tag:www.reiznersway.com,2012:/articles/1 2011-03-05T18:06:54Z Articles providing investment advice and insight by John Reizner Movable Type 4.37 tag:www.reiznersway.com,2011:/articles//1.91 2011-03-05T16:06:56Z 2011-03-05T18:06:54Z

May one attempt to forecast the long term future dynamic of the economy by examining the nascent or long term price breakouts (sometimes measured in multi-decade patterns) of economically important sectors of equities or commodities such as the gold and...

John Reizner May one attempt to forecast the long term future dynamic of the economy by examining the nascent or long term price breakouts (sometimes measured in multi-decade patterns) of economically important sectors of equities or commodities such as the gold and oil markets and to project forward further significant long term price progress in the group? May one project the future dynamic of the U.S. economy from the current price behavior of commodities or equities sectors whose price performance is affected by economic activity relevant to their underlying businesses? The stock market has long been thought of as an economic forecasting tool, however imperfect it may be at that task. If gold decisively breaks a long term technical downtrend measured in decades, then may one project forward from that price breakout behavior a decisive change in U.S. economic or political dynamics that a secular bull market in gold represents? Permit me to use the history of my own personal experience and analysis of both the physical gold market and the oil equity sector to illustrate this concept. The economic and political events of the 1970's in the U.S. left an indelible image on many of the youth of that generation. I was studying economics in college during that time, while nurturing my interest in investing in equities. The 1970's has been called a pessimistic decade by some, marked by the unpopular Vietnam War and economically broken up by the quite severe recession of 1973-1974; the Dow Jones Industrial Average fell below 600 in 1974, marking the low of a lifetime and a wonderful long term buying opportunity for equities. I also witnessed the double digit inflation (or stagflation) and interest rates of the latter part of the 1970's. I watched with amazement as the gold market traveled to its zenith of $850 in 1980 and oil topped out at $40 per barrel as the second oil shock occurred in 1979-80. Many commentators at the time thought that we would then enter hyperinflation. The gold market subsequently fell into an almost twenty year bear market as Federal Reserve Chairman Paul Volcker squeezed inflation out of the system through a restrictive monetary policy. Crude oil hit $10 per barrel in 1986. Fast forward to 2003: I noted a long term breakout of gold on the monthly chart and made the inference from that price behavior that the U. S. economy could be potentially headed for a similar economic dynamic as the 1970's, complete with elevated inflation, gold and oil price levels. At the least in 2003, I projected a potential continuation of what I believed to be secular bull market for gold bullion similar in form to the bull market from 1970-1980. I later made the case on this website in several articles and blog entries (see gold and silver investing categories) that this bull market for gold and oil was potentially no ordinary cyclical or short term uptrend, but a secular or long term one for the gold and oil markets. In fact gold has run from below $400 per ounce range in 2003 to its current market price of $1431.10 per ounce on March 5, 2011. Oil is only now moving past the $100 per barrel mark for the first time since the commodity collapsed from its high of $140 per barrel in July 2008. I bought gold bullion bars and gold coins starting in 2003. Much later I bought silver bars. I continued to hold my largest equity position, which is a major integrated international oil firm, among other equities. Commodity price pressures are now manifesting themselves today especially in worldwide food price inflation, felt acutely by the citizens of developing economies. It appears that the food price surges in many developing countries (particularly in the Middle East) have made many of these counties citizens day to day survival quite difficult. In some Middle Eastern autocratic regimes, a new outspoken generation is demanding more freedom from their rulers than their rulers may be willing to give. Thus the current violence in Libya (which has disrupted oil exports from that country) and protests in Bahrain and Saudi Arabia have propelled the oil, gold and silver markets and their associated stock sectors upward. In our own country, the recent upward pressure in oil prices is producing rising gasoline prices affecting the already strained pocketbooks of consumers. However, the oil equities sector is benefiting from the currently strong prices of the underlying commodity. In addition, gold and silver bullion and the miners are currently surging strongly higher at the moment. Was a future long term bull market in gold telegraphed by the bullish breakout by the yellow metal on the monthly chart as I described in 2003? That's the importance I gave the breakout. Did this further forecast at the time that our economy may experience some of the problems normally associated with and witnessed by many in the past accompanied by a secular upward trajectory in the gold market price: potential high inflation, economic upheaval, or even war? I am not sure that I have the complete answer to the latter question. But In my own work, I placed great significance on the long term breakout and have written about my projections about the economy, gold, oil and political issues as well as a variety of other topics on this website. Gold bullion has been in long bull market lasting over ten years. Now silver is joining the party, and may represent a greater opportunity in the longer term. The only thing that I can say is much of the easy money may already been made - we may be firmly in the "optimistic" stage in my opinion, as legendary investor John Templeton defined the various stages of a bull market. Now we may just have to wait for the market "euphoria" accompanied by investor and public hysteria over gold and silver investing accompanied by further price progress - a euphoria that may be building now. Fundamentally, this may be caused by a number of catalysts: the Federal Reserve embarking on a QE3, an unaddressed Federal debt burden potentially resulting in highly elevated domestic inflation level or an "unmanaged decline of the U.S. dollar. Additionally should China stop supporting our Treasury market, the Federal Reserve might continue or restart QE to pick up the slack, which could under that potential scenario escalate the level of demand for gold and silver as the public witnesses sharply escalating price levels and turn to a recognized store of value in order to protect their purchasing power. The Federal Reserve is committed to modest inflation of 2% (engineering that is a different story). That target might be exceeded if the velocity of money increases, bank lending to creditworthy companies quickens or should economic activity pick up. Then the much talked about Bernanke exit strategy may come into play. I believe that we still have time to put our house in order. Yet, we may need a different President or have to undergo another economic crisis in the future to spur an environment where long lasting economic growth and meaningful debt reduction can occur. Time is limited: hopefully citizens and lawmakers may take the opportunity soon to have a national dialogue in 2011 on important economic issues as debt reduction and maintaining a sound currency as we are all in this together. The Dow Jones Industrial Average currently rests at 12,169.88 while the S&P 500 closed at 1321.15 as of this writing. Gold trades at $1431.10 per troy ounce while silver trades at $35.60 per ounce. Crude oil is at $101.91 per barrel. Technically, silver appears to have the most potential for gains in the next couple of years, though my work shows that if it reaches the $38 - $42 range, the time may be ripe for a correction in the range of 24% to 50% from that high range before it potentially reverses again and may exceed the previous high over time. I am maintaining my core gold or silver bullion positions at this time as well as positions in a silver miner and ETF. The fundamentals behind the continued upward price movement in these markets are in my opinion still formidable: (i) the Federal Reserve has said that quantitative easing (QE2) may continue at least until June, and (ii) neither party in Congress nor the President at this time and for that matter many members of the public appear to desire to sit down and seriously discuss the need to downsize federal spending and government to a degree that it would meaningfully reduce our debt burden and contain inflationary federal stimulus (we currently have QE2 to counteract many potential economic effects of cuts in government spending). For the time being, I have a strong allocation to U.S. equities, but am monitoring carefully whether or not the succession of higher lows and higher highs in the S&P 500, NASDAQ Composite, and the Russell 2000 on the daily chart will continue. Should that uptrend be violated, I would look for the indexes to maintain strong support at the indexes 50 day simple moving average range. Should the latter range be violated on higher volume, I would look for potential opportunity to realize past gains and reduce risk. My technical studies appear to indicate that the S&P 500 may have further up to go, but a stronger case may be made for greater upside progress if we penetrate the 1335-1356 resistance area on the S&P. The Nasdaq Composite and the Russell 2000 indexes appear to me in better shape technically than the large cap indexes - which has occurred in the past in the more speculative stage of a stock market advance. I believe that the stock market low of S&P 666 that we witnessed in March 2009 may have been a low of similar importance as 1974 and may have represented a stellar buying opportunity for the long term. Just remember the after the stock market low in 1974, the stock market struggled for years after the initial market recovery and the economy experienced two more deep recessions punctuated by the 1980 oil shock (also the gold top) before finally the stock market lifted off in August 1982 for an 18 year long bull thrall. We may very well in the next several years be in store for another recession. No one that I know of has repealed the business cycle yet. What ammunition may the Federal Reserve have left to fight this inevitability, especially after the Fed's extensive response to the 2008 debacle, or if Americans and their leaders do not face our mutual debt burden in a timely manner? Just as the breakout in gold on a long term monthly chart may have telegraphed further upside price progress in the yellow metal on a secular basis, the U.S. stock market has been interpreted and publicized by some as a recession forecasting tool. However, the stock market has a mixed history at predicting such events. Looking at economically important commodities and their associated equity sectors price behavior may render clues not only regarding the potential future price progress of the commodity or sector, but may render insights into future economic dynamics. tag:www.reiznersway.com,2011:/articles//1.90 2011-02-24T00:53:02Z 2011-02-24T19:08:36Z

What can we learn from Joseph Schumpeter's idea of "creative destruction" in capitalist economies as it applies to the U.S. current economic situation? How has the Obama administration and the Federal Reserve attempted to stop the economic process of creative...

