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4.19.2015 Financial Intelligence Report Bookmark

What To Do?

I tend to think there’s an “event” coming that will shake up the world and change a lot of our economic foundation. I’ve laid out a mess of these possible events and some of the likely outcomes of them. Things like China being added to the SDR’s, some form of gold backing to those SDR’s and eventually to the Chinese Yuan itself. The probable loss of “Reserve status” for the US dollar, and a global “reset” where nations literally revalue their currencies and debt levels.
 What To Do?

I tend to think there’s an “event” coming that will shake up the world and change a lot of our economic foundation. I’ve laid out a mess of these possible events and some of the likely outcomes of them. Things like China being added to the SDR’s, some form of gold backing to those SDR’s and eventually to the Chinese Yuan itself. The probable loss of “Reserve status” for the US dollar, and a global “reset” where nations literally revalue their currencies and debt levels.

If I’m right and I think I am, there’s some bumpy road coming our way. Depending on how something this significant plays out, it could be fairly “calm” or all hell could break out.  It’s that hell breaking out that keeps me pondering things.

It used to be that it would be weeks if not months between finding significant things that make you say “hmmmm….”  But now, they hit almost daily. Why is the military moving so much of their stuff to Cheyenne mountain, a gigantic underground bunker that was the center of operations for years on end and then closed? Why so many military drills in our towns across America? Why yet ANOTHER purchase by the DHS for more AR15 bullets? Why are armed National Guard troops marching in full regalia and directing traffic in a California town? Why was a “special insurgent operation” done in Ft. Lauderdale simulating taking over 200 dissidents away by helicopter and truck?

I’m not going to use today’s letter to show you a hundred examples of very strange things going on across the country, I’ve talked about many of them for months now. Just suffice it to say that “someone” is getting ready for “something”.  What that something is, is anyone’s guess. Depending on how far you will let your imagination go, it could be as ugly as a full martial law type take over to something much less sinister. My feeling is that they know a global monetary reset is in the works, it could get pretty ugly for a while and they want to show that they have the muscle to control the masses.

But the thing that is hardest of all to talk about is “money”. What the heck do you do with it? Let’s say I’m not nuts, and we either get a reset, or some form of financial crash or what have you. What do you do with your 401K? What do you do with your money in the bank?  I have a habit of saying “it depends on how ugly you will let yourself believe things could get” that will determine what is best for you. That’s not a play on words, I’m not doing double talk and here’s why…

If I tell someone “hey, I think the market is close to a crash”, they can do what we did in 2008. They can run out and buy put options against the market. We did just that in 2008 and bought puts against the financials in a big way. It was a tremendous gain for us. Some of our puts went up 400%.  But here’s the catch…What if this time it isn’t just another NASDAQ year 2000 crash, or 2008 market crash, what if this time the banks crash? Your brokerage crashes? The exchanges themselves crash? What if the system were to implode so badly that it doesn’t matter that you had 20K put options…the exchange is “gone?” Your money is “gone”.  Do you see my point? Could it ever get that bad?  Who’s to say it can’t?
In the 1800’s and into the 1900’s we had things called “bank runs”. People put their money in banks, the banks went belly up, and everyone would rush down to get their money out. But it was gone. People lost their entire life savings, and it happened more than once.  Supposedly we are so much better educated and the systems are so much better and the Governments so solid that there’s no need to worry about such a thing happening any more. But yet we’ve seen Bail-in’s in other nations. The G-20 has announced that the definition of ‘money” when you make a deposit at your bank has changed.

Most people, I’d venture to say 90% of the people don’t know that the law now reads that when you make a deposit, that money is no longer yours. You have become a “lender” to the bank and the bank has the right to do any damned thing it pleases with it. If they do something stupid and lose it all, anything past FDIC insurance is GONE. Sorry. But wait a second. What if in a really bad situation the FDIC can’t cover everyone? What if it isn’t just your bank, but 75% of all banks go bust? You’re money is gone. Poof.

So you have to make a decision based on what you think “could” really happen. Just by being a reader of this letter I know you understand a lot more than the average guy on the street. I know you have the mental capacity to ponder such things. Well there’s something to ponder.

Now most folks tend to go with the herd. If the herd has no worries about all this and they aren’t pulling money out of banks or preparing for any rough times, they won’t either. I get it there tends to be strength in numbers. But crashes do happen. Every talking head on the Street, from Jim Cramer to Ben Bernanke himself said there was no housing bubble, no credit bubble and no problems. A year later in 2008 our Treasury secretary was telling Congress that we are “just hours from a complete systemic collapse”.  What if there’s another one, even bigger?

