Peter Schiff Was Right, Ben Bernanke Was Wrong

This should be obvious by now, but this video and this video on YouTube proves the point beyond a shadow of a doubt. Now, Schiff hasn't been perfect on the timing of some of his investment recs; however, on the fundamentals he's been rock solid.

In contrast, "Helicopter Commander" Ben Bernanke has looked like a total shill and a fool. He studied the Great Depression in detail while he was at Princeton, and unfortunately, he got the cause and effect totally wrong. The Federal Reserve helped cause the 20th Century's greatest economic downturn - and it didn't help the economy recover. Expanding the money supply by printing more dollars doesn't increase prosperity, it increases inflation - and acts as a hidden tax on an individual's wealth.

Our country desperately needs to have our currency backed by gold, instead of the "full faith and credit" of the federal government - which is rapidly declining around the world. Until that time, you should avoid most financial paper assets (stocks, bonds, mutual funds, etc.) - UNLESS you understand the companies and trends well, and know how to swing trade stocks in the short-term. And save your money in gold or silver bullion.

The 401(k) Hoax, and How You Can Avoid It

Came across a good website and 11-minute video from Garrett Gunderson - author of the book, Killing Sacred Cows.

I recommend it because I'm not a fan of traditional financial planning, mutual funds and 401(k) plans. And I want more Americans to become financially literate, and not keep buying into financial myths that just aren't true.

The reasons why I don't like 401(k) plans are:

1) They offer limited choices for investors - usually several mutual funds, which only increase in value when the stocks these funds are invested in increase in value. If the market crashes (like it did last fall), your portfolio is in trouble. 401(k) and IRA plans came about in the early 1980s; and that's when the bull market in stocks started. These plans made it easy for workers to put money away, and they were sold to Americans as a supposedly safe way to invest in the stock market.

2) Even with employer matches to 401(k)contributions, and assuming employees consistently contribute to their accounts for 35-45 years, there's still a good chance that they'll outlive their money. If someone developed an asset or a business over several years, they could have a source of passive, residual income for retirement, and not have to worry about the stock market going up.

3) Baby Boomers are starting to retire, and pull money out of the stock market. Boomers' buying of stocks and funds were the primary reason for the stock bull market of 1982-2000. When tens of millions of Boomers start selling stocks and funds instead of buying them, the chances of the US stock market going up again are pretty slim.

But the biggest reason why I don't like 401(k) plans is this:

4) People aren't taught how to become skilled investors. I blame Wall Street and the government for this, because I believe they want ignorant, under-educated people blindly buying stock-based financial products.

How can people avoid the 401(k) trap? Get educated. You DO have choices when it comes to investing. You do NOT have to invest in stocks and mutual funds. Look at precious metals, tax lien certificates, or having a professional trade an account for you on a performance-only basis. In other words, he only makes a profit when he makes you money.

If you just have to invest in the stock market, for goodness sakes, get educated. Listen to Phil Grande at www.PhilsGang.com, or Tom O'Brien at www.TFNN.com. They have weekday live radio shows that are saved as podcasts, so you can listen to them at your convenience.

Listen to wise investing advice from Peter Schiff, Jim Rogers and Dr. Marc Faber; check out the weekly webcasts at www.financialsense.com, www.HoweStreet.com, www.GlobalEconomicAnalysis.Blogspot.com, and www.KEReport.com.

CNBC is a good Wall Street marketing show, disguised as investing advice. Don't depend on it for your only source of investing information. That's all for now, get started on your financial education TODAY.

No-Fail, American Capitalism

That's what I call the current brand of policies with regards to big investment banks, plus Fannie Mae and Freddie Mac. They can reap all the rewards they want, but the government will protect them from the consequences of their bad decisions.

Bill Fleckenstein has a good article on MSN Money, where he calls this situation "Crybaby Capitalism."

Unfortunately, this new kind of capitalism will lead us into old problems our country has seen before. At best, we'll just see a repeat of the economy of the 1970s. At worst, we'll see the economy look like it did in the 1930s - and I'm not exaggerating or saying this for shock effect.

The reason I say this is because there was just too much borrowing and spending that went on in residential real estate. Good old-fashioned savings and investment are the real drivers of true economic growth. Not the financial steroids of easy credit and the increased supply of money.

Peter Schiff (one of the best American economic/financial analysts) echoes these sentiments in his latest column.

Again, I may sound like a broken record (or a skipping CD), but I still like physical gold and silver as medium to longer-term investments - even though both spot prices took a beating this past week.

Congress Suing OPEC?

