. Right after the US election in November 3, 2005, I wrote an article regarding the US economy as follows: November 5, 2004 âEconomic Forecast for the US Economy for the Year 2005 and Beyond.â By: Ricardo C. Amaral If you have been reading most of my articles, then you know that I am very pessimistic about the direction that the US economy is taking. In my opinion we are heading for a worldwide depression, probably even worse than the depression of the 1930's. The US economy is heading south and it is picking up speed. The Bush administration's policies are a sure bet for a new economic depression. I have no doubts about that. We have a very weak economic team running economic policy in the country today. Here are my predictions for the year 2005 and beyond for the US economy: 1) The US dollar should decline further during the year 2005 at least to the range of: US$ 1.50 - US$ 1.60 equal 1 Euro. 2) Gold should increase in price from the current $440 price to around to $ 500. 3) The stock market should decline in the next 3 to 4 years in the range from 30 to 50 percent from current levels. (There are many reasons for that decline to become reality.) Market closings for November 5, 2004: Dow Jones 10,388 Nasdaq 2,039 S&P 500 1,166 Market will trade in the following range in the next 3 to 4 years: Dow Jones from 7,300 to 5,200 Nasdaq from 1,400 to 1,000 S&P 500 from 800 to 600 4) The real estate bubble will burst in the near future when interest rates starts rising to higher levels. Housing should lose in value from 25 to 40 percent depending where the real estate is located. (The actual price of real estate will decline in real terms, since inflation is very low) 5) To stabilize the US dollar decline, the US Federal Reserve will need to raise the Fed Funds rate to a level between 4 and 5 percent by the end of 2005. As the US Federal Reserve increases the Fed Funds rate at this fast rate, the US economy growth rate will decline accordingly; in turn helping the implosion process of the US economy. 6) Outsourcing American jobs to foreign lands will help the implosion process of the American economy. It is open season on American jobs, and millions of American jobs are leaving the US for cheaper labor places. Americans want equality, in terms of wages, equality is at the 50 cents per hour without company benefits. In the future, Americans will get what they are wishing for. 7) Companies of every size will transfer the responsibility of their pension plans to the US government. Most of the people now receiving pensions from these companies will receive a very large cut on their pension benefits when the pension responsibility is transferred to the US government: Pension Benefit Guaranty Corporation's (PBGC) These large cuts in pension income will result in a reduction in spending by pensioners, and in another important negative trend to affect the US economy in the coming years. (We are talking about millions of retired people here in the US.) It is pathetic to see a country such as the United States to decline economically so fast. But gross government mismanagement will do it every time. Without taking in consideration the US governmentâs usual published misinformation, the real rate of unemployment in the United States should be in the range of 13 to 15 percent, not the fictitious number published every month by the Labor Department of around 5.6 percent. The unemployment rate will increase drastically in coming months and years, as the US economy continues to deteriorate on its race to the bottom. After reading one of my articles someone asked me: "Are you able to suggest financial refuge for those of us who are small landowners and investors?" All I can say is that the risks are too high here in the US today. I would not invest any money in the stock market. The housing bubble is ready to burst. The only place that makes sense to park your money is in U.S. Government securities - "TIPS" Below is brief information about these US government securities. Better safe than sorry. Cash is king when the S⦠hits the fan. If you have cash on hand, after a major market decline, then you can pick up the pieces for a fraction of its previous price. NOTE: Above are the predictions that I made right after George W. Bush was re-elected. Most of you think that they are silly predictions, and full of gloom and doom. Do yourself a favor make a copy of these predictions and check them again by November 2008 (The new presidential election here in the US), and you will see that I was right in the nose. I am so confident about my predictions that I am putting them in writing for entire world to see it, as I did in the past. (And I did identify myself, and signed my real name) .
Could the banking system fail, like in the 30's, also? Would cash in the bank be safe? Also, what are your thoughts on the Euro economy and currency?
