Above All Else, Cover Thy Assets

Let’s start with the basics: survival.
There are five nonnegotiable bedrock commandments for covering one’s assets and eliminating (or at least, minimizing) one’s losses during the difficult times ahead. Most of these rules have to do with what you should not do in the run up to the coming multiple bubble collapse. No doubt, some of these rules will seem contrary to your current investment thinking and may require some serious thought before you are willing to act.

Asset-Covering Commandment 1: Thou Shall Avoid All Real Estate Purchases Except for Personal Use

In general, real estate is overvalued and on the way down. Although there may be some growth potential left in some isolated real estate markets, the next two to six years are certainly not the right time to add to your real estate portfolio. Even if some markets rebound after a dip, any recovery will likely be short-lived, and the potential risks of investing in real estate over the next several years far outweigh the possible benefits.
We understand that this rule may feel as uncomfortable as sleeping in a tent. Buying investment real estate has traditionally been a reliable foundation for building future wealth. But we have to face facts. American real estate is in a bubble. Long-term, the only direction the housing bubble is going to move is south, probably even into the deep south.
Although it may not be right around the corner, we are simply too close to the bubble collapse to see any significant upside in real estate. It is far more likely that you will suffer a loss, perhaps even a massive loss if you don’t get out early enough. Now is a good time to sell any investment real estate that you own other than your home. (You have to live someplace). By selling now, you may get less than you would like; but it is too hard to time the market perfectly to make holding it worthwhile. Besides, as you will see later in this chapter, there are much better places to put your money.
As tempting as it may be, we suggest that you do not hold onto rental income property. When the bubbles pop, your rental income will not compensate you for the loss of equity when the value of your real estate, in inflation adjusted terms, plummets. You would be much better off simply selling all your investment real estate before the bubbles crash and putting that money in much higher-return investments, which are explained later. As mentioned earlier, each individual situation is unique and we are not suggesting that we know what is in your particular best interest. It is important to consult a tax advisor before selling any real estate, particularly if you anticipate a capital gain.

Asset-Covering Commandment 2: Thou Shall Avoid Most Stocks Like the Plague

There are three vital reasons for avoiding stocks:

• The stock market is up tenfold in 20 years without an equal rise in real earnings, therefore we have a bubble.
• The stock market has been performing poorly for the last five years, therefore it’s only a matter of time before investor confidence wanes.
• When foreign investors buy fewer U.S. stocks, they also buy fewer U.S. bonds. When they buy fewer U.S. bonds, interest rates climb and stock values fall.

Bottom line: Most stocks are overvalued and on their way down.
Will there be some ups and downs? Of course. Is it worth taking a chance on it? We think not. As with real estate, although there may be some potential growth left in the stock market, the timing is very tricky and it’s not worth taking the risk. In the short run, you are about as likely to lose as to gain, And in the long run, all you will do is lose significantly when stock values begin to seriously plummet. Again, we will show you much better places to put your money.
We know the idea of getting out of the market may be unappealing, especially if you’ve been in a while and you’ve made some money. Remember, be smart, be reasonable. The Dow is up tenfold in 20 years. Real earnings in this same time period are not. The last five years have been pretty lackluster for the U.S. stock market. It’s time to get out and position yourself for much bigger returns elsewhere.
An exception to this general rule is individual stocks. There will certainly continue to be individual stocks that do quite well before the bubbles burst. If you can pick them, more power to you. Just keep your eyes open and be ready to unload fast on a moment’s notice.
Another exception: If you hold stock options in a company whose value may grow rapidly, you may want to keep them since there is no downside risk to holding an option. More than one of the authors currently holds stock options in companies that may do very well over the next year or two. However, it never hurts to lock in a profit on some of your holdings. Don’t wait too long to liquidate; eventually economic gravity is going to kick in and our bubbles—most likely starting with the Stock Market Bubble—will fall. 

Foreign Investors Don’t Love Us, They Love the Money We Make Them

The simple, yet important truth is that foreign investors will only love us as long as we make them money. If the dollar falls precipitously and they start losing money in the United States, they will take their money and run. If the stock market also falls (and it will), they will run even faster. Sometime people mistakenly think foreigners invest in the United States because they are so impressed with us. Remember, it’s not about us, it’s about profits. And that, unfortunately, can change on a dime.

