|
WARNING - Financial Crisis Ahead? |
Updated July 13, 2006
Some of the brightest financial minds of our time are warning of a
potential financial day of reckoning for the United States.
|
 |
|
McEwen is adamant that a number of key fundamentals have changed over the past six-odd years to create another gold rush. And the key metric in finding relative value is this: how many ounces of gold does it take to buy the Dow Jones Index?
At the height of the dotcom mania in the late 1990s, it took 44 ounces to buy the DJI. These days it takes 19 ounces to buy a DJI in the 11,000 range. McEwen says gold investors should watch the ratio carefully.
If the current level of the DJI is taken into account that would mean gold at $5,500 would be a trigger point to sell any holding. "This will be a mania when this (takes) off," he says. "It will look like the technology boom – going straight up."
McEwen also predicts gold will hit $850 an ounces by the end of 2008 and then move even higher through 2010.
"If you were to take the gold price in 1980 and adjust for inflation, an ounce in today's dollars would be $2,200," McEwen said. That's why a 10-fold increase in the price of gold today isn't far-fetched.
March 22, 2006
- Robert McEwen
Chairman and CEO of U.S. Gold Corporation
|
|
|
 |
|
"While we expect gold prices to be increasingly volatile, we believe that the primary risk is to the upside, and our commodity group has already pointed to the potential for slowing Central Bank sales to drive gold higher towards $800 an ounce," JPMorgan Chase analyst John Bergtheil wrote in a note to clients.
JPMorgan Chase & Co., January 31, 2006 |
|
|
|
|
"You have much more money that there is gold, and as people see their currencies falling relative to gold, they're going to be saying 'Maybe I should have some of this.' And you have an industry that's consolidated, so you have less product and more buying."
Robert McEwen, CEO of U.S. Gold Corp., March 6, 2006 |
|
|
 |
|
"...Gold and silver numismatics (collector's coins) are the only investments I know that have a built-in mechanism to make them insanely lucrative – and I use the word insane seriously. If I'm right, numismatics will be a mania as crazy as the dot-coms of the 1990s. The wise speculator will not try to pick a top, he will sell out gradually on the way up as the greed-crazed herd stampedes in. It's a good idea to establish a relationship with a broker now, so that you can be prepared to bail out when the time comes.
Compared to any other investment I can think of, numismatics are in very short supply. This creates a ratcheting effect when numismatics become fashionable...
I could be wrong, but I think this ratcheting effect may have begun again. Since September, some rare coins have nearly doubled. In my opinion, numismatics are the lowest risk shoot-for-the-moon speculation available at this time.
Prices will fluctuate, probably a lot, but Helicopter Ben, I believe, removes most of the long-term risk from gold and silver investments of all kinds.
If you buy MS-61 or 62 Double Eagles certified by ICG, PCGS or NGC, I think the present risk level is 1.75; five year profit potential 500%..."
U.S. & World Early Warning Report, Richard Maybury, March 2006 |
|
|
 |
|
Jim Rogers, the former George Soros partner who foresaw the start of a commodity rally in 1999, said the boom in energy and raw material prices will endure, driving gold to a record $1,000 an ounce.
"The shortest bull market for commodities lasted 15 years, the longest 23 years,"
Rogers, 63, said in an interview. So if history is any guide, "they've got a long way to go..."
Author, Jim Rogers |
|
|
 |
|
The Cheuvreux Metals and Mining Report (January 2006) said, "We are raising our mid-cycle gold price estimate to USD900/oz from USD750/oz and see the possibility of a spike to $2,000, or higher. Covert selling (via central bank lending) has artificially depressed the price for a decade."
Cheuvreux is currently ranked the number two investment researcher of Western European Countries by the Institutional Investors – February 2005. |
|
|
 |
|
According to technical analysts at Merrill Lynch (March 20, 2006), "Gold should outperform equities over the next few years."
This is because the relative ratio of the Dow Jones industrial average to the price of gold is declining and likely will continue to do so, according to a note by analysts Mary Ann Bartels and Cam Hui, who tracked the ratio back to 1910.
A chart in a report by the analysts shows the ratio is currently just below 20:1, down from about 42:1 in the mid-1990s. "The long-term target for the relative ratio appears to be 13:1," they say. "Based on the current DJIA level of roughly 11,000, this would translate into a long-term gold price target of $850 [U.S. an ounce], or the peak set in January 1980."
They warn, however, that returns are "likely to be volatile."
Merrill Lynch, March 20, 2006
|
|
|
 |
|
“The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.”
Hon. Ron Paul, February 15, 2006 |
|
|
 |
|
“I'd have about 15 percent in gold coins or some form of gold. The question might legitimately be asked, "Russell, why only 15% of assets in gold?" And my answer runs like this -- Every fiat paper currency in history has ended up in the ash can. The dollar and the euro and the yen will end up the same way unless they are ultimately backed by something real like gold.”