Excellent Commentary.... I agree with your economic view in context... The question for me deals with comparables... Think of it this way... Each country is a stock....It has earnings...sales expectations...costs of sales....debt....etc...etc... And what you are really talking about are each countries valuations in terms of future expectations... Another issue is where does money go..and what countries money is it...and how is it valued as it is utilized... Another issue is overall demographics...which is really just a part of earning capability of the country in relation to its monthly debt payments... In other words what countries would appear to be of higher value than the US in the near future ?....Assume the EU fails...which it will...and you can single out each country in its makeup... ............................................................................................. The US is learning that the disassembly of core ethnic groupings to attempt economic pervasion does not work...lacks harmony... The next big lesson that the US will quickly learn is that debt is not a good thing on any level... Attempting to harmonize with the ability to harmonize only causes less harmony....
. May 26, 2005 Mr. HJT asked me a few questions regarding my economic predictions for the US economy for 2005 and beyond as follows: Ricardo, Please, is there any information missing between the second to last paragraph and the last? where you state "below is brief info ... about these securities" Thank you for your suggestion of U.S. Treasury Inflation-Protected Securities. Is there any other astute financial advice you may give us, or are TIPS the best haven you can foresee. I assume you see the US as still solvent 20-30 years down the road? Please post your answers instead of responding directly to me, if you care to. Assuming you have more to say. Thank you for your insights. HJT ************** What I am saying here it is only my opinion, and I am not giving you any investment advice, since I donât have the proper licenses required here in the US to give direct professional investment advice to people. Over the years I learned a little about investments and I will post below information about that to give you an idea about my background. Here is the part that was missing on my posting: as per your request. US Government Securities - âTIPSâ (TREASURY INFLATION-PROTECTED SECURITIES): Background The first issuance of TIPS was in February 1997. Now there are seven years of TIPS history, and the TIPS market, as of 11/30/03, has more than $176 billion, or 4.9%, of the total $3.6 trillion outstanding marketable Treasury debt held by the public. The U.S. Treasury department, under both Democratic and Republican leadership, has assured investors that they are an integral part of the governmentâs debt management strategy. The current Administrationâs stated policy is to keep the TIPS program in place without a review for change for at least another five years, and has increased the new-issuance frequency from three to four times How They Work Currently, 10-year TIPS yield 1.96%. That is 2.29% less than the 4.25% that one will get with a 10-year U.S. Treasury note (the cash bond). The principal is adjusted to inflation and semi-annual interest payments are based on the inflation-adjusted principal at the same time interest is paid. As long as inflation remains greater than 2.3% - the difference between the regular Treasuryâs 4.25% yield and the 1.96% TIPS yield - TIPS are a bet. Like all U.S. Government securities, TIPS are guaranteed to return 100% of original par value even if deflation caused the principal value to fall below 100 as the Treasury will make up the difference when the principal is repaid at maturity. Safety Like all U.S. government securities, TIPS are guaranteed to return 100% of the par amount at maturity, even in deflation. If you more detailed information go to: http://64.233.161.104/search?q=cach...+"government+securities++Tips"&hl=en&ie=UTF-8 ****** HJT wrote: I assume you see the US as still solvent 20-30 years down the road? SouthAmerica: I donât know if the United States will be solvent 10 years down the road â never mind 20 or 30 years in the future. When the âDerivatives Marketâ blows up the result it will be worse than the market crash of 1929. Just to make a comparison that might give you an idea of what I am saying: Everybody knows what happens when you detonate a small atomic bomb such as the one that the US dropped in Hiroshima in 1945. But nobody really knows what happens to a city if they use instead a âHydrogen Bombâ that is 1,000 times more powerful than the bomb dropped in Hiroshima. We know what happened to the market in 1929 â that represents our Hiroshima event â But now, when the âDerivatives Market Blows Upâ that will be the equivalent to a large city going up in smoke after a Hydrogen Bomb bowing up. Someone asked me about the safety of their money deposited in the US banks â since today most bank accounts in the US are US government insured up to a certain amount. I donât know what will happen to the entire financial system after a massive âDerivatives Market Meltdown,â because we donât have anything like that happen before to know how bad the event is going to be â but we know that it will affect everything in sight including the Banks, Insurance companies, Mutual Funds, Pension Funds, all kinds of corporations with their hedging positions, the currency markets, the stock market, etc. We will have a domino effect going through the entire financial system and just after the dust settles down we will be able to evaluate the results of the âDerivatives Market Meltdownâ and will be able to find out what has survived such a catastrophe. The âDerivatives Market Meltdownâ it will be a new experience for the human race. Today, we might be closer to a âDerivatives Market Meltdownâ than most people realizes, and I donât know exactly what kind of event will set off this massive financial market meltdown. . .