Asset-Covering Commandment 3: Thou Shall Avoid Long-Term Bonds and Bond Funds

Interest rates will rise prior to the bubbles falling and will certainly rise very dramatically after the fall. Hence, there’s little reason to invest in long-term bonds or bond funds now. The premium for long-term is far too minimal to be worth the risk. You can probably push it for another year or two, but for the small extra return, is it really worth it?

Asset-Covering Commandment 4: Thou Shall Avoid All Evil Adjustable-Rate Debt

All adjustable-rate loans, credit cards, and mortgages will become an absolute disaster when the bubbles burst. Interest rates will rise dramatically and so will your mortgage and other payments if you don’t get out of these soon. Now is a great time to lock in low long-term interest rates. Don’t take chances; get rid of your evil variable-rate mortgage and other big debts now!
On the other hand, assuming your fixed rate credit card debt is not that significant, there is no great urgency to pay it off immediately. Even low-balance adjustable-rate cards can be held a bit longer. But do unload these before the Bubblequake because interest rates are going to skyrocket and credit terms on your adjustable-rate cards will not be pretty.
If you have investment or personal-use real estate currently financed at a variable rate, unload these now, either my selling the real estate or refinancing the loan. If you don’t, you will be sunk when the bubbles burst and your rate shoots way up. Please get out now, while the getting is good.

Asset-Covering Commandment 5: Thou Shall Not Depend on Fixed Payment Pensions

High interest rates and high inflation, coupled with collapsing asset values and a slew of corporate bankruptcies will make any fixed payment plan a complete loser. Many plans have some inflation protection built into the contract, but it likely won’t be enough to compensate for very high rates of inflation. Also, even if the contract requires it, the plan may not be able to provide all the protection it promises. Even now, during the best of economic times, many pension plans, including many state and local government pension plans, are seriously underfunded. Clearly, during the coming bubble meltdown, this will only get worse.
Even funds covered by the Pension Benefit Guaranty Corporation (PBGC) are at real risk once our bubble troubles get rolling because the PBGC could easily become overwhelmed. And funds not covered by the PBGC will be in even worse shape because they probably won’t be bailed out by the government, which will struggle mightily to deal with its own massive debt and massive interest costs. 

Opening the Gold Treasure Chest

Let’s get something clear right up front: We are not gold bugs. Like most smart, reasonable people, we don’t jump on (or off) bandwagons based on wishful thinking or a habit of seeing only doom and gloom. Traditionally, the warning to “buy gold” has been the longtime mantra of the chronically pessimistic. More recently, however, an entirely new, much more optimistic crowd is starting to buy gold, too, and for very good reason. Prior to and during the coming collapse of America’s Bubble Economy, there are several very compelling arguments for investing in gold (see sidebar).
We won’t bore you with more details than you really need to know. The bottom line reason for investing in gold is this: There isn’t much of it. As other asset values decline, people want to put their money somewhere. They want to buy something, preferably something of rising value that has a long tradition of acceptance and demand during difficult times. That is gold. As demands continues to rise for gold, and then rapidly rises when the other bubbles pop, the price of gold will shoot up. As the price of gold shoots up, gold buying is converted to speculative bubble buying, insuring a vast rise due to the typical conditions that propel a bubble forward. The rising gold bubble is your very best bet for profits during the coming Bubblequake.
Will the Gold Bubble fall back down? Of course it will; it’s a bubble, isn’t it? But why not go for the ride? This could be one of the longest rides of any bubble—10 to 20 years. Compared to other assets, such as stocks and bonds, the amount of gold now available is relatively tiny. You can count on more gold being mined in the future to satisfy growing demand, but demand will surely outpace supply, pushing up the price.
Huge and growing demand; relatively tiny supply—you do the math.

Timing the Coming Gold Bubble

Some people think we already have a gold bubble, that gold prices have reached their peak and are due for a fall. While the volatile gold market will continue to go up and down, the overall trend is most definitely still up—way up once the dollar falls and the rest of the bubbles pop.
Think of gold as having two stages of growth over the next several years: the first, relatively small but profitable, and the second very large and very profitable. Although we view gold as a long-term investment—meaning the real upside won’t start for another two to five years or more—there will likely continue to be good appreciation in gold in the meantime. Gold has already doubled in value since 2001 in a fairly consistent bull market and could easily double again in the next five years. While this increase pales in comparison to the coming growth in gold, doubling in five years is really quite good, certainly better than current stock market returns. By nature, gold always is somewhat volatile; but long-term, we see very little downside risk.
Of course, the rapidly rising value of gold, now and in the future, is itself another bubble—only this one is on its way up. Hopping off a falling bubble and onto a rising bubble will be your key to making huge profits while others take a beating. This is where that huge “transfer of wealth” we talked about earlier comes into play. Gold is and will continue to be a rising bubble. Don’t watch from the sidelines; ride it up! (For more insight into why gold is an especially good bet right now, see Chapter 6, Gold for People Who Hate Gold, by financial bubble expert Eric Janszen.)
Eventually, many years from now, after the worst impact of the other bursting bubbles are felt, and after the credit and capital markets stabilize and begin to rebuild, the big fat Gold Bubble will rise no more and like all bubbles fall back to earth.
In the meantime, here are your four wealth-building power tools from the gold treasure chest.

