Prediction Fulfilled, Gold Q&A, Gross’ Moves, Global Warming, and More!

by Addison Wiggin & Ian Mathias

  • The “shocking New Year’s prediction” already coming true
  • Bullion or collectibles? Your most commonly asked gold questions answered
  • Chris Mayer goes to the races… and comes back with two great plays for the New Year
  • Patrick Cox on the “collapse of the global warming edifice” — and the single best way to play it
  • “Telling it like it is”… or “Is he serious?” Bill Jenkins sets off an e-mail storm

“It was as if investors around the world took our advice,” says Jim Nelson.

Eight days ago, Jim issued his “Shocking New Year’s Prediction” to readers of Lifetime Income Report: 2010 would be the year the dollar takes off. It already has — the dollar index sits within spitting distance of 78 as we write.

The dollar index sits at a 3-month high.

“It may not mean anything just yet,” Jim cautions. “But it could be the start of what we predicted: a second collapse across all investments.”

”Bloomberg summed it up best yesterday afternoon: ‘The dollar rose to the highest level in three months against the euro while stocks and commodities slid as investors shunned risky assets on concern the global economic rebound will stall.’

”The line ‘investors shunned risky assets on concern the global economic rebound will stall’ may be the most telling line we’ve read so far from the mainstream media. Once this idea of a potential second dip gains traction, we’ll see the dollar really start taking off.”

Jim has a list of income-generating ideas to make the most of the trend — including one that’s generating a 9.4% yield. Check it out here.

For the moment, the inverse correlation between the dollar and U.S. stocks that’s been in play most of this year has been broken. While the dollar is up, the major stock indexes also jumped nearly half a percent after the open this morning on earnings numbers from Nike, Oracle and Research In Motion, the Blackberry maker. That makes up for some of yesterday’s losses, which took place for no reason we could readily discern. Mainstream media cited all of the following…

  • A vague suspicion the Fed might start raising rates sooner than previously thought
  • A rotten forecast from FedEx (shipping volumes being one of those economic barometers the government can’t manipulate)
  • Celeb analyst Meredith Whitney chopping her earnings estimates for Goldman Sachs and Morgan Stanley
  • The chronic festering sore known as Citigroup.

What’s that about the Fed raising rates? Bill Bonner says he’ll believe it when he sees it. “Interest rates will remain artificially low as long as Bernanke can get away with it… or until the depression ends… whichever comes sooner,” Bill writes. “That said, he hardly has to lift a finger. Judging from the last auction of short-term Treasury debt, lenders can’t think of anything better to do with their money than to give it to the government — in return for nothing. The last auction produced a yield of zero on one-month loans.”

We note here that people tend not to park money in the short end of the yield curve, knowing they’ll have nothing to show for it at the end of 30 or 90 days, unless they anticipate something bad happening in the interim.

We note further that the last time this happened was just around a year ago. And the Dow shed about 2,000 points over the following three months.

Among the people moving to cash in the above-described fashion: Bill Gross. November numbers from the PIMCO Total Return Fund, the jewel of the Bond King’s crown, reveal he dumped more than 15% of his position in longer-dated Treasuries last month. He also sold off more mortgage-backed securities, as he’s been doing the last nine months.

“People often get very confused about the difference between gold bullion coins and numismatic or collectable coins,” says our coin expert Nick Bruyer.

“In fact, they are entirely separate markets. The difference being that bullion coins are really the precious metal, but minted into coin form, and their value follows right along with the daily movement in the spot market price of the precious metal. In the case of the numismatic market, the coins may be made of silver or gold or platinum, but they don’t follow along with the price of the precious metal because most of their value is due to the rarity and history and grading.”

That’s just one of the answers Nick had to our readers’ burning questions during our exclusive webcast released yesterday. He also addressed…

  • What’s reported to the government when you buy and sell gold
  • How to determine a coin’s value when you don’t know it already
  • The best way to store your coins
  • Confiscation.

“I found the webcast very interesting,” says a reader who’s already viewed it.  It was straightforward and I picked up a few facts I did not know about.”


Even better, “I was pleased to see that Addison does not look anything like the picture of him in the ‘throne’ chair.”

We’re keeping the archive of this webcast available through early next week. Best of all, when you view it, you can get dibs on some bullion coins the general public never had a chance to buy. Here’s where to go.

