Is It Time To Leave The Stock Market?

I wanted to write this post earlier this summer, but had a health incident and surgery last month. I'm doing well and finally getting back in the swing of things.

I realize a good number of folks have already asked this question and answered it in the affirmative. They saw two major crashes in 2000 and 2008... hated to look at their 401(k) statements month after month with no hope of improvement... and just couldn't stomach the volatility and uncertainty of the Wall Street Casino. There are still some stock market true believers who are staying in the game; probably from their loyalty to a brokerage firm, or believing the old myth that "nothing beats the market in the long run."

Long term buy-and-hold investing has been debunked since 2000. Nimble swing traders can still scalp short-term profits, but it's getting more difficult for amateurs to win on Wall Street. That's because a majority of the daily trading volume comes from computers - not from individual traders or fund managers. This High-Frequency Trading (mainly from the large investment banks and brokerage firms) has made stock trading the equivalent of a rigged carnival game, and not a free, fair or honest market.

The recent increase in stock market and real estate values was fueled by ultra-low interest rates, "Helicopter Ben" Bernanke debasing the currency even more, and probably intervention by the Federal Reserve, the federal government and/or the big investment banks. It's given unsuspecting Americans the illusion that the economy is coming back, and happy days are here again. But nothing could be further from the truth.

Government bailouts of the big banks never solved the causes of our financial problems, which were (and still are) excessive money-printing and credit creation - mixed with a lot of good stories and short-term speculation. This financial leverage kept the economic good times going, and helped avoid normal economic downturns. But just like an alcoholic who keeps drinking to avoid the hangover, eventually he will have to deal with it - just like the United States will have to deal with the biggest financial "hangover" in the history of the world.

And this hangover will affect US citizens and markets for many years to come. Hoping and waiting for the economy to "get better" so your stocks or mutual funds will come back is a bad investment strategy. If you haven't done so, sell your stocks, ETFs and mutual funds and convert a good portion of your cash into physical gold, silver, food and commodities you can barter with.

If you (or someone you know) can profitably and safely trade stocks, futures or other markets on a short-term basis, that's fine. As I said before, long-term "buy and hold" investing isn't a wise strategy. Economies, markets and currencies are more volatile than ever before - and I don't see that trend changing any time soon. Because of these reasons, it's time for average Americans to get their money out of the stock market.

Time to Bail On Gold & Silver? Not So Fast...

Friday and Monday were one of the worst trading days for gold and silver in many years. You've probably heard and read from mainstream financial media that gold's best days are behind it. I don't quite agree with that notion, even though major technical damage has been done.

As I've said before, I don't claim to be a great short-term trader. However... I've called long-term trends months (and even years) before they came to pass. In early 2008 I bought put options on Fannie Mae and Freddie Mac, because I didn't see any financial statements for the past three quarters. My options expired worthless in February and April, but my long-term hunch was proven correct when both entities went into federal receivership (bankruptcy) in September 2008.

I also wrote a Guest Commentary for PrudentBear.com in 2004 calling the residential real estate bust 3-4 years early. I'm not saying this to brag or pat myself on the back - only as proof that I know what I'm talking about.

Why do I believe that gold and silver still have a bright future? The fundamentals that carried both metals higher the past 12 years are still in play - and have deteriorated further in that time frame. The Eurozone is proven to be an economic disaster with several member nations effectively bankrupt. The United States government is also bankrupt, but the Federal Reserve has kicked the printing presses into overdrive to try to keep the economic party going.

Throughout history, all government-sponsored fiat currencies have failed - while gold has remained a store of value for thousands of years. All currencies around the world are the fiat variety, and China has accumulated several thousand TONS of the "barbarous relic" (while selling out of its dollar holdings) to make the Yuan at least partially gold-backed - and have it be the world's future reserve currency in the future.

The Chinese (and most Asians) are long-term thinkers, and they want to make sure the Yuan remains the world's new reserve currency for as long as possible. Shanghai and Dubai have gold exchanges, and China encourages their citizens to buy as much gold as possible. Russia has also bought thousands of tons of gold for its reserves.

I don't know how long it'll take gold and silver to reach their 2011 highs, and frankly I don't care. They're tangible assets that will always have some value in both inflationary and deflationary times. They're an insurance policy against government and central bank stupidity. I trust the metals more than I trust bankers, bureaucrats or Wall Street stock jockeys pimping annuities, stocks or mutual funds.

Great Buying Opportunity in the Metals

No two ways about it - gold and silver got smoked today, along with the SLV calls I bought this morning. The barbarous relic was down about $100, silver lost over 6% in today's trading. I still believe the longer-term trend is up - way up. That's because the Federal Reserve and federal government (not the same entities) have told us with interest rates near zero until mid-2013, their only solution is to try and inflate their way out of the debt mess we're in.

It's possible we could see a further correction in silver and gold, but today gives investors a great opportunity to buy the physical metal at a discount... and maybe an entry point for gold and silver stocks/ETFs. Tray tables and seats in the locked and upright position, folks; this is gonna be a really bumpy ride for the foreseeable future.

My takes on the stock market, and what lies ahead...

Today's 512-point plunge in the Dow reminded me of the Crash of '08. We may see a "relief rally" on Friday of a few hundred points; however, if the news from Italy about possible bank runs and credit locking up is true... then look out below. I don't see a sideways market today... it'll probably be a 'rocket ride' up or down.

If we get the rally, Wall Street has dodged a short-term bullet for now... but there are many more financial and economic "bullets" to come. If it tanks lower, then Katie bar the door - this could get real ugly, real quick.

