Ready for Gold's Reality Show?
Kevin DeMeritt
President, Lear Financial
Used to be we turned to entertainment to escape reality. Nowadays, reality is our entertainment.
Or, at least, what the media is presenting as reality.
Most of the time, TV reality shows bear a vague resemblance to real life. We tune in, sit back and watch a bunch of frantic adults compete in supposedly realistic situations…all the while knowing that there's nothing very real about it.
But this "fake reality" isn't just limited to entertainment TV. You often find it in such unlikely places as the TV evening news.
What You Don't Know Really Can Hurt You
"Wait! The evening news? The news I turn on every night to get the scoop on what's happening in the world? It's not telling me everything I need to know?"
Bingo. And who knows why? The TV news will give you some of the surface stuff, some political stuff, some lifestyle trend stuff and some celebrity stuff. And, because it is the evening news, we're left believing that we've been completely briefed on the day's developments.
We think we're getting all of today's reality, in other words.
Sadly, that's just not the case. TV has a funny way of filtering out the touchiest, scariest, most controversial news, the stuff we, as responsible adults, really need to know. As a result, we're left without a clue of what's actually happening out there, of what the world is really struggling with. But just because we don't have a clue, doesn't mean these developments can't hurt us. As an example, here are two ominous, "media-overlooked" realities:
Dollar Panic at Our Doorsteps. The TV news never mentions a thing about the critical condition of our dollar...and that's like not lowering the gates when a freight train is roaring in. We aren't just at new dollar lows in the current dollar bear market, we're close to the all-time dollar lows!
Specifically, the U.S. Dollar Index (USDX) is at 80. So what? Well, if the dollar happens to fall below this highly scrutinized mark---something too many experts believe will happen shortly---it will accelerate an existing phenomenon: The world will shed its dollars faster and faster in favor of holding other "more stable" currencies, like the euro.
Consider the spiraling consequences analyst Adam Hamilton foresees from this: "After the foreign central banks sold their US bonds, they would sell their US dollars and buy other currencies like the euro. This would drive the dollar even lower, exacerbating its new lows. The worst-case scenario is a vicious circle forms. Enough foreign investors sell US assets then dollars to drive prices low enough to scare even more, who then sell and scare still more into selling, etc. A plunging dollar in such a scenario would wreak untold havoc on US stocks, US bonds, US interest rates, and import prices."
Yes, all-time dollar lows are knocking…and they could indeed trigger the kind of vicious spiral Hamilton suggests here. But that, apparently, is a bit too much reality for the mainstream media. Hence, the virtual blackout on the subject. Next up…
The Impossible Tightrope the Fed is Walking. Think those nice TV "news readers" would ever tell you about the Fed's dilemma these days? Nah. You have to find that kind of stuff out for yourself.
In short here, the Fed is trying not to raise interest rates, which would likely be the final straw for the housing market…even while hoping to keep rates high enough to prevent the above dollar panic. That's a pretty tall order. And the fact that foreclosures are up first quarter by over 35 percent and, as mentioned, the dollar is facing all-time lows could mean the Fed isn't doing a very good job of it.
Remember, should the dollar cross the critical 80 USDX mark, the ensuing downward spiral could force the Fed to raise rates…and that could finally pop the real estate market, "the biggest bubble in history." The New York Times reported, "Those who think that the worst may be over for the housing market should take another look at the data…"
Maybe the Fed should have its own reality show.
Defending Yourself Against the Happy-Faced Media
There's more I could talk about, of course. How foreign investing in anything U.S. is cooling…how we still need over $2 billion a day from these same disillusioned foreigners to service our ridiculous debt…how the scramble for oil could set off another terrifying chain of events that could lead to more war in the Middle East.
But that's enough reality for now.
You wouldn't know it by reading this, but I'm actually a pretty upbeat person. I don't believe in wallowing in pessimism. But that doesn't mean I believe we should ignore global realities, either (unlike our friends in the media). And that's why I sell gold.
Gold is the prescription for today's economic ills. It will more than offset any currency crisis coming our way. In fact, it already has been hard at work doing just that. As Richard Daughty, The Mogumbo Guru, just wrote, "I am astonished that gold and silver are not leaping in price to heady new highs, and grateful that they are not. So should you be, as it allows you to get rid of some more overvalued dollars by exchanging them for gold and silver while they are still cheap. One day it will not be so!"
So buy some gold, keep it as insurance against the worst happening, then just forget about it and go have yourself a good time. Walk in the park. Take in a movie. If you like, you can even watch a reality show or two.
Kevin DeMeritt
www.goldcentral.com
May 17, 2007
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