2-16-09

Finding the Bull

Well, the big day came and went. The Obama team announced the stimulus package... and the stock market fell through the floor when it was supposed to do just the opposite.

What went wrong?

It's a new administration and they are learning the hard way about how the game is played. Rookie Treasury Secretary Geithner gave the media what they needed (a restrained feel) instead of what they wanted: to be told everything will be magically okay now.

I don't know, maybe after the new head of the IRS got caught evading tax, he felt a little sheepish about shouting good news from the Hill.

Who can blame him?

I have had some thoughts though on what this bank bail-out will be. They say they will get private enterprise to buy all these toxic assets that are causing all the problems for banks and hence the economy. Now why would any private entity be so stupid as to do that? Well, I speculate that the Fed will lend them the money to do so at a stupidly low rate AND guarantee a floor in the values of these assets.

As if by magic, it will appear that the problem has gone away. But of course it won't have- the lent money to get those assets still has to come from somewhere. As the lender, effectively, the Fed will own these assets and will have purchased them by printing money (remember, the Fed does not own anything- it's a private entity strictly speaking!). 

The stock market tanked in response to the 'save us' plan it says because of lack of details from Geithner and rightly so.

Why the lack of details?

Because if he had given the details- i.e. the true losses of these banks and the ones still to come- it would have been panic. $350 billion remains in the bail-out fund but the loss is more like 3 TRILLION.

Think us lucky. Europe is WAY worse off on this score. Expect the Euro to get badly hit this year (you can make money from falling currencies).

The good news to emerge is that this stock market simply refuses to go back to its November low of 7570. From a chart perspective, this is encouraging. Should this level be broken, the doo-doo will really hit the fan as the Dow sinks to 5,000 or lower. Enter Great Depression II.

On that subject, there seems to be a lot of debate about what the difference is between a recession and a depression and which it is we're in now.

There are numerical definitions, but the more understandable difference is that a recession is a correction in the business cycle; a period of cooling down in what is otherwise a continuing upwards growth. Think 1991-92 or even 2001-2002. They are regular and healthy.

A depression on the other hand is something very different. Whereas you could say that a recession is healthy, a depression is not. A depression constitutes more of a massive shift in wealth and power and a tumultuous global change. A recession lasts a year or so, a depression lasts a decade or more. Think Japan in the nineties and even up to present day.

So which is it? The debate is on, but for now, you can say this is a severe recession. Though if history is any guide, depressions happen approximately every 70 years which would make this due. If there is a big shift about to happen it's one where power, wealth and the standard of living shifts away from America to an extent and shifts more to Asia.

But think for a minute how high our standard of living is. A reduction in this standard would not only be relatively immaterial but actually healthy for our souls ultimately in my view.

Anyway, so what if the action does shift more to Asia? You're entitled to ride that train via investing or even operating a business that benefits from this situation. Trust me, there are countries outside our borders. I know- I've seen them.

Recession or depression, there's money to be made. Bankruptcy lawyers have never had it so good! Okay, a cynical example but the principle applies in many other areas.

And here's where we come back to the crux of the matter; growing wealthy. Wealthy enough to live off your investments while you take it easy. This is a life where you can grow rich while you sleep as a dynamic Chinese company does a deal with a Japanese bank for example purely because you hold shares in say, Petro China.

The wealthy don't need to earn money- they just constantly shift their assets around into who pays them the most for sending it (yields).

So let's take a step back...

Right now, you're worried. Worried about your job, business, property, savings, 401k, the list goes on.

Our objective at the League of Power is to have our members turn debt into wealth and be free of all this worry. When you're retired or have your own business, a paid-for home and such a savvy investing mind you don't need to rely on hapless money-managers.

Instead of worrying, wouldn't it be better to channel that energy into removing yourself from the situation? What good will worrying do? As I've said several times, hope is not a strategy.

If you haven't become a member of the League of Power yet, I strongly urge you to do so. Plus, take a look at the many approved money-making opportunities they have vetted for their members.

Anyway, what else is happening?

Remember: it's ALWAYS a bull market somewhere.

And that somewhere is gold.

Last week I explained how gold was at a crossroads in its price and would break decisively up or down (for a healthy correction). It broke up and went aggressively through a price resistance level at $930 an ounce.

Fund managers who only a few years ago scoffed at owning gold are buying up the metal and the miners who produce it!

I've been hammering this subject for months and months now. If you still don't hold any gold but intended to, this is a possibly scary time. Getting in now may mean you miss a lower price when it comes, but not getting in also means you might be left behind.

Personally, I think gold will continue going up and burst through $1,000. BUT, no bull market goes smoothly. The bull tries to shake off as many people as it can on the ride up. It will test you and scare even the most resolved to its cause.

We have to see a big correction in gold soon before the final upsurge. Would I put money on that? No.

The final upsurge is 'gold fever'. Right now, the public scratch their head about gold (so successful the brainwashing about paper money has been), but the gold bull market will end only when a taxi driver or a shoe shine boy is telling you to buy gold. The time when everyone thinks they're a gold expert.

Sound familiar? Sound anything like how the recent property boom ended?? If you don't decide to do anything until your trusty know-all buddy or neighbor recommends doing so, you're too late!

Anyway, check recent issues for more about the yellow metal.

Tangible assets are what I want to hold in such a world. The gold story is getting out. The wheat, silver and oil stories are only just emerging. Treasury Bonds are sinking and regular readers know we've profited by this. This story too is only just unfolding.

Where do you get the cash to buy these things?

First get out of debt.

How do you get that cash? Especially if the job is on the line!

A home business with virtually no overhead and requiring virtually no additional time to run.

We have a ways to go before we're out the other side of this storm, though there will be calm periods and the occasional sunny day (to fool you!). The last man standing will be the man who is about to get rich. The man who has cash left to buy all the bombed-out assets.

There's no reason why you can't be this person. It's just a question of what you do NOW and how you channel your energy.

Will you simply hope for the best? Will you vent your anger at banks and politicians?

Or will you take decisive action to take matters into your own hands. To go your own way and never leave your precious destiny in the hands of no other than yourself.

I think you know the right thing to do.

Until next time,

Mark Patricks

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