The “Gold Bugs” Are Right … Sort of

The gold bugs are right. Gold will be a spectacular investment after the bubbles pop and a very good investment before they pop.
On the other hand, the gold bugs are wrong. The reasons that gold will be a spectacular investment has nothing to do with some fundamental quality of gold itself, but will primarily result from the other bubbles colliding and popping, and investor interest rationally shifting to gold—for a while. Eventually, gold values will collapse (as bubbles always do), making the Gold Bubble the biggest, baddest financial bubble of the 21st century.
All that will be many years away. In the meantime, as the Gold Bubble goes up, here are the top 12 rational reasons to join the gold rush:

1. The gold market is very, very small compared to the stock and bond markets. Even a small shift of capital out of these markets and into gold will be like Miracle Grow for the gold market. Any large inflow of capital into gold will have a very huge positive effect, indeed (see Figure 5.1).
2. Gold is immediately transferable into euros, giving investors a double benefit. That means if you buy gold, you are indirectly buying euros at the same time, which is great because euros will also go when our bubble economy falls. If gold goes up four times, and the euro goes up two times against the dollar, your net increase is 4 ´ 2 = 8 times. Not bad at all.
3. Gold has significant potential for being an illegal tax avoidance technique. Once the bubbles collide, tax rates in the United States and around the world will increase and incomes will decline. The combination means that interest in tax avoidance, even if illegal, will skyrocket. Holding physical gold is a very effective way to avoid taxes in the United States and around the world. We, of course, do not advocate illegal tax avoidance, but there’s no denying others will find this appealing, further boosting the demand for and price of gold.
4. The gold market is much more of a world market than U.S. stocks and bonds. Foreigners can buy U.S. stocks and bonds, but buying gold is easier. Hence, gold has a much greater world demand. For example, currently, India is the world’s biggest consumer of gold, buying 20 percent of the world’s gold, about twice as much as U.S. investors. On the other hand, India is not a large consumer of U.S. stocks and bonds. Therefore, the ease in which worldwide investors can buy gold will also heighten its appeal. Plus, gold already is a favorite for many investors in the Middle East and Asia.
5. It is very difficult to rapidly increase gold production. Gold mining will not be able to keep pace with demand for many years. When demand for gold goes up, so will the price.
6. Gold’s value increases with inflation. Inflation will be very high in the United States and also in major European and Asian nations.
7. All the world’s stock and bond markets will be under pressure. Investors will view gold as an excellent alternative.
8. If the banking system comes under severe stress, as it likely will, gold will have even further appeal.
9. Short term, the central banks of the world, which have been selling about 500 tons of gold a year since the 1999 Central Bank Gold Agreement, will likely reduce their sales. In fact, some central banks are already saying they will increase their gold reserves—in some cases, instead of buying dollars. This is no small issue given that South Africa, the world’s largest gold producer, only produces about 300 tons a year. If central banks significantly reduce gold sales, supply will drop and prices will increase.
10. Short term, South Africa’s production fell 15 percent in 2005. It isn’t clear if declines will continue at this rate, but clearly, South African production will not increase any time soon. Again, lower supply and growing demand equal higher prices.
11. As bubble fever takes over, gold will become a shining investment star in an otherwise very grim investment landscape.

Gold Power Tool 1: Buy Gold Bullion Bars and Coins

The most fun—but somewhat more expensive—way to buy gold is to buy actual bullion bars or bullion coins such as the American Eagle or the South African Krugerrand. Coins are one ounce (but are also struck in smaller one-half ounce and one-tenth ounce amounts) and are often a bit more expensive than bars, which come in 1 ounce and 10 ounce. You can buy these from local coin shops, where they are a bit more expensive per ounce than buying online. However, there are no postage or shipping insurance charges. Some states may charge sales tax or, like Maryland, may require that you buy at least $1,000 worth of gold in order to be tax exempt. The best way to find a local coin shop is to check your local yellow pages.
Buying bullion online or by phone may be the best way to buy bullion for many people. Simply type “gold bullion” into the search bar of your favorite Internet search engine and start investigating your options. We’ve had good luck with a few good vendors. Please visit our web site at www.americasbubbleeconomy.com/buygold for links to gold  vendors.
One problem with buying gold bullion is storage. You can keep it at home, but for extra security, you might want to store it in a safe deposit box. Even a small box can hold quite a lot of gold. Another problem comes when you want to sell your gold and you have to return to the store for a “sell” price that is less than the “buy” price.

