By Craig R. Smith
Dec 31, 2003
As the years roll on, I feel more and more like a broken record (or like a skipping CD for the pre-baby boomers). Each year-end I try to capsulize my best strategy for our clients into a short list of resolutions for the next year.
In recent years my "Top 10 List" of INVESTOR RESOLUTIONS has been:
1) REDUCE DEBT - Especially credit cards
2) INCREASE SAVINGS - Financial emergency preparedness
3) REDUCE STOCK EXPOSURE - Fully diversify assets
4) INCREASE TANGIBLE ASSETS - 5%-15% in Numismatics
5) FIND A BROKER YOU TRUST - Then tell them the truth
6) WRITE YOUR VISION DOWN - Goals, personal & business
7) INCREASE RESEARCH TIME - Read the fine print first
8) REDUCE FINANCIAL NOISE - Mute pop TV Wall St. Analysts
9) INCREASE INVESTOR IQ - Read SwissAmerica.com & DailyReckoning.com
10) PRIORITIZE RELATIONSHIPS - God, Family, work, friends
My guess is that less than 10% of American investors have heeded this simple top 10 list from years gone by, so this year I've shortened my list to just four major resolutions that investors should consider as critical for 2004. I hope they make as much sense to you as they do to me ...
1) I WILL NO LONGER TRUST IN THE U.S. DOLLAR AS A STORE OF VALUE -- ONLY GOLD IS 100% TRUSTWORTHY.
Many foreigners who have traditionally relied on the U.S. dollar as a store of value are not so sure any more. They are looking for a place to put both their confidence and their wealth. Will they turn to the yen... the yuan... the pound...the mark...the franc ... or the dollar? That is the big question, but here's the problem... all currencies have some risk, except one ... GOLD!
This growing international confidence crisis helps to explain why so many investors are turning to gold as the currency of last resort. Gold will not lose it's buying power over time, it is stable, liquid and the ultimate world standard of value.
This decision to 'go for the gold' is just common sense now and will accelerate globally in 2004. Why take a risk on any paper currency when you can convert to a no- risk position in gold. No contest!
American investors still have a fixation on perceived "high returns," but foreigners know better. History has shown them over and over again the devastation that results from watching paper currencies become worthless ... something gold has never done in 6,000 years of history.
2) I WILL NO LONGER TRUST GOVERNMENT TO SOLVE OUR DEBT/DEFICIT CRISIS -- REGARDLESS OF POLITICAL PARTY.
Despite all the good news of rising GDP, productivity and rising corporate profits, the biggest stumbling block to a real, sustainable economic recovery is the serious international concern about the widening U.S. Trade and U.S. Federal Budget Deficits -- now topping $1 Trillion per year!
The root meaning of the word "deficit" is "deficient," according to Webster's. Now I ask you, would you place your confidence in a deficient stock, bond or mutual fund? I hope not, because deficiency is the enemy of confidence -- and confidence is the cornerstone of investment and fiat currencies. So, deficits do matter, even if Greenspan and company pretend they don't.
Americans are viewed by foreigner investors as overstuffed, fat and lazy ... reminceint of the old woman in the TV spot who cried, "Help, I've fallen, and I can't get up!" Keep in mind that America is not immune to a hostile takeover attempt by the EU, China, or elsewhere if we remain debt-burdened and dependent on "the kindness of strangers," as Bill Bonner puts it. Remember, "the borrower becomes a slave of the lender," according to America's Holy Book, The Bible.
3) I WILL REMAIN VIGILANT TO ALL FORMS OF TERRORISM, INCLUDING FINANCIAL TERRORISM -- IN MEMORY OF 9/11.
Then there are the Fundamentalist Islamic terrorist who see Americans as the great "Satan." Al-Qaeda have proven their ability to target our financial jugular vein once already by attacking the World Trade Center. Even Homeland Security Chief Tom Ridge acknowledges that Americans should do some personal preparedness for another attack. I would add that preparedness should include financial terrorism.
For example, with the proposed 2006 launch of the "Gold Dinar" currency as the world's only a 100% gold-backed currency, what's to stop this 53-nation Arab alliance and OPEC from switching out of U.S. dollars and into Gold Dinars to price oil? Not much! It's no coincidence that OPEC has been limiting oil production, causing U.S. oil prices to rise (up 20% in '03) to offset the dollar's dropping value (down 20% in '03).
Be prepared! Own gold, the only real currency that can protect your assets from the emerging cultural/religious wars of the 21st Century. Gold preserves financial security and liberty because it is not anyone else's liability -- or debt-based -- like all paper currencies today.
4) I WILL NO LONGER TRUST WALL STREET, NOR REWARD SCANDALOUS BEHAVIOR -- INSTEAD, I WILL DO MY HOMEWORK.
Yesterday I watched Congressional lawmakers claim they were "shocked, discussed and outraged" as they heard testimony from Mutual Fund executives. What can we expect as American leaders plumb the depths of the mutual fund scandal? True accountability? Justice for all? Don't count on it. As Dow Theory Letters Editor, Richard Russell was once warned as a youngster, "Do you know why stock brokers never make big money in a bull market? ... because they never believe their own bull sh_t."
Instead of true reform, I suspect all we will get are more hearings on Capital Hill and then life will go on as usual. Oh sure, there will be some cosmetic changes, new legislation, some big fines, etc., but very little true punishment.
The only way that I believe Americans could exact public punishment from Wall Street cheats is to take their money elsewhere to invest. But they won't, even though Americans have been bilked out of billions, they will still keep their money in same Mutual Funds. Why?
If a restaurant feeds you bad food, you don't go back, do you? Or, if you get terrible service at one department store, you go to another, right? Yet, when it come to investing, it seems people generally keep their money where it is. The only explanations I come up with are; LAZINESS, LACK OF EDUCATION ABOUT ALTERNATIVE INVESTMENTS, or BRAINWASHING BY MADISON AVENUE MARKETING. Whatever the cause, Americans seem to allow their pockets to be picked over and over again by Wall Street ... and then say "thank you!" with what's left of their money. Crazy!
My wife and I have finally had it. We have decided to take the time, energy and expense to seek out alternatives. Edmund Burke once said, “All that is necessary for the triumph of evil is that good men do nothing.” How True! Therefore, the Smith's are no longer going to reward illegal and immoral behavior by investing in their products. I invite you to do the same if you are as outraged as I am. Wall Street is going to have to earn my trust before they get my business again. Until then, I will not own a Mutual Fund, no matter what type of return they offer. -CRS
Craig R. Smith, is author of Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush. Craig explains the root issues behind the social and economic trend-shift of the 21st century. He is featured regularly on FOX News, CNNfn, CNBC and Bloomberg for news analysis and commentary.