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Global Economic Trends

6.1 The Next Wave

Being a lover of the ocean, surfing and ocean sports all my life, I've discovered how important it is to "get up to speed" with an oncoming wave or risk having your nose slammed into the sand… or worse.

That which is true about the nature of waves is also true about the nature of economics. America has just gone through an unprecedented period of financial growth fueled by the longest bull market in stocks in recent history. But the tide is turning.

The total losses calculated from the dot-com carnage illustrate that the year 2000 brought a different kind of computer bite than was expected. An estimated $5 trillion (half our total GNP) was jettisoned into cyber-space in the year 2000.

In early 2001 many analysts began to warn of darkening financial clouds and a possible recession. Students of economic history know that bear markets always follow bull markets. Super-bull markets are usually followed by super-bear markets - it's just how the economic cycles work.

Between 1997-2000 I warned investors of a looming stock market crisis because the so-called new economy was driven by such wild speculation.

From March 2000 through March 2001, the NASDAQ lost more than 60 percent of its value. But what if the worst still lies ahead? A not-so-soft landing.

In 2000 many investors began to learn a very expensive lesson: the so-called financial experts are often wrong in calling market tops and bottoms.

My goal is to help you develop an “exit strategy” to move a small portion of your assets from high-volatility stocks into high-performance U.S. gold coins.

Over the years I’ve noticed that investors equipped with the bigger picture tend to have better discernment on the difference between investing and gambling.

Wall Street: Investing or Gambling?

On radio interviews I'm regularly asked about my view of the stock market. In 2000 I only published one article on Wall Street and one article on the NASDAQ bubble.

I consistently warned investors that the powerful bull market of the last 18 years had lulled them into a false sense of security, and that novice investors are prone to buy stocks based on tips rather than fundamentals like earnings and profits. It is not really investing at all - it’s gambling.

I remember a Sixty Minutes interview with an online gambling outfit that said they modeled their business after the Wall Street speculation model, claiming “stocks are just legalized gambling.”

Rather than fattening the bull for slaughter, my clients diversified their portfolios and some discovered that their rare coins had appreciated as much as 90 percent in 90 weeks. Yes, my clients were prepared for the dot-com information undertow and found a buried treasure in the form of U.S. Gold Commemorative coins.

Investors who took heed and diversified a portion of their assets into collectible U.S. rare coins discovered that they performed exactly as they should have, serving as the perfect counterbalance to the wobbling stock market.

In 2001 and beyond, as American investors rediscover the value of historic and rare coin, I believe that this product will grow exponentially. Why? The single principle that has been my central message for two decades is simple but profound:


I said it during the S&L Bank crisis of the '80s... during the stock market crash of '87... during the Gulf War crisis... during the Asian financial crisis... during the stock market bull of '91 through March 2000... during the Y2K scare... and during the dot-com meltdown from March 2000 through March 2001.

I have warned Americans again and again that debt and credit are like drugs - the more you rely on them, the more you need them to survive. But at what cost?

Alan Greenspan recently injected a surprise dose of credit and debt into the markets by dropping interest rates one-half percent right smack in the middle of the trading day. The result was a market rush that lasted a whopping 24 hours - then came the sobering reality that (this time) the credit drug alone may not revive the markets.

I was recently listening to a popular radio program who polled its listeners to find out if 2001 would bring a bull market or bear market. Some callers expressed fear and others faith, but it seemed everyone was still looking for the “inside scoop.”

The host’s advice to one caller asking whether to sell or hold stocks; “Sell, then reposition assets into something that you have long-term confidence in.” My answer to the question: bull or bear?

IT DOES NOT MATTER... IF you are diversified!

Thankfully the pendulum has started to swing in a new direction - toward conservation, debt reduction, savings and tangible assets. Most Americans are unaware of how well high-quality collectible coins and other tangible assets have performed historically due to preoccupation with the recent tech rush.

For example, last year U.S. Gold Commemorative coins outperformed almost every stock index and mutual fund - with a slow but consistent growth - amounting to as much as one percent per week. Yet virtually no one has heard about it except a few viewers of CNN's Business Unusual or PAX MoneyWatch when I was a guest.

In Greenspan We Trust?