. May 26, 2005 SouthAmerica: Reply to HJT. I have been following the stock market in the US since 1970, and here is some information about how I got interested in the US stock market as follows: In the early 1970âs when I was a young man, I was lucky to work for a few years at Templeton, Dobrow and Vance. I had a great time during those years, and I used to hang around and go to lunch on a daily basis with a bunch of old investment advisors. Some of these men had been working as financial analysts for Sir John M. Templeton for over 25 years at that time. In case you donât know whom I am talking about; Sir John M. Templeton is a legend in Wall Street, he is a âMasterâ in the field of international investments, and there are only a hand full of people that are in the same league as Mr. Templeton, people such as Warren Buffet, George Soros, and very few other people. In the early 1970âs I was studying for a B.A. in economics at the time, and every Monday we had a meeting to discuss what was happening in the stock market, and the strategy for that week. The meetings usually lasted most of the morning, and we had guest speakers from Wall Street on a regular basis. I used to stay in the office after hours to discuss about stocks with some of the other investment counselors. One of the old analysts became my very good friend, and we spent hours and hours in the research library going through the files of companies. These files had all kind of information about most companies in the US, from annual reports, newspaper clippings, to quarterly reports, 10-Q, etc, etc. After working very close for over 25 years with Mr. Templeton, my friend learned a lot about how Mr. Templeton did his analysis, his philosophy, and his way of looking at investments. I learned a lot from my old friend, and after Mr. Templeton sold that company and moved to the Bahamas, I had the pleasure to meet him in Englewood, and in New York City a number of times. I did continue meeting my old friend on a regular basis until his death in 1996 at age 91. But every time I meet my friend we discussed the old times and he used to up date me with everything that was going on with Mr. Templeton, since he was a close friend and used to talk with Mr. Templeton on a regular basis. Mr. Templeton is the smartest man that I had the pleasure to meet in my entire life. It was a privilege to have the chance to meet and work for such a person. In my opinion, Sir John M. Templeton is an outstanding man in every sense of the word. .
