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PROTECT YOURSELF &IN THE NEXT GLOBAL FINANCIAL M

Just about a year ago, I published The Economic Storm: Understand It, Survive It and

Make Money When It Passes . I focused much of that book on the reasons for the

financial collapse of 2008. I felt it important for anyone who trades or invests to

understand clearly how we got to where we were, as understanding that would help in

making future decisions about where to put ones hard-earned money. As well, though, I

also focused on identifying signs that would point to an economic recovery from the

recession that began in December 2007, and I recommended some general areas for

investing when the recovery began. Those signs arrived and they did point to a recovery,

but some of those same signs have shown some volatility, which has led some to

conclude we are headed for a double-dip recession.

Thinking we are headed toward a double-dip recession is understandable, as the

recession lingers on with unemployment at 9-plus percent, the housing market banging

around the bottom of one its worst downturns ever, and both consumer spending andconsumer confidence unable to stage a strong comeback. True, manufacturing,

corporate earnings, and small but positive gains in employment are forming the edges of

a nascent economic recovery, but without consumer spending and a decent housing

recovery, it might be a while before the key factor in any economic recovery

employment begins to rebound significantly. Thus, the words I wrote last year still

apply today, only the context is different. We are in much better shape economically.

Accept the possibility that the near-to-mid-termeconomic outlook for 2009 into 2010 is weak with

deepening problems in the short term. Accept that the

stock market will continue in a negative or volatile


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pattern during that near-to-mid-term future while it

continues to search for a bottom Accept the reality

that we have serious problems and will have for some

time.

Yes, we still have some economic hurdles in front of us, but, if nothing else, the baseline

fundamentals of our economy, as well as the baseline fundamentals of the global

economy, point clearly to an economic recovery. When that recovery will sustain itself is

not clear, yet, but we will find out soon as the monetary stimulus from all governments

is rapidly coming to a close. And this brings me to the focus of this Special Report.

Even though the economic picture has improved dramatically, that has come at a steep

price huge deficit spending from all the major governments, except China. Fiscally,

then, the picture is not so pretty, which means that any economic recovery is subject to

how we (the global economic powers) work our way out of the potentially dangerous

fiscal issues facing us today. This Special Report is a follow up to the book I wrote last

year, as a lot has happened in the world since, and the recovery is not as straightforward

as my book suggested it would be. I thought it might be helpful if we took a look at

where we are and where we might be headed.

Where Exactly Are We?

Arguably (and it is argued quite loudly and strongly), deficit spending was a necessary

evil to ward off a major depression on a global scale. Be that as it may, the argument is

purely academic now, as we are where we are, and in this place, we investors and traders

have to look squarely at the reality of the fiscal issues facing both Europe and the UnitedStates.


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Current Economic Environment

As I stated, the global economy is on the mend, but that recovery could be derailed

because of fiscal policies employed to save the patient. Europe and the U.S. are facing

some serious fiscal issues, and one is hard pressed to suggest blithely that we will easily

and cleanly extricate ourselves from the potential ramifications of those issues. Clearly,

the negative impact is coming. The question is not if, but to what degree that impact

will affect the economic recovery and the markets that track the economy, and since my

focus is how to help investors and traders navigate these turbulent waters, this is the

context in which I will discuss these issues.

Market Uncertainty

It is interesting to note that the market recovery began in March 2009, some nine

months prior to the emergence of the green shoots Ben Bernanke has referenced time

and again. This holds true to form, as the market is a leading indicator for the economy.

From March 2009 to January 2010, the market steadily regained much of its losses

from 2008 and 2009. That upward line, however, began to waver up and down in

February as uncertainty about both the global economic recovery and the impact of

global fiscal issues began to weigh on the market. Market volatility reemerged, and in

May, that volatility dropped the indices to lows for 2010. Note the chart for the DIJA

below.

