Thom talks to Pamela Aden of the Aden Forecast about finance, 27 August 2009

Thom Hartmann: Welcome back, Thom Hartmann here with you. And the news of the day, the risk of a double dip. Nouriel Roubini writing in the Financial Times Monday of this week. The headline, ‘The Risk of a Double-Dip Recession is Rising.’ He’s talking about how the fundamentals really haven’t changed all that much, particularly trade fundamentals for some of the developed countries of the world. Clive Crook actually echoing that on the comment page. It’s really quite remarkable some of the commentary that’s going on.

By the way, I wanted to mention, today is LBJ’s birthday. We’ll get back into that a little later on.

And China is planning a universal healthcare system. Boy, there’s a lot of news here. But bottom line, today’s Financial Times, Iceland shows the dangers ahead for us all. They’re talking about how Iceland is nowhere near out of the woods. That a lot is coming down the road. And a lot of problems are coming down the road. And another piece in the New York Times as I recall today about how the sub prime mortgage crisis probably hasn’t anything close to hit bottom because there are all these adjustable rate mortgages out there that are going to adjust up. And whether they’re toxic assets or not homeowners aren’t going to be able to handle them.

So we’ve got this weird macro economic, you know, big picture economy issue but how do we deal with it at the level of family and home economics? What do you do if you’re 25 years old, or 21 years old and just out of school, or just starting your family or your life? What do you do if you’re in your 30s or 40s and into your work career, and your company comes along and says you want to put some money into a 401 k or you want to start investing? What do you do if you’re in your 50s or 60s and you’ve got a little bit of money set aside or not a whole lot but you’ve got equity in your home? How do you invest? What do you do with those things? And for years, for at least the last 6 or 8 years, I’ve been subscribing to a newsletter that was started back in 1982 and I don’t want to make this an infomercial for it, there’s a number of good ones out there, and I have to say that these people have not always been infallible, but I've followed their advice and have done very well, thank you very much. And so I wanted to get them on the show.

Pamela Aden is with us, it's the Aden sisters, Pamela and Mary Anne. They’re investment advisors. They, or actually I’ll ask Pamela to describe how they describe themselves. They publish a newsletter, it’s called the Aden Forecast. You can find it online at AdenForecast.com. And they do a weekly newsletter and a weekly update, or a monthly newsletter and a weekly update. And just, with very specific stuff, like buy this stock don’t buy that stock. This area, this sector, that kind of thing. Pamela, welcome to the show.

Pamela Aden: Well, thank you for having me, it’s a pleasure to be with you today.

Thom Hartmann: It’s great having you on. And one of the things I find interesting, just kind of anecdotally, is that you and your sister live in Costa Rica. How long have you lived there?

Pamela Aden: Well you’re not going to believe it but it’s been over 30 years.

Thom Hartmann: That’s remarkable. I’ve heard wonderful things about that country. Our oldest daughter and her husband have visited there a number of times and have suggested that this is like, it’s just a paradise down there. There’s no military and there is national healthcare. Do I get that right?

Pamela Aden: Yes, in fact the national healthcare we always talk about it here compared to what Obama is going through right now and revamping the healthcare system. They’ve had unbelievable healthcare here in a poor country, and developing country. So it is interesting to see that everyone has access to the doctors here, yes.

Thom Hartmann: Well and in fact I was reading this new book by Richard Wilkinson called “The Spirit Level” which is available in the UK. There is a predecessor to it that he published in 2006 called “Why Inequality Matters” which is my BuzzFlash book of the month for this month. And he documents how Costa Rica, with an average income, per capita income, of around $5000, we’re at $44,000 in the United States, has better infant mortality, longer life expectancy, higher levels of trust among people, lower levels of homicide, lower levels of crime, virtually all indicators of quality of life are better in that country than they are here in the United States, which is amazing because inequality apparently isn’t as great. But all of that is kind of, anecdotal, I just found it fascinating that you’re down there. Um, where should people, how should people be thinking of investing?

Pamela Aden: Well, we’re actually in a very interesting situation with all the markets. Talking about the stock market in general, whether it be U.S. or globally, they all move together, it’s just which one is stronger in the sector of the stock market in general then we have the precious metals and gold shares and that sector resource and energy which since the melt down last year, well before the melt down actually, everything’s been moving together. All asset classes were basically rising together which is totally unusual, like it never has happened in the past, and then they all fell together. And some fell much more than others.

