What happened in the past when cash reached these levels?

• In September 1974, cash on hand reached $604.5 billion, representing a record 1.21 times the U.S. stock market’s capitalization. That preceded a 31% gain in equities between October 1974 and March 1975.
• In July 1982, just as a 20-month bear market was ending, cash as a percentage of the U.S. stock market’s value rose to 95%. The S&P 500 began a six-month, 36% advance. According to Bloomberg, the eight previous times that cash peaked compared with the market’s capitalization, the S&P 500 rose an average 24% in six months.

This time, of course, it didn’t take nearly as long for the market to rally.

Still, the greatest appreciation so far has been in smaller stocks. That’s normal in an early bull market. But if the bull market continues, the big, blue-chip stocks are likely to lead the market higher for two key reasons:

• First, there is still over $8 trillion on the sidelines earning next to nothing in short-term deposits. Investors tip-toeing back into the market are likely to gravitate here since these stocks are the safest.
• And then there is the growing influence of cash-rich sovereign wealth funds…

Sovereign Wealth Funds – The Financial Assets of a Country

Sovereign wealth funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund and put to work to earn a higher return on investment.

(Sovereign wealth funds are not the same entities as foreign exchange reserves, which are often used for short-term currency stabilization and liquidity.)

In the past, most countries put their liquid assets to work in foreign currency deposits, government bonds or gold. (The hard-working Japanese and Chinese, for example, have kept our interest rates low by maintaining a steady appetite for U.S. Treasury obligations.)

But with the dollar relatively weak and interest rates on Treasuries near record lows, U.S. government bonds are not generating the kind of returns you write home about.

So world governments are slowly moving money into global equity markets. And the sums involved are fairly staggering.

Sovereign Wealth Funds Control More Than $7 Trillion…

According to The Economist, sovereign wealth funds already control more than $7 trillion today. The exact amount is impossible to ascertain due to lack of transparency.

But China, Saudi Arabia, Singapore and the United Arab Emirates alone are known to control more than $2 trillion. And more money is being allocated to these funds all the time.

What does this mean for you as an investor?

Expect to see cash coming off the sidelines to accumulate shares of the largest, most liquid firms around the globe. Quite frankly, they are the only companies that can easily absorb buying on this scale.

For example, take a look at the Dow Jones Global Titans Fund (NYSE: DGT). It holds the world’s 50 largest publicly traded companies.

World-Class Diversification in a Blue-Chip Portfolio

When you buy this cheaply valued blue-chip portfolio, you’re getting world-class diversification.

Companies like:

• Exxon Mobile,
• IBM,
• Proctor & Gamble,
• Wal-Mart,
• Coca-Cola,
• Nestlé,
• Toyota Motor,
• Roche Holdings,
• Samsung Electronics

… Are just a few of the names that are major holdings of the DGT fund.

These firms will almost certainly be an early stop for U.S. investors who get frustrated with low yields and start venturing back into the game.

These same companies are a natural home for sovereign wealth funds – and the growing trillions they control.

History shows that cash on the sidelines always grows itchy with time. The Dow Jones Global Titans (NYSE: DGT) is a good way to take advantage of it – ahead of the crowd.

Source: Sovereign Wealth Funds: $7 Trillion Reasons to Stay Invested

Right now you can buy shares of General Motors (GM:NYSE) with a most unusual provenance: They used to belong to GM Vice Chairman Bob Lutz, GM North America President Troy Clarke, GM Vice Chairman Thomas Stephens, and Group Vice Presidents Gary Cowger, Carl-Peter Forster and Ralph Szygenda.

You Can’t Fix Stupid

Now I know we are supposed to think of stock shares as perfectly fungible. And it’s quite impossible to know for a fact that the shares you might be buying today actually came from some GM exec’s personal hoard.

Still, there is a touch of something – I’m not quite sure what: irony? fraud? despicable contempt? – to the idea that Bob Lutz is being allowed to sell off his last $131,000 in GM shares on the open market. Surely he has some sort of inside scoop as to when GM will declare bankruptcy?

On the other hand, one must also wonder as to who on Earth would be so stupid as to buy Bob’s shares, which have actually lost another 38% since he sold them.