I implore any investor with 401(k) or IRA money in the stock market: If you don't know what you're invested in (or why), GET OUT OF THE STOCK MARKET - NOW. If you can't get out right away, wait to sell into the next rally and go 100% to cash.

Only the nimblest of traders can survive in this market, forget about 'buy and hold' investing that most financial planners and stock brokers recommend. Their job is to get you and keep you in the stock market - probably not what's best for you and your wealth.

Through all this panic and fear, I see two ETFs and an index that I like:

UNG - Natural Gas ETF, which hit a 52-week and 2-year low today. Nat Gas has a history of going dormant for a few years, then exploding higher like a volcano. This could take awhile to realize gains, but if you're patient enough (a few months to over a year), I like buying this ETF and longer-term call options at strike prices of 12.00 and 13.00.

SLV - Silver ETF that's directly tied to the NYMEX spot silver price. I'm not sure if the sell-off in silver is done, but as we see more panic and less trust in paper financial assets, more investors will put money in tangible assets, like gold and silver. I want to see Friday and Monday's trading action to make sure this short-term move is close to finished, before going long on SLV.

VIX - This is the volatility index, which popped 8 points today - or about 30%. The more fearful the market gets, the higher the VIX goes. If we get the relief rally on Friday, the VIX will come back down - which could give a great buying opportunity for the index or call options. But if the market tanks and the VIX goes higher, wait for the next pullback to get in.

You ain't seen nothin' yet, this stock market has a long ways down to go - possibly to the March 2009 lows of 6,500 on the Dow.

Pull up a chair and get your popcorn out - Friday's market action will be a heckuva show.

SNL Obama-Hu skit speaks volumes about US debt problem

I was at a friend's house Saturday night, talking about business and life when SNL came on the TV. I don't watch much television, so we took a break from the conversation and watched one of the skits.

I remember SNL from the 70s and 80s when Bill Murray, John Belushi, Dan Akroyd and Eddie Murphy were cast members. Maybe it was because I was growing up and didn't pay that much attention to politics, but I never remembered SNL being really political.

However, I was taken aback when I saw this skit that showed Chinese Prime Minister Jintao Hu accusing President Obama of being a liar and trying to screw him and his country with the enormous debt that the United States owes China.

It was funny when the actor playing Prime Minister Hu said: "Why you not kiss me before you do sex to me?"

If Saturday Night Live realizes the American debt problem is this big and virtually unmanageable, I'm pretty sure that China and every other nation-state on the planet understands this as well. Under George W. Bush, it was apparent that the federal government had no intention of being fiscally responsible or getting close to a balanced budget.

Under President Obama, it's doubly apparent that the political inmates (Republican, Democrat and Tea Partiers alike) are running the asylum and want to do what's politically in their self-interest, instead of what's in the best interest of American citizens.

Even if Benny and the Feds don't "officially" implement QE3, it looks certain they'll continue to print large sums of money to try and inflate their way out of this debt problem and keep the economic party going as long as possible. Based on this SNL skit, it looks like the credit/debt/currency keg is just about dry - and the party's almost over.

Got gold and silver?

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.

Why Conventional Wisdom Is Hazardous To Your Wealth

I strongly urge you to read the chapters in Robert Kiyosaki's new book: Conspiracy of the Rich. It tells you why:

- Your house really isn't an asset
- Investing in a 401(k) could be the worst way to save for your retirement
- Why it's absolutely critical to invest at least part of your portfolio in gold and silver.

Go to: www.ConspiracyoftheRich.com. If you read it, fully understand it, and take the actions that Robert recommends... it's one of the best financial reads of 2009.

What you're being told in the mainstream and financial media is nothing more than Wall Street cheerleading. Yeah, the stock market has gone up about 2,000 points in the past few months. However, the Dow's still down at least 35% from it's peak of October 2007.

And it's still due for another downward correction. If you have any stocks or mutual funds that you hope will go up even further... don't keep "hoping and holding."

Get 'em sold - pronto. And put some of the proceeds into gold and silver.

Bush's - and now Obama's - insane federal spending has bankrupted our country, and a sharp decline (if not outright collapse) in the US Dollar is coming. And probably sooner than you think.

For you and your family's financial future, go to www.ConspiracyoftheRich.com.

Do it 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.

Paulson Didn't Listen...

Just as I ended yesterday's blog post asking Ben, Hank and the boys to get heck out of the way, they just couldn't leave well enough alone. I should have known better... it is an election year, and they have to throw some bread to lower and middle-class Americans, while the circuses of reality TV and pop culture entertain them.

My suspicion is that it'll help financial firms like Merrill Lynch and Bear Stearns with the valuation of these bundled and sold mortgage 'investments' (and I use that term very loosely), and improve how they look on their books - maybe for another quarter or so. But it's only a short-term Band-Aid that may prop up the public's confidence in the mortgage market.

And confidence is the only real 'collateral' that investors have with financial paper assets. History shows that once the public loses confidence in a paper asset, it takes a long time to get that confidence back. One example is the Dow Jones Index, which basically broke even in nominal terms from 1929 to 1954, and actually lost ground against inflation.

Other paper assets, such as Enron stock, will have a loss of confidence and never get it back again. That's why I'm very bullish on precious metals and commodities over the next few years to a decade. Gold is a good buy, but silver is still a GREAT buy - even at $17/ounce. Gold and silver-mining shares (and the physical metals) are the best places for your money. Metals markets can be very volatile, but don't let that scare you.

All markets - whether they're stocks, bonds, or commodities - will be pretty volatile in the next few years. Tangible assets will NEVER go down to zero, like a share of a dot.com stock can. And the Fed will keep increasing the money supply, with a larger number of dollars chasing the same number of commodities. That's the biggest reason I'm bullish about investing in these markets, and you should be too.