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The uncertainty that has returned will not go away anytime soon, which will more than

likely exacerbate the volatility that has returned to the market as well. So, if we are toassume the market will lead the economy, and it is uncertain if the global economy will

be able to sustain its recovery, then we must consider that uncertainty will drive the

market for the next 6-9 months, at least. This, of course, means volatility will play a

major role in any investing or trading we do. The following statistic fairly sums up the

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uncertainty prevalent in the business world, which directly relates to the uncertainty in

the markets. More or less, American corporations have some 1.8 trillion dollars in

unspent capital sitting on the books. This alone, if unleashed on the economy, would

provide a tremendous stimulus to the faltering economic recovery.

Market Volatility

Even though the fiscal issues referenced earlier are a potential danger to the global

economic recovery, one cannot ignore that we have come a long way since the recession

began in December 2007. In fact, though some key economic indicators backtracked in

May to some degree (housing, retail sales, and employment), others are hanging on to

gains, and do not forget, the invisible hand of government is still on the tiller with low

interest rates keeping liquidity in the economy. As well, the specter of inflation has yet

to show its face, which will help keep interest rates low for the foreseeable future.

Bottom line? Expect volatility to remain in the market for some time to come.

The Global Fiscal Issues

The piper has called in the IOUs. The European fiscal situation is clear evidence that it is

time to pay up, or not, as the case may yet turn out to be. Default is on the lips of those

who predict such things. Ripple effect is the term those who peddle fear like to bandy

about. I do not know how the European issue will ultimately play out, but of one thing I

am sure there are serious fiscal issues that threaten the global economic recovery and,

by extension, the market.

The Euro Zone

The one issue that launched the concerns we have today is the combined sovereign debt

problems of Portugal, Ireland, Italy, Greece, and Spain (PIIGS) in the Euro zone. This is

the origin of the default language out there. I, for one, do not believe default for any

country in the group is realistic, but now that the press is on, serious impairment of the

Euro zone economic recovery (and by extension, the euro currency) is very realistic. If

we take default off the table, then the only alternative left to fix the problem is to pay off


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the debt, and the only way that can happen is if the countries adopt serious austerity

measures in other words, cut spending and raise taxes. The cure itself is a virus that

just might spread into non-PIIGS European countries, which could cause a relapse for

the somewhat now anemic global economic recovery. In fact, we are already seeing the

spread of the virus as Germany, France, and England have announced they too will

severely cut spending and raise taxes. This has raised voices of protest in the U.S.

government, as this is not a course it sees as viable, at least not yet. The worry is, as I

have stated, severe measures to curb deficit spending and debt will undermine both the

global and U.S. economic recovery. It will choke off both consumer and business

spending.

The ripple effect here is the impact on the euro, immediately, and, longer term, on the

U.S. dollar, as the U.S. government is still not making any serious movement toward the

same type of austerity measures, although both spending cuts and higher taxes are

imminent if the U.S gets serious about curbing deficits and reducing debt. In the near

term, the euro should hold on as the European countries begin to tackle their debt

problems, and in the long term, the dollar will suffer if the U.S. does not follow suit. To

be sure, though, if the biggies in Europe do follow through on their rhetoric to

implement severe austerity measures, expect this will dampen the European economic

recovery, which will ripple through to the U.S. economic recovery. In reality, this is allgood, if it happens, as the world (and the U.S.) cannot have solid economic growth

without reasonable fiscal policies. It is tough medicine, but we all have to swallow it.

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The Euro

The recent dramatic decline of the euro is evidence of what can happen suddenly if

traders and investors think the Euro zone is failing (see chart below). Ironically, if the

economic powerhouses adopt severe policies to curb the debt, the actuality of this in theshort term will strengthen the euro, but as the policies take effect, it is likely the euro

will suffer as the economic recovery suffers. Thus, on our current path, assuming all

things in motion stay in motion, the next 6-9 months should see high volatility in the

euro, which makes for a trading opportunity.


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The U.S. Dollar

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If the euro is volatile, expect the same for the U.S. dollar. However, if the U.S.

government does not move toward reasonable fiscal policies soon, it is possible the U.S.

dollar could suffer both short and long term. Now, if the U.S. government does begin

making serious movement toward addressing our own fiscal problems, it is likely the

dollar will strengthen, even in the fallout of the dampened economic growth. It is still,and will remain for some time, the reserve currency of the world, and, if we adopt

corrective fiscal policies as Europe is threatening to do, it will become one true safe

haven to which money will go in hard economic times.
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Another is the market for U.S Treasury Bonds. It is painfully apparent that investors

would rather earn little money in more secure investments than take a chance on

improving their return on riskier investments, such as the U.S. equities market. I will

look at this in a moment.

