A Publication of Austin Rare Coins June 2008
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Investment Report Card 2008
Here’s a chart to show you how major indexes and precious metals performed over the past year. The charts don’t show it, but in 2008 alone, the U.S. Stock Markets have lost about $2.1 Trillion in value. That’s $2.1 Trillion Dollars that you, your friends at the country club, and your retirement plan have seen disappear, so far this year. Take a look at how Stocks have performed vs. Gold and Silver so far in 2008–  The NASDAQ is down
15%.The S&P
500
is down 14% The DOW
has lost 15%.Meanwhile,
Gold is up 13%.Silver has
gained a whopping 23%.
If you made plans for retirement last year or several years ago, be warned that the investment world has changed completely and investments you once thought were completely safe may be on the verge of becoming worthless. The current financial crisis took years to create and is likely to take some time before the severity and the risks become completely obvious to most people. Meanwhile, the economy drifts downhill. The ineptitude of the U.S. government and greedy bankers got us into this problem along with the loose policies of the Federal Reserve. Sadly, to fix the massive Sub-Prime Mortgage problem and the lack of liquidity worldwide Bush and the Democrats came up with a dump plan. Already, the Fed has mailed out checks to Americans to the tune of $168 Billion Dollars and begged them to spend the money immediately to keep the country from rushing into a recession. The plan makes no sense at all and most Americans have spent the money to pay off debt or to put away in savings. In this election year, politicians failed to mention that every single one of the $168 Billion Dollars to be handed out has been borrowed from foreigners. This is not a tax rebate or money cut from spending. The entire bailout just creates more debt that our children and grandchildren will be forced to pay off, with interest.  The Sub-Prime Mortgage Fiasco Last year, Sub-Prime Mortgage Crisis was not a household phrase, stock markets were at an all-time high, no one thought we were headed into a recession, and the US Dollar was not on the verge of a total collapse. In February of 2007, Pandora’s Box was opened– a 9% Chinese market sell-off started a panic wave that plunged the DOW 416 points in one day. The spawn of these events are still swarming the economy today, affecting every asset you own. In the dog days of August last year, Wall Street was shocked as the Sub-Prime crisis began to dry up liquidity worldwide. The banks, financial institutions, and mortgage companies began to report just how bad the mortgage losses really were. The DOW took a huge blow, losing 8.45% in a week and forcing the plunge protection team to flood the U.S. economy with $400 Billion to prevent a total Stock Market meltdown. Fears were growing that 2007 might very well become a repeat of the 1929 Stock Market Crash and the ensuing Great Depression. By September, “Subprime Mortgage Crisis” became the new market buzzword. The U.S. Dollar fell through the critical support level of 80.0 against the Euro and has stayed below ever since. Through the rough and tumble, extremely volatile stock market ride, investors looked for a safe haven. As a result, within a few months Gold (always the safe haven of choice in a crisis) crossed over $700 an ounce, on its way new all-time highs over $1,000 as the investment world had already begun to change. In our opinion, the U.S. financial disaster is at least as bad, if not worse than it was almost a year ago. The cover-ups continue as the banks, the markets, and the government put every single investment we own denominated in U.S. Dollars at risk.
We simply do not believe that the U.S. Government and the Federal Reserve have the best interests of Americans in mind. As evidence we point to the graph at left. In 1913, the Federal Reserve was created for the sole purpose of protecting the value of the U.S. Dollar by guarding it against inflation. The U.S. Dollar simply had few competitors and became recognized as the best storehouse of wealth in the world. That, of course, was through 1971 when the U.S. Dollar was backed by Gold held in Fort Knox. We won’t comment on the disastrous destruction of the Dollar during the 1970’s after President Nixon removed the U.S. Dollar from the Gold Standard, which tossed the world banking system into upheaval and took Gold prices from $35/ounce to over $850. Yes, the world has changed for the U.S. Dollar and the change has been downhill all the way. Bad for the Dollar, Good for Gold In recent decades, the U.S. Dollar has had competition from the Japanese Yen and today the Euro. When the Euro was first introduced in 2002, you could trade a U.S. $100 bill and get 112 Euro Dollars. Today, a $100 bill is good for about 64 Euros, or about half what it was worth six years ago. Hotel rooms in Europe, airfare, imported cars and goods from Europe all cost twice what they did five years ago. Ouch! Earlier this year, signs began popping up all over New York City, “Euros accepted here.” Why hold a currency that’s falling in value when you can hold the Euro that's going UP in value?  Whether we like it or not, the U.S. Dollar is losing favor around the world and even here in our own country. We may be headed for a Dollar crash. While that’s bad for almost every U.S. investment, a weak Dollar is great for Gold (and Silver.) Because of the direct relationship of Gold to the U.S. Dollar, Gold has risen in value as the Dollar has lost its buying power. As you can see here, since the beginning of the bull market in 2001, Gold has soared over its old all-time high of $850 in 1980 to over $1,000 for the first time ever in March. It’s been a great seven years for Gold, but it’s not over yet, in our opinion. Typically bull markets for commodities last for 18-22 years. Right now, we are only in the seventh year of this bull market for Gold and six years for Silver. You see our point? The last bull market for Gold lasted from 1971 through the high of 1980. During that time, Gold soared in value by 24 times the starting price of $35 an ounce. It is distinctly possible that Gold could rise from the 2001 low of $255 to top $2,400 if the world’s financial and banking systems freeze up completely. World Financial Markets Reeling Right now, we’re being told that China and India are the economic forces driving the world. However, that is a half-truth. The U.S. economy today is still responsible for 50% of the economic activity worldwide. If the U.S. falls into a recession (or is already in a recession) no place in the world will be safe to invest in stocks– Europe, China, India, Russia, Australia, Canada, and South America all depend on a strong U.S. economy for their growth.  Here’s what we predicted for the 2008 economic scenario earlier this year–
