What To Do?

I have been asked by those who have read this site - “What do you recommend I do?” Remember, I am not an investment advisor. What I am is someone who cares about his Christian brothers and sisters and does not want them to be unaware of the dangers that lurk in the economy. I cannot tell you when or even if these things will happen. What I am telling you with conviction and hopefully with enough evidence is that they very well could happen.

Historically in times of financial uncertainty, US Treasury bonds have been considered safe. However if a loss of confidence in the US dollar is the reason or the uncertainty the dynamic changes. This would mean interest rates would be rising and bond values would be falling.

During times of global uncertainty, gold and silver have been safe haven stores of value. Interesting how we come full circle - God’s money is where people flee when things get tough. So far, Gold has risen from a low of $252/oz in 1999 and is over $900 and rising. Silver has risen from around $4/oz to recently over $17/oz. Some of the “smart money” has moved in that direction. My feeling and the opinion of a growing number of professional money managers is that a percentage of your investments should be in physical gold, silver and gold and silver stocks.

Following are my personal feelings, so ask God for guidance. Pray about what you are learning. Does it resonate in your Spirit or do you feel a check? If you have indeed spent time researching this topic beyond what I have presented (this is due diligence) and feel like you need to make some decisions on protecting your finances, read on. Remember, you must do your own due diligence prior to considering any of this advice. In the spirit of full disclosure, my investments are in physical gold and silver bullion, gold numismatic coins, gold and silver related mining equities, energy (oil, natural gas, coal and uranium) and cash money market funds. When uncertainty arises in the paper equity markets, people will gravitate toward owing tangible assets or stock in companies that have tangible assets - commodities.

1. Markets have long term cycles that have repeated throughout history. In the early 1980’s you could not find anyone who wanted to own stocks. It was all about commodities. That was the time to invest in stocks. From 1982 through 2000, there was a great run in stocks. Today you can’t find anyone who wants to own commodities. Because of that, capital investment in that sector has been nearly nonexistent for over a decade. There is not enough capacity to produce and deliver most commodities and demand is increasing from places China and India. Now may be the time to invest as we are about 4 years into a possible 15 to 20 year cycle in commodities as they play catch up. Another reason to invest in commodities - a bushel of wheat, a barrel of oil and an ounce of gold will never reach a value of $0. Stocks (i.e. Enron) can.
2. Look into some good precious metals mutual funds. You don’t have to invest now if you don’t feel like you should. However having 10% of your investments in precious metals would be a good hedge against inflation. When and if things start to unravel won’t be the time to be doing your research. Be a good war general - send out the scouts now.
3. Find a local precious metals dealer where you can buy the actual bullion. Again don’t invest now if you do not feel right about it, but get your scouting done. You don’t have to purchase a huge amount. An few ounces of silver bullion per month, or an ounce of gold per quarter is a good start. Never feel like “I don’t have enough” to invest. Capital preservation is the goal. One national dealer I have used is California Numismatic Investments (www.golddealer.com). They have decent prices and a good reputation. With this said, I would still recommend finding a local dealer if at all possible.
4. Do not finance your home with an interest rate only, or even worse, a variable rate mortgage. This is especially true if you have less than 20% equity in your home! These will be weapons of financial destruction for those who have taken them out when housing does indeed turn down and rates rise. You could quickly find yourself owing more on your mortgage than your home is worth.
5. Do not speculate in real estate. Buying the NASDAQ stocks in January 2000 was a bad idea. I would say the same about real estate today. Prices have started falling! If you are speculating in real estate, get out now. This is not a “temporary” slow down. It is the beginning of something much longer term. It is possible real estate will continue to rise after a pause of a year or two. But if that is the case, it will be due to massive inflation and the real return on your real estate investment will be minimal.
6. For the next few years, don’t be looking for great gains in your portfolio. Simply try to protect your assets and maintain your buying power. Don’t be greedy!
7. I am at this time strongly recommending a minimum 10% weighting of precious metals in your investment portfolio. Get started moving in this direction today.

If you have any questions or would like to discuss any of these topics further, please e-mail me. I will respond as quickly and thoroughly as possible. I have been researching this topic on and off since early 2003. The single best site I have found for more information on these topics is www.financialsense.com. I would recommend the following sections:

http://www.financialsense.com/series2/perspectives2.htm - Articles written in 2000 and 2001 which predict the situation we are in today. To me they bring the author - Jim Puplava, instant credibly. Be ready. There are several hours of reading here.

http://www.netcastdaily.com/fsnewshour.htm - A weekly radio/internet broadcast covering the markets, the Fed and economic sign posts. You can spend 1 to 3 hours per week listening to their views. They have some investment guidelines as well. Listen to some prior weeks commentary to get “spun up” quickly.

Please see our Quicklinks page to dig into articles on specific topics.

None of this information is shared with any degree of eager anticipation. It is simply the factual situation we find ourselves in today. The arrogance of our financial community in thinking they can completely avoid the consequences of an unhealthy debt load is not surprising. How this unfolds is yet to be seen. The Federal Reserve and our government are powerful entities. Can they manage a way out of these excesses? History says “no”. Eventually these imbalances will correct themselves. The timing and degree of correction is what is at question - not “if”, but “when” and “how much” pain. It would be foolish for us to get caught up in the frenzy of speculative greed - especially in real-estate!

If the fundamental picture of this changes in any meaningful way, we will be the first to celebrate. However for now, be watchful. Foresee the danger. Seek refuge in the One who will provide it.

May God bless you and guide you in the years to come.

In His Service,

Doug