Hard Assets for Hard Times

united states currency eye- IMG_7364_web (Photo credit: kevindean)

If you want to protect your family and your wealth, it seems like the best place to invest now and in the foreseeable future is in hard assets:  i.e., gold, silver, oil, commodities and real estate.

Although the stock market has been doing well recently, we all know that it is a rigged game run for the benefit of institutions.  Many people lost most of their savings when the stock market crashed in 2008/2009.  I wouldn't want to have a significant portion of my wealth in the stock market now or anytime in the future.  
The bond market isn't much better.  Having enjoyed a long bull market, the weight of the US government's borrowing coupled with inflationary fears are driving investors away.  The smart money (Warren Buffett, Bill Gross) are selling U.S. Treasuries and I have been recommending a long US Treasury shorting strategy using a leveraged Exchange Traded Fund  - Proshares UltraShort 20+ Year Treasury ETF (TBT) that has done pretty well over the past six months.  
Real estate has been out of favor for the past few years, but provides an excellent hedge against inflation and the advantage of leveraging long-term borrowed funds at a fixed interest rate.  
Hard assets have real tangible value and have benefited tremendously from the destruction of the dollar's value - a direct result of the Federal Reserve keeping interest rates at almost zero and printing money in order to shore-up the economy (see the chart below showing the US Dollar index for the past 10 years).

The government's ability to continue to borrow to finance massive deficits is nearing an end.  As was widely reported this week, rating agencies have placed a negative outlook on US sovereign debt.  If the government is serious about reducing the public debt,  a major correction has yet to occur - higher taxes and lower government spending could slow economic growth enough to put the United States back into recession.  The alternative is a US sovereign default, a far more serious outcome which would result in financial market chaos accompanied by a collapse of the dollar and social unrest.

An interesting side note - this is all coming to pass almost exactly how Rich Dad (Robert Kiyosaki) called it in Conspiracy of the Rich.