The Dangerous Decade

September 14, 2000

When most of us think of financial centers that affect our investment portfolios, we think of places like New York, London, Hong Kong, Tokyo, and perhaps even Washington DC and Silicon Valley.

But over the next 10 years there are some place names that may have an even greater affect on your investments. Places like the Taiwan Strait, the Spratly Islands, Pyongyang, Kashmir, the Strait of Hormuz, Kabul, Johannesburg, the West Bank, the Caucusus, Chechnya, Bogota, Caracas, Nigeria and even outer space.

Many American investors have their heads buried in the sand. While they watch CNBC and "surf" the internet for the latest online investment craze, trouble is brewing in the world. Trouble is brewing out of sight and out of the minds of Wall Street pundits, Washington politicians, and the so-called "mainstream" news media. From an investment standpoint, the shame of it is that gold is uniquely suited to protect investors from the coming trouble, but Wall Street, politicians and the liberal news media don't want you to know that trouble is even possible. President Clinton himself said it at the 2000 Democratic National Convention: there are "no enemies." What a whopper that was!

Although it may not seem that way now, if you own a home or have any investments, events halfway around the world will have a dramatic impact on your life. The full story of how the next 10 years will be very different from the last 10 years is contained in the new special report, Clinton's Legacy: The Dangerous Decade.

The Forgotten Dimension

Most Wall Street analysts have enjoyed considerable success in the 1990s by taking their lead from Federal Reserve policy, news headlines, the latest economic statistics--even presidential elections. They have been able to totally ignore the foreign dimension.

Cisco and AOL can announce great earnings, maybe even Amazon.com could have a positive earnings surprise, but ask yourself, how will the markets react and what will happen to your investment portfolio if:

  • China launches a ballistic missile strike on Taiwan?
  • North Korea launches a surprise attack on South Korea?
  • India and Pakistan have a nuclear exchange?
  • Iran shuts down the Strait of Hormuz with a cruise missile strike?
  • South Africa plunges into civil war?
  • Russia becomes dominated by a nationalistic, totalitarian regime?
  • Terrorists conduct a biological warfare attack in a major city?
  • Narco-terrorists disrupt democracy in Mexico and wipe out all the euphoria over NAFTA virtually overnight?

Any one of these events could rock the international financial markets.

Suppose one of these scenarios does occur, would your investment portfolio be prepared? If physical gold investments do not make up at least 5% to 10% of your portfolio, we can assure you, you're not ready.

Investors who ignore the potential for trouble described in The Dangerous Decade do so at their own risk. All one has to do to realize this is to take a close look at the periodic bear markets in stocks that have occurred over the decades: virtually every one coincided with some international crisis.

1956-1957. The Dow fell 20% during this period. What was going on in the world? Soviet troops invaded Hungary, the Suez Crisis boiled over and Kruschev uttered the famous declaration: "We will bury you."

1961-1962. The Dow fell 27% during this period, which included the Bay of Pigs debacle, the Cuban Missile Crisis and the erection of the Berlin Wall.

1966. The Dow fell 25% as China tested her first nuclear-tipped ballistic missile, Israeli and Jordanian forces clashed in the desert, and U.S. warplanes bombed Hanoi for the first time.

1968-1970. The Dow fell more than 35% during this severe bear market. Not coincidentally, the world was filled with crisis: the Tet offensive in Vietnam, the Soviet invasion of Czechoslovakia, and the capture of the USS Pueblo by North Korean forces.

1973-1974. This was the worst bear market of modern times. The Dow fell 45%. The Yom Kippur War between Israel and the Arabs caused the Arab Oil Embargo, which devastated world economies. The price of gold exceeded $100 per ounce for the first time and nearly doubled during this period.

1981-1982. This bear market saw the Dow retreat 24% in a year in which martial law was declared in Poland, Iran and Iraq started a bloody war, and Israeli forces invaded Lebanon.

1990. Stocks fell over 21% after Iraq invaded Kuwait.

It's easy to forget about world tensions and the financial turmoil they can cause.

There is a way to help protect your investment portfolio from tomorrow's dangerous world—make sure that 10% of your investment portfolio is diversified into gold investments. Gold's history as a crisis hedge is well documented.

Gold has been referred to as the crisis commodity because it tends to appreciate in value in response to negative economic, monetary, or political conditions. Such conditions could very well be at the forefront of investors' minds over the next several years. Throughout history, tensions and crises around the world have disrupted international commerce, distorted economic conditions, and threatened vital U.S. interests. Today, however, few investors realize that world tensions still pose a threat to the financial markets.

Make no mistake. Turmoil, tensions and even outright war are very real possibilities in the coming years. The Clinton Administration may be nearing an end, but years of neglect of our armed forces and ill-advised foreign policy decisions will haunt us into the 21st century. Our nation better be prepared. And individual investors better be prepared also. Precarious global financial markets could convulse due to political and economic conflict that is simmering below the surface even now.

America Sleeps

The collapse of the Soviet Union and the Warsaw Pact was supposed to bring an end to the never-ending line of crises that was known as the Cold War. But, unfortunately, the world has only become different, not safer. Meanwhile, the Clinton administration has been asleep at the wheel, allowing America to become vulnerable.