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The U.S.

The Tax and Spending Choice

The U.S. government will surely make noise about addressing our fiscal problemsthroughout the remainder of this year, but the likelihood of Congress passing any

measure to either cut spending or raise taxes in an election year is close to nil. This

position, however, is only good for another six months. In January 2011, the Bush tax

cuts enacted in 2003 are set to expire. Congress will then face a choice let the tax cuts

expire, which means a hike in taxes, reinstate them and face the dismay of middle-class

voters who believe the wealthy are not paying their fair share, or let some provisions

expire and others go forward. Given the propensity of Congress to try appeasing all, the

most likely choice is the latter, which leaves more uncertainty in the market which will

stay and which will go?

The choices made about the Bush tax cuts could have far-reaching effects on the market.

The problem we face now is that no one knows which taxes will go up and which will

not. This is part of the market uncertainty discussed earlier, and it is a contributor to

the volatility we now see in the market. The conundrum Congress faces is that serious

pressure is mounting to do something about the spiraling deficit and mounting debt.

Given historical precedence on cutting spending, it is likely Congress will lean more

heavily on raising revenue than cutting the budget. On the other hand, given the

cooperation of both political parties in the 1990s that resulted in budget surpluses and a

projected disappearance of the debt, the possibility, no matter how slight, of Congress

enacting solid spending cuts along with raising taxes is real.

The Debt Issues of State and Local Governments

The issues of taxes and over-spending are of tremendous importance in the long term.

Of more immediate concern, however, is the pressure coming from the debt problems at

the state and local levels within the U.S. At best, these issues will require huge cuts to

state and local budget programs, meaning hundreds of thousands more added to the


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unemployment rolls. At worst, these issues could lead to default. If the latter occurs, we

could see not just a dampening of the economic recovery, but a serious lapse back into

economic sickness. This brings us back to the ripple syndrome. What happens to the

U.S. dollar, for example, if the 8 th largest economy in the world (California) defaults?

When you look at it this way, it makes the PIIGS issue seem somewhat small.

Unfunded Liabilities

No one talks about this much, but both the federal and state governments are facing an

impending catastrophe with unfunded liabilities, such as Medicare, Social Security, and

the state-infused, healthcare-rich retirement programs. On a federal level, this problem

is further out, but on a state level, the issue is right now and menacing. If any state

defaults on its debt, what happens to the hefty, not-fully funded retirement funds that

every state provides? The following excerpt from an article in the Los Angeles Times

(April 2010) tells a sobering story.

The state of California's real unfunded pension debt clocks in at more than $500

billion, nearly eight times greater than officially reported. To put that number in

perspective, it's almost seven times greater than all the outstanding voter-approved

state general obligation bonds in California.

Why should Californians care? Because this year's unfunded pension liability is next

year's budget cut to important programs. For a glimpse of California's budgetary

future, look no further than the $5.5 billion diverted this year from higher education,

transit, parks and other programs in order to pay just a tiny bit toward current

unfunded pension and healthcare promises. That figure is set to triple within 10 years

and -- absent reform -- to continue to grow, crowding out funding for many programs

vital to the overwhelming majority of Californians.

Again, if this domino falls, what happens to the line of dominoes supporting the

economic recovery?


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Hyper-Inflation

Last year when the U.S. government employed quantitative easing (printing money to

buy our own bonds), the talking heads predicted that by now, we would see hyper-

inflation. Quantitative easing spelled doom for both consumers and investors alike.

After all, if the economic recovery took off, this policy would produce inflation upon

inflation. Images of people pushing wheelbarrows full of worthless money in pre-WWII

Germany spilled out. How would we survive the coming inflationary spiral?

