Freedom Matters – Issue: January 18th 2011

Where is Galt’s Gulch When You Need It?

Welcome to 2011 and the establishment media is telling us happy days are here again. Expect economic growth, falling unemployment, more manipulated stock market gains, a stronger dollar, rising real estate values and the end of the recession.

Come to think of it, I believe this was also their forecast for 2009 and 2010. Eventually they will get it right at least temporarily and – who knows? – it might be this year, given with trillions of additional stimulus and costs added to the national debt and future generations of taxpayers.

Here at Freedom Matters, we don’t care about the short term and we have no reason to be cheerleaders for Washington, Wall Street, the EU or the political establishment. Looking back at the last decade it would appear the euphoria and propaganda early in the decade was certainly misplaced.

The Last Ten Years December 31, 2000
December 31, 2010 Gold $316 $1,400 plus Silver $5.00 $30.00 plus Swiss Franc/Dollar Exchange Rate 61 cents $1.06 plus

Later in the newsletter Ron Holland will give us his dire forecast for the next decade as Washington and other governments attempt to maintain the sovereign debt Ponzi scheme for a few more years by stealing more of our private wealth.

We agree with Pat Buchanan’s 12/28 editorial question, “Is A Bond Crisis Inevitable?” Who Lost the Middle East? by Pat Buchanan on Creators.com – A Syndicate Of Talent and we believe the answer is yes and the only unknown is the timing of the event.

Our concern is although the sovereign debt crisis is primarily a creation of the Wall Street financial elite, the consequences will be almost global in nature due to their success in exporting this flawed financial scam to politicians and governments across the West.

We are concerned the nations of the world may well demand retribution and reparations from the US and Wall Street for the crisis in the longer term. America will no more be able to pay the outrageous costs than was the Weimer Republic of Germany with the illegal war debt levied by the Treaty of Versailles.

In Ayn Rand’s freedom classic, “Atlas Shrugged”, Galt’s Gulch, the place of safety and security for those that had planned ahead was for practical purposes located somewhere in the western United States. Her model for the location was actually Ouray, Colorado where she wrote much of the novel. I’ve visited Ouray many times and on occasion there is indeed a mist or fog over the village protecting it from being easily seen from above just like Galt’s Gulch in the novel.

We are not entirely sure where the safe haven locations will be in the coming bond crisis and dollar collapse but be assured neither you or your assets will be safe inside the United States or most other debt ridden western nations as this event unfolds. .

But never fear! The House Republicans promise to read the entire Constitution aloud in Congress; they will challenge raising the debt ceiling in the upcoming session. More smoke and mirrors. Won’t work in this day and age. The Internet will cover the real story and the Tea Party will read between the lines.

If incoming House Speaker John Boehner thinks that by crying on cue and making the right noises about “budget cuts” he can damp the anger of the American people, he may soon find out how wrong he is. More and more Americans today now look past the establishment news propaganda organs of the state and get their news on the internet and see these pathetic staged events for what they are, just window dressing for a failed political system based on government debt and nothing more.

Rest assured, we will continue to search for and report on locations and strategies to help you build your own Galt’s Gulch to defend your family, wealth and liberties.

Sincerely,
Anthony Wile
Executive Director
The Foundation for the Advancement of Free-Market Thinking

Your Private Wealth Is Threatened By Government Revenue Needs & Treasury Debt

Ron Holland

This is Part 2, of Ron Holland’s speech “Down Argentine Way” presented on the recent FreedomFest Untitled 1 financial cruise down in South America during November. Here at the Foundation we hope to report more information and editorial comment about what is happening in South America. …
There is nothing very complicated or prophetic about forecasting how Washington plans to steal much of the remaining private wealth of most American citizens over the next decade or so. This is the norm in history and politics throughout world history and this has always been the major function of governments. While the Anglo-American establishment has whitewashed this part of history, politics and information over the last 150 years, today with the internet, the truth of our history is apparent to anyone willing to do the research.

Just as the citizens of America and Great Britain have in the past financially benefited from living under the Anglo-American Axis in many ways, today in these twilight latter-days of the empire so we will suffer under the wealth confiscation and likely retribution from the rest of the world due to the accident of our birthplace and citizenship.

As the American national debt grows larger, here are 15-plus probable attacks on your wealth over the coming ten years.

Your assets, benefits and future prosperity will be forfiet to Washington’s elites as they try to buy time to right a sinking ship – and to no avail. The impact on our wealth and future prosperity will likely dwarf what has happened before in Argentina, during the Russian collapse and in Germany with the post First World War Weimer republic.

This essay will discuss the threats and possible new taxes, penalties and controls designed to transfer wealth from the private sector to the federal government.

Social Security Theft – As we see today in France, Social Security retirement ages will be further extended into the future. Wealthy Americans will be “means tested” and entirely forfeit their benefits and Washington will eventually end cost-of-living adjustments for all but the poorest Social Security recipients.

Manipulate Cost of Living Adjustments & Statistics To Steal Your Wealth – Even those receiving existing benefits will find their cost-of-living adjustments dramatically reduced over time with false inflation statistics just as we see today.

The End of Capital Gains – The severe depth of the recession has bought US investors a couple of years extension of capital gains but this will not be a permanent benefit regardless of the party in power. First favorable capital gains treatment will likely be ended for all privately owned investments except for US domestic stock and bond investments. Foreign stocks and bonds will be taxed at regular income tax levels while domestic securities other than (non-productive assets) including mining and natural resource companies will still be provided favorable capital gains treatment. If they are able to manipulate the stock market to new highs then expect an eventual end to capital gains for US equities.

The Probable Imposition of a Non-Productive Asset Gain Tax – Americans with highly appreciated precious metals investments (including numismatics and collectibles) will find a substantial amount of their gains charged with an emergency non-productive asset gain tax. Not only will you lose capital gains treatment but expect an additional high penalty tax on gains as the last thing the establishment wants is hard money investors benefiting while the rest of population find their investments collapsing in value.

This Tax Will Likely Be Extended to Mining and Natural Resource Stocks – Another reason to take your profits sooner rather than later in a crisis situation where the public with conventional investments will clamor for this type of retroactive tax.

A Two-Tier Gold Price Structure – At the very least there may well be a government enforced set or internal price for precious metals sales that operates outside the free-market pricing outside the jurisdiction of the United States. This could be handled by the non-productive asset tax mentioned about or used during a time of government gold confiscation to pay lower prices to American investors than the price outside of America. This is what happened during Roosevelt’s earlier gold confiscation and don’t expect Congress to help you.

The Risk of Private Gold Confiscation Will Continue To Increase – When the dollar and Treasury market crashes, Washington will enact legislation or use Presidential Executive Orders against gold investors to curtail your profits, add a confiscatory non-productive asset tax or confiscate your gold with some type of fiat currency exchange. In any case, they plan to end up with your gold as this will be the basis of a fake gold standard which may be used as the pretense to confiscate your gold. This will take place during the coming bond and dollar crisis by Presidential Executive Order. (Next month’s letter will have a discussion on Presidential Executive Orders past and future.)

