Two years ago, I traveled from Las Vegas to Baltimore with five gold coins – worth $8,000 – in my pocket. I wanted to know if the gold coins would set off the airport security systems.

I put my bag onto the belt and threw my shoes into a plastic bin. I kept the coins in my pocket. The security officer beckoned me through the metal detector.

Nothing happened. The gold coins did not set off the metal detector.

I love owning physical gold bullion. With gold bullion, I have an asset that’ll never lose its value or its utility, no matter what happens in politics or the economy. I can’t always buy the gold I want at the shop around the corner, so I’ve spent some time researching the ins and outs of transporting and storing my gold…

For example, if you’re moving gold out of the country, keep it in your pocket, not your hand luggage. Only ferrous metal (which contains iron) sets off the detectors in airports. So pure gold coins in your pocket will not set off airport metal detectors. If the gold is in your hand luggage, it will show up in the x-ray machine.

Last week, I sat down with Michael Checkan, an international gold investment specialist who’s been in the business for 30 years. I asked him to discuss the different ways to store your gold once you’ve bought it…

A bank safety deposit box was the first solution Michael mentioned. It is the easiest. Boxes cost as little as $50 a year. If you’re already a customer of the bank, they may even offer it to you for free.

But I have a problem with banks. What if they go bankrupt? You don’t want to get stuck banging on a locked door when you need your coins in a hurry. Second, Michael says the Feds can force banks to divulge information about your security box. They can force the bank to tell them whether or not you own a box. Then the Feds can issue a subpoena and force the bank to open it.

So Michael suggested keeping gold bullion in an IRA…

To qualify for inclusion in an IRA, the gold must by pure, 24-karat gold. The Feds make one exception to this rule: They allow you to put the U.S. Eagle, a 22-karat gold coin, in your IRA. (Here’s a good FAQ about including gold bullion in an IRA.)

I see a couple of big problems with buying gold in your IRA. First, you can’t put coins you already own into an IRA. You have to make a fresh purchase. Secondly, you don’t have access to the coins. A qualified custodian must keep them on your behalf.

Another option is to send your gold overseas to a private security vault. I like this idea. You keep your gold where it’s out of reach of the U.S. government. These private vaults don’t qualify as financial institutions, so you don’t have to report them as foreign accounts when you file your taxes. Michael recommends Safes Fidelity in Geneva and Das Safe in Vienna. These are the two safest, most confidential vault businesses in the world. You can send them your gold through the mail. Just make sure you use registered insured mail. Or you can take it there yourself.

But of all the places Michael suggested, hiding gold on your property was my favorite solution. You have instant 24-hour access to your gold, and you don’t pay any storage charges. The key is, it has to be safe.

One option is to install a safe or a gun locker in a discreet part of your house. Make sure you secure the safe to the floor so a thief can’t carry it out of your house. Or you can bury the gold in your backyard or a friend’s backyard. You can buy waterproof coin tubes online or go to Home Depot and buy a PVC tube and caps to seal the ends.

Just make sure you tell one person where you hid it… in case something happens to you. And don’t tell anyone else.

Good investing,

Tom

P.S. Michael Checkan has been helping investors use precious metals and foreign currencies for 30 years. He’s extremely knowledgeable and has offered to answer any questions for DailyWealth readers. Visit his website at www.assetstrategies.com or call 1-800-831-0007.
]]> http://goldenopportunityblog.wordpress.com/2009/11/11/the-four-best-places-to-keep-your-gold/feed/ 0 goldenopportunityblog http://goldenopportunityblog.wordpress.com/2009/11/03/the-best-three-gold-coins-to-buy-right-now/ http://goldenopportunityblog.wordpress.com/2009/11/03/the-best-three-gold-coins-to-buy-right-now/#comments Tue, 03 Nov 2009 15:30:04 +0000 Joseph Wong http://goldenopportunityblog.wordpress.com/?p=57 ]]> The Best Three Gold Coins to Buy Right Now
By Tom Dyson

“What if my bank account gets wiped out?”

My friend has nightmares about a virus attack on the global computer network. He says terrorists are developing programs that will wipe out bank databases. Account records will vanish, he says, and no one will know who owns what or how much. It’ll wreak havoc on the financial system.

I have different “financial wipe out” nightmares. I worry the federal government will run out of credit and won’t be able to backstop the FDIC. They’ll be hundreds of bank failures, like there were in the Great Depression. In my nightmare, I lose my savings in a bank collapse.

Here’s another bad dream: Inflation gets so bad, the Feds impose currency controls and then devalue the dollar. My money gets stuck in the United States… losing its value.

These fears are some of the reasons I’m building a stash of gold coins… and why you should, too. Gold is real money. You can take the coins anywhere you want in the world, and they’ll always have value. Gold coins are the ultimate “safe haven” insurance asset.

And here’s the bonus: Right now, there’s no “opportunity cost” of owning gold. Usually, you’re giving up the chance to earn interest on your cash when you buy gold. But now, the dollar is paying next to no interest.

Yesterday morning, I had breakfast with one of the largest private gold bullion dealers in the world. His name is Michael Checkan. He runs a business called Asset Strategies International. I asked Michael what gold coins he likes right now…

Michael told me you should keep two things in mind when you buy gold coins. First, you want a good deal. He says you should buy the coins with the lowest premium to the international gold spot price you can find. Right now, there’s an orderly market in gold coins and you shouldn’t pay more than a 5% premium to spot. As I write, gold is at around $1,060. So you shouldn’t pay more than $1,113 an ounce for your coins.

Secondly, you should buy coins with the highest worldwide acceptability, so you’ll have no problem selling them anywhere in the world. For example, Michael says Asians prefer 24-karat gold coins, but the American Eagle and the Krugerrand are only 22-karat gold. They aren’t so popular in Asia. He also says the South African Krugerrand, the British Sovereign, the Mexican Peso, and the Austrian Corona gold coins are “passé” and not as popular worldwide anymore. You won’t get such a good deal when you sell these.

