4 Tips to Beat the NEXT Crisis

6 03 2010

Friday, March 5, 2010
4 Tips to Beat the NEXT Crisis
by Sean Brodrick

The politicians in Washington tell us the economy is recovering. Well, maybe so … as long as you don’t need a job. The problems facing this country — in debt, energy, lost jobs, unbalanced budgets and more — continue to mount. In short, I think we’re headed for a head-on collision with hard times. Are you going to be ready? I’ve got 4 tips to help you do just that.

Economic dark clouds are gathering over the country like mile-high thunderheads …

Jobs Depression. Sure, sure, GDP is rising … on a tide of government spending. U.S. manufacturing is growing too, as long as you don’t mind that a growing slice of the parts used in “U.S.” manufacturing are made in China. Meanwhile, jobs are vanishing. Twenty-nine million Americans either can’t find jobs or can’t find full-time work. Do you think that’s going to improve as long as companies can ship American jobs overseas where someone will work for $3 a day? Heck, no. It’s going to get worse!

Budget Implosion. Yes, the national debt of the U.S. has doubled in less than eight years, but I’m sick of talking about the ballooning U.S. budget gap. For a different dose of awful, let’s talk about the states. Across America, states are running deep in the red, and together, face a shortfall of $156 billion in fiscal 2010, according to The Economic Policy Institute.

Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing severe funding crises, and they’re just the tip of the iceberg. And the head of JPMorgan Chase, Jamie Diamond, says California’s $20 billion budget deficit is worse than anything facing Greece or other financially troubled countries in Europe. Since California is the world’s eighth-largest economy, that should set off alarm bells!

State budget deficits will likely be resolved with layoffs and budget cuts, which will hammer local economies and worsen the downward spiral.

Energy Crisis Dead Ahead. After over 18 months of recession, world oil consumption is roaring back to its pre-crash peak. The International Energy Agency says oil demand will probably hit 86.5 million barrels a day this year. That is equal to a thousand barrels a second. The growth in demand isn’t in the U.S. — we’re using oil at 2005 levels. Instead, it’s the growth in China, India and other emerging markets that is driving global demand now.

Meanwhile, on the supply side, new oil discoveries peaked decades ago, as this chart from the Association for the Study of Peak Oil shows …
World oil discover over 10-years periods (source ASPO)

Starting in 2011, we’ll see a drop of just over 4 million barrels per day from the fields that are currently producing about 85 million barrels a day. After 2014, world production will go into steeper and steeper decline.

The Road to Famine. World food demand is projected to increase 100% by 2050 due to a rapidly expanding population in countries such as China and India. And yet, 963 million people, 14% of the world’s population, are already chronically hungry. Do you think you’re immune? The food on your dinner table travels an average 1,500 miles to get to your plate. Think again!

I could go on, but a whole list of all the problems facing us can seem overwhelming, and it’s probably too early for you to start drinking. I don’t think these problems will hit next week, but they are growing, and time is a luxury we cannot afford to waste. Here’s the good news: You don’t have to sit there like a lump and wait for bad news to smack you in the face. You can stand up and fight back!

What am I doing? It all boils down to the Three P’s — Plan, Prepare and be Proactive. In other words, I’m trying to take an honest assessment of the problems facing the country and me personally. I’m preparing both physically (storing food, water and more) and financially. And I’m trying to be proactive — spending a little now to save a lot of potential pain down the road.

I cover many of the basics of what “prepping,” as it’s called, in my new book, The Ultimate Suburban Survivalist Guide. And when it comes to finances, you should be using these good times to get ready. And if you don’t think these are the good times, brother, you don’t want to know about the potential bad times.

Let me give you some basic ideas on what you can do in your portfolio …

#1) Move Your Money. Do you trust the big banks? I sure don’t. I think they’re so crooked they have to screw on their pants in the morning. The bailouts they’ve received by their bought-and-paid-for pals in Washington should be criminal. And the bad behavior was never punished, which increases the odds that the big banks are going to mess up big-time again. Do you think that Wall Street banks will get another bailout? I think that’s unlikely — the American people are downright furious! So I don’t want my money in their banks when the manure hits the fan AGAIN.