John Reizner What can we learn from Joseph Schumpeter's idea of "creative destruction" in capitalist economies as it applies to the U.S. current economic situation? How has the Obama administration and the Federal Reserve attempted to stop the economic process of creative destruction from taking place in our economy today? How has the Great Bailout harmed our country's economic future and the worth of our currency? article about hydraulic fracturing. Barack Obama may not be the person who has the expertise to make us completely independent of foreign oil imports. A technology may be developed that we cannot conceive of yet. We must as a people tell our legislators to address duplicative and unnecessary spending and to genuinely foster new business creation. A healthy stock market may play a role in this as new companies go public and raise funds to grow, further develop and hire additional employees. Economies and entrepreneurs operate in a dynamically always changing environment. The next transformative process or technologies may lie in the hands of researchers only a handful of people ever recognized or who may even be totally unknown in the present day. Even President Obama recognizes the importance of research and development in creating new jobs in the long run. The only problem is that the government cannot force technological change (they may encourage it through research tax credits, etc.), but the creation of life changing new technology for the masses comes from individuals, teams of people, and entrepreneurs. How does this discussion bring us to the Bailout of the economy and its relationship to the power of creative destruction? When the stock market and the world economy almost came to a standstill in 2008, U.S. policymakers were given two choices: bailout both the market and failing important U.S. banks and brokerages by increasing federal indebtedness or no bailout. We all know what the consequences have been so far in the greatest bailout in American history orchestrated by the monetary ease of the Federal Reserve and the fiscal stimulus of the Obama administration: the stock market has doubled from its Crash low of 666 on the S&P 500, economic deflation has been avoided in my view, it is not likely in my view that there will be a double dip recession unless the economic numbers change in the coming months, the economy should accelerate in the coming months, and as job holders with financial assets may be feeling better about the state of the economy - consumer spending may improve. This in turn may inspire businesses to invest a bit more in their businesses, potentially hiring some new workers. It sounds great, doesn't it? Just what the doctor ordered? Good or bad? But this may not represent creative destruction in my opinion: new ways of thinking and technologies supplanting the old. The Bailout may be keeping the old ways on life support. May we have had a mass run of corporate and individual bankruptcies greater than today had Wall Street been allowed to fail? I am sure that we may have. Wall Street misbehaved, but they may have been saved. Why? Well, I suppose that one good result from the bailout maneuver was that companies may still offer stock to the public in IPO's, raising money to hire new workers and expand. There are currently winners and losers from the Bailout. Perhaps the next generation may even see Wall Street as a good place to place their retirement nest eggs. Perhaps the mistrust of the Street may eventually wear away. We and our policymakers may have stewarded economic evolution rather than creative destruction at this time: financial reforms have been legislated and our policymakers have chosen to move forward. As most people recognize, one problem with the bailout is the cost. The Congressional Budget Office in a report issued in August, stated that the national debt could grow larger than 100% of GDP in just 10 years. Citizens Against Government Waste stated in a letter to certain of its members that "under that scenario, half of all income taxes will go toward paying interest on a $23 trillion national debt... The national debt per household, which was $52,000 before the recession, would approach $150,000 by 2020." The financial markets and the bond vigilantes may eventually stop tolerating this position, or our foreign trading partners and competitors may. However, once the drug of quantitative easing by the Federal Reserve stops in June 2011, assuming there will not be a QE3, the stock market's fate will rest on the economy's laurels. The keys here may be U.S. monetary policy and the debt that we are all mired in. We do not want the United States to hit an inflection point where the there is a QE3 and QE4, which inflation sensitive equities may love, but which may cause interest rates to move further upward. There may be also a potential risk that China stops buying Treasury bonds in retaliation to the cheapening of our currency (and their U.S. dollar holdings) through our Federal Reserve's extreme "monetary ease." This may be two gambles our policymakers are taking. A third potential gamble by our policymakers whose outcome may be delayed by several years down the road is be that the U.S. debt balloon is not deflated in time before either the international currency markets or our own financial markets anticipate and/or react to potentially extremely high levels of inflation not seen before in the U.S. in the modern period: the stock market could cascade down from elevated levels, the bond market bubble may have already deflated quite a bit by then, the dollar could waterfall downward as gold and silver potentially polish off their decade plus bull market with a flair. . The American citizenry really may hold the power here, just as they always have. We must support those in government who want to bring government costs down to size. Freezing spending at elevated levels is not good enough. The government needs to pare down its spending just like the citizenry of America have. The Dow Jones Industrial Average rests at 12,105.78 and the S&P 500 closed at $1,307.40 as of this writing. The mini gold contract is at $1,412.40 and the mini silver contract is at $33.494. The dollar index rests at 77.297. Since my last blog post here, I have done little to change my investment positions. I took off a small portion of one of my silver miners as the price of silver surged and sold two smaller Chinese equity positions. Please reference the foot of that blog post for some of my other current positions. Please see comment box below. Related posts: U.S. Economic Future: May We Lose Complete Control over our Destiny? posted July 10, 2009 How to Invest in Barack Obama's "Workers Paradise" posted March 13, 2009 The Obama Factor: Why His "Change" May Make You Economically Worse Off posted July 28, 2008]]> tag:www.reiznersway.com,2009:/articles//1.75 2009-06-02T18:58:12Z 2009-07-28T22:41:36Z

See specific inflation hedge strategies It is widely known that government authorities across the globe are attempting to pump prime their nations' depression-racked economies by printing vast sums of paper money. Some nations, including the United States, are running trillion...