The world in the next decade will be fraught with uncertainties of new and troubling dimensions which will not necessarily be improved by parallel advances in technology or risk management. The national security issues facing America are already evident in trends and indicators. How the U.S. responds to these challenges will determine our domestic quality of life as well as world economic and political stability.

Specifically, there are 8 challenges to U.S. national security that will severely impact the world economy and financial markets in the years to come:

  1. Weapons of Mass Destruction—The spread of weapons of mass destruction--and ballistic missile delivery systems--has already altered the world's security calculus. How will the financial markets react to being potential nuclear hostages to rogue states and madmen like Saddam Hussein, Kim Jong il and Moamar Qaddafi?
     
  2. Troubled Behemoths—-Russia, China, India and Indonesia are all in various stages of change beset with internal factional, ethnic and religious struggles and financial disparities. Together, they make up half of the world's population. Instability in these nations has implications for the entire world.
     
  3. Drugs, Thugs and Plagues--Narco-states, syndicates and kleptocracies threaten states and world systems. Terrorism in all its varieties--conventional, chemical, biological, radiological, and cyber-based--will have cross-cutting effects around the globe.
     
  4. Systems, Supplies and Structures--The majority of the world's key mineral resources are located--and/or transit--in areas of current or projected instability (Middle East, Caucasus, Central Asia, Africa) producing the real possibility of shortages and crises. Meanwhile, 95% of the world's population growth is taking place in Third World countries, a strain that could eventually lead to migration/refugee problems and epidemics for the First World.
     
  5. Chaos: More Than a Theory--Potential adversaries, be they terrorist organizations or rogue nations, have a growing ability to produce chaos for the United States, and we have an ever-lower tolerance threshold for such events. The chaos can come in the form of economic, political and military activities--even all three at once.
     
  6. Information and Space: Securing the Insecurable—Increasingly major portions of military, civil and commercial systems rely on space-based technology. Potential adversaries such as China and Russia, and others, have active space, anti-space, and space denial programs underway. This brings a new level of political and commercial insecurity to a heretofore military mission. This vulnerability is perhaps the least addressed major U.S. security and intelligence issue.
     
  7. Latin America--Threats are metastasizing in Colombia and Venezuela. The persistent success of narco-guerilla enterprises, and any further reversals of democracy in the region, will sharply impact already fragile structures in Latin America. Central America's fledgling democracies could revert; the immigration, infrastructure and security costs for the U.S. would be huge.
     
  8. Africa--HIV infection rates of 25% and higher in many major countries will reverse the marginal gains from market reforms and debt forgiveness. Fights over food and water will continue and the predators of international organized crime, terrorism, and Muslim fundamentalism will further expand activities into weak-state areas including Kenya, Nigeria, South Africa and other U.S. trading partners.
     

In short, there is a lot of nonsense that passes for conventional wisdom in the "mainstream" press. We all need to look directly into the future to protect ourselves against these possible events.

Why should you care about what happens thousands of miles away? After all, the U.S. is the world's only superpower and Wall Street investment gurus claim that international tensions only represent investment opportunities, not threats.

Here's one good reason: take a lesson from history. The Yom Kippur War of October 1973 between Israel and the Arab world sent the world into the worst economic crisis since the Great Depression. On October 5, 1973, the day before the war broke out, the Dow Jones Industrial Average stood at 947. One year later, it had lost 40% of its value, falling all the way to 587. The Arab Oil Boycott, which was a direct result of the war, led to oil and gas shortages throughout the industrialized world. The U.S. economy was beset with high unemployment and double-digit inflation. It took nearly a decade for the stock market to fully recover.

What else happened on the first day of the Yom Kippur War? The price of gold exceeded $100 per ounce for the first time in history and nearly doubled over the next year.

Here's another good reason: On 4 November 1979, Iranian "students" stormed the U.S. embassy in Tehran taking much of the embassy staff hostage and beginning a 444-day ordeal that consumed America's attention and nearly resulted in war. The price of gold stood at $372 per ounce. On 27 December, the world was shocked when the Soviets invaded Afghanistan, a Middle East nation dangerously close to the Persian Gulf and vital oil supplies. By January 21, 1980, the gold price reached $875 per ounce, largely as a result of the dual crises brewing in the Middle East.

The world is changing. Just as the Arab-Israeli War, the Iranian hostage crisis and the Soviet invasion of Afghanistan racked the financial markets in the 1970s and pushed gold prices to record highs, world crisis will impact the financial markets during the first decade on the 21st century. And it is not enough to just react to these crises. We must forecast the trends that are shaping the future now and then prepare for them in advance.

Those who fail to foresee these shocking events could see their wealth shrunk overnight. When crisis hits, the Wall Street pundits will scramble in shock to react to events. By then the damage will already have been done. You see, Wall Street is so mesmerized with the dot-com craze that they don't believe that national security and foreign affairs matter. That was true yesterday; it won't hold true tomorrow. How will they react when modern China is transformed from today's emerging market opportunity into tomorrow's menacing threat to world peace?

You certainly won't hear about these issues from today's liberal media. You must access the uncensored truth behind tomorrow's headlines to help ensure that you are not blindsided by unexpected developments that could affect your investments, your businesses and your family's future.

If you choose to act on the warnings contained in The Dangerous Decade, you'll have the satisfaction of knowing that you are prepared to protect and preserve your wealth in the earth-shattering changes coming in the new millennium.

The total world's holdings of gold could be transported by a single solitary oil tanker.

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