Segment 1: Trading with the Greats SEGMENT BEGINS AT 00:41 A rules-based approach to trading has been economist/trading coach Jerry Robinson’s clarion call for many years. Listen as he shares seven important trading rules he has learned and adopted from three...
What a dismal week for economic and geopolitical news!
Of course, the big news last week came out of the Middle East. The U.S. announced new peace talks set to take place next month between Israel and the Palestinians. And after years of delays, Iran finally began loading tons of uranium fuel into their first nuclear reactor (Russian-built) on Saturday. Iran claims that they have a right to produce nuclear energy, and in an unusual gesture offered to allow oversight of their nuclear activities. Iran maintains that its intentions are peaceful. Israel immediately denounced Iran’s new nuclear power plant calling it ‘totally unacceptable.’ In response to the news of an atomic Iran, Israeli Foreign Ministry spokesman Yossi Levy said:
“It is totally unacceptable that a country that so blatantly violates resolutions of the (United Nations) Security Council, decisions of the International Atomic Energy Agency and its commitments under the NPT (non-proliferation treaty) should enjoy the fruits of using nuclear energy.”
The U.S. appeared to disregard the political urgency of the news. Darby Holladay of the U.S. State Department told news agencies:
“We recognize that the Bushehr reactor is designed to provide civilian nuclear power and do not view it as a proliferation risk.”
However, the U.S. did admit that while Iran posed no immediate threat, they could potentially have a bomb through the conversion of fuel into weapons-grade uranium within 12 months. According to sources within Washington, U.S. and Israeli intelligence would detect such conversion “within weeks” and would have ample time to engage Iran in military strikes.
In classic form, Iran’s leader warned that an attack on the reactor would be met with a global and “painful” response.
I would expect that we will witness rising tensions followed by a full-scale war between the West and Iran within the next 18-36 months.
And it appears that the U.S. government’s “chicken in every pot” policy regarding home ownership may be coming to an end as Washington attempts to “untangle the wires” of America’s housing and mortgage crisis.
Besides, “renting” instead of “owning” is fast becoming a new normal in today’s tumultuous economy. At least so says Fortune magazine in it’s new article entitled: Five ‘new normals’ that really will stick
Flight to Safety… In other news, small investors appear to be losing their appetite for risk by fleeing the stock market for the perceived “safety” of the bond market. According to the Investment Company Institute, small investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year. Click the chart to the right for more.
No Liquidity… And in a sign that American’s lack liquidity, Fidelity Investments reported this week that hardship withdrawals from 401(k) retirement saving plans rose to the highest level in 10 years during the second quarter.
When this news is coupled with the fact that most working Americans have very little liquid savings, it offers further proof that the Mutual Fund industry has successfully trained the American public to max out their 401(k) before building adequate liquid savings reserves.
The Mutual Fund industry sponsors many popular financial commentators today who fervently preach the “max out your 401(k)” gospel. Suze Orman and Dave Ramsey are just two examples of the droves of financial personalities who have been paid handsomely to pay little attention to the importance of adequate and diversified liquidity prior to “maxing out a 401(k).”
However, as of late, “abundant liquidity” has become a hallmark of many financial gurus like Orman and Ramsey. Unfortunately, this sudden emphasis upon liquidity comes late for the millions of Americans facing foreclosures and bankruptcies.
Consider for a moment that most people’s two largest assets are their primary residences and their 401(k)’s. Both of these assets are explicitly government-controlled. Diversification is the only weapon against a cash-strapped government hungry for revenue. When the government comes looking for cash where do you think it is going to look? With nearly $20 trillion in personal retirement assets, why not slap a higher distribution tax on your 401(k) and traditional IRA? Could they? Of course. What could you do about it? Nothing. Except maybe curse the Suze Ormans and Dave Ramseys of the world who told you to stuff money into a 100% government-controlled asset. Why not just put your money into a box and hand the government the key and ask them to give it back to you at retirement? That, by the way, is the definition of a 401(k)… minus Mutual Fund fees.
Across the Pond… Since making the news a couple of months ago, the country of Greece has imposed strict austerity measures. The result? Greece is in the grip of a depression. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies are on the rise. In addition, stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Has Greece entered the death spiral? You can read more here.
Big Brother Alert… There’s more troubling news on the growing threat of government intrusion.
Biometrics R&D firm Global Rainmakers Inc. (GRI) announced today that it is rolling out its iris scanning technology to create what it calls “the most secure city in the world.” In a partnership with Leon — one of the largest cities in Mexico, with a population of more than a million — GRI will fill the city with eye-scanners. That will help law enforcement revolutionize the way we live — not to mention marketers.
The intrusion of constant government monitoring is slowly becoming a reality. We are already tracked like animals. But they won’t stop until they have total and complete control.
Is the real price of gold over $2,000 right now? My weekend radio interview with GATA Chairman, Bill Murphy, offered some unusual information. According to Murphy, the artificial suppression of the price of gold has caused the precious metal to be severely undervalued. Murphy states in the interview that if the price manipulation were to end, gold would be trading at around $2300/oz! If you are interested in the precious metals sector, do yourself a favor and take time to listen to this weekend’s radio program. You can listen to the entire show here. Or, if you prefer to listen to the show on iTunes, click here.
That’s all for this update. Look for a few blog updates this week and an excellent radio program next weekend. My guest will be geopolitical and economic analyst, Puru Saxena. Mr. Saxena will be joining me from Hong Kong.
Have a prosperous week!
About Jerry Robinson
Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website, FTMDaily.com. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week’s economic news.