First off I’m not a doom and gloomer. I’m not a gold bug that hopes the world ends so Gold goes to $10,000 an ounce so I can say, “You see! I’m right, now I’ll trade you this chicken for that bushel of apples”. I’ve always been an optimist when it comes to the United States and our ability to weather the storm. That said I’m a realist and I think it’s important that everyone draw their own viewpoint on where the world markets are headed over the next 2-5-10 years, and then place your bets accordingly. This is what I see happening.

We have started to see the initiation of a worldwide debt crisis that is hitting most developed countries to some degree. It first hits less populated (less important) counties in the worlds eye, such as the PIGS. This forces surrounding countries to bail them out, thus increasing debt loads on the top tier developed countries. It really is a giant house of cards. Generally speaking I think it takes 3-5 years to “clean up” Europe. As euro countries bail out the PIGS, the non PIG countries start to falter. During this time frame the euro will continue to get crushed thus propping up the US dollar but also keeping gold ascending (but not exploding). While the euro gets crushed, the professionals say, “you see! Everyone is buying US dollars because we are the safe haven”. This will make US politicians even more complacent about our own fiscal problems for an elongated period of time. Over the next few years I believe the future global powerhouses (China/Brazil/etc.) will more freely float their currencies giving the US dollar some competition. Eventually the US will be a house of cards just as Europe is/was. The US dollar will devalue as there won’t be anything left to go down to prop up the US dollar. By this time China, Brazil, etc who are the real growth drivers for the world (and also have fiscal restraint) will have no need to buy US debt as their domestic economies will become self sustained (ie they will be able to sell domestically what they produce domestically.) This will cause the final straw that decouples the dollar and will basically force the US government to deal with our debt and fiscal problems since we won’t’ be able to print out way out of it. So in short, I think we have a few years to invest in domestic securities while everyone addresses Europe, but in the end we will have our day of reckoning here in the US. Let me end with the fact that even when that day comes, it won’t be fire and brimstone. The US won’t all of a sudden be forced into a nomad agrarian people wandering the countryside bartering with one another. It just means we will likely not be “top dog” anymore. The US will be fine, but the fittest countries will be on top.

Over the intermediate term (2-3-4 years) we can still make money on US domestic non mining related companies since the lack of focus on our US fiscal policy (everyone dealing with Europe) will keep the markets in a sideways/choppy motion here in the US. We will still be able to make money on great US micro caps like we always have, but it’s good to keep the long term macro economic implications in the back of your mind.

How do we make money off this?

First and foremost Gold is going to do very well just as it has over the last 8 years. While the world is in this quasi currency destabilization mode, Gold will outperform for several years to come. Basically Gold will outperform until the new “top dog” country (safe haven currency) emerges, maybe it will even be a basket of currencies. You want to own some gold in some regard whether it is physical gold, gold miners, etf’s, etc.

Second, own stocks that have an international footprint.

Third, own stocks that will benefit by the shifting demographics in our culture. We are becoming more of a melting pot than ever before. Pick companies that will benefit from increases in diversity. People are living longer. Pick companies that benefit from an increasing older population. Ie: Medical Equipment, Biotech etc.

Fourth, look for efficiency companies or companies that enable consumers/businesses to save money and cut costs. Ie Technology and Communication.

Lastly, I think it is more important than ever get out of debt and stay out of debt. If you don’t have the cash to pay for it, then don’t buy it. Owning a home is the most OVERRATED aspiration ever. Renting is great: No taxes, no interest payments, no mortgage payments, no maintenance, no HOA fees, no headaches. I’m not wasting 10 hours a week mowing, weeding, mulching, gardening, etc. I used to own a small condo and between the mortgage, HOA, upkeep, I paid 40% more then what I’m paying in rent for a house twice the size. I love renting.

I had a few more things I wanted to talk about but this blog is getting way too long. Sorry for the rambling and the vocabulary errors throughout this blog. I write like I talk. All over the place.