Here’s a possible gold play.

The spread between gold miners and gold bullion has widened considerably since the beginning of the credit crisis in August last year.

Eric Roseman says this only happens in extreme market circumstances.

He expects gold stocks to double over the next one to three years because colossal global government bailouts will back fears over inflation.

“When chaos rules, invest in chaos” says The Sovereign Society’s investment director Eric Roseman.

Eric’s chaos portfolio is thriving in the current market volatility. And he says anyone can make huge gains in the coming stock-market rally by applying a simple-to-follow strategy.

Eric’s strategy is four-fold: 1) Hold plenty of cash in FDIC-guaranteed accounts; 2) Use it to buy up distressed assets at multi-year lows; 3) Sell into strength; 4) Invest at least 10% of your portfolio in gold.

It’s easy to be pessimistic.

Today, Japan’s Nikkei 225 and just about every other international stock index on earth plunged about 10%. The Dow is down 40% on its all-time high last October. Iceland’s krona just lost 73% of its value. Bankers there, reports the WSJ, are becoming fishermen.

But Eric Roseman says the doom and gloom is overdone. He says “heavily oversold and stocks are going to post at least a big bear market bounce at any time.”

Once of the biggest casualties in the financial crisis has been REITs. Globally, these made astonishing gains during the property boom. But they’ve taken one heck of a beating since.

Eric Roseman says the US REIT sector is likely to recover first. That’s because Europe and Asia are behind the US in the credit crunch cycle and have further to fall.

Pending home sales index bounced 7.4% in September. And government-auctioned foreclosures create great property bargains. Eric says iShares Real Estate ETF (NYSE:IYR) is one good way of playing this recovery.

Governments and central banks around the world are engaged in a fierce battle with asset price deflation. As Byon King says,  “It’s like Napoleon’s retreat from Moscow. There’s no relief from the suffering.”

Eric Roseman says the Fed will eventually triumph over deflation with by a massive expansion of credit.

In the meantime, he recommends a defensive portfolio weighting: 50% cash, 10% gold, and 20% in reverse ETFs, such as Short Dow30 ProShares (AMEX:DOG) or Short S&P500 ProShares (AMEX:SH).

Europe is rapidly following the US into financial oblivion. The eurozone’s economic cycle some six to nine months behind the US. This means the the short-term future looks bleak on the other side of the Atlantic.

But Eric Roseman says Spain’s solid regulatory system should protect its banks from the worst of the storm. This is despite a major slump in real estate that is wreaking havoc in the wider economy.

This makes the country’s biggest bank, Banco Santander (NYSE:STD), an interesting investment option…

Tonight, the Senate will vote on a revised version of the bill Congress trashed on Monday.

Eric Roseman says the passing of the bill will not address the root of the banking crisis: asset price deflation. This could takes years to reverse; Japan is still suffering from the deflationary hangover of the real estate slump there in the late 1980s.

Eric says it’s difficult to see a bull market in US stocks in the near future. He recommends investing in assets that produce regular income… like high-quality corporate bonds.

It has been a wild ride for investors over the last couple of days. All eyes are on stocks and commodities as they get whacked by the meltdown on Wall Street and the government’s bungled attempts to ‘fix’ the situation. The investment-grade corporate bond market, meanwhile, is showing some great value, says Eric Roseman.

On September 19, the SEC suspended short selling for 799 financial companies to “protect the integrity and quality of the securities market and strengthen investor confidence“. Since then the Dow has lost 165 points. The ban ends tomorrow.

Eric Roseman says the legislation targets the wrong traders. Short sellers make the market more transparent. By blocking them, the SEC is violating the free market.

The ban has so far failed to stabilize the markets. Don’t be surprised if the government now moves to target other safe havens such as gold and offshore accounts.

– There really must be a financial crisis. John “the fundamentals of our economy are strong” McCain has suspended his presidential campaign to to return to Washington to work on the proposed $700 billion bailout bill of financial institutions before Congress.

– Meanwhile, McCain’s fellow Republican George W. Bush made a televised appeal for the swift passage the plan. He said the “entire economy is in danger” and warned of a “financial panic” and “a long and painful recession” if Congress didn’t pass the bill soon.