Care Our Health: Green Energy's Beneficial Impact on Natural Gas

There are very few things we need in this world. According to most state legislatures, heat and electricity are two of these things. If you are planning on moving into a new apartment or house in most states, you are required ― by law ― to have your gas and electricity turned on before you can spend your first night.

Of course, this may seem like common sense. But it does make a statement about the necessities in life. Most areas these days are heated with natural gas… Meaning, you are mandated to pay for natural gas to live.

Here's a small-cap technique to use this pay-to-play mandate in your favor…

The Small-Cap Sector You'd Never Think to Look At

Natural gas is much cleaner than other fossil fuels. Coal and oil are just about as dirty as it gets. For the same amount of energy when burned, natural gas produces 29% less carbon dioxide than petroleum and 44% less than coal.

But natural gas is an important energy type even if it's not simply burned. And it doesn't take much of an imagination to see how more "green" legislation is on the way.

In 2007, Congress worked its way through a bill mandating a ridiculous amount of ethanol to be produced by 2022 ― 36 billion gallons. That's roughly five times more ethanol than is currently produced. And it takes a lot of natural gas to produce that ethanol.

In the U.S., corn is the largest source of ethanol. To grow corn, it takes a lot of fertilizer ― about 22 million tons of fertilizer is consumed every year. The price of fertilizer is 90% dependent on the price of natural gas. On top of that, ethanol plants are powered by natural gas.

While natural gas is greener than what we currently use, there is still one more reason for the natural gas price hike: demand.

If you take a look at the accompanying chart, you can see the expected growth of natural gas in electricity generation. Coal is still the No. 1 energy source, but natural gas is about to blow away oil, nuclear and renewable energies.

The demand for natural gas is only going to strengthen the industry. One way to play this growth is to buy a natural gas producer. However, figuring out which ones will pop is guesswork at best.

What we have today is not a growth story. It's a true profit story. You see, as strong as natural gas is, we aren't going to be placing any bets on future prices. Instead, we found the one segment of the natural gas industry that thrives when the price of natural gas is both up and down…utilities.

Gas utilities perform well no matter what the price of natural gas is. These companies pass on costs straight to consumers.

It's smart business for these distributors. They simply profit from their services, not what the speculative prices are.

Fortunately for us, the overall utility market is fragmented. I know that doesn't sound like a good thing, but it is…

If we had a national utility, we'd end up with a megacap stock that would have too much attention. With attention comes slow to no gains. That's why you won't see us recommend any blue chips here at Penny Sleuth. But, a fragmented industry, such as this one, leads to many small caps to choose from ― many of which are extremely undervalued.

The second important aspect to consider when looking at utilities is the monopolistic attributes these companies have. To get into this business, you have to front a lot of costs. You have to secure the product ― in this case, natural gas ― make sure there's a large enough customer base, and work out the policy issues ― which can be quite a hassle depending on the state and municipality.

You don't normally have a choice of which supplier you want to get your natural gas from. You just get it from whichever utility company is supplying the rest of the community. That gives almost all of these businesses an advantage. It is also the reward for the upfront costs.

On top of that, many of these companies are considered Master Limited Partnerships, which give them another market advantage ― they are tax-free.

With the many small-cap utilities to choose from, it's important to do your research. It takes plenty of digging to find the right one.

A.Gary Shilling's Predictions: Economics is Still Screwed In 2009

Last year, economist A. Gary Shilling humiliated the rest of the economic forecasting industry by going 13 for 13.

As promised, here are A. Gary Shilling's predictions for this year:

Every one of our 13 investment strategies for 2008 worked last year. Some of them have been fully exploited so we dropped them from this year's list. But others are only partially achieved in view of our dire outlook that the worst global financial crisis and deepest worldwide recession since the 1930s will continue throughout 2009.

So we've retained 10 of our 2008 strategies this year, some in modified form, and added two new ones.

1. Sell homebuilder stocks and bonds.

2. If you plan to sell your house, second home or investment houses anytime soon, do so yesterday.

3. Sell some housing-related stocks.

4. Sell some consumer discretionary spending companies.

5. Sell most commercial real estate.

6. Sell some commodities.

7. Sell emerging market equities.

8. Sell emerging market debt.

9. Buy the dollar.

10. Sell stocks in general. (S&P 500 to 600)

11. Sell consumer lenders' equities.

12. Buy, carefully, high-grade bonds.

A. Gary Shilling on Financial Sense Newshour

Jim Puplava interviewed Gary Shilling in the first hour of his weekly Financial Sense Newshour program. It was Shilling's first time on the show -- and what a treat it is hearing him allowed to finish his thoughts and sentences. Much different from when he's appeared on CNBC roundtable discussions with 4 or 5 others, all talking at the same time. Some of whom aren't qualified to tie Shilling's shoelaces.

Shilling correctly forecast much of this current financial mess several years ago -- and he tells Puplava housing has further to fall. In fact, he thinks we might not see a bottom in housing until sometime in 2010.

I like listening (and seeing and reading) Shilling when the occasion arises in the same way I enjoy guys like Jim Rogers and Marc Faber on "big picture" type stuff. He's been writing columns for Forbes for what seems like forever. He strikes me a man who's been around a while and who takes a long-term view of things. Let's hope this is the first of many appearances with Puplava.

So first let's review Shilling's forecasts for 2009. He was amazingly accurate with his 2008 investment strategies. Expect the same in 2009 as he's part of a growing chorus of experts who believe "the worst global financial crisis and deepest worldwide recession since the 1930s will continue throughout 2009." His 12 strategies, with my notes:

1. Sell home-builder stocks and bonds.
2. If you plan to sell your house, second home or investment houses anytime soon, do so yesterday. (Yes, another 20% drop is coming.)
3. Sell some housing-related stocks.
4. Sell some consumer discretionary spending companies.
5. Sell most commercial real estate.
6. Sell some commodities. (But proceed "carefully:" Selling "some" securities, or buying, or actively trading in today's volatile markets demands a level of skill sets, savvy and sophistication most investors lack.)
7. Sell emerging-market equities.
8. Sell emerging-market debt.
9. Sell stocks in general. (Shilling's forecasts that corporate profits will fall 48% from their peak in the third quarter 2007 to the fourth quarter 2009, and drop 32% from 2008 to 2009. This forecast implies much weaker S&P 500 earnings than projected by Wall Street analysts and strategies.
10. Sell consumer lenders' equities.
11. Buy the dollar.
12. Buy, carefully, high-grade bonds.

No recovery in 2009? Not till 2010, or later? Shilling's not alone. But in the eyes of the Wall Street happy-talkers, he's just another dark-side bear vying for the title "Dr. Doom" in 2009.

Shilling offers 10 "sells" and two cautious "buys." The dollar's one: "The buck tends to have five-to-seven year moves, and the current one appears to have just started. With a global recession, the dollar is the safe haven, the best of the bad lot."

I spent the past weekend in Colorado (go Broncos!), and looked through my father's library at some of my old books. I grabbed a copy of Shilling's Deflation to read on the plane ride home (which is currently listed for $600 since it is out of print - hat tip to reader AC). Shilling has been spot on this year, as his recommendations at the beginning of 2008 show amazing foresight:

In the January 2008 issue of his INSIGHT newsletter, Gary Shilling outlined his 13 investment recommendations for 2008:

Sell or sell short homebuilder stocks and bonds.

If you plan to sell your home, second home or investment houses anytime soon, do so yesterday.

Sell short subprime mortgages.

Sell or sell short housing-related stocks.

Sell or sell short consumer discretionary spending companies.

Sell low-grade fixed-income securities.

Sell or avoid most commercial real estate.

Short commodities.

Sell or sell short emerging market equities.

Sell emerging country bonds.

Buy the dollar before long.

Sell or sell short U.S. stocks in general.

Buy long Treasury bonds.

A. Gary Shilling: Still a Hardcore Bear

The past week has seen a number of previously stalwart bears adopt a more bullish posture, including Doug Kass, Marc Faber, Steve Leuthold, Barry Ritholtz and Richard Suttmeier.

Gary Shilling, president of A. Gary Shilling & Co., is another member of the bearish all-stars, but he's not adopting a bullish stance, even as the market extends its two-day winning streak. Not by a long shot.

Shilling is sticking with his target of 600 for the S&P 500 and believes three key events must occur before any talk of recovery can be taken seriously:

A reduction in the huge inventory of excess homes: The official stats say there's 3.6 million inventory of unsold homes on the market but the "shadow supply" - homes likely to come on the market if demand improves or because of rising unemployment - is widely viewed to be much larger.

