Obama’s Reelection and the Future

I always talk about how in investing, it’s critical to be unbiased and let the facts speak for themselves. The same goes with politics. Unfortunately, we all know most people don’t have a clue when it comes to investing, and politics, because emotions cloud their judgment. It’s more like a religion on both sides. The whole concept of a 2-party system is flawed; after all, when’s the last time anything materially changed in the U.S. under either party?

To be completely honest, I think the GOP will be better positioned in 2016 to win the Presidency because Obama has a serious economic crisis on his hands without the tools to solve it. After 4 more years of failed policies, it won’t be Bush’s recession anymore. The fiscal cliff should be front and center headed into 2013, and this will be the “uh oh” moment for everyone. Capital gains rising from 15-40%? Expiration of the Bush tax cuts? This is the recipe for a Greece-like economic slide. Unless both parties miraculously come to a compromise, we are headed for 10%+ unemployment between 2013 and 2014.

This deep into the debt crisis, I’m very shocked that people are not giving it more coverage. By 2016, we can legitimately have half of our government revenue consumed by interest payments alone. We are already in the viscous cycle where deficits lead to higher taxes, which lead to the rich fleeing, which leads to less revenue, which leads to higher taxes, and again, more rich people fleeing. No matter what you believe on a personal level about progressive vs flat tax rates, the fact remains that human nature doesn’t change. And with higher taxes, people look abroad for safety. The number of Americans renouncing their citizenship is going up exponentially, and my best guess is that this trend will continue rising.

2013 is going to be one of those crazy years that lays the foundation for this coming economic collapse. I expect a lot of volatility in stocks. For now, we are probably talking about a sell-off as the higher capital gains rate comes into focus. Then there is going to be a monster rally because the spread between dividends and bonds is going to become even more skewed. It is going to be a bumpy ride.

Physical gold in your ownership is the best course of action. An underground economy will emerge, as it always does in times of currency crisis, and gold and silver will be the foundation of this new economy. Our economy will first experience deflation, then inflation. Or put another way, first hoarding and uncertainty, then the acquisition of physical assets and fear. It may sound crazy now, but the volatility coming in the next 4 years should rival or even surpass what we saw in 2008. We are very, very close to some major economic catastrophies.