![\"](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/08\/070813_PC_lombardi.jpg\")
<\/a>Detroit, once the emblem of the growing U.S. economy, had no other options than to file for bankruptcy. Other cities in California, and cities like Jefferson County, Alabama, have done the same for very similar reasons: registering a budget deficit<\/a> year-after-year as revenues declined and costs rose\u2014especially pension costs.<\/p>\nMunicipal bond investors are crushed when cities file for bankruptcy. But that\u2019s old news. Unfortunately, there could be many more bankruptcy situations at the city and municipal level going forward.<\/p>\n
Cities across the U.S. economy are experiencing rising budget deficits, and contrary to popular belief, it\u2019s not just smaller cities; major cities are in the same situation. In fact, two major American cities are in big fiscal trouble.<\/p>\n
Chicago, the \u201cWindy City,\u201d is expected to incur a budget deficit of $338.7 million next year. By 2015, this budget deficit will increase to $1.0 billion, moving up to $1.15 billion by 2016. The city is in deep trouble as pension liabilities are soaring\u2014police and fire pensions are in a cash crunch. (Source: Chicago Sun Times<\/i>, August 1, 2013.) The city has received credit rating cuts and warnings from credit rating agencies. It owes billions of dollars to its suppliers and it can\u2019t pay them.<\/p>\n
Baltimore is in a similar situation. In February of this year, the city\u2019s long-term budget deficit was projected to be $750 million. In a desperate attempt to fix the issue at hand\u2014to reduce the budget deficit\u2014the city cut about 2,200 dependants from the health insurance plan it provides to its employees. (Source: Baltimore Sun<\/i>, August 2, 2013.)<\/p>\n
When a city is faced with a budget deficit, it usually has to go out and borrow money by issuing municipal bonds; often, the interest rates on those municipal bonds, if they are not insured, need to be bumped higher to attract risk investors.<\/p>\n
Rising budget deficits and too much borrowing are a huge burden. We saw what happened in Detroit. Even more problematic, we even saw, not too long ago, what happened to investors who bought Scranton, Pennsylvania\u2019s municipal bonds: the city defaulted on its payments.<\/p>\n
In the first six months of this year (January to June), more than $176 billion worth of municipal bonds were issued. (Source: Securities Industry and Financial Markets Association web site, last accessed August 5, 2013.) It is foolish to think investors won\u2019t see some problems with some of these bonds.<\/p>\n
Still worried about the economy? Become a charter member of DAILY PROFITS Going forward, I will not be surprised to see more cities succumb to the pressures of a negative budget deficit. Chicago and Baltimore are only two cities to keep an eye on.<\/p>\n I am watching how the federal government reacts to cities going bankrupt. Will the government let them or will it bail out the cities with staggering budget deficits? If it follows the latter scenario, the Federal Reserve will have to go on printing money for a long, long time.<\/p>\n Michael\u2019s Personal Notes<\/a>:<\/b><\/p>\n Our in-house gold<\/a> guru, Robert Appel, BA, BBL, LLB, issued an e-mail alert a few days ago, which I\u2019d like to share with my Profit Confidential<\/i> family of readers:<\/p>\n \u201cWe wish to thank those readers who have commented that our publication has evolved into one of the most informative gold letters they have found. In fact, that was not our original intention.<\/p>\n The rise of gold in an era of unprecedented fiat money printing; massive deficits; loss of manufacturing; stubborn unemployment; diminishing quality of available jobs; un-natural relationships between bankers and politicians; contagion into all developed western nations (including Japan!); the state becoming the final purchaser of its own debt in plain sight\u2014all these events in the normal course should NATURALLY cause gold to rise to a higher level, and bring the mines with it.<\/p>\n What level? For about a century, an ounce of gold purchased one Saville Row suit. Today the cheapest such suit is $3,000 and gold is \u2018market priced\u2019 below half that number. Keep this information in mind the next time someone tries to tell you that gold is overpriced.<\/p>\n All the above should have taken place naturally and easily. Our original intention was to have gold be merely one investment option of many. However, as we began to grasp the magnitude and horror and brazen-ness of the state\u2019s intervention in allegedly free markets, the focus of the letter shifted. Our position now is that the excessive force used by the state to stifle these markets will result in an equal and opposite effect over time.<\/p>\n What is happening right now?<\/p>\n For several sessions gold bullion has been struggling in a narrow range between approximately 1290 and 1330 [dollars per ounce]. Similarly the mines have been hanging on for dear life in the area above gap support.<\/p>\n This is called \u2018Tension on the Tape\u2019 and shows a major struggle between buyers and sellers. These struggles always break one way or the other. Our view is that, if the break is up, it will scare the shorts and the market will turn bullish. If the break is down, the new short-term damage will need time to heal. Look to post-Labor Day for the next trend change.<\/p>\n Mainstream media will tell you that the gold market is reacting to news (jobs, GDP, etc.). Nonsense. <\/i>These news reports are used as an excuse to explain the always-strange action in the gold pits. The real explanation\u2014and one that historians of the future will acknowledge when they look back\u2014is the gold wars.\u201d<\/p>\n We\u2019ve arranged for readers of Profit Confidential<\/i> to get a free issue of the advisory Robert is talking about above. Just click here to see the current issue of Profit Taker<\/i><\/a>. If you like what you see and would like to become a subscriber, just call our customer service department at 1-866-744-3579 between 9 a.m. and 5 p.m. EST.<\/p>\n
\n<\/em>and you could…TRIPLE YOUR MONEY IN A MONTH!<\/strong><\/span> Learn how here!<\/a><\/strong><\/p>\n<\/div>\n<\/div>\n