Stabilization in the financial sector: The crisis has now morphed from subprime to consumer credit and commercial real estate, the insurance industry and beyond.

"Real" fiscal stimulus: Shilling estimates only about $200 billion of the $787 billion stimulus package is "rock hard infrastructure" spending that might actually aid the economy in the short term. He believes a second fiscal stimulus package is coming later this year that's less of a "social agenda."

Shilling, who's predictions for 2008 proved notably prescient, also notes the fact "bottom picking" has become the national pastime suggests sentiment isn't really as negative and fearful as typically occurs at important market/economic turning points.

Geo-fiction or not, high-grade magnates rule: ThomWatch

Mining magnates are shaking the money tree. We cannot guarantee this two-minute Melt-Up is free of some "geo-fiction," but we can assure you the next two minutes of ThomWatch will alter your natural resources:

Sean Boyd, a top executive at Agnico-Eagle (NYSE: AEM) … $100 million in cash and "significant cash flow" … three copper/zinc/gold mines hurtling toward operating status: "I remember these BMO Capital Markets conferences many years ago when they were at Squaw Valley (California), and 10 or 20 people would be there. … Our team is trained geologists. (We) are not an exercise in geo-fiction. There are more and more investors coming to this space … coming to see where they were positioned. … We like to buy (gold properties) early." Sean Boyd was speaking today at the BMO show, a Florida gathering of big fund managers, i-bankers and sizeable mining companies.

Peter Barnes at Silver Wheaton (NYSE: SLW), also speaking at BMO: "Almost 80% of our revenue comes from four mines. … About half our silver come from gold mines. … Almost three-quarters of our silver comes from Mexico, and Mexico is probably the best country in the world to operate as a miner. … We have the best leverage to the silver price of any company if it goes higher. … We believe silver prices are going to continue to (appreciate). … Over 60% of the silver produced in the world comes from primary metal miners. … I believe silver is going to $30 over the next three to five years, and maybe a lot higher."

Across the country, in another sunny venue, Phoenix, a handful of small miners showed their commitment to telling their story to an audience of about 1,000 garage-loft investors. Joe Martin and Howard Fitch's annual Arizona metals show featured silver companies Endeavour Silver (AMEX: EXK), Mag Silver (AMEX: MVG) and Tumi Resources (TSX: V.TM). Other steady-eddies at the Cambridge House Show included Bravo Venture Group (TSX: V.BVG) and Quaterra Resources (AMEX: QMM).

For our beloved garage-loft investors, silver rounds were everywhere at the show. Silver rounds, as Jason Hummel, Peter Spina, Joyce Espinosa and others who mint and auction one-ounce silver "rounds pointed out, are capturing the attention of Europeans and North Americans. The customized coins sport some gorgeous designs, thanks to Jim Pavlakos at Superior Sources Inc. and other designers. Our kids' favorite one, of course, was the skull and cross bones. Ozzy Osborne eat your Black Sabbath heart out.

Road shows are going into turbo drive. At least 200 small and mid-sized miners, everything from silver and lithium to molybdenum, gold, platinum and geothermal, are on the breakfast and luncheon circuit. They are air-dropping via elevator and motoring via creaky taxis across Toronto, New York, Boston, San Francisco, LA, Philadelphia, Denver, Houston and Chicago. Stay tuned to subscription service www.tickertrax.com for the ones I am attending for the words and the food.

Frank Barbera, a gold stock technician with whom I shared a Phoenix panel this past weekend: "Copper and the base metals still have a ways to go lower this year, so more pain. Gold I see at $5,000 (an ounce) at some point in the future."

My favorite line: Peter Grandich of The Grandich Letter – "Those who live by the crystal ball learn to eat broken glass."

My favorite place in Arizona, where I attended graduate school: Sedona. We stayed for a couple of days at Enchantment Resort, which is lined by red rock canyon walls. Thanks to Mason Romney of www.MasonryDomes.com, a local builder whom we ran into at Euro Deli in town. Mason was using gold coins to pay one Sedona contractor. Nice chap and thanks for the hiking directions.

Finally, of note, and back to the BMO show for heavyweights in Florida this week: One of the few presenters and keynoters who requested their words and materials not to be audio-streamed to the general public at this URL, is Robert M. Friedland of the Mongolia miner Ivanhoe Mines and the natural gas/oil producer Ivanhoe Energy. Mr. Friedland told me today (Tuesday morning) that he would prefer keeping his keynote address from Monday and his company presentation today "confidential." Robert's son, Govind Friedland of Beijing, is operating a uranium company with great hopes in Africa and elsewhere and also decided to keep his presentation at the BMO conference "off limits" to Internet stream.

Ticker Trax™
Ticker Trax By Thom Calandra explores planet Earth for a handful of stakes and strategies that offer the prospect of excellent, in some cases cosmic, returns. The new service is for those who can cope with stratospheric levels of risk attached to a handful of planetary prospects. (Please see www.tickertrax.com.)

Bonus: Please nip into our Ticker Trax™ discussion group – only on Stockhouse.

THOM'S STORY: Thom Calandra during 27 years of road work has helped his audience find value in a quagmire of investment choices. Thom co-founded CBS MarketWatch, MarketWatch.com and FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom fancied $300-ounce gold before that metal became an investment rage. Thom visited bioscience companies, metals mines and energy companies in a search for reliable sources and fine planetary prospects. (He was imperfect in at least one regard, having settled a U.S. Securities & Exchange Commission complaint in 2004.) Thom's novel PABLO BY NUMBERS was completed in 2008.

HOLDINGS: Thom's cosmos of holdings is listed for free Stockhouse members on www.Stockhouse.com under the "portfolio setting" for user TCALANDRA. He and his family own recently minted gold coins. They receive no compensation for these reports. They own shares of Western Uranium. They have no interest in any publicly traded Ivanhoe company. For the free ThomWatch, please click here. For subscription service Ticker Trax, please visit www.TickerTrax.com. Thank you!

Ticker Trax™ is published by Stockgroup Media Inc. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Stockhouse/Stockgroup Media that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader's reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax does not receive compensation of any kind from any companies that may be mentioned in the report. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax.

Initial Report on the Phoenix "Silver Summit" Show

My speeches were well received. I spoke on my most frequently asked questions about silver, and I will send out a write up of that speech soon. My speech for the workshop was written out, "Why Silver is Money", and I will send that out tomorrow.

I spoke with many enthusiastic readers who said they were fans of my work, which was very encouraging. Everyone was very respectful, appreciative, friendly and supportive. I'm beginning to gain a bit more confidence now, for several reasons. One is that I hear so many of the same questions again and again, which helps to know what the common concerns and thoughts are of people who are buyers or holders of silver, which helps me help people even better.

I got a chance to sit down with my "posse" consisting of my brother Ted Terbolizard, my mom Joyce of www.momsilvershop.com, my business partner Greg Kyle of www.silveriswealth.com and Peter Spina of www.goldseek.com and www.silverseek.com so we could all talk with Thom Calandra about everything we've been up to, regarding minting silver into rounds to auction off at Peter's site at www.seekbullion.com. Thom Calandra said our story deserves to be told in USA Today, which was very encouraging. Thom was gracious to mention us already, here:

http://www.stockhouse.com/Columnists/2009/February/24/Geo-fiction-or-not,-high-grade-magnates-rule--Thom

Thom's been making what he calls a "comeback" into the precious metals industry, but is being wiser about many things these days.

By the evening dinner on Saturday, there was an excellent panel discussion, where someone asked about the potential gold/silver price ratio in the future.

I answered: "Silver to gold production ratios in the past were 15 to 1, which mirrored the price ratio of 15 to 1 which lasted hundreds of years. But today's ratio of 70 to 80 to 1 does not imply that 80 times more silver is produced than gold. The opposite is true. Since silver is too cheap, too little silver is produced. About 550 million oz. of silver is produced each year, and about 80 million oz. of gold, so it's about a 7:1 ratio in terms of production, which might imply a future 7:1 price ratio.

But historic total production might be a better indicator. There are about 5 billion oz. of gold produced in human history, and about 43 million oz. of silver, but perhaps only about 14-15 billion oz. of silver remain, the rest having been consumed and lost in many industrial applications and ended up in lanfills. So that implies a future 3:1 price ratio.

However, when you realize that if gold and silver ever become money again, and that gold is unsuitable to use as money when an oz. of gold is worth a year's salary, gold is unsuitable for the vast majority of monetary transactions. Therefore, silver has to do all the work. So that might imply an even higher value for silver in the long run, than even the 3:1 ratio."