Gold Power Tool 2: Buy Gold from a Gold Depository

In addition to storage problems and the hassles and cost of buying and selling physical gold, the bigger issue with buying physical gold is you miss out on the considerable advantages of buying gold on margin. For leveraging gold and for ease of ownership of physical gold, we recommend looking at depositories. For our recommendations, please visit our web site at www.americasbubbleeconomy.com/buygold for links to gold depositories.
Buying gold from a depository means you always keep direct legal ownership of the gold, although not necessarily physical possession. If the depository went bankrupt (unlikely), the gold would still be yours. As soon as you buy it, they sign legal ownership over to you and deposit it with a separate legal entity. Also, at any time, you can ask for your physical gold to be shipped to you.
Some depositories allow you to buy gold on margin, putting 30 percent down and obtaining the rest on credit. That means you can use, say $3,000, to buy up to $10,000 worth of gold, or $30,000 to buy $100,000 worth of gold. Like buying anything on margin, you have to be careful. If the price of gold falls, you will have to make up the difference in equity, plus pay some other fees. Even in an overall bull market, there can be short-lived reversals. If you overleverage, you can be caught in a downdraft in the market.
Still, buying physical gold at a reasonable margin can be a great way to grab a ticket to ride on the rising Gold Bubble.

Gold Power Tool 3: Buy Gold ETFS

Gold ETFs (Exchange Traded Funds) first came on the scene in the fall of 2005 and are now traded like stock on the New York Stock Exchange under the symbols GLD and IAU. The price of one share of a gold ETF is set at one-tenth the price of an ounce of gold. When gold goes up, gold ETFs go up, too. The advantage is that you needn’t buy large quantities of gold to get in on the gold action. Unlike stocks, each ETF share is backed by physical gold. You can even have the physical gold shipped to you if you like.
You can read more about specific ways to buys gold ETFs through links on our web site at www.americasbubbleeconomy.com/buygold.
Gold ETFs account for more than 300 tons of gold bought by investors as of early 2006. Currently, there are only about 3,500 tons of gold sold each year, worldwide, for all purposes (including jewelry, industrial, and investment), so that is a very impressive amount of gold (almost 10 percent) after only six months in existence.
Also of interest for some investors, a silver ETF and a combined silver/gold ETF are now also available.
Like physical gold, gold ETFs can also be bought on margin.

Don’t Buy Stock in Gold Mining Companies

Many investors would rather buy stock than gold, so why not buy stock in companies that mine gold? Over the past few years, gold mining stocks have generally performed better than gold itself. However, we do not recommend gold stocks. Although they may continue to out-earn gold for the next couple of years, gold will do far better than gold stocks in the long run, and when the stock market declines, it will take gold mining stocks with it.
If you wish to invest in gold stocks to try to catch some better returns than gold itself over the next couple of years, we recommend you buy a gold stock fund rather than individual gold stocks, which tend to be somewhat more volatile. As with all stock, you can make money by picking the right company at the right time, but you have to be very careful.
Now, let’s look into your second treasure chest of wealth-building power tools. 