. May 26, 2005 SouthAmerica: Reply to HJT. I have been following the stock market in the US since 1970, and here is some information about how I got interested in the US stock market as follows: In the early 1970âs when I was a young man, I was lucky to work for a few years at Templeton, Dobrow and Vance. I had a great time during those years, and I used to hang around and go to lunch on a daily basis with a bunch of old investment advisors. Some of these men had been working as financial analysts for Sir John M. Templeton for over 25 years at that time. In case you donât know whom I am talking about; Sir John M. Templeton is a legend in Wall Street, he is a âMasterâ in the field of international investments, and there are only a hand full of people that are in the same league as Mr. Templeton, people such as Warren Buffett, George Soros, and very few other people. In the early 1970âs I was studying for a B.A. in economics at the time, and every Monday we had a meeting to discuss what was happening in the stock market, and the strategy for that week. The meetings usually lasted most of the morning, and we had guest speakers from Wall Street on a regular basis. I used to stay in the office after hours to discuss about stocks with some of the other investment counselors. One of the old analysts became my very good friend, and we spent hours and hours in the research library going through the files of companies. These files had all kind of information about most companies in the US, from annual reports, newspaper clippings, to quarterly reports, 10-Q, etc, etc. After working very close for over 25 years with Mr. Templeton, my friend learned a lot about how Mr. Templeton did his analysis, his philosophy, and his way of looking at investments. I learned a lot from my old friend, and after Mr. Templeton sold that company and moved to the Bahamas, I had the pleasure to meet him in Englewood, and in New York City a number of times. I did continue meeting my old friend on a regular basis until his death in 1996 at age 91. But every time I meet my friend we discussed the old times and he used to up date me with everything that was going on with Mr. Templeton, since he was a close friend and used to talk with Mr. Templeton on a regular basis. Mr. Templeton is the smartest man that I had the pleasure to meet in my entire life. It was a privilege to have the chance to meet and work for such a person. In my opinion, Sir John M. Templeton is an outstanding man in every sense of the word. .
south america would you publish your forecasts from the previous 5-10 years? Have you noticed that there is always a reason to believe the U.S. economy would collapse since the vietnam era. I mean how many books have prechter and ravi batra (I think that is the serial publisher of doomsday scenarios) published saying pretty much the same thing? How do I know which predictions to take seriously. I remember when I the first time the U.S. became a debtor. That was supposed to spark imminent collapse. Then when the dollar was too strong then too weak. All sorts of currency crisis. Japan their buying up the U.S. curruency cirise around the world. Mexico, LTCM, JPM and their derivatives. A few years ago Jim Rogers was predicting massive inflation, Then others deflation. Then Jim said FNM was going to 5 dollars and going to take down the whole mortgage industry. When will the hammer drop. Why are you smarter than every other doomsday guy?
it's very easy to be Kassandra these days - if you are wrong, nobody'll remember, if you are right, you can boast that you have predicted the "greatest crash ever". it takes a lot of balls to say - "things are going ok, but i see a weakness here", rather then produce Nth sigma crash predictions.
I first became acquainted with the Templeton World Fund in 1978 ...and remember well the reasons why one should purchase the fund...It also had one of the higher load fees...7.5%... I have always appreciated and admired Templeton.... Part of my questioning here relates to a higher form of equity...which would be the short term certificates issued directly by the Central Banks of each government...in combination with the interest paid... Always in times of crisis the interest rates shoot sky high..but then always came back to normal rates...All countries have the sovereign right to print money and affix rates of interest...Unlike companies..they have infinite lives... In almost every case when calamity occurs....you roll the short term rates combined with interest...and you come out ahead from the countries peers...this has to occur as there is incredible pressure for these numbers to come together... What's becoming interesting about stocks and capitalism...is that as the core exchanges are centralized via electronic trading etc...more and more of the control will be towards those responsible for the initial capitalizations... To simplify this.....If the paper that represents the equity is held in names of those who are living in the countries of duress...they legally hold the ownership of the lowest cost producers of most of the worlds inelastic products and established elastic products ...in other words..there's no way to produce the goods cheaper...then in effect these entities own the control...although the labor could be in any country...then how can it be that the values to be found are better anywhere else... I remember an insurance company that was bought by Templeton in Texas in 1987 whose stock per share had a high ratio of cash per share ...it was almost 1:1... I have played some of the world's currencies as I have mentioned which I think will work more predictably than stocks...Currencies in dire straights tend towards equilibration with its higher percentage trading peers... It will get very interesting indeed when the countries that house the greatest ownership of the world's best companies are in severe trouble which have used the paper ownership for other debt purposes... Templeton would love to be picking up the pieces after such a debt/derivative wash out opportunity.... You know the issue about labor and its costs will be a brutal historical story for the US one day... However..the world's control will be in the hands of those who hold title to its best companies..and thus the wealthiest as well... Capitalism will win out every time because of greed...