I’m happy to say that my family has joined the “Move Your Money” campaign. We’ve moved our money from a large, global bank to a couple of smaller, local credit unions and community banks. Community banks are typically more conservative about how they manage their money. I certainly don’t have to worry about them using my taxpayer dollars to hand out billion-dollar bonuses.

I checked on Bankrate.com to find out which banks in my area are the most financially secure — a precaution I recommend for anyone thinking of making the same move. And you can google “Move Your Money” for more information on this movement.

It’s not just individuals who are doing this. Cities as big as New York and Los Angeles are fed up and considering moving their money to local community banks as well.

#2) Buy Gold While It’s Still Cheap. We’re all used to gold going down when the dollar goes up. But a funny thing happened in February — gold and the dollar started going up at the same time. And this new trend is continuing.

I think this is because both gold and the dollar are seen as safe havens by Europeans who are worried about their currency, the euro. As I explained in a recent video, “Opportunity in Gold and the Dollar,” we saw the same thing in 2005 … when Europeans were worried about the euro.

The dollar’s rally ended in 2006, when it slumped again. As for gold — in 2006, it continued to accelerate higher, helped along by a falling dollar.

You see, when the dollar was rising, it kept a leash on gold’s gains. When the dollar started to slump, gold was able to bolt ahead.

So, if you think gold is pricey now … just you wait!

I prefer to own physical gold for the long term, but you can always buy the SPDR Gold Trust (GLD) or ETFS Gold Trust (SGOL) if you’re just doing it for a trade.

#3) Buy Gold Miners While They’re Still Cheap. You can play the coming rally with any gold ETF, but I think gold miners look cheaper right now. If you don’t like buying individual miners, consider the Market Vectors Gold Miners ETF (GDX) or one of the other funds or ETFs that holds a basket of miners.

Now, why buy gold miners if I think hard times are coming? First, if the U.S. dollar slumps the way I think it will, stocks will probably head higher. That’s because they’re priced in dollars, so it takes more dollars to buy them.

Secondly, in the Great Depression, when many stocks weren’t worth toilet paper, select gold miners did well. That’s because the price of gold did well, and they were real companies producing a real asset.

And that brings me to my fourth recommendation …

#4) Ride The Market Megatrends. Not all things financial are headed down the tubes. The commodity supercycle is real and we’re seeing it play out as China, India and other emerging markets buy more and more metals, energy, and other commodities to feed their economic expansions. Commodities should continue to outperform going forward.
While other sectors are headed down the tubes, commodities should continue to outperform going forward.
While other sectors are headed down the tubes, commodities should continue to outperform going forward.

Meanwhile, America’s baby boomers are aging. They’re going to be looking for income, and with bonds paying piddly yields, they’ll probably load up on dividend-paying stocks. And what are some stocks that pay some of the best dividends? Commodity stocks!

Put those two trends together and you should have some stocks that will outperform the market, pay you nice dividends and potentially rack up solid price appreciation, too.

You can find these stocks on your own. If you’re looking for dividends, as a rule of thumb, you want stocks that pay at least a 3% dividend. Just be careful, and be aware that when it comes to stocks that pay dividends, it can be hard to tell the turkeys from the eagles.

The good news is I have a new publication, Crisis Profit Hunter, that has a bushel of recommendations in dividend-paying natural resource stocks — as well as non-dividend-paying recommendations that should protect your portfolio and even profit as crises hit in water, food, energy and more.

Crisis Profit Hunter recognizes that …

A big commodity bull market is in place, and there are truly huge profits to be made there.

The U.S. dollar is in big trouble, as is our banking system. While there may be short-term rallies, you should use those to prepare for the next down-turn.

The torch of leadership in the global economy may be passing from America to the emerging markets — and there are profits to be made on that mega-trend as well.

America is at the intersection of multiple crises that we haven’t seen in our lifetimes, if ever. And there are ways to invest to help protect and profit from those crises.

There are actions you can take as an individual to protect yourself, along the lines of my new book, The Ultimate Suburban Survivalist Guide.

You’ll find all this and more, every month, in Crisis Profit Hunter. And now, for a very short time, I’m offering a special subscription price — just $89 for one year.

These ARE the good times. The hard times are coming. You can protect yourself, profit, and prepare, but you’ve got to start now. Sign up for Crisis Profit Hunter today — CLICK HERE.

Yours for trading profits,

Sean


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