The Gold Bubble: The Biggest, Baddest Bubble of Them All

Although gold performs spectacularly after the other bubbles pop, it is important to recognize that, like the stock market and the dollar, gold too will follow a classic up-down bubble trajectory. The coming Gold Bubble could easily last 10 or more years, and at its height, gold prices could become truly stratospheric—so high, in fact, we won’t even mention our best guess for fear of losing credibility. (Of course, as soon as the Bubblequake hits, we will certainly tell you all about it.)
The reasons that the Gold Bubble will go up (see the sidebar Why the Gold Bugs Are Right—Sort Of) are actually the same reasons the Gold Bubble will go down only in reverse. Gold will go up when the other bubbles (stock, dollar, real estate) go down because investors will want to buy something seemingly stable and profitable while their other assets look increasingly unstable and unprofitable.
In time, however, the instability of other assets will evolve to stability again, and their huge downside risks will transform back to normal upside gains. In other words, it will make sense to buy them again. When that happens, the big fat Gold Bubble (like all bubbles) will dramatically fall.
Some people say there may be a fundamental shift away from intangible assets, such as stock and bonds, whose value can easily evaporate depending on investor interest and government irresponsibility, and towards more tangible assets, like gold. This will be true for a while, perhaps even for quite a while—but not forever.
How far gold will fall depends on a couple of factors. It won’t collapse completely because there is some commercial value for jewelry and industrial uses. However, for some period after the Gold Bubble pops, there will be a huge oversupply of gold, relative to industrial and jewelry demand. That will certainly push the price into the ground. With a huge oversupply and no investment demand, the price of gold will fall well below the cost of production, probably in the range of $50 per ounce when adjusted for inflation.
At some point, many years from now, private investors and central banks will no longer hold gold, and we will have finally completed our long evolution away from metal-based money to the next stage of money, as we explain in Chapter 8.
In the meantime, we highly suggest you join us on the wonderful ride up on the big fat Gold Bubble. You won’t believe how high we’re going.

Opening the Euro Treasure Chest

As the Dollar Bubble falls, the price of the euro will rise dramatically. Euros won’t have the same appreciation potential as gold, but they will do very well during the coming Bubblequake.
Have your doubts? Well, Warren Buffet, America’s greatest living investor, who has already invested heavily in euros, can’t be wrong, can he? Well, of course, he can be wrong—in the short term. But, in the long-term, Buffet and some other big-time investors are showing some very good foresight. The value of the euro will continue to fluctuate against the dollar; but when the bough breaks and the dollar finally does fall, up go euros at least for a while.

Timing the Euro Bubble

Timing on the euro will be trickier than gold. It hasn’t shown the same solid bull market growth that gold has shown. However, the huge imbalance in foreign trade will put continuing pressure on the dollar. The U.S. Federal Reserve has and will continue to offset that by raising interest rates dramatically. But we can only raise rates for so long without damaging the economy a lot. As we have said, gold and euros are long-term investments, so now is about as good a time as any to buy. The Euro Bubble is a relatively weak bubble compare to recent bubbles. It will also be relatively short-lived, rising against the dollar until long-term exports and import equilibrate for the industrial world. It’s hard to time it perfectly, as even the best of the best, Warren Buffet, has shown.
In addition to euros, the Canadian dollar and the Japanese yen may also do well, relative to the dollar. However, the euro is much more widely traded, so we are focusing our discussion there.
There are two ways to invest in euros:

Euro Power Tool 1: Buy Euro ETFs

This is by far the easiest way to invest in euros. It is much easier than trying to play the currency futures markets, which we don’t recommend for people who aren’t skilled commodities traders. euro ETFs were introduced to the market in December 2005. Like gold ETFs, these trade like stocks on the New York Stock Exchange. Its price is set at 100 times the price of a euro in dollars. So, if the price of the euro in dollars is $1.20, each euro ETF “share” sells for $120. When the value of the dollar falls, the value of the euro (in dollar terms) goes up, as does the “share” price of the euro ETF. The big downside of owning euro ETFs is there is no interest. Euro ETFs can also be bought on margin.
You can find out more about how to buy euro ETFs on our web site at www.americasbubbleeconomy.com/buyeuros .

Euro Power Tool 2: Buy Physical Euros

You can also buy physical euros from your bank and hold them in a safe deposit box, like gold. This may have some attraction if you only want to hold a small amount or just want to see what a euro looks like, but the best way to invest in a lot of euros is through euro ETFs.
Again, the big downside of owning physical euros is there is no interest.

Euro Power Tool 3: Buy Short-Term Euro-Denominated Government Bonds

To overcome the problem of not receiving any interest on your euro ETFs or physical Euros you could alternatively invest in euro-denominated government bonds. Don’t invest in euro-denominated corporate bonds because there is a risk of loss due to bankruptcy. Stick to government bonds.
Euro-denominated government bonds are most easily and most safely purchased through euro government bond mutual funds. For suggestions of good places to purchase these Euro bond funds, please go to www.americasbubbleeconomy.com/buyeuro. 