Just when I thought the news couldn't get any crazier (other than oil hitting $133/barrel), this is the headline I read.

Now I'm convinced that 99% of our Congressmen and Senators are economically illiterate, crazy and stupid. I'm pretty sure their ears are burning from angry constituents wanting them to 'do something' about the skyrocketing cost of gasoline and diesel fuel.

But this isn't the long-term solution, just a short-term election year PR opportunity.

The biggest cause of increasing food and energy prices is our national central bank, the Federal Reserve. The Fed has continued to increased the supply of fiat currency, and as a result, we have a larger number of dollars chasing the same number of goods.

It's done its best to keep this bubble/consumption economy afloat, and bail out the investment bankers on Wall Street. But this juicing of the money supply is hurting Americans and everyone else who holds dollar-denominated investments.

I don't think anyone outside of the Bush Administration really believes Hank Paulson when he says our government has a 'strong dollar' policy. Yeah - pull my other leg, Hank, it plays Jingle Bells. The Fed is letting the dollar sink in value, while trying to pump up the economy and Wall Street.

In the meantime, all Americans are seeing their wealth decline because the value of our money is declining. Unless they hold their wealth in appreciating foreign currencies, stocks of high-quality foreign companies, or commodities such as gold and silver.

Yes, I probably sound like a broken record, but it's the best investing advice I can recommend for current market and economic conditions. Please read Chapters 8 through 10 of Peter Schiff's book Crashproof, and move your money accordingly.

Deflation... Sort Of - Stagflation, Yes

Bloggers and columnists have different takes on whether the economy is in an in-flationary or de-flationary cycle. In most parts of the country, real estate is in a deflationary cycle.

US stock markets (the Dow, S&P 500 and Nasdaq indices) are going sideways to slightly lower. Incomes of Americans seem to be stagnant.

But the prices of food, energy and just about everything else are going through the roof. In Idaho Springs, Colorado last Saturday, I bought my first gallon of 87 octane gasoline for $4.00/gallon ($3.999 to be exact). Wasn't happy or proud of that to say the least. Especially after losing $100 at poker in a Blackhawk casino earlier that day.

I know the government says that inflation is still low or "manageable" (depending on which parallel universe you live in where you don't eat or drive your car), but Gary Dorsch confirms the fact that inflation levels are vastly understated by Uncle Sam.

This adds up to the economic condition known as stag-inflation (or stagflation), which was last seen in the US in the late 1970s. Fortunately, we had a Fed Chairman with the cajones to put the kibosh on inflation through higher interest rates.

Unfortunately, today we have "Helicopter Commander" Ben Bernanke instead of Paul Volcker as Chairman of the Fed. And Ben Bernanke is darn sure no inflation hawk. For all the talk from Hank Paulson about a supposed "strong dollar policy" (yeah, right), what the Fed is doing is a totally different story. More of the same stuff that got us into this mess - low interest rates and an increased money supply - is being done to hold off the inevitable recession (at least in the short term).

What should you do to prepare for the upcoming economic mess? Invest in tangible (non real-estate) assets, such as physical gold and silver. For more complete recommendations, read Chapters 8-10 of Peter Schiff's book, Crashproof. It's well-thought out, and clearly explains where and why you should invest in certain asset classes to protect yourself against stagflation.

The Mother of All Bad Ideas

Peter Schiff hits it on the head with his latest column. President Bush and Secretary Paulson are putting the best possible spin on this proposal, and how it will alleviate problems in the sub-prime and overall housing market. But the only thing that will "solve" this problem is time, sanity and better lending practices.

Whenever government gets involved to 'help' free markets, bad things happen. As Schiff eloquently says, this is a stay of execution for the real estate market instead of a pardon. A majority of Americans are over-leveraged with bad debt (credit cards, auto loans and home mortgages on their residences) that doesn't put any cashflow into their pocket.

While a growing number people are focused on rapidly-declining (or negative) equity in their homes, they're ignoring the most important part of personal or business finance - cash flow. The flow of cash is to a business or household what blood is to the human body. These high levels of debt Americans have incurred to finance their rock-and-roll lifestyle, are clogging their financial arteries (and reducing the net positive flow of cash) like a baked potato loaded with sour cream and butter constricting human blood vessels.

The only way to solve cardiovascular and financial problems is to make healthier financial choices - cut back on bad debt... learn to sell and market... start your own (or a more profitable business). I'd recommend reading authors such as Peter Schiff, Robert Kiyosaki, and Dave Ramsey. All three are healthy oases of common sense in an increasingly insane world.