Fiscal Cliff? More Like “Washington Soap Opera”!

Hi everybody, I want to take a few minutes to talk to you today about the latest news on the fiscal cliff. Or as I like to call it: The latest in the Washington Soap Opera.

Ok, so a fiscal cliff deal was just approved in Washington and  I’ll discuss what that means to you as an investor, but before we do, I just want to revisit a few of the points I’ve made in the past that still hold true now more than ever.

First is the fact that your financial future is at risk, and that the post World War II era of investing, meaning principally buy and hold a diversified portfolio, is obsolete. So if you’re still in that mode with your IRA or 401k or your cash accounts, I believe that your financial future is at risk, that’s what I mean when I say that.

Now, why do I say that post World War II era of investing, buy and hold investing, is obsolete? It’s because — and here are the underlying causes of that — it’s because the developed countries, principally the United States, Europe and Japan, and others, are essentially broke, and they’re broke because they all have incurred massive debt that they can never pay back. It’s just a simple case of arithmetic, simple arithmetic. It’s a case of simple arithmetic.

Because of that, central banks are essentially printing money, led by the United States Federal Reserve, as well as to a certain extent, as well as to a lesser extent the ECB in Europe. They are printing money, and they’re doing that to prop up the massive debt of their respective governments.

This has the effect of debasing all of the currencies, not just the U.S. dollar, not just the Euro, but also the Japanese Yen. Also the Swiss Franc, also the British Pound.

It all falls under the heading of what I call the currencies are all on the race to oblivion. It’s just a matter of which one gets there first now.

So, when you consider the massive debts of the governments of the developed countries, the debasement of the currencies on a scale that has never occurred since World War II, it’s a complete game changer. So what would serve you well as an investor up until about the late 1990’s, it no longer does.

So we’re in an all new financial environment, and we will be for several years. You need three things for a flourishing economy. First, sound economic policy. Second, a strong currency. Third, a safe environment with minimal but effective regulation. Those are the three things that a government should provide, and as we’ve said before, none of those three are being provided by the leading governments in the world.

Great. So what do we do? Well, stay tuned, I’ll be back next week with some more tips for you to not only survive this “Washington Soap Opera” but I’ll give you ways to profit from it. Till then, ignore the hype in the media. Take control of your own financial destiny. Stop looking at long term buy and hold investing and learn to become a trader. Till next time… Good Trading.