostly because of renewed worries coming out of Europe.
It now looks as if the $100 billion bank bailout package the European Union granted to Spain isn’t going to be enough and the fear is that a much larger, broader bailout of the country’s financial system will be required. Spain is not Greece. Spain has a much larger economy and a much larger banking system. Scraping together the money to fix Spain’s debt woes is a lot easier said than done. In fact, no one is certain that a bailout can or should be accomplished at all.
Speaking of Greece, the old problem that was supposed to have been fixed is still very much of a problem. The bailout program that the European Union put together for Greece worked so well that now their Prime Minister is saying their economy is in a “Great Depression:”
For now, the Dollar has been the beneficiary of the European trouble, but there are other indications that the dollar’s strength can’t last:
For example, the drought that we have reported on here twice before is getting worse, which means higher commodity prices ahead, pushing inflation fears higher, even as the economy stagnates:
And despite all the government spending over the past few years, all designed to stimulate the economy, the poverty rate in America is soaring, reaching levels not seen since LBJ originally launched the so-called “war on poverty:”
Meanwhile, disappointing earnings are pointing to a fast-aproaching recession in the US to go along with those higher food prices. STAGFLATION anyone?
Experts expect that recession any time now. Nouriel Roubini says the US economy is going from bad to worse:
Anyone who expects good things from the US dollar and stock market in these conditions is whistling past the graveyard. Diversification is the best defense and hard assets provide the best form of diversification.
July 20, 2012
Many observers thought that the economic and financial trouble in Europe was a thing of the past.
But just as we have learned so many times, this is the slow-burn crisis that always seems to come back. European policymakers can come up with band-aid bailouts, but those don’t solve the underlying, fundamental problems that exist in Europe. The European economy is in a depression, much of the European Union is in deep, unsustainable and, in some cases, unservicable debt. Bailouts won’t fix the breakdown and Wall Street knows that the trouble isn’t going away any time soon. In fact, the reason Wall Street sold off sharply today is that they know that in today’s interconnected world in which money flows at the speed of light, the crisis in Europe will be exceedingly difficult to contain.
As a result, with bad news coming from Spain today, the US stock market sold off sharply across the board.
The Dow fell 112 points, or 0.86%, to 12832, the S&P 500 dipped 11.9 points, or 0.87%, to 1365 and the Nasdaq Composite slumped 33.7 points, or 1.1%, to 2932. The US indexes were just following the example set overnight in Asia and Europe, where stock markets took even steeper dives. The Euro Stoxx 50 sunk 2.8% to 2237, the English FTSE 100 dipped 1.1% to 5652 and the German DAX slumped 1.9% to 6730. The Japanese Nikkei 225 sold off by 1.4% to 8670.
Readers may recall that early on in the European crisis bad news in Europe usually meant lower gold prices as investors liquidated gold to cover losses in other assets. Those days appear to have passed. While world stock markets were tumbling, gold was up over $2 per ounce, demonstrating gold’s role as an excellent diversifying asset for a balanced portfolio.