I am working on a new report for the Armageddon Trade as well, and hope to have this out soon. Bottom line here is that this trade allows you to make massive returns from both a collapse in fiat currency as well as a collapse in government debt. Of course, gold and silver give us the fiat currency side of the trade, and on the debt side I use TMV (3x short ETF for long term gov debt). To date, TMV has been a complete loser, and each time I expect a bottom is in place it goes lower. I don’t fault anyone for waiting to buy TMV, however I also believe that dollar cost averaging here will make you look like a genius in the months and years to come.
As I write this, the Dow is off more than 200 points, giving us a one month correction of more than 8%. However, like 2008 (review my recent updates comparing 2012 to 2008), the carnage is just beginning…and SPXU and FAZ should continue to be purchased.
There is one caveat. Money printing…excuse me…much MORE money printing is on the way. What you will not hear in the mainstream media is that global governments NEED the equity markets to collapse. WHY? It’s simple really…with the economic collapse that’s underway in China (and the rest of Asia), who will be left to buy government debt? Whenever you have a stock market collapse, investors typically buy government debt…its considered to be much safer than stocks. With the massive amounts of unsustainable debt in existence, and with China removed as the largest buyer of US (and other) government debt, the collapse in equities is almost required in order to find buyers for all sovereign debt.
And there you have it…the death spiral exists in the government debt to equity markets as well.
For all of my Australian friends, your local economy is of course directly tied to the ongoing economic disaster in China. If you have the ability to sell your real estate holdings, now is that time. If you can short the Australian equity markets, now is that time.
Back to the caveat; next up…huge money printing announcements from central banks around the world. QE3!….then QE4!….etc, etc, etc. Initially, this will be perceived as positive for stocks, but like all experiments in Keynesian economics, this one will go down in flames as well….the only question is one of timing. Without a doubt, we will get a bounce in the equity markets when QE3 is announced, and my best guess is that this announcement will come as early as July.
Let’s not forget the major US event happening in November. If Ben Bernanke wants to keep his job, he will do whatever is in his power to re-elect Obama, because with a Romney presidency, Bernanke is TOAST. Recently, I have been thinking back to the Presidential campaign of 1992, between Bush 1 and Bill Clinton (and of course Ross Perot). Alan Greenspan (then Fed Chairman) knew that a recession was on the way, yet he did VERY little to jump start the economy and help Bush to get re-elected. Whatever the reason, Greenspan refused to prime the pump. Now, this was also a point in time where the Federal Reserve was viewed as being completely and absolutely non-political, and their actions were not to be influenced by the affect they would have on a presidential election. This thought process seems laughable today…Bernanke is without question the most politically minded Fed Chairman in history, a point that just about no one would argue with. So the question is, to what lengths will Bernanke go to in order to get his buddy Obama re-elected? In 1992, I can tell you that everyone on the right was surprised that Greenspan did very little to help Bush 1. I DO NOT expect the same from Bernanke, meaning that if he has his way, we should expect a huge increase in money supply and lots of big time pump priming. Of course, this would be positive for stocks in the short term.
Why did I bother to go back in time and give this comparison? Here’s the reason; if Bernanke is left to his own wishes, we should not be surprised to see a completely manipulated economy, along with a completely manipulated stock market. This my friends is the only reason that I see stocks as having any real chance to rally, but its a point that we should all keep in mind. Of course I will write further about this in the days and weeks to come.
Regardless of what takes place in the medium term, this is how fiat currencies die an ugly and painful death in the long term. This is how gold and silver skyrocket in the end. This is how stocks collapse in the end. This is how real estate collapses in the end. This is how a global great depression happens in the end. And most importantly, this is how we return to free market capitalism, all over the world…with fiat currency viewed as the massive failure that is has truly been…with gold and silver returning as the backing for all money in existence.
Is all of this depressing? Sure, it “can” be, but only if you view the events of the day as fatal…they are NOT. The planet will continue to rotate…global growth will continue to evolve and produce massive positive change….entrepreneurs will continue to find incredibly creative ways to become wealthy…and investors that view this change through big lenses will make more money than ever. For example, if the scenario that I have been laying out for years continues to take place, consider the following:
Because you have had the courage to be a contrarian…an outside the box thinker, unafraid to do the “right” thing rather than the “majority” thing…your playbook may look something like this over the coming months and years:
** You kept your exposure to “dumb” real estate at a minimum…and you avoided the current 30-50% losses, along with the additional losses to come (and they will be significant over the next 1-3 years). By “dumb” real estate I mean investing heavily in it as an asset class, and outside of your personal residence and possibly rental properties, you simply avoided this kind of exposure. Instead, you invested these funds in”alternative investments” such as gold and silver, and private opportunities that act as contrarian investments, and that work in even the most difficult of economic environments.
**You avoided being “long” the stock market, (outside of special situations such as those in the VRA). Instead, you were “short” the markets and profited immensely.
**You diversified your most safe and liquid holdings, and rather than committing all of your conservative funds into CD’s and government bonds, you placed a percentage that you are comfortable with into REAL money, aka, gold and silver.
**Instead of depending on the corporate world, or the government, for your employment and major source of income, you instead became an entrepreneur and determined your own ceiling.
These kinds of contrarian moves allowed you to side-step the Great Global Collapse, and from the profits you made (along with the disasters you avoided), you were in an incredibly positive economic position…one that allowed you to buy cheap assets like real estate and stocks…after the fire sale that is just around the corner.
Have a great weekend all….thinking about, and then acting on the opportunities that arise from crisis, might be a good topic of discussion.
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