A Daunting Warning

"Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies - inflation, currency devaluation and low to negative real interest rates"

 

I'm frightened to see this prediction. More so when I know who is predicting this. Who is this guy? Bill Gross. If you don't know Bill Gross, you really can not call yourself an investor. He is called Bond King, a self-made billionaire, one of the most successful and respected living investment masters. He is the co-founder of PIMCO, the world largest bond fund with1.2 trillion dollars assets. If you don't know what bond is, it is a formal contract to repay borrowed money with interest at fixed intervals. You can consider it as a loan, for which the lender will get a pay via a fixed interest during the predefined duration/term. The bond market is many times larger than the stock market and actually it is the real driving force determining the ultimate direction of the stock market. Therefore, when the Bond King is talking, I'm listening and very carefully. So did you notice what Gross was saying? Inflation and currency devaluation! And do you know which country he was talking about the default (bankruptcy)? It is USA!

 

Friends, if you are still one of those who simply rely on saving cash for your retirement, hoping you can keep your buying power in 20 years from now, please wake up. I'd like to pound the table to alert you that you are too naive. I won't be surprised to see that the US$ will be worth 50% or less of today's value in 10-15 years from now. Before 1971, the US$ held its value quite well due to the fact that it was backed up by gold (the gold standard). Since 1971 when Nixon demolished the gold standard, the US$ has been devalued by over 95% in terms of gold. I hope you will not be the ones facing the shocking fact at your retirement that your hard-earned money and life-long saving is only worth half or even less when buying goods and services. Start to act immediately to learn to invest. Buy gold and silver if you haven't done so. Buy solid companies' stocks at good prices when opportunities arise. Use dividend re-investment to compound your wealth. These are the simple strategies to fight against inflation and currency devaluation!!!