John Reizner See specific inflation hedge strategies It is widely known that government authorities across the globe are attempting to pump prime their nations' depression-racked economies by printing vast sums of paper money. Some nations, including the United States, are running trillion dollar deficits and will go deeper into debt in future years in order to finance an expansion that may not materialize as planned. If we reach that point where the pump priming from the Fed and the fiscal excess of the government fail to keep the economic shell game going, the financial markets may lose greater confidence in our dollar (the dollar index is currently at 79.19 on June 1, 2009), Treasury bonds and stock market {Dow Futures at 8688 {(though the stock market may move higher as it has exceeded its 200 day moving average: a widely watched indicator)}. ]]> How can one protect one's portfolio and family from the potential ravages of a great inflation? I saw years ago that our commodity bull market had begun in 1999. Inflation and the oil and gold markets were rising and I looked back to the 1970's stagflation era for lessons that I could use from that time to benefit from those trends. At that time, gold and silver rose powerfully (gold ran from $35 per troy ounce in 1971 to $850 in 1980 and silver ran from $2 In 1973 to $49 in 1980), oil and oil service companies soared (oil surged from $3.50 per barrel in 1970 to $40 per barrel in 1980), interest rates soared to double digits as many long term bonds lost half their value, and the Swiss franc was highly regarded as a hard money investment against a falling dollar. Were it not for the monetary discipline of Fed Chairman Paul Volker in the early 1980's, we might have entered hyperinflation at that time. We may need Paul Volker's monetary discipline again. Gold and silver may be poised to accelerate their rallies (gold is currently priced at $977.90 per troy ounce and silver at $15.60). There has been a great deal of discussion that potential IMF gold sales could harm the gold market, but I believe that if the sale goes through and there is a negative effect on the market, the decline would (i) likely be temporary, and (ii) represent a potential buying opportunity. I have owned gold coins and bars for over five years, which generally act as inflation hedges in the event of sharply rising consumer prices. I have invested in silver bullion in the last two weeks. The price of oil has rallied from below $40 to over $68 per barrel. It may continue its rise to the $80 per barrel range. I am holding my investments in major multinational oil firms and established oil service companies. The September 2009 30-Year T-Bond futures lost more than three points on June 1st, settling at 114.18. It appears to be entering an area of price support on the weekly and monthly charts with many market participants expecting increasing inflation down the road. There has been a five month sell-off in long term bonds, which inversely means interest rates are going up. I missed my chance to refinance my mortgage, but I think keeping a fixed rate mortgage with a stable payment is best if you can do it. I am avoiding long bonds, and I have sold my mutual funds that had greater exposure to longer maturities. There is now much justified concern about the fate of the U.S. dollar, which is under pressure due to our government's decades of borrowing overseas to finance our citizens' consumption and the severity of our economic crisis. Many participants are worried that we are at an inflection point: that the dollar may go into freefall. I have heard one commentator who has stated his view that there may be a managed decline of the dollar. In a previous article, I have stated my opinion on the monthly U.S. dollar index chart. In 2007, we fell through a twenty year shelf of support at approximately 80 on the dollar index. In late 2008 and into 2009, we rallied back into that previous support area and have in May 2009 resumed the decline. I continue to hold the Franklin Templeton Hard Currency Fund and for now the CurrencyShares Japanese Yen Trust to maintain asset diversification. Both potentially benefit from a falling dollar. I also own mutual funds which invest in foreign stocks. In the resolution of today's crisis, Americans ought to come together to solve our problems as a people without great discord while protecting our government's ability to continue without running out of viable fiscal options. Regarding our personal welfare, what can we learn from the actions of families weathering the inflationary economy of the 1970's? In the late 1970's, hard money newsletters were in the mainstream. Many households were buying gold, silver and even diamonds as hedges against inflation. Some citizens stocked up on canned goods and prepared to survive for the worst of times. Others rushed to buy goods to beat anticipated price increases. Prices were indeed rising in the late 1970's, but famed commentator and investor Jim Rogers has stated recently that he expects food shortages in a few years with sharply rising prices for food. He states that presently farmers cannot get loans for fertilizer and equipment because of the credit squeeze. Consequently, he says that less food may be produced and there may be shortages in the future. I would like to draw attention to the fact that commodities are notoriously volatile and can be known to turn on a dime. I will say that as long as our government can afford to continue its farm loan programs, then our farmers may be more insulated than elsewhere, but you may draw your own conclusion on that. Rogers is recommending, among other investments, an agricultural index. All of us may be hurt to some degree by an embedded inflation, and many families may be hurt dramatically by such an event. In this environment, perhaps the best one can do is to hedge one's bets and plan for the possibility of future inflation. Should it come to pass, one may be more prepared to protect one's family and one's portfolio. Related posts: Silver Market may be Embarking on Important Price Rally posted May 30, 2009 The End of the Dollar as We Know It? posted April 13, 2009 Why Gold May Begin the Last Leg of its Bull Market Sooner than You Think posted February 23, 2009 How Obama May Bomb the Stock Market and the Economy in 2009-2010 posted June 19, 2008 ]]> tag:www.reiznersway.com,2009:/articles//1.68 2009-04-13T23:26:48Z 2009-07-11T05:23:22Z

Downloadable PDF version of this article The currency markets, like most other financial markets, rise and fall partly based on international confidence in the economies, politics and monetary and taxation policies of the various nations whose paper money is traded...

John Reizner Downloadable PDF version of this article The currency markets, like most other financial markets, rise and fall partly based on international confidence in the economies, politics and monetary and taxation policies of the various nations whose paper money is traded through international exchanges. The U.S. dollar enjoys a current status as a reserve currency. The Wikipedia Free Encyclopedia defines a reserve currency as "a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc." ]]> Why Our Economy Will Not Prosper Until We have Hard Money and How You Can Profit from It posted January 13, 2009 Will the U.S. Suffer an Inflation or Deflation in 2009-2010, (or Both)? posted February 3, 2009 Gold Market Strategy: An Upward Price Acceleration May be Imminent posted March 23, 2009 The Future of the Dollar: Worth Less or Just Worthless? posted April 6, 2009]]> tag:www.reiznersway.com,2009:/articles//1.64 2009-03-13T19:29:03Z 2009-07-11T03:20:01Z

Downloadable PDF version of this article The Obama administration may be doing everything in its power to destroy private industry jobs faster than the government can "create" them. The U.S. government itself may be the best growth industry in the...

John Reizner Downloadable PDF version of this article The Obama administration may be doing everything in its power to destroy private industry jobs faster than the government can "create" them. The U.S. government itself may be the best growth industry in the U.S. as the government directs taxpayer money into the industries and pet projects of its choice. Normally in capitalist economies, recessions clean out businesses and consumers whose risk-taking did not succeed or who accumulated excessive debt and cannot pay it back. A downturn will then lay down the foundation for healthy growth in the future by rewarding both older and new business success stories and punishing businesses that did not adjust to a dynamically changing economy and therefore failed. This is sometimes a painful process. ]]> How Obama May Bomb the Stock Market and Economy in 2009-2010. For further information regarding the effect of Obama's policies on the stock market, see Why the Stock Market May Have Collapsed Months Before Barack Obama was Elected President. There is also the Law of Unintended Consequences, as big government's intrusion into the private sector has unintended and potentially harmful consequences to the economy. For example, Bill Clinton's luxury tax on yachts almost destroyed the boat building industry in the Carolinas as the buyers of higher priced yachts refrained from purchasing because of the excess taxation. This taxation was probably more harmful than good for economic growth. Obama's comment that businesses that receive TARP money should think carefully before sending their employees on "junkets" to conventions in Las Vegas, has resulted in many convention reservation cancellations. Restrictions on executive travel destinations and behavior may cause a significant unemployment ripple effect that will harm the hotels, restaurants, cab drivers, theaters, etc. I do think that TARP money should not be wasted on business/gambling junkets, but the reduction in business travel has consequences for the economy. The pharmaceutical companies are other obvious targets of the Obama administration, as lifesaving drugs may be placed under price controls. Such price controls, if enacted, may result in shortages of many medicines as it may not be as profitable to produce the drugs. It is possible that the drug companies may attempt to cut costs by reducing sales representative and research scientist staffing. Most of the new drugs developed globally come from U.S. companies. If price controls are imposed, we may see in several years a significant reduction in the count of new drugs being created. Bureaucratic delays of drug approvals may further limit the number of new medicines available to the public. Pharmaceutical companies may end up needing to modify their businesses to suit the heavy hand of government, not the free market. The U.S. is now effectively subsidizing the drug prices of other Western economies that have socialized medicine. In a free market, the high prices that are being charged in the U.S. might fall and prices in countries with socialized medicine might be adjusted upward. This would end the subsidy through the free market and at the same time save crucial drug companies from being forced to cut back their research and development expenditures. What does this all mean for the investor? I only hold one bank, and have sold my two pharmaceutical holdings, all which I have held at least fifteen years. Future inflation beneficiaries such as physical gold, major integrated oil companies and major oil service firms may pick up steam should inflation go into the high single or into the double digit range, as I believe it may. See my article: Will the U.S. Suffer an Inflation or Deflation in 2009-2010, (or Both)?. The dollar may resume its decline against certain major currencies should market players take into account the United States' uncontrollable budget deficits and a reduction of our living standards (because of high consumer and Federal debt levels). I am trying to keep enough cash in money market or bond funds, both foreign currency and U.S. dollar denominated, to cover my mortgage debt.]]> tag:www.reiznersway.com,2009:/articles//1.29 2009-02-23T17:43:51Z 2009-09-09T07:25:43Z

Downloadable PDF version of this article The gold market in February 2009 is trending up towards its all time high of $1,023 per ounce made on March 18, 2008, after a correction that lasted for seven months. The price of...

