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A momentous event just occurred this afternoon:
For the first time in many years, the Chairman of the Federal Reserve went before Congress, set aside his rose-colored glasses, dispensed with most of his sugar-coated platitudes and made some hard-hitting statements about the U.S. economy.
Bernanke on jobs:
“This is the worst labor market since the Great Depression.”
Bernanke on housing:
“The market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction.”
Bernanke on fears about the future:
“Most … viewed uncertainty about the outlook for growth and unemployment as greater than normal, and the majority saw the risks to growth as weighted to the downside.”
Bernanke on tight credit for small businesses:
“Bank loans outstanding have continued to contract. Small businesses, which depend importantly on bank credit, have been particularly hard hit.”
And never forget: All this is coming from a man whose job invariably makes him extremely reluctant to admit to negative trends in any sector at any time — if Bernanke is saying things are bad, you can bet your bottom dollar they’re actually far worse.
Our recommendation:
- Act on our warnings to greatly reduce your exposure to the stock market, especially in the sectors we’ve been pinpointing as vulnerable to a double-dip recession: Housing and construction, retail, manufacturing, banking and more.
- Keep most of your money safely tucked away in short-term Treasury bills or equivalent. The return on your money (no matter how low) is not nearly as big of an issue as the return OF your money.
- To hedge against any threat to the purchasing power of your dollars, maintain a core position in gold — through bullion, a gold ETF or both.
Good luck and God bless!
Martin
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