The Fed & Washington Might Manufacture A Fake Gold Standard – Free-market public and private currency competition should replace the failed fiat currencies in use around the world today, But Washington will not give up their monopoly on currency creation without a fight and fraud against the American people and we can expect in the latter stages of a dollar crash some type of complicated, fake gold standard or backing as a final fallback position. .Just plan on this happening and it may well be the excuse used for outright gold confiscation.

Washington Will Confiscate Large Private Retirement Fund Balances – Hungry, Bulgaria and Poland are already seizing private retirement funds to meet budget shortfalls. This will take place in the United States. Read the current report on the European pension seizures later in the newsletter under “What You Might Have Missed in the Press”.
The long-term confiscation and control idea is to eventually force all retirement benefits under the new automatic/mandatory IRA program where everything will be combined with and managed like your Social Security benefits. Wealthy and productive Americans will find their retirement benefits used to support the trillions in underfunded union, state and local government employee plans.

Remaining Retirement Funds May Be Forced Into Mandated US Treasury Obligations – As in Europe, you can expect a percentage of your remaining retirement funds and new required contributions in the proposed Automatic IRA accounts will be forced into government bond obligations and your funds will become the buyer of last resort of US Treasury debt. While the Chinese, Japan and offshore nations, central banks and investors are dumping Treasuries your retirement security will be sacrificed to provide liquidity for investors selling the debt obligations.

All Productive Working Americans Will Be Forced Into A Mandatory, Automatic IRA Scheme With Required Annual Contributions – Americans with limited or no savings may actually benefit with this program while those of us with substantial retirement assets will find our benefits stolen to prop up the retirement programs of cities, states and unions.

Home Values May Continue To Decline From the Bubble Levels – There are still substantial levels of foreclosures and short sales on the market which will be followed by more homes being listed for sale which are currently held off the market due to low demand during any temporary price upturn.

An End to the Home Interest Deduction – Proposals in Congress are already putting the home interest deduction on the table of deduction to be reduced or eliminated in the future. I project the home interest deductions will first be eliminated for wealthy homeowners and later expanded to the middle class. This will create further downward pressure on real estate values and the current weakness may buy some time for homeowners.

Rising Income & Estate Taxes – We have already seen this play out during the Lame Duck session of Congress. Estate taxes have been restored and the only question is will the rate remain at current levels or go up. Second, the Bush tax cuts have been extended for two years due to the bad economy but both parties will soon raise income taxes due to revenue needs.

A National Sales or VAT Tax Is Coming – Most western nations already have a VAT tax and this is also already in discussion stages by Congress. Expect an initial tax rate of 5% or more in addition to existing state, county and city sales taxes and the rates will only go up from there.

State, Municipal & Union Bankruptcies & You Pick Up the Bill – Note these costs which will be bailed out by the federal government in many cases and ultimately by the taxpayers will be in addition to the coming bailout on their existing retirement and health benefit plans. Note there is finally some good news on this front as many Democrats and Republicans are attempting to curb the growth and powers of parasitic public employee unions.

What Should Americans Do About Washington’s National Debt?

Everyone with any intelligence in the US and around the world knows that there is no way for Washington to manage the tens of trillions in debt and unfunded liabilities short of ultimate repudiation or hyperinflation. Thanks to Wall Street bankers and the Anglo-American financial elite, our ruinous debt-financing Ponzi scheme has been exported to most Western nations as their politicians have made a compact with the devil in delivering vote buying programs and postponing the interest and debt reduction to future generations. Watch the cuts and subsequent riots in Greece, Ireland, the United Kingdom and you’ll see just a little of the future for the United States with its faltering world reserve currency status.

The question is, should the citizens and the formerly sovereign states of the United States wait for Washington’s foreign creditors to seize the remaining government and private assets left after our politicians have finished with us?
Our politicians are in the process of totally bankrupting the country, individual states and municipalities and in a less than a decade will have confiscated most private wealth and placed tens of trillions of more debt on future generations. Should we act now before Congress and our politicians loot our personal, retirement and real estate wealth, destroy our Treasury obligations and kill the dollar and democratically take matters into our own hands before the looming dollar and debt crisis?

One alternative is for Americans in the individual states to organize and work toward a “Washington National Debt Constitutional Amendment” and repudiate much of the Washington government debt before it bankrupts every private American citizen. Otherwise, the massive increase in the level of indebtedness due to the meltdown and depression may first bring down the Treasury market followed by the US dollar and this will destroy the American economy for decades to come.

The American people need to meet the problem on terms which will make the best of a difficult situation for the nation and our personal financial security instead of allowing foreign creditors, our financial establishment and Washington to buy more time for them through the confiscation of our private wealth, financial security and liberty.

Only a grassroots effort by the American people through state-nullification or the constitutional amendment process have any hope of success. The alternative is to expect those who are destroying our economy and nation to solve the problem they created without sacrificing us in the process. This is just wishful and foolish thinking.

On 12/21/1913 the New York Times stated “New York will be on a firmer basis of financial growth, and we shall soon see her the money centre of the world”, one day before the Federal Reserve Act was hurriedly passed and signed into law with limited debate by a Congress controlled by Washington and banking special interests.

These undemocratic tactics were designed then – just as today – to thwart the will and overwhelming opposition of the American people to expensive handouts for Wall Street and those shadowy few who stand behind the banking system.
Now, Washington’s illegitimate national debt is growing exponentially due to the bailouts and stimulus bills as Congress tries to jumpstart a depression threatened economy. This additional debt load will within the next decade bankrupt our nation and impoverish most productive, working Americans.

The Federal Reserve, together with the above financial elites, essentially manufactured the credit and real-estate bubble. The result: continued enhancement of foreign investment in their Treasury debt Ponzi scheme along with obscene profits for Wall Street at the expense of the American people.
This scam by our financial establishment makes Bernard Madoff’s despicable actions look like Mother Teresa’s charity operation in comparison. An unintentional consequence of these actions was the meltdown in markets, the credit crisis and spreading global depression when the bubble finally burst.

Now there is a cover-up of the cause and coming global run, crash and probable collapse of US Treasury obligations because of the dramatic increase in Washington’s national debt to unsustainable levels. This economic tidal wave threatens the financial security and wealth of every American along with their savings, real estate, retirement plans, investment portfolios as well as their promised Social Security and Medicare benefits.

Concerned Americans must bypass a corrupt Congress and the leadership of both political parties often controlled by special interests at the national level and seek a debt solution through the constitutional amendment and nullification process starting at the state level.

Repudiating the illegitimate national debt of Washington politicians and special interests will allow existing treasury debt obligation owners and investors time to dispose of the unlawful debt created only to profit special financial and corporate interests. They own and control majorities in the House and Senate, much of the party leadership positions and the Federal Reserve System. State legislatures must resolve that most of the national debt is not a legitimate debt of the American people nor the future generations who would otherwise find their prosperity and financial security sacrificed for the profit of a few corrupt global financial elites.

