Special Report from John Williams at shadowstats.com

Groovygirl is interrupting her normal posting for a special report from John Williams at shadowstats.com. Since his latest commentary is a subscription (well worth the money!), I will not reveal the detail.

However, here is the summary:

- Protracted Economic Downturn Re-Intensifies
- Systemic Stability: “Tap-Dancing on a Land Mine”
- Risks of U.S. Dollar Instability and Systemic-Salvation Efforts Pose Severe Inflation Threat

John’s general outlook remains the same as detailed in this Hyperinflationary Report updated for 2010. Click here. (It is free, please read.)

John does get more detailed on dates in the commentary released today. He sees the Fed completely monetizing their debt in 6-9 months brought on by a flight from the dollar. This will set up the next step-the move to hyperinflation.

Remember that there may be a few more short-lived tricks up the Fed’s sleeve after that 9-month period, like buying gold at a predetermined price (make sure you do not sell your gold then). That move is a warning sign to buy gold if you have not already, not to sell gold. It is a way to devalue the dollar further.

The bottom line is we are still on the road to hyperinflation, with no detours in sight.

Be prepared. Buy and hold physical gold and silver during this period. I am sharing this information, so you know how much time you have to get into position.

More info on John’s latest letter here.

P-E Ratio chart September 2010

Click here for the an updated P-E Ratio chart from chartoftheday.com

As you can see the P-E ratio is back to pre-crash 2007 levels. And MSM is talking about stocks being undervalued because of chart. This will lure investors back into the stock market. However, from a long-term historic perspective (as you can see on the chart), they are still very high. I am not convinced that we will never go below where we are now in the future.

You can also see from this chart that the P-E ratio can turn on a dime in this volatile market. Enter stocks again at your own risk. The markets are really touchy right now. Money moves from moment to moment on rumors and fear. Groovygirl is just waiting for the next sovereign debt crisis to hit. Groovygirl expects a crisis that affects market movement every 18 months or so. This is the new normal. Be very watchful. You just can’t predict where the next crisis will come from (there are so many possibilities) and which investment market it will impact most.

From a historical perceptive, the P-E ratio has been very high the last 10 years (probably driven by debt creation and baby boomer investment), groovygirl suspects that we might have an over-correction to the downside in the long-term (closer to a ratio of 5). That is when groovygirl is looking to get back into the market, but that could be many years away.

Groovygirl understands that some of you out there in retirement land get your living expenses from the dividend income from your stocks. If you have to be in the market now for income, pick your stocks well and be ready to buy or sell in an instance. You could also “collar” your stock. It cuts into your return, but it protects you from violent moves like the one from 2008. Click here for an explanation.

For those of you who don’t have to be in stocks, protect your capital from the coming collapse of the dollar. Buy physical gold and silver.