Hurt by skyrocketing oil and fears about banking failures, the value of the U.S. Stock Markets have lost $2.1 Trillion Dollars in value this year and appear to be getting worse each week. The markets are on the cusp of their first bear market in six years. The Big Bad Recession Federal Reserve Chairman Ben Bernanke finally admitted that we may be entering a recession this year but should recover during the later months as it's only a "mild recession." Lately, Bernanke has held interest rates at 2.0% and is refusing to budge either way for fear of the critics' response. Goldman Sachs was right on in predicting that it expected the US Economy to drop into recession this year, that interest rates would go as low as 2.5 percent by the third quarter (2.0% and holding!), and that unemployment will rise to 6.5% by 2009 (5.5% in June and rising). Morgan Stanley has issued a “Full Recession Alert” for the US Economy. They might have been the first to call it, but they are not the only ones who are worried.  Consumer
Confidence is FallingAccording to the Economic Cycle Research Institute, seven out of 10 U.S. citizens now believe we are or will soon be in a recession. Consumer confidence is plummeting on a downward landslide. In times like these, the safest place to park your savings, away from volatile stocks and slashed job security, is in the privacy of Gold and precious metals. Gold has no Japanese competition, it thrives on economic uncertainty, and it is a proven safe-haven for times of turmoil. In 2007 alone, Gold increased 31%, and since 2001 it’s gone up an incredible 295% to the recent highs over $1,000. New Highs for Gold and Oil Prices So far this year, oil prices topped $145 for the first time in history and are making new records daily. We fully expect to continue seeing oil prices close to $130 and gas prices over $4.00 a gallon. In an exciting move as well, Gold has made new record highs over $1,000. While that number is impressive, some people are concerned that maybe the price of Gold is just too high. Since the last bull market for Gold dates back to the 1970’s, it’s prudent to consider the real top of the Gold market in inflation-adjusted Dollars for true comparisons to make sense.
If we consider the old all-time high of $850
in January of 1980, Gold may or may not trade in the years ahead at 24 times the $255 low. We just don’t know how bad things will get. You should also consider carefully that past performance is no guarantee of future gains. However, lately here at Austin Rare Coins & Bullion we are seeing $100,000 and $250,000 checks being converted from paper into precious metals. Some clients are hoarding away a million dollars or more worth of precious metals and rare coins. These folks are taking the news seriously and buying up all the protection they can afford. Holding 10% of Your Assets in Precious Metals Financial analysts often recommend holding 5% to 10% of your liquid assets in precious metals at all times. At least, that was a recommendation we often heard for years. Since the 21st century and the raging bull market began for Gold and Silver, many people we talk with are holding 20% or more of their liquid assets in Gold, Silver, and a carefully chosen portfolio of U.S. Rare Coins. Many people are holding larger amounts of precious metals these days for good reasons:
FDIC Insurance is
Worthless
– The Federal Deposit Insurance Corporation has a net value of $52
Billion, which is not nearly enough to cover the losses of a serious
banking crisis.
Looming Bank Failures
– There are 76 banks on the FDIC's list of "problem institutions"
which means they are expecting about 10 banks to fail this year.
Lousy Returns on Cash
– Money market funds and bank CDs are back down to paying 1% to 3%
thanks to the interest rate manipulation of the Federal Reserve.
Risks Too High in
Stocks
– Many of us are so close to retirement that we can’t afford stock
losses. If we lost 30% to 50% in the stock markets it might take 10
years or longer just to recover our losses.
Bonds May Default
– The risks increase daily that major bond insurers may default.
Real Estate and Home
Prices Falling
– There’s no end in sight to falling real estate values.
Greed
– With Gold rising in value 31% in 2007 and Silver up 15%, precious
metals have clearly been the way to protect and grow your savings
for retirement.
We hope you’ll agree that every single one of these reasons
is based on common sense thinking. If you’re not going to
make much money in stocks, CDs, bonds, or real estate then
why take the risks? Today, it just makes good sense to hold precious metals safely, securely, and privately so you can access them immediately. We don’t recommend letting us or anyone else hold your Gold and Silver. Stash it away in a secure safe, vault, or bank deposit box. Never try to leverage your precious metals by trading futures. And never, never, never give anyone your driver’s license number or your social security number to buy Gold or Silver. You have the right to own and hold both Gold and Silver for investment purposes. Now is the time to take advantage of your rights as an American under the current laws to buy and hold precious metals. We highly recommend you keep your purchases completely private from prying eyes. Don’t tell your stock broker, your friends, or anyone that you are thinking about buying Gold and Silver. In a worst case situation, your privacy is of the utmost importance. How to Buy and Sell Precious Metals Believe it or not, we buy and sell millions of dollars worth of Gold, Silver, and U.S. Rare Coins over the phone. As a firm that’s been in the business in Austin Texas for the past 19 years, Austin Rare Coins & Bullion has a sparkling reputation. In that time, we’ve never had one single outstanding complaint from the Better Business Bureau or BBBonline.
We have Gold Specialists available by phone at 1-800-928-6468
seven days a week from 9am till 9pm central time. Our reputation
has been based on our belief in providing more coins, better
service, and expert advice. Our team is fully trained and can
advise you on the benefits of owning Gold, Silver, and U.S. Rare
Coins. If this is first time you’ve ever acquired precious
metals, we understand that you’ll have a number of questions. We
can handle them all courteously, privately, and professionally.
Call us and let’s talk. |
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Questions? Call a Gold Specialist at 1-800-928-6468
Austin Rare Coins, Inc. Serving Investors & Rare Coin Collectors since 1989 7200 North Mopac • Austin TX 78731
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