But You Can Buy Smart!

And then there are Ford (F:NYSE) shares. In few days, you will be able to buy 300 million shiny new shares. This has the market in a bit of a tizzy. The very idea of an American car company deliberately diluting shares in these hard times is – well – delightful, really.

Ford’s health benefit responsibilities are under-funded to the tune of a couple of billion dollars. This doesn’t exactly show up as debt on the books. If the guys at Ford’s C-suite wanted to, they could just as easily sweep the whole issue under the rug. (Heck, GM did exactly that for decades!)

But they’d rather face up to it now and get it out of the way. Did they whine? Did they simper? Did they go to the government for a cheap loan? No!

Do the Right Thing

They are doing what American blue chips are supposed to do: They are raising capital on the open market, and using that capital to dramatically strengthen their company.

They can do this because unlike GM shares, which are hovering somewhere around a dollar (61 cents less, by the bye, than Bob Lutz got for his shares), F shares have gone up 547% over the past few months.

Right now F is down a tad on the news of these new shares. This is pure foolishness: First of all, the inherent value of all shares will rise in the end because Ford is using the cash to retire what is, in essence, debt.

And second, Ford’s market cap is somewhere in the vicinity of $14 billion, so it ain’t but so much dilution in the first place. My advice? Ford is on the straight and narrow path, and how many American companies can you say that about these days? Buy more here at $4.75 and smile when it hits $10 this fall.

Vive la Différence!

This ability to detect subtle clues can clue you in to all sorts of wonderful opportunities. For example, the difference between a cup of coffee at Starbucks and a cup of coffee out of the coffee maker at home is a critical clue that many in the commodities biz completely overlooked.

Everyone knows about the collapse of Starbucks (SBUX:NasdaqGS). It was the canary in the coalmine for the crash of 2008. SBUX completed a double top in November 2006 (well ahead of the rest of the market) and went on to peel away some 82% over the next 24 months.

The guys who study these things figured: “No one wants a morning cup anymore, so that’s it for coffee and sugar.” Wrong again! No one wanted a $5 cup of coffee. But a 10-cent cup at home? Heck, I’ll take two, honey, with tablespoons of sugar in each.

A Sweet Ride

In the end, demand has remained high, but supplies of both sugar and coffee are coming up wildly short.

The spot price for generic coffee has climbed to $1.28/lb, making for a 22% rise since December. Still think folks have totally abandoned the good stuff? Colombian beans have hit a two-year high of $2.20.

And sugar is putting them both to shame: White sugar has risen 52% since December to its three-year high at $450 a tonne.

How to Capitalize on the Coffee Guys’ Mistakes

Now I would be the last guy to tell you to buy coffee or sugar futures, because, quite frankly, I am terrified of getting an e-mail asking what to do with the truckload of beans that just showed up.

But these are most enlightened times, and there are Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs) and Exchange Traded Notes (ETNs) for most everything these days, including coffee. The name (oddly enough) is the iPath Dow Jones-AIG Coffee Total Return Sub-Index (JO:NYSE). The fund has been falling pretty much nonstop on the idea that coffee was going to tank. But now that coffee is clearly still the drug of choice, I suspect those fortunes are about to experience a real sea change.

Last price on my ticker is $39.01 a share and quite frankly, the volume is as thin as all get out. But if a body were to enter tenderly over several days, I imagine they could enjoy quite a ride.

Source: Subtle Differences Can Double Your Money

Japanese exports fell by 45.7% in January from a year ago – the steepest decline since 1957 – as exports to three of Japan’s biggest overseas markets fell by record levels. Exports to the United States fell by 52.9%, exports to Europe declined by 47.4%, and exports to Asia dropped by 46.7%, Japan’s Ministry of Finance reported.

The sharp drop in exports has had a crushing impact on Japan’s trade deficit, which grew for a fourth straight month to a record $9.84 billion (¥952.6 billion). But the impact on the nation’s leading corporations has been even more devastating.&

Many Japanese blue chips, such as Toyota Motor Corp. (ADR: TM) and Sony Corp. (SNE), have been saddled with plummeting profits and forced to reduce capital expenditure and employment.

