The United States federal deficit is ballooning wildly out of control.
The deficit is threatening to drive interest rates sharply higher ... sabotage the economic recovery ... destroy the value of the U.S. dollar ... and turn your entire financial future upside down.
It doesn't matter if Washington is in the hands of Republicans or Democrats. It doesn't matter if the stock market rally continues or ends. The 2003 federal budget deficit was the largest in history ... and the 2004 deficit is going to be much, much worse.
Just based on minimal, bare bones official estimates, this year's deficit is going to be a whopping $475 billion.
That's over twice
as big as the worst deficit in the Reagan years.
But even that shocking number is a gross understatement of the real deficit. Add in the $87 billion President Bush got from Congress for Iraq, and the deficit swells to $562 billion!
Add the $217 billion the government is borrowing from the Social Security Trust Fund, and it bulges to $779 billion.
Add the deficit spending required to pay for planned tax cuts, prescription drug coverage, and money needed to bail out the Pension Benefit Guarantee Corporation and the 2004 federal deficit swells to over $1 trillion.
David M. Walker, Comptroller General of the United States, puts it this way:
"If these numbers are making your head spin, don't worry; just remember that they are all big, and they are all bad ...
"While we are starting off in a financial hole we don't really have a very good picture of how deep it is. Specifically, there are a number of very significant items that are not currently included as liabilities in the federal government's financial statements; for example, several trillion dollars in non-marketable government securities in so-called 'Trust Funds.'
|Another Kind of Budget Disaster|
Apart from the huge deficit, there's another hidden disaster in the U.S. budget that few people are talking about: The federal government's entire accounting process is a mess, and the books of most departments and agencies don't balance.
Result: At the end of each fiscal year, the accountants at each department do something that's worse than Enron-type accounting: They create a fudge account, and enter a mock debit or credit — to force
their books into balance.
The problem is so bad that the Office of Management of Budget (OMB) has developed a rating system of its own for each government department or agency, ranging from A to D, and many are still getting lousy grades. For example, the Department of Defense, one of the biggest spenders of all, gets a D. They fail even the most elementary tests of sound accounting.
Bottom line: The government's books are so murky, the Auditor General has flatly declared that it's absolutely impossible to certify them.
This raises another urgent question: How in the heck can they fix the budget, if they don't even know what the budget is?
The U.S. General Accounting Office, the auditing arm of Congress, is responsible for auditing the budget and the government's books each year. But in 2003, the GAO was unable to certify the government's books for a sixth consecutive year.
According to the GAO, the primary reasons were serious financial mismanagement at the Defense Department, the government's inability to account for intra-governmental transactions, and the government's inability to properly prepare consolidated financial statements.
In other words, the government's books are a mess, and until the government cleans up its accounting, there is only one way to track what's really going on:
Bypass the Treasury Department, the Congressional Budget Office or the Office of Management and Budget. Instead, look at the total amount the government borrows in new funds each year, as tracked by the Federal Reserve. These numbers, although also imperfect in some ways, give you a much clearer picture of the true deficit.
"In the case of the Social Security and Medicare Trust Funds, the federal government took in taxpayer money, spent it on other items and replaced it with an IOU... Given this fact, why aren't the amounts shown as a 'liability' of the U.S. Government? At the present time, they are not.
"These additional amounts total tens of trillions of dollars.
"They are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day."
What about the arguments that the deficit is natural in times of war ... that it's "manageable" given the size of the overall economy. Here's Mr. Walker's response:
"The current and projected deficits far exceed the costs associated with Iraq, the global war against terrorism and any incremental homeland security costs. ... Our projected budget deficits are not manageable."
In less than 10 years, he says, due primarily to the retirement of the baby boom generation, the United States will be hit by "a huge demographic tidal wave
that is not expected to ever
recede ... unprecedented in the history of our nation."
Huge! A tidal wave! Unprecedented!
These are his words -- not mine.
