Real Money Perspectives 2005

Real Money Perspectives 2005


2005 Real money Perspectives

INTRODUCTION: ECONOMIC SOLUTIONS? WHERE? This 23rd Anniversary Special Edition contains the best of the latest news and views. Financial wisdom is the ability to judge which investments are true and represent good judgment.


Debt, Deficits and the In-Credible Shrinking Dollar
are the primary components of "3-D Economics."

We might be past the dawn of a great commodities
bull market. But it could yet be early morning.

By Richard RUSSELL, Dow Theory Letters
Gold is real money, and always will be, despite the
efforts of the central banks to have you think otherwise.


By Kevin LIPTON, KLRC, Beverly Hills, CA
It was another record year for the coin industry. More
investors entered the market than anytime in history!

Welcome to the 21st century paradigm shift- from a
"stock-driven era" to a new "commodity-driven era"

By Jeff OPDYKE, The Wall Street Journal
You don't have to be rich to invest in coins. In
fact, the lower end of the market is booming, too.

By John EMBRY,
We are in the early stages of a global currency
debasement which will see tangibles rise dramatically.

GOLD ETFs...Where's the BEEF?: Page 15
Investors in StreetTracks, the World Gold Councils'
new ETF should be asking: "Where's the Gold?!"

By Richard SPOHR, SATC
Is this really a new era for silver? Could silver rise
to $50, $75 or even $100/ oz. based on fundamentals?

GOLD COMMEMORATIVES: Value & Growth: Page 20
Now is the time to diversify into an asset that offers
an INVERSE relationship to your U.S. dollar holdings.

By David BRADSHAW, Editor
Building a financial portfolio that is able to
withstand the storms of life is not easy. Start here...


INTRODUCTION - Worldview Perspectives: Page 22
By David BRADSHAW, Editor
Ideas have consequences. To win the cultural war for
ideas, we must understand and grow our "worldview."

By Pat, BOONE, Entertainer
"A man's character is fate... If America ceases to
to be good, she will cease to keep great."

GOLD IS...: Page 24
By Bill BONNER, Daily Reckoning
Gold is the money with no one's picture on it.
No central bank promotes it... and none destroys.

TWO NATIONS UNDER GOD: Worldview War: Page 27
This war of the worldviews holds within itself
the possibility of the genuine renewal America needs.

Forward by Craig R. Smith After reading this book, I'm compelled to share it's
message with my family, friends, associates... and you!

Golden Broadcasters offered brings my radio show to
millions of new listeners, an opportunity I couldn't refuse.

We are witnessing the end of an era and a new
renaissance of morality in culture and economics



"It is a characteristic of wisdom not to do desperate things." -Henry David Thoreau

Today's world is heavy-laden with "desperate" social, economic and political conundrum and appears very skimpy on real solutions.

The best and brightest minds on Wall Street have been befuddled by the major financial paradigm shift of the 21st century -- away from paper assets and toward tangible assets.

But not out readers. Swiss America's Real Money Perspectives has told the financial truth for two decades now. Over the last five years, we've even posted daily economic news and views at to help our readers avoid desperate investing.

This 23rd Anniversary Special Edition of RMP contains the best of the best news and views. Our premise, first penned by Craig R. Smith, Swiss America CEO in his book Rediscovering Gold in the 21st Century, is a simple, 21st Century Investment Commandment: "Thou Shalt Diversify Assets to Include Tangible Assets!"

The information age has both helped and hurt investors at the same time. Why?
*Too much bogus information
*Too many inflated funds
*Too many overvalued stocks
*Too many "insider deals" that relied on the passe market fundamentals of the 1990s (a perpetual bull market) which abruptly reversed in 2000.
*Too many "desperate" brokerage firms trained how to "Put some lipstick on this pig and sell it!" which have resulted in scandalous behavior on Wall Street.

The 21st century financial world requires successful investors are able to factor in a growing number of threats to our life, liberty and assets, such as; was, terrorism, record debt and deficits, a declining dollar, market manipulation, retirement and pension crises, etc.

So far in the 21st century, commodities and collectibles have had the best growth record. The $64,000 question is, "Will the bull market in tangibles last?"

You, dear reader, must decide that for yourself after looking at the facts presented in this issue whether or not we are presenting financial wisdom or simply the latest financial fad.

Fads are trendy schemes that usually start at the top -- with mass media promotion, glitz, glamour, sex appeal, sparkling teeth, etc ... and then work their way down to the masses.