Alternative Investments in Emerging Markets

Emerging Markets—Foreign Stocks

There has been a great deal of interest in foreign stocks lately, due to their good performance. In fact, almost all foreign markets, except Chile’s did better than the U.S. stock markets in 2005, in many cases twice as good as the United States. Japan’s stock market performed more than five times as well as the U.S. market, rising more than 50 percent in 2005.
The correction of late spring 2006 put a damper on some of the enthusiasm for these emerging markets, but clearly significant interest remains and significant amounts are held in emerging markets.  Short term, there may still be some money to be made in foreign stocks, but as in the U.S. stock market, you are playing a risky game. Plenty has been written on how best to invest in foreign markets, which we will not repeat here. From our point of view, as the bubbles start to pop, foreign markets are not good places to protect your money. Unlike the euro, which will go up dramatically as the dollar falls, European and Asian stocks will fall dramatically, along with every other stock market around the world during the Bubblequake.
When the Bubbles pop, the old adage will remain true with a vengeance: When America catches a cold, the world gets pneumonia. 

Emerging Markets—Real Estate

Although interest in emerging markets has focused primarily on foreign stock markets, foreign real estate is also worth a brief mention.  Real estate in some places such as India and China is currently experiencing a boom due to enormous growth in their economies. As incomes rise, as growing number of people will seek more expensive housing, driving up the price of existing housing and boosting home building. As we have seen in the U.S., a housing boom creates many new jobs, further stimulating the economy.
However, as we have said, when the bubbles pop, China and India will trade in their booming economies for a deep recession.  Hence, like their stock markets, and perhaps even more so, real estate values in these countries will dramatically decline.  Although there may be some money to be made from the boom before the bubbles burst, timing will be tricky. Therefore, in general, we find foreign real estate an good emerging market to avoid from now on.   

Betting Against the Stock Market

The stock market is in a bubble and heading for a fall. Many, many stock investors will get hurt, and there’s no point in joining them. Either get out of the market now, or if you are experienced and confident enough, you can try your hand at playing with fire: betting against the market.
Most stock holders get happy when stock prices rise. But seasoned investors know they can make money in any stock market, on its way up or on its way down. There are three tools for extracting profit from a falling stock market:

• Buying bear funds
• Placing put options
• Shorting stocks

The least risky way to bet against the market is to buy bear market mutual funds. These funds are often designed with varying degrees of emphasis on a down market. Some funds may be designed to track the market’s decline. Other funds may be more aggressive and try to double the market’s decline. It’s like investing in income vs. aggressive growth mutual funds, except that it’s inverted. For suggestions of good places to purchase bear market mutual funds, please go to www.americasbubbleeconomy.com/bearfunds.
Another way to bet against the market that could produce higher returns, but could also be much more volatile, is to buy put options on stock market indexes such as the Standard & Poor’s 500 index. The S&P index is known as the Spider—trading symbol is SPDR. Being based on the S&P 500, it is a broad market index that tracks the market as a whole. Such indexes are traded like stock and, as such, you can buy a put option against them. Of course, options by their nature are volatile and require a higher level of skill than most investors have. However, they also offer extremely high returns—like buying stocks on steroids. Your broker will have to qualify your account to buy options. Timing is key. Don’t start until the market is beginning to burst. For more information on timing and more specifics on playing the options market, please go to www.americasbubbleeconomy.com/putoptions.
Just as you can buy put options on indexes or even individual stocks, you can also short stocks. Clearly, this strategy will do well in a down market, but individual stocks are riskier than stock indexes. However, options are also more volatile and more difficult to manage. Hence, there may be a role for the more sophisticated investor to short stocks in industries that are likely to decline most significantly, such as capital goods. Again, timing is key. For more information on and more specifics on timing and on shorting stocks, please go to http://www.americasbubbleeconomy.com/shortstock. 

When the Bubbles Pop, the Stock Market Will Fall—So Why Will Stock Prices Skyrocket?

One of the many strange aspects of the post-bubble economy will be adjusting to the new price of everything, including stocks. After the stock market dramatically falls in real terms, high inflation will make the nominal price of stocks soar. Finally, Dow 36,000 will actually become a reality! Of course, a pack of chewing gum will be selling for $7 by then, so don’t get too excited.

A Safe Place to Stash Your Cash

In the short term, money markets are a fine place to keep your cash and maximize your returns. However, as we get closer to the Bubblequake, the risk of corporate bond and bank CD defaults increase, so we suggest eventually moving to short-term government debt mutual funds.
As mentioned before, never put any of your money in long-term bonds—the small premium is just not worth the risk. Keep an eye on our web site for more formation on when to change your cash from money markets to short-term government debt. You can also sign up at the web site to receive e-mail alerts.