Interest Rates and Gold Soaring Again Money Update May 22 2009

NEW YORK (CNNMoney.com) -- The Obama administration announced Thursday that it has invested $7.5 billion in GMAC, aiming to prop up the troubled lender and boost its ability to make loans to Chrysler dealers and customers.
Marc's Notes:

More bailouts. I could have posted a dozen more articles here saying the same thing but why bother. You know whats going on out there. Money to all who ask!

Our interest rate funds are climbing and gold and silver and oil as well. Our positions in these are doing nicely. Hold for more. The markets are fighting with 8500 and bouncing between 8200 and 8500. A break will come. The longer it lingers here between the 2 spots, the more violent the break, usually.

I keep seeing all those talking heads on CNBC and our evening news that the lows are in and its time to buy. ( Heard that before?). Last night on tv I saw a show on real estate basically saying the same thing. Look, here's the deal.

The FEDS are pouring trillions in one end and a retracting economy is drinking it up on the other end. You have two forces pulling against each other. All SEEMS calm, but its much like a tug of war where the rope is not moving much, but the straining on both sides is immense and waiting for one side to collapse. I dont know which way it will break but NEITHER will work out. One of two things happen:

1) Deflation sets in again.The market fails to overcome bad economic news and retraces back down- BAD NEWS if this happens. It means all that money they wasted was, well, wasted. Oil, gold and silver reverse and ALL THINGS go down. Therefore your bank CDS and T bill funds safely guard most of your money.The US dollar will probably strengthen.The Feds will then dump MORE money into the economy until they get their wish and inflation resumes.

2) The money piles in and the market and inflation take off. Gold and Silver skyrocket as all things real will. The US dollar crumbles and the FEDS try and withdraw the liquid gasoline money they poured in and interest rates spike as a result. The FEDS get their dreaded inflation and the race is on as to how fast the US dollar collapses.

Either way, inflation looks like the eventual outcome. Will it be deflation first then inflation of inflation first followed by a hyper version, then followed by deflation?

No one knows. But either way spells bad things in store for our country and you if you are not prepared. Can I envision a happy ending and solid recovery?

No I cannot. There is too much debt. The banks and the FEDS are dropping all sense to again get the banks "lending agai". Liar loans, No qualification loans, cash subsidies to help you spend money on cars and houses and goods. More debt, the same mistakes made before and now again, even lower interest rates. The fuels that caused the first fires. They NEVER learn.

What to expect:

Inflation- most likely: Hold commodities to protect you in our dividend payers list. This list was updated again with even more high paying funds and stocks. (See Super Dividend Payers list tab).

Real Estate: More downside. Many buying in the last year will see their equity vanish and more will walk away from their mortgages. Even some buying NOW will walk as real estate WILL CONTINUE DOWN for months if not years. There will be NO RECOVERY in this sector for years. I do not recomend buying real estate at this time, unless you get a steal on your primary home with a very low interest rate.

Would I buy investment property or a rental? NO NO NO !!

The economy will devastate the income of potential renters and you may get stuck with no rent money and still have a mortgage.

Commercial Property- The next major crisis. You will see more FOR LEASE signs popping up in malls. Just you wait. You aint' seen "nuthin' yet! Stay away and get out of this sector in my STRONG opinion.

Retail sales- will continue to be hammered. Prepare and hunker down your finances. Pay off debt, dont splurge unless you are rich.

Stocks- Use these rallies to sell off stocks. I only hold dividend payers, oil, gold, interest rate funds, some contrary funds, energy, foreign currencies. Those holding regular mutual funds paying little or no dividends will go nowhere for years. This is NOT a buy and hold market. You must get dividends to pay you while the market lanquishes. Add gold and silver and oil. Interest rate funds like RRPIX and TBT are the most important holdings you can have right now along with gold and silver. Can they go down? Of course, but they will offset your bank CD and US dollars loss of purchasing power if the dollar goes lower.

Dividend payers- ADD. Helps you with inflation protection.

Foreign Currency Funds- Continue to hold and ADD: FXF FXA FXC and FXY.

Swiss Annuities- Add- holds money offshore away from prying governments and lawsuits and may grow TAX FREE as long as you hold it there!

Everything else remains the same. Watch interest rates. Watch for "STRONG US DOLLAR" rhetoric along with "WE WILL REDUCE THE BUDGET" spin. Both are lies meant to decieve you and calm you. Remember, once a government denies something, you know its true, and once they tell you not to panic, take action!

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All for now,

Marc