The Comptroller General adds: "Tough choices will have to be made. The alternatives are not only unattractive, they are infeasible. Specifically ... raising taxes to levels far in excess of what the American people have ever supported before, cutting total federal spending by unthinkable
amounts, and further mortgaging the future of our children and grandchildren to an extent that our economy, our competitive posture and the quality of life for Americans would be seriously threatened."
Why Aren't More People Warning You About This?
The Comptroller General has an answer to that question as well. In fact, he went on to reveal something that, in a subtle and insipid way, is even more frightening than the numbers themselves.
The Comptroller General revealed that many members of Congress, many key policymakers and many opinion leaders actually do agree a disaster is looming. But they don't want to talk about it in public.
Look. This is not a maybe, what-if forecast. It is a locked-in event, virtually written in stone. A deficit crisis is the unstoppable outcome of decisions that have already
Your children ... your grandchildren ... even your great grandchildren could end up paying dearly for the trillions in budget deficits the government could pile up over the next few years.
It will rob them of their Social Security. Their taxes will be astronomical. And the average American's standard of living could be a lot lower than what we enjoy today.
These are the long-term consequences. But now, also consider the immediate and direct consequences we're already
beginning to witness in the financial markets ... consequences that are affecting your money right now:
Deficit Consequence #1
U.S. bonds have suffered their worst collapse since 1987, with much more to come!
When the government runs a huge deficit, it has to borrow more by selling more government bonds — there's just no other way to do it. That extra supply of bonds almost inevitably drives their prices down.
That's why 30-year Treasury bonds have suffered their worst price collapse in 16 years. And that's also why the interest rate on Treasury bonds has suddenly turned higher:
Every month, the government needs to borrow more and more. So it has to pay a higher and higher interest rate to entice investors to lend it the money.
And as soon as the government pays more, other interest rates go up all over the country. Homebuyers pay higher mortgage rates. Borrowing costs rise for cities, states and businesses.
But ... the bond market decline and the interest-rate jump so far are just the beginning. They don't even begin to reflect the impact of the $1 trillion deficit that will inevitably strike in 2004.
Deficit Consequence #2
The U.S. dollar has suffered its worst decline in 16 years, with much worse to come!
As I write this, the U.S. dollar has fallen 31% against the euro, 20% against the British pound, 28% against the Swiss franc, and 20%against the Japanese yen. But ...
The dollar plunge so far is just the first, preliminary phase of the dollar decline. It doesn't even begin to reflect next year's $1 trillion budget deficit — let alone an even more dangerous, out-of-control trade deficit.
Deficit Consequence #3
Gold has surged to a 7-year high ... And that's just Phase I of its new bull market!
When governments lose control over their spending, they almost invariably finance their deficits with printed money. And I can think of no other combination that's more bullish for gold.
Already, the price of gold bullion has surged 55% from a low of $255 to a recent high of $394. This has driven gold mining shares like Royal Gold up by 99.8%, Newmont Mining by 231%, Agnico-Eagle by 569% and Glamis Gold by a whopping 1,019% from low to peak. And ...
The gold surge so far is merely the first phase of the new bull market in gold. It doesn't even begin to reflect the bulging budget deficit, the record-smashing trade deficit, the plunging dollar, and the surging investor demand for gold around the world.
Turning A Great Disaster Into A Great Opportunity
For up to 99% of the investors of the world, the deficit will be an unmitigated disaster. It will strangle the recovery. It will end the stock market rally.
In fact, 16 years ago, in the Autumn of 1987, we saw a very similar sequence of events: First the dollar began falling sharply in February 1987. Then, in April, interest rates started surging all over the world. Finally, just eight months after the dollar plunge began, Wall Street was struck with the worst disaster of all time — Black Monday of October 19, 1987.
That's when the Dow Jones Industrial Average plunged 22.6% — over TWICE as much as on the legendary Black Tuesday during the crash of 1929.
Will we see a similar pattern this time? Will the sinking dollar make foreign investors dump their American stocks and bonds? Will interest rates rise up to smash the stock market? Will millions of stock investors lose another great fortune?
I don't know about you, but I'm not risking it. I don't care how long the stock market rally continues or how soon it turns back down. I'm not touching your average industrial or technology stock with a ten-foot pole!