“The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted,” Yasuhide Yajima, a senior economist at NLI Research Institute, told The New York Times.

While automakers General Motors Corp. (GM) and Chrysler LLC have been emasculated by rising unemployment and slumping confidence in the United States, Japanese carmakers are faring little better. Japan’s auto exports, which account for 20% of all the country’s exports, plunged 66% from last year.

Toyota, the world’s biggest automaker, said earlier this month that it would likely post a $4.9 billion (450 billion yen) operating loss for the year ending March. The company has never before posted an annual loss.

Toyota said earlier this month that it would cut pay for factory executives and eliminate bonuses for all salaried production unit staff. The company has also created an optional program for assembly workers who wish to leave voluntarily and offer voluntary buyouts to plant workers in North America.

Toyota has slashed global production by 43% last month, the most since 1987.

Meanwhile Sony posted a loss of $19.9 million (17.96 billion yen) for its fiscal third quarter ended Dec. 31, with net profit falling 95%. The company has forecast an annual operating loss of $2.9 billion.

Japan’s gross domestic product (GDP) shrank at an annual 12.7% pace in the fourth quarter of 2008, and the unemployment rate jumped half a point to 4.4% in December.

“My friends tell me that factories in the normally highly industrialized Osaka area have shifted to 15-day-a-month production schedules, and many salary men (Japan’s iconic office superheroes) are being encouraged to seek ‘arubaito‘ – or part-time work – to make ends meet,” said Money Morning Investment Director Keith Fitz-Gerald. “And those are the people who are still fortunate to have jobs.”

Shorting the Yen

In addition a dearth of global demand for its products, Japan has also been plagued by a rising yen, which has made its products more expensive to foreign countries. However, the yen has quickly reversed course with deterioration of Japan’s economy.

The yen has tumbled 6.4% against the dollar this year, according to Bloomberg News. Last year, bolstered by its safe haven status, the currency rose the most of 171 currencies tracked by Bloomberg, climbing 23% versus the dollar and 29% against the euro. The yen has traditionally been viewed as one of the world’s “safe haven” currencies.

“With Japan’s trade data deteriorating sharply now, the Japanese yen is finally following suit,” Mansoor Mohi-Uddin, chief currency strategist at UBS AG (UBS) wrote in a note to clients yesterday (Wednesday). “Japan’s currency potentially has a lot further to slide if investors stop perceiving the yen as a safe haven and trade the currency instead on Japan’s worsening export numbers.”

Bob Parker, who helps oversee $600 billion as chairman of Credit Suisse Asset Management (ADR: CS) in London, told Bloomberg that there’s a “reasonable probability of a breakout” that will drive the yen down 3% to 100 per dollar.

“That’s why shorting the yen may wind up being one of the most fundamentally successful investment choices we can make in today’s mad markets,” said Money Morning’s Fitz-Gerald.

Japan’s Exports are Halved by Crisis, Boosting the Odds for a Drop in the Yen

This from the Sovereign Society:

Yesterday’s [Tuesday] spectacular 889 point rally for the Dow ranked as the sixth largest daily percentage gain in history for the world’s most widely followed benchmark. The Dow surged 10.9% on Tuesday and other international markets also followed suit with huge double-digit gains.

But again, don’t get too cocky thinking we’re at the cusp of a new bull market. It won’t happen. The economic backdrop does not portend profit recovery any time soon. Domestic consumption is still declining in the United States as Americans start saving again. A higher savings rate is bearish for earnings.

A big stock market recovery like Tuesday’s probably has many investors itching to get back into the market to recover losses – but that’s a major mistake if you’re unhedged.

Joining Ranks with the Great Depression

Yesterday’s price action joins the dubious list of other extraordinary Dow rallies in history. According to The Wall Street Journal, the Dow’s 889 point rise on Tuesday and its 936 point gain on October 13 are dwarfed by Great Depression rallies of similar magnitude.

Of the top 10 stock market rallies in history, seven occurred during the 1930s, one in October 1987 and two this month. Unfortunately for investors, Tuesday’s 889 point rally was preceded by a 15.3% gain in March 1933, a 14.9% surge in October 1931 and a 12.3% gain in October 1929. That’s not exactly in good company when it comes to impressive rallies.