In contrast, "Wisdom" is defined as "the ability to discern, or judge what is true, right, or lasting insight. 2. Common sense; good judgment." .. and which investments do not.

Thank you in advance for investing the time to investigate a long-term-economic-solution-strategy together with us! At Swiss America, our goal is to present hopeful, tangible alternatives to financial "desperation," gloom, or doom.

At your service,
David M. Bradshaw
Editor, Real Money Perspectives

In The 21st Century
By Craig R. Smith, CEO, Swiss America


"It's the value's, stupid," writes an 18-year old conservative published at And boy is he right on -- not just from a social and political perspective, but from an economic perspective.

Real value is what investors, wage earners, homemakers, retiree's -- everyone seems to want. Even our kids are searching for true value (and values) today. But for too many, value and true "wealth" and very illusive - which would explain why, according to the Social Security Administration, over 50% of the people who retire at age 65 retire broke and need to work to get support from friends and family.

So it is obvious that Americans need some help with financial stewardship from someone. What's that you say? Wall Street can manage it for us? Ha! Sure, better than government perhaps, but let's get serious about taking personal responsibility for our financial future instead of playing the blame game now - and playing the broke game later. There is no time left to gamble with our future.

Let's face it, stocks have been hitting a glass ceiling ever since scaling the 2000 heights. Bonds may be "safe" but they require great confidence in the U.S. dollar, which many feel is very misplaced. Real estate is a great long-term investment, but it can become a burden during tough economic times. So that leaves commodities and collectibles - which have both been rising nicely since 2001-02.

Debt, deficits and the U.S. dollar are the primary components of what I call The "3-D" Economics that all Americans must face in the 21st century. We will examine each of these weakest links for clues about the future trends -- based on the past experience and present realities. Our goal is to help you arrive at some "economic solutions" by the end of this Special Issue.

The real question today is: Are we moving toward a recovery, financial certainty and debt reduction... or are we moving toward financial uncertainty and a debt explosion that could blast us toward another recession? Or worse?!

Very few analysts are right all the time, and since our 5-year track record is still unbroken -- just to be safe -- we'll let our readers decide. Either way, tangibles are not all the rage, just like we've said over the past five years, and likely will be for another five years.


"Dollar Tumbles on Central Bank's Shifts" -Reuters
"Gates, Buffett and China Gang Up on Dollar" -Bloomberg
"Buffett sees no way but down for US dollar" -AP
"Weak US$ in '05 to get worse before better" -Reuters
"2005: Year of the weak dollar" -AFP
"A Hurting Dollar Pains the World" -MSNBC
"OPEC Dumps the Dollar" -Newsmax
"How to Profit on a weak dollar" -CNN
"Dollar under heavy selling in Shanghai" -Xinbuanet
"Japan threatens huge dollar sell-off"-Guardian
"Dollar slide to continue" -UBS Warburg
"Makings Of A Meltdown: Dollar Stampede" -BusinessWeek
"Dollar's Fall Tests Nerve of Central Bankers" -NY Times
"The passing of the buck?" -The Economist
"Dollar's plunge a blight, not a benefit" -MSN
"Why the Wold Needs a Weaker Dollar"-Morgan Stanley

INTRODUCTION: The Dollar Domino Effect

The decline of the U.S. dollar has now moved into phase two, what I call The Dollar Domino Effect

First it was Warren Buffet, then Bill Gates, then George Soros, now even our allies like the Korean central bank are starting, one by one, to diversify out of U.S. dollars and into other forms of money And who can blame them?

If a dollar is viewed as a unit of measurement for the world's confidence in America's ability to manage and reduce our trillions in debt, it is likely due for another major decline in 2005.

Devaluing the dollar is the markets way of correcting the U.S. trade deficit. Alan Greenspan recently said that either the value of the U.S. dollar... or the trade deficit.. had to decline. Both cannot continue rising, but U.S. interest rates WILL continue rising in 2005.

The U.S. dollar has now lost over 40% of it's buying power against the euro since 2001 -- and that's under a "strong dollar" policy from the White House! Can you imagine what the next four years hold in store for the debt burdened dollar? I can. Hold on to your wallet, a surge in the cost of living is coming at you in 2005 and beyond.

Sure, a lower dollar has some benefits, such as lowering the trade deficit and increasing U.S. manufacturing competitiveness abroad. "Provided the currency shift doesn't get out of hand, a sustained but managed weakening of the dollar is good news for the global economy and world financial markets," says Morgan Stanley Economist, Stephen Roach.