You have two choices:
5 Steps to Protect Your Money From the Upcoming Deficit Crisis!
- You can either watch passively while the deficit disaster of 2004 rips through your portfolio and threatens to ruin your financial future. Or ...
- You can turn the deficit disaster into the profit opportunity of a lifetime.
Even in the worst of times, too many investors neglect the importance of avoiding risk. And when the economy or the stock market are enjoying a recovery — no matter how temporary — they neglect risk even more.
That's a grave error for the simple reason that it's far more difficult to recover from losses
than to grow your wealth slowly and steadily.
For example, if you invest $100,000 at just 5% per year you will have $200,000 in about 14 years. However, if you suffer a 50% loss in your first year, you would need to earn 10.25% per year — more than DOUBLE — in order to get back to $200,000 in that same 14 years!
So protecting your capital and avoiding losses must be your very first priority for the overwhelming bulk of your money. If you have a bit of a riverboat gambler in you and want to swing for the fences with some of your money, that's fine. But make sure it's money you can afford to live without and still get a good night's sleep.
Here are the five steps I recommend:
Step 1. Keep your priorities straight:
Aim first for savings and capital preservation, second for growth, and third for speculative profits. If you do not have a savings plan in place, the sooner you begin, the better. Figure out how much you can comfortably save each month. Then stick with it.
Step 2. Do your utmost to control your risk.
High-risk investments are not bad. Indeed, often they are the outstanding performers. So, there certainly is a place for risk, provided you take advantage of the devices that can help you control that risk. Specifically:
For investments that expose you to large potential losses, use stop-loss orders. In the Safe Money Report,
for example, I usually recommend a stop loss on investments that I feel may expose you to risk. If the value of your security falls, there is no guarantee that you will get a price that corresponds exactly to the stop-loss level I specify. But it should help protect your capital to a large extent — either to prevent a larger loss or to protect an open profit.
Diversify beyond the stock market by investing in various asset classes. Some people think that "diversification" means spreading your money among multiple stocks or stock market sectors. I have never believed that to be adequate, and the wholesale decline of nearly all market sectors in 2000-2002 vindicated my views. A truly diversified portfolio should also include Treasuries, gold-related investments, other hedges against inflation or deflation, and, at the right time, other asset classes like real estate.
Maintain a balanced portfolio. Too many investment decisions are based on just one theory about the future direction of the market. I'll admit, I do have strong views about the future, but I also recognize that, ultimately, the future is not predictable with any level of precision. Therefore, one of my key goals is to build a portfolio that should be able to handle multiple future outcomes.
Step 3. Weed out the risk in your portfolio.
Whether the overall stock market is going up, down or sideways ... whether you are bearish or bullish on the future ... no one can deny the wisdom of getting rid of investments that expose you to excessive risk.
Have a look at Table 1
. According to my proprietary Weiss Ratings, these are the weakest widely held companies in terms of risk. These may have already suffered significant price declines. But if you own them, I recommend getting out — whether at a profit or a loss.
Conversely, if you still want to invest in stocks, I recommend that you favor those that (a) have a high Weiss rating AND (b) pay a dividend. I've provided a list of these companies in Table 2
Keep in mind that a good rating does not necessarily mean your stock will go up. In fact, if the market as a whole is falling, it can drag down even the best of stocks.
Step 4. For your savings, avoid the weakest financial institutions and stick with the strongest.
When interest rates rise, one of the first sectors to feel the pinch is financial companies. They suffer losses in the market value of their bond portfolios. Their profit margins are squeezed. And those with too many speculative derivatives (high-leverage bets on foreign currencies, interest rates and other markets) are vulnerable to losses.
At first, you will see the impact of rising interest primarily in their share prices. But later, banks and other financial institutions with the weakest capital could fail.
My advice: Even though it may not appear to be an immediate
threat, you have nothing to lose — and everything to gain — by avoiding the weakest institutions and sticking with the safest.