It will be a mistake to waste our time or effort in another futile attempt to lobby Congress, the Courts, the President or the national party leadership of either party. Most have shown their willingness to sacrifice principle, integrity and our future in the recent bailouts and the legislation just passed during the Lame Duck session of Congress.

The proposed constitutional amendment must first call upon the state legislatures to ratify, an amendment repealing Section 4 of the 14th Amendment which outlawed even questioning the validity of the national debt; “The validity of the public debt of the United States, authorized by law….shall not be questioned”, followed by language to further prohibit future indebtedness and deficit spending by the federal government and repudiate all federal government debt (except for obligations for Social Security Trust Funds) and debt and interest service obligations accrued after the 12/22/2013 deadline regardless of when the amendment is ratified by 2/3 of the states.

Thankfully, our Patriot Founding Fathers provided Article Five of the United States Constitution for a future time of congressional, judicial and presidential tyranny as we have seen for the last ten plus years. It provides for an option to assemble a national Convention to propose amendments to the United States Constitution as an alternative to the process of securing two-thirds approval in both houses of Congress.

Like the bailout actions and national debt increases today, Section 4 of the 14th Amendment was an unconstitutional act forced on the American people in a time of crisis just after the end of the War Between the States much like the questionable creation of the Federal Reserve and the Income Tax were enacted on the American people back in 1913.

The amendment was proposed on June 13, 1866 and later ratified on July 9, 1868 at a time when the legitimate voters of all the former Confederate States of America were disenfranchised and not allowed to vote and the states were under military occupation, reconstruction and control of the same special interests who started the war. In addition to making it illegal to question the validity of the public debt of the United States, it also unilaterally prohibited the payment of previous lawful debts incurred by the Confederate States of America or the individual state debts during the war.

Therefore we seek the right by constitutional amendment to lawfully question the validity and legality of a $60 plus trillion Washington national debt forced on productive Americans without their consent by a Congress representing only special interests and not the will or best interests of the nation or the people of these United States.

We urge by constitutional amendment the repudiation of the unlawful debt service and repayment of principal based on an excessive level of taxation and confiscation of the private wealth, earnings and productivity of this and future generations of Americans accrued after December 22, 2013.

Yes, this may be a pipedream solution but I have heard nothing from the political establishment except empty promises. The time for talk is over. Either we take action soon or wait for China and other world creditors to act. They will not be working in our best interests.

What You Might Have Missed In the Press
European Nations Begin Seizing Private Pension To Meet Revenue Needs
European nations begin seizing private pensions – CSMonitor.com
This confiscation of private retirement plans and IRA style accounts will happen here in the United States probably within the next decade.

Russia Cuts the Number of Federal Officials By 20%
Medvedev signs decree to cut number of federal officials | Russia | RIA Novosti
A great idea so why can’t we get congress to do this in the United States? We all know the answer to this rhetorical question but the fact is while Washington is borrowing, the rest the world is cutting government employees and benefits. This does not bode well for the United States.

Janet Napolitano to the Rescue in Afghanistan
Napolitano Visit Aimed at Beefing Up Afghan Border Security, Customs – FoxNews.com
What a joke and a farce as her visit to Afghanistan to help secure their border would be funny if Janet Napolitano’s entire performance as Homeland Security Secretary wasn’t such a total failure. 150 thousand troops plus almost as many highly paid mercenaries, now described as “private contractors” can’t secure the borders of Afghanistan. While at home 67,000 TSA gropers do nothing to defend the totally open American border other than molest peaceful airline passengers.
If she really wants to do her job and defend the security of our homeland maybe she should either close our border with Mexico or take the opportunity and join the US military. They could make her another butt kissing general or something and she might even do a good job in some areas.

China Will Bailout Spain?
China backs Spain to emerge from crisis: Beijing
Or so they claim? It is looking more and more like China will continue to purchase much of the European sovereign debt at least for now. What happens if they bailout the western world except for the United States? This would certainly make foreign retribution and claims against the Anglo-American banking elites and the United States far more popular and possible after a worldwide debt crash as we would have few friends and many foreign leaders and politicians looking to solve their problems at home with our remaining wealth and government assets.

New Jersey Is the Grinch That Wants To Steal Christmas
News Headlines
They want to seize and confiscate unused Christmas gift cards to help balance the budget. Just a taste of what we can expect in the future from desperate politicians at the state, local and federal level. Why stop with gift cards? Why not any extra cash in checking and savings account, money market funds etc.

In Conclusion
We hope you have enjoyed the forth issue of Freedom Matters, the official publication of The Foundation for the Advancement of Free-Market Thinking. The Foundation is a non-profit organization recently established by Appenzeller Business Press (publisher of The Daily Bell) to provide financial support for projects that further the public’s understanding of free markets.

During this new-year, we hope you will consider making a small contribution toward restoring freedom to a world badly in need of it. The foundation emphasizes Austrian economics to solve the deep problems threatening the West today.

A Note From Alf Fields

January 18, 2011 05:14 PM

Dear CIGAs,

Firstly, to finish off on the ultra short term, here is the chart I showed a couple of days ago:

Note the small a-b-c correction from $1420. The A leg was from $1420 to $1363, a decline of $57. If the C wave is the same size, a decline of $57 from $1412.50 takes us to $1355.50.

Yesterday the PM fix was $1360.50 and the morning fix $1357.50.

Conclusion: gold has either already finished the correction or requires one minor drop below yesterday’s fixings to finish it.

Turning to the longer term picture, I sent you the following weekly price chart in mid 2009.

This is what has happened since then:

I have numbered the minor waves and concluded that wave 5 is extending. This opinion is based on the size of the corrections since the wave 4 low at $1058. The following analysis of the minor waves and their relative proportions should make this quite clear:

Wave 1 ___ 712.5 to 989.0 ___ +276.5 ___ +38.8%
Wave 2 ___ 989.0 to 870.5 ___ –118.5 ___ -12.0%
Wave 3 ___ 870.5 to 1212.5 ___ +342.0 ___ +39.3%
Wave 4 ___ 1212.5 to 1058.0 ___ -154.5 ___ -12.7%
Wave 5 ___ is extending – see analysis below.

Note: The similarity of the 12% declines above indicate that they are part of the same impulse wave. The much smaller declines of 7.9% and 5.9% are evidence that wave 5 is extending.

Extended wave 5:

Wave 5.i ___ 1058.0 to 1256.0 ___ +198 ___ +18.7%
Wave 5.iiv ___ 1256.0 to 1157.0 ___ -99 ___ -7.9%
Wave 5.iii ___ 1157.0 to 1421.0 ___ +264 ___ +22.8%
Wave 5.iv ___ 1421.0 to 1337.5 ___ -83.5 ___ -5.9%
Wave 5.v ___ 1337.5 to 1642.0 ___ +305 ___ +22.8% (forecast – assumes the same % gain as 5.iii)
Total 5 ___ 1058.0 to 1642.0 ___ +584 ___ +55.2%

If we assume that 5.v is an average of the 5.i and 5.iii gains of 18.7% and 22.8%, say 20%, the target for 5.v would be $1604. One further possibility is that the gain in wave 5 equals the overall gain in waves 1 through 3, i.e. $1212.5 from $712.5 = $500. This provides a target of $1058 + $500 = $1558.