So which coins should you buy?

Michael likes one-ounce Canadian Maple Leaf coins best. He also likes Australian Kangaroo one-ounce nuggets and the new American Buffalo coin.

The national mints sell these coins to wholesalers at a 3% premium to spot gold. The wholesalers take another 0.5% and the retailer takes 1.5% in profit. So you pay a 5% premium to spot. (The Buffalo is a new coin and supply is still a bit tight. If you buy fewer than 10 coins, you may have to pay a 6% premium.) These coins are all 24-karat gold, they are all popular worldwide, and you can hold all three of these coins in your IRA. When you sell, you should expect to receive the spot gold price plus about 1%.

There’s never been a more important time to own gold than right now, even if it’s just a few gold coins. We’re entering severe financial turbulence, and gold coins are the ultimate insurance. Canadian Maple Leafs, Aussie Kangaroos, and American Buffalos are the best coins to buy right now.

In my next essay, I’ll discuss what you should do with your gold coins once you’ve bought them…

Good investing

Tom

Dear Subscriber,

When the leaders from the 20 most powerful countries in the world (including China) met last month, they left with a pledge to work toward rebalancing global economies.

That means countries running large trade deficits, like the U.S., would save more, consume less, and produce more … and export-driven economies, like China, would spend more and export less.

That’s a lofty goal. Even lip service to some. To me, it’s a statement that speaks directly to China. It’s “code” that China needs to stop manipulating its currency.

Lopsided trade was a key driver in the asset price bubbles over the past few years and the continuation of these imbalances are a recipe for another rendevous with global recession.

That’s why the G-20, the IMF, the OECD — all of the major institutions and central banks of the world — are talking about the importance of repairing imbalances.

and, again, it all boils down to China …

China’s Currency Policy
Gives it a Distinct Advantage

While most of China’s major economic competitors around the world have seen their currencies climb against the dollar by 20 percent, 30 percent, 40 percent … even 50 percent in the last eight months … the Chinese yuan has been virtually unchanged.

That’s because China controls the value of its currency. And that creates a major advantage for Beijing in the competition for world exports. It’s a primary reason China has been able to achieve such a rapid rise in global economic power.

While other world currencies have climbed against the dollar, the Chinese yuan has been virtually unchanged.

China’s currency policies have long been a problem for the United States. Cheap Chinese goods and cheap credit fueled a consumption binge for U.S. consumers and a massive trade deficit.

Prior to the financial crisis, the U.S. was on its own to convince China to adopt a more “flexible currency regime” … i.e. stop keeping its currency artificially weak.

The results were modestly successful — only after the U.S. Congress threatened to impose a tariff on Chinese imports! China allowed its currency to appreciate by 17 percent against the dollar between 2005 and 2008.

But since the financial crisis, China has returned to a peg against the greenback. Its authority to determine the value of its own currency and to stockpile U.S. dollars through one-way trade has put China in a position of strength against the rest of the world.

That’s why when the rest of the world was in recession, China was still churning out growth and is now outperforming in the early global economic recovery phase.

Look, it’s no secret that China has the most undervalued currency in the world. In fact, the Chinese yuan would have to appreciate more than 40 percent against the U.S. dollar to bring the exchange rate in line with economic fundamentals.

While the rest of the world was in recession, China continued to grow.

To make matters worse, a weakening dollar and recovering global appetite for risk has sent world currencies soaring over the past eight months. But Chinese currency has been weakening along with the dollar, an effective devaluation against its Asian trading competitors.

Because of this currency advantage, China has been winning even more share of the world export market.

And countries that need healthy exports to work their way out of recession are losing out. That’s why over the course of the last few weeks we’ve seen South Korea, Taiwan, the Philippines, Thailand, Indonesia and Hong Kong all intervene to weaken their currencies.

Meanwhile, Major Developed Economies
Are Losing Out, Too. So …

The China currency issue will likely become a major global point of contention.

Remember, to put the world back on a sustainable path to growth, the G-20 pledged to …

1. Work toward repairing global trade imbalances,

2. Avoid protectionism,

3. And avoid competitive currency devaluations.

All three of these key issues have a lot to do with China’s currency policies.

In an indirect way, the world is telling China to stop manipulating its currency and to work on creating a more balanced economy by cultivating domestic demand.

If China continues to manufacture a weak currency, dump cheap products on the rest of the world, and stockpile currency reserves, points number 2 and 3 will grow in scale and frequency.

That’s a major threat for the global economy.

For now, traders are beginning to make bets that China will placate the rest of the world with some appreciation in its currency. But not much.

The chart below shows the U.S. dollar vs. the Chinese yuan. The red line shows a Beijing-manipulated exchange rate while the blue line indicates the market’s expectations for where the exchange rate will be in twelve months:

Source: Bloomberg

The fundamental equilibrium exchange rate suggests the yuan is 40 percent undervalued.

As you can see with the red line, China started allowing its currency to appreciate in 2005, at the rate of about 6 percent a year. But in 2008 that gradual strengthening of the yuan came to an abrupt halt.

Now the market expects the yuan to start trading higher again from the dynamics I mentioned above, but only 2 percent by this time next year.

This won’t be nearly enough to keep its counterparts at bay.

I’m looking for this discussion on China’s currency to heat up. And the potential political fallout could cause quite a stir for the global economy and currencies.

Regards,

Bryan

It is encouraging citizens to put at least 5% of their savings into precious metals.

The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year’s meltdown in the stock market, people believe it. After all, Chinese citizens don’t receive government retirement money… and they don’t have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it’s cheaper per ounce).

The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don’t recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?

In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That’s not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

First, look where China stands as a gold-producing nation.

In 2008, China produced 9,070,000 ounces of gold, exceeding all other countries. Further, its production continues to rise, while many of the top-producing countries are in decline.

Second, China had the lowest per-capita gold consumption of any country over the past half-century. This year, it is widely expected that Chinese demand for gold will surpass that of India. In other words, they’ll also become the world’s No. 1 retail buyer.

