“I don’t know if I will live to see it,” said Brazil’s president Luiz (Lula) da Silva a couple weeks ago. “But Brazil has to transform itself into a big power in the 21st century. We have everything to make it happen. We are not talking about a little country here.”

No, indeed. Brazil is not “a little country” anymore. Any prudent investor has to consider how to hitch a ride on the Brazil growth story. Brazil is transforming into one of the world’s great powers in this century. It’s important to follow the news from Brazil. At the same time, you have to know where to look, and how to read between the lines.

By official count — what the Brazilian government will confirm — the rocks of Brazil hold nearly 20 billion barrels of proven reserves. That number is on par with the total for U.S. oil reserves, including Alaska and the Gulf of Mexico.

It’s an impressive number, but then there’s also the unofficial Brazilian reserve count. How much oil is “really” down there under Brazilian jurisdiction? It depends with whom you talk. Some Brazilian officials will smile and say the country has 50 billion barrels of resources. If the Brazilians can tap into this treasure, it adds up to more than twice the total reserves of the U.S., including Alaska.

Other knowledgeable — VERY knowledgeable — Brazilians give much larger estimates. I’ve seen estimates that place the resource number at “over 100 billion barrels.” This puts Brazil in with the largest of the large oil nations, such as Iraq, Iran and Saudi Arabia.

These massive oil resources offshore Brazil lie beneath deep water and thick layers of salt. And since it’s all within Brazilian waters, the government of Brazil is increasing its control over offshore development. This way, Brazil will have its own oilmen keeping an eye out for the overall national interest — and making big money for the Brazilian treasury.

The new level of Brazil’s state control over oil development is a strategic decision. Brazil is counting on the hydrocarbon resources to help propel it forward as one of the world’s major powers. And the development in Brazil will control the destiny of a good number of players in the OI portfolio.

Many companies whose fate is tied to the wheel of the Brazilian ship of state are in that portfolio. All of them have operations that span the globe. They’re not a pure play on Brazilian energy development. Just the same, it’s nice to know that they’ll be pulling down a big chunk of business in one booming region over the next couple of decades. As I see it, these firms are long-term core holdings for any diversified energy portfolio.

Gold on the Move

This week, the price of gold touched $1,040 per ounce. Silver also took the elevator to higher floors, to now over $17 per ounce. It’s been good news for all of the gold and silver miners in the OI portfolio.

We’re way up on many of the miners I’ve added this year to the OI portfolio. Some of the beaten-down guys are also showing us their inner Lazarus as precious metals prices soar.

What’s with the Rising Tide?

I just love it when the stocks in the OI portfolio are going up. It beats the heck out of what we experienced last October with the meltdown, that’s for sure. And it makes it easier to be the editor of a financial newsletter that focuses on precious metals, energy and other natural resources.

What’s going on? What’s with the rising tide? I believe we’re seeing some short covering in the precious metals arena. It has always amazed me in the past couple of years that there were people out there shorting gold. Huh? It’s like that scene from the movie The Deer Hunter in which Robert De Niro is playing Russian roulette with a pistol holding bullets in the chambers. You don’t have to be crazy to short gold, but it helps.

I may not have the same eyesight today as back when I flew Navy jets. But how close do you have to look to see that the U.S. dollar is in trouble? Yet people still want to bet on the dollar and against gold? Hey, it’s a free country. And I’ve spent the past few years feeling pretty lonely at times as I described my vision of monetary gloom and doom.

So now the dollar is dropping due to bad news on many fronts. The U.S. economy is NOT “recovering,” contrary to the propaganda from Washington. Unemployment is up, and it’ll stay up for a long time. There’s a structural readjustment going on within the U.S. economy, and it’ll take years (maybe decades) to play out. Meanwhile, U.S. tax policy, energy policy and the overall political process are a train wreck in living color. Can anyone explain to me how this has a happy ending?

The world, of course, is noticing. Now we read about a group of nations (the usual suspects, but add in modern allies Japan and France) trying to figure out how to ditch the dollar and use some other medium of exchange to trade oil. It’s not exactly a new rumor, but now it’s getting traction. And like people smelling smoke in a crowded theater, dollar holders are looking for the exit signs.

Is anyone surprised at this? How much fiscal and monetary abuse can the greenback stand? Hence, the precious metals prices are levitating.

We’ll probably see a pullback in precious metals prices, but that’s just going to be profit taking and the market working its magic. Long term, the metals are still going up.

It’s part of the long-term thesis of Outstanding Investments. Go with precious metals. Go with energy plays. Go with solid resource plays.

Until we meet again,
Byron King

Source: Energy, Brazil, Gold: What More Could You Want?

Good day… And a Thunderin’ Thursday to you! It’s raining here in St. Louis, so, it must be Thursday! It’s a big night for yours truly, but I’ll talk about that at the end… We’ve got some big moves going on in the currencies and metals, so we had better get to it, and save the chit-chat for later, eh? But first, today is the funding deadline on our latest BRIC MarketSafe CD… We’ll have one more in November and then that’s it!

OK, front and center this morning, Gold has soared to another all-time high! When I turned on the screen this morning, Gold was flashing a great big $1,055 figure… WOW! But wait! OK, now that sounded like an infomercial… But wait! If you act now, you can get double the Ginsu knives! HA! OK, getting back to the original, but wait… Gold and Silver for that matter, aren’t the only risk assets moving higher this morning… All 16 of the countries that are deemed to be the biggest U.S. trading partners, have currencies that are taking liberties VS the dollar this morning…

Basically, it’s like this folks… We keep seeing signs that a global recovery is taking place, I mean, the Reserve Bank of Australia (RBA) even hiked rates this week for crying out loud! And… With those signs of recovery, come the feelings that global rates will be rising, as witnessed by the RBA this week, and with global rates rising, the yield differential to the dollar becomes even greater in favor of the non-dollar currencies.

