2003 was the year when we began warning our readers about the massive amount of derivatives that were overhanging the world markets, endangering the world banking system. We continued to warn readers for years, and then in 2008 our warnings became reality. Those who listened to us were better positioned to protect themselves, and profit from the early warning.
Today, we note that derivatives are a much larger, more intractable and difficult problem, and have contributed to the current banking malaise. We see other warning signs of credit contraction and economic contagion, and we specifically suggest that you own certain investments in various countries. When will our current insights provide you with the information you need to both protect yourself and to profit? We believe that time is coming very soon.
In this week’s Premium Edition, learn how Guild Investment Management is investing in this environment, two techniques for investing for income, Europe what it all means for investors in the short, intermediate, long, and very long term…
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Spanish Banks get a Bailout
Last week, on June 9, Spain got a big bailout loan from a European entity. Which agency is as of yet uncertain, but this low interest rate loan was somewhere in the region of 125 billion Euros (125 billion USD). This loan will be at only 3 percent — a rate about half the rate on Spanish debt in the world bond markets. This money will be used by Spain to take over more Spanish banks and to recapitalize the banking system. As readers know, this is the first but far from the last bailout loan for Spain.
There will be a continuous stream of these types of financial arrangements for Europe and Spain in coming months and years. Once the Pandora’s Box of QE has been unleashed it will continue until the government is the only buyer for sovereign bonds…
Ireland Asks, “What About Me?”
Ireland to the rest of the EU: ‘What do we get for good behavior?’
Central banks are adding to their gold reserves steadily and consistently. Very recently, the country of Kazakhstan has said that it is reducing its reserve holdings of Euros from 30 percent down to 25 percent. At the same time, it is adding 24.5 tons of gold to move its gold reserves from 12 to 15 percent of its total holdings. Kazakhstan’s stated goal is to raise gold holdings to 20 percent.
Kazakhstan is not alone. Many countries which have been holding reserves in Euros and U.S. dollars see the high debt levels and deficit problems that the developed world’s economies are facing. These nations prefer not to gamble their future on the choices of politicians in Europe and the U.S. Accordingly, they are wasting no time in substituting gold for the two major currencies. Unsurprisingly, the price of gold is steadily rising as central banks of the world’s emerging nations continue to buy gold. As emerging countries grow and profit, they garner trade and payments surpluses. Gold is one way they spend the money that they make to protect their financial future.
Many argue that gold must fall in value if the world moves into a deflationary depression. They claim that in deflation all commodity assets decrease in value. This conclusion does not agree with history. The buying power of gold always benefits from deflation, and the actual price of the metal often appreciates. We personally see a deflation and depression as a possibility for Europe.
We continue to believe that gold is an excellent investment, whether the world experiences inflation or deflation. It’s not rocket science; countries need only to observe the profligacy and incoherence of the two major currency blocs to decide to diversify more of their assets into gold.
Everyone is Bearish on Oil…Which Encourages us to Consider Getting More Bullish
When you hear the financial news media constantly telling you how bearish oil is, and when you see a chart as bad as the one below, it is time to check the fundamentals…
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