"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

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Journal Archive
Twitter: @kherriage


Where We Are Right Now...

Right in front of our eyes we are witnessing the most serious threat to our financial system in 70 years, and anyone that tells you that it’s almost over is either guessing or just hoping. I’ll go so far as to say that I believe CNBC will face a huge class action lawsuit in the coming days and weeks, and that they stand a very good chance of losing this landmark case. So, what’s the case? For those that watch the network you likely already know where I’m going with this. For those that don’t watch CNBC….don’t use this as an excuse to begin doing so now. So here’s the deal: Every day during this 40% decline CNBC has had their cheerleaders on TV pumping the markets up. Seemingly every single guest they bring on says something like “there are incredible values in the stock market”, or “those that are buying now will wind up with huge bargains”. I believe they are very, very wrong, and that they contributing to the massive losses that investors are chalking up. Sure, every now and then they will bring a guest on to talk about the potential for even deeper stock market losses, but they are outnumbered by at least 5 to 1.

So, where are we right now? 

The good news is that this is not the 1930’s all over again. It is very unlikely that our banking system will collapse, or that there will be a run on the banks. The government has made it very clear that they will do whatever it takes to ensure this never happens, even if it means that we only wind up with just a few major banks. Unfortunately, this is just about the only good news. 

The bad news got worse this past week as global stock markets hit new lots on Friday, with many dropping over 10% in just one day. It looked very much like the US market would follow when we opened up, but a 1000 point loss was averted when the FED injected over $150 billion in the opening hour. Amazingly, US banks borrowed another $450 billion from the government last week alone simply to remain solvent, and the worst has yet to even hit them.

How can it get worse than what we’ve already seen? Here’s how: So far the vast majority of the losses that banks have suffered have come from the US housing market, and of course the derivatives tied to same. So far both corporate debt and commercial real estate debt have managed to remain somewhat steady. 

This is about to change….

This is simply not going to be just an average recession, and in fact we have only just begun to see the effects of it. Once the recession begins to catch up with corporate America, we will start to see the cracks in those loans as well as in commercial real estate. There is simply no way to avoid this. Unfortunately, the talking heads on CNBC choose not to discuss this possibility much, but once it becomes reality it will be interesting to see how they sugar coat it. 

Going forward, as things begin to get really tough on not only the banking industry, but on the real economy as well, the FED will “really” begin to get aggressive with their printing presses, which is when we will see the US dollar resume its bear market. Recently there has been a “flight to safety” in the markets, which explains why the US $ and US Treasury bonds have been going up by leaps and bounds. This also explains why gold dropped to just under $700/ounce on Friday (as of this writing gold has spiked back up to $735/ounce).

 We are witnessing a global deleveraging of never before seen proportion, which can only end one way. Eventually every fiat currency will begin to go down in value as each country does the only thing they know how to do….print more money! 

Case in point: Michael Maloney is the hand picked hard money expert of Robert Kiyosaki and the author of “Guide to Investing in Gold and Silver” (he will also be presenting at the upcoming WMI m2 Wealth Conference in Marco Island, Florida, Nov. 21-24). In his excellent book, Maloney provides an excellent review of past currency crisis dating back to the 1500’s. One such case study is the German currency crisis of the 1920’s. Following World War I, Germany was deep in debt and owed war reparations that they could not pay. Once they had used all of their gold to pay France’s reparations, they had no other option but to begin printing money as fast as they could to make additional payments. 

According to the front page of the New York Times, February 9, 1923, “Germany had 33 printing presses that were belching out 45 billion marks every day! By November it was 500 quadrillion a day (yes, that’s a real number).” The end result was a complete collapse of their currency, and an all time historic move in the price of gold and silver. The price of gold rose from 100 marks to 87 trillion marks/ounce, an 87 trillion percent increase in price! 

Folks, this is why everyone that I trust is saying that the safest place to be right now is in cash and gold and silver. At some point the fear will shift from deflation to the coming monetary inflation, which will send gold well past $1000….then $2000….and likely even higher. Many of these trusted experts believe that silver will fair even better, and I am seeing forecasts of $50 to $100/ounce. 

Regardless, this is no time to be a hero or to try and catch a falling knife. There will be a time in the not too distant future where we will be buying common stocks again, and I will have that buy list ready for you when the time comes. For now, continue to make smart decisions for yourself, for your family, and for your business. Very unfortunately, the worst is yet to come.





Limit Down!

So...will this finally be the blow off? The 1000 point down Friday, followed by another black Monday?