Among money market mutual funds, a very convenient savings vehicle, the safest of all are those that invest your money exclusively in short-term Treasury securities or equivalent. Table 3
gives you the 20 safest of these funds according to my Weiss Ratings.
And among banks or insurance companies, the safest are those with plenty of capital, good liquidity and steady earnings, meriting the highest Weiss Safety Ratings. These are in Tables 4 and 5
Once you have the bulk of your money in a safe place, then
you're ready to allocate a portion of your funds to more aggressive strategies, which I talk about in my other special reports that you can read about in Step 5 of how to protect yourself and your money against the coming deficit disaster.
Step 5. Read these special reports that I wrote for my Safe Money subscribers.
I wrote these additional reports to give my subscribers even more detail about how to protect their assests and help them grow during the looming deficit disaster.
Report #1: "Make 562% Gains OR MORE In The New Bull Market For Gold"
This brand new report is an insightful look at the forces behind the current bullish run that gold is enjoying, and why I believe that a second — more explosive — phase is about to begin.
In the first phase, the U.S. federal deficit was by and large under control. The U.S. dollar was not falling. And there was no mad rush by investors to get into gold investments. In other words, the price of gold was driven higher exclusively by diminishing supply and rising demand.
Now, as we get set to enter the second phase, these powerful supply-and-demand pressures that have been driving gold higher will still be in full force. Plus ...
- Investors fleeing the falling dollar will start rushing to buy gold;
- Inflation — long subdued — will come back with a vengeance;
- As investors begin to catch on to the out of control U.S. budget deficit, they'll seek refuge in commodities like gold;
- We're beginning to see surging investor demand in China, where millions of Chinese can now buy gold freely for the first time on the new Shanghai Exchange.
I firmly believe that all of these forces, converging at the same time and place, could drive gold through the roof!
Included in this report are the names of my favorite gold mining companies that I believe are perfectly positioned to give you great profit potential in the coming months. For example …
Gold Mining Company #1.
This company hasn't enjoyed as much of the rally in gold as other companies have, but we expect it to start catching up to the rest of the pack soon. It has 4.3 million ounces of proven and probable reserves, producing gold at an unbelievably low cost of $114 per ounce. That makes its nearly 600,000 ounces of gold production per year some of the most profitable in the industry.
Gold Mining Company #2.
A top international junior producer, this company holds nearly 4 million ounces of proven gold. Its total production costs have been running on the high side, at over $200 an ounce, but that is likely to decline substantially in the months ahead. Chief reason: It is actively reducing its hedge book. This is a gold miner whose share price was once as high as $15 at a time when gold bullion was worth far less than it is today. You can own it for less than $3.
Gold Mining Company #3.
It's sitting on a hoard of 5.1 million ounces
of gold, worth an astonishing $1.84 BILLION, even at the low evaluation of $360 per ounce. Since the company's total market cap is only about half
that — just $984 million — buying this company's shares is like getting free gold!
I name each of these gold picks and tell you exactly how to get in on the ground floor in "Make 562% Gains OR MORE In The New Bull Market For Gold."
Report #2: "Make At Least 20% During The Interest Rate Surge of The Next 12 Months"
To most Americans, investing in interest rates is entirely alien. They don't know how. They don't know where. The most they ever do is look for the highest yield in a certificate of deposit or bond. That's a shame, because as I see it, large profits are going to be made in the next few years in the interest rate markets.
The interest rate markets are at the core of the world's financial markets. Every bank, every large corporation, every local, state and federal government is intimately involved in these markets. The interest rate markets dwarf the stock market. The typical daily trading is as much as $839 billion — nearly 20 times more than the trading on the New York Stock Exchange.
So, to help you protect your bond portfolio from losses — and profit directly from rising interest rates — I have selected a special mutual fund that I believe is perfectly designed for this goal. You have probably never heard of this fund. Even your broker probably doesn't know of its existence. Yet this fund is run by a large mutual fund company and readily available to all U.S. investors with no load and no strings attached.
This mutual fund is especially designed to make you money whenever Treasury-bond prices fall (an automatic consequence of rising Treasury interest rates). For example ...
