"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra: Buy Gold and China. Sell short on pretty much everything else. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

Twitter: @kherriage

Twitter: @kherriage

Karl Bessey

Mary Dee

Mike Budny 
Monday
Sep272010

F.E.A.R.

F.E.A.R.

There are 4 emotional stages that 99% of the population must endure when dealing with tough situations. And I would say that 17.5% real unemployment and the greatest level of poverty in close to two decades qualifies as pretty tough. Of course this is just in the US. In Spain, the real unemployment rate is over 30% and throughout much of Europe…as entitlement minded as it is…the real unemployment rate averages well over 20%. And this same reality is setting in all over the world. There is a quite discontent creeping into the global mindset. A palpitating anxiety that our kids may not have the same opportunities that we have enjoyed. 

The 4 stages are shock, denial, fear, and acceptance. 

At our m2 Wealth Conference in Boca Raton I said that we were close to coming out of denial and were about to enter the fear stage. In the fear stage, the reality of our dire situation will become prevalent. This is when stock markets retreat to new lows, home owners realize that the value of their residence will continue to decline for years to come, and economic desperation (for most) begins to set in.   

But that was premature. We have remained in the denial stage for longer than I thought. 

And here’s why. Those of us that have managed to hold onto our incomes are doing ok. For us lucky ones, the economy seems to be holding on. Of course, tens of trillions in global government stimulus programs and loan guarantees…or taxpayer funded bailouts…that mask economic realities, can tend to have that affect. This is Keynesian economics hard at work. Keynesian economics is the economic theory recommended by economists like the very liberal Paul Krugman, whose Nobel prize in economics in 2008 is second only to Barack Obama’s Nobel prize for peace on the laughometer. 

And since my son, who is a freshman in college at Southwestern University in Georgetown, Tx., is currently taking an economics class and using the textbook written by Krugman himself, this is an issue that I have spent quite a bit of time thinking about (sorry Tyler, but think of it as taking one for the team). 

Keynesian economics can best be described as an economic theory stating that active government intervention in the marketplace is the best method of ensuring economic growth and stability. Or as I like to say “I’m from the government and I’m here to help.”    

Here’s the bottom line on economic theories. Liberals believe that the answer to a strong economy lies in the Keynesian approach, while conservatives believe in the Austrian school of economics, which teaches that the free market system… pure capitalism…is the only tried and true method of growing and sustaining a strong economy. Now, for all of you Bush haters (and on many issues that includes me), that have bought into the liberals message that Republican economic strategies are responsible for the mess we are in now, let me remind you of this.  

Under Bush we had the lowest unemployment rate in a generation. His mistakes with the housing market, defense spending/two wars, and government led bailouts of Wall Street and the banking industry were beyond atrocious, and without a doubt led us down the path of economic destruction. But that doesn’t mean that his belief in the Austrian school was a mistake. To the contrary, tax revenues were at a record high during his Presidency. Bush succeeded in lowering the income tax rate for all Americans, yet somehow tax revenues to the government increased. This my friends is the very definition of the Austrian school, yet for some reason almost no conservative can find their voice to make this point; when income tax rates decline, corporate and personal profits increase…and therefore the overall level of tax revenues must rise. We saw this exact result under the last two Republican presidents that lowered taxes (Reagan and Bush II) and a Democratic president in Bill Clinton.  

The problem of course is that they spent all of these record tax receipts incredibly poorly (along with a very complicit Democratic majority in Congress). But the fact remains that government spending is the issue…not the Austrian school of Economics.  

Back to level two…denial. Because the current administration (and yes, Bush was just as guilty at the end of his presidency with the $890 billion TARP bailout) believes completely in the Keynesian theory, we are now witness to endless government bailouts and a level of economic manipulation at Ben Bernankes Federal Reserve that defies believability. And the same can be said for central banks globally.  

Yep…when you add tens of trillions in funny money into the economy, it has to go somewhere. And in this case, it’s going to the exact criminal led banking cartels that caused this crisis in the first place. Sure, some of it is trickling down throughout the economy, but just barely enough to keep us out of an official Depression. But it’s been enough to keep the sheeple in denial...at least for a while longer.  