Third, the Chinese government has been using its foreign exchange reserves to buy gold – a lot of it – and doing so on the sly. This past April, Chinese officials made a surprise announcement that they had been secretly buying gold since 2003, increasing their gold reserves by 76% to 33,886,000 ounces. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the 12.9 million ounces the International Monetary Fund says it will sell.

But all this production and all this buying isn’t enough…

Even though China is the world’s seventh-largest holder of gold, gold comprises but a tiny fraction of its reserves, as shown in the table below.

What would happen to the gold price if China increased its gold reserves to just 5%? What about 10%? To overtake the U.S. as king of the gold hill, it would have to buy all the gold held by the governments of France, Italy, and Germany combined. Can China really do any of that?

At $1,000 gold, to push China’s gold holdings to 5% of reserves would take $55.3 billion; to 10% would cost $144.4 billion; to be the world’s top gold dog would run $227.6 billion.

Chinese reserves are approaching $2.3 trillion, of which almost 70%, or $1.6 trillion, are denominated in U.S. dollars. The cost to become the world’s biggest holder of gold would be a pittance compared to the amount of money China has available. In other words, money is not a problem.

Combining the country’s massive holdings of dollars and the very real likelihood those dollars are going to lose much of their value, the motivation to buy tangible assets is urgent.

Further, keep this in mind: China’s reserves continue to grow. Therefore, the country must continue buying gold (or consuming its own production) just to maintain the small gold-to-reserves ratio it has, let alone increase it.

In addition to the government buying precious metals, Chinese citizens will continue gobbling them up, too. Demographics alone tell us why.

Government statistics show the average urban household in China has about US$1,300 in disposable income. Multiply that by the number of urban households in China and you come up with roughly $36 billion in available capital.

According to precious metals consultancy CPM Group, about 9.5 million ounces of gold will be turned into coins this year (including “rounds” and medallions). At $1,000 gold, that’s $9.5 billion, or only about one-third of the capital available in China.

The number is more striking for silver: Total coin production this year is expected to hit 35 million ounces, equaling $615 million or just 1.7% of the available capital in China. Of course, a lot of Chinese people want cars and refrigerators, etc., but it won’t take much of a shift of this capital into gold and silver to have a major impact on the global retail precious metals market. It may already be under way.

And long-term projections show the demographic trend won’t slow down: The middle class in China is expected to increase by 70% by 2020. So over these next 10 years, more Chinese and more money will be coming into the precious-metals markets, all at a time when inflation is almost certain to be high, adding to gold and silver’s appeal. Couple this with China’s long-standing cultural affinity for gold and you have the makings for a potentially life-changing gold rush.

If I were a crime detective, I’d say China has the motive, means, and opportunity to push gold and gold stocks much higher.

Regards,

Jeff Clark

Last week, I showed you the most shocking numbers I’ve seen in my lifetime:

Up until the day Lehman Brothers collapsed in September of last year, it took the Fed 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks.

In contrast, after the Lehman Brothers collapse, it took Bernanke’s Fed only 112 days to double the size of those reserves. He accelerated the pace of bank reserve expansion by a factor of 45 to 1.

Even the Fed’s response to the biggest emergencies of the recent past was far smaller by comparison: Before the feared Y2K crisis and after the 9/11 attacks, the Fed’s money infusions were 14 times and 25 times smaller, respectively.

Moreover, they were quickly reversed as soon as the crisis subsided.

This time, the Fed has done precisely the opposite: Despite its largest money infusion of all time in late 2008, the Fed has added still more reserves in 2009!

The end result is a massive supply of U.S. dollars, driving down their value. (See “Bernanke gone berserk.”)

And unfortunately, this is just one aspect of the U.S. government’s efforts to devalue our money, the subject of our recent webinar …

Washington’s Secret War on the Dollar:
Protect Yourself and Profit
with Martin D. Weiss and Larry Edelson
(Edited Transcript)

Martin Weiss: Welcome to our online seminar on what may well be the most urgent financial and strategic dilemma of our time — the threat to the cornerstone of our nation, the threat to the value of the U.S. dollar.

The dollar is careening toward its lowest level in history! Gold is going through the roof right now, plowing past every barrier, surging to its highest level of all time. Major oil producers all over the world are talking about abandoning the dollar as the basis for global oil contracts, right now!

Joining me today from his office in Asia is long-time Weiss Research analyst, Larry Edelson. Over the last two weeks, thousands of our readers have been joining Larry on his blog in a hot debate about the fate of the dollar.

Our readers are deeply concerned about the dollar’s current decline … how that decline could slash their wealth … and how it could impact their quality of life. They wonder when and how they will be able to save for their future, for their children and grandchildren.

They ask: Can the United States survive the decline of its currency? Could the dollar’s decline mark the end of our nation’s greatness as a world power?

And now with gold and natural resources going through the roof, they’re also asking: What should I buy today to profit from this surge?

These are not questions just for the future. They are questions we must address right now.

The dollar is already falling in value against all major currencies.
The dollar’s role as a reserve currency is already being challenged in Europe, in Asia, and in the Americas. The dollar’s day of reckoning is already here.

Larry Edelson was among the very first to warn about this day.
Throughout the 1980s and 1990s, he continually wrote that America’s massive debts will someday become unsustainable.

He consistently explained that the favorite debt solution of both Democrats and Republicans will be to pay off government debts with ever-cheaper dollars.

He repeatedly warned that, in a desperate attempt to escape the nation’s massive debt burden, Washington will literally declare war against the U.S. dollar!

He further warned that, step by step, international investors will abandon the U.S. dollar.

And perhaps most alarming of all, he wrote about the ultimate day of reckoning for the dollar — the day when foreign countries and international organizations will push aggressively to replace the dollar with a new reserve currency, ending America’s supremacy as a global economic power.