- If the 30-year Treasury bond price goes down by 10%, this fund is designed to go up 10%.
- If the Treasury bond price goes down by 20% your investment is designed to go up by 20%.
- If the Treasury bond price goes down by 30% your investment is designed to go up by 30%.
Could you lose money? Of course. But only if interest rates decline. And with interest rates already near 45-year lows, and with the deficit ballooning wildly out of control, I expect Treasury bond prices will fall by at least 20% in 2004, handing you a profit of at least 20% with this fund, minus any minor fees or commissions.
So while most savers will probably be earning a meager 2% on their money, this gives you the opportunity to make a profit of ten times more by betting on rising interest rates.
I give you the name of this mutual fund and everything you need to know about it in my third free report — "Make AT LEAST 20% During The Interest Rate Surge of the Next 12 Months!"
Report #3: "Make Up To 413% Gains from The Dollar Decline"
The dollar decline is not next month or next year. It is here and now, and it's happening fast!
The economic ministers of the seven most powerful countries in the world — United States, Japan, Germany, Britain, France, Canada, and Russia — now want
the dollar to decline. They virtually said as much in their most recent conference. They agreed that the dollar is overvalued and that the currencies of other countries are too cheap.
Translation: They're now pushing for a DOLLAR DEVALUATION. This is already clobbering the dollar and sending overseas investors fleeing from dollar-denominated paper assets
The last time something like this happened, the dollar plunged 20.2% against major world currencies. This time around, the federal budget deficit and the U.S. trade deficit are far worse. So I believe it's safe to assume that the dollar could fall even more.
For starters, you can invest in two relatively conservative "contra-dollar" mutual funds that I've chosen precisely for this situation. These are mutual funds that are especially designed to go up in value whenever the dollar goes down
I give you all the details — including the funds' names and how to buy them — in the fourth free report in my series, "Make up to 413% Gains from The Dollar Decline!"
I'd Like to Send You These Reports Today!
These reports are hot off the press, reflecting the very latest events that have just taken place in recent weeks and days. Each one gives you insights and profit opportunities that are unavailable from any other source.
But the deficit, gold, the dollar, and interest rates are not standing still. Nor is the stock market. Throughout 2004 and well into 2005, you are going to need immediate and frequent updates on what to buy, when to take profits, and when to cut short any losses.
I cannot guarantee the future, and I cannot guarantee profits. No one can. But one thing I know with certainty: If the deficit grows as large as all the numbers now demonstrate, there are bound to be many more shocking surprises ahead.
To keep up with the rapidly shifting sands, you will need the investment updates that only my complete SAFE MONEY INVESTOR SERVICE
can provide, including:
My model CONSERVATIVE PORTFOLIO that generated total returns seven times greater than CDs, money funds and other cash investments paid in 2002 ...
My model SPECULATIVE PORTFOLIO, with updates on my strategies to profit from rising interest rates, a falling dollar ... and much much more.
My SPECIAL SITUATIONS AND OPPORTUNITIES in gold, oil stocks and other investments that have skyrocketed up to 562% — even during the worst years of the stock market!
Of course, all investments involve risk and not every recommendation can be profitable. But overall, SAFE MONEY has done so well Mark Hulbert of CBS MarketWatch/Hulbert Financial Digest recently rated my SAFE MONEY REPORT the #1 Top Performing Investment Newsletter for the period of March 2002 to February 2003!
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Don't Be Caught Offguard — Take This Chance to Protect Yourself Against The Deficit Disaster
This is a watershed moment in history and in your financial life. The ballooning deficit is the greatest threat to our country — and to you — of any threat now before us.
But it is also a powerful megatrend that I'm convinced will churn out one great profit opportunity after another for me to share with my over 100,000 Safe Money
subscribers. I hope you join them, and don't wait … the sooner you jump on board, the more you stand to make.
To start immediately, just click here to order online
, or call toll-free 1-800-236-0407. For telephone orders, be sure to mention special offer code p212-35476 to claim your free reports.