As I said last week, preparing yourself for a really rough patch isn’t that hard on the physical level. We can talk about water and food and cooking and heat. We can talk weapons, ammo and defense. But at the money level, it’s harder. Make the wrong move and you’ll lose it. That’s bad.

I am NOT a broker, registered advisor or financial planner. I cannot tell you what to do about your finances. I can however give you ideas to think about or even tell you what we’ve done.  If you go back to our letters just before NASDAQ crash you’ll see that we were suggesting some very strange things were going to happen to our economy. We saw the beginning of the housing bubble forming and while we thought that the market had gains ahead of it, we knew it was a “house of cards”.  Our theme was that  we needed some protection away from “money” and we started talking about buying gold.

We had two 401K’s. We liquidated the bigger one, paid our penalties and taxes and then used the balance to start buying gold. We left the other 401K in play, sort of knowing that the criminals would try their best to keep things going like all was “normal”. The strategy paid off for us. The bulk of our gold was bought below 500 dollars. Yet by moving money around in our little 401K, we’ve managed a gain every single year since in that.

Now however, things are even “more different”. We see Cyprus doing bail in’s. We see Obama pushing a new Government retirement program. We saw Corzine “commingle” fund and lose everyone’s money. We saw Sentinel commingle and the courts said they were perfectly fine in doing so.  We see the banking sector in WORSE shape than before the crash, with more derivatives and more debt. We continue to see strange events that tend to make you ask “what are they gearing up for?”  We see odd military actions, we see the IMF openly talking about China. We see all manner of hell in the Middle East.  

So we ask the question…what do you do with your money? Just leave it in the system and pray nothing happens? Or do you take it out? If you take it out, then what?  What if nothing happens and things just continue on almost like normal?  

I’m not a big fan of 401K’s because the Fee’s are outrageous, and the stock portion of most 401K’s is NOT covered by any FDIC insurance. Yet if your employer wants to donate a percentage to you, it seems silly not to take it. So am I against leaving a 401K in place? No. But I’d only contribute the match that the employer makes and since a “money market” is considered a deposit  account, it most likely is covered by a portion of FDIC insurance. I’d probably consider making a lot of use of the money market option and keep stock holdings to a minimum for a while.

Again folks, that’s just me. I can’t tell you what to do I can only tell you what I would do. See the key is “diversity” but not in the way you’ve been taught. You think being diversified means having stocks in various sectors. I don’t. To me diversified means having some money in stocks. But it also means having some money in PHYSICAL gold and silver coins. It means owning some good real estate. It means holding things not necessarily normally considered an investment. Let me give you an example that some of you can relate to.

Not so many years ago, I’d go to Walmart and buy 100 round boxes of CCI “mini mag” ammunition for our .22 guns. They were about 5.95 a box. Today if you could even find a box of them, they’d be 14 bucks. Ammo has been a stellar investment. If you had 1000 boxes of that ammo I could sell them for you in literally 4 minutes for a 135% gain.

If you are in a family with two separate 401K’s, is it nuts to take one, liquidate it and buy “stuff” with it? I don’t think it’s crazy at all. But then again, I’m just some newsletter writer. Yet in this particular time period, I’d rather have one 401K with most of my holdings in money market, and dump the other one and buy gold coins. Silver coins. Hard to find ammo. Etc.

One area in particular that was always attractive to me was the idea of paying off a mortgage. If you’ve got 120K in your 401K, and all it would take is 90K to pay off your mortgage and free you from the bank, I’d take that move every single day. Why? Because for most people the ability to pay your mortgage depends on reliable employment. In this day and age, is anyone’s employment really that solid? Not likely.  Now granted you NEVER own your own property. Ever. Your town does. If you don’t believe that, try not paying your property taxes for two years, you’ll discover who owns your land as they auction off your tax lien. But since it is generally a lot easier to scrape up the yearly tax money than it is to pay that 1K, or 1.5K monthly bill, I’d rather have the house free and clear.

If something really ugly were to hit…I can make the argument that there’s a chance your 401K can be taken from you. There’s virtually no chance your real estate would be affected by a financial collapse.  In a two 401K family, if one of them is big enough to pay off your mortgage, there’s no question I would do that. Again, that’s just me.