Another question was asked, "What is the high price for silver that you can see?" I said something like, "Let me, the young man on the panel embarass himself with trying to answer. I've said in the past that silver could hit $10,000/oz., as that is the price suggested by all of the past inflation of money creation that has yet to show up as real inflation. The gold price, based on all of M3 being backed by US gold implies a price of $50,000 to $100,000/oz, which give us a conservative price of $10,000/oz. for silver based on a conservative 10:1 ratio.

But if it takes us 15 years to get there, to change societal attitudes about silver, then the amount that silver has to go up per year, to compound it's way to get there, seems rather tame, as it's only a mere 50% gain each year that would take us there.

But 50% gain each year is about 1 penny per day, starting at today's prices. Thus, since silver has been going up over 10 cents per day, over the last month, that means that silver is now currently rising 10 times faster than my wildest prediction!

The audience went into wild applause, showing they understood the veracity of the argument. I think that was one of my best arguments at the show.

One man asked how difficult would it be to sell silver if silver went to extraordinary high prices, and wondered if crime rates would be very high, and who would be able to buy it, which is a typical question. This is where the panel diverged in opinion. One panelist thought it would be bad, like during the great depression.

I disagree. The great depression is an example of the horror that happens when government abandons the gold standard and many free market principles, like we are doing today. But if very high prices exist for the precious metals, that's a sign they are returning as money, which creates times of freedom, and prosperity.

For example, after gold ran up 24 times from 1970 to 1980, there was business boom times, because a lot of fraud had been eliminated from the system due to the rise in the gold price, taxes were lower, and trade opened up. Society did not turn out like in the movie, "Mad Max, Beyond Thunderdome". I suppose I should elaborate on this more, since it is a common question now, especially because times are hard now.

But times are hard because they are manipulating gold and silver prices too low. See my essay from a few years ago:
Rising Gold Prices Will Help The Economy Dec 2, 2003

In that essay, I did not predict that if prices of gold went up a little, such as from $300 to $1000, things would be better, I'm saying that if gold returns to common use as money, such as from $1000 to $50,000 or "no dollar value", things will be a lot better.

In the evenings, we tried showing off, and even "redeeming" our new "beer rounds".

The first evening of the show, we gave one to our waitress, who took the round for herself, and comped a group of 15 adults a round of about 10 shots or more.

The last evening, the bartender said they have "no cash value", as if too many of them had been presented there already before. (We did sell about 50 of them during the show). How interesting. Yes, what he said sounds about right, cash has no value. Silver has value, silver IS value, silver is wealth!

Funny thing about silver. It has no value to 99.9% of the population now, yet stil has value. You can't spend it everywhere, but sometimes you can, depending on if you get a nice waitress.

The last 100 of our Beer Rounds are up for auction here:
http://www.seekbullion.com/auction_details.php?name=100-ounces--100-x-1-troy-oz-Silver-Rounds-BEER-Last-Hour-Reserve--US-from-Jason-Hommel-1A-of-1A&auction_id=102396

So, do they have value? I suppose it mostly depends on who you ask. Even a bum on the street cannot give you anything substantial for a $100 bill. Does that mean cash is already worthless? Heh!

This brings me to another point made on the panel. One man said to not buy any generic rounds, because dealers might not give you anything for them, or might give you less, or, in other words, they might have a wider spread. That's ok. You can actually buy them from me for about $17 each, and sell them for up to $20 each on ebay, or at a mining show, but what do I know? That's actually a negative spread right now, isn't it? One of our plans is to sell the Beer Rounds in gift shops for up to $25-35 each, but again, what do we know?

Oh, many of my Canadian readers do complain that it is hard to get silver in Canada. Canadians can get silver at Border Gold, run by Michael Levy, one of the panelists at the show. http://www.bordergold.com

His prices are competitive, sometimes slightly less or slightly more than ours at www.seekbullion.com.

Two of my gold and silver mentors were at this show, Ted Butler, and Bill Murphy of GATA. Well, I never received any private tutoring from them, but I continue to read them all the time, and have, for at least 8 years or so.

Ted Butler already put his speech into writing, here:
Silver; Past, Present, Future - Phoenix Silver Summit Speech
http://news.silverseek.com/TedButler/1235407708.php

The thing about giving a speech is that it forces a man to do his best work. That was an excellent presentation by Ted. So if you don't read Ted every week, at least read that one.

I wish I had more time to talk with Ted, but I only had a brief moment after our evening panel. I asked his opinion on the report by Bix Weir about the 400+ million oz. of silver used in the Calutrons used to enrich uranium. It seems that he didn't think it was a valid story. I found his answer disappointing, and last week, I ordered the History Chanel Report mentioned in this report, because I wanted to verify:

The Great Silver Mystery (...and the greatest secret of all time!)
http://www.silverbearcafe.com/private/silvermystery.html

Wikipedia links to two reports that verify that 470 million oz. of silver were used in this way.
http://en.wikipedia.org/wiki/Calutron#cite_note-2

I know a man who is great at research, especially on silver, and he may give us more answers in the future. My apologies to Bix, for not reporting on this issue sooner. Bix broke this story on silver over a year ago, maybe two now.

Bill Murphy reports on gold daily, and I read him almost daily at www.lemetropolecafe.com. He offers a free two weeks subscription, and it's definitely worth it, as Bill is more plugged in than anyone. Bill Murphy asked me to ask my readers to see if anyone can help him get on CNBC. Any of you can make your own appeal directly to CNBC to try to get Bill on TV. Here is Bill's appeal:

Bill Murphy of www.GATA.org writes:

I am on the case again and am asking everyone who is not donating to GATA but still wants to advance the gold cause to contact CNBC.

Nothing would be more helpful to our fund raising than to get our story told. In turn that would help your own precious metals investments.

Few in the mainstream investment world can conceive of a gold price above $3,000. In fact, most in the mainstream investment world think gold is just going through its own bubble phase. The more that investors realize where the gold price is going and why, the more they are going to invest in gold and silver mining shares.

Yesterday I called CNBC and reached its Viewer Services desk. After declaring my intentions, I was told to send my pitch by facsimile machine to this number: 201-735-3200. Here is what I sent:

* * *

"To: the producers of 'Fast Money'

"From: Bill Murphy, chairman, Gold Anti-Trust Action Committee

"Subject: The gold market

"I am a big fan of your show and watch it daily. As a former professional football player with the Boston Patriots, I find it amusing to watch some of the
panelists who have 'been there.'

"Last night there was a great deal of discussion about gold. Most of the comments were clueless.

"I have chaired three international gold conferences over the past decade:

" -- The GATA African Gold Summit in Durban, South Africa, on May 10, 2001.

" -- Gold Rush 21 in Dawson City, Yukon Territory, Canada, on August 8 and 9, 2005. Among the participants was Andrey Bykov, an economics consultant to Russian President Vladimir Putin.

" -- GATA Goes to Washington in Arlington, Virginia, on April 18 and 19, 2008.

"My organization placed a full-page color ad in The Wall Street Journal on January 31, 2008, in which we warned of a coming 'catastrophe' and 'disaster' arising from the long manipulation of the price of gold. That ad may be viewed here:

http://www.gata.org/node/wallstreetjournal

"The press would not give us the time of day. No one asked what we were warning about and why, including CNBC. Ten years ago I was interviewed on CNBC by Ron Insana and have not been allowed back on the network since then, right as I was then. Dylan Ratigan and others are calling for 'transparency.' If transparency is to be achieved, it would be helpful for your viewers to understand what the gold market has been all about and why there is a bigger story here than the Madoff scandal.

"At the Gold Rush 21 conference, when the price of gold was $436) and in our Wall Street Journal ad GATA predicted the price of gold is going to $3,000 to $5,000. It would be helpful for your viewers to understand why. At any rate, we have been correct on the price of gold for nine years.

"Should you wish to check GATA's credentials, please visit www.GoldRush21.com and review our summary video of the conference.

"I look forward to telling the real gold story on your network. I can travel to New York or speak from Dallas, where I live.

"Thank you for your consideration."

* * *

So, friends, most of the work is already done for you. GATA would like you to make your own appeal along the lines of the above and fax it to CNBC in care of one of the following programs:

"Squawk Box"

"Squawk on the Street"

"The Call"

"Power Lunch"

"Street Signs"

"Closing Bell"

"Fast Money"

"Mad Money"

"The Kudlow Report"

If our friends will take just a few minutes to contact CNBC, the network may realize what a big deal this is and how it also can be of value to the network's ratings. If you don't have a fax, please look up the e-mail addresses for these programs and contact them that way.