John Reizner Downloadable PDF version of this article The gold market in February 2009 is trending up towards its all time high of $1,023 per ounce made on March 18, 2008, after a correction that lasted for seven months. The price of gold in this upward trend may reach as high as $3,700. I conceive that this price move may transpire within the next two years. As bubbles tend to repeat over history, there are a number of markets that can be instructive in determining the dollar amount and duration of a long cycle. ]]> For example, gold and oil are sometimes analyzed together: When the gold market last had its heyday in the inflationary 1970's, the price moved from $35 in 1971 and then multiplied over 2,000% in value trading into its 1980 high of $850 during a span of nine years. In the last two years of the move from 1978-1980, the gold price exploded from $200 to as high as $850, up over four times in dollar value. The price of oil tells a similar story. Oil rose from $3.50 in 1970 to almost $40 in 1980, a gain of 1,100% in ten years. The recent rise in the price of oil from $10 at the end of 1998 to $140 in June 2008 represented a rise of 1,400% in ten years. The three long term bull markets in gold and oil from different decades were of similar magnitudes and duration. The current long term bull market in gold (1999-?) may be in the process of completing an upward acceleration. The gold market has moved from a long term trading low of $250 in 1999 to over $1,000 in March 2008, a powerful fourfold increase. The outlook over the medium term may be quite positive for the gold price to multiply over fifteen times (an average of the long term gold and oil examples) from its 1999 low of $250, or towards $3,750 per ounce in 2009-2010. This would take into account an upward acceleration in gold in the next two years of similar magnitude as during 1978-1980. The entire bull duration might represent a completion of a 10-11 year move. Markets may trade in long cycles. There was a long term bear market in stocks from 1966-1982, a period of sixteen years, followed by a long term bull market in stocks from 1982-2000, a period of eighteen years. And now we are in another long term bear market which began in 2000. U.S. financial history is replete with such examples. tag:www.reiznersway.com,2009:/articles//1.27 2009-02-04T03:00:05Z 2009-07-11T03:41:52Z

Downloadable PDF version of this article In my article, The Credit/Debt Crisis: A Depression Era Stock Market and America's Financial Failure?, published on my website on October 10, 2008, I posited four possible scenarios regarding the outlook for our general...

John Reizner Downloadable PDF version of this article In my article, The Credit/Debt Crisis: A Depression Era Stock Market and America's Financial Failure?, published on my website on October 10, 2008, I posited four possible scenarios regarding the outlook for our general economic future. Of those four scenarios, it may be that we are experiencing the most chaotic and potentially destructive scenario, one that may be difficult for many to envisage: That is the third outcome posited in the article: "In this case, the deflationary forces would win the battle against Federal Reserve easing and government action, at least temporarily. In response to a deflationary calamity, the Federal Reserve may run the printing presses until an inflationary recovery could take place. Gold may do well under this chaotic scenario."]]> The new Amazon Kindle 2 allows you to download many books, newspapers, magazines, and blogs in under a minute each. Take your library with you! Currently, U.S. consumer demand for goods is abetting and consumers are retrenching as a result of the drying up of the credit spigot. Credit is now only available to the soundest of borrowers. Money may not be readily available to many borrowers to buy new homes, refrigerators, and automobiles. The consequent deleveraging of the average consumer (who is over his head in debt and who cannot borrow more to finance purchases) is a powerful wave in the U.S. Without the proposed mortgage and bank bailout by the Obama administration, millions more Americans might be on the cusp of losing their homes. I referenced the potential of a housing disaster in my August 8th, 2007 report on Ken Heebner's forecast of housing prices in my article, Bad Banks, Good Banks during a Credit Crunch: Opportunity Knocks. In addition, significant layoffs (from the likes of IBM, Intel, and Macy's) have the potential to lead us into a downward economic spiral of decreasing demand and employment. Further, in this economy, we are also experiencing price decreases caused by retailers selling off goods as they liquidate their businesses. In a normal economy where credit is available, these retailers might have been able to go into bankruptcy and then receive financing to operate until they emerged out of it, saving valuable jobs. Weakened banks are receiving huge cash injections of Federal money, turning them into partial wards of the State. Tens or hundreds of billions of dollars may ultimately be spent by government authorities in bailing out the countless owners of three- or four-bedroom houses whose mortgages are under water. The Federal Reserve under Chairman Bernanke and the Obama Administration has used and may utilize further the myriad tools at their disposal to extricate our economy from this slump that has shown deflationary characteristics. The Fed can simply print all the dollars that are necessary to stimulate domestic growth, which in the long run makes the dollar worth less. The dollar may simply be inflated away, with the current deflation turning into a great inflation in the coming years, damaging the dollar's local and international purchasing power. It may be that the "cure" for our disease--massive government spending and easy money from the Federal Reserve--will be our undoing. In Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, Thomas E. Woods, with foreword by free market thinker Ron Paul, describes the real causes of the current economic and stock market collapse. Woods, "a senior fellow at the Ludwig von Mises Institute and winner of the 2006 Templeton Enterprise Award," shows how government is not the solution to the current economic crisis, but is actually making the slump worse. Buy this one to gain greater insight into today's economic disaster. A demonstration of how quickly an economy can change is in the example of the Icelandic financial calamity of 2008. As reported on Wikipedia, the nation's three largest banks failed and their government's central bank was not large enough to guarantee the banks' bad debts (something that may not happen here: theoretically, our Federal Reserve's balance sheet is infinite). Iceland's stock market fell 90%, the local currency inflation rate rose into double digits and the value of the Icelandic krona sharply declined. Unemployment increased. The savings of many citizens were decimated. The movement of capital to and from the country is permitted only with permission from the authorities. Citizens who hold foreign currencies must hold them in an Icelandic bank. Iceland's transition from an enviable success story to utter financial collapse all happened in the span of less than a year. Great Britain's government authorities have effectively nationalized much of the banking sector in response to insolvencies among many formerly powerful banking institutions. The British currency has fallen 30% from about $2.00 to $1.40 per Pound. The Pound does not have world reserve currency status, which may explain why so many market participants are more able to bet against it: it is not widely owned throughout the world and may be available in the scheme of the currency market to be sold heavily. Britain is seen as a declining power in the midst of crisis and its currency is merely reflecting this. However, Britain suffered mightily from the stagflation years of the mid 1970's, when inflation rose to 25%, but its economy was later revived by the free market policies of Margaret Thatcher. So I would not count Britain out just yet. Much will depend on future U.K. economic policy. That said, I would not be surprised to see a short term rally in the Pound as the difficult reality of the current situation has been well broadcast and has been absorbed by almost all players. The Pound may be oversold. Since the dollar is still the world's primary reserve currency (though that is in a state of adjustment), it is unlikely at this time that countries such as China and Japan who buy our Treasuries and sell us manufactured goods (taking our dollars in return as I.O.U's, increasing the supply of dollars outside the U.S.), will give up on us completely. However, they may look upon their massive U.S. investments with trepidation as we have lowered our living standards by accumulating massive public and private debt which must now be deleveraged. And there is no guarantee that the deleveraging will go smoothly. It certainly has not up until this point. Our foreign creditors may shudder when they see us run our printing presses to stimulate our domestic economic growth, which may turn the current whiff of deflation in our economy into a galloping inflation and gold price, with double digit interest rates, and may result in the fall of the dollar in future years. During a time of severe stress on the dollar, the Obama administration could conceivably restrict the movement of U.S. capital to and from our shores. As has happened with nations who have followed such a policy, our stock market and the dollar might react badly. On the subject of free trade, should we enact a protectionist trade policy, such as the trade barriers enacted in the 1930's, we could see additional shuttered storefronts and increases in unemployment, amplifying the current recession. Demand for goods by displaced workers could dry up. Given that so many of the goods used in this country have been produced entirely or in part outside the U.S., the net effect of increased protectionism could be inflationary, reflecting the higher costs of producing more goods by better paid American workers. The big risk is that our tariffs might be reciprocated by our trading partners, which could be a real disaster for the world economy. A misguided Obama administration might enact strict regulations or increase taxes on industries that are currently performing well (at least relatively): the oil industry and the railroads are possible targets. Some see the railroads as price gougers because they are making excellent profits on hauling a variety of commodities. And last time I checked, at least one railroad was hiring. Before they were deregulated in 1980, the rails stagnated for decades and many rail lines were unprofitable. The deregulation allowed the industry to dynamically alter its business: reducing costs and improving service performance, laying the foundation for a deregulation success story. Reregulation may restrict the railroads' profits and would likely lead to more layoffs and cuts in service. I believe that under some circumstances, regulation can be effective, but the problem lies when regulations stay on the books for many years or even decades, hamstringing the industries they were meant to "help" as the old regulations become increasingly obsolete. It appears to me that more regulation leads to less overall potential in the economy and could result either in inflation or deflation. The case of the struggling airlines is instructive. Prior to deregulation, airline profits were guaranteed and the public had to swallow the cost. In this instance regulation inflated airfares. In conclusion, the deflation of many asset class values and some prices at the retail level that we currently see may be followed by a longer period of increasing price inflation caused by excessive growth in the money supply. This scenario could further destabilize our stock market, economy, and our currency markets. If the Obama administration makes economic policy blunders as I have discussed, many market participants may lose confidence in U.S. policy and continue selling the stock market. However, if there are limited economic policy mistakes, the stock market may find a bottom in 2009 and may rally powerfully from that trough, and then may continue in a trading range (a similar pattern occurred in the rally after the nearly 50% 1973-1974 decline). Reflation winners who may benefit most from the rally are major oil firms and gold firms as well as physical gold. Gold is also insurance should the unthinkable occur and the economy melt down into a broad deflation without near term recovery in sight.]]> tag:www.reiznersway.com,2009:/articles//1.26 2009-01-13T21:23:41Z 2009-05-16T00:11:14Z

