I guess Mr. Obama is a League of Power reader. In his own words this week he said, “The day of reckoning has arrived.”
Last week, I explained how, from a technical point of view, by the stock market dropping below it’s November low, this was an ominous omen, not just for the stock market, but for everything. Combine this with the fact that January ended lower than it started (the ‘January Barometer’ effect) and it doesn’t look good.
Now having said that, that’s not to say we couldn’t see a powerful rally from here, but ultimately, we will see Dow 3-4,000 is my (and many others’) guess.
If you’re still clinging on to this ‘buy and hold’ mentality that’s been beaten into you, you need to perhaps question it. Even now, before the next drop down, the stock market is at 1997 levels. Where did ‘buy and hold’ get you the last dozen years?? Between 1929 and 1932, the market lost 89% of its value.
“There’s no sign that we are anywhere near a bottom,” hedge fund legend George Soros suggested last weekend. “We witnessed the collapse of the financial system. It was placed on life-support, and it’s still on life-support.”
Likewise for the property market and business/job situation. I think it will surprise people just how low how property will ultimately go AND that any recovery isn’t swift.
So what’s a guy or gal to do?
Take a look back through the newsletter archives.
In short, hope, faith and hesitation are going to KILL YOU. It’s time to be pro-active in your plan…
GET MORE CASH.
It’s time to become the best employee/business owner you can be. MEANWHILE, start a home business IMMEDIATELY. Now, don’t start coming up with all the usual excuses people come up with over this! There are many opportunities we’ve vetted for you and the latest one- The Magic Words- is simply brilliant in that YOU CANNOT LOSE. Currency traders have never had it so good with all this volatility. Remember, things don’t have to be hunky-dory to make extra money; just ask a bankruptcy attorney or pawn shop owner or anyone who makes money by providing information products.
Bottom line: the biggest risk you now face is relying on just one source of income. Change this situation at once.
INVEST FOR CAPITAL PRESERVATION.
The name of this game is ‘last man standing’. When the dust eventually settles (and it will), you’ll be able to buy companies and properties for pennies on the dollar and be set up for life. Please read previous issues about gold as a defense against government counterfeiting.
And I say emphatically, THIS WILL PASS. Nanotechnology and Biotechnology will create such advances we simply won’t be able to digest the implications of them. I see this as leading us out of the mire. You want to be positioned to profit by this with some cash in hand.
You know my views on gold, so I’m not going to talk much about it this week. A correction (buying opportunity) may be due, but so may another surge upwards. This is anyone’s guess. If the stock market does have a (short-term) rally, this would make gold drop maybe 20% in the near term.
I think it’s still worth being short US Treasuries- some point soon, this bubble will burst as the government keeps issuing more and more debt for sale. By the way, IBM now has a better credit rating than the US government and IBM isn’t exactly bulletproof! You can profit by this by buying an ETF such as TBT (ask your broker).
Oil itself and certain oil stocks are positioned very well. We are pulling out of Iraq, and Iran next door probably now has nukes (and who has also publicly said they want to wipe Israel off the face of the planet). Hmmm… doesn’t strike me as a harmonious situation in the oil patch moving forward! And that means higher oil prices even without taking into account that the world’s oil reserves are running out, new exploration projects have been abandoned, the dollar is depreciating (oil is priced in dollars) and a global government spending spree on infrastructure.
Barring certain gold and oil stocks, I wouldn’t go near the stock market right now- it’s poised on the edge of a cliff and I think this week we’ll see which way it teeters.
But, never fear, the government ‘fixers’ are here…
This week, this once great bastion of free enterprise took another dive down into Socialism. As if it wasn’t enough that essentially, the banks are steadily being nationalized (the new ‘n-word’), a big cheer went up as it was announced that energy corporations would be heavily taxed to redistribute wealth to the people.
And what do you think will be the response of energy-providing companies to this? They will pass the cost on to YOU, the consumer. So who’s REALLY paying this tax?
As always, middle-America.
Does anyone have the number of a solar-power company?
But just as the energy companies have seen it all before, so have we at The League of Power when it comes to playing with numbers…
This from John Mauldin regarding what is effectively a ‘stealth tax’…
“This week saw President Obama give us a budget with a projected deficit of $1.75 trillion dollars, and a massive tax increase on the “wealthy.” But hidden in the details was an even larger tax increase on everyone. Obama wants to create a cap-and-trade program for carbon emissions. This is expected to generate $79 billion in 2012, $237 billion by 2014, and grow to $646 billion by 2019. These will be payments by energy (primarily utility) companies to the government. That will cause utilities to have to raise the prices they charge customers for energy. Such a level of taxation is eventually 4-5% of total US GDP. That is not small potatoes. And since the wealthy do not use all that much more power than the rest of us, it will affect the lower incomes disproportionately.
It will take money out of consumers’ pockets and transfer it to the government. You can call it cap-and-trade, but it is a tax. And a huge one. Anything that will take 4% of GDP away from consumer spending is not business friendly. And by driving the cost of energy up, it will drive high-energy-using businesses away from the US to developing countries where energy is cheaper. It will make it even harder for people to save money and drive up costs for the elderly and retired. But it will make the environmental lobby happy.
Further, Obama’s accounting magicians assume that the US economy is going to grow by 1.2% this year and 3.2% next year and at a blistering 4% pace after that. Since that is not likely to happen, the deficits will be far worse than projected. Since large taxpayers can see the tax increase coming, it is likely that they will shift behavior, and tax revenues will be less than projected.
Several analysts have noted that you could tax 100% of the income of the “wealthy” and still not balance this budget. While the bottom 95% may not see their taxes rise this year, you can bet they will see them rise in the future. While the US can run multi-trillion-dollar deficits for a few years, it cannot run them for long without serious consequences for interest rates and inflation. And when our entitlement program problems hit in the middle of the next decade? You can count on higher taxes.”
You see, Socialism (robbing the rich to give to the poor) will never work in a capitalist country. Politicians know that taxing corporations too much will hamper any recovery and deter new advancement in technologies. All taxes must ultimately be on working Americans.
But the problem with directly taxing middle-America is that it doesn’t win many votes. So, they come up with sneaky ways of taxing you.
Of course, the ultimate ‘stealth tax’ is by making the very dollar itself worth less by printing and borrowing it away. This way, you can secretly tax EVERY single American by having them pay more for things through inflation (caused by dollar depreciation).
The sorry fools now baying for capitalist blood are about to ‘mysteriously’ wake up poorer, regardless of political rhetoric; the value of their dollars will be transferred to holders of gold. That is where the REAL redistribution of wealth will occur.
Even if the government is successful in pulling the economy out of a nose-dive (thus interfering with the course of economic nature), it will not come without a price. That price will be severe inflation, and Obama’s advisors know it. They just don’t have any other choice that is acceptable to the voters all screaming “save us!”
Whichever way you cut it, the rich will always get richer and the poor poorer. But here’s the thing: in The League of Power, we give you a choice about which team you want to be on. This newsletter is not meant to torment or stress you; it’s ALWAYS just an invitation to walk on the sunny side of the street forever through the acquisition of knowledge and its implementation.
Until next time,