Our time is here. Let's go for it. Help GATA to help yourself.

Thanks to all of you who are willing to participate in our campaign.

CNBC contact form is here:

https://register.cnbc.com/email/EmailSupport.jsp

==============

If there's one thing I just learned about myself from this show is that I'm a lot nicer in person, and so is everybody else. I'm often too abrasive or too abrupt in email, because I sometimes get too much email, and because sometimes, people are more mean to me in email, too.

I also learned that I would like to speak more, if I get the opportunity, because it's a great learning experience, and it's great to get instant feedback from people in person. However, with a baby at home, I will likely try to stay close to home in my own community, if possible, and maybe speak in local churches, if they will have me.

Rising Gold Prices will help the Economy

   It is a common myth that says a rising gold price would be followed by economic doom, misery, hard times, and perhaps a dreaded depression.

    Nothing could be further from the truth. Rising gold and silver prices helps the economy, as I will prove.

    The reason this myth is created in the media is to scare people away from investing in gold and silver. The myth creates a sense of guilt among those who own gold, and among those who are thinking about buying gold. It wrongly claims, "You will be to blame for harming the economy, if you buy gold and the gold price goes up." It whispers the socialist lie, "If we all remain in the dollar, everything will be OK."

    The amazing thing about this media-myth is how many gold investors are scared out of their minds of the thought of gold rising past $3000/oz. as they fear it will bring on the prophesied economic doom, with riots, joblessness, homelessness, and widespread poverty.

    Here is the reality from history. In 1933 U.S. farmers were dumping milk and destroying their crops because prices were artificially kept so low that they were losing money. Why were prices too low? Because gold was fixed at $20/oz.! And thus, other commodities were also priced too low! It would cost farmers money to bring their produce to market; therefore, they stopped doing so. The farmers were smart enough to realize and act on the axiom, "Do not engage in uneconomical activity."

    I wish the silver miners today would be so smart. In other words, if you are not making a profit by mining and selling silver, stop bringing silver to market!

    In my opinion Franklin D. Roosevelt was one of the worst presidents in our nation's history. He did more to befriend the big banks, and hurt the interests of the common man, and destroy economic freedom than perhaps any other president. Under FDR we got the dreaded Ponzi-scheme called Social Security. He created bigger government, social handouts, price controls, pulled the nation into World War II, and did everything needed to lead to the totalitarian government we have today.

    But there was one thing he did that I think that had positive benefits. He revalued the gold price upwards from $20/oz. to $35/oz. Most gold commentators will say this was theft, a default, and the worst thing he did. But FDR did not create the theft that was originally created when excess paper money was created in the first place. The money-creation was the theft. FDR issued the decree that said that this excessively created paper money should not be valued as highly as it claimed it should be. That was the good thing FDR did, since he helped to reveal the fraud inherent in the dollar. Unfortunately, this re-valuation in the price was accompanied by the proclamation that made it illegal to own gold domestically. Yet, it still helped things for FDR to reveal the fraud of the dollar.

    This created a boom in all commodity prices, and helped the farmers out tremendously, and helped the economy. Finally, it would be economic to produce food again. The rising gold price helped the economy.

    If anything, the gold price did not rise high enough.

    Move forward to the 1970's and 1980's. The years of Ronald Reagan, 1980 to 1988 were prosperous years. Society embraced morality more strongly than in the swinging 70's. Disco was out, and polo shirts were in. Reagan got re-elected in 1984 by asking the simple question, "Are you better off now than you were four years ago?" Prosperity followed after the gold price rose to $850 in 1980. It was not chaos, not doom, not poverty everywhere you looked. It was a boom time. The after effect of the rise in the gold price was prosperity.

    So, as if the facts from history are not enough, let's look at the logical, rational reasons why higher precious metal prices will help the economy. It's very simple.

    Barter is inefficient. You cannot efficiently trade cookies for a TV set, and you cannot efficiently trade a car for crayons, you cannot efficiently trade chickens for clothes. I hope I'm not boring you to tears, but do you get the concept? You cannot have an efficient economy without real money. You need a medium of exchange that is easily divisible, portable, valuable, and does not spoil or go out of style.

    Gold and silver are what you need, for the reason that they make trade easier and more efficient, or economical. Gold and silver thus save time and energy, and are extremely useful.

    Furthermore, a gold or silver coin cannot be tracked, does not need to be kept in a bank, does not need to pay interest, and therefore, cannot be taxed on every transaction. Therefore, gold and silver are very efficient for trading, far more efficient and useful than paper money.

    (The reason that gold and silver do not need to pay interest is that there is a constant deflation when gold and silver are used as money. They grow ever more valuable over time as production grows more efficient and prosperity increase when gold and silver are used as money. This fact utterly refutes the "time value" of money that states that money today is more useful than money tomorrow, which is a lie used to justify charging interest on a loan. A no-interest gold loan, when gold is used as money, is generally repaid with gold and silver that is more valuable than before!)

    In contrast to the usefulness of gold and silver as money: If I'm paid in paper money, drawn from a bank, the other party feels a compulsive need to report to the government how much he paid me, in order to keep his paper trail of transactions open for the government to follow. Thus, each transaction is looked at by the government, and is taxed at every step. This taxation harms and discourages economic activity from taking place, and thus is not an efficient process at all, and reduces trade and the exchange of dollars, and hurts the economy.

    Furthermore, as paper money always suffers from inflation or hyperinflation, there is a lack of incentive to save and invest, which also hurts future production, and hurts the economy.

    Next, the excessive creation of paper money and overvaluation of that paper money creates economic mis-allocations of capital, and dislocations of economic activity. Jobs are lost as workers overseas produce more for less. People over-invest in housing due to the easy money available for home loans.

    Price fixing, (especially in the form of a low gold price, or a manipulated low gold price), in all its forms, hurts the economy. Price fixing is a disruption of free market capitalism. Free market capitalism, and free market prices, create the most prosperity for the most participants far more than any other economic system yet invented by man.

    When the price of gold is allowed to seek its natural free market level, and when the fraud of paper money is destroyed (and paper debts wiped out), then economic freedom and prosperity will follow. It will be too expensive to wage needless wars, too expensive for a massive totalitarian government, too expensive for social programs that destroy a person's incentive to work.

    When gold and silver are used as money, there will be plenty of people available to work, needing to work, and willing to work. There will be plenty of money (since the gold and silver would then be valuable enough to do the work of money). There will be plenty produced, since the economy will be free from debt, free from over-burdensome government regulations, free from excessive taxation. There will be plenty produced and prosperity will follow because gold and silver are more efficient at promoting trade than the fraud of the dollar that is over-valued and excessively-taxed.

    Some people will counter with the lie that certainly paper money is lighter, and thus more efficient. Again, not true. I have a 1/10 oz. gold coin that is very light and small, lighter than a stack of $1 bills. I have a 1 oz. gold coin that is lighter and more compact than four stacks of a 100 count, $1 bills. Besides, our coins have become dross, worthless heavy slugs.

    I'd rather have a tenth oz. gold coin in my wallet than two twenty-dollar bills. And I'd rather have an oz. of gold than four hundreds. Who really needs to carry around more than an ounce of gold, anyway? (Only for the large and more rare transactions.) Too heavy? Hogwash! Society can pay for the cost to transport bottled water, but transporting gold costs too much? Ridiculous!

    Gold and silver are not too heavy to transport. Silver alone may be relatively heavy today, given that it is so undervalued, but when the metal is fairly valued, transportation is not a problem. When an ounce of gold or silver is $100,000/oz., then an oz. of gold or silver will not be "too heavy" to transport. Transportation costs are miniscule to the extreme, and are no justification for the fraud of paper money.

    If gold and silver are good for an economy, the parallel point is that fraud is bad for an economy. And since the dollar is fraud, then the dollar is bad for the economy. Yes, it's that simple.

    A rising gold price means economic misery for the Federal Reserve, for politicians, for the banks, and for the socialists, and all whom they sponsor, such as the Universities and mass media. A rising gold price means economic freedom and prosperity to everyone else!

    Buying gold and silver will bring prosperity not only to you, but also to everyone else! Buying gold and silver is the most useful and economic thing you can do to help bring a positive change to the corruption of society that exists at all levels.

    If you would like to learn more about gold and money, please come by and visit silverstockreport.com. I also write a free weekly silver stocks report that lists over 80 different silver stocks, and you can sign up to receive it at silverstockreport.com.

In Government We Turst?