Downloadable PDF version of this article What is meant by the terms "real money" or "hard money"? I associate hard money with a gold-backed currency or a consistently well managed paper money standard, both of which can protect the financial...

John Reizner Downloadable PDF version of this article What is meant by the terms "real money" or "hard money"? I associate hard money with a gold-backed currency or a consistently well managed paper money standard, both of which can protect the financial system from the many dangers of a fiat, poorly managed paper standard. We know that the main danger of a paper standard is that if too much money is printed, it becomes worth less as the value of the money is inflated away through excess supply. ]]> Call to the Bernanke Federal Reserve: Round up the Debt! The Federal Reserve using extreme monetary ease in 2008 and possibly forward to fight the credit seizure in our economy may result in significant inflation down the road, a dollar under severe pressure, and economic dislocations in future years. Whether we have a gold standard or not in the future (which admittedly has its own set of issues), there are opportunities to make money currently by investing in various paper and hard asset classes, including stocks, bonds, foreign currency instruments and gold. See my article on gold, posted on April 23, 2007: When Gold Speaks a Thousand Words. Under economic duress such as we had in 2008, the government can begin to simply diminish our currency's value by printing money. This means families can pay off their mortgages with cheaper dollars and government can inflate away its massive debt. Under those circumstances, bond prices could fall and interest rates could go up (yes, I said up!) as inflation increases. Famed investor Jim Rogers has spoken in television interviews of a massive bubble in the bond market, and I would agree that there are better alternatives than lending one's money to the United States government in 2009 for little return as it seeks desperately to extricate itself from the downside of the business cycle. Currently, as 2009 begins, we witness a dramatic slowing in the global economy, as country after country embarks on its own stimulus plan. Ken Heebner, a respected veteran mutual fund manager whom I have quoted in this article series before, has stated on financial television that as a result of this slowing, there may be a glut of commodities on the world market for years to come. Thus, there may not be commodity inflation for some time, according to Heebner. In contrast, David Dreman, another well known veteran money manager and Forbes Magazine columnist, has recently advised getting back into certain oil stocks as he believes that inflation will return as a result of the current easy money policies in the U.S. If Dreman is right, the gold price may rise strongly after its current intermediate pause, and major oil firms may do quite well in future years until the necessary tight money policies to fight a ballooning price level force an end to the boom. I believe our leaders in government will have to learn the lesson of the 1970's once again, when double digit inflation forced the Fed to choke off an overheating economy. Common stocks are surprisingly a reasonable hedge against rising prices as companies' revenues (and their costs) may increase in an embedded inflation. Thus, their "paper value," or stock prices may increase. It seems possible to me that the late Obama years may end up being characterized by a rapid increase in the price level. The last great inflation was led by increasing gold and oil prices (the Jimmy Carter years). It was not until after the inflation was "broken" by Volker's tight money that we embarked on a super bull market in stocks that lasted from 1982-2000. My investment portfolio contains positions in oil, oil service firms, gold bullion and coins, mutual funds that invest in foreign currency instruments and diversified stocks and other mutual funds. Gold could even prosper during periods of general economic mismanagement during the Obama years. Yet, I believe after much economic pain and a peak in gold, the bull market in stocks may again return and a diversified stock portfolio could do quite well as the major averages finally increase consistently some years from now. For now, countries with economies and money supplies well managed by monetary authorities with an eye toward maintaining low inflation may have better stock market performance and currencies that appreciate in value. In that line of thinking, I continue to hold the Franklin Templeton Hard Currency Fund, the Templeton Global Bond Fund, and a Japanese Yen Exchange Traded Note. ]]> tag:www.reiznersway.com,2008:/articles//1.25 2008-12-08T17:08:34Z 2009-07-28T22:44:13Z

Downloadable PDF version of this article The stock market erosion that began in the second half of 2008 when the Dow Jones Average was slightly above 13,000, has built into a sharp and nearly relentless stock market collapse from September...

John Reizner Downloadable PDF version of this article The stock market erosion that began in the second half of 2008 when the Dow Jones Average was slightly above 13,000, has built into a sharp and nearly relentless stock market collapse from September 2008 forward. The Dow is now trading above 8,000. A popular pundit declared on his widely viewed show on a major financial television network that long term investing is dead. ]]> Are Stocks Still Worthwhile Investments? A Reconsideration: The Odds of a Panic, that there was an unsupported speculative fever in the stock market. I have made numerous comparisons of the recent economic and stock market events to those of the 1970's, when high inflation and unemployment, poor stock prices, and lofty oil and gold prices ruled the day. There are some in the current bear market, who are dismissing the long term investment techniques practiced by such investing geniuses as Warren Buffett and others of his kind over the past few decades. In fact, the technique of security analysis from which Buffett's methods originally emerged, was out of the thinking of Benjamin Graham during the Great Depression. Security analysis was born during the bear market of the 1930's, when common stocks were viewed as dismal investments. In fact, it may be argued that investing for the long term during extremely depressed stock markets may provide good investment outcomes over the long run. Don't count out the Oracle of Omaha out just yet. In The Snowball: Warren Buffett and the Business of Life, Alice Schroeder, "a former managing director at Morgan Stanley, and chosen By Buffett to be his biographer," authors a startlingly frank appraisal of the billionaire. This book is even more relevant during this time of stock market and economic crisis. I am attempting to make the case that long term investing has not been relegated to financial history, and that an investor may be wise to hold long term common stock and mutual fund positions as long as one is properly diversified across industries, countries, and asset classes (such as gold and foreign currency money market and bond funds). Diversification may help the investor manage a bear market in stocks. I believe that diversification is most important when we are in a long term bear market, as we are now, in my opinion, and until we may again enter a new long term bull market in stocks. Making strategic decisions with one's portfolio during a bear market in stocks can be useful. I have selectively made strategic buy or sell decisions for various stocks in my portfolio while still maintaining a very significant common stock exposure. For example, I sold HSBC and PNC Financial after the Shanghai stock market downdraft of February 27, 2007. Our stock market followed suit after Shanghai and declined, with many bank stocks declining sharply. Bank stocks were still trading then at high prices (especially compared to today's prices). I recognized in August 2007 that a decline in financial issues represented a potential breakdown from a long distribution pattern in these stocks (when shares are unloaded by informed holders to weak or less informed holders). However, even though I sold Wachovia at 56.45 and MBIA at 55.37 stocks during this time, my remaining portfolio has been meaningfully affected by the late 2008 severe stock market decline. Of course, the subprime credit crisis was a high risk to bank issues. In my August 8, 2007 article, I wrote that the credit crisis might cause further pain in these issues, and that one should only consider buying the stronger banks less affected by subprime holdings at lower price levels. I have stated previously that the future should see another long term bull market in stocks (which may not emerge until after years of a trading range bound market). In fact, if our economic system does not buckle completely, then the Federal Reserve aggressive pump priming of the money supply and repeated government bailouts, may result in a terrible inflation problem in the coming years. The Federal Reserve and the government seem to be trying to repeal the business cycle by attempting to inflate away our debts. The types of investments that may do well under this scenario are inflation hedges such as gold and oil. Please see my article, Strategies for the Coming Inflation of 2009-2010. We have seen in recent months the price of oil (currently at $44 per barrel) collapse from $145 and gold trade recently at $768. The early 1980's high for oil of $40 per barrel, and again reached in 1990 and 2000, may actually act as support to the oil market at the current level from which the oil market may rally. Gold may be working off a correction, though may trade lower before it resumes a strong uptrend. I have recently added a new position in the Franklin Templeton Hard Currency Fund and shares of the Barclays Bank IPath Exchange Traded Note USD/Japanese Yen Exchange Rate, the latter which increases in value if the Yen rises against the Dollar. I maintain my position in the Templeton Global Bond Fund, gold coins and bullion, selected oil and oil service firms, and various mutual funds and common stocks as well as invested cash. I believe that it may be consistent with the tenets of successful long term investing to still hold through this bear market a position in selected common stocks and mutual funds. In the next long term bull market some years away (notwithstanding cyclical, or short term bull markets), these investments may do quite well, if the long term record of stocks is any guide. ]]> tag:www.reiznersway.com,2008:/articles//1.24 2008-10-10T16:16:58Z 2009-04-08T07:15:59Z

