December 2012 Investment Outlook

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Worst and best investments for December 2012.

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Hi everyone, I am Claudio Fahmy, the owner and founder of Zero Debt Investments:

Hi everyone, I am Claudio Fahmy , the owner and founder of Zero Debt Investments

Today I would like to talk about my investment outlook for December 2012, but before I do that I would like to remind you that all the opinions expressed in this video are solely mine and are not meant to be taken as financial advice.:

Today I would like to talk about my investment outlook for December 2012, but before I do that I would like to remind you that all the opinions expressed in this video are solely mine and are not meant to be taken as financial advice.

First I would like to talk about the worst investment options that in my opinion are out there right now.:

First I would like to talk about the worst investment options that in my opinion are out there right now.

As of today, December 1st. 2012 the US has a national debt of over $16.3 Trillion, unfunded Social Security liabilities are $16 Trillion, unfunded Prescription Drug liabilities are $21.2 Trillion and unfunded Medicare liabilities are $84.4 Trillion. That gives a total of $122 Trillion in unfunded liabilities. :

As of today, December 1 st . 2012 the US has a national debt of over $16.3 Trillion, unfunded Social S ecurity liabilities are $16 Trillion, unfunded Prescription D rug liabilities are $21.2 Trillion and unfunded Medicare liabilities are $84.4 Trillion. That gives a total of $122 Trillion in unfunded liabilities.

But Federal tax revenues are only $2.5 Trillion. That alone results in a budget deficit of more than $1T a year that is added to the National Debt. :

But Federal tax revenues are only $2.5 Trillion. That alone results in a budget deficit of more than $1T a year that is added to the National Debt .

This is an unsustainable situation that is not going to continue forever, and the Federal Reserve is forced to purchase bonds to finance the Government. Default is very unlikely, while printing seems to be a better option because it makes rich people, who own real assets richer, while robbing the poor who live on fixed income. Defaulting would trigger mass riots, so it’s better to print money in the government’s opinion.:

This is an unsustainable situation that is not going to continue forever, and the Federal Reserve is forced to purchase bonds to finance the Government. Default is very unlikely, while printing seems to be a better option because it makes rich people, who own real assets richer, while robbing the poor who live on fixed income. Defaulting would trigger mass riots, so it’s better to print money in the government’s opinion.

But what is the National Debt, and who are the lenders? And why do they keep lending money to the government? As you can see below , the biggest holders of the National Debt are US citizens, followed by the Federal Reserve and China. :

But what is the National Debt, and who are the lenders? And why do they keep lending money to the government? As you can see below , the biggest holders of the National Debt are US citizens, followed by the Federal Reserve and China.

They keep buying Treasury Bonds because the US Government has never defaulted on its debt many people assume. Unfortunately this is not true because if a bond pays 1.6% in interest when inflation is 5% , the real return is 1.6-5= -3.4% that’s right, bond buyers are paying the government to lose 3.4% each year. Isn’t that crazy? (The definition of inflation by the way is money printing):

They keep buying Treasury Bonds because the US Government has never defaulted on its debt many people assume. Unfortunately this is not true because if a bond pays 1.6% in interest when inflation is 5% , the real return is 1.6-5= -3.4% that’s right, bond buyers are paying the government to lose 3.4% each year. Isn’t that crazy? (The definition of inflation by the way is money printing)

Nobody is expecting the Federal Government to default on Treasury Bonds, all economists agree at this point that the Government will print money to pay for this debt since tax revenues are not enough. Bond prices have been rising steadily since 1982 as you can see below, making a great investment,:

Nobody is expecting the Federal Government to default on Treasury Bonds, all economists agree at this point that the Government will print money to pay for this debt since tax revenues are not enough. Bond prices have been rising steadily since 1982 as you can see below, making a great investment,

And the yield, which is inverse to bond prices has been declining steadily from 17% to 1.69% in the past 30 years as you can see below.:

And the yield, which is inverse to bond prices has been declining steadily from 17% to 1.69% in the past 30 years as you can see below.

The Federal Reserve has been buying bonds during QE1 and QE2 in order to push bond prices even higher and yields even lower, that way financing the Government. This is why interest rates on mortgages are the lowest they have ever been, because they are tied to the 10 year bond yield.:

The Federal R eserve has been buying bonds during QE1 and QE2 in order to push bond prices even higher and yields even lower, that way financing the Government. This is why interest rates on mortgages are the lowest they have ever been, because they are tied to the 10 year bond yield.

But pay attention!!! There is only so much the Federal Reserve can do to keep interest rates low.:

But pay attention!!! There is only so much the Federal Reserve can do to keep interest rates low.