Gold is treading water today near $1,100 an ounce. In contrast, sugar is trading at all-time highs — up 2.1% just today — on a forecast of more rainy weather in Brazil, further disrupting the harvest there. Raw sugar can’t be had for less than 25 cents a pound — the first time that’s happened since 1981.

Members of Alan Knuckman’s Resource Trader Alert have already had a crack at 107% gains on a sugar play over the summer. More recently, they booked gains of 107% and 162% on consecutive days at the start of this month. For a very limited time, you can secure membership in Resource Trader Alert for just half price.

For the record, the republic remains under outlaw rule as we write — the national debt once again exceeding the statutory limit of $12.104 trillion. Currently, it’s $12.129 trillion, which is actually down slightly from the day before. Must be those “extraordinary accounting tools” we told you about yesterday doing their magic, however slowly.

In the meantime, the House has voted to raise the limit by $290 billion so as to preserve the patina of legitimate governance; the Senate might get around to it next week. That would buy time till around February, when we’d get to revisit the issue all over again.

“Big Brown was an undefeated three-year old colt,” writes Chris Mayer, finding timeless investing lessons in the most unlikely places. “He won the first two legs of the Triple Crown in 2008 in fine fashion. He won the Kentucky Derby by an impressive 4¾ lengths. Big Brown then won the Preakness by 5¼ lengths. Winning the Triple Crown seemed a foregone conclusion. Big Brown was a sure thing.”

“But what happened? Big Brown made history by becoming the only Triple Crown contender ever to finish dead last in the final leg of the Triple Crown at Belmont.”

“What did people miss? They fell in love with Big Brown’s story, but forgot about basic odds. Only 40% of all horses ever won the final leg of the Triple Crown after winning the first two. And it’s worse if you look at the record since 1950, when the success rate drops to only 15% of all horses.”

“When it comes to stocks, we see this all the time. People fall in love with a certain story and pay a very big price because they are sure this one will work out. It’s why Amazon goes for 75 times earnings and trades at a price not far from its all-time high, set earlier this month.”

“Perhaps Amazon will buck the odds and prove a very good investment. But you will lose money in the stock market if you repeatedly buy such popular stocks. I’d rather fish among the unloved stocks, where you get a very good price. Here, your odds of making money are better. If you repeatedly fish in these waters, you’ll make money.”

Chris has two “unloved stocks” in mind as especially good buys as we approach the year’s end. For access, look here.

“It’s altogether possible that warming may return,” says Patrick Cox, as the Copenhagen climate summit races toward a conclusion in which it appears little will be concluded.


Patrick points out temperatures were much higher during the Medieval Warm Period — roughly A.D. 800-1300 — and right now we’re still recovering from the Little Ice Age (which ended around 1850).

But “the bigger questions concern the cause of current warming. The leaked e-mails prove that supporters of the anthropogenic global warming (AGW) theory cannot prove it is CO2. CO2 levels, in fact, historically follow, rather than precede, changes in temperature.”

“The bigger point, however, is that the solutions put forth by activists are incredibly expensive and even organizations like Greenpeace say they won’t work. So I ask you, will democratic societies long put up with huge taxes on energy and CO2? Since the fastest growing segments of the world economy have made it clear they will not hobble their economies based on the CO2 model, we will not see global reductions in CO2, despite anything the U.S. and Europe does. Canada and Australia, by the way, are growing particularly irritated with American AGW advocates.”

“So I expect the entire GW edifice will collapse. If you want to invest in technologies that require massive subsidies to exist [solar, wind], go ahead. My recommendation remains the same. Don’t do it. I still strongly recommend investing in the one alternative energy that is proven to significantly reduce CO2 emissions.”

It’s part of his Breakthrough Technology Alert portfolio, along with his pathbreaking selection of tiny biotech wonders that will also change the world. See his vision of the future here.

“Was Bill Jenkins serious?” a reader writes, responding to Bill’s suggestions for how the nation can stop the “smooth slide to socialism.”

“His world sounds like hell to me. Getting rid of government and having everyone fend for themselves does not result in utopia, as most third-world countries demonstrate.”