Downloadable PDF version of this article With the Dow Jones Industrial Average below 9000, we are witnessing an epic battle between the forces of a stock market crash and possible economic deflation, on the one hand, and the might of...

John Reizner Downloadable PDF version of this article With the Dow Jones Industrial Average below 9000, we are witnessing an epic battle between the forces of a stock market crash and possible economic deflation, on the one hand, and the might of the Federal Reserve and government, on the other. We face frozen credit markets and a huge debt burden on our citizens and government that has built over decades as both citizens and the federal government have been living beyond their means. The final debt binge led by subprime lending and massive war spending by the government leaves little wiggle room for the consumer and government to bail us out, as happened after the 1987 stock market crash. Deleveraging of the consumer and government debt burden under this scenario may be a painful process.]]> In The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash, Charles Morris insightfully describes how the orgy of hedge fund excess and high leverage on Wall Street helped lead to the current intractable credit crunch. Also, I believe the stock market is anticipating an Obama victory and a more radical agenda than has been forthcoming from the Democratic camp. I see basically four scenarios that may occur as this crisis unfolds: I have not written considerably about the possibility of a pure deflation in my articles until recent stock market events have raised the probability of that occurrence. The first scenario is a complete deflationary failure of the stock market and the economy, characterized by a stock market that in total may lose 90% from its peak in the near to medium term (I know that sounds improbable), a possible deflation of most asset classes, except perhaps gold, and an unemployment rate possibly in the high teens (or even higher). There is precedent for this belief, as demonstrated by the breakdown of the financial system following the 1929 stock market Crash. In this scenario, the stock market would continue to bleed until it is almost unrecoverable. We have a situation now where price/earnings ratios on many stocks are well into the single digits because of the market decline, but with a potential economic freeze on growth, the earnings part of the equation may fall further, leading again to high P/E's. Also, DJIA bear market bottoms are sometimes characterized by the average itself yielding as much as 6% or more. Currently, it is approximately 2%. The second scenario is that the actions of the Federal Reserve and the government would be enough to halt, at some point, the hemorrhaging in our stock market and free up credit markets in the next year to year and a half. If the housing market should clear the overhang of foreclosure sales (this could take some time), and banks start to prudently lend again to businesses and individuals, the economy may respond to all the Federal Reserve and Treasury measures in place to get our economy going again. However, the current Federal Reserve easing may produce a powerful revival of the inflation that is now abetting (because of the current slowdown) a year or two down the line. Gold, under this scenario, may reach unexpected new highs in the future. At some point the stock market, in this line of thinking, would rally but would not exceed the old highs until years of consolidation and range-bound trading had passed (similar to the 1966-1982 long term bear market). The current long term bear market began in 2000, after the technology bubble burst. The third scenario borrows from the first two. In this case, the deflationary forces would win the battle against Federal Reserve easing and government action, at least temporarily. In response to a deflationary calamity, the Federal Reserve may run the printing presses until an inflationary recovery could take place. Gold may do well under this chaotic scenario. The fourth scenario is that the Federal Reserve and the government manage to get the economy going again while containing the fires of inflation. This is obviously the most benign possibility. I have for my own situation, enough funds to cover my mortgage and still have enough stocks to participate in a stock market rally, however ill-fated the rally may be. There was a stock rally in 1930 after the Crash of 1929, which many believed at the time was a new bull market, to their terrible disappointment. Events in the stock market will dictate my future actions. I am still holding my gold position, the Templeton Global Bond Fund, a portfolio of stocks and mutual funds (though less than before), and invested cash. We need to have banks lending again to worthy businesses and individuals, and at the same time, working through the housing decline. The Federal Reserve and Treasury actions are a good start. Now we need to restore confidence in our markets. I am hoping that our next President will not abandon the capitalist marketplace entirely so that all of America may prosper. ]]> tag:www.reiznersway.com,2008:/articles//1.23 2008-09-16T20:50:37Z 2009-07-11T05:29:30Z

Downloadable PDF version of this article We have seen the gold price peak at over $1,000 per ounce at the time of the Bear Stearns bailout, and decline into a correction afterwards. I have written on my website in previous...

John Reizner Downloadable PDF version of this article We have seen the gold price peak at over $1,000 per ounce at the time of the Bear Stearns bailout, and decline into a correction afterwards. I have written on my website in previous articles for many months that I was expecting a temporary pause in the upward progress of the gold and oil markets, and in many other inflation hedge style investments. ]]> In Peter Schiff's popular volume, Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books), Schiff shows the assets in which you may invest to profit from and protect your portfolio in today's difficult investing environment. ]]> tag:www.reiznersway.com,2008:/articles//1.22 2008-07-28T21:13:06Z 2009-08-08T04:56:01Z

Downloadable PDF version of this article Americans are known for voting according to the health of their pocketbooks, and this year's election may be no exception. While Ronald Reagan's election in 1980 emerged out of the very noticeable dissatisfaction with...

