Servias Ministries Blog

In a speech earlier this month, President Obama called the current situation “an urgent and growing crisis”.  This crisis did not begin in the last six months.  Anyone with access to the consumer statistics in adjustable rate mortgage payment resets, overall debt as a percentage of income, and personal savings rates, knew that we were headed for a train wreck.  Hmmm!  The Federal Reserve had all of that information and more.  I wonder why they didn’t send us the early warning signal? Recession is a contraction in spending but a Depression is a de-leveraging of debt.  The globe is in a depression, not a recession.  Those that were caught with an exorbitant amount of debt are in for a rough ride and those with no debt but are relying on bank interest are also in for a rough ride… I guess everybody will have some challenging times.  However, there will be winners in this down cycle and those who can break away from the paradigm of the last 30 years will fare better than those who are holding on to the current mindset.Baby boomers are starting to downsize and smaller & simpler is better.  As we all know, the debtor is servant to the lender and we will now see how that reality plays out during this severe contraction.  When lenders move into survival mode, they rely on that “fine print” found in every contract.  That fine print is put there as a protection factor to guard against unintended consequences that are beyond their control.  Only Our Heavenly Father knows the future thus how can we create a contract for 30 years into the future without some safeguards?  Those whot saw the trends of the mortgage bubble knew there would be a day of reckoning and that day has arrived.  Baby boomers are shedding their McMansions for smaller, more affordable homes.  Why pay exorbitant taxes, insurance, heating, cooling, and maintenance for a house that you can get lost in?  What is the right size house for you?  Get on your knees and ask THE LORD GOD ALMIGHTY to direct you to the right house.  That is exactly what we did.  When you do that, your home becomes part of your ministry to others.Poland is on the brink of collapse as are other Eastern European countries.  The interconnections of global financial system are complex and far reaching thus requiring us to pay attention to the exposure of other countries besides our own.  The growing complexity of the current system ultimately will break, for that is the nature of complexity, it’s a monster!  When everything is in synch, life is a bowl of cherries, but when one aspect of the system fails, the domino effect results in a crash.  A $5 internal battery can cause a computer system to fail.  With the high degree of leveraging that has taken place, the house of cards is teetering at the brink of collapse.I expect a rise in commodity prices and it will possibly occur from two separate and distinct events.  First, the depreciation of the U.S. Dollar will cause prices to increase in terms of the Dollar.  Secondly, there will be a restriction of commodities due to the developing countries increasing their relative use of commodities.  China must grow or suffer civil unrest.  It has a large investment in U.S. Dollar holdings which provides a means to continue building infrastructure at the expense of the value of the USD.  The U.S. has lost the trust of other countries as the commercial monetary base of exchange.  I expect other countries to slowly disconnect from their reliance on the U.S. Dollar which will also send the value down. Demand destruction of oil is being offset quickly by supply destruction.  However, people just don’t understand that this supply destruction will come back to haunt us if demand picks up.  We saw the same supply destruction occur 20 years ago and the domestic oil industry is half the size it was.  Unused rigs will rust and the mass training of new workers has stopped.  This is not good for the energy industry or the rest of the country.  Alternative sources of energy cannot make up the difference in the short run.  This sets the stage for a dramatic increase in oil prices in the near future.Pakistan continues to be the most dangerous place on earth.  They recently signed an agreement with Islamic hard-liners, a move in favor of the Taliban.  Obama’s war will be the Afghan/Pakistan theater… Just down the road apiece from Iraq.California is in the midst of a $41 Billion deficit and they can’t print money like the Fed can.  I expect their contraction to be more severe than the heartland since their real estate was so overpriced.  They will increase “use” taxes to the point, people will migrate to lower tax jurisdictions to flee from the sanctioned extraction of wealth.On the bright side:  As I have mentioned in the past, gold is the barometer of monetary risk.  As of this writing, gold is up over 6% from a year ago.  Silver is still down 17% from last year, but compared to the value of housing it looks pretty good.  Most of us have the opportunity to buy silver and I personally believe it is a good buy at these prices.  Those of you who can step up to gold, it looks to be heading over $1,000 soon.  Gold stocks are lagging in performance compared to the metal but that may change as more people realize that financial and retail stocks have no immediate future.Remember, Fear not: Psalm 118:6  The LORD [is] on my side; I will not fear: what can man do unto me?