This concludes the end of intermediate wave I of Major Three. The decline to follow the peak of wave I, (the peak being somewhere between $1558 and $1642), should be of a magnitude of between 16% to 22%.

I think that we can conclude that your $1650 forecast will come close to achievement during the up-move which should start this week.

Best wishes,
Alf Fields

Gold and the Love Trade

The 5 min. Forecast
January 12, 2011 01:24 PM

by Addison Wiggin – January 12, 2011
China, India go for gold: Frank Holmes on “the love trade” in emerging markets
$426 million into $10 billion? Patrick Cox on the awesome potential behind one “wealth quake”
Complacency rules… Jim Nelson on why the VIX is sure to rise, and a sure way to play it
“Clarify your gross assumption”… Readers unload on our Chinese correspondent, and call our letter to Harry Reid “a waste of time and effort”

On the surface, our favorite yellow metal isn’t doing much this week. The spot price has moved within a tight range around $1,380. But just below… we sense something lurking.

Retail buyers in China can’t get their hands on gold bars fast enough. The premium in Hong Kong, for example, has reached $3 an ounce over the spot price, a level last seen during the Panic of ‘08.

“I don’t have any gold,” one dealer told Reuters yesterday. “Premiums are very high. Some say they have no stocks on hand.”

Chalk it up to inflation — officially at 5.1%, but probably double that — and the run-up to the Lunar New Year. “The jewelry sector is gearing up,” another expert tells Reuters, “and giving gold bars as a gift has been getting very popular.”

Likewise, the first gold-oriented fund in China has had no trouble meeting its goal of raising $500 million. Lion Fund Management hung out its gold shingle barely six weeks ago, giving ordinary Chinese access to overseas gold ETFs for the first time.

In the limited space of funds allowing Chinese to invest overseas, this was the biggest offering in three years. Perhaps not a surprise for the world’s No. 2 consumer of gold.

Meanwhile, the world’s No. 1 consumer of gold likely set a record for imports last year. Final figures aren’t in yet, but Indian purchases totaled roughly 800 metric tons — a massive increase from the previous year’s 557 tons, according to the World Gold Council.

Investment demand for bullion surged 73% in the year ended Sept. 30, says the Council’s Ajay Mitra. “Price is no longer a factor,” he adds, reinforcing a point we made here last week: Indian buyers no longer wait for a 10% pullback before backing up the truck.

We have visited gold markets in Mumbai and Beijing over the past year and can attest to the irrational desire buyers have when they get near the stuff.

“There are two main drivers of gold demand,” says U.S. Global Investors chief and Vancouver favorite Frank Holmes, helping put the demand in perspective: “The Fear Trade and the Love Trade.”

The Fear Trade is what we have in the West, “driven by negative real interest rates — where inflation is greater than the nominal interest rate — and deficit spending. Whenever you have negative real interest rates coupled with increased deficit spending, gold tends to rise in that country’s currency.

“In the U.S., we’re in the middle of an extended period of negative real interest rates that will likely last through the year.”

By contrast, “The love trade is significant and unique to gold,” Frank continues. “People buy gold out of love and those in emerging markets are especially amorous of the metal. It is customary in most emerging countries to give gold as a gift to friends and relatives for birthdays, weddings, and to celebrate religious holidays.

“What is important to remember when looking at the history of gold is that in the 1970s, China, India and Russia were isolationists with no significant global economic footprint. The world’s population was 3 billion, and today we have witnessed an awakening of epic proportions.

“These countries are growing with free market policies and massive infrastructure spending. In the 1970s, gold rose on the fear trade and the Cold War. Today, the world is significantly different and the love trade drives gold.

“It’s impossible to predict where gold prices will be 12 months from now,” Frank concludes, “but we think gold prices could double over the next five years. This would mean roughly a 15% return if you compounded it annually.

And that’s just the bullion. If you haven’t checked out Byron King’s report on ways you can still get rich with gold, he has a list of nine right here.

“At long last,” Patrick Cox wrote his Breakthrough Technology Alert readers yesterday, “we can begin to view the No. 1 cause of death — aged hearts and vascular systems — as a preventable disease.

“The ability to restore the heart, vascular and immune systems to full youthful health, using the donors’ own cells, has so many enormous implications.” One of the tiny companies Patrick follows unveiled plans last week to accelerate the development of a revolutionary treatment for both heart disease and autoimmune disorders.

How much will this breakthrough treatment cost? Patrick compares it favorably to a biotech darling of the recent past: “I don’t believe it will be more than Dendreon’s anti-cancer vaccine Provenge, which costs about $93,000 per customer.

“Dendreon estimates $400 million in U.S. sales this year. If you divide total expected revenues by the cost of the therapy, that amounts to only 4,301 prostate cancer patients. Analysts are predicting sales of over a billion annually. That’s 10,752 patients buying a therapy that on average extends life by about four months.

“Now think about the market for a nonsurgical cardiopulmonary therapy, delivered through transfusion, which could easily extend life by a decade.

“Let’s pretend this firm charges $200,000 for the procedure, clearing $100,000 per procedure. Also, pretend that only 5% of the world’s high net worth individuals buy rejuvenated cardiopulmonary system every year. One clinic in Hong Kong could perform that many transfusions easily.

“Regardless, that’s 100,000 procedures at a profit of $100,000 each, for a total profit of $10 billion a year.” All for a company with a market cap today of $426 million. No wonder Patrick sees this as one of the five “wealth quakes” coming in 2011. To learn more about all five, check out Patrick’s predictions for the year. Don’t hesitate; this presentation goes offline at midnight on Friday.

U.S. stocks are adding to yesterday’s gains, traders cheered by the news Portugal pulled off a bond issue successfully. The S&P 500 just topped 1,280.

Canada’s TSX is also up for a second straight day, driven by acquisition news: Cliffs Natural Resources, the country’s largest iron producer, is buying out a smaller competitor, Consolidated Thompson.

This is sweet news for readers of Mayer’s Special Situations. Chris recommended Consolidated Thompson in July 2009 at C$3.11 a share. Cliffs’ offer is for C$17.25 a share. That’s a 455% gain in just 18 months. Did you buy it? If so, we’d like to know.

If you’re interested in Chris’s favorite special situations of the moment, he lays out the story on four of them in this presentation.

The Volatility Index is down over 3% this morning — not to the ultra-complacent lows of last month, but as Chris would put it, “fear is still cheap.”

“As you’ll recall,” writes Lifetime Income Report’s Jim Nelson, “the VIX measures how much implied volatility investors foresee in the S&P 500 through the volume of puts on the index.

“This is based on the idea that investors buy more puts on stocks when they think the stocks could fall. It’s the easiest way to hedge investments. So the higher the VIX, the more hedging there is on the S&P.”

