The 5 Money Moves You Should Make Post Election
1. Cash up and focus on a core position of good companies that you know well and want to hold for the long term. FutureMoneyTrends.com sees a significant amount of volatility as we approach the debt ceiling and new negotiations in D.C. on how they will kick the can down the road. Investors who have a nice cash position will have great opportunities to day trade commodities and stocks as well as purchase shares of some of our long term favorites.
2. Take a serious look at some of these junior mining companies, as far as we are concerned, the bottom is in! Plus, as Jeff Neislon pointed out in his recent article, all the big gains are going to come from the juniors, it simply isn’t in the large cap business model to see big moves. As Rick Rule told us last month, the thing that most excites him is a discovery, which is why we suggest all of our members to look at Brazil Resources (BRI.v & BRIZF) when looking for a quality gold junior exploration company.
Owned 14% by the KCR Fund, a fund ran by Doug Casey, Marin Katusa, and Rick Rule, BRI is also held by the Encompass Fund, & Brasilinvest, one of the oldest merchant banks in Brazil. FutureMoneyTrends.com is extremely bullish on BRI and all members should take the time to read our special alert we released earlier this year.
3. Make sure you are hedged to the downside, short the broader market with an ETF or Bear Mutual Fund. For those not looking to day trade with short positions, we suggest you look at some of the ETF, mutual funds, or even some long term PUTS. The markets have been driven up largely by the Federal Reserve devaluing the currency, federal government propping up the housing market, and investors buying on the perception that the recession was behind us.
In reality, the recession never ended. All of our economic imbalances are much worse and the ammo used to blunt the effects of a real recession have all been exhausted, so the next down turn will hit the markets hard. With investors experiencing a crash in 2001 and 2008, there will be a lot of weak hands ready to hit the exits on any major down move in the Dow, which of course can build on itself as a panic sets in.
4. Moving wealth offshore. This is extremely important, the government is looking for money, new taxes, regulations, and scapegoats. Before we face new taxes or policies that trap our money in the state we reside, get some of your wealth out of the USA. For those looking for a bank account, consider Panama, for gold/silver storage, check out GoldMoney.com or MilesFranklin.com. Don’t exclude real estate either. Buying real estate in South America, Australia, and Canada is very easy for Americans. In times where certain western governments are taxing some individuals up to 75% and the mob of democracy wants to tax the job creators, it is very important you hide your money from the mob by diversifying your wealth regionally.
5. Enjoy your life and focus on the ones you love the most. No matter who wins an election or what is going on in our economy, remember that you have a limited time here on earth. Take the time to plan living just as you plan your finances, plan for vacations, special trips, family time, and daily conversations with loved ones. Spending money on quality time is money you can’t lose, because the memories become priceless.
Our Forecast of the Next 4 Years:
Perception is reality, this is very important to remember when forecasting market reactions to political figures. FutureMoneyTrends.com did not see much of a difference between the two candidates, both believe in Keynesian economics, government intervention, foreign aid, foreign intervention, stimulus, and keeping the status quo (Income Tax, Federal Reserve, & Entitlements). So for us, in reality it didn’t really matter, however, for most people the perception is that Obama is a big government guy and Romney is a little government guy. Though we will never know what a Romney Presidency would have looked like, we do know what an Obama Presidency will look like.
The markets were down overall today as the fiscal cliff is being baked into the cake, we all remember what happened during the summer of 2011 when the U.S. had its credit rating downgraded and the government almost had a fake shut down. We call it a fake shut down because it is a government shut down in name only (the government is still running minus some park rangers and other non-essential employees). The markets are pricing in a fiscal cliff because now we are even closer to the edge and as of the other night, we have the same players who will be responsible to fix it.
A noted optimist is John Mauldine, a man whom we often enjoy hearing at investment shows across the country. John has spoken to the leadership in both the Republican and Democrat camps, and he states that “they get it.” His prediction is that it will get fixed in the first 8 months of 2013, however if it doesn’t get fixed, he says we will go over the cliff this time.
You see investors and sovereign nations know that the U.S. is in an enormous amount of trouble, however, they have given us some time to change course, to see if we can grow our way out of this. No major player wants to see the U.S. collapse because if the U.S. economy goes, so will the rest of the world since they are so heavily tied to the U.S. consumer and currency. Think about it, if you were in power, let’s say in China, you have a billion people (the majority who are poor) do you really want to see China in an unstable world? No, of course not because when you have a billion people and things get unstable, you see revolutions.
