As the Eurozone crisis via the Greek tragedy unfolds, most of the risks that I’ve examined in The Kelly Letter over the past half-year or so have come to the fore. We’ve been concerned about sovereign debt implosion that would start somewhere relatively insignificant on the world stage, but quickly blossom into a major-economy-threatening failure.
Here we are.
In truth, we never got far away from it. Those in the know knew all along that the stock market rise was just the result of firehose-style liquidity stimulus. They also knew that such shortsighted policies included a day of reckoning. Only the financially illiterate thought the giving of borrowed money to people most proven to manage money badly would end, well, badly. It always does, and it already has this time around, too.
This shows up in everyday life in America. It’s not just the world of high finance that’s damaged by debt gone wrong. How many people do you know who were rescued in some way during the recession so far? I know many. From a guy who missed his payments until the bank finally forgave that and offered a 4.25% interest rate for the remaining years on the note, to another who refuses to accept full-time employment because it would reduce the assistance he’d receive from the government, our society rewards bad behavior. What do the financially responsible get from the government? Tax bills.
If the first guy had been tossed out on the street and the second guy went hungry for a while, you know what they’d do? Get their financial acts together. They’d become contributing parts of society instead of the dead weight that you and I have to work extra hard to support.
The problem with wealth redistribution is that it takes capital away from the people who use it to create productive societal assets and wastes it on temporary fixes for financial idiots. As time goes on, a greater percentage of economic resources gets flushed down the toilet of incompetence.
It works that way in a household, in a city, and in a country, and when it goes on long enough it ends in disaster. It’s gone on for a darned long time in America and much of the developed world, and now it’s disaster time.
As such, I’ll be issuing in lieu of my usual Kelly Letter this weekend a special report looking at what’s happening to the global economy, what it means for Americans, and what steps individuals can take to guard their assets against the breaking maelstrom. Subscribers will automatically receive the report. If you’re not yet a subscriber, please join us.
Look insideThe Kelly Letter
Do you see an increase of people starting to save money because of the hardship that Americans have went through since the crash of 2008? With the issues at Greece, it clearly shows that Americans aren’t the only one who lives a lavish lifestyle, and they will have to change to control their spending habit as well.
I’m currently reading your book and just started on Chapter 2, since I’m starting to invest a week and half ago…but I’m afraid that this might be bad time for me to start since not a single stock has been making as much as a penny for me. I can’t figure out what to expect for the Greece issue plus the oil spill, and don’t even know if we’re facing another crash again.
We’ve been expecting a correction because most of the stock market’s gains have been artificially stimulated over the past year. I suggest that you help guide yourself through the ups and downs with my value averaging strategy that taps small cap stocks to earn 3% per quarter in every environment. By automatically harvesting gains beyond 3% and then using them later to prop up the plan when it fails to earn 3%, you smooth out the market’s volatile path. In the 2010 edition of my stock book, you can read about value averaging small caps in chapter four, “Permanent Portfolios.” Kelly Letter subscribers are waiting for the plan’s next buy signal now, and if the sovereign debt issue keeps prices falling, they’ll get it.
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