Jim sees a number of speed bumps facing the market this year. “The number of objections we often list — continued stubbornness in real estate, weak commercial financing, energy prices on the rise, the muni bond market’s ticking time bomb, etc. — are just the start.

“With the endless lists of potential mini-crises about to unfold in the next several months, we’re going to see investors begin hedging their bets. The VIX should fly.”

Last year, Jim uncovered a one-of-a-kind way to play a rising VIX. And it has nothing to do with VIX-oriented ETFs, which do a notoriously awful job of tracking the movements of the index. Best of all, this one pays you a dividend; that’s right, you collect checks as market volatility takes off.

Jim lays it all out in the current issue of Lifetime Income Report, released just yesterday. If you’re not yet a subscriber, here’s where to go.

After a week in which the Chinese notched a record buildup of forex reserves, test-flew a stealth fighter jet and completed the world’s longest bridge, what’s next?

They’re taking one more step toward making the renminbi a global currency.

Starting today, the Bank of China is allowing U.S. firms to trade in renminbi. Heck, even individuals can open renminbi-denominated accounts (minimum balance: US$500).

On first glance, there’s no real point. There is still something of a yuan-dollar peg; the yuan can move no more than 0.5% in a day. Standard Chartered figures the people’s currency might appreciate 6% this year.

But the general manager of Bank of China’s New York branch makes it clear. Echoing a trend we first identified in the 2005 edition of Demise of the Dollar, Li Xiaojing explained, “We’re preparing for the day when renminbi becomes fully convertible.”

Tim Geithner, call your office.

“I’ve been enjoying your letters…”

[And the inevitable ‘but’]

“however, sweeping the Tea Party into the tragedy in nearby Tucson is a real reach and insult to [your readers]. There was NO reference by anyone to the Tea Party re the tragic events in Tucson.

“Mein Kampf, The Communist Manifesto, etc., were among [Jared Loughner’s] reading. There wasn’t a scintilla of reference directly or indirectly to the Tea Party. I am shocked and disappointed.

“You might care to clarify your gross assumption, which was totally ungrounded in fact.”

The 5: We assume nothing about the mind of an assassin who’s clearly unhinged. But you missed our contributor’s point: To those on the outside, the Tea Party smacks of populism fueled by anger. He made the leap to violent ultra-nationalism from there. And suggests whether the association is accurate or not, we will see more violence in the future.

“I know you had the wisdom to say you didn’t necessarily agree with the ridiculous comment from China about the Arizona gunman and his (nonexistent) connections with the Tea Party. But you spread the lie, so you should also spread the truth. Here it is:

“A friend described him as decidedly ‘left-wing’ as recently as 2007. On YouTube, he flagged as a favorite a video of a person dressed as a terrorist burning the American flag. Only a lunatic or a leftist would do that. His favorite work was a staple of every left-wing bookshelf, The Communist Manifesto.

“If we take the evidence as presented and not as the media and the left would have it presented, the gunman is clearly not of the right. More precisely, the shooter is neither left-wing nor right-wing. He is crazy and evil — a word not used enough.

“By the way, as an exit thought, the Tea Party movement won in November. Winners don’t go on shooting sprees.”

“Who cares what China thinks about our political system?” asks another. “We have no intention of allowing our system to deteriorate to the point that China has.

“For them to equate what a insane jerk did to a political view is just what a radical left-wing nutjob wants you to believe, I am dismayed you give such viral a platform.”

The 5: You have no intention of letting the system deteriorate… how do you propose to stop it?

For the record, it was one reader’s point of view. While he’s a high school teacher in Beijing, I don’t think he can be thought of as speaking for the entire Chinese nation.

Having said that, what makes “their” point of view interesting is the $900 billion pile of U.S. debt the Chinese government holds… on top of the other $1.4 trillion pile of U.S. dollars.

“Addison’s letter to Congress is excellent, and I agree with every word. However…”

[Here we go again.]

“sending it to Harry Reid and most members of Congress is most likely a waste of time and effort. Too many in Congress only care about their next election, and the easy path is to give things to people ‘for free.’

“Since most people know there is no such thing as a free lunch, they fool people into believing they are entitled to these ‘free’ things, that they have earned them or paid for them, when the cost is just being passed on to others.

“If all this spending results in a disaster, many politicians just see that as an opportunity to expand their power and influence. As Rahm Emanuel says, ‘Never let a serious crisis go to waste.’

“Nothing will really change until the people understand Addison’s message and recognize the promises of something for nothing and ‘entitlement’ for what they are, lies to buy votes and power. I applaud I.O.U.S.A., but wish it had been seen by more people. It should go to colleges and high schools.

The 5: Amen.

Cheers,
Addison Wiggin
The 5 Min. Forecast

P.S.: Tomorrow, we hear from the attorneys representing both the kingdom of Spain and Odyssey Marine regarding the WikiLeaks cables that reveal a shifty deal proposed by the then-U.S. ambassador to Spain offering to turn over the coins Odyssey found in their ‘Black Swan’ shipwreck find in exchange for a painting (stolen by the Nazis), which now hangs in a museum in Madrid.

The painting reportedly belonged to a California family with some weighty political connections in Washington. That said, we’re told the WikiLeaks cables will have no bearing on the court case currently in progress regarding the “ownership” of the $500 million cache. Uh, right. We’ll see.

[Program Note: We’ve been granted an extension on our deadline to submit the film we’re making about the Black Swan treasure to the Tribeca Film Festival. This week remains a critical week in the development of this first festival cut, however. Wish us luck. We’ll continue to let you know how things develop.]

Gold Bull / Stock Market Bear Overview

Mark J. Lundeen
07 January 2011

* Author’s Note 07 Jan 2011: 10PM *
I’m starting with a late Friday addendum to my article below. I’m not going to do a rewrite to fit the following short comments into the body of the text, but I want to comment on Gold & Silver’s Bear’s Eye View Charts for the week. The talking-heads on CNBC, for the most, part were greatly concerned by the “crashing” price of gold this week. My Bear’s Eye View Chart (BEV), with its emphasis on all-time highs (BEV Zeros), and percentage declines from last all-time highs tells a completely different story.

Gold has declined less than 4% from its last BEV Zero (last all-time high), seen just this Monday.

Silver has fallen only 7.5% from its last 30 year high, also seen on Monday 03 Jan.

So far the action gold and silver saw this week is completely normal for a bull market and in no way deserves the hysterical comments expressed by so many TV “experts” in the gold markets. I’m not saying the closing prices for the week are the lows for the move, they could go much lower. I am saying that based on what we saw Friday 07 Jan, there is no logical basis to shout “crash” on TV unless you are attempting to start a selling stampede in the gold and silver markets. My investment tip for the week is: if after watching television you feel like selling your gold and silver: stop watching TV.

