Phil. Stock Market Discussions, Comments and Forecast
Known for its lush landscapes, welcoming citizens and dark stout beer, Ireland’s been considered a European gem for years.
But not all that glitters is gold.
Thanks to the global financial crisis and European debt woes, the green island nation has quickly fallen from grace. Its finances may actually be worse than Greece’s.
Despite its efforts to curb the rising tide of debt with the first austerity program among developed economies, Ireland fell short. It miscalculated. An additional 15 billion euros over the next four years is necessary—a whopping 30% of the country’s total output.
Bond yields are surging above 8% for the first time in 11 years. A third-consecutive year of economic contraction is in the cards. An IMF bailout is practically inevitable.
Why should you care? Because, as the folks at Disney like to say, “It’s a small world after all.”
The repercussions of a second EuroZone bailout will be felt around the globe. No one will be spared in the aftermath.
Remember What Happened With Greece?
When the Greece bailout hit the books, stocks slammed on the brakes.
What’s worse is that Greece’s austerity measures are falling short. The country’s budget deficit will be greater than 8.1% in 2010. Bond yields are already surging above 10%. And its economy is projected to contract 4% in 2010.
Simply put, Greece’s bailout has failed. So what are the odds an IMF bailout for Ireland will work? Slimmer than slim.
Not only will another IMF bailout not save the EuroZone from collapse, it would crush the global markets and investors—again.
The Currency War
If you thought all the “currency war” threats were over-hyped, think again.
Currency wars are devastating. Dirt-cheap currencies destroy consumer purchasing power, sparking more serious protectionist measures and crippling global growth. Nobody wins.
This is serious, folks.
Everyone is trying to keep their currencies low—the U.S., Brazil, Japan, Singapore, South Korea, India, Thailand and, of course, China. We haven’t seen currency manipulation to this extent since the 1930s. And we all know how that round of shortsighted gamesmanship ended—World War II.
Now, I don’t see armed conflict ahead of us. But if global government leaders don’t pull their heads out of their keisters—and fast!—it definitely could spiral into the kind of global economic gridlock that could devastate your savings.
We must prepare for the worst.
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A New Wave of Inflation
The U.S. economic recovery is barely worthy of that title.
Banks are still in big trouble, even with the Fed’s gift of historically low interest rates. New home sales and residential construction are on life support. New residential construction isn’t much better, with housing starts in a multi year slump. And the unemployment rate still sits just shy of 10%.
Does that sound like a fundamentally strong economy to you? I didn’t think so.
Throw in the fact that 55% of U.S. debt will mature over the next three years, Ben Bernanke is between a rock and a hard place. He has two choices:
Don’t forget, with deflation, Washington would have to pay back all those borrowed dollars with more expensive dollars. Not an option in Ben Bernanke’s world.
You know what that means: Inflation rules, and for the unprepared, its impact will be sudden and debilitating.
Don’t be a victim. Follow my three-step inflation-survival plan:
China, China, China
China is easily one of the most serious threats to investors today. Its path to financial greatness is eerily similar to Japan’s rise. And that makes me think it will mirror Japan’s devastating fall…
Japan’s export boom spurred robust economic growth for 40 years, but an undervalued yen burst one of the largest speculative bubbles in history. An earthquake that has left Japan floundering ever since.
Sound familiar? China is following in Japan’s footsteps.
Over the past two decades, China has posted an average of 9% GDP growth—mainly thanks to its robust export market. And now, it’s being called out as a currency manipulator—which it is. Chinese government leaders keep the yuan undervalued to keep the factories running at full speed and employment high. But a day of reckoning will come.
You should be very concerned.
China is much, much larger than Japan. When that bubble bursts—and trust me, it will—the consequences will be massive and widespread. No corner of the globe will be spared.
Here’s what you must do to protect yourself today:
With its diversified economy—not export-driven—Brazil is the most compelling opportunity for long-term investment in emerging economies.
No matter how you slice it, we’re facing some of the strongest headwinds of our lifetimes. The EuroZone crisis, currency wars, rising inflation and China’s bubble are just the beginning.