This is quite evident, when you look out on the currency landscape and see that Aussie dollars (A$) are trading with a 90-cent handle… Brazilian reals are trading 36% higher VS the dollar since March 1st!

Why did I highlight those two currencies? Well, as has been well documented, the RBA already hiked rates and increased their rate differential to the dollar this week, with the thought that they would come back again in November for another rate hike… And Brazil? Yesterday, I saw a story flash across the screen that the Brazilian Central Bank Gov. is mentioning at least 200 BPS of rate hikes before he leaves office next year! Talk about increasing the rate / yield differential!

Yesterday, I talked to you about the euro, and explained why it had not participated with the other currencies’ assault on the dollar… Well, the Big Dog /euro got off the porch to stretch its legs and chase the dollar down the street a bit last night… The euro is trading with an eye toward 1.48…

I’m waiting for some data to print from Germany this morning before I go on… So let’s wait a bit… OK, I’m back now… Well, keeping with the theme that a global recovery is taking place, German Industrial Production rose in August 1.7% from a decline in July. As reported here about a month ago, Germany exited their recession in the 2nd QTR, posting a positive, albeit negligible, GDP… I expect their 3rd QTR to be a bit stronger, as they build on this nascent recovery.

The European Central Bank (ECB) meets this morning, in fact, they’re meeting as I write… I don’t expect the ECB to move rates, announce any quantitative easing, or anything like that… What I’m half expecting though is for ECB President, Trichet, to attempt to put a tourniquet around the dollar, to stop the bleeding… Hey! Nobody in the U.S. is fighting to keep the dollar strong, so somebody has to!

OK… I’ve explained this many times before, but for the new readers, it’s really something that needs to be understood… Look, the ECB and Trichet, know all too well that the U.S. has painted itself into a corner, and the dollar is getting punished for their actions… And, they understand that all they would have to do is talk glowingly about the euro and it would deep six the dollar in a heartbeat! But what good would that do? It’s far better to just keep the lips zipped shut, and watch a general, slow, depreciation of the dollar… So… The euro’s run to the high 1.47 handle this morning, could be at risk to what Trichet has to say… But remember folks, he’s just wrapping a tourniquet around the dollar, it’s not like he’s in love with the dollar and the fundamentals behind it!

Last night, I was doing some reading / research and came across a story that really piqued my interest… Here’s a snippet from the Bloomberg…

“Central banks are diversifying away from the dollar “more aggressively,” according to Barclays Plc, the world’s third-largest currency trader.
The dollar accounted for 37 percent of the $115 billion foreign reserves central banks amassed in the second quarter, after adjustment for exchange-rate changes during the period, compared with 52 percent in the euro, according to a Barclays analysis of data that the International Monetary Fund released on Sept. 30. That was the first time that the dollar’s share fell below 40 percent in the new accumulated foreign reserves of $100 billion or more since the euro’s 1999 debut.”

Remember, about a week or so ago, when I told you that the IMF’s currency report basically showed a move away from the dollar too…

HEY! IF CENTRAL BANKS ARE DIVERSIFYING, SHOULDN’T YOU BE DOING IT TOO?

OH! And there was this quote from Canada’s Finance Minister, Flaherty said…”We are all concerned about the U.S. dollar”…

And then there was this… Haven’t you heard about the guy, known as the Cheater? it seems every day now, you hear people say now, Look out for the cheater, make way for the fool-hearted clown, look out for the cheater, he’s gonna build you up just to let you down… Come on… We all know who I’m talking about, you know him, you love him… It’s U.S. Treasury Sec. Tim Geithner!

Yes, the man that was in charge the NY Fed, and oversaw the banks in that region, of which, most of them needed TARP money didn’t they? Any way… The thing I want to talk about is his latest statement about the dollar… Here’s Timmy! “officials recognize that the dollar’s important role in the system conveys special burdens and responsibilities on us, and we are going to do everything necessary to make sure we sustain confidence.”

Yeah, sure you are… How many Treasuries have you auctioned off this year? Something like $1.6 Trillion? Now, that will give everyone in the world a warm and fuzzy about the dollar’s future won’t it? NOT!

OK, I had better go on to something else before I get too wound up!

The Bank of England (BOE) is also meeting this morning… And after an awful set of economic reports in the past month, the BOE members are scratching their heads and wondering what to do next… They cut rates to the bone… They’ve bought toxic assets from financial institutions… They’ve nationalized a few companies that were about to go under… They spent money on stimulus packages… And they’ve implemented Quantitative Easing…

Sounds like the U.S. doesn’t it? I’ll tell you who else it sounds like… It sounds like Japan in the last decade… I hate to be the one to half to tell these dolts that none of this works! It just makes a laughing stock out of your Central Bank, and puts your currency on the slippery slope downward…

Oh, but not to worry, Tim Geithner is maintaining the confidence in the dollar… ( I guess no one told Canada’s Finance Minister, eh?)

Again, Chuck, go on to something else, and quit coming back to this!

Well… Earlier in the Pfennig this morning, I told you about the rise in the A$… I didn’t tell you that it was trading at a 14-month high, as it was reported that Australian employment surged 40,600 in September! With a print like this, I think that’s it’s almost a given now that the RBA comes back in November and hikes rates again!

Another currency at a 14-month high is the New Zealand dollar / kiwi… Remember how I’ve told you about the Reserve Bank of New Zealand (RBNZ) Gov. Bollard, and his penchant for jawboning kiwi lower? I despise him for these things, as a Central Banker, your job is to protect the value of your currency, not diss it!

