DRIP Investing for Dividend growth, Cashflow and Financial Freedom

N.B., Acknowledging the fact that some Americans probably think Gerald Celente is a nut - those who are familiar with him at all - just as, for many people, Peter Schiff is seen as an extremist or nut - I think that, given their analytic track records - which you have to admit, have been better than the prognostications chirped out through nationwide media from Ben Bernanke and Henry Paulson - it is important to take their hypotheses seriously and plan accordingly.  It’s Pascal’s wager, plain and simple.  What would happen if they were right and you *didn’t* plan?  With that in mind, I think it’s prudent to consider the worst-case scenario and make sure one is prepared anyway.

If Trends Forecaster Gerald Celente is right, like he has been with so many economic forecasts since 1980, then you’ll need to do a lot more than just protect your money over the next 2-5 years.

Simply put, Celente is predicting a total US economic collapse .  He has told ABC that he feels as certain about this forecast as he has about any other forecast he has been assured of.  How might he know this?  His company, the Trends Research Institute , gathers and analyses over 300 independent global variables and generates prognoses in over 20 different categories - from food, to consumer spending, home sales, entertainment trends, political and environmental trends, baby boomer trends and military spending.  And he doesn’t just analyse the USA.  His company looks at data all around the world.  As Celente is famous for saying, he’s “a political athiest.”  He doesn’t care to take political sides, his data just follows “the facts.”

“People like Warren Buffett, you know, “I want more money, I want more money….” him being lionized as well, you know?  What has he contributed to society other than his ability to put deals together and make money?  So the country has just become a bottom-line country, and in this bottom-line society, cheap is best.  Everyday low prices; but what people don’t understand is with everyday low prices comes everyday low-paying jobs.”

Gerald Celente’s Predictions for the US Economy

Tent cities.  Ghost malls.  Widespread strikes.  Gang warfare.  (wait a minute. we’ve already got some of these…)

1. No Real Economic Recovery In Sight .  Companies like UPS’ earnings have dropped 49%.  Stock market “green shoots” have been fueled by magical accounting - less costs and layoffs, not increased sales.  Export demand even in Asia is down around 30%.  These are Depression-era numbers.  No one can print their way out of it by using phantom money without destroying the economy and the dollar.

2.  Unemployment .  According to Celente’s numbers, “the effective unemployment rate in the U.S. is 18.7% .”  This includes only part-time jobs and those who are no longer looking.  This number will grow.  We’ve lost 2.5 million jobs since Obama has become president.  The stimulus package at best so far has only created 150,000 new jobs.

3.  Education .  We have 50% highschool graduation rates in urban centres; where will these people get jobs?  The manufacturing jobs are no longer there.  Forecasts for new job creation going ahead lies largely in jobs that will pay less than $30,000/year.  As a result, Celente predicts individual crime levels to significantly rise.  “When people have nothing left to lose, they lose it,” as he likes to say.  And the next big bubble is the “college bubble; they’re going into debt now for jobs that aren’t even going to exist.”  (Another good reason not to go to grad school ).

4. Problems To Occur this September and October .  Traditionally August is a thin month for trading .  Everyone is on vacation, especially in Europe.  This month, U.S. Congress is out until Labor Day. Federal budget numbers were due to be released this past week, but they’ve rescheduled these to be released after Congress adjourns for the summer.  This is a big signal for Celente.  Numbers released mid-month will not have as much of an impact as they will in the beginning of autumn (there’s a reason previous market collapses have occurred in Sept-October).  “After the summer break, reality sets in in September.”

5. January 2010 .  If the shoes haven’t dropped already by then, they will in January.  When Christmas sales are tallied, they will be worse than 2009.  Will open year on down note.  In 2009, these were the only things that bought some economic time before more bailouts and the Obama stimulus came into effect.

6. Taxed to death. After the “printing scheme” runs out and the dollar sinks considerably, as Celente thinks is starting to happen again now, the only other option will be more taxes.  He sees rising taxes on such things as parking tickets, charges for spitting on the street and other “petty acts” that all pale in comparison to the “great heist” which is that of the government taking taxpayers’ money to bailout banks and pay executive bonuses.  Surtaxes; green taxes; sin taxes etc.  The tea parties and tax protests are just the beginning.

7. California one of the first to collapse .  California is already completely bankrupt and looking at budget cuts and significantly higher crime levels.  Its system of roadways and cheap-oil infrastructure will not be able to withstand the higher oil prices ahead.

“The gap between the rich and the poor is the widest in the U.S. of any of the industrialized nations.  We have a huge underclass in this country… you can’t print phantom money out of thin air, backed by nothing and producing practically nothing…we’ve all heard from China, India, Brazil and Russia they all want to bail out of the bucks.  So where’s it all going? The decline of empire America.”

What To Do To Protect Your Money Going Ahead

The principles of wealth protection themselves never change (spend less; save more; invest, etc.), but the strategies do.  If you’re expecting a certain sort of outcome, or at least a possible range of outcomes, it can change the priorities you have in place for the type of savings and protection strategy you adopt.  With that in mind, consider these wealth protection basics which Celente is recommending (what he’s doing; he’s quick to say he doesn’t give investment advice).

1. Save more money. There’s many vehicles and strategies for saving your money .  But there’s a difference between keeping it in US dollars in cash in your ING account versus holding other currencies and physical metals and metals stocks.  Either way, it’s a good idea to cut back on expenses now so that you will have more leverage and flexibility going into an uncertain economic climate.

2. Buy physical gold (and silver). Already, certain types of coins are no longer available.  Other dealers are simply on backlog and it’s going to take a a few weeks to get your delivery.  Celente is 80% invested in gold and he’s still buying gold .  TRI predicts gold at $2000.  It’s hard to tell when because the markets are being highly manipulated right now. Gold is an important hedge because there are so many wild cards out there.

3. Diversify out of the US Dollar .  The sinking US Dollar is approaching its index lows again at 71.18.  Better to hold Euros and Swiss Francs.  “To me, the Swiss are the money cockroaches of the world.  They never go anywhere,” Celente jokes.

4. Have an emergency plan .  Think for yourself and create an emergency plan based on the realistic scenario you come up with.  It might include a stockpile of goods, it might just be a significantly sized emergency fund .  It might include setting up contingency plans and places you can travel to if you need to evacuate your home.

5. Stay updated on the news .  Celente reads 4 hours a day - global newspapers and in many different fields.  Economics is only one factor contributing to future trends.  Put together many different perspectives - don’t just read US papers or your favourite gurus.  The difference between even the US media and the UK media is significant.

There’s no question that Celente holds some extreme beliefs which, in all fairness, have little to do with his company’s actual forecast.  It’s best to look at the bottom line and look at what he has forecast in the past and the basics of what he — as well as others such as Jim Rogers and even Nouriel Roubini — are forecasting coming up.  Tailor it to your own situation, but give it real consideration.  It’s always good to be prepared, and whatever happens in this economic scenario, one doesn’t want to be caught surprised about it, or waiting until it shows up on the front page of the New York Times before talking about it and what to do next.

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