Alan Greenspan and former President Bill Clinton are frequently given credit for the stock market boom of the late ‘90s, but the truth is they had very little to do with it. The real credit should go to the brave corporations who cut costs and downsized in the mid to late '80s - creating an atmosphere conducive to higher profits and future growth.

Another key factor of the '90s bull market was thriving consumption by consumers who abandoned savings and instead speculated by living and investing on borrowed money. And a third major factor was the promise of increased productivity resulting from technology and the Internet.

As a result, we have been programmed to believe the stock market is synonymous with the economy during the last decade. Not so. The economy is much broader than stock market speculation.

The real economy is based on what's happening on Main Street, which means that profits and earnings are the keys to sustainable growth - a painful truth that Wall Street is learning in 2001 (along with 50 percent of Americans holding stocks).

Bill Bonner's Daily Reckoning explains why the stock market must correct in 2001:

Demand for credit is saturated. Confident of an era of permanent prosperity, protected by Greenspan, consumers cut savings rates fromnine percent in 1991 down to nearly zero in the year 2000. Household debt rose to 13.7 percent - near an all-time record.

Life, as we have come to enjoy it, has been one long continuous boom. And the economy has enjoyed its longest continuous period of growth in nearly 40 years. As a result, too many people owe far too much money-and have too little to show for it. You don't solve these problems with lower interest rates. You solve them with bankruptcy, defaults, workouts, cutbacks and real savings.

Investment and business strategies rely on Mr. Greenspan to such an extent that he has come to assume a godlike stature. Not long ago, Fortune magazine ran a cover story called “In Greenspan We Trust.”

Will Alan Greenspan succeed in keeping the bull market alive? Will he manage the soft landing that he hopes for? I'm not so sure. More than one million bankruptcies are expected in 2001 alone - without forecasting a major bear market or recession.

So I ask, in whom can you trust if not Greenspan? Wall Street gurus? They're all playing the blame game for their bad market calls over the last two years. Recently even Congress has called Wall Street analysts into accountability for their “unbiased” forecasts.

For two decades I have suggested that investors learn to trust in historically sound economic principles - such as getting out of debt, increasing savings and diversifying into tangible assets - rather than trusting the world’s wisdom.

2001 appears to be a year of financial reckoning and now is the time to invest in liberty and independence from Wall Street speculation. The best hope Main Street (and Wall Street) has in 2001 is a major tax cut led by George W. Bush - not lower interest rates. Alan Greenspan's effort to slather more liquidity on Main Street will not help the 90 percent of consumers who are already tapped out. Ditto for most corporations. They need to find more profits, so they'll need to cut expenses, which means downsizing, lay-offs and very possibly a recession in the economy.

The solution for confused investors is the same in 2001 as it has always been. Diversify your assets, “…for you do not know what disaster may befall the land.” (Eccl. 11:1-2)

To ride the next economic wave safely into shore means getting yourself up to speed with what is really going on in the market and then diversifying a small portion of your portfolio into tangible assets like U.S. rare coins for long-term growth. Then, next time someone asks you, "Bull or bear?" You can honestly say, "Who cares, I'm covered!"

The Big Picture Challenge

During the last 20 years, I’ve tried to pour my heart, soul and mind into millions of investors, by announcing that true wealth is built on more than just money - it's built on peace of mind, time-tested principles and strong relationships.

Toward that end, I even produced a CD/booklet entitled “The Big Picture” to help my readers and listeners get up to speed and plan now for the next social, political and economic wave of change.

From my perspective, the bigger picture looks beyond the world as it is, to see the trends that are shaping the world to come. A world system that will increasingly become more volatile.

Thankfully, rays of hope are on the horizon as a fresh group of leaders begin to tackle the tough issues behind the news. America desperately needs more brave, self-governing leaders that embrace humility and morality - rather than mocking it.

Our nation and communities need more men and women of understanding and wisdom, who are less concerned with personal advancement. These new leaders will offer hope to our generation... and the next.

But, the next financial wave will bring with it a heavy undertow called debt. Like a deceptively strong underwater current, the undertow of debt can overpower anyone - including the strongest swimmers - unless they have a life jacket.

Throughout the last two millennia gold has consistently served as an economic life jacket. Smart investors are already reducing debt and diversifying assets to include tangibles - like investment-grade, historic gold and silver coins.

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