Gold $1500

by Addison Wiggin – April 19, 2011

  • More debt and deficit dismay? Gold touches $1,500
  • Turk, Faber, Mayer weigh in on the dollar, the debt, precious metals and how to play the coming volatility
  • "Sorely disappointed"… What retirees can expect out of both the Obama and Ryan budget plans
  • Aging rapper announces huge expansion plans for his business… as soon as he can make payroll
  • Expensive wars, fear of foreigners, lack of accountability… lessons from a 17th century shipwreck

From Standard & Poor's skepticism yesterday that Congress can compromise by 2012, we turn today to populism expressed by a 14-year-old girl in Wisconsin:

And just like that, gold hit $1,500 for a nanosecond this afternoon.

"The warning from S&P is unlikely to change the spending habits of Washington's politicians," writes James Turk of "Given the willingness of the Federal Reserve to monetize the government debt, there is no major fundamental change in the outlook for the dollar.

"Given that there are no safe haven currencies anymore like there were in the '70s when you needed to get out of the dollar, the only alternative left is gold and silver.

"In fact, the news about the University of Texas holding $1 billion of gold is clear evidence that market leaders are abandoning the dollar for the safety of precious metals."

"We have a government that borrows and spends money recklessly," chimed in our own Chris Mayer after the S&P report yesterday. "We have a government deep in debt with massive obligations, particularly when you include entitlements.

"We're looking at big tax increases and lots of money printing. On top of all that, we seem to be in a climate of increasing hostility toward business and wealth. That's not a pretty backdrop for investors."

You "have to expect a lot of volatility, which also creates opportunity. There have been difficult investing environments throughout history, and looking back, these are the times when the rich seeded their fortunes."

[Ed. Note: Chris sees two fortune-making opportunities among junior gold miners right now. One is working territory next to one of the most lucrative ore zones in history. The other is still finding gold in lands where the conquistadors first laid claim hundreds of years ago.

Both have the potential to multiply your money many times over, as Chris makes clear in this presentation.]

"Last week," says our income investing specialist Jim Nelson, "President Obama announced a supposedly $4 trillion deficit reduction plan, countering Congressman Paul Ryan's $5.8 trillion reduction plan.

"If you have been watching and waiting to see how they take care of entitlements like Social Security and Medicare — like us — you were probably sorely disappointed.

"The fact of the matter is they didn't… and can't.

"Every single scenario to shore up Social Security comes through benefit cuts, tax hikes, pushing back the retirement age or a combination of the three. And of course, no one is saying anything about paying back the trust from which both sides have been plundering for the past several decades.

"Regardless of where things end up, one thing is clear: Retirees and near-retirees will need one heck of a savings plan. The likelihood of an affordable retirement — the way many have thought about it in years past — is slim.

"But our own research is much more optimistic. We've been able to find a number of winning plays, rising dividend payments and nondollar-denominated investments that aren't affected by the Washington ineptitude."

[Ed note. Jim calls this the "Plan B" pension. He shares the details here.]

"The value of the U.S. dollar," Vancouver veteran Marc Faber has suggested on many occasions, including in an interview we broadcast last fall on The Daily Reckoning site, "will be precisely its intrinsic value — namely zero, precisely zero."

Investors "should be their own central banks," Faber recommended to viewers of CNBC Asia yesterday, "and gradually accumulate gold reserves as a currency. I still believe the best currency is gold and silver, and this is not the perception of most people. They believe gold and silver are speculative investments."

You decide.

Stocks are holding their own after yesterday's drubbing delivered by S&P. The major indexes are more or less flat from yesterday's close.

By day's end Monday, the S&P 500 index rose back above 1,300… the key level that's been watched for months by our small-cap analyst Jonas Elmerraji. Still, he cautions, "We're not in full bullish mode again until shares overtake their previous high of 1,344.

"There's a different story forming in commodities right now, as major exchange-traded commodities like oil, gold and silver still sit well above their breakout levels" following Goldman Sachs' sell signal last week. As a result, the commodity-related recommendations in Penny Momentum Trader are moving back up.

In the last three months, Jonas' readers have had the chance to collect gains like 8% in two days… 26% in 12 days… even 51% in five days. The key is the S.T.O.R.M. system Jonas refined during most of 2010. He explains how you can put it to work in your portfolio in this presentation.

The housing market is… well, not getting worse. At least not if you judge last month by Commerce Department figures on "new construction"; housing starts rose 7.2%, to an annualized pace of 549,000.

Still, considering last month's figure was the second lowest on record — April 2009 still holds top honors — we're not ready to write home just yet.

Turning to science briefly today, we note that 43 years after the first human heart transplant, the operation remains a rarity… and even then with only limited success.

"The waiting lists are long," says Ray Blanco of our tech team studying the problem and looking for solutions. "Even when a recipient does receive a transplant, it is from a foreign donor, and a lifelong course of immunosuppressant therapy is needed so that they do not reject the organ."

But "once stem cell-based organ replacement becomes a reality, it is going to make an enormous dent in some of our largest health care problems. It will mint numerous new millionaires in the process."

With that in mind, researchers at the University of Minnesota "have found a way to create a complete structure to which stem cells can attach and grow into a working heart."

"If a heart could somehow be reduced to its basic skeleton," their theory goes, "it could then be used to create the framework for growing a new one. In order to do this, all the old cells would have to be removed while leaving behind the extracellular matrix (ECM). This matrix consists of the protein fibers that form the scaffolding that gives the body's organs their shape and structure."

Easier said than done. But through trial and error, they found a very common chemical compound — one used in most shampoo — actually made this process happen. It's already been made to work with rat hearts.

Ray tells the whole story in the current issue of Technology Profits Confidential. Subscribe now and you'll get the scoop on six "jackpot events" that will create new fortunes for early investors.