* End Gold & Silver BEV Comments / Start my latest article. *
For the past eleven years, the financial media has touted the virtues of Wall Street’s slowly aging soiled doves. Little is made of the major bull market in precious metals that’s been raging for the past ten years. Using the Dow Jones Industrials and the NASDAQ Composite as proxies for the stock market, and Barron’s Gold Mining Index (BGMI) & the XAU for precious metals miners, the chart below displays the profits investors have lost listening to the “advice” by the main-stream financial media for the past decade.

Gold, and the Gold Mining Indices have all gone on to new all-time highs since their 2008 credit-crisis plunge, with silver in striking range of its old 1980 high of $50. The Dow Jones Industrials has just last week exceeded its highs of 2000, but is still 18% below its highs of October 2007. The NASDAQ Composite has performed miserably since 2000. It’s currently 6% below its highs of October 2007, and 47% below its highs of March 2000. But the benchmarks of 2000 are getting stale. So let’s take a look at how the precious metals and a sample of major stock-market indexes have performed in 2010, relative to the highs and lows of 2007-09. Not surprisingly, silver leads the list from the lows of the credit crisis.
Relative Performance of Precious Metals and the Stock Market
from the Credit Crisis to End of 2010

2007-08 Highs2008-09
Lows31-Dec-10
CloseCredit Crisis
DeclinesBounce Back from Credit Crisis LowsSilver 20.698.7930.91-57.51%251.65%* BGMI1,528.87464.111,624.69-69.64%250.07%* XAU206.3770.86226.58-65.66%219.76%NYSE Financial9,982.832,110.684,958.62-78.86%134.93%NASDAQ2,859.121,268.642,652.87-55.63%109.11%Gold1,003.20704.901,421.10-29.73%101.60%NYSE Comp10,311.614,226.317,964.02-59.01%88.44%Dow Jones INDU14,164.536,547.0511,577.51-53.78%76.84%* Based on Weekly Closing Prices, all Other Prices are Daily.

Precious Metals and Mining Shares (BGMI & XAU) Peaked in Late 1st Quarter of 2008, and Bottomed in December 2008. Stock Market Indexes Peaked in 4th Quarter 2007 and Bottomed in March 2009.

Source Barron’s
Graphic by Mark J. Lundeen

With the exemption of gold itself, precious metal assets have exceeded by a good measure, the returns seen in the stock market since their lows of 2008-09. In fact gold, silver and the BGMI & XAU have all exceeded their pre credit-crisis highs, while the major stock indexes in the table above have yet to do so. As we were reminded constantly by CNBC during the 1990s high-tech bull market, two bull-market hallmarks are upward momentum, and the ability to recover from declines. For the past decade, these hallmarks have taken on a golden aura.

Washington’s worst kept secret has been that the financial markets are supported by the Federal Reserve and the US Treasury, via their agents on Wall Street, with hundreds of billions of dollars of pure inflation. Yet with this gale-force wind to its back, the general stock market has been unable to outperform precious metal assets. This is an ill-omen for the stock market, and a huge plus for precious metals.

The problem “policy makers” always come to in an inflationary financial system, is that the flows of “liquidity” don’t always go where they desire it to go. In this case, the Fed’s “liquidity” isn’t puddling under the stock market as they would have it, raising valuations in stocks both large and small. But since 1913 this sometime happen, when the consequences of uncontrollable money flows benefits the commodity markets, and increases the price of consumer goods, not the valuations in financial assets.

Prices trends aren’t based on “monetary science”, as Doctor Bernanke would have us all believe, but on what fickled people do with the inflationary dollars Doc B creates with a few simple keystrokes on his computer. This is why investors, over time, have always had a love / hate relationship with their investments: because deep in the monetary water-table, “liquidity” is constantly flowing from one aquifer to another, turning once rock solid positions into quicksand, and trash into cash.

Gold mining shares were an excellent 20th century proxy for gold during a time when the price of gold was fixed by the US Government. That changed in 1968, when gold was finally allowed to float. Washington had no choice, as central banks were taking the Fed’s inflationary dollars, and returning them to the US Treasury, demanding gold for them at a $35 paper dollar to 1 ounce US Treasury gold rate.

The problem was that the Fed had created many more paper dollars than the US Treasury had gold to redeem them. With gold’s official price set by the 1945 Bretton Woods Monetary Accords of $35 paper dollars for each one ounce of gold held in deposit at the US Treasury, gold at $35 paper dollars became a legal fiction that could no longer be maintained in 1968.
Paper Dollar Inflation 1945 to 2011
US Dollars to One Ounce of US Gold

Event MilestoneYearDollars per One Ounce US Gold ReserveStart of Bretton Woods1945 $39.00 : 1Start of London Gold Pool1961 $64.97 : 1Kennedy Assassination1963 $81.42 : 1End of London Gold Pool1968 $135.01 : 1US Closed Gold Window1971 $198.82 : 1Barron’s 03 January 2011 Issue2011 $3761.60 : 1
The Bretton Wood’s Monetary Accords instituted a $35 Dollar an ounce Gold Standard. This Standard was to prevent the United States from Printing more than $35 Paper Dollars for Every Ounce of Gold it Held in the US Treasury. History shows that the US Never took the BWA’s $35 / 1 Ounce of Gold Standard Seriously. This is the Root Cause of today’s Current Debt Crises.

Source Barron’s
Graphic by Mark J Lundeen

A fact largely forgotten today, is that there was a run * on * the US Treasury’s gold reserves from 1958 to 71; and then a run * from * the US dollar into gold from 1971 to 1980. This is exactly what the smart money has been doing since 2001, running away from dollar assets, seeking safety in gold, silver and mining shares. The current trend of appreciating precious metals and mining shares will continue building momentum as the Federal Reserve, and US Treasury continues with their quantitative-easing program. This makes investing in gold, silver and mining shares possibly the safest, and highest returning investment opportunity investors in 2011 will see in their lifetime.

We can see the shifting flows of “liquidity” since January 1920 by plotting the weekly values of the:
the Barron’s Gold Mining Index (BGMI)
the Dow Jones Industrials (DJIA)
and Currency in Circulation (CinC)

Using the BGMI as a proxy for consumer prices, and the DJIA for a proxy of financial assets in the chart below, we get an excellent picture of these oscillations of “liquidity” flowing from financial assets into consumer prices, and then from consumer prices back into financial assets. Note how the creation of dollars (monetary inflation from the Federal Reserve) is the one constant in the economy. Where these inflationary dollars are flowing to, is clearly seen in the price action of the DJIA and the BGMI.

In the chart above, note how rising CinC, (the number of US paper dollars issued by the United States) drives the values of the DJIA and BGMI. The CinC plot reminds me of a moving average, where financial assets underperformed gold mining for decades. Sometimes the DJIA and the BGMI rise and fall together, but typically they have been counter-cyclical to each other for the past 90 years.

So the rising CinC green plot above not only explains why in 2011, gold no longer trades for $20.67 an ounce (as it did in 1920), but also why my little house, which cost $500 to build in 1910, saw a market valuation of $150,000 in 2007! There is no doubt about it, if investors don’t understand that price trends (both up & down) in the financial and commodity markets are driven by uncontrollable oscillations of inflation, flowing from the Federal Reserve, they cannot be successful in the markets over the longer term. As the current flow of inflation is away from financial assets (stocks and bonds), and towards commodities which includes gold & silver, we should all position our portfolios accordingly.

