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Wednesday, April 15, 2009 Tax Day turns into Protest Day...bailout money is running low... Feds to release results of the bank "stress tests"... Lower CPI is no good for the gold price... Porter Stansberry on the greatest economic disaster ever...and more! --------------------- Special Offer --------------------------- It's Time to Buy This Unique 26.7% Yielder Sales of existing homes grew 5.1% in February...the largest gain since July '03. So if you're interested in positioning yourself for the resurgence in real estate, now's the time to make your move. We've uncovered a stable, diversified REIT that's already raking in the profits, and it's poised to climb even higher. This REIT carries an annualized yield of 26.7% and has risen +10.3% since we first featured it. For the details on this high-yielding cash cow, see this report just released by editors Paul Tracy and Carla Pasternak. Get the Report Here --------------------------------------------------------------- Tax Day Tea Parties by Kate Incontrera Baltimore, Maryland In case you managed to forget, today is Tax Day. And according to the Wall Street Journal, "Tax Day Becomes Protest Day." There will be rallies or "tea parties" taking place all over the United States today, to protest higher taxes and out-of-control government spending. DR contributor, Gerald Celente, who is director of The Trends Research Institute, calls these tea parties and tax protests "harbingers of revolution." So who are these 'revolutionaries' that are organizing these events? Turns out, not a political party or a union...just ordinary people harnessing the power of the Information Superhighway. The WSJ reports: "The protests began with bloggers in Seattle, Wash., who organized a demonstration on Feb. 16. As word of this spread, rallies in Denver and Mesa, Ariz., were quickly organized for the next day. Then came CNBC talker Rick Santelli's Feb. 19 'rant heard round the world' in which he called for a 'Chicago tea party' on July Fourth. The tea-party moniker stuck, but angry taxpayers weren't willing to wait until July. Soon, tea-party protests were appearing in one city after another, drawing at first hundreds, and then thousands, to marches in cities from Orlando to Kansas City to Cincinnati." As the idea gained popularity, people wanted to synchronize these events on a certain day...and Tax Day became the obvious choice. Although these protests are focused on what may be seen as typical GOP issues, they are not a Republican effort, but a popular effort. People far and wide are coming out to show that they are fed up with incessant government spending and exorbitant bailouts. And as it turns out, the bailout money is running low. There's "only" $135 billion left at the Treasury Department for bailouts. To see which banks need the most money, the Obama administration has been doing a "stress test" of the country's 19 largest banks to see who needs the moola the most. The administration plans to disclose the conditions of these banks, hoping to restore confidence without unnerving investors...which will no doubt end up being a tight rope act. Even by admitting that some of the banks still aren't stabilized, the government runs the risk of causing investors to panic - which is exactly what they are trying to avoid. In his speech to the nation yesterday, President Obama covered these plans...and defended his administration's decision to prop up the failing banks: "Of course, there are some who argue that the government should stand back and simply let these banks fail - especially since in many cases it was their bad decisions that helped create the crisis in the first place," he said. "The truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth." But judging from these tea parties and tax protests, the American people remain unconvinced. Though there is no one organization putting on these rallies, those attending are unified on what they are up in arms about. Reports the Heritage Foundation: "What does unite the protesting taxpayers is the unprecedented expansion of federal government power and spending that has taken place over the last 14 months. Starting with President Bush's $168 billion economic stimulus, through the 2008 housing bailout, TARP I, TARP II, President Obama's trillion-dollar stimulus, the auto bailout, etc. Americans have grown more and more wary of the ever expanding size and scope of the federal government." Gerald Celente sees these protests as a step in the right direction, but "Nothing short of total repudiation of our entrenched systems can rescue America," he says. "We are under the control of a two-headed, one party political system. Wall Street controls our financial lives; the media manipulates our minds. These systems cannot be changed from within. There is no alternative. Without a revolution, these institutions will bankrupt the country, keep fighting failed wars, start new ones, and hold us in perpetual intellectual subjugation." Viva la revolución! Now, we turn to Addison for more on everyone's favorite day of the year: "As could be expected - and just when Uncle Sam and his friends need it the most - total tax revenue among American states will be down this year by the largest percentage since the Great Depression," writes Addison in today's issue of The 5 Min. Forecast. "State tax revenue fell 4% in the last quarter of 2008, the first decline in six years and the largest decline in over 50. Preliminary numbers suggest the first quarter of 2009 will be even worse...by a multiple of three. Average state tax collections in January and February were down 12.8% compared to the same time in 2008. "Personal and corporate income are in the crapper. Property taxes are too. Taxes on investment profits? Heh, right. And with all the economic strife over the past year, we can only begin to imagine what tax