You'll be happy you own gold and silver once you read this, compliments of our associates at Stansberry Research and the S&A Digest: "'Sovereign wealth funds,' foreign government investment pools, are dumping the dollar. One big fund in the Persian Gulf has cut its dollar-denominated holdings from more than 80% a year ago to less than 60%."
"China's State Administration of Foreign Exchange (SAFE) is working out deals with European private-equity funds to diversify away from the dollar. SAFE holds the majority of China's $1.6 trillion in foreign currency reserves in U.S. dollars.
"Foreigners also hold roughly $1.5 trillion in Fannie (NYSE:FNM) and Freddie (NYSE:FRE) AAA-rated debt. Merrill Lynch (NYSE:MER) warned that the U.S. could face a foreign "financing crisis" within months as Fannie and Freddie unwind. And Merrill is certainly credible on the subject of financing crises, having caused more than its share of them...
"Merrill has about 40,000 customers holding roughly $6 billion of securities called auction-rate preferred securities. Like all auction-rate securities, you can only sell them at auction, which occurs only once a month. These obviously illiquid instruments were successfully marketed as liquid, money-market instruments, which can be sold instantly at any time.
"Market makers used to act as buyers of last resort if auctions didn't work well. But since auctions started failing earlier this year, the buyers of last resort have dried up and blown away. They don't want to get stuck with bad paper. They just want to stick others with it. Mutual funds that bought these securities as cash equivalents have a problem. They're unable to liquidate auction-rate securities to pay the large redemptions they all face in a bear market.
"We all know gold and silver are great to own during inflationary periods, but how about Google (Nasdaq:GOOG)? Google raised the price of its online advertising 19% in the past year. And the worst-performing industries, mortgages and retail, are paying the highest prices. Google raised mortgage-company advertising rates 35% and retail rates 9.3%. Bloomberg expects Google shares to rise 25%." (www.StansberryResearch.com ).
I don't know about you but this has my attention, and if I wasn't already invested in gold and silver, I'd be convinced to start accumulating.