Bond prices will finally start to decline at some point, I don’t know for sure if it’ll be next year or the year after, but it will happen, and the yield will increase. When that happens millions of savers will lose money on their bonds, and there will be panic in the market just like when the stock market crashed in 2008. Millions of people that have Treasury Bond funds in their 401ks will lose money and panic.:

Bond prices will finally start to decline at some point, I don’t know for sure if it’ll be next year or the year after, but it will happen, and the yield will increase. When that happens millions of savers will lose money on their bonds, and there will be panic in the market just like when the stock market crashed in 2008. Millions of people that have Treasury Bond funds in their 401ks will lose money and panic.

That’s why I stay away from Bonds and Bond Funds!!!:

That’s why I stay away from Bonds and Bond Funds!!!

Another kind of Bonds that I think is very risky and should be avoided is Municipal Bonds: those represent debt held by municipalities, cities and states. Municipalities don’t have the power to print their own money and they rely on state and city taxes to pay their employees, but because they are not able to raise taxes further, many cities will default on Municipal Bonds. This has already happened in Stockton, CA and San Bernardino, Ca. Those 2 cities had to file bankruptcy recently. :

Another kind of Bonds that I think is very risky and should be avoided is Municipal Bonds: those represent debt held by municipalities, cities and states. Municipalities don’t have the power to print their own money and they rely on state and city taxes to pay their employees, but because they are not able to raise taxes further, many cities will default on Municipal Bonds. This has already happened in Stockton, CA and San Bernardino, Ca. Those 2 cities had to file bankruptcy recently.

Corporate bonds, which is debt held by corporations are also risky because several corporations pile up too much debt that they’ll never be able to pay off, and end up bankrupt.:

Corporate bonds, which is debt held by corporations are also risky because several corporations pile up too much debt that they’ll never be able to pay off, and end up bankrupt.

When the bond bubble implodes, investors will run for safety, and the only investment that will look safe will be gold and silver. :

When the bond bubble implodes, investors will run for safety, and the only investment that will look safe will be gold and silver.

The price of silver has been rising in recent years but silver is still unknown to many people. The price of silver is very low because it has been manipulated and kept low on purpose to keep the public away from it, but at some point it will catch up with gold , this is why I regard silver as a great investment. Silver and gold can’t be printed out of thin air like dollars, so when they print dollars, those dollars will end in the silver market (and in other commodities), pushing up the price of silver , while the dollar becomes worth less. :

The price of silver has been rising in recent years but silver is still unknown to many people. The price of silver is very low because it has been manipulated and kept low on purpose to keep the public away from it, but at some point it will catch up with gold , this is why I regard silver as a great investment. Silver and gold can’t be printed out of thin air like dollars, so when they print dollars, those dollars will end in the silver market (and in other commodities), pushing up the price of silver , while the dollar becomes worth less.

The price of silver is right now $34 per ounce, which is a real bargain compared to the price of gold at $1,700 because silver is also an industrial metal with hundreds of applications in electronics, while gold is merely a store of value. Due to high demand of electronics, there is a real shortage of silver right now in the world.:

The price of silver is right now $34 per ounce, which is a real bargain compared to the price of gold at $1,700 because silver is also an industrial metal with hundreds of applications in electronics, while gold is merely a store of value. Due to high demand of electronics, there is a real shortage of silver right now in the world.

Another investment that I like particularly beside precious metals is real estate, and in Michigan, in the state where I am, prices of real estate have dropped dramatically following the real estate bubble of 2008 when prices dropped more than 80%. Houses in Michigan are selling for $30,000 right now and can be rented out for $1,000 a month, giving a Return on Investment (ROI) of 10-15% a year. If you are interested in buying real estate in Michigan click the link below, and I will tell you how you can do it. :

Another investment that I like particularly beside precious metals is real estate, and in Michigan, in the state where I am, prices of real estate have dropped dramatically following the real estate bubble of 2008 when prices dropped more than 80%. Houses in Michigan are selling for $30,000 right now and can be rented out for $1,000 a month, giving a Return on Investment (ROI) of 10-15% a year. If you are interested in buying real estate in Michigan click the link below, and I will tell you how you can do it.

When the dollar becomes worth less, and pay attention, I said worth less, not worthless, all the stuff that we are buying from China will become more expensive, so it’s a good idea to start to produce and manufacture here in the US. If you have some land, it’s a good idea to start to grow your own organic food and to sell it to local markets, because food prices will continue to rise also. :

When the dollar becomes worth less, and pay attention, I said worth less, not worthless, all the stuff that we are buying from China will become more expensive, so it’s a good idea to start to produce and manufacture here in the US. If you have some land, it’s a good idea to start to grow your own organic food and to sell it to local markets, because food prices will continue to rise also.

I hope you liked this video. I am going to continue to make videos like this one each month so that you can always stay on top of what is happening in the financial world. Thanks for watching!!!:

I hope you liked this video. I am going to continue to make videos like this one each month so that you can always stay on top of what is happening in the financial world. Thanks for watching!!!

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