Well, now Bollard has company… New Zealand Finance Minister, Bill English, has this to say… “We’re uncomfortable with it (kiwi) at this stage in the economic cycle.” You see, Mr. English is concerned that the economic recovery will be stamped out with a strong kiwi… Well, I’ve got a cure for you Mr. English… Tell Bollard and the boys over at the RBNZ not to raise interest rates, and that will do the trick! It’ll stop the speculation in its tracks! However, if the RBNZ does raise rates next month, then you have no one to blame but yourselves!

OK… Let’s get back to Gold, before we head to the recap and the Big Finish!

I did a video yesterday on Gold… And I talked about how you can go about your life without an inflation hedge in your back pocket and suffer the consequences of not only having your purchasing power reduced by the falling dollar, but having what dollars you have left eaten away by inflation… OR… you can get that inflation hedge… and put it away for a rainy day… or pull out to play it like a “Get Out of Jail Free Card” when inflation hits…

To recap… Gold has soared to another all-time high of $1,055 overnight. And the non-dollar currencies are all gaining VS the dollar on the thoughts that a global recovery will result in wider yield differentials in those currencies VS the dollar. A$ and kiwi have both traded at 14-month highs overnight… And… We could see some downside risk to the euro if ECB President Trichet decides to defend the dollar today after the ECB meeting this morning.

Currencies today 10/8/09: A$ .9050, kiwi .7398, C$ .9475, euro 1.4770, sterling 1.6060, Swiss .9745, rand 7.3440, krone 5.6545, SEK 6.9890, forint 182.75, zloty 2.8655, koruna 17.4375, RUB 29.60, yen 88.30, sing 1.39, HKD 7.75, INR 46.36, China 6.8260, pesos 13.31, BRL 1.7480, dollar index 76.03, Oil $70.23, 10-year 3.19%, Silver $17.84, and Gold… $1,055.08

That’s it for today… Have a Thunderin’ Thursday.

Chuck Butler

Source: Gold Soars To Another All-Time High!

Silver is the most flexible metal on earth. We’re not talking about its malleability. We’re talking about how it is used.

Let’s take the point of view of those expecting a quick, painless recovery. In that case, silver is a great investment. It has many industrial uses other precious metals don’t. As the global economy kicks back into gear, we’ll see more demand from electronics manufacturers, battery makers and solar cell producers — all of which use silver in their products.

There are thousands of uses for silver in industry. It is used in water purification, medical machinery and, of course, jewelry. All of these industries will begin to pump out products again, which will put a strain on our limited aboveground silver reserves.

Now take a look at the world through the eyes of those thinking we are going to see a second collapse. The best place to store wealth is in precious metals. Of course, gold is the most common place to store cash, but silver is no slouch.

From 2006 until now, the physical holdings of silver funds have jumped 11-fold. That’s because more people than ever are interested in holding silver — or at least a fund that holds silver.

Silver is both a way to safely store your wealth and to spend it. Over the past several centuries, silver has been used as currency. In fact, our own U.S. dollar was once backed by silver. For those expecting the worst, silver is a must-own. These ETF holdings don’t even take into account how many people are stocking up on personal physical holdings.

There’s no shortage of demand. Everything is in place for another massive run-up. Gold already broke the $1,000 per ounce threshold last month. And it busted through its 2006 highs this week. Even so, silver is still lagging around $16.50.

David Morgan from Silver-Investor.com notes that when gold breaks through $1,000 and stays there for a length of time, silver will shoot up. He even went as far as to say silver will break through last year’s $21 high and hit $25 per ounce sometime in 2010.

Are we suggesting you buy silver? Well, yes. But we have a much better way for you to make money off this rise…

Buying shares of a major primary silver miner like Silver Wheaton (NYSE: SLW) would do the trick. It’ll certainly leverage its massive reserves and production against silver’s rise and return larger profits to shareholders than simply buying silver will. But even these gains will be miniscule compared with what you could see with small-caps.

We have an opportunity to get option-sized gains on silver’s rally without the downside or expiration hassles of actually buying options. By buying shares in a junior silver miner, like Hecla Mining (NYSE: HL) or Mag Silver (AMEX: MVG), we can take advantage of huge price swings without worrying about it expiring worthless, as options often do.

In just the last week, Hecla is up 15%, and Mag is up another 5%. As I write, these stocks are continually pushing into new 2009 highs ever day. When the silver boom gets traction in the market, expect small players like these to rocket as a result.

Sincerely,
Jim Nelson

Source: Finding Option-Sized Gains from $25 Silver

He noted that “These people who were often truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the aristocracy,” he says, “only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.”

This goes along with an article in the St. Petersburg Times about Tom James, chairman and chief executive of Raymond, James Financial, who had “some tough words for the wizards of Washington, DC who oversaw the $700-billion bailout package”.

He reports, “The Brave And Wonderful Mogambo (BAWM) was right all along! Those government weenies are the biggest freaking morons you ever saw, and we as a country should be ashamed of ourselves for having elected such corrupt, half-witted, utter failures and congenital idiots!”

As you have probably guessed by now, he did not say those exact words, but he implied every syllable when he said, “Legislators were almost embarrassingly ignorant of how the financial system works”, which I figure explains how they don’t understand the linkage between their own Bad, Bad Performance (BBP) as legislators and the subsequent Bad, Bad Performance (BBP) of the economy, and he says that only 3 of 16 legislators that he talked to actually understood what was going on in the “credit crisis.” Less than 20%! Hahaha! We’re doomed!

