An Economic Winter Wonderland

An Economic Winter Wonderland

Editor Sara Nunnally

Storms have dumped buckets of snow across the Midwest this holiday season. We have a tamped-down pathway to get to our wood boiler and the snow comes up to our knees.

When you're sitting all cozy inside with a mug of coffee or hot chocolate (or something stronger) it's gorgeous to look at: pristine white crisscrossed by rabbit tracks and the occasional deer. Our pines are weighed down with thick cloaks of snow.

But out in this winter wonderland, it takes a lot of effort to do anything.

It took me an hour to shovel out one small car-sized portion of our plowed-in driveway. I sometimes wear snowshoes to get our mail. And it took a half-hour and a second heavy truck to pull our wood delivery pickup truck up the slight hill from our wood boiler.

I can't just run to the barn to throw hay for our horses. It's a long process to get there. I have to bundle up -- coat, hat, gloves, heavy boots and sometimes snow pants -- and trek over half-frozen crusted snow banks continuously replenished by the wind coming down our valley.

It's not easy, or fast, or gorgeous.

It's winter in Wisconsin, and I knew what I signed up for when I moved here.

The same can't be said for the hundreds of millions of Americans snowed in by our economic winter. We've seen massive job losses, trillions in wealth evaporate, and a near collapse of our financial system.

Folks can't get loans, and we're all about to pay a lot more in taxes.

It takes a lot of effort to do anything in today's economy.

And the sad part is, things are only going to get worse. We are in an economic winter. There's no way our snow banks of debt are going to just melt away tomorrow, and it's going to take more than hours of shoveling to get us out of this mess.

Our spring may come in just a few months, but our economic spring could be years away.

Here's how things stand.

An economic winter consists of:

  • Confidence: Concern - Fear - Panic - Despair
  • Inflation: Fall of inflation quickens to outright deflation
  • Credit: Following credit crunch - virtually no credit
  • Interest Rates: Rates fall, then rise in credit crunch, then fall much lower
  • Investment: Gold, and Cash, and Bonds (after credit crunch)
  • Economy: Decline into depression

These are all necessary aspects of an economic cycle. This is where we deleverage our debt. Heck, it's why we deleverage our debt. But that's not happening. The only thing we're really doing is cutting the value of our dollar so that the value of our debt drops too.

That won't get us out of an economic winter.

Governments are delaying the inevitable. Economic cycles are too big to change. Interventions are only pushing spring farther away... perhaps even making our economic winter worse. So much so that we could see 10 more years of winter before the green shoots of growth finally start poking their heads through the snow.

In the meantime, pay close attention to that investment bullet point. In economic winters, you should hold cash and gold.

Both of these assets are taking an unusual beating right now. Gold is down below $1,700 an ounce -- even as the Federal Reserve has promised to keep the dollar cheap for the next two years. And the dollar itself has been buying fewer and fewer euros of all things!

Dollar Chart
View larger chart

This could be a good opportunity to get positioned in both gold and cash. But don't think you have to just pick gold and the dollar.

Both platinum and silver have great supply and demand fundamentals that are pointing to higher prices over the next year and more -- and they can hold their value just like gold. Look at the last 25 years for these three precious metals.

Gold Chart
View larger chart

And there are so many strong currencies to choose from that it is easier to customize your cash allocations than ever before.

The Australian and Canadian dollars and even the Japanese yen could have given you decent returns over the last 25 years.

The point is, even though this economic winter points you to cash and gold, you don't have to sit idly by and wait for spring. There are a number of investment opportunities that could grow your portfolio even in freezing temperatures.

If you do only one thing as we head into January, put these currencies and precious metals on your watch list. See how they perform against the rest of your portfolio.

Happy Investing,

Sara

Editor's Note: Since 2008, one little-known silver investment opportunity has crushed the return of physical silver by more than 10-fold... And here the thing: It has NOTHING to do with owning risky mining stocks, silver coins, ETFs or options.

It's no wonder some of the world's savviest billionaires are pouring what could be millions into this incredible opportunity.


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