Now, each and every one of Larry’s forecasts is coming to pass. And now, other voices — some very prominent voices — are saying, in essence, the same thing Larry was writing years ago. We have tapped Weiss Research’s research department to compile the relevant expert comments made recently on C-Span, CNN, NBC News, Bloomberg, and other major sources. So let’s review them right here and now.

Announcer:

President Barack Obama has declared: “The long-term deficit and debt that we have accumulated is … unsustainable. We can’t keep on just borrowing from China or borrowing from other countries. We have to pay interest on that debt … and that means we’re mortgaging our children’s future.”

Senator Judd Gregg has shown how Washington’s favorite solution is to pay its debts with cheaper dollars. “One way to solve the debt problem,” he said, “is to … devalue the dollar and … inflate the currency. That’s the cruelest tax of all.”

Fed Chairman Ben Bernanke puts it this way: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Jim Rogers states unequivocally: “It’s the … official policy of the central bank and the United States to … debase the currency.”

Zhou Xiaochuan, Governor of China’s Central Bank, has declared that “The costs of a dollar-dominated system to the world may have exceeded its benefits. The dollar should be replaced by a new global reserve currency.”

Even the United Nations has effectively declared war on the dollar with a new, game-changing report that recommends a new artificial reserve currency.

Martin: Larry, welcome and congratulations on your foresight! I prayed that you would be wrong. I hoped that Washington and the world would not wage this war on the dollar, that this day of reckoning would never come. But now it’s here.

I have not given up hope for the dollar or for the United States, but at the same time, I recognize that, as investors, we can’t survive on hope alone. We must be pragmatic. We have to take protective action for ourselves and our family. That’s why I’ve invited you here today, not just because you saw this coming, but more importantly, because you have helped investors convert your vision into action.

Larry Edelson: Thank you for that recognition.

Martin: What I especially want to recognize is the fact that you have demonstrated, in actual practice, that the best defense for investors is to go on the offense, to convert the dollar decline into a myriad of wealth-building opportunities. We’ll talk about some of those later. Plus, before we finish today, I trust you will be giving us specific, actionable recommendations.

Larry: Yes, I will, and I will also tell you when.

Martin: Which brings me to a fundamental timing question: All the debts the United States has today have been built up over many years. All the trends we are seeing today have been decades in the making. So I ask you: Why is this suddenly a crisis now?

Larry: These years of dollar decline you’ve seen so far are merely the prelude — the build-up — to the day of reckoning for the dollar … to the convergence of events we are now seeing today.

Martin: Show us precisely why.

Larry: Because of the convergence of four factors. First, we no longer have merely a mountain of debts. We have a volcanic eruption of debts. You saw that eruption in the form of a massive financial crisis which swept the globe just months ago. And now, you are seeing that same eruption in a different form.

Martin: In the explosion of the U.S. federal deficit!

Larry: Yes, if the U.S. federal deficit were growing by 20 percent or 30 percent or even as much as 50 percent, the pundits could have argued that it was just the continuation of a long-term trend, that it was simply more of the same.

But just in the last 12 months, the U.S. federal deficit has exploded from $454.8 billion in fiscal 2008 to $1.4 trillion in fiscal 2009.*

This year’s deficit is over three times last year’s level — and last year’s deficit was already the largest in history, in dollar terms.

Martin: That’s not just more of the same.

Larry: No, it’s a whole different ball game, a clear break with the past. That’s the first major change. Second, we’re witnessing a sea change in the global economy.

Martin: The power shift from West to East that we talked about in the Weiss Global Forum …

Larry: … which is now being reflected in the all-critical shift out of the dollar as the world’s reserve currency. Put yourself in the shoes of an international investor. Even if you can choose the right dollar investment, the falling dollar is slashing your returns. You’re fed up. You’re anxious to diversify out of the dollar. But you’re not the only one.

Central banks are doing the same. Remember: The U.S. dollar is not only the money we keep in our bank accounts or carry around in our pockets; it has also been the money foreign central banks keep in their reserves.

Martin: The dollar has been the world’s dominant reserve currency.

Larry: Exactly. Which means the world has had to take our dollars whether they liked it or not. They had no other choice. So that gave us a huge strategic advantage as a nation. Unlike all other nations, we were shielded from the consequences of our follies. We could postpone our day of reckoning. We could party, binge, and abuse … yet never suffer a hangover or side effects.

Now, that protective shield is melting away. Now, we face the danger that all our past excesses could come crashing down on us in one fell swoop. You can see that clearly in what the world’s experts are saying and what the world’s leaders are doing … as you so vividly demonstrated a moment ago. You can see it even more clearly in the dollar’s decline in currency markets.

Martin: You’ve cited two critical factors pointing to a dollar decline: the explosion in U.S. debt and, at the same time, the global shift away from the dollar by investors and central banks. But there are other forces …

Larry: Force #3 is the dollar cycle. Our work with the Foundation for the Study of Cycles, based on centuries of data, leads to the conclusion that the dollar won’t hit bottom until the end of 2012. That’s three more years of potentially traumatic declines.

Factor #4 is the hidden debts that could suddenly burst onto the scene and destabilize financial markets.

Martin: Can you be more specific?

Larry: Everyone talks about our debts to Japan or to China. But our foreign debts go far beyond that. According to the U.S. Treasury Department, our total liabilities to foreigners are now $7.9 trillion — not just to countries like China and Japan, but also to Eurozone and Latin America… not just to central banks, but also to private companies and individuals. It’s a massive mountain of foreign debts that everyone just takes for granted.

Another, even larger example of hidden debts is the true obligations of the U.S. government.

Martin: When experts talk about the “national debt,” they are referring exclusively to funded debts — the debts for which the U.S. has issued securities like Treasury bonds or agency bonds.

Larry: But there again, the problem goes far beyond that. In addition to the gargantuan funded debts you see on the government’s balance sheet, Washington has another $104 trillion in unfunded obligations.

Martin: Social Security, Medicare, Medicaid, Veteran’s benefits, government pensions.

Larry: Correct. And to make matters worse, the first wave of Baby Boomers are turning 63 this year. Washington is going to have to begin paying out that money starting now!