Well, maybe these Congressional losers will understand the unfolding economic slowdown, as evidenced by the Baltic Dry Index, which is an index of the cost to transport stuff by cargo ship, and which has fallen precipitously, which seems very important to me, and to Junior Mogambo Ranger (JMR) Riccardo, too, who is also alarmed by this like – as I previously said – me.

It’s actually beyond scary, in a terrifying kind of “ain’t nobody buying nothing in a consumer economy” kind of way, which means that without the consumer buying stuff as his or her contribution to the famous statistic of “the consumer is 70% of the economy”, we are, in case you ain’t heard, freaking doomed!

Well, maybe not all buying is drying up, as silver market analyst, Ted Butler, reports that in the last 10 months, “some 150 million ounces of silver can easily be documented to have been bought by investors. Undocumented purchases would add tens of millions more ounces.”

In fact, when you add it all up, “Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout.”

Thus, it is easy to see why Mr. Butler is “bullish beyond belief for silver”, since this kind of demand means that “In silver, the documented 150 million ounces bought in the first ten months of this year is equal to 15% of all the silver bullion equivalent thought to exist!” Wow!

More than one-seventh of all the silver bullion “thought to exist” in the whole world was suddenly bought up in less than a year, and yet the price of silver has been pounded down to less than 10 bucks an ounce? No wonder I am so bullish on silver!

He also notes that the gold/silver ratio is at more than 80, which is “one of the biggest differences in history.”

And not only that, but since there are 4 to 5 billion ounces of gold in the world versus only 1 billion ounces of silver, that means that “the total dollar value of all the gold in the world is worth 300 to 400 times more than all the silver in the world (80 times 4 or 5)”.

Talk about undervalued! Hey! This investing stuff is easy! Whee!

Until next time,

The Mogambo Guru

Source: A Bull in a Silver Shop

This time around, silver has failed to match the gains that gold posted in recent months, spawning a widespread believe that silver is poised for a bull run. Such factors as a decline in supply and a weakening U.S. dollar have buttressed that bullish belief. And so has the fact that China’s government is strongly encouraging that country’s residents to buy the white metal.

With Beijing’s plan to inject $587 billion (4 trillion yuan) into China’s economy, and a growing desire to diversify away from the U.S. dollar as its key reserve currency, the Asian giant could increase its reliance on such precious metals as gold and silver – especially if global inflation takes hold.

China’s central bank “could use gold, silver or even a basket of commodities” to diversify away from the dollar, said Money Morning Contributing Editor Peter Krauth, a recognized expert in metals, mining and energy stocks. “It’s impossible to know how they’d go about it.”

This wouldn’t be the first time that silver played an important economic and transactional role in Mainland China. Nearly 2,500 years ago, the Red Dragon was the first to use silver as money. While China invented paper money in the ninth century, silver made its way back several dynasties later as legal tender until the government again prohibited its ownership in 1935.

Now, 75 years later – in the wake of the worst economic downturn since World War II – China has reversed its stance on silver.

In July, state-run China Central Television (CCTV) began a campaign that pushes the purchase of silver bullion as investment opportunity. Analysts say silver has been undervalued in the last few years, and is a good investment for individual investors, according to CCTV.

“The investment threshold [for silver] is not high, and is more suitable for the general public,” said Want Chunli, GM of Beijing’s Caibai Shopping Mall, the first to offer silver as an investment opportunity. “Silver is much cheaper than gold.”

Silver’s investment potential is best measured by the silver-gold ratio, or the price of gold divided by the price of silver. Over the past five years, the ratio has held fairly steady, requiring 55 ounces of silver to buy an ounce of gold. Earlier this year, as gold increased at a faster rate than sliver, the ratio skyrocketed to 70 to 1. It has since corrected to around 60.

Money Morning’s Krauth says that when this relative price ratio does correct, it tends to overshoot.

“I see it going to 50 at least,” Krauth said. “With gold at $1,000, that means silver could trade to $20 or even higher, which is another 20% from [the current price].”

Silver closed Friday at $16.06, while gold closed at $991.10 – implying a silver-to-gold ratio of 61.71.

Krauth sees China returning to an asset-backed currency and says ownership of silver could help the average citizen, even if its central bank is unable to diversify out of the U.S. dollar fast enough.

The more Chinese citizens who own silver, “the stronger the country will be in the eventuality that the world establishes a new world reserve currency backed by (most likely) precious metal(s).”

China’s middle class is estimated at 300 million – roughly equal to the entire U.S. population. And that consumer group in China is growing. As those incomes continue to rise, so, too, will the demand for silver.

China’s use for silver goes beyond jewelry or as a safeguard against inflation. Thanks to the antibacterial properties of silver ions, the white metal is used for everything from socks to wash machines, to name a few.

Silver Supply is Falling

The world once had 2.2 billion ounces of silver above ground, but that figure has plummeted 86% to the current 300 million ounces, according to Addison Wiggin, a best-selling author and an executive publisher at Agora Financial LLC, which, like Money Morning, is part of the Agora Inc. group of companies.

However, above-ground silver accounts for only 25% of the silver produced today, says Money Morning’s Krauth. The other three-quarters is actually a byproduct of such mined base metals as iron, nickel or lead.

When the financial markets nearly collapsed last fall, base-metals producers weren’t spared. As demand forecasts were cut, they quickly throttled back on production, expansion and exploration.

“More has to come from mine production, which can only grow so fast,” Krauth said. “The fact that base-metals producers have cut back a lot hurts silver production because it’s a byproduct of base-metal mining.”

Once the recovery begins – and it’s already under way in China – supplies will be hard to come by as demand for base metals returns, resulting in higher prices for silver.

Gold’s “Lap Dog”

The price of gold doesn’t necessarily affect the price of silver, but when other economic factors such as the U.S. dollar falter, prices traditionally rise at the same pace. But when the global financial crisis took hold last year, the silver-to-gold ratio shot up to 84.