Global stock markets; however, remain oversold and are likely to extend their first bear market rally since the Fed’s bailout of Bear Stearns in mid-March. All sentiment indicators I follow are extremely bearish, suggesting we’re going to see more gains, however short-lived. The VIX Index – which plunged 16% on Tuesday – is still heavily elevated at 67.

Don’t Jump the Gun

In my view there’s no point chasing this short-term bounce.

The Presidential elections next Tuesday might also provide a jolt to stocks as renewed investor confidence is celebrated once McCain is sent packing his bags. Yet any celebration is unlikely to last beyond several weeks because corporate earnings are still rapidly deteriorating and consensus estimates are too optimistic, meaning more downgrades are coming.

There’s also the big risk surrounding unsettled CDO and credit swaps. There’s about US$60 trillion worth of these things floating around the world. And you can bet that most counter-parties probably can’t honor more defaults should they occur. Credit derivatives need a clearing house and hopefully, they’ll get just that in 2009.

Meanwhile, the credit markets are slowly improving. LIBOR rates are coming off their highs and commercial paper is flowing again, courtesy of the Fed.

I think it’s a good time to nibble – not bite – at your favorite blue-chip stocks and non-Treasury bonds, including investment-grade corporate bonds, intermediate tax-free municipals and TIPs, or Treasury Inflation Protected Securities.

I’d also bet against Treasury’s because long-term yields look awfully low this morning at 4.2% compared to the monster level of Treasury issuance coming our way over the next 12-18 months.

Source: October 28 Up-Crash Joins 1930s Bear Market Action in the Record Books

– Yesterday, the Dow surged 11%. It was the second-largest gain in the the history of the index (all 112 years of it). Before you pop the champagne corks, it’s worth remembering that despite yesterday’s show-off surge Dow indsutrials are still 36% off their October 2007 record close. That puts U.S. blue chips deep in bear territory.

– While analysts desperately pour over their charts and numbers in search for a bottom in stocks, economists are on the lookout for a turnaround in the U.S. economy. It’s not looking promising. This from the WSJ:

The current downturn is shaping up to be worse than the recessions of 1990-91 and 2001 and the prolonged downturn that ended in 1982. Banks are cutting back on lending, consumers are spending less, companies are shedding jobs amid sinking profits, and the housing bust that triggered the slide persists.

According to the paper, economists are focusing on five key indicators: 1) interbank lending rates such as Libor; 2) house prices; 3) consumer confidence; 4) jobs; and 5) stock prices. So far, only interbank lending rates, which have been greatly boosted by government bailout money, are showing signs of recovery.

– Take consumer confidence. Yesterday, the NYT reported that the Conference Board measure of consumer confidence, a widely wathced measure, “plunged to its lowest reading on record in October as Americans reported fewer jobs and smaller incomes and curtailed plans for major purchases like cars and appliances.”

– Or take U.S. housing, which to a large extent influences how American shoppers feel about spending. (The more money their house is worth, the more money they are willing to spread around.) According to AP:

Home prices tumbled by the sharpest annual rate ever in August, with little indication of a turnaround in sight, a closely watched index showed Tuesday.

The Standard & Poor’s/Case-Shiller 20-city housing index dropped a record 16.6 percent from August last year, the largest drop since its inception in 2000. The 10-city index plunged 17.7 percent, its biggest decline in its 21-year history.

– Another great way to measure economic woes is the so-called “misery index.” According to Infectious Greed blogger Paul Kedrosky, “The Peterson Institute has brought back the ‘misery index’, a combination of the inflation rate and the level of unemployment, and added to it a measure of asset price declines. The upshot? The modified misery index is now at record highs.”

– At least the government’s on the case. Cafe Hayek blogger Don Boudreaux argues, however, that this could actually be sinking the markets, rather than helping:

We now have proof that government is a god that failed — a poverty-inducing and economically destructive institution that humankind should finally learn must be kept on an extraordinarily tight leash, lest it wreak havoc in the lives and on the fortunes of innocent parties.