Pundits on TV tend to make us believe that commodities are in unlimited supply with improved technology as the basis for finding this "unlimited" supply.  For the first time in 16 years, the price of gold has surpassed the S&P 500 Index.  For the previous 18 years, the S&P Index number exceeded the price of gold.  This would suggest a reversal in investing philosophy in the marketplace.  Gold closed the week at $927.10.  Gold producers’ cash costs in U.S. Dollars are benefiting from currency gains against the Dollar.  I expect the Gold stocks to start moving back up as the investing public sees the profit improvement in this industry.

There is not an unlimited supply of gold just as there is not an unlimited supply of crude oil.  This does not mean we have run out of either of these commodities.  It is estimated that the world supply of known oil reserves has passed the halfway point thus peaking.  Our Heavenly Father established gold as being "precious". In Genesis 2:11 the first mention of gold occurs: "The name of the first [is] Pison: that [is] it which compasseth the whole land of Havilah, where [there is] gold".  Pison means "increase" and Havilah means "circle" or never-ending.  The next mention of gold was to describe the wealth of Abram in Genesis 13:2: "And Abram [was] very rich in cattle, in silver, and in gold."  Therefore, God’s Word established gold as a store of value.  It provided an adequate medium of exchange versus herding cattle, sheep, or camels when you wanted to acquire something new.  Gold has been a store of value for thousands of years.

Once the U.S. currency was disconnected from gold, the trouble began.  Gold slowed down economic growth and by removing the dollar from the gold standard, determination of value was placed in the hands of man.

Politicians are expected to print 2-4 Trillion Dollars to fund the new aggregator bank where they plan to place the toxic assets of the banks.  That is a bullish event for gold.  Nouriel Roubini, professor at the Stern School, New York University, estimates the cost of this bank to be about $3.6 Trillion.  Even though short term price gyrations and de-leveraging events can impact the price of gold, sustained excessive fiat money creation will cause the price of gold to rocket skyward.  By using the new "don’t tell the public the real cost of the problem" multiplier, we could see up to 8 Trillion Dollars before it is all said and done.

Compared to one year ago, gold is up 3/10 of 1% whereas the Dow Jones Industrial Average is down about 35% and housing is down even more.

"Critical Status" is where many retirement funds are heading.  Historically retirement funds view their investments on a 40-50 year picture.  Short term fluctuations are not as important as cash for distribution of benefits.  They MUST have liquidity to meet their monthly obligations.  There is no financial based entity shielded from the current crisis.  There are some retirement funds already modifying and limiting withdrawals.  Over the last thirty years, retirement plans for the average American have been methodically dismantled in favor of Wall Street.  Defined benefit plans were replaced by individual contribution plans.  By establishing 401K plans, Wall Street effectively added millions of new stock investors to buy what Wall Street was selling.  Share volumes exploded on the upside as a result.  Instead of the boring 5% return received on bank and Treasury products, the American public was duped into believing that stock were a sure bet and could only head one direction- up.  "Boring" looks good now and a 0% return on investment looks much better than the losses now being suffered by most retirement vehicles.

We have recommended you take possession of your stock certificates and precious metals.  For those of us who focused on silver, it is more cumbersome than those who were able to buy gold simply due to the weight difference.  Brokerage firms do not want to transfer stock certificates to the owner because it reduces the possibility for revenue.  There’s been a move to eliminate paper certificates all together.  Instead, the industry would prefer all electronic media which makes their job easier and more profitable.  However, it also makes illegal activities easier and harder to investigate and prosecute.  Anytime you place someone between you and your investment, you increase the risk of loss.  See: http://query.nytimes.com/gst/fullpage.html?res=9C01E5DE173BF936A35753C1A965948260&sec=health&spon=&&scp=1&sq=AUDIT%20AFTER%20GOLD%20DEALER’S%20SUICIDE%20SUGGESTS%20CUSTOMERS%20LOST%20MILLIONS%20&st=cse

The cleansing of epic proportion is underway.  It appears that we are heading for the cliff of currency devaluation.  We are less than 24 months from my 1/11/11 watch date.  Could we be at the end of an age?