Much like a “nervous little lapdog,” the price of silver follows gold closely, Krauth says.

Since its mid-July low of $12.46 an ounce, silver has rebounded roughly 30% to current levels. But if gold supplies run short, silver may have even more room to run.

When gold hit its all-time high of $1,033.90 per ounce in March 2008, silver prices soared as high as $20.92. But when gold hit its 18-month high earlier this month, silver stayed in check.

“Silver has lagged the rise in gold prices since 2000,” said Money Morning Contributing Editor Martin Hutchinson, a former investment banker with more than 25 years’ experience in the global financial markets. “If gold really takes off and the big money finds there isn’t enough of it, there should be spillover into silver.”

Famed commodities investor Jim Rogers also noted the lag in silver and gold’s prices.

“I’m looking at all commodities, but some commodity prices are very depressed,” Rogers told China International Business. “Silver is 70% or so below its historical highs, coffee is 70% or so, as is sugar, while gold is only 10% off its all time high.”

Making the Investment

While buying physical silver is an option for investors, the simplest way to get in, Krauth says, is via the iShares Silver Trust (NYSE: SLV) exchange-traded fund (ETF). In the three years since its inception, SLV has accumulated $3.91 billion in assets, and the share price – which is the equivalent to one ounce of silver – is up more than 50% this year.

During last fall’s market crash, SLV’s holdings remained nearly flat, around 220 million silver ounces. Since then, it has grown a further 22% to about 280 million ounces.

“That’s a testament to investor commitment,” Krauth said.

Hutchinson calls SLV “quite a good vehicle” over the big silver miners – such as Coeur d’Alene Mines Corp. (NYSE: CDE).

Coeur d’Alene has a large silver deposit in Bolivia. But Hutchinson characterizes Bolivia as a country that he “wouldn’t touch,” thanks chiefly to the Venezuela-like nationalization of the country’s other commodities, including oil and natural gas.

Source: The No. 1 Way to Profit When Silver Upstages Gold

It’s a world shrouded in deep myths and folklore that include stories of people losing their homes, or having 5,000 bushels of soybeans dumped on their front lawn.

I’m talking about the commodities world, of course.

But despite these tall tales, commodities aren’t necessarily dangerous investments. Not if you know what you’re doing and take adequate precautions. Rather, the “secret society” stuff comes from the belief that the sector is a murky one that many investors simply don’t understand. Just the mere sound of “commodity futures and futures options contracts” was enough to send people running for cover…

However, nothing could be further from the truth when dealing with commodities. And over the past few years, we’ve seen great changes in the financial world that have opened the doors to this “secret society.”

Step Out of Your Comfort Zone… Don’t Be Afraid of Futures & Futures Options

I’ll tell you what I’ve told my friends and acquaintances over the years: Don’t be scared of commodity futures and futures options, they’re essentially little different than stock and stock options. If you know how to trade stocks and stock options, then there’s no difference from futures and futures options.

For example, if you can buy and sell IBM (NYSE: IBM) shares and IBM options, then why can’t you buy and sell sugar futures and sugar options? There is no difference. As long as you have an idea of where an investment (be it IBM or sugar) might move to and its underlying fundamentals, then what is there to be scared about?

Here’s the problem as I see it (based on my 18 years of experience in the commodities sector): Most people just don’t know enough about the underlying fundamentals of commodities – how/why soybeans, cocoa, cotton, or live cattle trade in a certain way. The majority of people know stocks and that’s that. They don’t like change and are fearful to step out of their comfort zone.

But all commodities that are available to trade on various U.S. exchanges are highly regulated. They have strict rules, which are efficient and assure the integrity and safety of your capital.

So if you’re looking to add some great potential gains to your portfolio, then consider what commodities can do for you…

Four Commodities… Four Explosive Moves

Want some examples of how explosive the world of commodities can be? Just look at these moves for oil, natural gas, gold and silver over the past year…

How would you have liked to hop aboard some of those moves?

Oil: When it started rising in 2007 and topped in 2008, it encompassed a staggering $90,000 move if you’d held just one contract. And the freefall that ended last March brought in an unheard of $110,000 for anyone being bearish.

If you’d held 10 contracts during those moves, you could have seen gains of over $1 million! And that’s just one direction. Double it if you went both ways.

Natural Gas: The move up in the summer of 2007 to the top in 2008 encompassed an $85,000 move, while the drop back down to the lows hit just two weeks ago and saw an even larger haul of $110,000. And this was for holding just one measly little contract. Imagine if you had 100 contracts.

Gold: From the gold chart below, you can see the trend higher from 2002. But even if you got onboard as late as 2006, the move could still have netted you $45,000.

Silver: A bullish position taken in 2006 would have scored $60,000 on just one contract. And if you’d hopped on the bear train near the highs in the spring of 2008, you could have pocketed another $65,000 just six months later.

This is some serious money folks.

And the great thing about commodities is that it’s normal for them to cycle from highs to lows and then back again. This gives you opportunities to profit on the way up and the way down. Moreover, it’s in contrast to the stock market, where most moves are biased to the upside.

Now, if you want to profit today…

Three Reasons Why You Should Trade These Four ETFs

Due to the changes that have taken place in the commodities world, regular investors have a chance to take part in the sector without leaving the comfort of a stockbroker.

We’re talking about commodity-related exchange-traded-funds (ETFs), which mimic the moves of the underlying asset. So you can use them to play some of the most popular and active commodity markets.