Many who agree with me on a lot of other issues, do not understand my enthusiasm for gold and sound money or why I spend so much time studying and talking about monetary policy. It's true that I talk about money differently than most, but the fact is sound money offers many benefits. For example - peace.

Can sound money really bring about peace? Actually, it plays a big part in peaceful international relationships. Money based on commodities, rather than paper, is not subject to government manipulation, and is a key component to free and honest trade. History shows that if countries engage in trade with each other, their governments tend to find ways to get along for the same reason you do not kill your customers at your place of business, even if they occasionally annoy you. If someone outright cheats you, however, you may engage in "war" by taking them to court, for example, and the relationship will sour. Governments and central banks with unfettered power to manipulate currency also have the ability to cheat their creditors. One way they do this is to simply create enough currency to pay off debts. This devalues the currency and "cheats" the recipient out of what they are owed. It would not be fair if you watered down your product the way our government waters down its currency, so it is not hard to understand, in these simplified terms, why loose monetary policy contributes so much to ill will and war around the world.

Sound money, on the other hand, simply is what it is. Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat. Sound money ensures that our government's spending priorities would be brought into sharp focus and reduced to only what we can afford.

Sound money also limits the ability to wage wars of aggression. Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal! Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money. The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden. The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world. As a consequence, there is therefore more talk of economic isolation and war.

This vicious cycle of spending, fighting and inflating is not what Americans want. It is what the government wants, and it has had to deceive the citizens into allowing and supporting it. Sound money curbs the government's ability to engage in these shenanigans and reduces the wars we fight to only truly defensive ones, for which Americans are more than willing to stand and fight. So in these ways, sound money is very conducive to peace.

Another benefit of sound money is financial security.

Can sound money give you financial security? There is something very comforting in knowing that what you earn today will retain its purchasing power in the years to come. Indeed, the same silver dime that bought a loaf of bread in the 1960's can still buy a loaf of bread with its precious metal content - which is worth about $1.00 today. An ounce of gold has always been about evenly exchangeable for a finely tailored men's suit, which these days is roughly $800. And in these days of fluctuating gas prices, when priced in gold, oil has been stable. Meanwhile, since the creation of the Federal Reserve, the fiat dollar has lost 94 percent of its purchasing power. The erosion of purchasing power rapidly accelerated when it was completely uncoupled from gold in 1971. This sort of fluctuation in the medium of exchange creates a lot of uncertainty in the marketplace and necessitates that you either take extraordinary defensive maneuvers, or face financial ruin. Trusting in government for financial security in retirement is not a safe option. Indeed, a recent study by the Consumer Bankruptcy Project shows that bankruptcies among those 75 and older has more than quadrupled since 1991. This represents wealth and savings that have been eroded by inflation, and trust in entitlement promises that were more fantasy than reality. Even with the pittance that social security pays to seniors, it is bankrupt and bringing the economy to its knees. It is no wonder that many in the younger generations want no part of it, and they should not be forced into a failed system.

On the other hand, holding physical gold can defend against aggressive government monetary policies that threaten to inflate away the value of your life savings. During the hyperinflation in post WWI Germany, what used to be a comfortable nest egg was suddenly the value of a postage stamp. If one held just a portion of their savings in precious metals, the crisis was greatly softened. Gold will never be worth nothing, even if the exact price fluctuates. There is a famous photograph, however, of a German woman during this time period burning piles of tightly bound banknotes to keep warm.

Imagine if the money you earned had honest, stable value, or even appreciated like an investment! No such special measures, like converting dollars to gold, would be required to ensure that your savings would sustain you in your golden years. That is the way it could be and is supposed to be. However, the government's thirst for power will not be easily, or cheaply, quenched. Fiat currency is one tool governments have to extract wealth quietly from the working class. It is time for the people to wake up to this ruse and look to the Constitution to restore sound currency.

Sound money keeps government spending in check, keeps trade fair and honest, which reduces the temptations, and many underlying causes, for governments to wage wars. It also gives you the peace of mind of knowing that your savings will be able to sustain you in your retirement.

So if sound money is such a good thing, what is stopping people from simply trading with each other in gold and silver? Why are you still being paid in fiat dollars, and why can't you pay for gas in gold? The answer is that the government has enacted policies that provide considerable stumbling blocks to such transactions.

One of the main stumbling blocks is Federal legal tender laws, which state that government-controlled fiat currency MUST be accepted for many kinds of monetary transactions. In light of this, Gresham's Law takes effect. Gresham's Law states that bad money drives out good money. Meaning, if someone is forced to accept your bad money, it is to your advantage to pass it off, like a hot potato, in exchange for something of value. Any good money you have, you will hoard. Eventually, real money is driven out of circulation and under people's mattresses, so to speak. In the absence of legal tender laws, people are free to accept the medium of exchange of their choice, and are likely to insist on payment in something of real value.

Related to legal tender laws, contracts in gold are not enforced. Meaning if two parties agree to exchange goods or services for gold, and end up in a dispute, the courts will simply settle the dispute in Federal Reserve notes. While gold clauses have been legally enforceable since the late 1970's the fact remains that disputes over gold clauses might well be resolved in court with a dollar figure calculated in terms of Federal Reserve Notes. In the recently decided case of 216 Jamaica Ave v. S&R Playhouse, which reversed a district court decision, the court upheld the enforceability of a gold clause, but sent the case back to the district court to decide what obligations the gold clause imposed on the defendant. It is not inconceivable that this will result in a decision that the value of the "gold coin" referred to could be valued by the court in terms of Federal Reserve Notes, not in terms of ounces of gold. Furthermore, given the federal government's actions against Robert Kahre (the Nevada businessman who paid his employees at the legal tender face value of gold bullion coins) it is obvious that the government is still waging a war on gold. Whether either of these cases establishes a precedent remains to be seen. Additionally, because 31 USC 5103 establishes Federal Reserve Notes as legal tender, it would likely take a court challenge to determine whether a gold clause or legal tender law takes precedence.

Governments should do very little, in my estimation, but it should enforce contracts and property rights through the courts. But in this instance it shirks this basic duty, when it comes to gold, as one way to keep control of our economy and the medium of exchange. One is also expected to pay sales tax on the purchase of gold. This is as ludicrous as if you paid sales tax at the bank when you converted dollars into quarters! The IRS also expects you to pay capital gains tax on gold, which is so backwards, since gains on gold really represent decline in the value of the dollar!

Legal tender laws should be repealed at the Federal level. Congress has the Constitutional duty to protect the integrity of our money. However, since it has passed this duty off, and the Federal Reserve has only debased our currency, Congress should no longer force Americans to do business in dollars if they would prefer to transact in gold, or silver, or cigarettes or seashells, for that matter. Free people should be free to associate and do business in ways that benefit them. Instead they are forced to use the unstable dollar to their own detriment, and the benefit the government.

The Small-Cap Sector You'd Never Think to Look At

Here's a small-cap technique to use this pay-to-play mandate in your favor…

Green Energy's Beneficial Impact on Natural Gas

But natural gas is an important energy type even if it's not simply burned. And it doesn't take much of an imagination to see how more "green" legislation is on the way.

While natural gas is greener than what we currently use, there is still one more reason for the natural gas price hike: demand.

Geo-fiction or not, high-grade magnates rule: ThomWatch

My favorite line: Peter Grandich of The Grandich Letter – "Those who live by the crystal ball learn to eat broken glass."

Bonus: Please nip into our Ticker Trax™ discussion group – only on Stockhouse.

Rising Gold Prices will help the Economy

The Retirement Paycheck: Plan B Pension

There's no reason to let the topsy-turvy stock market decide when you can afford to retire...if you can take that much-needed vacation...or buy that summer home.

You can collect up to $120,000 in extra 'paychecks' every year - without a second job.

With that kind of additional wealth, you can build a very nice nest egg to pass on to your children...even to your grandchildren.

This strategy has a proven track record over time...and offers many more options for rebalancing your portfolio during times of economic uncertainty than you'll see in more classic plans, like 401(k)s.

Without doing a single moment's work, now you can legally sneak onto the "payroll" of over 1,000 of America's best companies...

And collect a regular "Plan B Pension" check as often as every 12 days...

At any age and for as long as you like, even after you've already retired...

With nonstop annual incomes running as high as $120,000 or more...

Suppose you could collect up to $120,000 in work-free 'paychecks' every single year.

Even if you're retired. At any age. And for as long as you like.

What I'll show you is that, thanks to a few little-publicized opportunities, now you can.

What's more, you can even pass this steady stream of annual cash that I'll introduce you to... to your spouse, to your children, even to your grandchildren.

