All about investment

By: Kevin Demeritt

The perfect storm this. The perfect storm that.

The cliché is getting tossed around about as much as those old-time favorites, "uphill struggle," "right on the money," "you can run but you can't hide," "at the end of the day" and "there's a quarterback controversy on this team."

Even so, feel free to drag it out one more time, shine it up and reapply it to the economy. Everybody else is doing it. The title of Sebastian Junger's bestseller is how an awful lot of people are now describing what we face

HIT BY ONE PERFECT STORM (OR ANOTHER)

In his book, The Perfect Storm, Junger writes of a hurricane crashing into a Canadian low pressure center which then does a head-on with a cold front hanging off the New England coast. The result is a hundred year storm generating 120 mile-an-hour winds, 100-foot waves and several fatalities.

That said, there seems to be a bit of confusion over exactly what constitutes a perfect economic storm.

"The combination of soaring demand from 3 billion new players on the world stage, record-high oil prices and a plunging U.S. dollar has never happened before and is more than throwing kerosene on a fire: It's like setting off a nuclear bomb on top of another nuclear bomb," wrote analyst Larry Edelson.

That's one perfect storm. Martin Weiss of the Money and Markets newsletter sees another. In his scenario, "close encounters with a Wall Street meltdown" collide with a severe U.S. recession, which smashes into surging inflation.

LIKE A DISASTER MOVIE MARATHON

We're just warming up. This is the perfect storm-a literal storm like in Junger's book-that Larry Elliot of The Guardian envisions:

"In October 2008, George Bush finally loses patience with Tehran and, in the last big decision of his presidency, launches air strikes against Iran's nuclear capability. On the same day, just as the citizens of Louisiana, Mississippi and Texas think they have seen the last of one of the stormiest summers on record, a category-five hurricane sweeps across the Gulf of Mexico and shuts down half of America's oil-refining capacity. The combination of military action in the Middle East and natural disaster sends the price of oil shooting up to $150 a barrel, pushing up inflation in all western economies. Central banks, fearful of another 1970s-style surge in the cost of living, raise interest rates, intensifying the effects of the economic downturn. Financial markets suffer a spasm of selling. Banks stop lending and, as businesses fail in droves, [there's] a meltdown in the housing market."

On and on it goes. Julie Chen of the CBS Early Show likes her perfect storm served up with higher gas prices, a crisis in the housing market and "the devastating floods in the Midwest." Glenn Beck, who's fond of saying that he has the number three talk radio show in the nation, may use the cliché more than any other living soul today. Then there's the Website, marketoracle.co.uk. It refers to the mess as a "perfect hyper-stagflationary storm." No, that's not nearly as slick a term.
Meanwhile, standing like a cheerleader in a bomb crater, the Paris-based Organisation for Economic Cooperation and Development advises us that, much to our relief, we've survived a "near-perfect storm" in the financial markets remarkably well and, come next year, we'll all be on the road to recovery and, presumably, live happily ever after.

Still haven't gotten enough perfect storm analogies? No worries. There are over 3 million more "perfect storm" search pages on Google.

THE GOLDEN CLICHE YOU CAN TURN TO

It's at least apparent that a large number of learned folks believe something of significance- something of negative significance unfortunately-is about to happen in our economic lives. Whatever form that actually takes, be it recession, depression or "hyper-stagflation," the common themes here seem to be soaring oil prices, runaway inflation, surging world demand for commodities, a sinking dollar, the credit crunch and a global recession.

And maybe another war or weather disaster thrown in.

Interestingly, it's also starting to be a cliché to say that gold is an antidote for much of the above.

But that's only because gold keeps demonstrating that it actually is an antidote for much of the above. Since the start of 2007, gold is up an impressive 46 percent in anticipation of this perfect storm business. Predictions of gold continuing to thrive in today's nasty environment and reaching $1,500, $2,000 and higher abound (the Google search, "$2,000 gold," fetches 2.7 million pages). Marketoracle.com believes gold will "start its run north to the $1,500 -- $2,000 range before the year is up."

Not surprisingly, commodities are king when both inflation and uncertainty are out of control. They were king in 1980 and are today as well. People understandably prefer commodities-investments they can actually hold in their hands-when their traditional paper assets lose value almost by the week...yet another reason why the gold forecast remains so shiny.

So the next time you wince at a perfect storm cliché, use it as motivation to acquire more gold. Not only will that help you safeguard your own finances during these extraordinary times, you'll actually be putting a cliché to good use.


You've seen him on Fox News Television and heard him on the Rush Limbaugh Show. He's a published author, writer and an expert guest on more than 1000 radio programs discussing today's economy and gold.

Kevin DeMeritt, President of Lear Capital, is a nationally renowned analyst whose insight into the future of domestic and global economies is unmatched. And, now more than ever, his insights are welcome by nervous investors. Visit LearCapital.com for all the help you need.

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