For example, if you’d like to go for oil, natural gas, gold, and silver, consider these ETFs:

• Oil: United States Oil Fund (NYSE: USO)
• Natural Gas: United States Natural Gas Fund (NYSE: UNG)
• Gold: SPDR Gold Shares (NYSE: GLD)
• Silver: iShares Silver Trust (NYSE: SLV)

If you want to gain exposure to the often lucrative commodities world, here’s why you should trade these ETFs…

1. Simple: ETFs trade like stocks, so you can buy and sell them as you would with shares of any other company from a regular stock brokerage account. So you don’t even need to get involved with commodity brokers, futures, or futures options contracts.
2. Options: The ETFs also have options available, which offers you more leverage and can reduce your risk.
3. Liquidity: Because all four of these ETFs are the largest ones available for their respective commodities, there is enough volume to be able to get in and out quickly and safely.

Next time, I’ll show you one of my favorite ways to use an options strategy to execute a bullish commodity trade. But in the meantime, check out those ETFs above.

Good trading,

Lee Lowell

Source: Four Easy Ways to Trade the World’s Top Commodities

Now as then, China keeps its own counsel. We know what they want us to know, plus what we can surmise from rumor and reading between the lines. But lately, we’ve been able to add presumption to news and come up with something that looks very significant.

Specifically, there’s been a flood of tantalizing stories out of the East that, taken together, strongly suggest a growing preoccupation with a form of money that was ancient even in Signor Polo’s time. And it ain’t silk. It’s gold.

We already learned, back in April, that China has been salting away bullion for the previous six years, out of sight of international gold watchers. To the tune of 14.6 million ounces. Now the evidence suggests that that was merely the prologue.

Let’s take these tidbits one at a time:

Sovereign Wealth Fund Dumping $$ for Gold?

This one is still at the rumor stage, but highly-respected website Mineweb.com is supporting it. What we know for sure is that the country founded its primary sovereign wealth fund, China Investment Corporation (CIC), two years ago, with the stated aim of rapidly deploying some of its $1.5 trillion forex surpluses – $200 billion initially, with another $100 billion recently added to the kitty – into investment in non-Chinese enterprises. This it has been doing in spades, acquiring businesses around the globe. Extractive industries are among them, including Teck Corp., the diversified Canadian mining giant.

Might it also be buying up gold? We don’t know that for sure, but it seems likely. And, in addition, rumors sneaking off the mainland indicate that within the CIC, a lot of effort is being poured into prospective investment deals in the oil and precious metals sectors. The more it produces, the more it can keep.

The Chinese have made no secret of their disdain for current American economic policy and what they see as the inevitable destruction of the dollar. That they would be moving to diversify out of the greenback shocks precisely no one, and gold is one logical landing place for all those bucks. We suspect that’s exactly what is happening, behind the scenes as well as center stage.

Gold and Silver Pushed to the People

As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it’s actively pushing folks to buy some personal metal, with China’s Central Television, the main state-owned television company, running news programs cum infomercials, letting the public know just how easy it is to purchase gold and silver as an investment.

It truly is as simple as can be, because every bank sells gold and silver bullion bars in four different sizes to individuals. (Try to find the same the next time you make the trek down to Wells Fargo.) Mining companies are reportedly encouraging employees to convert some of their wages to gold on payday. Gold is traded in some form 24 hours a day. And paper proxies for the metal are also soaring in popularity.

There are persistent rumors that the export of silver has already been banned. Gold could be next.

Thus China, which only yesterday was the lowest per-capita consumer of gold in the world, is bidding to become the biggest. Some analysts believe it will pass India – the top dog since forever – as early as 2010. Clearly, the government believes the country is strengthened if everyone who can holds some hard currency.

All this suggests a mania in the making, and only in the formative stage. Imagine if hundreds of millions of new consumers climb on that particular bandwagon…

China Repatriates its Bullion

Meanwhile, in early September numerous sources reported an announcement that Hong Kong is pulling all its physical gold holdings from depositories in London and transferring them to a newly built, high-security depository at the city’s airport.

That means the government is backing the promotion of Hong Kong to a more formidable status as a Swiss-style, regional trading hub for bullion, at the same time as it reduces London’s role as a key settlement and storage center.
Press reports cited government officials as saying that marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility. Outreach will also be made to commodity exchanges, banks, precious metals refiners and ETF providers.

There can be little doubt this signals that the Chinese government fully recognizes the importance of gold in a time of crisis, and that the most prudent plan involves keeping its stores close at hand.

China Threatens to “Just Walk Away”

In one of the year’s most intriguing developments, commodity and derivative markets were thrown into a tizzy on Monday, August 31, by the worldwide circulation of a story published two days earlier in Caijing magazine (and reported by Reuters here).

According to the Caijing article, a spokesperson for China’s state-owned Assets Supervision and Administration Commission – the regulator and nominal shareholder for state-owned enterprises (SOEs) – told six foreign banks that SOEs reserve the right to default on contracts.

Say what?

Maybe the commission has been paying attention to the “just walk away” forfeiture movement that blossomed among American homeowners whose overall debt on their properties far exceeded the assessed value.

Small wonder there was panic in trading houses that hold a lot of Chinese paper. They hope any problems will be worked out short of a default. In fact, “It’s [only] a handful of companies who are being encouraged by regulators to ‘re-negotiate’,” says one banking source. “It’s outrageous, but it’s China, so everyone is treading very carefully.” Very carefully.

Nevertheless, in addition to tangible losses, those potentially affected fear the establishment of a dangerous precedent, one that could lead to utter chaos in the enormous, tangled world of derivatives.

And there is one other, albeit highly speculative, possibility. Some major entities – we don’t know who, due to the opaque nature of international gold trading – have huge, perhaps quite concentrated short positions in the metal, both on the COMEX and OTC market. Is one of them China, acting through American intermediary banks?