Martin: This helps explain why Washington is now doing something that, on the face of it, seems to be patently insane: trying to spend, borrow, and print its way out of a debt disaster.

Larry: And why I see a convergence of forces toppling the dollar. It all comes down to what President Obama himself admitted: The debts our country has racked up are unsustainable. Or more to the point, they are patently unpayable. It will simply be impossible for our government to ever get out of debt by any conventional means.

Martin: But do you really believe the government is going to take radical measures to make the debts go away?

Larry: Why is that so surprising? Haven’t they already taken radical steps — steps that no one would have ever imagined possible just a few years ago? Look at how they bailed out Bank of America, Citigroup, Merrill Lynch, and AIG. Look at the trillions they poured out in loans, investments, and credit guarantees. Look how they’ve given the Fed new superpowers.

Martin: But now Mr. Bernanke and Mr. Geithner are claiming victory. They’re saying that the crisis is over and that all those extraordinary measures were a necessary evil.

Larry: They have indeed eased the debt crisis, but only by creating still another crisis — the dollar crisis, which is just beginning. Yet they haven’t made a dent in the mammoth problem that gave rise to the crisis in the first place —overwhelming, burdensome debts. All told, each and every household in America is now indirectly responsible for over $1 million in government debts and obligations.

We’ve got the officially recognized national debt at $11.8 trillion … unfunded national obligations of $104 trillion … another $9 trillion in cumulative deficits over the next 10 years … plus another trillion dollars for health care reform, no matter what bill finally makes it through Congress. Grand total: $125.8 trillion.

Imagine the government could somehow pay off that debt at the rate of $100 million per day, every day starting right now. Even at that rate, it would take 3,446 years before the total government debts and obligations are paid off …

Martin: … assuming no new government spending, no new social programs, no new wars, no new economic disasters or bailouts, no new deficits in the meantime …

Larry: … which, as we know, is a pipe dream. Even the White House admits we’re looking down the barrel of one-trillion-dollar deficits for years to come. That’s why I say that, no matter how you look at it, this debt mountain is patently unpayable. It will never be paid off, other than through some form of default.

Martin: Could you explain that please?

Larry: There are two ways a government can default on its obligations: The first way is simply to stop paying its bills and obligations. That’s highly unlikely, for obvious reasons. The second is to default on the sly — by paying off creditors with cheaper dollars, dollars that have less buying power.

But this is not just theory. It’s practice. And the idea of debasing the currency in order to delay a debt collapse certainly was not invented by Washington. Time after time, history shows us that when a government cannot print money fast enough to overcome its exploding debt burden, it has no choice but to take more drastic steps to slash the value of its money.

Martin: Let’s take a quick peek at that history.

Announcer: Since the dawn of civilization, every major nation that has been saddled with unpayable debts and obligations has ultimately resorted to currency devaluations in some form.

In ancient Rome, the Roman denarius was the dominant currency not only of the Roman Empire but even beyond its borders. But when Rome began to fall, so did its currency.

From its heights in the fourth century A.D., the Roman denarius plunged to 1/50 of its former value — in just 13 short years … and then ceased to exist.

Later, during the Byzantine Empire, their money was, in many aspects, the world’s reserve currency for 1,000 years. But in the 12th century, when the empire began to suffer under the weight of overwhelming, unpayable debts and obligations, it was also devalued by reducing its gold content until it effectively ceased to exist in the 14th century.

More recently, the fate of the British Empire and the fate of the British pound were also intertwined. In the late 19th century, London devalued pound sterling and then did it again in the early 20th century. From its heyday at the height of the Empire to its low point in recent years, the pound ultimately gave up 80 percent of its value.

So you can see that this is a well chartered path: The rise and fall of empires; the rise and fall of their currencies. What is most alarming, though, is what happens when countries lose all semblance of discipline and when they are ultimately punished by market panics.

In Germany after World War I, the government printed money in massive quantities to repay war loans and reparations with worthless currency — and to help industrialists to pay back their own loans. The reichsmark plunged from 4.2 to the U.S. dollar at the outbreak of World War I to 1 million per dollar by August 1923 … and then to as low as three trillion to 1 in the final panic before the rise of the Nazi regime.

Larry: Now let’s look at the current era: In the past 10 years, the dollar has progressively lost 36 percent of its value against other major currencies and 75 percent of its value against gold. And in the years to come, it’s bound to lose much more. I repeat: A wholesale currency devaluation is the only politically expedient way to address a debt crisis as massive as we face today. Bush, Obama, and Bernanke have already committed us to this path.

Martin: Can you give us evidence of that?

Larry: Evidence? Are you kidding? Look at last year when the U.S. economy was threatened by systemic risk from the credit crisis. Bush and Bernanke were faced with two simple choices: Either to step aside and allow a sudden, savage depression … or to spend countless sums that the government didn’t have — that it would have to borrow and print, that would almost surely lead to a future erosion in the value of our money. They chose the latter. They chose to sacrifice our future for the expedience of the present.

And this year, when faced with similar choices, the Obama team did the same. They spent hundreds of billions of TARP money. They passed a second stimulus bill AND a $300 billion omnibus spending bill. And then, just for good measure, they bailed out the automakers.

There’s your evidence: Two very different presidents — one, Republican, one Democrat — choosing the same path, the only politically viable path, the easy way out.

Both presidents chose to fight the impending depression by borrowing and printing money … while both knew full well that this has set us up for what could be an even more devastating future crisis — the crisis of the dollar, the crisis of inflation.

Martin: Which is actually worse in some respects, isn’t it?

Larry: This isn’t just an economic discussion we’re having here. It has real and dramatic consequences for everybody listening to us right now. When the value of a nation’s currency falls by half, its people’s money goes only half as far; their cost of living doubles.

When a currency falls 70 percent, 80 percent, 90 percent, or more as in the examples we just looked at, the people who earn it have to pay up to 10 times more for many of life’s necessities — food, energy, and more.