In response to a reader's question about conservative investing, Dow Theory Letters, June 2, 2004
“[D]ue to our never-ending deficits what we're seeing is a massive transfer of assets from the U.S. to creditors probably the greatest transfer of assets in history. Over time this is going to mean a lowered standard of living for my kids and your kids, and if it happens quickly it will also mean a lowered standard of living for you and me. When you build up gigantic debts, somebody has to pay for those debts. The great American debt-sponsored party is slowly coming to an end.”
Dow Theory Letters, August 25, 2005
- Richard Russell
Editor-Publisher, Dow Theory Letters |
|
|
 |
|
“’If you get to a point of fairly significant long-term structural budget deficits, it begins to impact on the level of long-term interest rates.’ That means the government must pay higher rates to borrow money, leading to even higher deficits, he said. ‘If you get into that sort of debt maelstrom, it is a very difficult issue to get out of.’”
To the House Budget Committee, Bloomberg, September
8, 2004
“If we have promised more than our economy has the ability to deliver [in Social Security and Medicare expenses], as I fear we may have, we must recalibrate our public programs so that pending retirees have enough time to adjust through other channels. If we delay, the adjustments could be abrupt and painful.”
Forbes, August 27, 2004
- Alan Greenspan
Chairman, Federal Reserve Board |
|
|
 |
|
“[T]he evidence grows that our trade policies will put unremitting pressure on the dollar for many years to come.... [O]ur country's trade practices are weighing down the dollar. The decline in its value has already been substantial, but is nevertheless likely to continue... A country that is now aspiring to an 'Ownership Society' will not find happiness in - and I'll use hyperbole here for emphasis - a 'Sharecropper's Society.' But that's precisely where our trade policies, supported by Republicans and Democrats alike, are taking us.”
Berkshire Hathaway Letter to Shareholders, February 28, 2005
“I think, over time, unless we have a major change in trade policies, I don't see how the dollar avoids going down. I don't know when it happens. I don't have any idea whether it will be this month or this year or next year, but we are force-feeding dollars on to the rest of the world at the rate of close to a couple billion dollars a day, and that's going to weigh ont he dollar.”
CNBC, January 19, 2005
- Warren Buffett CEO, Berkshire Hathaway & Second Wealthiest
Person in the World |
|
|
 |
|
"The economic challenges facing the United States today - including the needs to address the implications of an aging population, to achieve long-term energy security while protecting the environment and to reform our tax system so that it is simpler, fairer and more supportive of economic growth - are as great as at any time since the council was created in 1946."
- Ben S. Bernanke
Chairman, Federal Reserve Board
Bloomberg, May 25, 2005 |
|
|
 |
|
"Any portfolio designed to counter
government-mandated inflation has to be bedrocked in gold….
I figure gold could reach $1,000 if the Chinese stop buying
our paper. Once the levee to the Treasuries breaks, the easy
high ground worth gaining will be gold. When paper gets debased,
you can’t have enough minerals, gold or otherwise…."
- Jim Cramer
Market Analyst, Television
Host, & Author
New York Magazine,
October 10, 2005 |
|
|
 |
|
“We believe such a large imbalance [of growing indebtedness by the United States] is a risk not only for the United States economy, but for the world economy.”
- Rodrigo de Rato
Managing Director, International Monetary Fund
Speech to Council on Foreign Relations
New York Times, September 20, 2004 |
|
|
 |
|
“We are substantially dependent on foreign lending... Emerging countries are using their capital to pay down their debts, and they are buying the U.S. Treasury bonds to hold their own currencies back. Fundamentally, though, you have to ask yourself whether the ties between us and the emerging countries that are buying our bonds will last. It doesn't make sense.
Now, increasingly, emerging-market countries are going to let their currencies appreciate. Now Korea, in particular, but other Asian countries as well, are beginning to change their reserve mix away from dollars.
They're buying more euros and more gold. Gold is going to play a much bigger role. Only 2% of Chinese reserves are in gold. There is a saying that gold is the only asset you can have that isn't someone else's liability.”
- Ray Dalio
Chief Investment Officer, Bridgewater Associates
Manager of nearly $120 billion in institutional assets
Barron's, June 13, 2005 |
|
|
 |
|
“'Too much debt, geopolitical risk and several bubbles have created a very unstable environment which can turn any minute.... With all this consumer debt, business debt, government debt, smaller movements in interest rates have a magnified effect...a small movement can tip the boat... The US dollar is being supported by the kindness of strangers - Japan and China. It should be 20% lower than it is.”
- Bill Gross
Chief Investment Officer, Pimco &
World's Biggest Bond Fund Manager
Financial Times, June 16, 2004 |
|
|
 |
|
"With the combination of the problems with our country's financial system, corporate scandals at Fannie Mae and AIG, problems at General Motors, our inability to strengthen the dollar, and a major housing bubble, these are all recipes for a much higher gold price."