A short position in precious metals means that the initiator of that position is obligated to deliver physical gold or silver if the buyer (who holds the long end) wants it. Suppose China is one of the big shorts. Suppose it’s been playing the market in order to buy at what it sees as bargain prices. Now suppose a gold rally induces it to just walk away from all those obligations to deliver. Who’s going to force it to make good? Guess what, no one has a gun large enough.

Granted, it’s an outlandish scenario. But impossible? No. Beijing has shown nothing but indifference to what others think of it. And if the dollar does crap out as the world’s reserve currency, there’s nothing to say that China won’t see its self-interest as lying in a completely new direction.

Conclusion. Gold, and the companies that produce it, have enjoyed a brisk runup of late, as the metal mounts yet another assault on the beckoning, symbolic $1,000 level. How much of this can be traced to what China has done, is doing, or may yet do?

We don’t know, but we suspect it’s not entirely coincidental. All rumor and speculation aside, as China clearly turns more and more bullish on gold, so will everyone else.

Regards,
Doug Hornig

Source: What the Heck Is Going on in China?

This caused the federal debt clock to add a 14th digit (by breaking the $10 trillion dollar mark).

We’ve also got an out-of-control trade deficit. For having a 40% share of the world’s economy, we certainly don’t produce that many goods.

Finally, we have a credit crisis that is causing many to worry that our lenders, like China and Japan, will turn off the tap.

With this nightmarish scenario we find ourselves in, it wouldn’t surprise us if the US’ credit rating fell. That would cause an immediate panic in the currency markets and send the buying power of the dollar into a tailspin.

I guess what we’re saying is get out of the dollar as fast as possible!

There are a couple of ways to go about this:

Currency Protection Strategy No. 1: Sell the Dollar

The easiest way to get out of the dollar is to trade in the cash you don’t need to live on for another currency. You might even be able to hold other currencies in your brokerage account.

Here at Lifetime Income Report, we don’t recommend currencies directly. We’re here to help you find income, not to pick currencies.

Exchanging currencies is one way to protect your wealth from a potential dollar disaster. But it’s not the only way…

Currency Protection Strategy No. 2: Buy Precious Metals

There’s probably no safer way to protect your wealth in the world than to own gold and silver. There are many Web sites and exchanges where you can do this, as well as coin dealers that can help you make this move.

While we personally think precious metals are going to continue increasing in value, you probably shouldn’t just spend all your money on gold nuggets. There’s a big difference between the spot prices and what you would pay. Gold coins, for instance, are trading at a hefty premium over spot.

Currency Protection Strategy No. 3: Buy US Companies With International Exposure

Again, this shouldn’t be a surprise. We have many US companies in our portfolio. After all, we are here for income, not to be global traders. But you’ll probably notice that most of our US companies have plenty of international exposure.

Currency Protection Strategy No. 4: Buy American Depositary Receipts

We saved the best for last. This is the theme we have been hitting the hardest in recent months. ADRs have been a cornerstone of this newsletter. From the very first issue, we had at least two ADRs in our portfolio. This month, we are adding another.

There’s a huge reason why we buy ADRs instead of the currencies themselves. Instead of just the upside of foreign currency to US dollars, we also get the benefit of fast-growing emerging markets and mega income from international players.

You see, foreign markets, especially now, have huge dividend yields.

The US is near the bottom of the list of places for income investors to look. The smart money is in companies staying out of the dollar.

Regards,

Jim Nelson

Source: 4 Ways to Protect Against a Falling Dollar

In fact, not only is the world not getting hotter, but neither is New York, which is not actually a part of the World As We Know It (given the people they elect), but which is still affected by the weather, and in this case, “The average temperature for the month in Central Park so far is 72.6, 3.9 degrees below normal, putting it in a tie for sixth place on the list of coolest Julys, along with 1895” whereas “The coolest July on record was 1888, with an average temperature of 70.7.”

And arctic.atmos.uiuc.edu has a chart that shows that “Current Southern Hemisphere Sea Ice Area” has expanded by a huge 14 million square miles, up from 2 million square miles, in the last 6 months! Wow! It takes a lot of cold to make 14 million square miles of sea ice!

And this is exactly what you would expect from the strange disappearance of spots on the sun that has made me crazy with fear in the last year or so as it developed, which is admittedly not the only thing that has made me crazy in the last year or years or decades, but the sun is the source of the earth’s energy, and when something happens to the sun, it is Important Freaking Stuff (IFS) in that all-important weather way that, Chaos Theory-wise, affects everything.

In fact, Prisonplanet.com had the headline which summarizes it all: “Artic Ice Grows 30 Per Cent in a Year”, and from that deduces that “A general cooling trend across the planet is now clearly apparent as sunspot activity, the main driver of climate change, dwindles to almost nothing.”

The facts are that there have not been any sun spots for over 400 straight days, and the evidence of measuring sun cycles and sun spots for the last 200 years leads to the prediction that “global temperatures will drop by two degrees over the next two decades as solar activity grinds to a halt and the planet drastically cools down, potentially heralding the onset of a new ice age.”

In fact, it must be worse than that, as we later find out that temperatures have already fallen by about 0.5 degrees Centigrade over the past 12 months, which seems like a hell of a lot to me if it is going to take 20 years to drop 2 degrees, which is enough to be another Maunder Minimum, like the kind that lasted from 1645 to 1715 and during which “sunspots became exceedingly rare and contributed to the onset of the Little Ice Age during which Europe and North America were hit by bitterly cold winters and the Thames river in London completely froze.”