In fact, many of America's richest families count on these "plans" to do exactly that for their own loved ones. What exactly are we talking about?

This technique goes by many names. I call it the "Plan B Pension."

As I said, this strategy rarely grabs the big headlines.

Even though it's the best "little-talked-about" retirement secret I've ever come across.

I'll show you how it works over the next five minutes. I'll also reveal why right now, in the midst of the greatest market shakeout since the 1930s, this may be the best time in history for you to take a closer look at this secret.

Why? For one thing, "Plan B Pensions" have a proven track record over time.

They can easily outclass classic fixed-benefit pensions on reliability.

They can nearly double your market performance.

And "Plan B Pensions" give you many, many times more options for rebalancing your portfolio in a shifting market than you'll see in either the classic plans or more modern versions, like the 401(k) approach.

What's more, unlike those better-known approaches, with a "Plan B Pension," you'll never butt your head against age limits, withdrawal penalties or participation restrictions.

As long as you enroll, you can participate.

You don't have to work for anybody to get in.

You don't have to give away a piece of your paycheck every month either.

Once you set up your "Plan B Pension," it starts running itself.

You can start getting checks issued in your name every 12 days, on average. And getting this ball rolling can be as easy as opening a savings account.

In fact, I'll show you six different "Plan B Pension" programs you're invited to join right now. I'm not personally affiliated with any of them. But after a lot of research and analysis ― all of which I'll share with you ― these six moves are easily the best "Plan B" opportunities you'll find on the market today.

The report that details each of these six moves is yours to send for, at no charge. You can download it right after you read this or I can mail it to you. I show you how to set that up at the end of this letter.

And by the way, you don't need a lot of money to get started.

You can get into some of these "Plan B Pension" programs with as little as $10.

And once you're set up, you could be collecting as many as 38 "Plan B Pension paychecks" each year... with your first in this lifelong stream of cash windfalls arriving in as little as two weeks from today.

Like a classic fixed-benefit pension, these checks can keep coming for as long as you need them... and long after you retire. And like a 401(k), with "Plan B Pensions," you can also get "matched" gains... where the "plan" owner actually kicks in some extra cash with each payout, just to reward you for participating in the "plan."

In some of these "plans," you even get the chance to own shares in the top stocks you've chosen at a fat discount to what others pay on the open market. That's like getting an instant gain, the day you buy shares. It's also a special "perk" reserved only for members of these "plans."

What's more...

You Can Collect "Plan B Pension" Checks as Often as Every 12 Days

Even if you just stick with the six "Plan B Pension" opportunities I'll reveal to you... over the next five minutes... that alone could start you off with checks as frequent as every 12 days.

Let me show you more of these opportunities and you could start collecting even more often... and with even greater results. I'm ready to give you my research right now.

In fact, I'll send you the details on the six "Plan B Pension" moves I just mentioned at no charge. Just as soon as you give me your permission. Details on that in just a moment.

But first, let's take an even closer look at how doing this ― using a "Plan B Pension" ― can give anyone an advantage of the much more common moves most of us are used to.

Take, for instance, the classic "defined-benefit" pension plan.

You know how these work. Or at least, you do if you've got a good memory. Because, you see, these same classic company pensions ― given out like golden parachutes to parents and grandparents ― have all but disappeared today.

In just the 10 years from 1994�2004, the total number of defined-benefit pension plans fell by half ― from 59,000 to just 28,000. Today that number is even lower, with more old-school pensions set to get wiped out over the rest of 2009.

The idea of getting a "fixed-benefit" check for life was great. But a benefit that disappears when you need it is no benefit at all! Anyone who worked years for the promise of a classic pension got rooked. And now a lot of these people face hard times ahead.

The same is true if you were "duped" into accepting the modern-day alternative, the so-called 401(k). You know these plans all too well, I'm sure.

About 30 years ago, companies came up with 401(k) plans because they seemed like a great way to slash exposure to classic pension obligations... while giving employees a chance to manage their own retirements.

Guess what happened.

Today, top economists are calling 401(k) plans a "failed experiment." And The Wall Street Journal recently reported that today's credit crunch has already wiped out over $2 trillion in these 401(k) accounts alone ― with more big slippage to come!

Over 60% of Americans depend on 401(k) plans for retirement. Many have seen them lopped in half, with little time left to make up the lost ground.

What's more, with these more common kinds of plans, you can easily get stuck putting your eggs in only one basket, if you've worked with only one employer. Or two or three, at the most, if you've put in the years at more than one job.

That's not at all the case with a "Plan B Pension."

First of all, "Plan B Pensions" can move with you the day you get started. They're yours to control and yours to draw from whenever and wherever you like. You control the size of the checks. You control how many you get. You control how fast the wealth pile grows.

With no limits based on your age, whom you work for or how many of these programs you'd like to tap at one time. There are over 1,020 of these "Plan B Pension" plans in America.

You can enroll in as many of them as you like.

All at once or switching between them until you find ones you prefer.

It's literally up to you. And I can help you choose the best possible ones to follow, starting with the six "Plan B Pension" opportunities I'm ready to name for you at the end of this letter.

You can collect "retirement paychecks" not just from one company... but from as many companies as you like... even the ones you've never worked for a single day in your life.

This is a "work-free" strategy. Except for the work you'll do to set it up ― which is only about as much effort as it takes to set up a bank account.

It's really that simple. Even though doing this now could give you astounding, life-lasting results.

Here's something else...

How "Plan B Pensions" Can Double Your Wealth

Forbes reported a study...

In other words, "Plan B Pension" helped double the size of those gains over time.

Despite the '87 market bust... the S&L banking crisis and first Bush recession... the currency crash of '97 and the dot-com bubble... Sept. 11 and the start of this most recent real estate bust...

What's more, the best of these "Plan B Pension" programs just keep on paying straight through the current credit crunch. With checks that could be landing in your accounts right now.

And unlike typical pensions or 401(k)s, "Plan B Pensions" don't quit working for you when you retire. That is, you can keep putting money in and taking it out as you like.

Growing it, tweaking it, even spending it... as you see fit.

There's no penalty for early withdrawal.

And no age or employment restriction when you get in or out.

Start now, and even with just the six special moves I've promised to show you, you can already start collecting a "Plan B Pension" payout as often as every 12 days.

Plus, with many of these "Plan B Pension" plans, you can also...

Collect an Instant "Matching" Bonus With Each Payout

One big draw on 401(k) programs is supposed to be the "matching" dollars some companies throw in when employees use the plans to set money aside.

When it works, it's a great benefit. But right now, cash-strapped companies have started slashing those "matching" benefits too. Again, a benefit you don't get... is no benefit at all.

The thing is, "Plan B Pensions" also offer your own kind of "matching." Because many of the 1,020+ "plans" you can choose from "match" your gains by as much as 10%... with each regular payout.

This can be like "free money"... piled up on top of what you're already making.

A Depression - With a Capital 'D'

We're glad we hoisted our Crash Alert flag when we did.

Yesterday, markets all over the world plunged to new lows...with the Dow closing below 7,000 for the first time since 1997. At 6,763...it has only a couple of thousand points left to go. Then, we can begin looking for the bottom.

"World markets are taking the long-dreaded 'next leg down'." Writes John Authers in the Financial Times. "The more hopeful scenarios for a swift economic rebound must now be jettisoned..."

What caused yesterday's sell-off, according to the papers, was this statement:

"With the benefit of hindsight, the group wishes that it hadn't made this investment."

Thus saith Mr. Michael Geoghegan, head of HSBC, the world's biggest bank. HSBC bought America's "Household Finance" for $15 billion in 2003. Now, it wishes it hadn't. The U.S. unit 'destroyed' $10 billion in capital, says the bank.

Of course, almost every investor in the world could say the same thing. No matter where they put their money, it got destroyed. We all wish we hadn't done something.

And it's not over.

HSBC is closing down its entire U.S. consumer finance business - some 600 shops nationwide.

California says it is suffering an "avalanche of job losses." Across the country, jobless benefits are at a record high.

AIG is getting another $30 billion in bailout money. The New York Times calls it "propping up a house of cards."

Another house of cards is General Motors. It just reported a loss of $31 billion on sales of $149 billion. By our quick calculation, it must have lost about $3,000 on every car it sold.

GM has already gotten a loan of $13.4 billion from the government. Now, it wants $16 billion more. (And poor Detroit...pity the parasites...more below...)

And don't forget Fannie Mae. Fannie made a loss of $25 billion...now she's drawing more money from the government too - an additional $15 billion.

