Peter Schiff, predictor of the subprime mortgage crisis and economic meltdown, has uploaded a new video warning against the “artificial stimulus” that caused the recent 3.5% GDP growth.

Schiff breaks down the numbers and explains that GDP growth is the result of government programs, not actual economic growth. On top of that, he brings up the fact that there was positive GDP growth for six years during the Great Depression, but no one was shouting from the rooftops that the Depression was over. How could they when unemployment was over 15 percent?

The Commerce Department stated, “Durable goods increased 22.3 percent, in contrast to a decrease of 5.6 percent in the second quarter. The third-quarter increase largely reflected motor vehicle purchases under the Consumer Assistance to Recycle and Save Act of 2009 (popularly called the ‘Cash for Clunkers’ program).” All in all, Cash for Clunkers made up 1.7 percent of that 3.5 percent GDP growth! And once the program expired, car sales fell 40 percent.

Schiff is still strong on gold. In the past he has said to buy gold is “the buy of a lifetime” and predicted the metal will hit $5,000/oz.

George Soros, stock market legend and 29^th richest man in the world, expects the global economic “recovery” (as its being called) to “run out of steam.” In fact, he thinks it’s likely that another recession will happen again!

Lecturing in Budapest today, Soros spoke largely about currency and the “dangerous” state of the dollar, as well as a complete overhaul of the global financial system. Soros is regarded as an expert in currency matters, most notably for his $10 billion bet against the pound sterling in 1992, earning him $1.1 billion and the title “the man who broke the Bank of England.”

Soros is anticipating the next dip to happen in 2010 or 2011. He predicted the recent credit crunch and subsequent great recession in his May 2008 book The Crash of 2008 and What it Means: The New Paradigm for Financial Markets, describing the “superbubble” that imploded and that blindsided most investment firms and government officials.

Soros has been long on gold since 2008. His uncanny understanding of currencies is very telling, and he has a long track record of accurate predictions. “The dollar no longer enjoys the trust and confidence it once did,” Soros said this morning. As we know, the weaker the value of the dollar, the happier investors will be if they decided to buy gold to protect against inflation. I certainly wouldn’t argue with a man worth $11 billion who has staked his career on his currency bets. 

Another dismal report – 530,000 lost their jobs last week. If you are one of them, I am deeply sorry for your situation and the hardship you and your family may be experiencing. Or maybe you are one of the 5,797,000 people who are still continuing their claims. Or maybe you fall into the category of the tens of thousands of “discouraged workers” whose benefits ran out and have simply given up looking for a job after sending out so many rejected resumes.

So what now for your 401K? A recent study shows that half of workers cash out their 401K when changing jobs. That is certainly one option, and there are three other things you can do with it. Let’s examine your options.

-Cashing out. In this scenario, you will lose the most money to taxes. By law, your employer is required to take 20 percent of the balance off in taxes. Then, you could be slapped with a 10 percent withdrawal penalty. Should you be in a tax bracket above 20 percent, you could get slapped with even thousands of dollars more in income tax.

-Don’t touch it. You can leave the account just like it is with your old company. A lot of people who do this forget they even have it. If you do leave it with your former employer, remember to check your asset allocations at least once a year (or quarterly, if the market is particularly volatile) to determine if you need to rebalance any funds.

-Roll it over to a new 401K. If you find new employment, and your company is offering a 401K, you can rollover your old 401K into that plan.

-Roll it over into an IRA. This is one way to back your retirement savings with gold or precious metals. An IRA can be a self-directed form of savings. In your 401K, you were most likely limited to some funds chosen by your employer. With a self-directed IRA, you can hold everything from a gold coin to government bonds to stocks, and, this is the wildest part, you can even own real estate. It’s probably the easiest way to diversify your retirement savings while still receiving tax benefits.

“Gold may rise to a record $2,000/oz in the next three years as investors hedge against massive inflation sparked by governments printing money,” a Superfund Financial analyst told Bloomberg. Gold gained 2 percent today as the dollar’s value continues to jump around like a heart rate monitor. The other precious metals also did well today with silver and palladium moving up 3 percent and platinum nearly 2 percent.

Precious metals have historically been viewed optimistically when stocks perform poorly. Those looking to buy gold right now cite their fears of inflation and the weakness of the dollar as the major reasons for their investment choice.

Superfund’s Managing Director Aaron Smith said, “Soon, when you go to buy a cup of coffee, you’ll pay $20 or $30 because the dollar won’t be worth anything.” But the dollar won’t be the only problem. Due to globalization and the interconnectivity of trade and investment, Smith continues, “When the U.S. dollar crashes, all the paper currencies have to crash, otherwise if their currencies are too strong, their economies will be weak.”

The rise in new home purchases this summer has some media outlets reporting that the mortgage crisis is over, but it was likely only the result of a seasonal peak that occurs every year. Already as we enter autumn, applications for home loans fell over 12% last week, according to a survey by the Mortgage Bankers Association.

