If these were normal times then normal investment advice would be appropriate; but with the massive Federal Government Debt: at present over 16 Trillion Dollars and rising by $100,000 every 10 seconds, this is the biggest baddest loan in world history. In the short term massive money printing by the Fed. will likely continue to boost the stock market and help to temporarily to stimulate the economy. however in the long term (likely in 2013-2015 range) a heavy price for this temporary stimulus will have to be paid. Rising inflation will put downward pressure on the dollar, thus reducing investment from foreign investors in dollar denominated assets, especially bonds, but also stocks and real estate.
When the real estate bubble started to pop in 2007 and kicked off a global financial crisis in 2008, along with a stock market drop of nearly 40 percent, many investment experts were confused, the entire global financial crisis was unpredictable and beyond our control. Suddenly when this looked like economic Armageddon, the U.S. Federal Reserve came to the rescue-at least in the short term- with massive money printing, as well as massive government borrowing.
The key to correct investing in the future is to recognize that the future will be significantly different from the past. This time there are six interdependent financial bubbles (the real estate bubble, the stock market bubble, the private debt bubble, the discretionary spending bubble, the dollar bubble, and the biggest and worst of all the government debt bubble).
In the years since the financial crisis of 2008 both the dollar and government debt bubbles have grown bigger and bigger than ever in an effort to keep the rest of the multi-bubble economy afloat…this is okay as long as massive money printing continues. But massive money printing cannot continue forever. Why? Because massive money printing causes inflation. The combination of rising inflation and rising interest rates will pop the huge dollar and government debt bubbles, and will pull down what is already left of the falling real estate, stock, and private debt, and consumer spending bubbles. With all our bubbles fully popped, a global economic Aftershock will begin.
Normally in times of uncertainty or difficulty conventional wisdom suggests that you add greater diversity to your portfolio, plus an addition of bonds to create more safety. This was good advice in the past, when stocks and bonds were not in danger of significant long term declines. The wisest view for investing in the future is to diversify by moving from endangered assets to safer assets classes. The key to good timing will be to avoid trying to time it perfectly. Better to get out too early than too late.
A good way to move out of stocks is to move out a little bit at a time, selling off more and more each month and moving into gold and other safe investments such as silver, etc.
Right now the idea that gold is a good investment is controversial. Conventional wisdom is with stocks and bonds, and perhaps real estate. Gold has been highly valued for millennial, not just centuries. Over the long haul no other worldly substance has retained such high and universal value as gold.Rising interest rates caused by massive money printing and inflation will have a very negative impact on stocks, bonds, real estate, whole life insurance, annuities, and other interest sensitive assets. But there is one asset that rising inflation and rising interest rates will not be able to push down: GOLD.
Therefore, when most other assets are falling, gold is going to look increasingly attractive around the world as people around the world begin to bail out of their sinking investments and pile into the gold lifeboat. Gold will be seen as a safe haven when the U.S. and world bubbles begin to pop. Much of these same concepts apply to silver as well. When will the gold bubble pop you may ask? Not for a long time. It will be a long time before we start to see some real economic recovery.
The Aftershock Investor by David Weidemer, Robert Weidemer, and Cindy S. Spitzer