Economic Doomsday? Or Opportunity of a Lifetime?

After two weeks, I am finally home from my eastern European road trip.  It was a whirlwind trip with visits in Lithuania, Ukraine, Serbia, Bulgaria, Hungary and Poland.  The trip was mostly pleasure, but there were a couple of meetings along the way.

In future articles I will discuss some of the opportunities that arose from these meetings, but in the meantime, if you have interest in 2^nd passport opportunities, anonymous merchant account services, or private offshore banking and money management services, please send me an email and we can schedule a call to discuss your personal situation.

For those of you not aware, I now host a weekly radio show every Monday from 3-4pm EST on the Overseas Radio Network.  My show title is, “Global Escape Hatch”.  On the show we will discuss various topics ranging from privacy issues, offshore banking, taxation, investments, economics and more.

This week on “Global Escape Hatch”, my guest was a good friend of mine, Roger Arnold.  Roger is the chief economist for ALM Advisors, Inc. – a CA money management firm specializing in income portfolios.  He is also an economics columnist for The Street and has previously hosted his own nationally syndicated radio show called, “The Roger Arnold Show” for 15 years.

On the show this week Roger and I discussed the current state of the world economy and where he thinks things are headed.  He has been very prescient in the past having predicted the housing market crash and the following stock market tumble.  Below you will find the interview from the radio show.

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Bobby – What do you think is the general direction for global economic activity?

Roger – The US and Europe will continue to slow with both heading into a recession.

Bobby – Where do you see interest rates heading over the next couple of years?

Roger – The long yields in Germany and the US will converge with Japan with 10 year sovereign yields at about 1%, 30 year sovereigns at 2%, and 30 year fixed mortgages in the US at 3%.

Bobby – What about oil and gold?

Roger – Oil and gold could drop by as much as 50% before the end of 2012 as the global recession takes hold – they won’t stay there long and will provide the buying opportunity of the decade if not longer, especially for gold.

Bobby – What about US equities?

Roger – The S&P500 could drop by 30-50% because of the steepness and depth of the recession.  It may catch investors and traders unprepared.

Bobby – What about the Euro, does it survive long term?

Roger – The Germans, Brussels and the ECB are now committed to it.  They are very late in the acting, but the ECB will commence a quantitative easing program similar to the US Fed’s this year.  Yes, I think the Euro survives.

Bobby – What do you think will be the impact of the ECB printing Euros on the global economy?

Roger – The greatest beneficiary of the ECB printing Euros will be the eastern member states; Latvia, Estonia, Hungary, etc.  The eastern states rely on exports to the US for about 3 times as much of their GDP as do the western member states – so a falling Euro is a real benefit to them.  It makes their goods less expensive in the US and boosts their exports.

Bobby – Who is hurt by the falling Euro and the ECB printing?

Roger – Two main areas hurt by it are Chinese exporters to the US and US exporters to Europe.  Chinese exports to the US will become relatively more expensive versus European exports.  Some manufacturers will even switch from China to Eastern Europe.

Bobby – Could China choose to float their currency to compete against a falling Euro?

Roger – Probably not, but maybe.  We are watching very closely.  If history repeats itself, China will become increasingly antagonistic toward foreign governments and investors causing investors to flee China.  It could be disastrous for them.

Bobby – It seems you are fairly gloom and doom for the short term at least.  With interest rates so low, US equities at risk, gold and oil setting up for a fall, where should someone place their money these days?  Maybe you can offer me and my readers 5 or 6 ideas on how to make money in this environment.

Roger – I have only one investment suggestion right now.  Cash.  Short term money market accounts and cold, hard cash.  Just sit and wait for the fall.  The global recession is already underway and it will cause a rush to safety, which means US or German treasury bonds.  Whether or not you feel these are good investments is irrelevant.  When there is a recession and fear in the marketplace, people are ‘risk-off’ and go to cash and treasuries.  Be patient and wait for the drop.  You will likely see ‘once-in-a-lifetime’ investment opportunities very soon.

Bobby – Thanks for your time Roger.

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There you have it folks.  I don’t necessarily agree with everything Roger is saying here, but he has been very good at predicting this type of thing and it is very possible he will be right this time.

The main point is that right now is a very difficult time to make a decent return on your investment.  As Roger told me, he is now focusing on a return of investment instead of a return on investment for his clients at ALM Advisors.

From my perspective, I wouldn’t recommend liquidating your entire portfolio, but I would certainly put in some automatic trailing stop losses or buy some protective puts as insurance.  In addition, you may want to consider keeping a lot of cash in various currencies like Canadian dollars, Australian dollars, or Norwegian kroners as a way to hedge your country risk.

If you are interested in joining me – and 40 other radio show hosts – on the Overseas Radio Network, please click the link below to register for your free trial subscription.

Overseas Radio Network – “Global Escape Hatch”

Call today for your free 30 minute asset protection consultation.  Until next week, live well.