The saddest victims are folks on fixed incomes, who worked, scrimped, and saved for a lifetime to ensure they’d have enough to live on in retirement. Suddenly, the nest egg they thought would provide a comfortable life is barely enough to keep body and soul together.

Any way you look at it, this kind of currency devaluation is like government-sponsored theft.

Martin: Like a burglar who slips undetected into your home and picks up your spare change — every night, 7 days a week, 365 days a year.

Larry: Unfortunately, the majority of savers and investors don’t have a clue. They don’t believe it can happen … that it is happening right now. John Maynard Keynes said it all 79 years ago: “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”

In public, Washington will never admit to it, but both President Obama and Fed Chairman Bernanke are actively waging their secret war on the dollar right now as we speak. And as an investor, you have no choice but to take defensive steps starting immediately.

Martin: Name those steps.

Larry: Step one, at a bare minimum, I believe that everyone should put 10 percent of their investment portfolio in gold and gold-related securities.

Martin: And how much would be too much?

Larry: Even if you want to be aggressive, I would not go beyond 25 percent. There are too many other contra-dollar opportunities you’d be missing.

Martin: Suppose I have, say, $500,000 in stocks, bonds, and other liquid investments. Please give me a more precise breakdown.

Larry: Each investor needs to take a look at his or her individual investment needs. There’s no such thing as a one-size-fits-all portfolio. But let’s assume the 10 percent.

You’d have $50,000 in the gold sector. Of that $50,000, I’d put about $3,100 in bullion, in ingots, or in bullion coins like the American Eagle or Canadian Maple Leaf. Given the storage hassles and costs, there’s no need to put more than that in bullion.

I’d put another $3,100 into the SPDR Gold Trust ETF, symbol GLD, and another $3,100 into each of three favorite gold mutual funds: the Tocqueville Gold Fund (TGLDX), the U.S. Global Investors World Precious Minerals Fund (UNWPX), and the U.S. Global Investors Gold and Precious Metals Fund (USERX). Then, I’d put the rest into my top-rated gold mining shares.

Martin: How high do you think gold could go?

Larry: I have three gold price scenarios. First, I believe that, no matter what, gold is going to hit its inflation-adjusted high of $2,300 an ounce — at a minimum. But that assumes an orderly decline in the dollar and an orderly process of phasing in a new world reserve currency of some kind.

In scenario two, that process is more chaotic and muddied, with rising global uncertainty regarding the outcome. In that scenario, despite sharp pullbacks, you could see gold reaching $3,000 an ounce.

Martin: Many people think $1,000 an ounce is already very high.

Larry: Adjusted for inflation, gold at $1,000 per ounce is actually selling at less than half its all-time high. Moreover, at $1,000 an ounce, gold investors are banking on an orderly transition to a new reserve currency over many years. That’s highly unlikely, in my opinion.

In scenario three, markets take over, panic sets in, and investors lose any semblance of trust in process of transitioning to a new reserve currency.

Martin: How far do you think gold could go in that scenario?

Larry: In that scenario, all bets are off! The dollar could overshoot dramatically to the downside, while gold and other natural resources could overshoot dramatically to the upside. I wouldn’t be shocked to see $5,000 an ounce for gold.

So in my lowest scenario for gold prices, I think your bullion has the potential to double. And in a worst-case scenario for the dollar, you could be looking at a 5-to-1 gain on your bullion positions.

Martin: All this is about step 1, investing in gold. What about step 2?

Larry: Step 2 is to diversify beyond gold to other natural resources. Washington’s war on the dollar will drive up a wide range of tangible assets — and companies backed by those assets. Assets that have intrinsic value and assets where the dollar crisis is manifesting itself!

Look, over the last decade we’ve seen tech companies go bust. We’ve seen the leveraged mortgage markets go bust. And we’ve seen the financial sector collapse. So savvy money now wants tangible assets and resources that provide the world with the basic necessities of life. It’s where people like Jimmy Rogers are investing. It’s where surviving hedge funds are going. And most important in my opinion, it’s where the giant sovereign wealth funds are shifting a lot of their money, especially China’s.

That gives you a double tailwind to propel your investments: Resource companies propelled higher by (a) the falling dollar and (b) the demand from China and other Asian countries.

Already, Beijing has quadrupled its gold reserves. And already, Beijing is gobbling up copper like there’s no tomorrow. China is buying oil and oil reserves, cutting deals left and right all over the world, scooping up natural resource companies and investments. It’s not just a strategic ploy to secure supplies. It’s also a hedge against the decline of the dollar.

Martin: And this is having an impact on commodity prices.

Larry: A huge impact! Beijing has $2.14 trillion of cash in the kitty, and most of that cash is now in dollars, which are falling. They cannot liquidate those investments all at once. But they can shift progressively over time. At the same time, China desperately needs those natural resource supplies to feed its rapidly growing economy and the rising lifestyles of 1.3 billion people.

Martin: In our Weiss Global Forum, you talked about the huge growth in China’s acquisition deals. Can you run through that again briefly for those who missed the Forum?

Larry: In 2002, China made only one deal; In 2003, 2 deals; 2004, 3 deals; 2005, 11 deals. In 2006, that more than doubled — to 25 deals; 2007, 33 deals; 2008, 53 deals.

And not only are there more deals, but the average value of each deal is growing by leaps and bounds. These figures also include related companies, like railroads that ship resources.

And they’re being done all over the world — in Brazil, Peru, Venezuela, Australia, Africa, you name it. And in virtually all commodities — from oil to soybeans, copper to lumber … from rubber, wheat, and corn to timber.

Make no mistake about this: The combination of the disappearing dollar and the huge demand for natural resources from Asia is unlike anything this planet has ever seen before.

And it is a key reason copper has surged 94.6 percent this year … oil has roughly doubled from its lows in January of this year … sugar has exploded higher, up over 70 percent … even cocoa is jumping, up over 30 percent this year.

Martin: Step three?

