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G&G Associates Tax & Financial Consulting
e-Newsletter

Update to the Writing is on the Wall

Karibu (Welcome) G&G Readers,

This is an update to the e-newsletter I published on Dec 14, 2010 “The Writings on the Wall.” If you missed that newsletter, go to www.gngassociates.net and click on the newsletter archive link.

As longtime readers know, I often introduce you to new techniques and strategies you're unlikely to learn about anywhere else. I've written extensively about why I believe most investors should focus on investing in precious metals... why selling stocks short will make your portfolio safer (not riskier)... and why hedging your portfolio in the ultimate collapse of the US Dollar is the only real way to make a lot of money without taking any risk at all.

This week, I want to give you something I know will be far more valuable than just learning about another strategy.

This is the most important financial problem you will ever face. And I want you to know exactly how this crisis will unfold, so you can completely protect yourself. Save this Newsletter. Print out a copy. Put it somewhere where you'll see it. Keep reminding yourself that this process is underway... and that you have to prepare NOW.

Why do you need to take steps now? Why not just wait and see what happens? Two reasons...

First, when you look at the numbers, you can see the problems we face will not be solved by any normal or legitimate means. How do I know this? Just consider this one fact: Even if federal tax revenue were doubled, we would still have an annual deficit.

I've got to be making that up, right? Surely that can't be true, right? It's true. Income tax receipts are roughly $900 billion a year. Corporate taxes are roughly $200 billion annually. That's $1.1 trillion in tax revenue. Our current government expenditure is $3.5 trillion. Even if you doubled tax revenue, we would still be facing a $1.4 trillion deficit.

"Wait a minute," you say. "How can that be? Doesn't the mainstream media report that our deficit is only around $1 trillion per year right now?" Yes, that's what they report. But that's because the government counts all $850 billion of payroll taxes (Medicare and Social Security) as current income. It's not. Those taxes are supposed to be funding the future liabilities of those programs, but we're spending all that money now. If a private corporation did the same thing, its executives would all go to jail.

Second, you have to act now because when the situation finally turns, it will happen suddenly. If our government suddenly finds itself unable to sell bonds at a reasonable price, the rule of law will evaporate overnight.

This will happen at some point. The only question is when. You don't have to believe me. Listen to what Congressman Ron Paul said in an interview:
They are going to have currency controls and exchange controls and limit the amount of money you can take overseas... the description of a free country is one where you can leave with your money when you please. That is going to get harder and harder.

Yes, Ron Paul is a libertarian. But he has also been in Congress (off and on) since the 1970s, and he is now the chairman of the Joint Finance Committee. He knows more than almost anyone else about the true financial condition of the government. He is giving you a clear warning. What are you going to do about it?

Most people will do nothing. They will continue to assume tomorrow is likely to be pretty much the same. Sure, we might have some tough times... but this will pass. Nothing serious is going to happen.

If you feel this way, that's fine. But ask yourself these questions:

1) How high will gold have to get before you think something is seriously wrong?
2) How high will silver have to get?
3) How many banks will the FDIC have to close before you consider the dollar to be unsafe?
4) How many municipalities will have to go under before you think there's a crisis?
5) How European states will have to leave the euro before you begin to doubt the stability of the world's paper currencies?
6) How high will agriculture prices have to go before you see that a global food panic is underway?

I suggest you write down the answers to these questions now. Because almost no matter what you answered, you'll get to that point soon.

So how will it happen? That's what people keep asking me. My answer is: The collapse of the global fiat money system is already under way. Gold has gone up for 10 straight years. Gold is the counterbalance to fiat (paper) money. For 10 years in a row, investors around the world have been favoring gold. This trend is going to continue, and it will not stop until serious actions are taken to put a floor under the value of the world's major paper currencies: the euro, dollar, and yen. And that can't happen because the governments backing these three currencies are all bankrupt. The euro will die first. Just look at the numbers...

Greece, Ireland, Spain, Portugal, and Italy have all made the same mistake. They responded to the collapse of real estate prices and debts by guaranteeing the private obligations of their banks with their country's treasury. (America is doing the same, by the way.) The problem is, the debts are vastly larger than the governments can afford to repay... far larger.

So for example, when Anglo Irish Bank failed, it announced it required $35 billion. That's equal to 25% of Ireland's GDP. And that's only one of Ireland's failed banks. Ireland will never be able to afford these obligations.

As a result, Germany, France, and the other euro nations have put together a bailout plan. All of the European treasuries will act to save any member state. Let's look at the numbers. Total debts owed to foreign investors in the so-called "PIIGS" countries are $2.6 trillion. The bailout package that's been assembled totals $1 trillion. That sounds pretty good... at first.

But Italy and Spain have pledged $130 billion to the bailout. Where will they get that money? Greece has pledged $12 billion. Ireland, $7 billion. Portugal, $11 billion. Only about half this money will ever be raised and almost all that can be raised will have to come from France and Germany. Sooner or later, the taxpayers in those countries will say "enough" and the whole thing will unravel.