Thom Hartmann: Let me separate this out a little bit for our listeners, if I may, and tell me if I’ve got this wrong. We have, there’s a bunch of different places where you can invest. You can put your money in cash, which could be U.S. dollars or Australian dollars or Canadian dollars, which we haven’t talked about and we will. You can put your money in bonds, which we haven’t talked about but we will. That’s debt, either foreign government debt, U.S. government debt or corporate debt, that’s bonds. And you can put your money in stocks, and then in the stock world there’s really kind of two categories. There’s the normal stock market of companies that make things or that sell services, you know, the Microsofts of the world and the General Motors of the world. And then there are the stocks of the companies that are producing energy or gold and these are referred to as Asset Class stocks as opposed to what, General Manufacturing stocks or something like that?

Pamela Aden: Yes. Well actually what we do is we look and see, we always do a relative strength layout, of the stocks. Well not all, but a good portion of the stocks, in the U.S., the sectors and in the world. And it’s unbelievable how much stronger actually the global markets have been than the U.S. markets, just in general. But that doesn’t mean that you’re not going to make a lot of good money in the U.S. stock market. There, it's been very good, as you may know, that everything pretty much bottomed out in March of this year and we have always felt that 2009 and 2010 are going to be bargain basement type of buying, like look for bargains and not just in the shopping centers.

Thom Hartmann: Right, because the market is going to essentially crash?

Pamela Aden: Well the market in March for example was super bargain and it still is a fair bargain only that it has risen a good amount from March until now, that's been a 6 month rise. In the big picture that’s small, it’s still at a very low level, but on a short term basis we’ll probably have some sort of set back, but basically we’re seeing 2009 as buy bargains, look for bargains and this is what we have been doing and we see that this is what is a good thing for an investor to do if they’re new, coming into the market now or if they're old and are recouping or making money now. Everyone’s in a certain position today.

Thom Hartmann: So you don’t think that we’re at the tip of the W, because my sense of it is that we’re kind of at the tip of the W and the beginning, the unraveling could begin any day. You think that the stock market is going to hold itself together for another 12 to 18 months kind of thing?

Pamela Aden: Well what’s interesting is yeah, the tip of the W is a good way to explain it, because we do still have a lot of loan losses that are growing in the U.S. and in other parts of the world, so that could be a short term culprit that could cause us to be at the point of the top of the W but how far down would the other, like for the economy is one thing and for the market’s its another. The markets right now are temporarily overbought, so they are due for some…

Thom Hartmann: What does overbought mean?

Pamela Aden: Overbought, like looking at the Dow Jones industrials or the S&P, looking at the different individual stocks.

Thom Hartmann: Does overbought mean that the prices are higher than they should be or lower than they should be?

Pamela Aden: No it means that they rose, they had a good rise, and they are due for a breather. It doesn’t mean they’re going to crash it just means they are due for either a consolidation sideways downward correction.

Thom Hartmann: They’re going to drop a little, which is a buying opportunity in your mind.

Pamela Aden: Yes, yes. Now that could be 6 months away that we have another great buying opportunity so this is where look for bargains is a very good way of looking at all the markets today.

Thom Hartmann: Now to put this in context, back about 6 or 7 years ago as I recall in your newsletter, and you would know exactly when it was, you were talking about, as I recall, and I might be mixing up my newsletters here, you were talking about how basically the stock market inflation or growth, paper stocks, was probably going to be coming to the end fairly soon and you should move your investments into asset categories like gold and oil and things. And Louise and I did that, and gold was selling at $289 an ounce and oil was at about $13 a barrel as I recall. And we did very well over the years with that. Is that kind of cycle… Actually we have to take a break. Can you stick around over the break?

Pamela Aden: Yes.

Thom Hartmann: Great. We’re going to take a break here. And I want to get back and talk about these cycles between for example oil, gold and some of the other Asset class categories, copper, zinc, silver, versus regular stocks and how people make those decisions on those. And what you’re seeing ahead. We’re talking with Pamela Aden. She and her sister Mary Anne publish a newsletter called the Aden Forecast. AdenForecast.com which just, personally, and I have no business relationship with these folks at all. I just have subscribed for years and I think it’s a great newsletter. We’ll be right back.

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Thom Hartmann: Welcome back. The Aden sisters, Pamela and Mary Anne Aden publish a newsletter, the Aden Forecast or AdenForecast.com the website. And in fact they offer a one month check it out free subscription if you’re curious, just mention that you heard about it on this show. And Pamela Aden is with us from Costa Rica, one of the publishers of the newsletter. And she, during the break we asked, and Pamela I understand that you’ve consented to stick around with us for the hour and take calls from our listeners with specific investment questions?

