Here’s the bottom line. The bear market has returned in force and while financial manipulation from global central banks could stem the speed of the decline, make no mistake about it….2010 will likely go down in the history books as the year of the most shocking global financial collapse in history.
Could the Federal Reserve, European Central Bank (ECB) and other central banks around the world prevent the coming collapse until 2011 or even 2012? While anything is possible, I assign odds of this at just 20%...this situation is just that grave. On top of this, the money is simply not there for “global financial system bail-out part 2”. The world is awash in tens of trillions in dramatically overpriced toxic debt and the smart money around the world smells blood. We have now entered a vicious negative news cycle which will look like 2008, but this time instead of simply having to deal with the subprime crisis and insolvent commercial and investment banks, the 2010 version of this financial Armageddon will bear down on the sovereign debts of every bankrupt entitlement country on the planet. Unfortunately, this includes every major country on the planet. And yes, this includes the US, Japan, China, every country in the euro zone, Eastern Europe and the UK.
On Friday, while the US stock market was dropping over 300 points following a absolutely horrible unemployment report, our good ole granddad Warren Buffet was testi-lying before Congress, having been served a subpoena to appear. You would think that the Oracle of Omaha would have seen the financial tsunami headed our way back in 2007, but as he told our incredulous looking lawmakers, “I just missed it….I screwed up”. I guess losing $50 billion (45% of all assets under management at Berkshire Hathaway) in 9 months qualifies as at least a pretty decent screw-up. He went on to say that “I don’t think anyone really saw this coming”, which makes you wonder if he is entering the early stages of senility or simply learning the game of liars poker from his good buddies at Goldman Sachs (where Buffet has invested huge money) and Moody’s. Speaking of Moody’s, the ratings agency that Buffet owns, they also seemed to be a bit late figuring out that the largest housing bubble in the history of mankind was upon us. I began warning about the subprime crisis and coming debt meltdown in 2005, yet somehow one of the worlds premier ratings agency couldn’t get their arms wrapped around the problem until 2 months before the Lehman Brothers collapse in September of 2008, when they officially began downgrading the debt of subprime mortgages. They only missed the onset of the crisis by a full year….NICE call! Even today, Moody’s has Triple A ratings on the government debt of just about every bankrupt European country. I’m pretty certain that the 500 or so “world-class” economists that are on the payroll at Moody’s have sold their souls…which puts them in good company with Buffet and the criminal enterprise that is Goldman Sachs.
The playbook for the rest of 2010 looks to be set. The debt and fiat currency collapse that began in 2008 will now transcend to massive global defaults of sovereign country debt. In the media you will hear of “coordinated monetary support” between all major countries, but these will be a mere smokescreen to reality. The dominos have begun to fall and the surprise of the collapse will be shocking, at least to most.
Gold and silver are well on their way to being viewed as the only true currencies on the planet, so continue to buy coins and bars. Unfortunately, mining stocks are just that….stocks…and for the time being their shares will be hit as well. In the future these will be the very best of investments, but for now they will most likely go down in price with the overall stock market. The US is responsible for unleashing the exact toxic debt instruments, not to mention the corrupt to its core concept of central banks, that caused this financial disaster in the first place. Karma will get the last laugh here.
I know that much of what I have written here, and over the last couple of years, has been negative. I am an optimist at heart, and you should believe me when I tell you that it’s not easy for me to take these positions. But I am also a realist, and I believe deep down that we truly need to hit the reset button when it comes to government, corporate and human corruption. The free market system will eventually win out…it always does…which is why financial bubbles never last in the long run.
Those that hold gold and silver….those that hold growth stocks with bright futures….those that make smart financial decisions…and those that learn to think on their own, will be the new wealthy in the years to come.