An investor who is prepared for any eventuality is one who sleeps better at night and who can survive (and even profit) no matter what happens.

In 2008, a global recession woke the world up to startling truths about debt. Although many countries came through the recession intact (despite being financially bruised and battered), there is talk about a second "double-dip" recession. Some people believe that this recession will be worse than the 2008 recession.

One of those people is Leonard Melman. Mr. Melman is a highly respected writer, speaker, and thinker. His articles and "Melman Minute" contributions, available at TheMelmanReport.com, provide insights into the markets, the mining industry, and global economics.

Recently, we spoke to Mr. Melman about his bearish outlook and what he believes investors should do to protect themselves. "I think we're in the advancing stages of an incredibly serious international monetary difficulty," cautioned Mr. Melman. "The world has never seen the likes of it, with one nation after another in a state of severe difficulty."

It's not just another recession, Mr. Melman asserted. There have been lots of those. Rather, it's a global phenomenon and THAT is what is causing the concern: "We've seen one nation or another nation going through a period of financial problems but we’re witnessing today is financially important nations like Italy, Spain, Portugal, Ireland, Iceland, and Greece, all simultaneously in one state of economic collapse or another."

The result has him alarmed: "The world's monetary authorities running around like a bunch of chickens with their heads cut off trying to apply bandages. The whole system is at risk."

With this kind of financial end-of-world scenario, readers might wonder what can be done about it. Mr. Melman advised: "For the long-term, I'm a strong advocate for gold and silver holdings. I think gold and silver are almost a requirement for the prudent investor."

Investors have probably heard a lot of these "buy gold" advisories in recent months, but it hasn't always been this way. Mr. Melman explained just how recent this thinking is: "The whole concept of financial responsibility has become ludicrous. If somebody had gone to a financial planner in 2007 and said 'I want the safest possible investments', that financial planner could have responsibly put that person into General Motors, MBIA, Citibank, Lehman Brothers, Bear Stearns – all the highest quality triple-A rated financial institutions. With those investments, their capital would have been wiped out by about 95% during the 2008 recession. However, if they had gone into gold and silver, some regulatory authority might have charged the financial planner with being reckless… but the investors would have seen their assets go up by 50% to 100%."

Gold and silver are good, but Mr. Melman pointed out that physical gold and silver just might be preferred to paper gold. "Gold stocks, strangely enough, have not done very well in the last year. I did an article on my website recently and I pointed out that, a year ago, gold was about $1300 and the XAU mining share index was at about 230 points. This morning we have gold at about $1800 and the mining share index is about 214. Gold has gone up almost $500 but the mining share index dropped about 16 points."

Mr. Melman then discussed a related issue – that of the faith and trust that someone has in their government. For many people, it's at an all-time low. "The United States recently conducted a poll by the Wall Street Journal and CNN combined, that showed the faith of the American individual in government is at a historically low level; it's actually dropped under [how people feel] about oil companies. That's the degree of disillusion that has taken place."

Readers may not be as bearish about the global financial outlook as Mr. Melman but no one can disagree that the changing economic landscape and a lack of trust in government are going to contribute to some very serious hardship in the short- and long-term.

So, what should investors do if they are concerned that we are headed for some kind of financial difficulty (either another recession or even a total economic collapse)?

Mr. Melman advised that people first consider their objective: "[Investing for the economic situation] depends on a person's objective. If their desire is to have the absolute safest form of money in case the US dollar or the Euro collapses, then you personally would want to hold your gold or silver physically at some private facility within your reach (that hopefully nobody else knows anything about). However, if you are interested in playing the market – either gold or silver, or mining shares – then [invest in the paper-form of the commodities or shares]. It depends, ideally, on what the objective is."

But Mr. Melman continued: "I really believe that everybody should have some gold or silver coins at their disposal," he warned.

Investors who choose to own gold or silver should do so thoughtfully and carefully. "You want to keep [your physical gold or silver investment] absolutely secret because if the day ever comes when you actually need them, many people will be starving out there and they will do anything they can to get their hands on gold and silver."

Investors should consider keeping their physical gold "in your own private dwelling, on privately held land, or even buried in the ground in public areas that only you know about. As an example, there is extensive woodland near where I live. There are many places that are never visited. It would be very easy to dig a little hole in the ground, put some of your gold there, cover it up, and it would be safe. You should let somebody know (like a child or grandchild) because if you kick the bucket and nobody knows about it, [it won't help anyone]. Private, out of government control, is the goal because we saw in 1933 that the government is quite capable of confiscating all privately held gold."

If you are as bearish as Mr. Melman, then you probably can't invest in physical gold and silver fast enough. And even if you think we might be headed into some economic hardship but maybe not the total collapse Mr. Melman cautioned us about, it doesn't hurt to consider physical gold and silver as a type of diversification against a the risk of cataclysmic changes.

REFERENCES

Leonard Melman www.themelmanreport.com