. SouthAmerica: Reply to libertad Recently, someone in another forum for politics and economics asked some questions comparing the Brazilian and the US economies. Below are some of my answers to that fellow. Economic comparisons between the Brazilian and US economies. The US government budget for 2004 was $ 2.5 trillion dollars, but the US government actually will spend $ 3 trillion dollars. The extra $ 500 billion dollars in expenditures by the US government will be done on credit for future generations to pay. (or maybe in the future the United States will become another Argentina, and it will repudiate its debt.) The total Brazilian government budget for the year 2004 = $ 100 billion or $ 0.1 trillion The US government budget is approximately 25 times larger than the Brazilian government budget. The amount that the US government borrows from the rest of the world per year (the US budget deficit alone) to finance current US government expenditures is 5 times the amount that Brazil spends to run the entire government of Brazil per year. The US government debt is so large today ($8 trillion dollars and growing) that in interest alone, the US pays in interest US$ 300 billion dollars per year, an amount which is 3.5 times the amount of the Brazilian government budget to run the entire country for a year. For example: Today, the US government has such a humongous outstanding debt, that the US government had to pay in interest expense the following amounts for each fiscal year: Fiscal year Octâ02 to Septâ03 = $ 318,148,529,151.51 Fiscal year Octâ01 to Septâ02 = $ 332,536,958,599.42 Fiscal year Octâ00 to Septâ01 = $ 359,507,635,242.41 These are actual figures for these periods, and for these three years the US government paid out in interest alone on its debt the amount of $ 1,010,193,122,993.34 In comparison, the total cumulative debt of the Brazilian government as of December 31, 2004 is around $ 180 billion dollars. Note: The US government pays more in interest on its debt per year than the current total cumulative outstanding debt of the Brazilian government. You can check the detail of US government interest on its debt on the following website: http://www.publicdebt.treas.gov/opd/opdint.htm The US trade âdeficitâ is over $ 600 billion dollars per year compared with a trade âsurplusâ of $ 30 billion dollars for the Brazilian government for year 2004. The US economy is taking away 89 % of the entire surplus of the planet. (This is what the $ 600 billion dollars of trade deficits represents in terms of the global economy. Here in the USA, Americans have a high standard of living, but it is only an illusion since we are doing on credit.) The US government spends per year to run its prison system in the USA almost dollar to dollar the amount that the Brazilian government spends to run the entire country. Please donât forget that the US government also has another $ 70 trillion dollars of debt that is coming due in the near future regarding the entitlement programs related to the baby boomers - Social Insecurity, Medicare, Medicaid, and all sorts of other government programs including pensions. What is in the horizon for the American economy it is not a pretty picture, as Alan Greenspan, chairman of the Federal Reserve, put it in a recent speech: â If we have promised more than our economy has the ability to deliver, as I fear we may have â¦â¦â ************ SouthAmerica: Reply to Jem and to Sle Usually. I donât make many predictions, but many of the predictions that I made â I was right and they did come to past. Regarding my new predictions, only time will tell whether or not these prediction come to past I donât have a forecast regarding the economy going back 5 or 10 years. Basically, this is the first time that I make a forecast such as I did on November 4, 2004. (See above posting about my forecast) 1) Prediction: Stock Market Crash of 2000 I am on record regarding an article I wrote on September 27, 1999 about the coming stock market crash. I could have written that article one or two years before I did it. But I did not. Today, if we could turn the clock back to September 27, 1999 â I know that you probably would be among the people who were skeptical about the content of my article. When I made my stock market prediction in September 27, 1999, that article generated a lot of letters to the editor and emails at that time, and not a single one was from people who did agree with me. I took a lot of abuse from the readers at that time, since some people call me all kind of names and accused me of being an idiot, incompetent, did not understand the stock market, others said that I did not know what I was talking about, I was full of doom and gloom, I was too pessimistic, too negative, and so onâ¦. Most of the correspondence came from people who were related to Wall Street on way or another â investors or people