Whitney Tilson’s T2 Partners put together an excellent presentation called “An Overview of the Housing and Economic Crisis – and Why There is More Pain to Come.” Here are two slides that explain the jump in sales that occurred this summer and why we can expect another obscene level of foreclosures in the future.

The presentation calls the recent signs of price stabilization “the mother of all head fakes” and attributes the cause of stabilization to several factors, none of which are a legitimate price bottom:

-Interest rates are abnormally low

-The $8,000 tax credit

-Higher priced homes are being sold which is boosting the average price we see in the news

-Resets on ARMs have temporarily declined

-Foreclosures are being delayed in a glut of paperwork which means there is a low inventory of available homes for sale

-The FHA is providing a lot of support to their market through lending

-April-June tends to have higher prices and more home sales due to the spring selling season and tax refunds

All of these things coupled with the unemployment rate and the high numbers in which employers are still shedding jobs would make anyone think twice about stepping into the real estate market right now. The data suggests purchasing a home right now will only leave you under water in a couple of years when home values plummet even further, and, honestly, I don’t know a lot of people that are absolutely certain they will have a job in the next two years. Now is not the time for great risks. You may even want to buy gold with a portion of your wealth to protect your family’s savings.

Allan Sloan’s piece in Time today sure sums things up:

“Are you furious? If not, you should be. The giant financial institutions that make up Wall Street have been bailed out, thanks to trillions of dollars of our money, and are on track to hand out record-breaking multibillion-dollar bonuses while millions of regular folks are hurting.”

The article brought back some memories to me of when I first decided to buy gold. It was 2001 and I had a great stock, a real winner, whose shares were valued at $90. I thought it might even go up to $140! But in a few short months, it all unraveled, and the stock was worth pennies. The press got involved and the whole ugly story was unveiled, ending in bankruptcy and disgrace.

Yes, I was an Enron shareholder. I was so angry that I had put my money in the hands of crooks! I never wanted to make a mistake like that again. As I started doing research in different financial asset classes, I thought about precious metals. Sure, gold wouldn’t pay interest or dividends, but it wouldn’t be at risk for default or racketeering or running a Ponzi scheme. Gold wouldn’t rob its shareholders or manipulate its business partners or rip off its employees. Gold was simply worth what it was worth, and offered protection unlike any other asset class. After that epiphany, I was hooked.

Have you taken Time’s poll yet on who to blame for the financial meltdown? My favorite part is the photoshopped police lineup of all 25 major financial players who are directly related to our economy’s near collapse. They cover everyone from Alan Greenspan to Bernie Madoff to Bill Clinton to the American consumer and the worst of the worst on Wall Street. And now Treasury Secretary Timothy Geithner is asking for more bailout money, to fund a program that Rep Brad Sherman calls “TARP on steroids. You’ve got permanent unlimited bailout authority.” Geithner drafted a proposal that is supposed to grant the government the ability to wind down a firm once it fails. I am a little confused as to why a firm will need money for its own bankruptcy proceedings, but as the Congressional interviews continue today, hopefully there will more comprehensive information reported.

I know, guys, I know...

When asked by the host of a BBC news show about the “visceral public reaction” to the Wall Street bonuses, Warren Buffet responded

“It’s infuriating to people to see their friends losing their jobs… having their homes foreclosed… And, nobody going to jail. It was one thing in Enron. At least you had Skilling and Ken Lay, or WorldCom or those things. Society at least felt there was a little bit of vengeance taking place. But here nobody’s going to jail. In fact, a lot of them are walking off with tons of money which they got, in many cases, with preferential tax terms. So the American public’s exasperation of this is very understandable…”

This is in line with our earlier post about the trust that is required between an investor and the company they are investing in. Large gains can be attainable in any asset class, but it shouldn’t prevent you from diversifying. No matter how small your savings or your emergency fund or 401K is, safety comes in the form of diversification. Even if it’s just a matter of purchasing a single gold coin, you may have peace of mind knowing all your eggs aren’t in one basket.

Peter Schiff, renowned financial analyst and author, appeared on CNBC yesterday to give remarks about the dollar’s latest rally:

“The dollar has moved up about 1 point from the lows and I guess if you are a daytrader that means something but for everybody else it’s insignificant. The trend hasn’t changed, nothing has changed, the fundamentals haven’t changed, if anything they continue to get worse day by day. So I would continue to be out of the US dollar, I will continue to be on the anti-dollar trades, gold, commodities, foreign stocks. Nothing moves in a straight line, the dollar is always going to have some rallies but you know, don’t be fooled by them.”

Schiff still stands by his statements of the last few years that we are in for a commodities boom. Whether it’s a bullion bar or a gold coin, the dollar’s current rally makes this week an excellent time to begin easing into diversifying your wealth to prepare for any future upsets in the economy.