Pamela Aden: Well sure, my pleasure!

Thom Hartmann: OK, great. So if you want to give us a call 866-987-THOM if you have a question about what you should be doing with your money, I’ll get out of the way and let you talk with Pamela. Pamela talk to me for a minute about these cycles, you know I’ve heard about 20, 30 year cycles of stocks go up and gold and oil and copper and things go down and then stocks go down and those things go up. Am I getting this all wrong or am I totally confused about this or, make some sense for me out of it.

Pamela Aden: The daily ups and downs and especially if you listen to the news every day, does confuse the average investor because it sounds overwhelming. So this is where the big picture, for us, is like the only way to be able to see exactly the big picture, meaning how the markets interrelate over the last say 40 years or even longer if possible. And then you invest accordingly. We have found that to be very useful in being able to buy the right sector. For example, if you just take the gold price compared to the Dow Jones Industrials. If you use that as a big picture, you would have bought more gold in the early 2000s and started lining up on the stock market and end up proving stock market rising but we had a much better higher percentage gain in the gold sector, gold, silver and the oil and the resource sector. And that’s when the whole world started exploding into infrastructure growth and so resources became the darling of the investment world. But this you could see in the big picture where on an every day, even yearly basis it’s hard to see that sometimes.

Thom Hartmann: Right, right. So if somebody is, OK, so you mentioned the stock market, you said you think there’s some buying opportunities coming, particularly as the stock market weakens, the general market. What about currencies? What about parking your money? You can buy exchange rated funds in currency. You can buy Swiss Francs, I believe on the New York Stock Exchange, can’t you, in exchange traded funds?

Pamela Aden: Oh yes.

Thom Hartmann: So what about buying foreign currencies?

Pamela Aden: Foreign currencies have become an easy way to buy now compared to before and that goes for the gold market too. All those markets used to be hard to buy and therefore the average investor, it wasn’t easy for them to call their stock broker and buy it but now it is. Like you can buy an exchange traded fund in the Australian dollar, Canadian dollar, the Euro, the Swiss franc, you can buy funds. So we have found those to be great vehicles for buying the currencies with ease for your average investor. So we do like those very much. For example. The currencies rise when the U.S. dollar falls. So it’s not being anti-U.S., it’s only as an investor protecting themselves.

Thom Hartmann: I’m seeing that the structural fundamentals of this country since Reagan came into office and started deconstructing our industrial policy that Alexander Hamilton put into place in 1793 that, and then Bill Clinton just kicked the doors wide open with NAFTA and GATT, that our industrial infrastructure is screwed. We basically make military hardware and not much of anything else. And that really concerns me. And that along with the debt that we’ve been running up since the early 1980’s really concerns me about the future for the dollar. Are you concerned that the, you know, are you moving out of dollars and do you recommend moving out of dollars because of the long term concern for the dollar?

Pamela Aden: Oh very much. Actually if you look at the long term picture of the dollar since the early ‘70s, that’s the big picture of the U.S. dollar pretty much, because that’s when it started floating in the free market, and the economy of the U.S. started backing up the dollar which was the first...

Thom Hartmann: Since Nixon took us off the gold standard in ’72, wasn’t it?

Pamela Aden: Yes, that was during the Nixon times. So since then you’ll see a long-term deterioration in the dollar since that time. And certainly it will have it’s ups and downs. It will have a couple year rise, but the main trend is down for the dollar. And the dollar is still the reserve currency of the world, it’s still the interchangeable currency all over the world. It’s still number one but it’s slowly losing that status where eventually, we think, eventually means years. This is a very long process, but it’s already started. That the a small basket of currencies will, could, easily end up being the currency for most central banks rather than just dollars like, right now, China for example, Japan. They have so many dollars and they worry. They worry about the dollar going down and so they worry about what the U.S. is doing about it because they are the major creditor of the U.S. So we have that today that we never had before. So these are the things that could put pressure on the dollar. Like the dollar did reach a low last year before the melt down, which was interesting. That it became sort of a safe haven during the meltdown. So, it could continue to stabilize for a while but still the trend is down for the dollar, yes.

Thom Hartmann: Right, and I notice in your newsletter you actually have a basket of currencies that you recommend. We’re talking with Pamela Aden of AdenForecast.com, an investment advice newsletter. And we’ll be taking your calls for Pamela. If you have questions about how you should be investing your money at 866-987-THOM right after this.

Please listen to the podcast to hear the calls and answers.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.