by Michael Pennington 

The US economy is near collapse. In spite of the FED lowering interest rates for more than a year, the economy is on the edge of a historic collapse – not just a recession. The US banks are nearly all insolvent right now. They are only existing based on bail-out type loans and capital infusion by the FED, who can print as much money as they want.  It will take many years and considerable legislation to change the current predicament. There is no quick fix. The retail market is falling apart at the seams. Today, Starbucks announced the closure of over 600 stores. Retail customers are saving what they can just to put gas in their family cars. The outlook is bleak. The housing sector continues to decline and while many attempt to predict the bottom, we are not close yet. Prices on homes will likely decline another 15% this year and next. The automobile and airline industries are falling apart. The losses at GM, Ford and the major airlines continue to set records with every quarterly report. Stocks will continue to fall as the FED cannot raise rates without pushing the economy over the cliff, and it cannot lower rates anymore as inflation is already burning out of control like our forest fires. Any move in interest rates right now will hurt stocks and that is why the Dow continues to fall, and that is also why the FED is sitting on its hands. How about bonds? If the FED raises rates, like everyone is expecting them to soon, bonds will eventually fall harder and faster than stocks.

Gold and Silver is the only safe place to be invested for the near future.  Regardless of what the FED does, Gold and Silver will go up and go up fast. I believe we will see $1,175 in gold and $25 in silver before the end of this year. The correction we have been experiencing since gold dropped over $125 is over. I have said all along that even in a bull market we will some major reversals, but that does not mean the bull is over. It is just an opportunity to accumulate more metal at lower prices.

For hundreds of years, citizens have bought metals to fight inflation. Our inflation is picking up huge momentum and can only be reversed with tough economic policy that the US is unwilling to consider at the present time. Their only defense now is to jawbone their denial that inflation exists. The Middle Class of the US is in the bullseye of the political elite. Purchasing Power is eroding faster than the government’s revenue. Taxes are going through the roof and that will not change. Every large corporation in the US has either announced large price increases or will soon. The pressure on these businesses to increase prices is intense as their costs are escalating rapidly.

The US dollar keeps dropping against other currencies. While this might help our exports in the short run, it debilitates US customers in the long run. All products imported from overseas will cost more, as will overseas travel. There will be widespread decline in respect for the dollar. Just as a penny is walked over today, soon it will be $1, because like the penny it won’t be able to buy anything.

RECOMMENDATION

I suggest immediate accumulation of gold and silver in everyone’s portfolio based on the following:

30% Gold Bullion, Eagles, mapleleafs or krugerrands; 30% Silver Bullion, Eagles or mapleleafs; one bag of silver $1,000 face amount coins; 20% in a well-diversified Precious Metals Mutual Fund; 10% in high quality numismatic gold and silver coins, and the remainder in an insured money market account.

I would avoid especially all stocks, mutual funds not already mentioned; bonds, ETF’s and storing metals overseas. This is the time you want to diversify your assets out of dollar denominated investments and transfer them into hard assets, like silver and gold.

If any of you think it might be too late to begin re-location of your assets, I can assure it is not. The dollar news will get worse and the gold/silver moves will be extraordinary. DO NOT DELAY further however. If you do, you are needlessly putting in jepordy your hard earned assets.