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Not Investing in Gold is Insanity
By Al Korelin

What a way to spend the first couple of hours of my day! Getting up and going downstairs to get my essential cup of coffee and newspaper and then going from mildly unhappy because I had to get up to truly frightened, because I read the local newspaper.

The paper, which normally deals with critical issues like the progress of the local professional basketball team, had the following three front-page articles: “High oil prices here to stay, say executives”, Expect jolt in utility bills, too” and “Double-digit declines sap investor optimism”.

The conventional press is starting to catch on - yes the emperor has no clothes.

Let’s examine the implications on consumers of these articles and how, I believe, their thinking will change.

Oil prices in the area of $130 per barrel or more have the capacity to cripple businesses. Will prices stay at that level for a while? Here is what the Associated Press had to say on July first, “As oil set a new record, top industry executives and a senior EU official on Monday urged the world to pull together in the face of skyrocketing energy prices, while acknowledging that – even if it does – costly crude is here to stay for years.”

Stop and think about the fall out. Higher petroleum costs will force virtually all businesses to raise their prices, consumers will suffer across the board, the value of the U.S. dollar will continue to fall and, even though energy prices are not included in the core inflation numbers, people will know that real inflation is going up, up and away.

Regarding utility bills, Ted Sickinger of The Oregonian newspaper wrote, also on July first, “Regional utilities face rapidly escalating fuel prices and, in some cases, project wide gaps between their power supply and customer demand. As they purchase expensive wholesale electricity to meet that demand, pay inflated costs to build power plants and invest heavily to meet renewable energy and global warming mandates, consumers can expect an extended series of rate increases, experts say.”

So what about the effects of utility rate increases? Well, how about folks having less money to spend in the future on goods and services which will then cost them more money because of the need for manufacturers and service providers to pass on their increased fuel costs to them? Pretty picture isn’t it.

The last article I referenced above is “Double-digit declines sap investor optimism”. In this article the reporters commented on U.S. market activity during the first half of 2008, “The major indexes closed out the first six months of 2008 with double-digit declines, leaving them perilously close to the levels of a bear market.......The first half was the worst for the Dow Jones industrials since 1970, when the nation fell into a recession.”

Okay, let’s talk about what drives financial markets – investor confidence.

When people are assured that economic conditions are positive they invest in the conventional markets and, conversely, when people think the opposite they invest in precious metals and stocks associated with companies that are in those industries.

Look what happened in the late 1970’s and early 1980’s when the prices of gold and silver soared to unheard of highs and the prices of public companies in these sectors did the same.

Well, I maintain that you “ain’t seen nothing yet”.

The conditions today are much more conducive to prices appreciating in both the commodity sector and the stock market sector than they were about forty years ago.

Rapidly escalating oil prices, utility bills and the declining conventional stock market are only three examples. When you throw in additional considerations like the housing collapse, the huge rise in the amount of personal debt, the escalating tensions in the Middle East and many others, well then, the gravity of the situation becomes quite apparent.

And, this is just the tip of the iceberg. As a result, Mr. and Mrs. Average America are going to become very aware of what listeners of the Korelin Economics Report radio program have been hearing since 1990. That is, “Stop spending money you don’t have and protect yourself and your families by putting a portion of your money into gold and silver or gold and silver related investments. For thousands of years, this is what smart people have done in times of crisis.”

Take a listen to our radio program and hear what our group of experts have to say on this subject every week. If you don’t live in one of the hundred or so markets in which the show airs, listen on the Internet at www.kereport.com.

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