How's this for a business plan? Expand your operations to Las Vegas, even though you can't make payroll at your one and only existing location.

Yet that is what aging rapper and reality TV star Flavor Flav proposes to do. He met recently with management at Riviera Casino about opening a Flav's Fried Chicken inside the hotel.

Flavor Flav: Rapper, reality TV star, chicken entrepreneur?

Flav scored a meeting with Riviera CEO Andy Choy despite reports all over celebrity media that employee paychecks were bouncing at the first Flav chicken location in Clinton, Iowa.

Why Clinton, Iowa? It's the hometown of his business partner, Nick Cimino.

Two employees said they were unable to cash checks for three weeks' worth of pay… despite trying several banks. Cimino confirms the account had insufficient funds, but… well, we don't want to get in the way of a good story. We'll let Flav tell the rest in his own words:

"Let me say this — being that is a new, up-and-running business there was a couple glitches, ya know, with the credit card machine, ya know what I'm saying? Right now we've got that fixed and there's nothing else that's going to bounce ever… I'm not worried about that [the claims] because it's not true information… Maybe these are people that's [sic] probably just jealous of me being here and probably wanting to see me out… but yes, we do have money in our accounts…

"This business has been successful and it's gonna even grow bigger. You're going to have people bad-mouthing you and trying to take you under. But can't nothing take your boy Flavor Flav down. And employees are paid, in full."


"A superb adaptation of Rand's novel," reads a late-arriving review of the movie version of Atlas Shrugged. "The 'right out of today's headlines' should have wide appeal to younger and older viewers alike.

"Well acted, visually appealing, and well produced. Will definitely see again. Can't wait for the DVD and Part II. Wife came home, went right to the bookshelf, pulled out Atlas. I asked why, and she said, 'I need to catch up and be ready for Part II.'"

"Just spent 48 hours in a hotel room North of Pittsburgh," writes another reader. "Confined to bed after eating some bad sushi. Fortunately, I had just purchased Bill Bonner's Dice Have No Memory. I read it cover to cover in almost one sitting.


"First, a lot of foggy intuitions (on my part) were crystalized into reasoned thought by Mr. Bonner's perceptive analysis of the financial scene and the world at large. Finally, a lot of things make sense!

"It seems ironic that the day after I finish his book, Standard & Poor's comes out with their report on America's financial standing. Perhaps they bought a copy too!

"Bonner knows more about life than just making money. I really enjoyed the narratives about his family life. Clearly, he has his priorities in order and is that rare entity: a man who sees clearly and is able to live as he sees fit. The 'Memento Mori' chapter was especially moving. This is a book that will stay with you for a long time."

"Being new to trading and Agora," writes our last reader for the day, "I didn't know what to expect from your daily email. I'm generally cautious about people when I go into a new venture, and when they propose to 'understand the way things work,' I sit back and observe for awhile.

"But from the start, your 5 has been so refreshing and riveting on several levels. You aren't just about obtuse financial terms, but share a broad spectrum of what's going on in our economy.

"You genuinely care about our country and see through so much of the sham that's going on in our government's (and some businesses') handling of the economy. You comment on things not with a pompous or 'mean' spirit, but with surprising candidness I'm not used to hearing that much. Thanks for sharing your knowledge about financial markets, how people are so far off course when it comes to money sense, etc. And I never dreamed how connected we are with the rest of the world, for better or worse!

"You make things so engaging and clear. It's good to hear people uphold what's valuable in our capitalist system, but also agree there are dangerous trends trying to destroy our fabric. You give 'hope' not just for hope's sake, but you 'share truths' as a way to make us sober about certain realities.

"In answer to those who may not appreciate some of your words in The 5, tell them that when a person's truly vigilant about what he's assigned to do, he's actually obligated to show concern and be sarcastic or whatever when describing how 'leaders' or systems cower from their responsibilities and make a mess of things for others.

"Thanks for all you do!"

The 5: Thank you for the kind words. If you want the company of kindred spirits, we invite you to join us this summer in beautiful Vancouver, British Columbia, for the annual Agora Financial Investment Symposium, July 26-29, 2011.

You'll get four days' worth of candor from speakers like Bill Bonner, Doug Casey, Barry Ritholtz and Rick Rule. Seats are filling fast, but discounted admission is still available.


Addison Wiggin
The 5 Min. Forecast

P.S. Lest we get ahead of ourselves and think we're the only nation to succumb to hubris and spend our way into oblivion, allow us to tell you a tale we picked up in Stockholm on Friday:


The Vasa: the replica and the real deal.

In 1628, the Swedes were at war with Poland, which lies south across the Baltic Sea. The two countries were primarily fighting over trades routes and control of the ports in a long Baltic coastline. But the Swedish king, Gustavus Adolphus, was able to keep up the very expensive endeavor, and high tax rates needed to sustain it, by continually reminding the Swedes the "papists" were fighting in Germany (during the Thirty Years' War) and intended to invade Sweden and take their land and women.

To demonstrate Swedish naval prowess, Gustavus Adolphus commissioned five great warships to be built, the Vasa being the grandest among them. After two years of construction, the Vasa set sail from the old town of Gamla Stan with great pomp, sailed less than a nautical mile, caught a strong breeze sideways, capsized and sank. Fifty men drowned. An inquest was conducted, but no one was found responsible. When asked, the ship's architect proclaimed he had only been following the king's orders.

(Three hundred and thirty years later, the Vasa was rediscovered intact, and raised. The port water is brackish — half salt, half fresh — and not hospitable to the shipworm that feasts on shipwrecks in open salt water. As such, the ship was recovered in its entirety and undergoes reconstruction at the national museum dedicated to it not half a mile from where it sank.)


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