Larry: For funds you can afford to risk, use leverage. The more leverage you use, the more you can make …

Martin: And the more you can lose!

Larry: Of course, but if you use leverage carefully, that relatively small amount invested can potentially multiply your returns many fold.

Martin: Please give us some specific examples.

Larry: First, use no leverage whatsoever, just sitting in bullion. I am aiming for a minimum gain of about 130 percent — from $1,000 per ounce to $2,300 per ounce. Any gold you can buy for less than $1,000, consider it a bargain. That’s the first tier of your strategy — long term with leverage.

Martin: And the second tier of the strategy?

Larry: The second tier is to use the moderate leverage that’s inherent in most resource stocks. In gold mining companies, for example, you take advantage of the reserves they own, the profits they stand to make, and the fact that those profits can rise a lot faster than the price of bullion itself. No guarantees, but I think with the gold mining shares, you have the opportunity to multiply that 130 percent gain three or four times over.

Martin: For those not familiar with this, explain why the shares are more leveraged than the natural resource itself.

Larry: Say the company’s cost of mining gold is $400 per ounce. And say gold is selling for $500. What’s their profit?

Martin: $100 per ounce.

Larry: Now say gold goes up 10 percent to $550 per ounce. How much is their profit now?

Martin: $150 per ounce.

Larry: So there you have it. Price of gold — up 10 percent. Profit — up from $100 to $150, or 50 percent. For each 10 percent rise in the price of gold, the company’s earnings are rising 50 percent. That’s effectively five times leverage.

Martin: Larry, you are the founder and editor of the Real Wealth Report. And in your Real Wealth Report, you recommend a wide variety of resource investments. So beyond just citing a few examples, we have gone to our research department to compile your entire track record for the year, including all the losers. Do you have that for us?

Larry: Yes. Here are all the trades this year as of September 29.

Martin: Let’s have a look at this. In the first one, Company “A,” you have a loss of 18 percent. Then I see a series of small losers and small winners. But starting with Company “L,” it looks like you have had some excellent performance.

A 40 percent gain with Company “L.” A 127 percent gain with Company “M.” Company “N” — 152 percent gain. Then some smaller gains and small losses, but as we go down towards the bottom of the list, some more nice winners — 35 percent gain, 48 percent gain, 196 percent gain. And these are strictly with natural resource companies, correct?

Larry: Strictly their stocks, without any leverage — except the natural leverage that comes with stocks we talked about earlier.

Martin: A few important warnings I’d like to point out here. First, as with any stock market investing, there’s a risk of loss.

Larry: Yes, and if you cannot tolerate that, you should not buy stocks.

Martin: Second, if you’re playing this market strictly for the upside and it takes a big dump to the downside, you will see losers.

Larry: Yes, that can and does happen. My goal is to ride the great bear market in the dollar and its natural corollary, the great bull market in natural resources.

Martin: So if we get big downside moves in natural resources, you’re going to lose money in this strategy. And if that bull market continues as you expect …

Larry: I believe you’ll see a flood of double- and even triple-digit gains.

Martin: What do you do to protect your capital?

Larry: My entire point today is that if your capital is denominated exclusively in U.S. dollars and it does not include a strategy for protection against the falling dollar … you may be preserving it in name only. To truly preserve your capital and its purchasing power, you may decide you need to go on the offensive with this kind of strategy. Just like China is.

Martin: You haven’t really answered my question, though, about capital preservation.

Larry: I use very tight stop losses on nearly all my stock trades. Plus, one of the best ways to reduce risk is to diversify the instruments you’re investing in — not just individual stocks, but also mutual funds … not just ETFs on resources, but also ETFS on resource stocks … not just resource companies based in North America, but also resource companies all over the world … and sometimes, when needed, not just stocks that benefit from rising resource prices, but also stocks that benefit from falling resource prices.

Martin: Larry, I can see why you’re so enthusiastic. Gold has busted through the $1,035 barrier; and now there’s nothing on the charts — and nothing in the real world — that can stop it from exploding higher. Other natural resources are surging in tandem and the companies that produce them are rising even faster.

Just in one day this week, on a day that gold surged about 2 percent, resource shares surged 8 percent and more — all between the opening bell and the closing bell in one single trading day.

So thank you, Larry. I appreciate your enthusiasm. Your timing in presenting this seminar couldn’t be better. And I’m sure everyone is anxious to see your next recommendations.

And thank you, our members, for joining us today. This could be a frightening turning point in our history. But I trust that, with Larry’s help and with the help of the entire Weiss Research team, you can avoid the dangers — and profit — as Washington wages its secret war on the dollar.

Despite what most people believe, investing in oil is actually simple, easy, and capable of building a lifetime of wealth.

All you need is this four-step plan: 1) Buy an established, well-run oil producer like ExxonMobil or ConocoPhillips. 2) Hold it for years and collect dividends. 3) Always reinvest those dividends. 4) Get rich.

ExxonMobil, ConocoPhillips, and companies like them are masters at finding oil, producing it at a low cost, and refining it into useful products. And as Tom Dyson pointed out a couple years back, a boring, well-run oil company is an extraordinary long-term wealth generator. Standard Oil, for instance, generated a 14.42% annual return for over 50 years.

But if you’re looking to trade in oil, I suggest you find a much different company than ExxonMobil… one that finds oil and produces it at a high cost.

As I’ve mentioned in these pages before, if you want to profit from a bull run in oil, you need to know about the potential of owning high-cost oil producers. You need to know about the potential of the Canadian oil sands. This region could make you a fortune in the coming years.

It all comes down to leverage…

In conventional oil regions like Saudi Arabia or West Texas, oceans of oil sit thousands of feet underground. Tapping that oil is a lot like sticking a straw in the ground and sucking it out. Oil companies in these regions make money whether oil is at $30 or $75. The Canadian oil sands are a different story.

This region in Western Canada is one of the world’s largest oil resources. It holds an estimated 170 billion barrels of oil… but it’s trapped in layers of silt and sand.