My next chart uses the same data as the chart above, but the plots are ratios using CinC as the divisor:
DJIA / CinC
BGMI / CinC

The plots below takes into consideration the effects of CinC inflation on market valuations. The Green line indicates when either the DJIA or the BGMI has been inflated as much as CinC itself, which in Barron’s 03 Jan 2011 issue is 219, meaning that there are 219, 2011 paper dollars in circulation for every 1 paper dollar circulating in 1920. The best way to understand the plots below are as follows:
Under the Green Line: Asset has returned an inflationary loss
At the Green Line: Asset broken even to its 1920 valuation
Above the Green Line: Asset has delivered a real inflation adjusted profit

Of course whether an investor makes a real inflation adjusted profit on these oscillations depends on when they take a position. Purchasing on a rising uptrend is the key. In 1982, investors in the DJIA (red plot) did see real gains in the Dow up to 2000. We know that as the DJIA’s red plot was rising slightly towards the CinC’s green 1920 break even line, even though the Dow failed to break above it. The red plot also tells us that even if in December 2010, when the DJIA finally exceeded its highs of 2000, investors in the large blue-chip stocks (as measured by the DJIA), actually took a 44% inflationary loss in purchasing power.

These are real losses. Look at the issue price of Barron’s and the cost of first class postage. In January 2000 an issue of Barron’s cost $3.50, and a first class stamp cost $0.33; today they’ll go for $5.00 and $0.44. These are price increases of 42.8% and 33.3% respectively. Rising prices for food, fuel, and yes gold, silver and mining shares have been largely unreported facts of life since the DJIA’s 2000 top. Doubt what you see below at your own peril.

So you see why I like using CinC as a deflator. CPI is just a bad joke government economists and statisticians play on the gullible American who actually watch CNBC with the volume turned up. Critically, until 2008, CinC went up in lockstep fashion with the Federal Reserves balance sheet. So CinC has actually tracked “monetary policy” since the late 1930s.

However after Doctor Bernanke’s QE1, the Earth no longer produces sufficient cotton to allow the BEP’s monetary printing presses to match the dollars gushing out by the trillions from the Doc’s hard drive. That’s a joke on my part – I hope. Still, the growing production of paper dollars spilling off the BEP’s printing presses is as good an inflation index as can be expected.

From a CinC perspective, the last Dow Jones Industrials’ bull market that produced real after-inflation returns was during the Roaring 20s. Since then, inflation has made non-sense of the dollar price of the DJIA. For example, using the actual price of the DJIA, it went from 92.92 on 28 April 1942 to 193.16 on 15 June 1948, a nice 100% gain; until you look at the DJIA in inflation adjusted terms. From a purchasing power perspective, the Dow actually declined from 0.33 on 28 April 1942 to 0.29 on 15 June 1948. An actual inflation adjusted loss of 13%.

But the IRS’s capital gains policy has always insisted that investors calculate their taxes with nominal dollars. For reasons that should be clear to you now, a dollar to Washington is no different in 2011 than it was in 1920. So since 1929, investors have frequently paid capital gains taxes on actual inflationary losses they’ve taken on their wealth. The reinvestment of dividends may have made a difference, but dividends are taxed as ordinary income, and the income tax laws are so complex, with so many different tax rates that change from year to year, sometimes up to 70% for wealthy individuals; that a simple model for a typical tax payer is impossible to derive. But with or without dividends, it’s fair to say that since 1937 the returns from investing in blue chip stocks have mostly failed to compensate investors for the inflationary losses resulting from the Federal Reserve’s “monetary policy.”

Unsurprisingly when one really considers what has happened since the creation of the Federal Reserve in 1913, the Barron’s Gold Mining Index has frequently proven to be a superior investment to the Dow Jones Industrials for the past 91 years. This is a historical fact recorded with ink on paper, on the pages of dusty old news papers from many decades ago. That this is not widely known says a lot about the ship-shod research produced by Wall Street analysts, and targeted at retail investors from financial news sources such as CNBC. We should expect our current cycle of rising consumer-prices and deflating financial assets, will once again drive the BGMI high above the CinC’s 1920 break-even line sometime in the not too distant future, and stay there for quite some time.

I’m going to close this article with a look at how a broad range of stock groups from the Dow Jones Total Market Groups (DJTMG), various commodity prices, and monetary & inflation indices have performed in 2010. I took this Data from Barron’s first and last issues of 2010. Here is the color key:
DJTMG ———————————————: Yellow & Grey
Metals and Miners ——————————–: Black
Major Stock Market Indices ———————: Green
Inflation and Washington’s Disinformation —: Red

Strangely, aluminum mining is last on the list. I don’t know why, or care.
Investment returns for 2010
From Barron’s First and Last Issue of 2010

Category% Chg

Category% Chg1CLOTHING FABRICS122.08%
51GAS UTIL16.94%2SILVER One Ounce73.64%
52CONSUMER NON CYCLS IDX16.63%3CASINOS71.55%
53ENERGY IDX16.48%4AUTOMOBILE MANUF64.02%
54INSUR PROP & CAS16.36%5AUTOMOBILE PARTS56.18%
55CONTAINERS15.94%6LODGING54.19%
56POLLUTION CONTROL15.77%7NON-FERROUS MINING47.12%
57RETAIL BROADLINE15.25%8RECREATIONAL PRODUCTS38.94%
58BUILDING MATL15.11%9RAILROADS36.65%
59STEEL14.72%10HEAVY MACHINERY33.79%
60NATL DEBT14.61%11RETAIL SPECIALTY32.83%
61SOFT DRINKS14.44%12FOOTWEAR32.79%
62FOOD14.24%13RESTURANTS32.64%
63OIL MAJORS14.06%14CHEMICALS32.41%
64OIL DRILLING14.04%15XAU (Precious Metals)31.51%
65RUSSELL 100013.79%16BGMI (Precious Metals)30.83%
66PUBLISHING12.78%17HOME FURNISHINGS30.66%
67LIQUOR12.78%18REITS29.63%
68S&P 50012.70%19COAL29.31%
69MARINE XPORT12.14%20OFFICE EQUIPMENT29.13%
70TECHNOLOGY IDX11.80%21BASIC MATERIALS IDX28.42%
71SEMICONDUCTORS11.80%22ELECTRONIC EQP27.66%
72FOOD RETAILERS11.47%23CRB INDEX27.60%
73SOFTWARE11.42%24DJ PRECIOUS METALS MN27.46%
74DJIA10.98%25COPPER One Pound27.25%
75PHONE COMPANIES10.88%26HEAVY CONST27.25%
76TELECOMMS IDX10.71%27RUSSELL 200026.15%
77RETAIL DRUG BASED10.55%28AIR FREIGHT25.21%
78HEALTHCARE PROVIDERS10.33%29BROADCASTING25.15%
79INDUSTRIAL SERV10.31%30ADVERTISING25.13%
80FINANCIAL IDX10.27%31TRUCKING25.08%
81BANKS9.46%32OIL SERVICES25.05%
82BIOTECH8.48%33GOLD One Ounce24.81%
83HOUSE NON-DURABLE8.20%34PIPELINES24.71%
84DJ BOND INDEX7.77%35INSURANCE LIFE24.41%
85PAPER PRODUCTS6.28%36WIRELESS PHONES24.28%
86CinC5.48%37DJTA23.89%
87MEDICAL SUPPLIES5.43%38INSURANCE FULL LINE23.67%
88UTILITIES IDX3.61%39INDUSTRIALS IDX23.64%
89HEALTH CARE IDX3.21%40DIGITAL HARDWARE23.11%
90COSMETICS2.85%41CONSUMER CYCLICAL IDX22.48%
91ADV MEDICAL DEVICES2.31%42RETAIL APPAREL21.67%
92DJUA1.94%43TOBACCO21.33%
93COMMUNICATION TECH1.91%44AEROSPACE & DEFENSE20.35%
94BROKERS1.66%45AIRLINES19.50%
95ELECTRIC UTIL1.20%46TOYS18.90%
96CPI1.16%47INDUSTRIAL DIVERS18.83%
97HOME CONSTRUCTION0.14%48HOUSE PRDS DUR18.77%
98CONSUMER SERVICES0.01%49WATER UTIL18.28%
99DRUGS-0.82%50NASDAQ17.47%
100ALUMINUM MINING-3.74%2010 was a Good Year for Investors. It was hard finding an Investment that didn’t return an above Inflation Profit. But as a Class, Metals and Mining were at the Top of this List!