John Reizner Downloadable PDF version of this article Americans are known for voting according to the health of their pocketbooks, and this year's election may be no exception. While Ronald Reagan's election in 1980 emerged out of the very noticeable dissatisfaction with the economic policies of the Carter years, Senator Obama may capitalize on similar sentiment among voters today in the race for the Presidency. ]]> Reagan asked the voters if they felt that they were better off than when Jimmy Carter was elected. The voters ushered in Reagan to the White House as voters answered that question for themselves. The misery index, a measure of consumer discomfort based on the high inflation and high unemployment of the Carter years made Reagan's election more likely. Senator's Obama rapid rise to become a popular candidate for the Presidency may be attributable to the current level of dissatisfaction with the economy: the level of high inflation, mortgage defaults, bank failures, a faltering stock market, and the feeling among the citizenry that they are not better off than they were four years ago. Senator Obama has been saying that America needs change, though he has stated that he is going to tell Americans not what they want to hear, but what they need to hear. I think Americans hunger for something, though I am not sure that many are bargaining for the changes that Senator Obama might effect. I would argue that while the Reagan years ushered in an era of relative economic stability, dramatically lower inflation and unemployment, and a stock market boom, the Obama years may result in a contracting, less globally competitive (competitiveness is a must in today's globalized world), less flexible economy, higher inflation and unemployment, a declining or range-bound stock market, and waiting lists for such essential health services as non-elective surgery. The consumer may feel more pain, not less under Obama. Inflation results in the debasement of the currency. When prices rise, it takes more dollars to buy goods and services. The current high oil price and easy monetary policy have resulted in price inflation across many sectors of the economy and may auger in greater inflation in the future as the level of inflationary expectations continues to rise. Obama may face this threat to economic health from day one if he is elected, as people are conditioned to expect greater inflation, and may act accordingly. Inflation has a distorting effect on the economy, and consumers may feel more pain under Obama if the price level of goods and services increases more rapidly. Obama's proposed economic policies of greater trade protectionism (free trade tends to moderate the level of inflation), budget-busting government spending, tax increases, and policies favoring higher cost, less flexible unionized labor may do little to curtail inflation, and may actually add to the problem. I believe that it is important to put the inflation genie back into the bottle at this time as the rate of change of the inflation level appears to be accelerating. Obama's budget-busting policies may not accomplish this end. As readers of this article blog know, I have been making the case for a year and a half that we may be experiencing, and may continue to experience a worsening inflation rate similar to the 1970's period that caused so many economic problems. What was needed then, as inflation surged into double digits, was a tighter Federal Reserve monetary policy. This contained inflation for two decades commencing in the early 1980's as Paul Volker's Federal Reserve clamped down on the economy, the latter which endured a terrible recession at that time. Containing inflation is really a balancing act, as an overly zealous Federal Reserve and poor government economic policy choices can result in an economic depression, as happened in the 1930's, and which some feared a repeat of after the millennium stock bear market commenced. Current Fed Chairman Bernanke seems to be playing with fire as he vigorously eases (for now) monetary policies to stave off recession and the effects of the housing crisis. I must write a moment about the potential future of our healthcare system under an Obama administration. His stated goal of reducing the cost of everyone's health insurance policies by $2,500 may not really reduce by much the cost of healthcare, as many existing insurance policies may be unprofitable for the insurance companies to continue to offer in their existing forms to new clients. Uninsured individuals entering the insurance market for the first time may receive less expansive coverage reflecting the reduced premium levels to the insuring companies. Some insurance companies that rely on healthcare premiums for their entire business may fall into financial distress as their lines at the reduced mandated premiums may not cover costs. Thus the burden of insuring many citizens may fall into the government's hands, which may cost the American taxpayer more, not less. Even if government picks up the slack and there are more insured, expect waiting lists for life-saving surgeries as a more heavily regulated health system struggles to keep pace with demand. I do not believe that Obama's vision for the economy will produce enlightened government policies that will protect the value of the dollar, contain inflation, keep us globally competitive and maintain the quality and rapid accessibility of our healthcare. Rather it appears that many of the ideas of the Obama campaign are drawn from the economic and political ash heap of history: the utopian concept of equality between the haves and the have-nots, or a society that redistributes wealth from its producers to others who are not as productive, is an idea that was hated by the citizens who lived under such "utopias" and whose end was celebrated when the regimes that embraced such ideas collapsed. tag:www.reiznersway.com,2008:/articles//1.21 2008-06-20T05:16:00Z 2009-04-16T00:33:23Z

Downloadable PDF version of this article I would like to draw your attention to the following web page graph denoting the Presidential futures market vote shares between Democratic and Republican candidates in the upcoming 2008 Presidential Election (as expressed in...

John Reizner Downloadable PDF version of this article I would like to draw your attention to the following web page graph denoting the Presidential futures market vote shares between Democratic and Republican candidates in the upcoming 2008 Presidential Election (as expressed in the Iowa Electronic Markets - a respected election futures market): http://iemweb.biz.uiowa.edu/graphs/graph_Pres08_VS.cfm. This shows a potential Obama victory in the Presidential election, as the Iowa Electronics Markets has a good record at predicting election outcomes. ]]> Read The Case Against Barack Obama: The Unlikely Rise and Unexamined Agenda of the Media's Favorite Candidate, "the first serious negative biography" of Barack Obama. Joseph Schumpeter's theory of the new supplanting the old, or "creative destruction," is meaningful here. For example, it might not be a good idea in many cases for an Obama administration to "bail out" failing companies as these companies may produce obsolete products, use outmoded manufacturing techniques, or just be globally non-competitive (no one wants to buy their products). If our government does not bail out failing companies, then risk takers will have the opportunity to establish companies that use new technology or that produce products in high demand. Also, it may be better to have workers from older industries retrained for the emerging jobs of up and coming companies. Further, higher taxes on risk takers, taking money from one group of wealth producers and giving it to another less productive group (the redistribution of wealth, sometimes embraced in left-wing countries), and the proposed gutting of free trade (the renegotiation of the NAFTA), may lower the level of confidence in the American economy here and abroad. Capital outflow from the United States from the investor class could begin in earnest. It is even possible down the road that Obama could be convinced, because of the outflow of capital from the US, to place capital controls on the movement of money, a move that might be a body blow to our stock market and the dollar. It is also conceivable that a run on the dollar could propel an Obama administration to place restrictions on US citizens on the flow of their money. I have written about the importance of the level of confidence behind the scenes in the economy and the markets in my article, The Level of Confidence in Our Stock Market and Our Social Contract, posted on my website on October 1, 2007. Without confidence, there is nothing to hold the stock market up. An example of this was in the aftermath of the October 1929 stock market collapse, when poor policy choices caused much suffering among the public and businesses (the Federal Reserve shrinking the money supply, tax increases, the Smoot-Hawley trade tariffs of 1930, and the wholesale liquation of debt). A loss of confidence in the stock market and the economy ensued and persisted for years. Should Obama win in late 2008, and should he make poor policy choices, the stock market may proceed into a 1970's style decline. As a result of this potential destruction of wealth, investors and the economy may be in for real difficulty. I have been writing about the 1970's style inflation in our economy on my website article blog for over a year. We already have an embedded inflationary economy which I believe may worsen over the next few years. Also, recent Federal Reserve easing to combat the credit crunch / subprime crisis may likely filter through the economy, perhaps lifting inflation dramatically. I also believe that as this inflation takes further hold, interest rates may climb. A rejuvenation of the unenlightened policies of the 1970's and even from the 1930's may cause a contraction in the price earnings ratio of many stocks (many stock prices may decline) in the market as well as a continuation of a higher inflation economy. I first wrote about this contraction of P/E ratios in my January 18, 2008 article, The Stock Market and Economy: A Return to the 1970's in Form?. We have already witnessed a 15% decline in the stock market. Some sectors of the stock market may resist the decline of equity prices. I plan to hold onto my oil, oil service, and railroad stocks, along with certain industrials and my gold position. The oil companies may be hit by a windfall profits tax, which may result in less oil being produced. Excess regulation in this area and the railroad sector would be a cautionary factor for these stocks. I also have some large cap growth companies which are already doing well: Anheuser Busch, Wal-Mart, and Johnson & Johnson (all Warren Buffett holdings). I will maintain these. I also continue to hold a position in the Templeton Global Bond Fund. If the general market turns down, most stocks, even the best groups, may move downward. However, I believe the resource and materials (inflation-hedge) stocks along with the price of gold may recover and surmount their highs as inflation may be hard to contain. With the higher inflation I foresee, the economy may in time need to be stifled by high interest rates and tight money to cure the inflation disease-just as Paul Volker's Federal Reserve in the early 1980's put a monetary stranglehold on the economy after the high inflation of the 1970's. I am going to continue to watch the Iowa Electronic Markets for clues about the election outcome. As far as my remaining stock portfolio, I am going to look at stocks to sell that may be badly bruised by an Obama market. Perhaps cash will continue to be king for now as we proceed through the unwinding of this credit crunch and the beginning of a possible ultra-liberal administration. ]]> tag:www.reiznersway.com,2008:/articles//1.20 2008-05-14T21:26:05Z 2009-04-16T00:37:15Z

Downloadable PDF version of this article Sir John Templeton's sentiment that never before in U.S. history has our government and its citizens accumulated the level of financial debt as we have recently was referenced in my February 28th, 2007 article....