I cannot pass up the opportunity to proclaim that you should be heeding the Loud Voice Of The Mogambo (LVOTM), the introductory overture of which predictably begins “We’re Freaking Doomed (WFD), you morons! Your money is dead and you will be economically dead, if not actually dead, all because you turned your backs on your own Constitution and its requirement that money be only of gold and silver coin, and instead embraced a stupid fiat currency, unleashing torrents of new money (inflation in the money supply) that produced bankrupting, inflationary booms in stocks, bonds, houses, consumer debt, derivatives and size of government, all of which that selfsame government is trying to keep from imploding by printing and spending more money, which caused the problems in the first place, which means huge, huge HUGE inflation in consumer prices, even without this scary sun spot thing and the horrendous, unthinkable possibility of years and years of persistent crop failures and famines during a mini ice-age, all of which mean that you should be buying gold, silver and oil with both hands, and indeed all commodities, because their prices, like all prices, are determined by the dynamic of demand versus supply, of which there ain’t a-gonna be any.”

And I say this not because I am an insufferable, arrogant and horrid little man who knows a little bit about some things and now he thinks he knows everything about everything, but instead I say this because things that we eat don’t grow very well or much during ice ages.

All of which make me squeal with childish glee, “Whee! This investing stuff is easy!”

Source: Economy Mimics Global Climate Change

And falling on its face, dead to the world, is what America so richly deserves, as it was built upon the idiocy of ignoring the Constitution (“Money shall be only of silver and gold”!), and then committing the folly of a fiat currency (“create as much paper money as the Federal Reserve wants!”) and insane degrees of fractional reserve banking (“we can loan as much as we want without limit!”) so that socialists and commie-think morons in Congress can deficit-spend us (“free lunches for everybody!”) into ruination.

For those who take everything literally, be aware that there was nothing in the book about giants actually falling and hitting the ground with a big “thud” or anything, but there was plenty about why it fell, mostly reasons that fall into the categories of stupidity, ignorance, corruption and greed.

Unfortunately for me, it’s taking me a long time to read it because I cannot read much of the book without suddenly leaping to my feet and shouting, “We’re freaking doomed!” and running to the cozy safety of the Cozy And Safe Mogambo Bunker (CASMB), whereupon I nervously sweep the perimeter with the periscope and thank my lucky stars for gold, silver and oil, because I know that no matter how bad things get, those three things will go up in price.

And this “sell high” part of what will happen in the future is what comes after the “buy low” part, which is Right Freaking Now (RFN), and it will be RFN for a long time to come as the dollar loses more and more buying power due to the sustained over-creation of money necessary to soak up the enormous, monstrous debt that the federal government will be peddling for years and years.

I am sure that Mr. Panzner comes to the same conclusion, although if you call him up to confirm this and, after he answers, “Hello?” you ask, “Do you recommend buying gold, silver and oil because they are sure to go up in price with the roaring inflation in consumer prices that will consume us because the loathsome Federal Reserve is creating so much excess money and credit so that the despicable Congress can spend a third of GDP – and deficit-spend a seventh of GDP! – and anybody who says otherwise is some kind of mental defective or has some kind of mutant spore from outer space, or CIA thought-control waves, controlling his brain? Yes or no?” he will say, instead of just answering my simple question, “What?” which is certainly not responsive!

Naturally, your eyes narrow to suspicious slits, and you wonder why he is evading my simple question! What’s he up to?

Perhaps the answer is hidden in his vision of the future, which would be important to someone like you because you are intelligent and clever enough to discover some profitable venture in it, whereas I am too stupid and dull-witted to see entrepreneurial opportunity, and can only look at gold, silver and energy as investments of choice due to the wonderful simplicity of the lesson of the last 4,500 years of history whenever a country was so stupidly ignorant, greedy and selfish as to produce an excess of money.

Since I have never seen you before, I know that you are a stranger around here, a stranger that doesn’t usually hang around with lowlife bums like me, pathetic mental midgets who are incapable of putting simple picture-puzzles together, or forming coherent thoughts to reach any conclusion that is not laid out in front of me, usually with someone literally standing right there, pointing out the obvious, to make sure I don’t miss it.

So, for you smart people who can see the silver lining in a dark cloud and prosper while all else is misery and suffering, he writes, in a paragraph that I consider to be as chillingly prescient as it is succinct, “Businesses will find it hard to thrive, let alone thrive, amid increasing violence and conflict, shortages and logistical interruptions, and a breakdown of markets and financial mechanisms. Individuals will be forced to rethink livelihoods, lifestyles, living arrangements, and locales. Political structures will be in flux. Around the globe, gangsters, maniacs and mobs will compete with established regimes for the reins of power. Nuclear attacks, domestic terrorism and other threats that once seemed so remote to most Americans will become an all-too-frequent reality. So, too, will breakdowns, epidemics, and other fallout stemming from economic deterioration, growing social unrest and criminality, and a forced shift toward greater self-sufficiency.”

He concludes that “For many Americans, the years ahead will be nothing short of a modern Dark Ages”, although he obviously does not mean you, personally, since you are so smart that you will make fortunes despite any “hard times”, and he obviously does not mean me, either, because I own gold, silver and oil! Whew!

So while you make your fortune “the hard way” by poring over annual reports and prospectuses to laboriously winnow the wheat from the chaff, I will just lazily watch gold, silver and oil go up and up in price, as is seemingly guaranteed by the entire historical record of the world, although I may be the first to actually ever wax lyrical and say, “Whee! This investing stuff is easy!”

It does not explain, however, why Junior Mogambo Ranger (JMR) Doug B. sees it as “Gee, this psychopathic world-domination stuff is EASY!” or why I agree with him and say, “And so it is, JMR Doug! So it is!”

Source: Golden Shelter from Falling Giants