Britannia Radio

The Daily Reckoning Weekend Edition Saturday, April 9, 2011 Montevideo, Uruguay -------------------------------------------------------- Picking the brains of the world's best contrarian thinkers, Dismissing the bogus "recovery" and forecasting inflation ahead, Plus, all this past week's reckonings, archived for your non-coercive reading pleasure... -------------------------------------------------------- New Presentation: Leading Micro-Cap Stock Expert Reveals Epic Wealth Potential See how you could turn just $500 into $6.4 million, even $19 million – in just 30 days. This amazing presentation closes at midnight Sunday. Watch it now, right here... -------------------------------------------------------- Joel Bowman, on his way to Montevideo, Uruguay... What if you could ask half a dozen legendary investors their opinions on gold, the dollar and what to do with your money over the next year? That'd be pretty sweet, huh? Well, that's exactly what Jeff Clark did recently when he picked the brains of Jim Rogers, Bill Bonner, John Williams and a handful of other investment luminaries. We've included Part I of his interview below for your weekend reading. Please enjoy...and keep an eye out for part two... Investment Legends, Part I Jeff Clark, BIG GOLD Stowe, Vermont What will happen to the US economy and the dollar in the near term? Will inflation increase dramatically? What is the outlook for gold, and where should you put your money? BIG GOLD asked a world-class panel of economists, authors, and investment advisors what they expect for the future. Caution: strong opinions ahead... Jim Rogers is a self-made billionaire, author of the best-sellers Adventure Capitalist andInvestment Biker, and a sought-after financial commentator. He was a co-founder of the Quantum Fund, a successful hedge fund, and creator of the Rogers International Commodities Index (RICI). Bill Bonner is the president and founder of Agora, Inc., a worldwide publisher of financial advice and opinions. He is also the author of the Internet-based Daily Reckoning and a regular columnist in MoneyWeek magazine. Walter J. "John" Williams, private consulting economist and "economic whistleblower," has been working with Fortune 500 companies for 30 years. His newsletter Shadow Government Statistics provides in-depth analysis of the government's "creative" economic reporting practices. Steve Henningsen is chief investment strategist and partner at The Wealth Conservancy in Boulder, CO, assisting clients interested in wealth preservation. Current assets under management exceed $200 million. Frank Trotter is an executive vice president of EverBank and a founding partner ofhttp://www.EverBank.com, a national branchless bank that was acquired by the current EverBank in 2002. He received an M.B.A. from Washington University and has over 30 years experience in the banking industry. Dr. Krassimir Petrov is an Austrian economist and holds a Ph.D. in economics from Ohio State University. He was assistant professor in economics at the American University in Bulgaria, then an associate professor in finance at Prince Sultan University in Riyadh, Saudi Arabia. He is currently an associate professor at Ahlia University in Manama, Bahrain. He's been a contributing editor for Agora Financial and Casey Research. BIG GOLD: A lot of economists, including the government, believe the worst is behind us economically. Do you agree? If not, what should we be on the lookout for in 2011? Jim Rogers: It is better for those getting all the government largesse, but the overall situation is worse. More currency turmoil. State and local problems, plus pension problems. Bill Bonner: None of the problems that caused the crises in Europe and America have been resolved. They have been delayed and expanded by more debt and more money printing and will lead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year...not unlike 2010. But the risk is that one of these latent crises will become an active crisis. John Williams: An intensifying economic downturn – what formally will be viewed as the second dip of a double-dip depression – already has started to unfold. The problem with the economy remains structural, where household income is not growing fast enough to beat inflation, and where debt expansion – encouraged for many years by the Fed as a way to get around the economic growth problems inherent from a lack of income growth – generally is not available, as a result of the systemic solvency crisis. Accordingly, individual consumers, who account for more than 70% GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth in consumption on which the US economy is so dependent. Steve Henningsen: The governments worldwide (I don't pay much attention to economists) want us to believe that the worst is behind us because the financial system is built upon the foundation of trust and confidence. Both of these were battered badly when it was shown that much of the world's prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debt with no means of future production. Now they want us to believe that they fixed the problem via more debt. What I will be watching for this year is sovereign and US municipal debt corpses floating to the surface sometime in the months ahead. Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011, we will continue to experience a Jimmy Carter- style malaise that combines continuing high unemployment, tentative business investment, rising prices, low housing numbers when looked at on an absolute basis, and creeping interest rates. As a very large mortgage servicer, we are not seeing significant improvements in payment patterns that would indicate the worst is fully behind us, and with mortgage rates moving upward, we see less ability for current mortgage holders to refinance and reduce payments. Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, no problems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that has postponed the problem, yet also made it a lot worse. I would say that we are still in the early stages of the crisis and have another 4-8 years to go. BG: Price inflation is creeping up, but the enormous amount of money printing hasn't really hit the system yet. Does that happen in 2011, further down the road, or not at all? Jim Rogers: It is happening. The US and CNBC lie about it. Most other countries do not lie and acknowledge it is worsening. Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. The explosion of money printing is being contained by the bomb squad of deleveraging. That will probably continue in 2011. But not forever. John Williams: The problems of the money creation will become increasingly obvious in exchange-rate weakness of the US dollar. Related upside pricing pressure already is being seen on dollar- denominated commodities such as oil. There is high risk of consumer prices rising rapidly before year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a US hyperinflation is 2014. Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues with deflationary-housing winds in our face and the banks still hoarding money like my 9-year-old daughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areas such as energy, bread, circuses, and whatever else provides sustenance to the Romans – I mean people. Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition, this theory contends that a growth in the monetary base – which is what has happened so far – only increases economic activity when accompanied by a decent multiplier; this is not occurring. The real risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue to QE3, QE4, and so on, all of which may have a significant inflationary impact. I am more concerned about general price inflation here in the US and the potential it has to reduce global growth. Krassimir Petrov: This is a tough one. I would have thought that price inflation would have been raging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger a rush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even a dollar crisis. To be continued... Regards, Jeff Clark for The Daily Reckoning Joel's Note: Stay tuned for the second half of Jeff's interviews, where you'll learn these guys' forecast for gold over the next year, what they see in store for the dollar and their best investment advice for 2011. In the meantime, Jeff has put together quite an eye-popping video presentation detailing why he thinks both China and Russia might be planning to dump the dollar. More importantly, he gives his views on what to do about it.Check it out, here. -------------------------------------------------------- 6 Penny Stocks to Own Right Now... Greg Guenthner, editor of Penny Stock Fortunes is giving away SIX penny stock recommendations to all new subscribers! But you must hurry because these plays could explode at any time. Click here to watch the presentation now. -------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... Cash on Hand...An Investors' Best Friend By Chris Mayer Gaithersburg, Maryland Warren Buffett's annual letter to shareholders came out recently. This is probably one of the most anticipated shareholder letters in the financial world. Everyone wants to know what the Oracle's take on the world is. Also, because Berkshire is so large and spread across so many sectors – it owns 80-plus businesses now – his thoughts may give some insight into how the economy is doing. We Are All Japanese Now By Bill Bonner Delray Beach, Florida Even before the Richter needle began to quiver and the pots began to fall, Japan's finances were already shaky. The country began running huge budget deficits following the stock market sell-off of 1990. Economists called this "fiscal stimulus" back then. Two decades later, the deficits are bigger than ever – 7.5% of GDP this year – and they stimulate nothing. Japan has gotten in the habit of living beyond its means. The country has an accumulated debt equal to twice national output and 20 times tax revenues. Japan has become a "zombie state." Its people are getting old. Net of private and public borrowing, its savings rate is now hugely negative. China's "Rare Earths" Exports Collapse, World Prices Soar By Byron King Pittsburgh, Pennsylvania Let's think back to September 2010. Japan confronted China at sea in a dispute over fishing rights. The Japanese arrested a Chinese fishing boat captain. The Chinese soon imposed an embargo on rare earths exports to Japan. Suddenly, rare earths – a relatively obscure set of industrial minerals, oxides and metals – became the stuff of high international attention and intrigue. It became common knowledge that China controls about 97% of the world's rare earths output. Overnight, the dire industrial and political implications of that geological monopoly became apparent. As Japan Goeth...So Goeth the US By Bill Bonner Baltimore, Maryland The US now finds itself in much the same fiscal boat as Japan. America's "stimulus" efforts have become permanent, structural elements of the economy. Since November, the Fed has injected about $4 billion a day into the economy through its QE2 program. And the federal government gives the economy almost another $5 billion worth of deficit spending a day. Together, this is $63 billion going into the economy each week. Handicapping the Rare Earths Stampede By Byron King Pittsburgh, Pennsylvania Over the past couple of months, we've learned plenty about the future of Chinese demand for rare earths. Bottom line is that the Chinese will likely become net-importers of rare earths within three years – certainly within five years. What does this mean for rare earths? Chinese export volumes will continue to decline. Not only will there be less Chinese rare earths product for sale, but the Chinese will compete for at least some of the very same rare earths product as everyone else. Big problem, right? -------------------------------------------------------- Retire Off This One Penny Stock? All of your retirement woes could be lifted thanks to this one penny stock's massive resource discovery... You could quickly turn $25,000 into a whopping $1,212,750...no matter how the market moves! But you must hurry before Wall Street catches wind of it... Expert geologist Byron King reveals the full details in his new presentation – here. -------------------------------------------------------- The Weekly Endnote: We're heading to Montevideo this weekend, Fellow Reckoner – the capital of Uruguay. Sometimes known as the "Switzerland of the South," we want to take a look at just how "free" the market really is there...or, more probably, how "freer" it might be. (Of course, they still trade a single, government issued currency there. Can't have it all, right?) Anyway, we'll check back in next week and let you know what we come across. For now, it's sit back, relax and enjoy the ride. Have a great weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning -------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor atjoel@dailyreckoning.com The Daily Reckoning - Special Reports: Gold: The Truth About Gold Fiat Currency: Using the Past to See into the Future Have You Heard of the OTHER Government Backed "Pension Program?"