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The reality of people pushing wheelbarrows full of worthless money is hyperbolic, but

the issue of enhanced inflation is not. In fact, it is likely, but, like the ramifications from

the sovereign debt issues in Europe, the question is not if, but to what degree? Keep in

mind that currently, in the midst of a global economic upturn, inflation has not yet

reared its ugly head. Keep in mind that energy costs (oil specifically) hit resistance some

time ago and have remained somewhat range-bound on the chart below ($70-$80 per

barrel).


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The Flight to Safety (Private Bonds and U.S. Treasury Bonds)

If you recall, last March and April, the concern for rising interest rates seemed

somewhat irrational. When the 10-year Treasury note hit 4%, a form of panic ensued. Yes, the U.S. Treasury was borrowing more, but the point everyone missed in the

discussion was that everyone else was borrowing less. Business and personal borrowing

had slowed to a crawl. A collapse in private borrowing existed, yet the demand for

government and private bonds remained strong. Still, today, bond demand is increasing

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and the supply is falling. This reality points to one important thing strong demand and

low supply equals low yields, possibly for a long time. Is this a bubble waiting to burst?

Perhaps. Then again, it could be one salient reason the market goes higher in the near

term. Big investment firms and large hedge funds always feel pressure to produce better

returns, so out of bonds they come and into equities they just might go. Then again,

given the reality of our global fiscal issues, the big boys and girls might continue the

flight to safety into low-yield bonds, both public and private, even though the supply is

low, which points back to low yields and low interest rates for some time to come.

Realistically, expect interest rates to remain reasonably range-bound into the near

future, certainly.

Where Are We Going?One might conclude from what I have written that bad times are imminently coming.

This is not my intention. Yes, it is true that I have pointed out some serious potential

issues coming down the road, some sooner rather than later, but no, I am not suggesting

we are doomed. Rather, I am saying that we all need to be aware of the potential of the

issues out there so we can adjust our investment and trading strategies as these issuesmove closer either to fruition or closer to resolution. Yes, all of the fiscal issues

discussed are resolvable. The $64,000 dollar question is: Can Congress and the Federal

Reserve follow the Europeans and actually do what is necessary and can each entity do it

in a manner that does not over-burden or under-support the fundamentals of economic

growth? Aside from the answer to this question, one thing is perfectly clear to anyone

who has an eye on the global economic/fiscal landscape: We are moving into an era of

constrained resources.

The Era of Constrained Resources

Certainly, the Great Recession combined with the financial collapse of 2008 has

opened our eyes to the excesses on both sides of the ideological economic spectrum, the


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excesses that have brought us to this place of decision. We have seen the results of

loosening regulations on business (think housing, oil, and financial) and the willingness

of governments to spend imprudently is now on display for the world to see (think

PIIGS and California). As money is a resource for everyone -- individuals, business,

and government alike -- we should now look at it in this light. It is time to understand

that, like any resource or commodity, an overabundance of supply means a devaluation

of that resource or commodity. In the case of money, governments can simply make

more of it when they need to, which is the essence of the fiscal problems coming at us. If

this is not disconcerting enough, the bigger issue we have is that because of leveraging

and borrowing ease, individuals, businesses, and governments can spend more money

then the value of the assets they actually have on their balance sheets. The simple truth

of this practice is this: Owing more than your net worth means you have no worth.

Now, borrowing and leveraging are healthy things in an economy, but, when either

practice denigrates value to little or nothing, it is a problem. It appears the global

economic powers are waking up to this fact. We should expect that the major economic

powers will embrace this and enact policies that bring us back to fiscal solvency. If you

believe otherwise, then put your money under a mattress because the global economy is

at a fiscal tipping point. If we continue on this path, at some point, the Chinese will stop

supporting the excesses of Europe and the U.S. It will stop not because it decidesenough is enough; it will stop because it no longer has the ability to support the excesses

of Europe and the U.S. Even the surplus cash of the Chinese is not enough to continue

down this road much longer.

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Resources Other Than Money

All economies are based on the amount of resources each has access to. Japan has

fought two world wars forcefully trying to get more access to resources. Today, it is

wealthy enough (at least for the moment) to buy what it needs. China, India, the U.S.,and Europe can do so as well, which leads to one other issue coming down the line. This

one is not about fiscal insolvency; it is about supply and demand, the heart of any

market-based economy. Specifically, it is about oil and coal, the two resources we

depend on more than any other to meet our global energy needs.

