Sunday, June 18, 2006

Financial hurricane near and waiting

Of what is in store in the future from what was happening in the recent past, it is not good. Like the article said, the experts use words like "Financial Train Wreck", "Deep Funk", "Great Disruption", "Category 6 Fiscal Storm", "Economic Earthquake", "Serious Collapse", "God-Awful Fiscal Storm", "Debt-Driven Meltdown", "Major Upheaval", "Demographic Tsunami", "Rude Awakening", "Economic Pain", "Systematic Banking Crisis", "An Accident Waiting to Happen"...a scary thought indeed!

What is happening is what all nations are happening when they switch to a fiat-paper money (America, it's called the Federal Reserve). With all that money to spend, the legislature grants special favors to its constituents, in order to get that constituent's vote, and that legislative will be re-elected. When that legislature spends more than it will collect in taxes, the bank will print money to pay the difference. When there is too much money in the supply, that money is worth less (i.e., inflation). When the banks print money like it's going out of style, the money is worthless (i.e., hyperinflation), and the nation will collapse by its own weight. That is what Dr. Alexander Tytler foresee before the birth of America, in his theme, Cycle of Democracy.

I am not alone. The financial experts used words found in my original paragraph. To protect my portfolio, there are many different opinions. Tony Allison, a Registered Representative at Puplava Securities, likes stocks and gold. "In our opinion the sectors that will best weather the storm that is approaching will be natural resources [including precious metals], as well as stable, high dividend-paying companies."

Bill Bonner of The Daily Reckoning and author of Empire of Debt, likes cash, gold, and stocks. "Preserving capitol is paramount and in a deflationary environment having assets in cash, gold, and various types of hedge equity funds is the way to go."

Larry MacDonald, publisher of "Market Trends" for Money Sense Magazine and, likes stocks, bonds, and cash. "Investments selling far below their historical average are to be invested in, those selling far above are to be avoided or sold. It is buying low and selling high for long-term investors. That being the case, it is time to be wary of overweighting growth/cyclical stocks and to seek shelter in defensive stocks, bonds and cash."

Paul Mylchreest, an Investment Analyst with Cheuvreux, likes gold, and the lesser extent stocks. "Gold and precious metals are the only asset class that should perform well in either an inflationary or deflationary scenario. As such, gold and gold mining stocks are poised for an unprecedented rise in prices and profile."

Now, not only does Richard Russell, publisher of Dow Theory Letters, likes what he likes, he used percentages. "We do it by trading in a portion of our paper--our 'fantasy money'--for real money, for real wealth. That 'real wealth' is called gold and silver. I'd put 15% in gold, coins, or GLD, the exchange funds. I'd put 25% of what's left in two-year T-notes and the rest in six-month T-notes."

I, myself, would add 10% to gold, for a total of 25%. The remaining 75%, I would invest equally in stocks, bonds, and cash; in other words, the entire portfolio will be equally balanced and diversified. What we will have is Harry Browne's 100% Bullet-Proof Permanent Portfolio.


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