John Reizner Downloadable PDF version of this article Sir John Templeton's sentiment that never before in U.S. history has our government and its citizens accumulated the level of financial debt as we have recently was referenced in my February 28th, 2007 article. And it is the citizenry who usually suffers from the eventual debt reckoning, forcing a decline in their living standards, Templeton believes. The last great debt liquidation in the United States happened as the 1930's Depression unfolded. After the stock market Crash of October 1929, the fledgling Federal Reserve shrank the money supply by a third, presumably to fight inflation, only exasperating the severe economic downturn of the 1930's. ]]> A valuable book is Investing the Templeton Way: The Market-Beating Strategies of Value Investing's Legendary Bargain Hunter, about the person Money magazine calls "the greatest stock picker of the century," legendary fund manager Sir John Templeton. The Federal Reserve in 2008 under the weight of the public budget deficit and profligate government spending is once again desperately trying to prevent or postpone a final reckoning of both our country's public debt and our citizens' privately held debt. The public debt is well known and has been advertised by many commentators and financial writers for years. It seems to have a life of its own, mostly growing from economic cycle to cycle, except for a short period of a balanced Federal budget during the Clinton years. The Federal Reserve, through its current interest rate easing as a response to the subprime debt crisis (though that easing might be reversed in the future to fight inflation), may succeed in inflating away part of that massive Federal budget deficit. The problem is that as the level of public and private debt has increased through several economic cycles without a cleansing of the system, it has become more difficult through each economic downturn for the Fed to get the economy going again through its usual monetary activities. Note that Alan Greenspan had to lower key interest rates to 1% after the stock market bubble burst in 2000 before the economy and the stock market recovered. Today, the Federal Reserve under Chairman Bernanke has attempted to stem an economic bankruptcy contagion with the Bear Stearns bailout. This is at the cost of a massive Federal Reserve easing, which I believe may exasperate the inflation that we are now experiencing down the road. We may have barely entered recession and already the Federal Reserve is giving the economy full courses of antibiotics. Allowing the business cycle to complete takes out the excesses and bubbles in the system - the Fed may be today attempting to repeal the business cycle by avoiding the slightest whisper of recession. The subprime debt crisis, partially caused by fraudulent and/or overly aggressive lending practices, has caused many people to lose their homes because of their high debt levels. Some perhaps should not have qualified for their loans in the first place. The Federal government now is offering assistance to creditworthy individuals whose mortgage payments may be escalating due to the terms of their mortgages. As bad as the credit and real estate crunch may seem, there may be responsible new buyers out there who would qualify for and deserve good home loans. On the investment front, there are some very savvy investors, Warren Buffett among them, who have been diversifying their portfolio or their company's portfolio to include non-U.S. companies. The dollar in late 2007-2008 declined through a two decade shelf of chart support and (except for short to medium term upward countertrends) may trade lower long term. Adding to the mix, we may find with the possibility of a Democratic Party triple-sweep later this election year, policies enacted that may hinder the stock market's progress in a manner not seen since the late 1970's. I discussed this possibility and its consequences in this article. However, it may be that certain inflation sensitive investments do well over the longer term. I own shares of the Templeton Global Bond Fund to take further advantage of the potential of a declining dollar. Gold is also a beneficiary of a declining dollar over the long term, and has even made upward progress during the last few years when the dollar has been intermittently strong. Gold can also be a hedge against a debt crisis such as we have seen with the subprime contagion, though the recent March 2008 high in gold was marked by the Federal Reserve bailout of Bear Stearns, which has hopefully stemmed the tide of the current crisis. I have owned gold over the last several years and plan to continue holding the yellow metal. The Federal Reserve's job is to fight inflation. As Chairman Bernanke is a student of the 1930's Great Depression when the economic system failed, he seems determined to prevent a similar economic catastrophe from happening again. Thus, recently we have seen easy money policies implemented designed to stimulate the economy and the housing market, where the hurt is greatest. Preventing a debt implosion whereby the financial system collapses seems to be on the Fed's priority list. That the Federal Reserve has taken such steps in the face of a current inflation indicates that the possibility of such a collapse has been seen as a possible reality. ]]> tag:www.reiznersway.com,2008:/articles//1.19 2008-04-01T22:27:42Z 2009-09-10T04:22:12Z

Downloadable PDF version of this article Please see the new updated article: Inflation Hedge Strategies and Thoughts for 2010 and Beyond The inflation that I believe may throttle though our economy in the late 2008-2010 period may not be the...

John Reizner Downloadable PDF version of this article Please see the new updated article: Inflation Hedge Strategies and Thoughts for 2010 and Beyond The inflation that I believe may throttle though our economy in the late 2008-2010 period may not be the first inflationary economy many of us have ever seen. There is widespread commentary these days about the similarities between the stagflation/inflation that transpired in the 1970's, and what may be starting to happen in that manner in 2008 and going forward. There are the behavioral similarities between the 1970's and now: a rising gold price, increasing oil prices, an increase in the rate of inflation in certain commodities such as food, milk, farmland, copper, and a declining dollar (concurrent with a rise in the value of harder money currencies such as the Euro and the Swiss Franc).]]> The Stock Market and Economy: A Return to the 1970's in Form, that I foresaw for the present: a temporary cresting of the prices of inflation hedges such as gold and oil. In the case of gold, the price has shot recently through its old 1980 high of $850 per ounce like a knife through soft butter, to as high as $1,023.50 on March 17, 2008, causing me to believe even more strongly that the long term outlook is good for the yellow metal, though as I said, there may be a pause or even an intermediate consolidation/downtrend, before it may resume its powerful rise. I believe that this is so, as even the intense rise in the price of gold in the 1970's was interrupted by a sharp mid-course correction in mid-decade. In The Handbook of Inflation Hedging Investments, Robert Greer of venerable money manager Pimco sees a return to inflationary times ahead. Add this one to your investment library! I came into my initial age of investing during the late 1970's inflation when there was a dynamically rising gold price, rising interest rates, and high unemployment. The depth of the recessions this country experienced in the 1970's and early 1980's dwarfs those that we have experienced since then, including the banking/real estate collapse of the early 1990's. Anecdotally, there were numerous popular newsletters and books at the time of the 1970's inflation predicting a permanent upward price spiral that would hobble the economy. Many writers in that last inflation were actually advocating converting one's money into gold, diamonds, rare coins, and stocking up on canned goods. Some newsletter writers were preaching to their readers regarding how to protect one's family should the U.S. economy collapse. That the 1970's collapse did not pan out is a credit to the tight money Federal Reserve led by Paul Volker, who probably saved this country from a distinct possibility of hyperinflation into the 1980's. This proved that it is possible to stop inflation in a financial system based on paper money if the will of the Federal Reserve is strong enough. Volker's actions laid the groundwork for twenty-five years of relative price stability. Yet today our Federal Reserve under Chairman Bernanke is doing something altogether different - stoking inflation through powerful monetary easing - while at the same time inflation is percolating in areas of the economy. Buy the new Amazon Kindle 2 and gain instant electronic access to your investment library at home or on the road. Download many books, magazines, newspapers and blogs in under one minute each! What are the markets telling us now in 2008 that so many commentators are beginning to make analogies from current trends to the 1970's? I personally have been invested in Canadian Maple Leafs and gold bullion for several years, and have offered positive commentary on gold during much of the last year on my website article blog. I believe that the rising gold price reflects not only increasing consumer inflation today as in the 1970's, but is anticipating a potential Democratic Presidential victory in the fall, where policies hostile to the stock market and economic growth not seen since the 1970's could be implemented - a poor omen for the economy and a harbinger of greater inflation. Please see my article, The Hillary Clinton Stock Market and Economy: Three Areas to Consider. Ken Heebner, a veteran fund manager whose opinions I have mentioned in my article blog in the past, was reported to say that he expects for the next few years a stock market showing out performance by inflationary hedges similar to 1976-1980. I would agree with this sentiment, reinforcing Heebner's view that money may be made with inflationary hedges such as gold and oil. Some of the advice the doomsday writers of the 1970's handed out might actually be worth taking now. Stocking up on goods before the price of those goods goes up seems a sensible strategy. I recently visited Nordstrom where I saw my Italian Napa leather shoes (the only kind of leather my feet will tolerate) on sale for $460 a pair, $60 a pair dearer than over a year and a half ago when I first bought them. Those extra $50's add up quickly! And owning gold which I believe will likely be worth more in a few years than the recent price of $879, appears to be a sound all-weather investment. Gold can be both an inflation and a deflation hedge (gold shares did well during part of the deflationary 1930's), which may explain why it is rising at the same time as the declining housing market. Assuming the entire system does not buckle, and I do not think it will, I am also thinking of dipping a toe into the water and buying one or two banks not affected badly by the subprime effect, but whose price went down in sympathy with affected banks. Warren Buffett has bought shares of US Bancorp, a high yielder. ]]>