It is in the best interest of the powers that be to keep the status quo, it always is. It’s the same thing with the people over at the Federal Reserve. Before you completely write off the central banks, think about the power they have, the power to create and control money. Now think about what they will be willing to do to keep that power… Scary thought because the answer is just about anything.
Last year the U.S. cut roughly $38 billion dollars out of $3.5 trillion dollars in spending. This is equivalent to your average person cutting $380 who happens to be spending $35,000 while only earning $22,000. As you can see, the fact that we haven’t already gone over the fiscal cliff is amazing and it shows you that our lenders and the powers that be would like this to keep going on for as long as possible.
However, we are nearing the point where investors will reject the status quo, the Fed will have to print to pay the bills, and the U.S. is screwing its lenders with a negative real interest rate. So a solution or at least a glimmer of hope needs to come out of Washington D.C. this year, because if it can’t get fixed in 2013, the next opportunity won’t realistically be until 2016. 2014 is an election year and in 2015 we will have a lame duck President.
A few solutions that could kick the can down the road are very controversial, the first one that comes to mind is upping the age for social security benefits. When social security was created, the average life expectancy was 62 years old according to the U.S. Census, today it’s 78 years old. Now when social security was enacted, it was supposed to be a temporary program, a safety net for the poor, today it’s America’s golden retirement plan. Without getting in to what we think of this program, you could kick the can and mean punt it if you raised the retirement age to between 75-80 years old. Now this is political suicide so the odds are low, however we should always keep in mind that there are solutions, it’s not just all doom and gloom.
Another solution that we believe would bring a roaring economy to the U.S. is to abolish the income tax, something this nation did without for its first 137 years. Contrary to what most people believe (their perception) the income tax only makes up about 1/3rd of income for the U.S., in fact with no income tax, we could balance the 1995 budget. Of course in reality we would see a massive increase in revenues in other taxes like sales, capital gains, and property taxes as Americans would have all the fruits of their labor to spend on more things like an improvement of the quality of our lives. This solution is outside of the thinking of most politicians and would also be considered political suicide since this would mean not taxing the rich and an end to redistributing our wealth as others see fit.
The final big solution we see is probably the one that would gain the most public support, but again would probably be political suicide, ending the war machine. We have 30,000+ troops in Korea, 40,000 in Japan, 68,000 in Germany, and tens of thousands all over the rest of the world. Imagine what would happen if we brought these troops home, what an incredible stimulus to our own local economies as our servicemen and women buy groceries, clothes, and goods from our cities.
The savings in transportation and most importantly the avoidance of blow back from being in the business of other nations’ business. End all foreign aid and trade with everyone, because nations that make money together don’t go to war. President Thomas Jefferson once said, “Commerce with all, alliances with none.” This is a prosperous and peaceful foreign policy, those that would claim we would be weakening our defense are not being straight with you, the U.S. has the most powerful navy and an arsenal of nuclear warheads, anyone attacking the U.S. knows that they will not be around for very long.
Unfortunately, these solutions probably won’t even be discussed, instead we are going to hear about very small cuts to the spending growth, not actual cuts, and of course raising taxes. Raising taxes might actually force the economy into the next big depression as business owners are forced to give their least productive employee (federal government) a raise in 2013.
The next 4 years will not be like the last 4 years at all! During the 2007/2008/2009 financial crisis we saw a huge dive, 2010/2011 were the big dead cat bounce, and in 2012 we have seen the markets and economy stall. 2013 we predict will be the turning point where the economy starts to contract in a big way.
QE3 isn’t yielding the same type of response QE1 & 2 did. In order to try and re-create 2010 and 2011, the FED will have to get even more serious about their dollar devaluing techniques. With congress and the President likely to have a stale mate, a move down is the likely scenario. We don’t see the FED coming in big until a crisis spreads into the minds of the majority of the American population.
[su_spoiler title=”Here are the top 10 things we see happening over the next 4 years” open=”no” style=”default” icon=”plus”]U.S. credit rating downgrade, Deflationary shock (market crash), The bursting of the bond bubble, Devaluation of the U.S. dollar, Government defaults, Mining stocks bull market that will turn into an epic bubble (currently in a bloody bear market), War with Iran (probably an attempt to distract us from the real reasons the economy is failing), A new normal for unemployment, real unemployment (U-6) will avg. 16%, U.S. Depression acknowledged by the media and world, The Dow Jones and gold will have a 1 to 1 ratio somewhere around $4,000[/su_spoiler]
Over the next few weeks we will expand on all 10, but for now, let’s look at some actionable things we can do in order to protect ourselves and profit from the future.
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