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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: LLCF who wrote (50474)	5/3/2006 12:12:15 PM
From: mishedlo	Read Replies (1) of 116555

Richard Russell on gold 321gold.com May 1, 2006 -- "How are we to pay for this future burden of healthcare and social security expenses? Aside from contractual legislative changes to both areas (which are surely just around the corner), the way a reserve currency nation gets out from under the burden of excessive liabilities is to inflate, devalue and tax." This is an excerpt from the current piece by Bill Gross on the PIMCO site. The Gross piece is a hair-curler and is a must-read for every one of my subscribers. Gross is managing director of the largest bond-management organization in the world. Gross' final advice in this article is a shocker. Here it is -- "Need I say more than to sell U.S. assets and buy Asian ones denominated in their local currencies; or if necessary to hire a global asset manager with sufficient flexibility and proper foresight to thrive in an increasing difficult investment environment?" Russell Comment -- Strange that Gross didn't mention gold (maybe it's too hot to handle for a bond guy). Note that Gross is not talking about an overnight situation or an overnight solution for investors -- he's talking about a situation that may take years to play out. The idea of selling US assets and buying Asian assets denominated in local Asian currencies is so foreign to US investors that I don't know if US investors are even capable of mentally taking in Gross's advice. In the past I've said the same thing but in a different language. I've said that over time the US standard of living must fall, and the Asian standard of living must rise. We're seeing that now but it's hidden in a subtle way. The value of the US dollar is falling, gas prices are rising, taxes in the US are rising (mostly local taxes so far), and the price of housing and food is rising along with energy. This means the Americans will have LESS money to spend on other items that they want, meaning in turn that the standard of living in the US is just beginning to decline. For those who are reluctant to buy Asian securities, I advise buying gold. The yellow metal is the only totally international currency, wanted by citizens and governments the world over. Since gold has been rising against all paper currencies, it's only a matter of time before an increasing number of knowledgeable people move to swap their central bank created fiat paper for real money. The march to gold is only beginning.

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