VREIC Newsletter and breakfast reminder

Update on my earlier prognosis (August) for U.S. and Canada and world economies.......

Long deep recession, even depression for two to five years or stagnant for 10 years. Reason for this fiasco is a shadow economy of derivitives featuring credit default swaps valued at more than the GDPs of every economy in the world over 50 trillion dollars, some even speculate 100 trillion.

In other words this is ponzi scheme of unfathomable debt created by brokers at the investment banking houses in the U.S. and London, insured by AIG and others, triple AAA rated by their buddies at Standard & Poors and supposedly backed by a REAL asset called real estate in something called trenches or mixtures of bad real loans with decent loans, and then dumped on poor, uninformed investors all over the world through bank trust departments and regular brokerage arms. Now the bad news, the reason is that every country and bank in the world does not want this debt, yet all have to deal with it. The worse news is that every country and bank in the world is technically broke due to issuing this junk along with regular paper currency which is debt and governments are now just covering with daily bailouts of every bank, and putting out daily confidence spins or lies. It is truly a "no place to hide" senario that seems to implore actions for those that want to protect assets.

Herein lies the myriad problems:

1. Real estate - with rates to potentially drop another 30 percent in the U.S. and 40 percent in Canada since you guys are just joining the panic party, why would anyone buy a home in a major de-levered freefall of any major asset (right now 1 in 6 homeowners in the U.S. are upside down on their mortgages), that is negative equity and it is predicted by Norial Roubini 12 to 15 million homes in foreclosure in the near future followed by car loans (already happening) and credit card debt defaults.

2. How about renting properties during downturn and waiting for the comeback???. In U.S., in some areas, if you could buy real 50 percent loan to current value this might work knowing that the world will never be the same debt carry lets all feel rich even though we are living on debt place and that real estate will not come back in any substantial way for many years maybe your lifetime if their are no great JOBS and that is number.

3. No debt created job wealth where every mom and pop could be an entepeneur.....a tougher more skeptical world where people save their money and do not take on debt because their job does not pay them as well anymore and in many cases they are lucky just to have one, a world that has to live with socialized banks and an enormous debts of the shadow economy to pay back and then in the U.S. and other countries figuring out how to pay for all the promised social programs, in Canada healthcare and in the U.S. social security, medicare, etc..and without a tax base due to limited job growth and in otherwords ,no jobs in an economy with no bubble monopoly money to fund the fun and make us all feel rich.

4. What to do? In short term buy some gold for the worse outcome and take ownership of it and put it in a safety deposit box. Secondly, watch the ted spread or libor which shows you when banks would be willing to lend to each other. This is at an all time high and is reflective of where we are heading and a truer read for the future of economies at this time. It is saying depression and a long one ...read a fantastic website called Naked Capitalism and read every blog and article on that site and you will become educated daily. Also read anyting by Norial Roubini, the economist out of new york university. He has called this disaster step by step since 06 and been right on everything including last weeks run on the hedge funds. Next, the savy people are going to need to know and understand the words credit default swap(cds) and libor / ted (the interest spead that banks lend to each other on three month paper. Finally, we have to determine whether we are going to continue to be in a major deleveraging environment (deflation) or a hyperinflationary one. This is crucial because it will determine where you place your investment bets. My view here is that deflation is going to continue with unemployment rising to a real 10 to 15 percent in the U.S. and less in Canada. Investments under this senario are real assets you want to live in and can do so without bank leveraging, in other words, own free and clear, like food shelter and clothing and some gold. Also pay off debts and simplify lifestyle ....do not overpay for decreasing large assets like home or car these will get cheaper and cheaper as people need your soon to be worthless currency and that brings me to inflation or hyperinflation. If economies seem to be turning around then watch for the kickback from a the next bubble CURRENCY ITSELF. In this senario it is good to be in gold or real commodities like oil or gas or possibly even wheat and if you have those as hedges against currencies worth less each day you can then leverage things like a house or car and pay it back with cheaper dollars but only if you have protective leverage in gold or valuable commodities as hedges against inflation. This is going to be a life altering, slowly unfolding, event with possible frequent mini panics as we have already seen in Russia (stockmarket closed for the rest of this week and down 80 percent for the year) or iceland currency now worthless and whole country asking for a bailout from of all people, Russia or some English tourists in Germany yesterday who could not use their english bank credit card to buy anything or the money market u.s. panic of three weeks ago or japan last night that lost 10 percent of its stock market value. It is the second largest economy in the world. Or brazil where markets have shut down two days in a row. Or Jakarta that closed their market yesterday. Do we see a trend here? The call is deflation or inflation and a new world that has created over 100 trillion dollars in fake derivitives that are mixed in with the other stuff (ever wonder how houses could sale for 20 million and up and 49,000 people in the U.S. were,until recently, worth over 50 million and controlled over 90 percent of all the worth in the U.S. and most of them lived in the east coast of the U.S. and, you guessed it, worked on wall street (one good event here is that many of these psudo millionaires are now broke believing in their own game and some like Abe Greenberg of AIG lost all his 4 billion dollars of networth). Well, the ponzi scheme they created is over and outed, but we are left with the problem and it will be a long hard pullback for everyone and a time to be generous to our fellow man who though he was a pig at the trough that wallstreet created he did not, in most cases, have any idea what was really going on. All he knew was that jobs were plentiful and the markets and real estate seemed to always be good investments. Lastly, there is the posibility that governments can keep both drastic senarios from getting out of hand and in that case we have stagflation where we will all feel poorer all the time until someone figures out another bubble scam that enough people will buy into and that govts. will not shut down or socialize.

Peace and God Bless everyone of us as we enter a brave new future.....paul