evasion strategies, subversive returns and delayed filings must be sticking in the IRS' craw on this fine day." Addison brings readers The 5 Min Forecast, an executive series e-letter that provides a quick and dirty analysis of daily economic and financial developments - in five minutes or less. The 5 Min. Forecast is free to subscribers of Agora Financial's paid publications...such as the reincarnation of The Richebächer Letter. Check out The Richebächer Letter and learn not only how to protect yourself from the continuing global financial meltdown...but the best way to profit in this market climate - even when a recovery is nowhere is sight. Click here for the full report. Now, back to Kate in Baltimore...where it is STILL raining: Stocks fluctuated in midday trading. The Dow rose 0.3% to 7,941.29, while the broader stock indicators fell. Looks like investors have a bad taste in their mouth following more downer data that points to signs that the economy is still in peril. The AP reports that "The Federal Reserve said production at the nation's factories, mines and utilities fell 1.5 percent in March, the fifth straight month of decline and worse than the 1 percent dip analysts expected." On the other hand, you have the Consumer Price Index data, released today by the Labor Department. This key measure of inflation shows that consumer prices declined 0.1% in March. The index has decreased 0.4% over the last year, the first 12-month decline since August of 1955. A lower CPI isn't great news for our favorite yellow metal, which investors flock to when inflationary fears are running high. Gold for June delivery fell $1.40 to $890.60 an ounce today. "The lower CPI print is certainly not friendly to gold," said Brian Kelly, chief executive officer of Kanundrum Research, a commodities and macroeconomic research firm. "Couple that with a stronger dollar and we have significant headwind for the yellow metal." But, you can take the CPI number with a grain of salt...that's what our friend Chuck Butler does. Writing in today's issue of The Daily Pfennig he says, "The government accountants want us to believe that inflation is only running at 1.7% annualized...which is hogwash!" Whether or not a government masseuse has handled the inflation number, we don't expect the price of gold to stay this low for very long. Take advantage of the dip in the price and get some to pad your portfolio with by clicking here. And lastly, our friends in the Far East keep popping up in the news lately...suggesting the creation of a new reserve currency...warning about U.S. Treasuries... They certainly seem a little skittish about the state of the U.S. economy in general. But really - can you blame them? The Chinese are the largest holder of U.S. Treasury securities...totaling $744.2 billion. No wonder they want to protect their investments. Yesterday, Dallas Fed President Richard Fisher hoped to ease fears that China would do anything to harm U.S. interests, such as dropping Treasuries. He denied that China would decouple economically from the United States, saying the relationship between China and the U.S. is 'symbiotic.' "China cannot succeed if the U.S. does not succeed," Fisher said. The Chinese do need Americans to keep up their appetite for geegaws and gadgets...but as we pointed out yesterday, the U.S. isn't buying much of anything - and the Chinese economy is noticing. "Recently, China injected close to $600 billion in a stimulus in their own economy," writes colleague Bill Jenkins. "There is some evidence that it may be helping. It has also been reported that they hold close to $2 trillion U.S. dollars in their investment portfolio, and it has grown 16% over last year, a whole $7.7 billion. If the value of their U.S. holdings should fall 30%, it would roughly equal the size of its recent stimulus. "If the whole thing went belly up, it would still only equal one- seventh of the whole U.S. GDP - and China would still be solvent. The striking facts about China relative to the United States are these: China has four times the people, but only a quarter of the GDP. If their holdings were to get washed away in a tidal wave of inflation, it would be like worrying about a roof leak while a whole tsunami is bearing down on their house. At that point stability is not likely on either side of the globe." Until tomorrow, Kate Incontrera The Daily Reckoning P.S. For more insights from Bill Jenkins, founder and managing editor of Master FX Options Trader and Forex currency markets expert, be sure and check out his latest report, found here. The Daily Reckoning PRESENTS: The current administration's economic strategy will create an unmitigated disaster - not only our country's worst financial calamity, but the greatest economic disaster in recorded history. Porter Stansberry explores... How to Protect Your Family from the Greatest Economic Disaster in Recorded History by Porter Stansberry Baltimore, Maryland It's going to be a real disaster... The current administration's economic strategy will create an unmitigated disaster - not only our country's worst financial calamity, but the greatest economic disaster in recorded history. I first warned my readers about what was happening last December, in a letter titled The End of America: "The coming great inflation will destroy America's economic leadership. It will lead - eventually - to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects. "By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the U.S. government. The price of gold will be well over $2,500 per ounce. Most importantly, commodities will no longer be priced in dollars either, but instead in the currencies of the leading producer. Americans haven't experienced anything like this since the Great Depression." Since I wrote that first warning, I have become much more concerned and much more afraid. What the president has done is actually worse - much worse - than even the dire scenario I had envisioned. Not only is the administration planning on enormous deficit spending this year, but the current plan calls for increasing deficit spending for the next decade - spending that will more than double our entire national debt during his presidency. The Congressional Budget Office produced the following graphic, which compares the deficits of the 1980s and 1990s to the current and future budgets. Assuming Obama remains in power over the next eight years and assuming these deficits aren't actually much larger (which almost always happens), the Congressional Budget office estimates the president's budget will add more than $10 trillion to the total federal debt by 2019 - approximately as much total debt as was outstanding at the beginning of 2007. Obama plans to borrow more money over the next eight years than all of the other presidents - combined. It's very hard to put this in perspective. The numbers have become so large they're almost meaningless. "Twenty trillion" has 13 zeros: $20,000,000,000,000. Nobody can think about a number that large. But consider this... In 1980, the entire federal debt totaled $930 million. Assuming we're paying 5% on our debt in 2019, we will spend more money on interest than our entire national debt of 1980. This level of debt is going to be a huge problem because no one will want to pay the money back - ever. And it can't be financed forever. The poor will blame the rich. The rich will leave and take their wealth offshore. And absolute chaos will follow. The dollar will be completely destroyed. Now... I know... you're thinking, "I've heard all of this before. But the end of the world somehow doesn't happen. We find a way out." Not this time. In fact, when I wrote last year that the dollar would cease to be the world's reserve currency much faster than anyone expects, I'm sure no one took me seriously. But since then, we've heard two of the world's leading powers - China and Russia - both openly suggesting a new world reserve currency must be created. Putin is even talking about using gold to settle international trade. It will happen because no one will want to be a creditor to the United States. "This level of debt is going to be a huge problem because no one will want to pay the money back – ever. And it can't be financed forever. The poor will blame the rich. The rich will leave and take their wealth offshore. And absolute chaos will follow." As more and more people try to get out of the dollar, the government will be forced to forbid the free exchange of dollars into other currencies - and perhaps even to forbid the purchase of gold bullion. This will happen. I guarantee it. And it will happen during the Obama administration. That's why it's critical for you to take precautions now, while you still can. The first thing you should do, if you haven't yet, is buy gold bullion. It's easy: You just call a few coin dealers, find out who offers the lowest premium on bullion, and wire them the money. Once you have the coins, they're easy to hide, easy to store, and easy to transport. There's no law (yet) saying you can't take bullion out of the country. If things start moving that way, you should have enough time to get the bullion out before the law passes. If not... well... you can clip your coins easily and use the gold to pay for whatever you might need. I also believe you should immediately buy gold stocks. In fact, I'm convinced you'll never have a chance to buy gold stocks this cheaply again... Gold stocks have never been cheaper compared to the price of gold itself. This is an amazing, once-in-a-lifetime opportunity. I truly hope you'll capitalize on it. The second thing you should do is move as large a percentage of your financial assets as possible out of the country. Unfortunately, I don't know enough about this yet to offer any good advice. I'm working on it. And the third thing you ought to do is to build a stimulus package for yourself. I realize it's paradoxical. But the coming crisis will make lots of people rich. It's not hard to generate a paper fortune in a huge inflation. All you have to do is own the most important economic assets: energy, communication, and transportation. Thing to do right now is buy the assets you know the government has to have for the economy to function. These assets will remain in private hands, and their values will increase the most. I can tell you what happens to countries that go bankrupt. I've been to Argentina. I'm familiar with the history of Mexico and Great Britain. We'll see the same things here, shortly: inflation, huge tax increases, capital flight and, eventually, capital controls. It will probably take decades for Americans to realize socialism doesn't work. But that clarity might not happen during my lifetime. And I don't want my assets to be stuck inside a banana republic in the midst of a huge socialist experiment. I'm graveyard serious: If you do not take precautions and prepare yourself and your family for the inevitable collapse of our currency, you will suffer incredibly over the next decade. Good investing, Porter Stansberry for The Daily Reckoning P.S. In the latest issue of my Investment Advisory, I told my readers about the absolute best ways to own energy, communication, and transportation assets. Yes, keeping the profits away from the government might be difficult. But in the early stages of this crisis, the value of these impossible-to-replace assets will soar. If you're looking to hedge your portfolio against the financial crisis, you must own these assets. Click here to learn about a trial subscription. The Daily Reckoning - Special Reports: The US Trade Deficit: Fort Sumter…And The U.S. Trade Deficit Inflation: Death by Money Supply Introducing the Single Best Way to Make Sure You'll Never Run Out of Money... Click to Learn More About Mobs, Messiahs and Markets.