- Bill Fleckenstein
MSN Money Analyst & President of Fleckenstein Capital
The Street, April 18, 2005
|
|
|
 |
|
“Bill Gates,
whose net worth of $46.6 billion makes him the world's
richest person, is betting against the U.S. dollar. 'I'm short the dollar,
The ol' dollar, it's gonna go down. 'It is a bit scary.
We're in uncharted territory when the world's reserve
currency has so much outstanding debt.'”
- Bill Gates
Chairman, Microsoft & Wealthiest person in the world
Bloomberg, January 29, 2005 |
|
|
 |
|
"[T]he catastrophe will come one day because even the most powerful country in the world cannot repay loans amounting to seven trillion dollars. Unless (the Americans) change their president and have a more responsible president who will try to reduce the deficit, they will have serious trouble with the US currency. But there will come a time when we will switch away from the dollar and we have suggested the use of gold for international trade."
- Mahathir Mohamad
Former Malaysian Prime Minister
The Street, April 18, 2005
|
|
|
 |
|
“But when the
run on the dollar begins, OPEC will inevitably at some
point switch its pricing to the Euro.... [I]t will be as
if the rest of the world declared war on the United States
of America by launching a missile, dropping a bomb, or
landing an army at Bethany Beach, Delaware. And, barring
a miracle, the end results will be exactly the same as
from a physical attack....
Buy physical gold, not paper gold. I am convinced that
we will see gold reach at least $600 per ounce in 2005.
It's a great way to hedge against a falling dollar.”
- Michael C. Ruppert
Publisher/Editor, From The Wilderness
From The Wilderness, December 1, 2004 |
|
|
 |
|
“Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.
I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change... I think we are skating on increasingly thin ice.”
The Washington Post, April 10, 2005
“Volcker predicts we face a 75% chance of crisis within five years.”
Running on Empty, © 2004
- Paul Volcker
Former Chairman, Federal Reserve Board |
|
|
 |
|
“'This is the blow-off phase for the Great Dollar Era. We're in an unsustainable trend right now,'...ticking off the miscalculations that have brought us to the brink of an economic apocalypse. To begin with, the U.S. has become the world's biggest debtor, with three outstanding obligations at alarming highs: consumer debt, or our mortgages and credit cards; the federal deficit; and our current account deficit with foreign countries. Federal Reserve Chairman Alan Greenspan, Wiggin continued, has simply shifted one bubble -- the 90's bubble in stocks and bonds -- into another, in real estate and 'overconsumption,' or the American propensity to pay for an ever-more-lavish lifestyle on credit.”
- Addison Wiggin
Editorial Director, The Daily Reckoning
New York Times, June 5, 2005 |
|
|
 |
|
“[A]rtificially
low interest rates and rapid credit creation policies
set by Alan Greenspan and the Federal Reserve caused the
bubble in U.S. stocks of the late '90s.... Now, policies
being pursued at the Fed are making the bubble worse.
They are changing it from a stock market bubble to a consumption
and housing bubble. And when those bubbles burst, it's
going to be worse than the stock market bubble.... No
one, of course, wants to hear it. They want to buy the
stock and watch it go up 25% because that's what happened
last year, and that's what they say on TV.”
- Jim Rogers
Financial expert and best selling author
Financial Reckoning Day, © 2003 |
|
|
 |
|
"The real news is
not the South Korean Central bank's desire to diversify
its reserves with a preference for other currencies as
replacement of a percentage of the dollar denominated
treasury instruments it holds. The event of note in today's
market and in the markets to follow is the report of how
many central banks around the world took the same action
last year. So the real news then is that 52% of world
central banks have started to diversify their reserves
out of the US dollar.... As the US dollar makes new lows,
gold will I believe make new highs."
- Jim Sinclair
Chairman & CEO, Tan Range Exploration Corp.
Jim Sinclair's MineSet, February
22, 2005 |
|
|
As history shows, typically the value of gold rises as the value of the dollar falls, the following graph of the past two years highlights this relationship and outlines the importance of diversifying your portfolio with gold:
To learn how you can profit from in this market, click on the links below to request free information.
|
|
 
| Metal |
Ask $ |
Chg ± |
| Gold |
--- |
--- |
| Silver |
--- |
--- |
| Platinum |
--- |
--- |
| Palladium |
--- |
--- |
| Loading Prices... |
|
The American Advisor with Joe Battaglia, a daily talk show focusing on conservative investments for tomorrow. Click here to listen to The American Advisor.
Goldline's success, growth, and experience have allowed us to acquire other outstanding precious metals firms including Deak International Goldline (US) Ltd. from Thomas Cook; Gold and Silver Emporium (asset purchase); and Dreyfus Precious Metals, Inc.
|