The facts are crystal clear.  Since the March 24 promise by the Fed to guarantee $29 billion worth of mortgage securities held by Bear, Stearns, the Dow has fallen 34 percent (as of mid-day on October 28, 2008).  Since the September 8th announcement by the U.S. Treasury Department that it will take over Fannie Mae and Freddie Mac, the Dow has shed 28 percent.  Since the October 3 enactment of Uncle Sam’s massive bailout bill, the Dow is down 20 percent.

Our instincts say Don is right. The problem with this argument, however, is that cause and correlation are two different beasts. Are the markets plunging because of the government bailouts or are they simply plunging after after the government bailouts?

– Eric Roseman on ContrarianProfits says Swiss money manager Felix Zulauf attributes America avoiding worse pain to the recent bailouts:

Zulauf believes we’re entering a soft economic depression. If not for the government’s backstops on October 13 to prevent further stock and credit market seizures, a depression would have followed. Zualauf is convinced the markets would have crashed.

Zulauf may believe in the power of government to positively influence the markets, but his outlook isn’t exactly rosy for U.S. stocks:

His prediction of a severe recession will take the S&P 500 Index down all the way to 550, possibly 500, or 35% lower from current levels. Stocks have already plunged 40% from their October 2007 highs. Zulauf is adamant: “U.S. stocks are still not cheap. The S&P 500 Index trades at 1.7 times book-value and the Dow more than 3.5 times book. This is still expensive.

Growth generally means better returns. And growing returns. Bank deposits generally give you more steady and stable returns.

Investing in stocks directly.

But what if you know nothing about the stock markets and are unsure which stock will actually do well? Just because a company is a “blue chip” today, does not mean it cannot fall into bad times in the future. Century Textiles and Bombay Dyeing were blue chips and “must own” stocks twenty years ago but today they have lost that stature. Infosys was not even a listed stock fifteen years ago and today it is one of the Top 5 stocks in the market. Investing in shares for long time periods is the only way to make really good returns. But, then, one needs to know which stock to invest in and always be on top of things in an ever-changing business world. And that requires a lot of time and effort on your part.

Investing through a “professional investor”.

A more common way of investing in the stock markets is by investing in mutual funds. Mutual funds take money from many individuals and then buy a basket of shares. This allows the investor to own a “diversified” basket which covers stocks in many sectors. The theory here is that the fund manager – the professional investor – is smart enough to have selected the correct stocks for the portfolio; will always monitor how the portfolio of stocks he owns on your behalf is doing; and will always look out for better stocks to buy. For all this effort, you pay the mutual fund a management fee for the services of the professional investor.

Great in theory. And a wonderful concept. But, what if you chose a professional investor who was not that good at picking the right stocks?

There are over 309 mutual fund schemes that invest in the stock markets. How sure are you that you will be able to identify the best fund to match your needs?

The Nifty 50: 5 in 5!

Maybe there is a better way to invest your money without having to waste your time worrying about picking your own stocks or even selecting a mutual fund? Well, there is: invest in a fund that tracks the Index. If you had bought a fund that tracked the NSE-50 Index you would have made 5 times your money in 5 years.Without any time wasted worrying about which stocks to buy or sell; or which mutual fund to subscribe to.

In stock market terminology buying an “index fund” is known as “passive” investing.

5 times in 5 years sounds like a pretty exciting passive investment to me.

NIFTY -50 INDEX: Up by more than 5 times in 5 years…

Sources: Bloomberg

* Past performance may or may not be sustained in future.

Now before you rush out to invest with a hope of making 5 times your money in 5 years, recognize the risks that stock markets can fall sharply and suddenly. Sometimes the markets recover quickly and sometimes they seem to bounce around going nowhere. And you may not make 5x your money in 5 years. You could make less. Or more. Or you could even lose a chunk of your investment. Past performance, as they correctly say, is no prediction of what the future will bring.

But stock markets are unpredictable and complicated – that is why you don’t wish to buy shares directly, remember?

And mutual funds have so many complications too: your choice of the kind of mutual fund you want to invest in; the best portfolio manager to look af ter your investments; the higher costs of most mutualfunds.

Take the easy way out: invest in the Quantum Index Fund (NFO closes on June 20th) which is an exchange traded fund (ETF). The Quantum Index Fund will trade on the NSE itself like any other stock, such as Infosys, Reliance, or Tata Steel.