Good money after bad. But the whole consumer economy is a house of cards....

Remember, this is a Depression...with a capital D...not a recession. It's a depression because it requires a perestroika of the economy...a restructuring, not just a breather and bailouts. The debt cycle is now turning in the other direction. America could be creeping back towards a 10% savings rate - as predicted here in The Daily Reckoning - and now taken up by Nobel-prize winner Paul Krugman. Savings bottomed out in the United States in 2006, when the rate went negative. Now, they're moving higher - fast.

This is good news for the people doing the saving, but it is the kiss of death to the consumer economy. Somehow, businesses have to get along without adding more debt to household balance sheets. House-builders have to make a profit by building houses only for people who can actually afford them. Malls have to give up on customers who spent money they hadn't earned yet. Every business in the world has to adjust to the new economy.

Economists call it the 'paradox of savings.' Savings are good for the individual, but when savings rates go up, spending goes down. The economy suffers. Then, people lose jobs and income, further depressing economic growth.

Many economists came to believe that a little inflation was a necessary thing, since it discouraged saving. But people will believe anything if you give them enough education. They also thought derivatives were a healthy innovation, since they dispersed risk...and that subprime debt was a service to the nation, since it made it possible for people to buy houses they couldn't otherwise afford.

But now it's the "Revenge of the Glut," says Krugman. He's referring to another stupid idea economists had: that the United States was doing the world a favor by consuming Asia's glut of savings.

Suddenly, Americans have wised up. They aren't carrying water for Asia's savers any more. As a result, the huge reservoirs of dollar savings in Asia aren't filling up like they used to. And as a consequence (as yet unnoticed by most commentators), Asians aren't going to be in a position to buy so many T-bonds.

Now Americans are saving for themselves. A welcome trend, as far as we're concerned...even if it does bring a Depression.

*** The Oracle of Omaha has spoken - and he is still optimistic about the U.S. economy. The excerpt below comes from his annual letter:

"Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21.5% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15-25% for many years. America has had no shortage of challenges.

"Without fail, however, we've overcome them. In the face of those obstacles - and many others - the real standard of living for Americans improved nearly sevenfold during the 1900s, while the Dow Jones industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."

Mr. Buffett has been unflinchingly positive on the U.S. economy, and is often seen as the lone voice in the wilderness when it comes to seeing the current situation as optimistically as he does. The same holds true with his interview for I.O.U.S.A. You can read the full transcript of his interview in the I.O.U.S.A. companion book, which is available as a part of our "Emergency 'Personal Bailout' Bundle"...along with the I.O.U.S.A. DVD and a free special report. Get yours here.

*** We're back from our vacation with a tan...well, an Irish sort of tan. We came away with a bet too. A Nicaraguan investor has wagered that the price of Russian energy producer Gazprom will rise more than gold over the next five years.

Our Nicaraguan friend is a serious investor...and a serious student of Russian investments. While we lost money in India, he lost money in Russia. So, we were even. But now, he's thrown down the gauntlet.

"Gold is not a very good investment," he points out. "If you take it over the last 30 years, it has produced negative returns. The price is barely higher than it was 30 years ago, while the consumer price index has probably doubled. And even if you're right about gold now, how much do you expect to make? Maybe it doubles. Maybe triples. But Gazprom is a real company with a real product that people really need - energy. It's been beaten down with the rest of the Russian market. But it will come back. And when it does, it has the potential to do much better than gold. For one ounce of gold today you can buy 74 shares in Gazprom. I'll bet that that ratio is lower 5 years from now - meaning that gold goes up less than Gazprom. How much do you want to bet?"

It was not the sort of bet we like. Because we don't really have an opinion about Gazprom; we don't follow it. Still, we took the bet for $10.

"You're on the right side of that bet," said colleague Simone Wapler, editor of the French version of MoneyWeek. "Of course, we don't know what will happen, but gold is low risk. Gazprom is not. Putin can take away Gazprom's profits any time he wants. Who knows what will happen in Russia?"

*** The cover story at the Economist: "The Collapse of Manufacturing."

Factory output in the United States just declined for the 13th straight month. Why make things if people can't buy them?

*** Want to save money? Sell your house. Move to Detroit. The median house in the Motor City sold for $7,500 in December. How about that, dear reader? You can buy a house for the same price as the Dow stocks. A little low on cash? Put it on your credit card.

Of course, then you've got to live in Detroit. The papers report that life in the city is so grim 1,000 people move out every month.

We've never been to Detroit. Out of curiosity, we offered to take Elizabeth for a romantic getaway to Detroit for her birthday. Our offer drew this reply:

"Are you out of your mind?"

Poor Detroit. No one goes to the city for a holiday. Not even students. As near as we can tell people only go there if they have to. And then, they get out as soon as they can.

We can imagine what it is like. We lived in the Baltimore ghetto for nearly 10 years. If you want to know what it is like, there's a TV show that chronicles life there - The Wire.

Was it disagreeable living in the inner city? No, it would have to undergo major improvements to be disagreeable. It was Hell. Drug dealers on the street corners. Trash in the alleys. Everybody with a pistol in his pants and a chip on his shoulder.

Elizabeth was once on the phone with her brother.

"What's that noise in the background?" he asked. "It sounds like popcorn popping."

"Oh, that's just someone shooting in the alley," Elizabeth replied. "I think they're trying to settle an argument."

We'd been there too long. Elizabeth hadn't even noticed the gunfire.

But it shows what government can do when it tries to fix a problem. In the case of Detroit and Baltimore, the government provided massive bailouts. Education standards collapsed...so the government provided money to the local education bureaucracy. Jobs disappeared (largely because people couldn't read or write)...so the government provided massive bailouts in many different bureaucracies - training centers, welfare, food stamps. Pretty soon, the only industry left was the welfare bureaucracy.

We don't know how it works now, but when we lived in the ghetto a girl's best career path was promiscuity. She got more money with each child she had...provided, of course, that the father didn't take responsibility for it. Then, the child grew up...took drugs and stole cars...until he got sent to prison. One problem led to another - but it could all be traced to the government's giveaways. They had the same effect in Baltimore as they had in Burkina Faso. The political elite took the money and lined their pockets...the masses become more miserable than before. And the worse conditions got, the more money the cities received from federal bailout programs.

Baltimore is still in business. But from what we read, Detroit sounds like it has become a kind of Port-au-Prince with snowdrifts. The whole city sounds like a hellhole without the warm fires.

And now Obama is proposing to make things worse. More bailouts...more giveaways...more programs...more bureaucrats... Already, the 'rich' support whole sections of the population. Obama says he will raise taxes on 'the rich,' creating even more parasites. Of course, who cares if the rich have less money? They will still live in their leafy suburbs and send their children to private schools. But pity the poor parasites.

Neither Mr. Obama nor none of the candidates for Mayor of Detroit (the last mayor is doing time in a federal penitentiary) has asked for our advice. We will give it anyway. Want to save Detroit? Here's how:

Abolish all welfare of all sorts...no unemployment insurance...no child tax credits...no welfare...no foodstamps...no nothing, except privately-sponsored charities. Close the public schools. Kick out all the bureaucrats and all federal and state employees. Abolish all rules concerning employment - no minimum wages, no overtime, discriminate all you want. Require all residents to say please and thank you...dress properly...and sneer at people who don't seem to be gainfully employed or polite. Declare the city an Open City and Free Trade Zone. In exchange for cutting all federal aid programs, eliminate federal and state taxes for people living in the city. Allow unlimited immigration into the city...giving all immigrants a U.S. passport after 5 years of residency. Levy a flat 10% tax to pay for basic services. Eliminate elections...have the city controlled by a town council composed of 10 citizens chosen at random.

Within five years, Detroit would be the most dynamic city in the nation.

Within the last year, 401(k)s and IRAs have ceased to be a safe haven for Americans' nest eggs. In 2008, employees lost on average 14%, or about $10,000, of their retirement money. Those with more than $200,000 are even worse off - they lost more than a quarter of their savings. No wonder that more and more people are asking whether they can, or should, use an Individual Retirement Account (IRA) to hold physical gold. Our answer to the first part of the question is yes, indeed you can. The tax rules governing IRAs leave room for gold. But our answer to the second part is equivocal.

In 1986, as the U.S. Mint began issuing gold coins for the first time since 1933, a tax rule against holding "collectibles" in an IRA was relaxed to allow gold and silver Eagles. Later, in 1997, the Tax Payer Relief Act opened the IRA door for a broad spectrum of precious metals (gold, silver, platinum, and palladium), whether in the form of bullion or coin. The easier rules now apply to all types of IRAs, including traditional, Roth, Simplified Employee Pension (SEP) and Simplified Incentive Match Plans for Employees (SIMPLE).