The demand for both oil and coal is on the rise. The U.S, and Europe have long

dominated the demand side of this, but now the emerging economies of the world,

particularly China and India (the two most populous nations on the planet), are staking

their claims to both oil and coal. Despite what many might argue, it is difficult to

imagine ramping up production for either of these commodities more than what is going

on now. For example, in the Gulf of Mexico alone, over 6,000 oil platforms are

currently pumping oil to meet the demand. Now add to that the tens of thousands of

wells all over the world on land and sea (think Saudi Arabia, Russia, and Iran), and you

have a staggering amount of production. The same is true for coal. The problem lies on

the future supply side, as well as the current and future demand side.

The global population is growing at an alarming rate, which means we will need more

and more oil and coal to satisfy the demand for those resources. Even though the price

of both oil and coal has stabilized in a range for now, this cannot last. In the short term

(1-2 years), the cost of each will rise dramatically as demand increases and supply

remains flat or lessens (if we fall back into recession, the demand will lessen, of course).

This, like the pending fiscal issues discussed earlier, could derail the developing

economic recovery. This issue has the power to ignite inflation, force consumers to cut back even more on spending, and could force business to cut reinvestment and raise

prices because of rising costs. In the long term, reliance on both as primary energy

sources is unsustainable. The demand for each will ultimately outstrip the supply. No

one can argue differently.


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The answer to this pending disaster is that the world needs to bite the bullet and make

the leap in transforming energy dependence from fossil fuels to renewable and clean

resources. Slowly, inch by inch this is happening. The bad news is that U.S. is far

behind China and Europe in the transformation, and other emerging economies of the

world are moving right past dependence on fossil fuels into alternative sources of

energy. One bright example is Brazil.

In The End

The one thing that has to happen on a global scale -- and it appears that those in power

are now waking up to this reality -- is that a paradigm shift on both fiscal policy and

energy production needs to happen, and it needs to happen quickly. If political will

cannot produce this shift in thinking, then who knows what might happen to get us

where we need to go. Whatever that is, though, it will not be pretty, and the effects will

last for generations to come. Given what is known about human history, and what is

known about the histories of both Europe and the U.S., specifically economic history, it

is clear to me we will find a way to solve all of these issues. The solutions might come

more slowly than most would like, but they will come. Hopefully, they will come before

we find ourselves mired in an economic mud hole that will require years to extricate

ourselves.

Look on the Bright Side

For every problem, there exists a solution. We just have to find it and implement it. In

our current predicament, I am certain we will resolve our issues before they take us too

far down a dark road. One reason for my optimism is our historical ability as a nation torise up in a crisis and make whatever is plaguing us go away. It is the indomitable

American spirit that has saved us before and will save us again.


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To emphasize this, I give you this chart from my book. This chart graphs all U.S.

recession since 1931, and it is the historical precedence for my belief in America and her

ability to get back on not just the right path, but a path that leads to unprecedented

prosperity. You should note that every recovery has kept the line moving upward. In

other words, we have come out of every recession stronger and more prosperous. I see

no reason why this will not happen again.

You might ask, then, why discuss the potential issues that could cause great economic

harm, if you believe we will not see their potential realized? My answer to that is

twofold. First, I am not suggesting some, if not all, of the issues will not come tofruition. Some or all might derail the economic recovery and put us on a dark economic

path. I am simply saying that we have been here before and we not only survived but we

prospered. Second, let the following quote from my book answer the question.

understand that vigilance and defensive

positioning are keys to survival and success in the

investing and trading world.

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This Special Report is focused on making you aware, so you can be vigilant and

defensive in your trading and investment strategies. As well, pointing out the potential

damaging issues also brings to light opportunities -- opportunities to make money

trading and investing. To find those opportunities, one has to know where to look. My

philosophy is to analyze the illness for knowledge, but look to the cure to make money.