Ironically, the worsening crisis in Europe will give our own dollar a bit of a reprieve this year. In a crisis, investors will prefer the liquidity of short-term Treasurys to any other asset, including gold and silver. Look at the precious metals markets this last week...

The euro (FXE) fell almost 2% Wednesday. Silver (SLV) fell 7%. Gold (GLD) fell 4%. What went up? The U.S. dollar (UUP) rose 2%. Don't forget... in 2008, the dollar rallied tremendously. Gold and silver fell sharply. In a short-term panic, investors are still buying dollars, not gold or silver.
The collapse of the euro will cause all kinds of big problems this year and almost surely lead to a huge correction in commodities. Does that mean the U.S. dollar's problems are just a mirage? Nope. Sooner or later the U.S. will face a stark choice...

If we let the euro fail, it will result in terrible short-term consequences. So the Fed will crank up the presses yet again. Quantitative easing “3” will be another $1 trillion effort, this time focused on buying European sovereign debt. The Fed must become the lender of last resort not only for the U.S., but for the world. That's the last step before its eventual collapse. After that point, people will no longer flee to Treasurys when a crisis erupts. They will flee to gold.

What should you do about this? It's pretty simple. First, you should use the correction in silver and gold to stock up on physical bullion. Make sure you've got a year's living expenses (at least) in gold and silver bullion. If you can, store a portion of it overseas.

Also, If you can, buy some real estate overseas. Look into getting a resident's permit or, even better, a foreign passport. If leaving isn't an option for you, then use this year to build some safeguards for yourself here. It could be buying a local farm... or maybe just planting a garden... or digging a well... or installing a big propane tank. Store a bit of food. Stockpile medicines. Improve your home security. Imagine what it would be like for you if the dollar wouldn't buy anything. Imagine what would happen if the 43 million Americans on food stamps couldn't eat. So, plan your affairs accordingly.

In regards to your portfolio, here's what I recommend, assuming you haven't done anything yet.

First, research oil and gas companies. And research gold and silver companies. Research agricultural companies. You'll find this information in several of our publications, including my G&G Investment Society (GGIS) newsletter service. Put together a wish list of companies that own the world's best trophy assets – food, energy, and sound money. Those are the key assets. There are others too, like transportation networks, refineries, key trans-shipment points. If the world's currencies collapse, what assets do you want to end up owning? That's the question to answer this year. Once you have made some good choices.... wait. Wait? Yes. Wait.

Wait for a correction. It will come this year. Wait for a crisis to buy. It will come. Wait for signs of massive volatility, like when the volatility index (VIX) – a key measure of fear in the market – shoots above 40 or 50. If you don’t know what VIX is, this is your time to shine…Google it. Wait for junk bonds to yield 15 or 20 percentage points more than U.S. Treasurys. It will happen. Just be patient or become a GGIS subscriber and I’ll keep you informed.

Then, go to your list of trophy assets/corporations. And get out of the U.S. dollar. By the time the big selloff in U.S. Treasurys has begun in earnest (let's say 18-24 months from now), you want to be 100% invested in gold and silver, high-quality short-term corporate debt, trophy equity, trophy real estate. But the key, as always, will be to move out of the dollar as it experiences the rare counter-cyclical rally – one of which is under way right now.

In a nutshell, the US is in deep shigidy with a vanishing middle class, big deficits and a deep recession. How we got here is water over the dam. It's now time to stop belly-aching and bite the bullet; no one wants to sacrifice, but we're up to our knees in the shigidy with a global economic crisis and it’s time to get back the American middle class. Where ten percent of Americans own 80 or 90 percent of this nation's income, where else will the revenue come from to get us out of our funk?"


To find out what investments I’m talking about to prepare for the ultimate calamity that will occur, sign up today to become a G&G Investment Society (GGIS) today.

A one-year subscription costs $99. Your subscription includes:

#1. 12 Monthly issues of investment reports sent to your e-mail, called: G&G Investment Society (GGIS) portfolio. The second week of each month, I'll send you my monthly GGIS portfolio. I'll keep you up to date on exactly what's going on regarding the current and future financial crisis, and I'll show you some unusual and incredible ways to make money now and as it all begins to unfold.

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#7. The G&G e-Newsletter. Also, twice a week, I’ll send you the G&G e-Newsletter giving you my weekly email that details what I think are the most important financial events of the moment.

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I hope you agree that’s fair. And I hope you take advantage of these opportunities right away. You will put yourselves among a very small group of Americans who actually come out ahead after this currency crisis unfolds.

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If you need a one-on-one consultation to evaluate your financial situation, contact me to setup an appointment and get 2011 started off on a good note.
Until the next time,

Ankh Uja Snb (Life, Health, Strength),

Asar Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
757-251-0174 office
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.