The 5: It’s an unusually poor day to use that analogy on us folks in Baltimore, where…

  • A government-run water main broke last night and for a time people in four surrounding counties were urged to avoid washing dishes or even taking a shower
  • The government-run snow removal system, pitiful even when there’s a 1-inch dusting, faces the prospect of a Nor’easter dumping up to a foot of snow this weekend.

In other words, we’re feeling a bit Third World-ish already.

Of course, Bill also got his share of “Very well put,” “Great summary,” “Thanks for telling it like it is.” But since agreement is boring, we’ll devote most of our remaining time today to dissenting views.

“That diatribe from Bill Jenkins about what you would do to ‘solve’ the nation’s problems appears to be the signal that The 5 has officially lost it. It should be clear, even to Bill, that doing something this drastic would, in fact, cause more problems than it would solve. It took a long time to get into this mess. It will take a long time to get out. Taking an ultra-libertarian view that we can somehow all go back to being yeoman farmers in 1787 is absurd. It’s no different than taking the easy potshots at current politicians and government officials. Of course they’re idiots and the things they do are stupid. We all agree on that.”

“How about some other practical suggestions that may actually be implemented? Auditing the Fed would be a good start.”

The 5: Um, we’ve suggested as much ourselves. Or at least we did before we “officially lost it.”

“The thought occurred to me,” another reader writes, “that this joker is setting us back to the days of the Wild West, when every citizen was carrying a gun on his hip… Shoot ’em up, cowboy??”


“But then, the next thought was, it would be a form of population control while we sort out the other issues.”

“Trader Bill Jenkins needs to read his federal budget,” admonishes another. “80% of federal dollars goes to five WILDLY popular programs that will NEVER be cut: Social Security, Medicare, Medicaid, interest on the debt and defense. Silly options like gutting the bureaucracy, cutting education and — my favorite — all the foreign aid… are pennies compared with the dollars in the five programs listed above.”

“In my opinion, the die is cast,” writes a reader who says it’s already too late. “The United States of America will cease to exist as we knew it 50 years ago. Certainly, the country our forefathers envisioned has already expired. We can talk endlessly about how screwed up things are getting to no avail. What we need to begin is a dialog of how to create a new country from the rubble that will remain.”

“There is no way the ‘leaders’ of our country have the integrity to do what is necessary to stave off financial ruin. It will come about either by defaulting on the U.S. debt or by inflation that ruins the economy. So if our ‘leaders’ won’t do the right thing, our only recourse is to start a new country. Hopefully, we will use the Constitution of the United States as a foundation, but even that needs to be reinforced so politicians have severe limitations on what they can spend and do.”

“There are a few states in America where its citizens might consider seceding from the U.S. To begin this dialog, what would a state have to do to secede from the union?”

The 5: Now you’ve done it. You’ve used the s-word. This should bring the discussion to a whole other level over the weekend.


Addison Wiggin

The 5 Min. Forecast

P.S.:  So Jim Nelson’s dollar forecast is playing out before our eyes.  The wrangling at the climate summit reinforces Patrick Cox’s outlook that the climate change movement is on shaky ground.  And Chris Mayer has spotted some bargain-priced opportunities even in a stock market that’s made a big run-up this year.


Truth is, if you asked me about any of these items, I’d likely tell you “I don’t know.” I have my opinions about the debt, the dollar and gold. I’ve had a lot of experience dealing with Congress and the media. But when it comes to the nitty gritty of investing in specific opportunities I rely on the professionals we’ve cultivated at Agora Financial – from penny stocks and options pricing to commodities, currency plays, breakthrough technologies and macroeconomics… if I have a question about what’s happening in Washington, on Wall Street, Beijing, Dubai or Bombay… I’ve got a man or woman on the scene with the expertise I need to make accurate and timely decisions.


That’s the team I want to put at your disposal for an inexpensive one-time-only lifetime fee. From now until the end of the year, you can gain access to all the profitable wisdom of all our editors with a membership in the Agora Financial Reserve. If you’re smart enough to realize there’s a lot you need to know when managing and trying to grow your own pile, you’ll love the deal we give when we open the doors to the Reserve.


But time is short, and we’ll be closing those doors in a few days.  Don’t wait till after your holiday rush is done, because once we close up access to new members, we don’t know when we’ll be opening again. It’s a great deal and I urge you to reacquaint yourself with how it all works.  Here’s where and why.


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