The Quantum Index ETF

The Quantum Index Fund would be traded on NSE and will buy all the 50 stocks comprising the NSE Index and stick to it during good and bad times, like a good Indian wife. Stocks which are not in the Index cannot be bought.

Why you should consider the Quantum Index ETF

• No pains of doing research in selecting a single stock or sector and taking the risk of the specific stock or sector, which may or may not do well.

• Well diversified exposure to stock markets and economy of India-NSE 50 Index comprises of 50 blue chip stocks in 21 sectors, so lowers your risk and dependence on any one stock or sector to make you money.

• No need to track the NSE Index portfolio, a committee of eminent market professionals monitors the NSE Index and makes changes based on well laid-out criteria .

• Low cost and easy way of making an initial investment: subscribe at the NFO.

• Low cost way to add to your initial investment by buying the Quantum Index ETF on the NSE (on listing) – just call your broker or use your online broking account.

Source: How 50 Gave You a ‘5 in 5′

Now the first two are on life support, while the third troughs, with no clear signals as to whether it will skyrocket again… or crash and burn.

Could the next asset class to take off once again be technology stocks? Keep in mind that tech products are incredibly portable and scalable.

What’s more, they are the least vulnerable to inflated commodity costs. Indeed, the most valuable asset at any tech company is its people, and labor is available at a relative discount right now.

So what would be the first sign of an inflating tech bubble?

The real launch of the original tech bubble began in November 1999. Oil was spiking 44% a year. Everyone wondered if the rising trend was busted.

Suddenly, the tech-heavy Nasdaq broke out, growing 18% in 30 days, while the stolid blue chips of the Dow Jones Industrials put on a mere 3%. Over the next few months, tech stocks would put on 51%.

Today we see the exact same setup all over again: Oil is spiking, and the long rising trend has been broken.

And once again, tech stocks are once again breaking away from the pack, growing 12% over the past 30 days compared to the Dow Industrials’ paltry 5%.

Will this micro-boom grow into the next bull market with tech stock prices doubling monthly? Why wait to find out when you can create your own boom right now?

WaveStrength Options Weekly readers are holding call options against three key tech stocks. All three are expected to double in price over the next 30 to 60 days!

Adam Lass

Editor, WaveStrength Options Weekly

Three Sectors to Avoid as 2008’s Plunge Looms

When 2008’s real financial storm hits, three sectors stand right in the path of destruction. Prepare for the worst by learning the names of nine companies in those sectors that could be hammered first. Plus, read about a simple (and slightly sinister) way you can lock in a 186% gain…

Selling sounds easy… but I know the majority of investors get way too attached to their stock holdings… both the winners AND the losers. They’ll hold a stock for years as if it’s part of the family. And oil stocks have done so well for the past few years, they almost deserve a place on the living-room mantle…

I’ve recommended 38 stocks in my monthly S&A Oil Report since I began writing it in October 2005. To keep it simple, we employed 25% trailing stops. Out of the 19 stocks we stopped out of, 10 were gains and six were double-digit gains. The trailing stops allowed us to exit our positions with our profits intact, rather than ride the stock back down below our purchase price. Out of the 19 stocks we’re still in, 15 of them show gains.

The math works out to a 66% success rate. Now for the scary part… 84% of those gains are double digit or better.

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I’m not talking about little companies either. Many are goliaths of the industry, with a billion dollars or more in market value. One of our biggest winners, Petrobras, is up 160% in just the past 14 months. My February recommendation went up 35% in just two weeks.

I’d love to tell you that, yes, I’m smarter than the market. Naturally, I’d like to think the research I’ve done has helped readers make bigger gains than the average investor. But when you get the big trend right and swim with the current, it’s relatively easy to make big returns.

In other words, I’m not going to confuse brains with a bull market.

Experience tells us to keep this all in perspective. I have a good friend who made a bundle in the tech boom in the late 90s… and started to think he was bulletproof. He gave all the money back during the crash because he refused to sell. He’s now an investor-relations officer for a small public company, and learned an expensive lesson.

“I never saw the end coming,” he told me. “In fact I averaged down on several companies and lost my shirt.”

