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...

Kip 

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

www.vraletter.com

www.kipherriage.com

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.

Kip

m2 Wealth Conference

How time flys...the older I get the faster that clock ticks. Remember when you were a kid and it seemed to take forever for that school bell to ring at 3? I guess this means that we just have to take advantage of every waking moment. I like that game plan.

I really look forward to seeing everyone at our upcoming Wealth Conference in Marco Island, FL (Nov 21-24).

Featured keynote speakers include these infamous gurus; G Edward Griffin, Mike Maloney, Chuck Butler, Allen Andrus, Deanna Latson, Jeff Combs, Wayne Allyn Root,  and 10-12 additional world class experts on wealth, health and wisdom.

The coming economy is going to have lots of people confused and scared for their financial future, but this does not have to be their reality. We have the unique ability to show people how to live the life of their dreams, and because this is our best line-up ever, our 7th Wealth Conference is going to be the event of a lifetime....likely the single best event ANY company has ever sponsored....on or off Wall Street.

See you in 30 days!

Kip

www.wmitoday.com/kip

www.vraletter.com

The Next 3 Years

I woke up this morning to CNBC and more negative earnings results, and thought back to my days as a financial advisor and venture capitalist. Its never been more difficult for the average person to invest in the stock market and don't look for that to change anytime soon. People are waking up to the reality of this economic crisis and wondering if they should get out, buy more, or just keep their eyes closed and hope for the best. Trust me on this one folks...this is going to get ugly before its all over. The average mutual fund investor is going to start freaking out when they see the market hit new lows in the coming weeks, because the concensus is that the government has things under control (finally).

Quick Question: have you ever known the government to have things under control?

(This is the point that I have to recommend Ron Pauls best seller "The Revolution". If you think that big government is the answer, then this is a must read for you). 

However, here's what I know to be a given; the "global supercycyle" is still very much intact and there are significant opportunities....right here, right now...that long term investors should be acting on. China is still growing their GDP at 8-10% per year. India, Russia, Brazil, Malaysia, the Philippines, Vietnam, and others in the region are not far behind.

So, what does this mean for us? Massive opportunity! Our favorite global ETF's for one....incredible buys at these levels. Energy is still very much a supply/demand story, and should be bought on this pullback. The same goes for the miners of course. This is the beauty of dollar cost averaging. While it may feel painful to buy more at lower prices, your reward will come in the next 3 years...with vastly superior returns.

Kip Herriage

Editor, VRA

www.vraletter.com