Age of America Over?

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After a week of being on edge, it turns out nothing has changed.

Bernanke has once again promised to keep rates low. As I predicted, he will continue with QE2 and will continue with record stimulus as needed. In other words, they’ll continue pumping money – they just won’t call it QE3. Gold and silver rallied while the Dollar fell. Surprise, surprise.

Lately, I have been scratching my head and seesawing back and forth on what to do with the markets. World stocks traded close to our July 2008 high on Thursday after Bernanke’s speech and this continued for the week. But are these gains sustainable? Are they even justified? I don’t think they are. But the markets keep roaring. Inflation anyone?

Technically, we are in a bull market that has risen without the help of a lot of volume. At this pace, a correction is due. When you have a such a strong rise in the stock market with low volume support, it only takes a small negative event to trigger a downside correction.

While I still believe the year will end in green, there will be short term pullbacks. Use these pullbacks as buying opportunities.

Mining Stocks

From a technical trading standpoint, mining stocks are looking weak. Selling pressures and low bid support are giving these stocks a tough time. Fundamentally, however, they’re looking great. I am looking to put up some stink bids (extremely low market bids) in hopes they get filled.

Commodities and resource prices are at near all time highs, yet many of the mining stocks are struggling to keep up. I’ve been speaking with some of the top brokers and money managers and many of them are looking for liquidity. That could mean a temporary drop in prices as the big money sells.

We’ve had some great runs in the last couple of years so profit taking is only natural. But before the year is over, the miners and explorers will be much higher than where they are today.

I’ve taken some profits off the table this week but will be looking to buy back at cheaper prices. As I have mentioned time and time again, mining stocks will eventually catch up with the price of precious metals.

Last year, record amounts of money were raised for exploration purposes. That means we should see a lot of strong drill results this year, which will more than likely spark a significant rise in share prices for many exploration stocks.

Gold and Silver

Regardless of pullbacks, gold and silver will continue to climb. I don’t care if both of them are at or near all time highs.

From an investment standpoint, both gold and silver are only a very small part of the world’s total global assets. That means the average person still doesn’t consider precious metals as investments. They still prefer stocks, bonds, emerging markets, etc. even as many lost their shirts in 2008.

But that is rapidly changing. People around the world are looking to protect their wealth. They’re looking to protect themselves from the governments around the world destroying their wealth through fiat currencies. They’re starting to see the consequences of the printing press. Inflation is showing up everywhere, from our food prices to the price at the pump.

Because of this, the average person will eventually look to protect their wealth and jump onto the precious metals bandwagon. It’s already starting. American Eagles and Canadian Maple Leafs have been selling out everywhere.

Eventually, the media will have to take notice. As the retail market for precious metals grow, so will their respective prices.

But that’s not all.

Recent sources say that China, a country expected to surpass the US by 2016 as the number one country by GDP, said it will diversify its massive $3 trillion dollar foreign reserve stockpiles into investment funds designed to invest in precious metals and oil.

If you combine China’s purchasing power with the purchasing power of the retail public, demand for gold and silver will undoubtedly skyrocket even further forcing precious metals prices much higher than where it is today.

So do I think both gold and silver are going higher, despite all time highs? You bet. Think I am crazy? That’s okay. A lot of people called me crazy when I was said gold would hit $1500 and silver near $50.

Whose crazy now?

The Dollar is falling and will continue to fall as long as the printing press keeps printing. There is nothing positive coming our way that says otherwise. The latest US monthly deficit hit $223 billion, the biggest in recorded history. No one is buying US debt – except for the Fed. If you’re looking to go short on something, go short US treasury bonds. Eventually, interest rates will have to rise with inflation. And inflation will eventually rise to new highs.

A friend of mine forwarded me an article on some facts that I think everyone should pass around. I believe the original source was from The Economic Collapse Blog.

19 Facts About The Deindustrialization Of America That Will Blow Your Mind

#1 The United States has lost approximately 42,400 factories since 2001.

#2 Dell Inc., one of America’s largest manufacturers of computers, has announced plans to dramatically expand its operations in China with an investment of over $100 billion over the next decade.

#3 Dell has announced that it will be closing its last large U.S. manufacturing facility in Winston-Salem, North Carolina in November. Approximately 900 jobs will be lost.

#4 In 2008, 1.2 billion cellphones were sold worldwide. So how many of them were manufactured inside the United States? Zero.

#5 According to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.

#6 As of the end of July, the U.S. trade deficit with China had risen 18 percent compared to the same time period a year ago.

#7 The United States has lost a total of about 5.5 million manufacturing jobs since October 2000.

#8 According to Tax Notes, between 1999 and 2008 employment at the foreign affiliates of U.S. parent companies increased an astounding 30 percent to 10.1 million. During that exact same time period, U.S. employment at American multinational corporations declined 8 percent to 21.1 million.

#9 In 1959, manufacturing represented 28 percent of U.S. economic output. In 2008, it represented 11.5 percent.

#10 Ford Motor Company recently announced the closure of a factory that produces the Ford Ranger in St. Paul, Minnesota. Approximately 750 good paying middle class jobs are going to be lost because making Ford Rangers in Minnesota does not fit in with Ford’s new “global” manufacturing strategy.

#11 As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time less than 12 million Americans were employed in manufacturing was in 1941.

#12 In the United States today, consumption accounts for 70 percent of GDP. Of this 70 percent, over half is spent on services.

#13 The United States has lost a whopping 32 percent of its manufacturing jobs since the year 2000.

#14 In 2001, the United States ranked fourth in the world in per capita broadband Internet use. Today it ranks 15th.

#15 Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.

#16 Printed circuit boards are used in tens of thousands of different products. Asia now produces 84 percent of them worldwide.

#17 The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.

#18 One prominent economist is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

#19 The U.S. Census Bureau says that 43.6 million Americans are now living in poverty and according to them that is the highest number of poor Americans in the 51 years that records have been kept.

At the end of the day, we are in unchartered waters. We are already feeling the effects of inflation. Producer prices have soared at an annualized rate of 19% as dood prices surged an unbelievable 47% annualized rate – the largest rise since 1974. Heck, I went to my local car detailing shop yesterday and after years of never raising their prices, they had to raise them just to stay in business!

While the economy appears to be doing better, what will happen if the Fed’s money printing bandaids are no longer around? Stagflation? Hyperinflation? I think if you are a new reader of the Equedia Weekly Letter, you should go back and read We’re Back and It’s Time to Prepare. It’s helped many of our readers already and I am sure it will help you too.

Until next week,

Ivan Lo
Equedia Weekly

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