In the cures for the fiscal and energy issues discussed, opportunities abound. Before

generally discussing those, though, I want to give you some words from my father Lou

Mendelsohn, a figure of repute in the trading world, and, as it should be, a successful

trader and investor

Traders stay nimble. Continually refine your

strategies. Keep abreast of whats going on in theturbulent markets, as asset bubbles inflate and burst.

(Is gold really the next real currency or is it just a

temporary asset bubble that will suck unsuspecting

traders in near the top?)

His words speak truth. The times call for awareness and agility in our strategies, and,

perhaps most important, we need to select our opportunities not on what the herd isdoing but, rather, select our opportunities based on what we know.

Investment/Trading Opportunities

Financial Sector

The first opportunity to look at is the global financial sector. Here is an opportunity just

beginning to bloom and it is the U.S. and European financial regulation just now coming

into play that will jumpstart it. Just like a misbehaving child, some form of discipline is

needed to get the child in line. The global financial sector has misbehaved, and the

regulations just passed in Congress and in the governing bodies in Europe will exert

some badly needed discipline. Yes, some might argue (as they will) that the regulations


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will kill the profitability of banking. In some cases, it will certainly reduce the profit

potential of some banking enterprises, but in the end, regulations will curb excess

behavior, to some degree. More important than whether the regulations are too strong

or too weak is the certainty the new regulations bring to the market. Many in the

financial industry will tell you: Uncertainty is worse than rules. Just tell us what the

rules are, and we will adapt.

As well, with reduced risk (which is what the new regulations purport to do) comes

confidence -- confidence to invest in what once were highly risky investments. Keep in

mind as well that business, government, and individuals have entered into an era of

constrained resources. Or, another way to express it, a period of deleveraging from

excesses of last three decades. Cleaning up balance sheets, reducing debt, building cash

reserves all contribute to a healthy and expanding financial sector, and a healthy and

expanding financial sector is the lifeblood of a growing economy.

Forex

Currency trading always provides opportunity, as money is always on the move.

Obviously, we will see more near-term opportunity (volatility) with the euro and the

U.S. dollar because of the uncertainty about how global governments will respond to the

fiscal issues discussed. This trade is a gimme. What about the Canadian dollar

though? Look at this excerpt from a recent CBS News report, and then look at the

VantagePoint chart below that. Clearly, that money is on the move.

The 20 world leaders at an economic summit in

Toronto next weekend will find themselves in a

country that has avoided a banking crisis where

others have floundered, and whose economy grew at

a 6.1 percent annual rate in the first three months of

this year. The housing market is hot and three-


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quarters of the 400,000 jobs lost during the recession

have been recovered.



that are up to 86% accurate 1-800-732-5407 If you would rather have the recent forecasts sent to you, please go here

Technology

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If the major global governments can keep us off the dark, economic path, then expect a

strong and robust economic global recovery. As always, in this, the Age of Technology ,

technology will lead the way. For example, synergistic movement is happening in the

telecommunications realm, specifically the Internet. Bandwidth depletion coupled with

the rise in downloading applications (think I-phone and I-pad) is leading us to a new

age of innovation in networking hardware/software. Cisco, for example, released a new

router last March that it says will forever change the Internet. Putting aside the


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hyperbole of that, the fact is that the router is faster than anything ever produced, and

since routers are the traffic cop of the Internet, fast allows for bandwidth to be utilized

more efficiently, which addresses the problem of bandwidth depletion. How fast is the

new router? Here is a quote from the web site Gadget Lab .

About a million times faster than your typical cable

modem (literally). Or, fast enough to allow every

man, woman, and child in China to make a video call

at the same time.

Biotechnology is another opportunity waiting out there, if the global economic recovery

gets into full swing. The quote below from the international Organization for EconomicCo-operation and Development points to where we are headed.

Scientific advances in biotechnology are ushering in a

new era of medicine: targeted therapies and

personalized medicine are coming of age. Traditional

medicine manages a disease through standard

treatments, without taking account of existingvariability between individuals or groups of

population. Personalized medicine, in contrast,

adapts treatments to the profile of each individual.

This revolution in biomedicine is due, in large part, to

the discovery of biomarkers.

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Energy

So much is happening technologically, in every realm, but one can reasonably expect

that more will happen sooner in the energy sector than just about anywhere else.