You see, the haves are still making and spending money. Luckily, we are among those that still have our primary source of income, which allows us to support an economy that relies on 70% consumerism. But what happens when the funny money is gone and unemployment rises sharply for all, regardless of your class? What happens when everyone…especially the wealthy… realizes that their homes are continuing to drop in value with no end in sight?  What happens when the real economic crash takes place…or in this case, when the bond bubble pops and no one is left to buy our bankrupt government debt, either in the U.S. or abroad? Japan has a debt to GDP ratio of 200%, not including entitlements. They have a dramatically aging population that is turning into spenders of their money in retirement rather than savers. Who is going to replace the nearly $2 trillion in Japanese government debt that matures this year, and every year for the rest of their existence?  

And anyone that can do basic math realizes that the same bleak economic reality  lies directly ahead for Ireland, Spain, Portugal, Italy, Greece, literally every small European country, and ultimately the UK…and of course the U.S. Can China, with its 60 million vacant homes, support the entire global economy? And, how will your country do, be it Canada, Australia or Norway, when the rest of the world is searching for investors to buy their own government debt? Will you be able to bail the rest of civilization out? Or let me put it this way, how did your country do when the subprime crisis hit in the U.S.?  

The remaining question for me is when do we leave the denial stage and enter the fear stage? And the best answer I can give you is that when it happens it will be too late to prepare. This is why we buy coats in the summer.  

I have taught, and warned about the coming reality, as much as humanly possible over the last 5 years. This is why we own gold and silver. This is why we remain as intelligently debt free as possible. And this is why we reduce our exposure to global equity markets. Because once we reach the fear stage it will be too late.  

And then… once there is blood in the streets (Wall Street verbage) we will be buying these very same assets at multi-generational lows. Fear has been referred to as “False Evidence Appearing Real”. Prepare now and make this your definition as well.

 

Kip                        

            

Tuesday
Sep142010

Libertarian National Congressional Committee Announces Addition of Kip Herriage to the Board

LNCC Announces Addition of Economist and CEO Kip Herriage to the Board

Wayne Allyn Root, the Chairman of the Libertarian National Congressional Committee (LNCC) announced today the addition of Kip Herriage to the Board of the LNCC. Kip is best known as CEO and Co-Founder of Wealth Masters International, one of the world’s fastest growing financial education and consulting firms, with 35,000 members and operations in over 140 countries. Kip is also the Publisher of Vertical Research Advisory Investment Newsletter (VRA), a top-ranked financial publication. His uncanny predictions, including the remarkable recent rise of gold and the failure of the U.S. economy have earned Herriage the nickname “The Nostradamus of Finance.”

Kip’s background includes a 15-year role as Vice President and money manager for one of the largest investment firms on Wall Street, where he managed money for institutions and high net worth clients.

Root said of Herriage’s addition to the LNCC Board, "I am proud to add a successful CEO, fundraiser and internationally-recognized financial expert to our LNCC Board. Kip’s remarkable success on Wall Street, with his investment newsletter, and with the international financial business he has built from the ground up, will all add great synergy to our Board. We hope to utilize Kip’s unique talents for fundraising, marketing and business building on behalf of Libertarian candidates across the USA.”

Herriage said, "I am honored to join Wayne Allyn Root and the Libertarian Party in their struggle to overhaul the U.S. political system. It is irrevocably broken and needs a fresh start. Our goal is not to just elect Libertarians, but also to defeat candidates from both parties who are responsible for the destruction of American values, the U.S. economy, and the American Dream.”

http://www.libertarianparty.com/blog

Tuesday
Aug242010

Prechter: The Market is Ready for a 1987 Style Crash

I began studying Robert Prechters work in 1986, met him in early 1987, and then saw him predict the 1987 crash just 3 days before it happened.

Now, he is saying that the last time the stock market looked like this....was just before that crash in 87. And as I have shared before, his forecast for the Dow is 400.....that is not a typo...400.

While I don't share his views entirely (but I do think the floor on the Dow may be as low as 3000), I agree entirely on his 1987 comparision. The news that almost no one is talking about is the re-emergence of the crisis in Europe. Ireland is in big, big trouble....Greece never left being in big trouble...Spanish banks cannot access the debt markets...and the $1 trillion bailout of the European Union is now in doubt. Once we see the bailout officially cancelled, all hell is going to break lose globally.

And all of this is happening in the face of a big slowdown in China, where they have 60 million vacant homes that were built and never moved into. Their housing crisis is about to begin. Add to this the recognition that the US never really left our recession...which will soon be recognized as a Depression. At least thats what I call 17% unemployment (U-6 figure...the only one that matters).