who worked on Wall Street. The rest is history. (I did published again that article as part of another article that was published in September of 2002 and you can see what I said below what I said in September of 1999, a few months before the stock market crash of 2000) 2) Prediction: December 2001 - US dollar will decline vs. the euro and gold. I started writing about the euro around December 1998. When I published a book about Brazilian history I had a chapter in the book why Brazil should adopt the euro - the new European currency. The book was copyrighted on December 1998, but before the book went to publishing I decided that the chapter regarding the euro was out of place in that book. After the final revisions the book went for printing without the chapter about the euro, and I took out of the book all references regarding my suggestion that Brazil should adopt the euro. After the book was published some asked me in which page he could find the information about the euro. I told him that the information had been deleted from the book, and I asked him why are you asking me that question? He answered me that in the back cover of the book mentioned the plan for Brazil adopting the euro. When I made the final revision of the book before the book was printed I missed that one reference to my plan that Brazil adopt the euro as its new currency. I had been writing articles about Brazil and the euro since July 1999. I will reprint these articles in this message board in the near future. But I made an actual and concrete prediction about the decline of the US dollar versus the euro and the price of gold in December 12, 2001 when I sent a letter to the president of the European Central Bank about Brazil adopting the euro. That letter has been published in a number of newspapers and magazines since March of 2002. I have been writing a number of articles about the decline of the US dollar since December of 2001. When I wrote a letter to the president of the European Central Bank in early December 2001 I told him in that letter why the US dollar was going to decline against the euro, and how gold price would increase in terms of US dollar. When I wrote the Letter to the European Central Bank the US dollar was trading at US$ 0.82 to Euro 1.00, and gold was trading at US$ 295.00 I have a track record and they were published at the time when I made the predictions. I made the predictions before the events happened, and I got a lot of email from people giving me a hard time. When I published the letter to the European Central Bank I also received a lot of letters and emails saying that I was out of my mind regarding Brazil adopting the euro, and regarding the decline of the US dollar. ******** In September 2002, various newspapers and magazine published one of mine articles â âCountdown to Armageddonâ (The editor of the magazine changed the original title of the article to Countdown to Armageddon): The article was 14-pages long, but I will quote the following from that article: The Crash of 2000. I am on record. On September 27, 1999, I wrote the following information: "The Dow Jones Index increased from 72 in 1920 to 360 in October 1929 when the stock market crashed. Then four years later the Dow Jones had declined to 60; a decline of 80 percent from its high point in October 1929. The Japanese market index increased from 4,350 in December 1975 to 38,916 in December 1989 when the Japanese bubble burst. Then by 1998 the Nikkei sunk as low as 13,000. From 1990 to 1998 the Japanese stock market declined by more than 70 percent. The Dow Jones index increased from 780 in 1982 to the current 11,000 level in September 1999. The Dow Jones has increased by 14 times in 17 years. Not Bad!!! But when we compare this increase with the 12 percent average increase per year for the Dow Jones over the long term, then we know that we are close to the exploding point of the bubble. During the summer of 1929, many fools thought the increase of the Dow would go up forever. We will have a reality check in the near future. If you want further evidence for the coming crash, just check the historical average market P/E ratios with the average market P/E ratios of the Japanese stock market before the crash in December 1989, and the current American market average P/E ratio. Market crashes give smart people the opportunity to find many bargains. It is just a matter of having cash on hand to pick up the bargains." I received various emails at that time, calling me a doom n' gloom monger and saying that I was sadly deluded. I wonder how much money these people (who did not believe my stock market predictions) lost in the market since September 27, 1999. The Dow Jones started heading South in January 2000 and the NASDAQ started its dive in March 2000. Many trillions of dollars have gone up in smoke in the American stock market since January 2000. .