What is “The Only Escape Route Left for Your Money?”

Sniffing out Roger Conrad's solutions to the "Triple threat" of a looming "crash in bonds, a sell-off in stocks and a blowup in inflation"

By Travis Johnson, Stock Gumshoe, January 23, 2013

There is often turnover at investment newsletters, as editors either have a few really bad years and get canned or get tired of working for a publisher and set off to start independent publications, and the folks at Investing Daily have recently seen more turnover than most — Elliott Gue and Yiannis Mostrous, who have in recent years made up half of their heavily promoted team of editors and generated a lot of teaser stocks for us to unravel, have left …

… and now their flagship letter Personal Finance, one of the long-standing “entry level” letters that has introduced investors to “alternative” investments and broad asset allocation strategies for decades under Stephen Leeb and Neil George and others, is being helmed by Roger Conrad, who made his name as a dividend hunter in Canada and in the utility sector (Investing Daily’s global letter that had been helmed by Mostrous, by the way, is now run by Benjamin Shepherd, who previously had written about ETF investing for them).

This is the first time a Personal Finance teaser ad has caught the eye of your friendly neighborhood Gumshoe in many months, so since we’ve got a new editor and a new teaser and a new year all joining together I thought we’d take a gander at this pitch.

You can see from the first part of the spiel that it’s a familiar “big picture” idea that backs the investments they’re recommending — and the big picture is, “we’re scared:”

“The Collapse of Obamanomics…

“Why the Next 4 Years Will Be Even Worse…

“and the Only Escape Route Left for Your Money

“In this special report from the longest-serving and most widely-followed advisory in the country, we explain…

“Obama’s 16-year curse on the stock market…

“Why stocks could drop in half from here and…

“7 obscure escape routes to profit from the coming collapse, including one yielding 10.1%.

“Below, urgent instructions on how to face the looming triple threat to your wealth.”

This is catnip for most readers of investment newsletters, who are ready to believe that Reagan singlehandedly created a growing economy and Obama is singlehandedly destroying it — we won’t go into that oversimplified look at history very much, since that then becomes the only thing that folks can think about as the chatter on one side of the aisle or the other turns their eyes red, and seeing red rarely helps investors to see green … but the point is that the economy is weak and still recovering very tepidly from the recession, the country is overleveraged, we’re hurt by unemployment, and hurt by an increasing “us vs. them” divide across any dividing line you can come up with.

Conrad sees us at a tipping point, with a “bloody endgame” that will have few “escape routes” … here’s how he puts it:

“A couple of years ago Harvard professor Ken Rogoff conducted a massive study covering 44 countries over 200 years. He found that economic growth always hits a brick wall when a nation’s debt climbs above 90% of GDP.

“At that point, it is almost impossible to grow your way out of the hole you’re in. The trend doesn’t look good for us. Total United States debt has just hit 102% of GDP.

“In other words, we’ve crossed the critical 90% tipping point… and are heading toward a debt-to-GDP ratio higher than the one that pushed Greece into bankruptcy.

“In 2009 Greece’s national debt reached 115% of GDP. Within a year, banks refused to lend Greece any more money. The Greek crisis was on.

“Look at how the world panicked over a tiny country with an economy half the size of Ohio’s. Can you imagine the carnage we’ll see when the world realizes that the biggest economy in the world is in the same sorry shape?

“The EU is trying to put Greece back on its feet with a trillion-dollar bailout. But we already borrow $1.2 trillion per year just to keep the wheels turning. When our next recession hits, who will bail us out? Who is big enough to even try?

“What’s worse, we won’t be alone. Many other overextended countries will be looking to borrow trillions, too. All these debt hogs will be crowding around the same trough trying to outbid each other for the available funds with higher and higher interest rates.

“Higher rates will sink bonds, hurt stocks, raise mortgage payments and depress home sales even more. Obamanomics could play out in a bloody endgame that will throw millions into poverty.

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“Again, there are very few escape routes. And I can’t think of any that the average investor is familiar with. But I’ve found a handful of obscure lifelines so perfectly suited for what happens next that they could make the coming few years the most lucrative investment stretch of your life.

“So many desperate investors will be crowding into these rare financial lifeboats that all you need to do is get in now… and watch as a flood of buying pressure pushes them higher.

“I’ve moved a significant amount of my own money into these investments. I urge you to at least consider doing the same.”

Those concerns are all perfectly logical — unfortunately, the logic of them doesn’t mean they’re particularly predictable. Very much the same things were being said about US debt and the inevitability of higher interest rates three years ago, and in the years before that even I thought more than once that we were absolutely due to see higher rates — I thought it was ludicrous that people would lend money to the US government at less than 4% a year for ten years, and now that 10-year note is down to well below 2% as bonds continued to be an incredibly and shockingly good investment over the past couple years.

But yes, I have to agree that it will end sometime — it is just such an absurd bubble building in fixed income inve