Thursday, September 18, 2008

Increase Your Gold Holdings Immediately!

Increase Your Gold Holdings Immediately! by Larry Edelson

Quite frankly — anyone who doesn't own gold in this environment has lost their marbles.
Consider the following ...
— The U.S. economy is experiencing its worst financial crisis since the Great Depression.
Fannie Mae and Freddie Mac have failed — the largest financial failures ever seen in this country. And the U.S. Treasury has guaranteed their $5.2 trillion of debt. Lehman Brothers has failed. Merrill Lynch has had to be sold off to help stop its bleeding.
The airline industry is broke. The big three auto manufacturers are all but officially bankrupt. And more woes are certainly coming.
Lehman Brothers goes belly up!
— The U.S. dollar has lost 33% of its value in the last few years, AND IT IS probably GOING TO LOSE A LOT MORE.
How can it not decline in value? The Federal Reserve is now accepting as collateral everything from investment-grade bonds ... to mortgages ... and even common stock from failing institutions in exchange for lending (printing) up money and loaning it out.
That means the Federal Reserve's once pristine balance sheet — the assets behind the dollar — is now being massively diluted.
Just a little over a year ago nearly 100% of the Fed's balance sheet was invested in U.S. Treasury securities. Today, more than 40% of the Fed's balance sheet is invested in assets and securities that would otherwise be labeled junk in the private sector.
And keep in mind the dollar's 33% loss in purchasing power occurred BEFORE the recent dilution of the Fed's balance sheet.
But it's not just the Federal Reserve whose balance sheet is deteriorating. So is the U.S. Treasury's.
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Our national Treasury is now on the hook for $5.2 trillion in Fannie and Freddie mortgage bonds. Not to mention the existing $9.6 trillion in national debt.
If just 10% of those mortgages go bad, the Treasury will take a $500 billion loss. If 20% go bad (not an unreasonable scenario), it will take a ONE TRILLION DOLLAR LOSS.
And since the Treasury is guaranteeing those mortgage bonds, and therefore must fund any losses on them — it will have to issue U.S. treasury bonds back to the Fed so the Fed can print the money to pay the Treasury's creditors. This includes hundreds of billions of dollars owed to foreign investors.
Oh, and let's not forget, the Federal Reserve will charge the Treasury interest on the money it prints.
So I ask you now: How can the dollar not go down? Other than an occasional short-term bounce, the value of the buck is destined to decline much further.
More ...
— Real interest rates remain negative, below the rate of inflation, and they will remain negative for some time.
In other words, it's cheaper to borrow dollars and speculate with them than it is with just about any other currency in the world.
In other words, negative real interest rates are bearish for the dollar. And when you hold dollars, you're losing out to inflation.
Period.
I haven't even begun to tell you the real nightmares for the U.S. dollar. I haven't even touched upon the $50 trillion in contingent liabilities in Social Security, Medicare, government pensions, money the FDIC will need, and more.
And there is no way, no how that any of these debts, liabilities, potential losses will ever be covered without a massive, ongoing devaluation of the U.S. dollar.
So why would you NOT want to own gold in this environment?
Gold is the only true form of money.
Gold is the only true form of money there is. It is no one else's liability. It has no board of directors manipulating its value. It has preserved its purchasing power for over 5,000 years of civilization. It has outperformed every paper currency on the planet.
Given all of the above, and more, I am now officially putting out an emergency buy signal in gold.
— If you don't own any gold, I urge you to buy some now.
— If you do own gold, I suggest you buy more, immediately!
The precious yellow metal — your vehicle to survive financially in the years ahead — recently fell back to major support at the $735 level.
It has since rallied back to $785. I believe the pullback I've been warning you about is now over.
But even if I'm wrong, and by some crazy fluke, the price of gold falls back to major long-term support at the $600 level, it would not be that big a deal.
Because I know that paper dollars are NOT where I want my money.
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And because I have absolutely no doubt whatsoever that gold will ultimately reach at least $2,270 an ounce, and perhaps even higher.
I now suggest you seriously consider holding as much as 25% of your net worth in gold.
Here are the four best ways, and my suggested allocation would be one-fourth of your total liquid funds for gold going into each ...
1. Gold Bullion: I prefer the one- and five-ounce gold ingots available at most reputable gold dealers. Store in your bank's safety deposit box, or at home in a safe that's securely bolted to the floor.
2. The SPDR Gold Trust (GLD). This fund allows you to invest in an ETF that owns the physical gold for you, but without the storage hassles. Each share of the GLD equals 1/10 of an ounce of gold.
3. Gold stock mutual funds: Consider spreading this fourth of your gold funds as evenly as possible amongst three of my favorite funds: Tocqueville Gold Fund (TGLDX) ... U.S. Global Investors World Precious Minerals Fund (UNWPX) ... and the U.S. Global Investors Gold and Precious Metals Shares (USERX).
4. Top-notch gold mining shares. This fourth is best suited for more accurate timing. See my Real Wealth Report for specific buy and sell recommendations.
Again, I suggest you allocate 25% of your net worth to gold holdings immediately. Do not wait.
Best wishes,
Larry
P.S. To get all of my specific gold recommendations, subscribe to my Real Wealth Report for just $99 a year. I'll let you know when and what to buy the moment I pull the trigger!
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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