Source Barron’s
Graphic by Mark J. Lundeen

If my standard for real above inflation gains is for appreciation higher than that of CinC, (item #86 in the table), 2010 was a generous year for the 87 items that gained more than CinC. But I do note that metal prices and mining shares (black items), with the exemption of aluminum, are all in the top 1/3 in the table above. I expect these same investments in metals and mining will do even better in 2011, but I don’t care to risk my reputation saying something positive for the financials and high-tech issues.

Mark J. Lundeen
Mlundeen2@Comcast.net
07 January 2011

The Most Astounding Gold Development I’ve Ever Seen

By Chris Weber, editor, The Weber Global Opportunities Report Wednesday, January 5, 2011
Ten consecutive years.

Three words. As rare as they are few. Gold has risen in price for 10 consecutive years. Not one year since this century began has gold not gone up in value.

Compare this to any other bull market and you won’t see its equal. Take the huge Nasdaq bull of the 1990s. Or, really, the 1980s and ’90s.

The Nasdaq closed at 151 the last day of 1979. It soared to close 1999 at 4,069. That’s 2,595%. But during those two tremendous decades, there were down years: 1981, 1984, 1987, 1990, 1994. That was the last down year, until 2000, when it all fell apart. But during that huge time, the most consecutive years of profits the Nasdaq average could muster was just five (1995 thru 1999). But long before the end of 1999, the bubble was apparent. Everyone and his pet seemed to be talking about how much money they had made in the Nasdaq.

Mid-1982 to October 2007 saw a quarter-century of gains in the Dow Jones Industrial Average unlike any other. From 780 to 14,165, bottom to top, is a rise of 1,716%. So transformative was this move that people still think in terms of it: that stocks are the only thing you should really be in, that they cannot lose. That’s what a 25-year bull market will do.

But during that magical quarter century, the most consecutive years of rises in the Dow amounted to nine: all the years from 1991 through 1999.

Until what happened recently, that was the greatest record I could find. And I’ve tried. I’ve gone back to 1800, to the one stock exchange that would be the most powerful over the next two centuries: the London Stock Exchange. It has managed to string together only eight consecutive years of gains.

Now, there may be a rather obscure market that broke the Dow Jones’ nine-year record during the 1990s. But I haven’t found it.

That is, not until the end of 2010. This past year marks 10 years of consecutive rises for gold.

From a low of $255 to a high of $1,421, that is a rise of 457%. Not the huge thousands of percent we saw in the Dow and Nasdaq… not yet. But for sheer consistency, I have never seen another market do what gold has just done…

Year Gold’s Rise 2001 1.97% 2002 24.80% 2003 19.50% 2004 5.35% 2005 18.36% 2006 22.95% 2007 31.35% 2008 5.14% 2009 24.30% 2010 29.80%
Just writing out those years brings back memories of where I was, and how I spent those years and what the world was like. In 2001, when I first bought gold, it was something that you kept very much to yourself. You thought, yet you said nothing. It was easier that way.

Today, I still say very little, but what I say is very different. Instead of doing the stupid thing and telling a few people to buy, this past year I mostly just asked people, with a wondering look, what they thought about gold. Is the price rise something you understand? Well, most people, if they even think about it, still don’t really understand it. If they own anything at all, it is a few shares of Newmont.

No, as great as the last 10 years have been, we still have much left to see. Sure, I’d be crazy to say that we’ll never have a down year. We’ve already beaten the odds. Each passing year is a tremendous statistical obstacle for yet another consecutive annual win. And yet, if (when) gold finally has a losing year, I think we’ll see choruses of “Ha! I knew it was phony! Stocks are really the place to be!”

Knowing full well that a person would have to be crazy to try to forecast anything over one year, here goes: For gold and silver, everything tells me that they will continue strong. However, I’m waiting to be proven wrong. You don’t ever see a major market go up 10 consecutive years. For gold to increase again next year would make it 11.

At some point, you throw up your hands.

For gold, we clearly are in uncharted territory. No one knows what is going to happen in the short term. But I believe that 10 straight years of gain and still keeping somewhat under the radar screen means that there is much more to come. It also means that, slowly but surely, gold is making its way back into the monetary system of the world. And silver is not far behind. This will be the story of the next decade.

Regards,

Chris Weber

FINANCIALS ARE STILL PLAYING THE BREAKOUT GAME

The bulls are working to end the long sideways saga of XLF.

A few times last year, we checked in with the action in XLF, the big financial stock fund. With large weightings in giants like JPMorgan, Goldman Sachs, Wells Fargo, American Express, and Bank of America, this fund rises and falls with America’s ability to earn money, invest money, service debts, launch new businesses, and generally just “get along.”

In 2009, XLF enjoyed a big rebound off its credit-panic lows. But in August that year, the uptrend stalled out and turned into a long period of sideways trading action. It’s still drifting sideways… though in the past few months, the bulls have managed to push XLF past $16 per share. It’s now in the upper reaches of this big sideways pattern.

XLF’s holdings are the backbone of our banking and credit system… so its share price is a good clue to what’s really happening in the economy, no matter what politicians or CNBC commentators are blathering about. Money talks and you-know-what walks. You can listen in with XLF. Right now, it’s starting to say “higher prices for me.”