Oil-sands companies have to buy huge excavators to dig up the silt. They have to buy the world’s biggest dump trucks to haul it (just one tire on these things can cost $60,000). They have to build giant facilities to “wring” the petroleum out of it. And they have to pay a highly trained, highly skilled workforce to make it all happen… all out in the middle of the Canadian wilderness.

The high cost structure means thin profit margins. Margins are so tight in the oil sands that if oil falls below $35 a barrel for any length of time, the industry gets wiped out. But when oil prices rise, profits in the Canadian oil sands soar. This means big leverage for investors.

To get an idea of the explosive potential here, let me show you an example…

Let’s say oil is at $40 per barrel. We have two oil producers, ABC and XYZ.

ABC is an efficient, low-cost oil producer. Its production costs are $20 per barrel… so it makes $20 of profit on every barrel it sells.

XYZ is an inefficient, high-cost oil producer. Its production costs are $35 per barrel… so it makes $5 of profit on every barrel it sells.

If oil rises to $70, ABC’s profit rises to $50 per barrel… an increase of 150%. Poor old inefficient XYZ, however, sees its profit per barrel increase to $35 – a 600% increase! XYZ stock will rise much more than ABC to reflect the margin explosion.

When you look at the numbers during a big run-up in oil prices, the returns get ridiculous. If oil climbs to $120 in the scenario above, high-cost XYZ sees an incredible 1,600% increase in margins… which can cause the stock to rise just as much.

Of course, this leverage works the same way in reverse. A large decline in oil can wipe out a high-cost producer in a hurry. But right now, oil’s breakout above $75 means the market is in “bull mode.” It means the trend is up… so any good trend trader should be long.

Most folks should stick to larger oil sands names like the blue-chip Suncor or Canadian Oil Sands Trust. There’s even a tiny, inventive ETF from Claymore that focuses exclusively on the oil sands (it trades on the Toronto exchange under the symbol CLO).

Advanced traders are best served with smaller, more speculative companies. These are the ones capable of the 1,600% rise I mentioned. Dyson and I just recommended two tiny oil sands plays to readers of our Penny Trends advisory. If oil continues its rise, these companies have incredible potential.

Good investing,

By Brian Hunt, editor in chief, Stansberry Research

Rightly or wrongly, investing in Gold is often compared to
investing in cash. This is in part because Gold has been
used as money for thousands of years and often it trades
like a currency although it also has some of the traits of
a commodity.
Regardless of how you choose to categorize it, Gold is
often considered a currency. The summary below clears
up some common misperceptions about Gold, relative to
cash, and shows that, when the concerns of the average
persons with respect to cash are taken into account, Gold
comes out on top.

For further reading, CLICK HERE to download.

Article above extracred from The Gold Report 65

Gold Guru: “$1,000 Is the New Floor for Gold”
By Dr. Steve Sjuggerud

“$1,000 an ounce is thought by some to be gold’s ceiling…” John Doody wrote last week to his subscribers. “We see it as now the FLOOR.”

When John Doody talks about gold, I listen…

This year, his Top Ten List of gold stocks is up over 100%. John says his Top Ten list has averaged a 30% annual return since the start of his newsletter, Gold Stock Analyst. John has been writing Gold Stock Analyst for about 15 years.

One thing I like about this former economics professor is that it’s all about the numbers to him… It’s not about conspiracy theories like it is with so many gold bugs. For example, John will actually tell you when gold stocks are overpriced according to his model – imagine that with dyed-in-the-wool gold bugs!

So why does John think gold will keep going up now, when many others say it’s bumping up against its ceiling? I asked John that yesterday…

It’s simple, he said, if you just compare the price of gold to interest rates.

In short, when interest rates are high, then gold (which pays no interest) falls. And when interest rates are low (like they are now), gold rises. To keep it apples to apples over time, John subtracts inflation from interest rates.

In the 1980s and 1990s, you earned high rates of interest on your cash. So gold was flat for those two decades. Plain as day.

But for much of this decade and the decade of the 1970s, you typically earned NEGATIVE interest on your cash (after you subtracted inflation). So gold has soared.

John sees those negative real interest rates continuing. So gold will keep rising. Simple as that.

For the specifics, currently, the consensus inflation rate forecast for the first half of 2010 is around 2%. But banks basically pay you no interest. So you have a choice: Own gold, which pays no interest. Or hold cash, which pays you NEGATIVE interest, when you take inflation into account.

Yesterday, John explained that since the Federal Reserve will likely keep interest rates very low for a very long period of time, gold can keep going higher.

I asked John if gold had become too popular these days. He said absolutely not…

“Look, hedge funds are just starting to get into gold. Retail investors haven’t bought. CNBC calls gold a bad inflation hedge. Central banks haven’t bought. If gold was popular, I’d have a hundred thousand subscribers, not a couple thousand. We’ve got a long way to go. $1,000 isn’t the ceiling… it’s the new floor.”

John ran the numbers, and in a sneak preview of his upcoming issue, he proves how the price of gold has “beaten” inflation fivefold since it first started freely trading 40 years ago.

“CNBC says that gold has only gone from a peak of $850 in 1980 to $1,050 today – for a $200 gain,” he said. “So CNBC’s conclusion is that gold is not a good inflation hedge… That’s just plain wrong, but the people believe it.”

To be brutally honest, if you plan to be a serious investor in gold stocks – and you’re willing to do your homework – you’re foolish if you don’t read John’s newsletter. John updates his unique valuation numbers every month for the 75 precious metals companies he follows. Plus, he writes up a detailed analysis about once a quarter on each company.

It is the best starting point in the business. It’s the first place I go to find out how much gold each company has in the ground and what its cash flows are.

If you agree with John – that $1,000 gold is the new floor, not the ceiling – chances are, you’re buying gold stocks. And if you’re buying gold stocks in size, you ought to do it with John’s help.

Good investing,

Articles written by Dr. Steve Sjuggerud. Meet Dr. Steve Sjuggerud HERE