Editor’s Note:
Following the America in Recession, Part 2 article, I received this e-mail.
"Ian, stop the recession talk. We’re not in a recession. When we see two quarters of negative growth, we’ll be in a recession."
We’ll have to agree to disagree.
Despite a chorus of recession-deniers, the recession has already begun. Greenspan, Buffett, Soros, and Jamie Dimon believe we’re already there. And as of this morning, John McCain thinks so, too.
According to TheHill.com, McCains "believes the country is in a recession, adding that ‘these are very, very tough times in America."
He went on to say that while Congress and President Bush are partly responsible for the recession, others played a role, too. "I think that there’s plenty of that blame to go around, including very greedy people that happen to be in Wall Street today … like the CEO of Bear Stearns who decided the day before he was bailed out by the federal government to cash in millions of dollar’s worth of stock."
Today’s Wealth Daily
When George Soros envisions a time "when the dollar is no longer the world’s main currency," it’s time to buy more gold. Yep, 10 years after warnings of coming economic disaster, he’s now warning that our current financial pain is just beginning.
"I consider this the biggest financial crisis of my lifetime," he says. "The United States is facing both a recession and a flight from the dollar. The decline in housing prices, the weight of accumulated household debt, and the losses and uncertainties in the banking system threaten to push the economy into a self-reinforcing decline."
So it’s no surprise that he’s shorting U.S. stocks, the dollar, and 10-year Treasuries, with a liking for non-U.S. currencies and equities in China, India and Gulf States. He also believes that U.S.-held stocks should be sold into strong, short-lived rallies with a plan to reallocate funds to safer havens, like precious metals.
Gold is headed to $1,000+
With further dollar pain likely, gold will rise above $1,000.
Sure, the International Monetary Fund wants to sell 12% of its stake. But it’ll take more than news of plans to sell gold to bring down the price of gold. News is that the IMF wants to sell 12%, or 403.3 tons from its 3,217.3 ton reserve to raise about $6 billion, and help make up for a $140 million budget shortfall.
But demand for gold is strong. And with tight supply and heavy demand, jewelers and investors alike will be lined up to take it off IMF hands. Gold mine production, say reports, are failing to keep up with global gold production, which fell to 10-year lows of 2,444 metric tons in 2007. And we’re likely to see more declines this year. All the while, petrodollars are buying up gold. Middle East demand for gold is up 30%. Dubai gold sales are up about 24% to $2.6 billion. And in Saudi Arabia, gold demand was up more than 15% to 120.2 metric tons.
Plus, while Bernanke hasn’t tipped his hand about the next Fed move on interest rates, we believe the Fed will lower rates at the April 29-30 meeting, especially on a disappointing employment market. Even if the Fed raises rates at the meeting (an unlikely move), we’d see a brief rally in the dollar. But even then, the dollar rally wouldn’t last, as the market would begin speculating on the size of the June rate cut.
Take that into consideration, and buy more gold now.
As for what to buy — On the very real possibility of $1,000 to $1,200 gold by year end, SC Trading Pit is doing its due diligence with this stock. It’s a buy on further gold pullbacks.
Ian L. Cooper
http://www.wealthdaily.com
