The BP oil spill continues to decimate the economy of the Gulf States. Add a potentially active hurricane season and you have a recipe for disaster. NOAA projects an 85% probability of an above normal hurricane season. See: http://www.cpc.noaa.gov/products/outlooks/figure1.gif If we have one major hurricane entering the Gulf of Mexico while the oil spill is still in play, then we will have an epic catastrophe, not that the current outlook is less than “epic”.
The vacation areas in the Gulf are down 40% due to the oil spill even though they are currently unaffected. The news media has affected the psyche of the vacationers. The gulf states’ economies will continue to suffer.
People unfamiliar with the oil industry assume that technology is an answer to peak oil. This environmental disaster is a clear indication of the difficulty of finding oil and developing fields. The easily extracted oil has already been found. The hard-to-find oil has high costs and high risks associated with it. This is why you should not expect to see cheap oil unless the global economy takes a nose dive. In that case, oil still will not be cheap on a relative basis.
Once economies of major countries become interconnected, they are all subject to the contagion that can wreak havoc in one country and spread to the others. Greece was enticed by Wall Street to participate in Wall Street’s financially engineered products. Along with their socialist mentality of entitlement, they are now in for austere measures which will produce more social conflict. California is trying to get a one time “wealth” tax on the ballot. If you owned expensive property, you would pay a tax on it. This would send a new wave of bankruptcies across the state. Fitch rating service downgraded Spain’s debt which is effectively downgrading the Euro. You can expect more downgrades this summer.
In the U.S., state, county, and local governments continue to see a contraction in tax receipts thus causing layoffs and potential bankruptcy. See: http://news.yahoo.com/s/nm/20100527/us_nm/us_economy_california_munibankruptcy
Once again, the FDIC is back to closing about 5 banks per week. See: http://finance.yahoo.com/news/3-Fla-banks-1-each-in-Nev-apf-392122267.html?x=0&sec=topStories&pos=2&asset=&ccode=
I have been suggesting the gold will continue its bull market run to significantly higher price levels. The media is now jumping on this bandwagon:
I also believe $3,000 is too conservative. $3,000 gold will pull the silver price with it. Gold and silver stocks would grow at an even faster rate. Commodity bull markets normally run at a 19 year cycle and we are 9 years into that cycle. You can expect notable volatility so do not leverage your investments of any type.