It sure looks like it and as I've been writing, this will get very ugly before its all over. I would not be surprised to see some real panic finally start to set in. So far the average person has taken this all in stride, and has not sold their mutual funds or liquidated their 401ks. Once that finally happens we can  start talking about a short term bottom being in place.

This is the deleveraging process that had to happen at some point, and my friends, its here with a bang. In the days to come there will be serious discussion about a global depression, and all the while global governments will be dropping interest rates and throwing as much money at the problem as they can.  

This will only add to the coming precious metals bull market.  

This is no time to be a hero, so don't try to find the bottom and buy stocks here. If you have not sold by now then its really too late. That day will come, and when it does, we will be ready.

Good luck!



Greenspan Speaks!

Today, before Congress, God, and everybody, our old buddy Alan Greenspan will be speaking about subprime lending, the debt crisis and the resulting recession. And more specifically, about his role in it. Greenspan, the Federal Reserve Chairman under Bush, Clinton, and then Bush II, is largely responsible for much of the mess we are in....of this, there is NO doubt. 

Years ago, back in the early 1980's, Greenspan spoke and wrote often about the dangers of high debt levels, easy money, and of our fiat currency. He was also a big fan of placing the U.S. back on the gold standard. But something changed when he came FED Chairman...like looking at Bizzarro and Superman...a total and complete change in belief systems took place.

Make no mistake about it, Alan Greenspan will go down as the one of the major reasons the U.S. experienced its largest economic slowdown since the 1930's.

Yesterday the U.S. stock market was down over 6%, and is now very oversold and probably due for a short term bounce. That will be all that we'll see...a bounce....assuming we even get that. The talking heads continue to tell us why "the stock market is so cheap here" and why "this selling has gotten much worse than it should have"...yet the market continues to go lower. What they are missing is that the  recession will reduce corporate earnings by as much as 30-50% over the next couple to three years. This is why I continue to believe that the Dow will drop to 6000 - 7000 before this is all over.

But even then, investor confidence is so shaken that the majority of those leaving the market may not come back for many years. I saw a poll yesterday that really surprised me. 98% of investors polled said that they will change their financial advisor because of the poor job they have done through this market meltdown. When develeraging begins...it simply continues until the process is over.  This apparently applies to stock brokers too.    

In the meantime, gold and silver continues to trade at remarkably cheap levels. While that does not mean that it can't go lower still, I will be a buyer all the way. Dollar cost averaging in pm's makes a lot of sense to me, and the miners are trading at obscene levels. Talk about buying low and selling high...



Remember Budapest, Hungary??

Many of us experienced the inaugural m3 together. No doubt about it…one of the best experiences of a lifetime. Hungary is a truly beautiful country that has rebuilt itself, time and time again, from more wars than most can even remember. That may be happening again soon…however this time it will likely be an economic war.

The news hitting the markets on Hungary now is plain scary. Monetary inflation is kicking in big time and they have been forced to raise their key interest rates over 3%... in ONE day… to over 11.5%.

The reason? Mounting debt (along with the local printing press) is putting significant pressure on the Hungarian economy, and their hope is that this move will strengthen their currency and head off a massive inflationary buildup.

So, why did I go to the trouble to point this out via an update? Why is it such a big deal? It will likely be a microcosm of what’s to come throughout Europe, and ultimately here in the US as well. If you’re getting a flashback to life in the US during the late 1970’s, then your finely tuned instincts are kicking in.

Our financial systems are deleveraging. It’s actually a good thing, because the purging must first take place before the imbalances are corrected….but for many it will feel like the 1930’s all over again.

So….deflation is the current global fear right? Tell that to Hungarians. When this new global reality begins to kick in, look for eerily similar things to begin happening here at home. That’s when precious metals will really take flight.

Kip Herriage

Editor, VRA




The Talking Heads

Anyone watching CNBC, and listening to their advice, is getting their heads handed to them in this market.

They are doing everything they can to be positive and "talk the market higher" and of course they are dead wrong. This recession is going to be the worst of our lifetime and 99% of the population is not prepared for it.

Moody's reported yesterday that over half of the country is already in a recession, and that only about 5 states still show a growing economy. Record debt levels will be the difference maker and its why I am so pessimistic about our chances for a short term recovery.

Oh...if you watch Jim Cramer and Mad Money... please view it only as entertainment. He can be brilliant in his thinking, but he changes his mind so much in the short term that it is impossible to make money with him.

Today will be ugly....back below 9000....likely for quite some time.