401K’s are NOT all they’re cracked up to be. They are not the retirement vehicle most people think. Now think about that in the context of a market that has been manipulated higher for 6 years. We are at a stock market high that shouldn’t have ever happened without stimulus and manipulation. We’ve got more global problems than we did in 2008.  Given the choice between “letting that ride” and cashing out to purchase my home, the home wins. Hands down.

So to recap and remember I’m not telling you to do this, this is what I would do…If I was to keep it, I’d only put in the minimum to match my employer. I’d keep the lions share in a money market fund if available. If it was big enough that after the penalty that I could pay off my mortgage, I’d make that move. If there were two 401K’s in the household, I’d liquidate one and either buy some gold coins, some silver coin, some alternative investments, etc, OR I’d pay down my mortgage to the lowest I could get it.

Let me end today by saying this. Our system is built on trust. You trust that when you put 5 grand in the bank you can get your 5 grand back. You trust that when you send money to your 401K it’s always going to be there. In a perfect “leave it to beaver” world, that would be true. But we’re not in that world any more. We’re in a greedy, evil world where every singe day there’s a fraud, a theft, a scam.  I never ever wanted to get to a place where I truly believed such institutions as our bank deposits or stock holdings could be “taken” from us, but I think we’re pretty close to that right now. I don’t like it one bit, but the reality says “it could happen”.   I think you need to at least ponder on it.

The Market…

On Wednesday the market had a nice fat “up” day, closing at 2106 on the S&P. The All-time high set on March 2 was 2117. They were close enough to toss a rock and hit those highs. But Thursday they couldn’t get any follow through and we ended the day sort of soggy.

Thursday night China announced some of the worst economic numbers in about 6 years, which really shook the global markets. The idea being that China is such an important importer and exporter, that if they’re slowing quickly, EVERYONE will pay the price. But maybe something “worse” was that Bloomberg terminals around the globe went “dark” early Friday morning.

Let me explain… If you are a true money institution, you most probably have a “Bloomberg” trading platform, where you are literally connected globally to the world. That’s where news, messages, trades, you name it swaps hands thousands of times an hour. The platforms are insanely expensive, to the tune of about 20K per year, but again… there’s tens of thousands of them out there. Well, they “went down” in the wee hours of Friday morning and that REALLY flipped out the institutional traders.

Between the lousy China news and the Bloomberg glitch, the market was in sad shape by 5 am Friday.  Could anything else be worse? Well yeah…evidently there was a whole lot more evidence that Greece was about to be in default once again and it brought the same chorus of “Greece is going to leave the Eurozone”.  So we had three major situations to deal with heading into Friday’s open.

Well there’s no other way to say it except that Friday was a complete washout. We opened ugly and it got butt-uglier from there. At times the DOW was down well over 300 points, the S&P under its 50 day moving average and  important “levels” were failing.

A lot of damage was done Friday, from a technical perspective and a mental one. It was a horrid day, much worse than even we might have expected. So the question becomes this… My opinion was that the market was going to struggle mightily at the All-time high levels. I really feel/felt that the March 2 “top” was pretty significant and even if they were going to get past it, it wasn’t going to come easy. It might take several attempts.

Yet I didn’t think we were talking about a day like Friday. I was more of the opinion that the market would bang its head against the highs, retreat a bit, try again, retreat a bit, etc. Not get smacked in one session for 350 points. Sorry, didn’t see that one coming.

So is the run over? Are we in correction mode now and the direction is down? It could be. I’m only being stubborn in believing that they might continue to try and bang away at making the highs is because 1) it’s April and April is historically a good month for the market, and 2) for years now they’ve jumped in and bought the dip each time the market has been hit really hard like that.

If we come in Monday and there’s no stabilization, and we continue to fall, the next stop would be around S&P 2060, then down to 2040.  If we lose 2040, we could literally be looking at the beginning of the first really ugly correction in over 6 years.

We’ve come one hell of a long way over the last 6 years. The bull is tired and even all the manipulations and QE’s and what have you have run their course. This is a desperate time for the market, especially with some of the things we see coming later in the year concerning China and the IMF. So again, if they don’t stop the bleeding this week, and at a very minimum hold us over 2040, it could very well be time to start selling this market.

Let’s see what they do over the next couple days and especially watch the S&P. If they bounce us Monday and we get back over 2084 which is the 50 day moving average, they might quickly forget Friday’s plunge.  It is certainly “getting interesting!” I’ll see you all on Wednesday.

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