My friend could have kept a big chunk of money by keeping just two things in mind:

1. Don’t get overconfident in your ability as an investor. Don’t let big returns go to your head and prevent you from admitting mistakes. And…

2. Make sure to ride any boom with one eye on your trailing stops. (Steve recently wrote a great summary of how these work, which you can read here.)

Please realize… I’m not telling you to sell all of your oil stocks right now… just alerting you to a potential danger down the road. If you’re hesitant to sell a stock after it hits your trailing stop or even starts a downtrend, remember folks who held their Internet stocks for years. I don’t think an Internet-style blowup will happen to the oil market, but even the strongest uptrends have shakeouts along the way. You can’t know how severe they’ll be, so you simply have to stick to your plan, take your profits, and move on.

So… for those of you out there who have made huge returns in oil stocks over the past few years, enjoy the ride. It could very well keep going for years, and it could run hundreds of percent higher. But keep today’s essay in mind, and you’ll make money whatever happens.

Good investing,

Matt Badiali

With everything in the world of finance, people get scared. Last month, gold broke the $1,000 threshold and silver broke the $20 one. So of course, weak investors got anxious. They pulled back and sold off some of those gains.

As I write, it would cost you $880 for an ounce of the yellow stuff, while silver is going for $16.90 per ounce. That’s 20% cheaper than it was a few weeks ago. Great. But, why should you care?

Money…and lots of it…

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Beat The Blue Chips Many Times Over — By Focusing on a “Secret” Market Whose Top-Performing Stocks Averaged Gains of Over 25,000% in 2007

FACT: In 2007 alone, savvy investors on the “secret” stock market could have turned an investment as low as a few thousand dollars into 50, 100, even 500 grand or more in value.

Until tomorrow night, you can jump on the next round of massive gains. Check it out here, before it’s too late…

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First, let’s take a look at the last gold rally, back in the late 1970s.

As you can see in the chart below, gold underwent an eerily similar correction at the end of 1978. It lasted exactly one month before it righted itself again.

Does This Correction Look Familiar?

On October 30, 1979, the spot price for gold was $242.75. Exactly 31 days later, it had shed $50. That’s a hair over 20% off its high.

See the similarities?

So, the next question you may be asking is: “What happened after the last time this happened?” Oh, just the largest bull market we’ve ever seen in the precious metals world.

In 1979, and then again in the first month of 1980, gold went from this puny little sub-$200 metal to an $850 investment. It ended up being a 340% jump from the bottom of the correction to the top in January 1980. That’s nearly four and a half times your money in 14 months!

Now, I’m not saying we are bound to repeat that this time around. But, others are:

“Market ructions, the sub-prime conflagration and a collapse of the dollar could send gold prices to more than $3,400 an ounce within the next three years.”

— Dr. Clive Roffey
Publisher, Gold Action

“If 1979 to 1980 is anything to go by, [gold] could exceed several thousand dollars per ounce.”

— Bloomberg

…And my favorite:

“Gold and silver are now early in a historic bull market that will dwarf the 500-1700% profits we made in the ‘70s. Gold will hit at least $2,172 and $100 silver is inevitable.”

— Marketwatch

*****Gold $2,000 — How to Play the Rally Today*****

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Gold $2,000

“I’m so sure gold will soar higher, I’ll even make you a guarantee…plus I’ll give you 5 entirely new ways to play the trend…”

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(But you have to jump on this before April 15, 2008…or the doors on this could slam shut to you forever…) Get the Full Report Here.

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Honestly, it doesn’t make a bit of a difference if you believe any of them. At current levels there are already some huge profits to be made.

We’ve written to you about the potential juniors have right now. I’m not going to bore you with any more. If you want to, you can check it out right here.

As for what you should do now…the precious metals world is on a silver platter. (No pun intended.) Take what you like.

We will continue to let you know when the best ones come along. This is something worth following for quite some time.

Sincerely,
Jim Nelson

P.S.: If this is something you’d like to get into, Greg Guenthner and I have the perfect way for you to do it. We currently have the absolute best silver play we’ve ever seen. It is still at rock-bottom prices. To get in on it, take a gander at this report…