Finally, the bulls continue to say that "all is fine because corporate earnings have been strong". But they forget two very important things. One, the earnings numbers are phony because you just can't count the trillions in government stimulus (taxpayer funded bailouts) as anything remotely "real", and two, that bear markets like this do not bottom until the average p/e (price to earnings multiple) for the US stock market is 5-7. Since the p/e is about 17 now, you can see how much further we have to fall.

This is not the time to be invested in the stock market. This is the time to be short the stock market.

Here's Precthers video: 

http://www.businessinsider.com/prechter-the-last-time-the-market-looked-like-this-was-right-before-the-87-crash-2010-8

Kip

Friday
Jul162010

Update From Jamaica

VRA Update... From Jamaica

We are at the WMI m3 Private Wealth Group in Jamaica this week. This is our 3rd m3, which are our International events, and we have also had 10 m2 Wealth Conferences, which are held domestically. 

This event is at the Ritz Carlton in Montego Bay, and as I write this I am sitting on our balcony overlooking the turquoise Caribbean waters...just breathtaking.

I began publishing the VRA in 2002, and in 2005 we formed Wealth Masters. Both companies exist for one reason; to empower people with the highest level of true knowledge and wealth accumulation strategies in existence. It is what my Co-Founder and partner Karl Bessey and I work on pretty much 24/7, and I cannot imagine doing anything else.  

The Chinese are famous for the quote "may you live in interesting times", and it is safe to say that these are certainly qualify as interesting times. More like upside down times. The world is awash in record levels of debt at all levels...government, corporate, and individual...yet the prescription is MORE debt. Clearly a recipe for catastrophe. It's like a train wreck in slow motion. Everyone can see it coming and it's impossible to take your eyes off of it.

And, more than ever before, it's becoming a world of the haves and have nots. The ultra wealthy and elite have the playbook in advance...their own crystal ball...and are busy preparing for the oncoming carnage. But what they are preparing for more than anything else is the resulting opportunity that presents itself during economic calamity. Because just as I'm certain that the water here will be turquoise again tomorrow morning, I am certain that the global economic crisis that began in 2008 is only in about the 2nd inning. Unfortunately...at least for 99% of the planet...the last 7 innings are going to be awful. 

Money backed by nothing cannot last. Corrupt government and financial markets cannot last. We know how the last chapter will read, the only question now is one of timing.

Market Update

While most stock markets are still down 10% in just the last month, last weeks rally raised the hopes of the bulls that maybe the worst is behind us. After all, 2nd quarter earnings are expected to be strong (at least for the largest companies) and historically this news has been positive for stock prices. The problem as I see it is that this rally is taking place on VERY light volume, and its also concentrated in only the biggest blue chips. Most stocks continue to tread water or continue in their decline. And while I would not be surprised to see earnings reports take the market a bit higher, if earnings fail to impress then the next big move will be sharply lower. Remember, the markets anticipate 6 months out. And in 6 months time, these are the news stories that I expect to see:

- Unemployment breaks 10% in the US by a considerable margin, with no reversal in site. Census workers are now unemployed (again), and with states laying off hundreds of thousands of workers in order to try and balance their budgets, the battle is being lost.

- Foreclosures reach record levels as the "shadow inventory" of 4 million homes finally hits the market, combined with fresh foreclosures of 3-5 million homes, brings the total for 2010/11 to nearly 10 million.   

- Europe declines into a severe double dip recession, which brings several well-known economists to begin forecasting a Global Depression for the first time.

These, and many more reasons, are why I believe the last half of 2010 will look very much like the last half of 2008...specifically the late 3rd and 4th quarters. If I am anywhere close to being correct, is there any scenario where you can imagine global stock prices rising? If nothing else, this is a great time to raise cash. In addition, the unintended consequences of untold trillions in freshly printed money worldwide, not to mention the 15 trillion+ in government loan guarantees and artificially low interest rates will bring on the next shock to the system...higher interest rates at the worst possible time. When lending begins to shut down completely worldwide (as is happening now throughout Europe) the competitive demand for fresh debt funding at all levels will lead us into global hyperinflation. This is the runaway freight train that few are talking about, at least publicly, but that everyone is scared to death of. 

Signing off from Jamaica....looking forward to seeing many of you this week!

Kip       

 

Monday
Jun072010

The Crash Has Begun

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.  

 Kip