The only stipulation is that all bars and all coins other than Eagles must be .995 fine. Thus Canadian Maple Leafs and Austrian Philharmonics qualify, but the South African Krugerrand, minted with an alloy, does not. Numismatic coins are also impermissible for an IRA.

The procedure for putting gold into an IRA is somewhat more complicated than with paper assets, but the requirements aren't onerous.

To begin with, you have to find an IRA custodian that handles investments in metals, and they are few. Don't look to your discount broker or a fund family like Vanguard; they won't touch the stuff. Instead, you'll need a specialist like the two original gold IRA custodial companies, American Church Trust (acquired by GoldStar Trust in 2007) and Sterling Trust. These are the most respected names in the business. An Internet search will turn up others, and if you do your due diligence on them, you might find one that works for you.

But remember that it's especially important to choose a custodian with a solid reputation, because your gold will be stored at a location twice removed from you. A firm such as GoldStar or Sterling would be merely your IRA's legal custodian; for vaulting your IRA gold, it will employ a certified depository, likely either HSBC Bank USA (which is also a COMEX gold depository) or Delaware Depository Services.

So chances are you'll have to open a separate IRA for physical gold, which will be a matter of doing a little paperwork and paying some fees. Then you put money into your account and tell the custodian what to buy. (Dropping in coins you already own is against the rules - a "prohibited transaction.") And if you want to mix in some paper - for example, to consolidate your gold, ETF, and mining stock holdings into one account - that's fine, too.

The custodian will charge either a fixed annual fee or a percentage of the IRA's value, with a ceiling. And the depository will charge its own fee for safekeeping. There also may be a transaction fee each time you add to your IRA. In all, you can expect the basic cost to run between $160 and $340 per year, depending on the fee structure of the custodian you choose.

You can make the same tax-deductible contribution each year to a gold IRA as with any other IRA. The current limit is $5,000, or a "catch-up" limit of $6,000 for those 50 and over. Custodians generally set their minimum initial investment at that $5,000 mark but will accept smaller subsequent contributions.

When the time comes to withdraw from your gold IRA, you don't get any coins or bars, alas. You get cash. The custodian sells the gold and distributes the proceeds, with the money then taxed at your ordinary income rate, just as with any other asset held in an IRA.

That takes care of the how-to. The trickier part is whether it's a good idea. For most readers, the answer is likely no. Here's why.

The idea behind a traditional IRA is twofold. First, reduce present taxes by taking a deduction upfront for your yearly contribution of $5K or $6K. Second, defer taxes on the investment income and gains that build up inside the IRA until after retirement.

Physical gold, of course, doesn't generate income. So you might be wasting part of your IRA's tax-saving power by filling it with gold instead of investments that earn interest, dividends, or trading profits.

Does that mean it never makes sense to have physical gold in an IRA? No. There are some situations when an IRA may be the right place to hold part or all of your investment in physical gold.

No-income portfolio. If you've decided that the outlook for bonds and dividend-paying stocks is so bleak that you don't want any at all, then putting gold into your IRA won't crowd out any income-earning investments.

Strategic switching. Perhaps you plan at some point, when you judge that the gold bull market probably has run its course, to liquidate part of your gold. Whatever gold you have in an IRA then could be sold and reinvested, with no loss to current tax, in something else.

IRA Only. If your IRA is the only investment vehicle you have, and you want gold, then using funds within the IRA to buy gold may be the only way for you to hold it.

In researching this, we chatted with Glen Kirsch of Asset Strategies International, who has been dealing with gold and gold-related investments for more than thirty years. We asked Glen what would be the benefit of a gold IRA. His experience accords with our analysis of when putting gold in an IRA makes sense.

He said he rarely if ever sees people open a gold IRA just to deposit that five grand a year. What he does see is individuals making the flight to quality with their accumulated retirement assets. Say, someone with most of his wealth in a pension fund limited by a menu of poor investments is searching for a way out. If the individual is generally suspicious of paper investments, a gold IRA will look attractive.

Making the move is simple if the pension fund is already an IRA. You're free to transfer funds from an IRA that's invested in stocks or anything else directly into a gold IRA.

Or if the pension fund is run by your employer, when you leave (quit, retire, or get fired), you can roll your interest in the pension fund over into an IRA, without tax consequences, and use the money to buy gold.

Are You In or Out of the Money?

As part of our ongoing options education series, we routinely answer questions from our reader on the basics of options trading.

Many readers have asked that we clarify the difference between strangles and straddles, so let's start with those before we get into more basics (such as the differences between in the money and out of the money options).

Strangle and Straddle Options Positions

With an options straddle position, you're simply buying a call and a put on the best stock, with both options having the same expiration date and strike price.

Say, for instance, you wanted to straddle Apple (AAPL) with options. You could buy the March 2009 100 call and the March 2009 100 put. But you must understand you're likely to pay a commission charge upon opening and closing both positions when playing a straddle.

When buying only calls or puts, you're playing a directional strategy. With the straddle, however, which includes a put and a call, you're not playing a directional strategy. Traders will use the straddle if they feel a large move is coming but remain unsure about direction.

Upcoming FDA decisions are a good example. If the news is encouraging, the underlying security is likely to jump along with the call while killing off a put premium. If the news is bad, the underlying security is likely to fall and kill off the call premium while pumping the put option.

As for the strangle, you're buying a call and a put on the best stock with both options having the same expiration date. The only difference is the strike price.

Let's use Apple again for our example.

To exercise a strangle position, you could buy the March 2009 100 put and the March 2009 95 call. But, again, to play this you'd have to pay two commissions to open and close the positions.

While I wouldn't recommend trading earnings announcements, investors use strangles to do just that. If earnings and outlook are positive, you could see a positive impact on the best stock. If earnings and outlook are horrendous, the best stock could fall rapidly. The risk to a strangle is if the stock price remains stable or falls between the strike price of the call and put option.

While this is a basic review of straddles and strangles, we'd be happy to review them further if need be. You can leave us questions below, and we'll get back to you ASAP.

Here's another question we received just this morning:

"Ian, in Options Trading Pit you mention in the money and out of the money positions? What does this mean exactly? Thanks for the service. I'm up 52% on Equity Residential puts."

Options are classified two ways: as "in the money," and as "out of the money."

Say, for example, your stock is priced at $38. A call option would be considered in the money if you bought an option with a strike price of $37.50 or less. But a call option of $40 would be considered out of the money. It just has to do with what strike price you buy and where the underlying stock market is trading at the time.

"Ian, what do you mean by 'deltas'?"

Deltas are part of the Greek methodology covered here.

How much will your option increase when the underlying stock market moves? That depends on the delta, which measures how much an option will change in relation to movement in the underlying stock market.

Every option carries its own delta, meaning one option could provide more of a gain than another option, and it's important to know.

Deltas are measured on a per-share basis. For example, a delta of 0.80 means for every dollar the underlying stock market rises, a call option would increase by 80 cents per share. But remember, when you buy an options contract, you're buying 100 shares of a best stock. So that delta of 0.80 means that for every dollar the stock increases, you make $80 per contract.

With put options, the delta will be negative. Had you bought a put instead of a call in the above example, the delta would have been listed as -0.80. That means for every dollar the stock market dropped, you'd earn 80 cents per share, or $80.

For more on options trading, we direct your attention to the following:

How to Invest in Options

How to Buy LEAP Options

Options Intrinsic Value

ETF Options Trading

Crisis Investing

Lockup Expirations

How to Trade Like a Hedge Fund: Secrets of an Options Trader

Stay tuned for more options education next week, when we'll dive into naked options trading.

Care Our Health

2009-03-13

Green Energy's Beneficial Impact on Natural Gas

A.Gary Shilling's Predictions: Economics is Still Screwed In 2009

A. Gary Shilling on Financial Sense Newshour

A. Gary Shilling: Still a Hardcore Bear

Geo-fiction or not, high-grade magnates rule: ThomWatch

Initial Report on the Phoenix "Silver Summit" Show

Rising Gold Prices will help the Economy

In Government We Turst?

The Small-Cap Sector You'd Never Think to Look At

Geo-fiction or not, high-grade magnates rule: ThomWatch

Rising Gold Prices will help the Economy

The Retirement Paycheck: Plan B Pension

How "Plan B Pensions" Can Double Your Wealth

A Depression - With a Capital 'D'

Are You In or Out of the Money?

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