Simply look to the utter ineptitude of the oil industry in the most recent, horrific Gulf of Mexico oil spill. It is clear to anyone without blinders on that the oil industry has spent

little to nothing on technology to repair a leak a mile below the surface of the ocean, and

to clean up the mess that leak has wrought. Junk shot, top kill, and every other hopeful

thing thrown at the leak has not worked. Expect a near-term boom in this area, as well

as in the area of oil-spill cleanup. The oil industry cannot afford another BP style leak,

so expect it to move quickly on updating the 1970s oriented technological tools it now

relies on in these disasters.

Aside from the immediacy of the above, a sense of urgency also exists in developing

alternative energy sources. Billions upon billions of dollars are moving into the

innovation and development of new energy sources. The most immediate are solar and

wind, but natural gas, biomass fuels, algae-based fuels, and geothermal energy are

moving up fast. The investment keys here are hardware and infrastructure. No matter

the fuel, we will always need a way to either capture it or manufacture it and then deliver

it. This opportunity is both near term and long term, as depicted in the excerpt below from an article on the Brookings web site.

Probably the most promising application of

renewable sources lies in generating electric power.

The four systems most commonly put into the

renewables rubric are variants of solar energy

(thermal or photovoltaic applications), biomass-derived fuels, geothermal resources, and wind power.


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24

Conclusion

As a nation, we have always faced crises -- economic, fiscal, natural, and man-made -- but not one of those catastrophic crises (world wars, threat of nuclear annihilation,

economic depression, huge government debt, or terrorism, for example) has kept us

from ultimately moving forward to greater prosperity. Granted, what we are now facing

on the fiscal and energy fronts could easily temporarily derail or postpone for many

years a sustainable economic recovery. Then again, the major global powers as a unit

may simply do what is necessary to work our way out of massive deficit spending and

hugely destructive debt. This alone potentially could push back any economic recovery

for some time. From a market perspective, I believe we should expect in the near term

what I said we should expect in the near term last year.

The stock market dropped so far in 2008-2009 that a

full recovery will take some time, and it will be

bumpy. In the short term, it will rise fast to a point,

and then it will recede again. This cycle will repeat,

and over time, the frequency and amplitude of the ups

and downs will lessen. In the long-term, it will

gradually rise to its former height, and as the new

economy kicks in, excitement and optimism will drive

the market higher.

Nevertheless, in the near and long term, trading and investment opportunities abound.

Thinking back to my dads advice, stay nimble, stay aware, refine your strategies, and

dont get caught up with the herd, as this will probably get you trampled. Keep your eye

on what the major governments say and do, and then try to stay one step ahead with


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your money decisions. Will they turn to gold as an answer? Or will the Chinese yuan

become the new major currency?





25

Finally, no wizard will magically lead you to the best position for your money in these

uncertain times. Only you can do that, but to do that well, you need to be at the top of

your game, which means knowing all that you can know, understanding what you know,

and comprehending how what you know and understand fits into the context of the


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moment. You need to make good choices. So, in that light, I have excerpted one more

quote from my book, The Economic Storm.

The point is that you should rely on your own abilities

to find the investments that work for you, in your

time frame, and within your pre-defined strategy.

Yes, you should listen to experts, but remember,

they are just people who are investing, too. As I have

stated before, if you do your homework, understand

the economics, and practice safe investing, you

probably know as much as they do about how toinvest wisely. Their advice should be just another

piece in your overall pursuit of information that will

make you a better investor.

Even though I have laid out potential hazards we all face, I am optimistic about our

near-term and long-term future. Even if you are not as optimistic as I am, you should,

nevertheless, pay attention to where we are now and where we might be headed fiscally,

economically, and on the energy front.

26

Keep in mind, your money needs you to be on top of a world seemingly spinning out of

control at times. And if you believe I am crazy and that the market is doomed from our

fiscal excesses, gold somewhere around $1,250 an ounce awaits you, or short-term

Treasuries paying close to nothing are calling you. If neither of these appeal to you, then

your mattress will work, assuming you still have one. Otherwise, get to work.


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