But, the price impact of a falling U.S. dollar is already starting to wash up on American shores as the European manufacturers raise prices to offset lost profits. The effects of a weaker dollar will fall heaviest upon 'We the People' who are the ultimate victims of declining dollar-denominated assets.

Investors are voting with their feet, moving in droves out of U.S. dollars and into foreign currencies and gold. Bloomberg reports;? "The real risk is that the sharper and the quicker the dollar falls that these investors pull out pretty quickly from U.S. markets..." DaimlerChrysler AG, the world's fifth-largest carmaker reports, "We weren't prepared for the dollar to be at this level...and 2005 won't be an easy year."

The dollar can add the world's two richest to its list of detractors. Bill Gates, chairman of Microsoft Corp., left no doubt of that, admitting "I'm short the dollar." Gates, the world's wealthiest man called the record $7.62 trillion federal debt "a bit scary" and lamented that the U.S. is in "uncharted territory" fiscally. This news comes on the heels of Warren Buffet's similar statements to the editor of Forbes in January 2005.


Why would foreigners want to hold assets in U.S. dollars, is becoming the new question around major corporate boardroom tables. Would you want to own something that seems destined to fall in value? I hope not! It is not good business, nor a profitable investment strategy.

Let's say there are two corporations: Company A and Company B. The first company issues stocks and bonds and used the proceeds to invest in plant equipment and research and development. The chances are high that in the future it will enjoy stronger profits and be able to pay the interest on its debt and a dividend on its stock. Investors are likely to be attracted to it.

Company B also issues stocks and bonds, but it uses to proceeds to throw lavish parties for senior management. That might call into question its ability to make profits and pay dividends and the interest on its debt.

"In recent years, the U.S. economy has seemed to more resemble Company B," says Paul Kasriel, Northern Trust's director of economic research. "We're using the $1.8 billion a day we borrow from foreigners to buy more and bigger SUVs and houses, not to mention all the things the government is spending money on. Those aren't investments that will enable us to grow faster in the future. And it the economy doesn't grow our standard of living won't grow, either, especially after making interest and dividend payments to the rest of the world."

At some point, the declining dollar is likely to make U.S. stocks less attractive. In the meantime, Kasriel says, it has boosted the earnings of U.S. multinationals, which earn profits in stronger foreign currency and translate them back to more dollars.


Gold prices punched through 17-year highs of $455/oz on Nov 26, 2004, and has risen 60% since the 2001 low of $256/oz. -- and the gold market has had to fight for every dollar it has advanced.

Wall Street recently started pushing their new gold "Exchange Traded Funds" (ETF's). Remember, ETF's are paper not gold. Physical ownership of gold is one of the last opportunities we have to maintain 100% control of our gold assets. So-called "gold-backed ETFs" are still someone else's liability, which could drop in value -- even if gold prices rise!

Article after article in the financial press warns us about dollar weakness and with all eyes now expecting this, the market may need to consolidate in the short term. The dollar's failure to react positively to better U.S. economic data and weaker data in Japan and Europe may not last, if more good data emerges. We'll see.

In the meantime, the next leg of the new bull market in gold, silver and other commodities is well on it's way and should take gold prices to the $475-$525 level very soon.

"And suddenly, like the Phoenix rising from the ashes, real money, better known as gold, creeps into the consciousness of Wall Street," says Richard Russell of The Dow Theory Letter. Mr. Russell recently told the London Financial Times, "We are now in the second phase of the gold bull market - the phase when the public gradually becomes interested. I think gold will hit $1,000 before this bull market is over."

"The best way for investors to think about gold," says Bill Fleckenstein, a Seattle hedge-fund manager who has made a tidy profit on metals investments this decade, "is to see it not as a $440 metal but at a $4.40 stock that might trade for $4 over the short term but could well be an $8 to $10 stock depending on how the world comes to view the US dollar". FT sums it up saying, "In other words, it is not too late to add a little glitter to your portfolio."

I think the next phase of this bull market will send gold prices up in ALL currencies, not just the U.S. dollar. Gold has already broken out to the upside in Yen and I expect the Euro will not be far behind.

The New York Times reports, "Europe is in the midst of another bout of angst over its currency, which has risen nearly 7 percent in the last two months, amid signs the Bush administration will tolerate a prolonged weakness in the dollar."


The Fed and Bush administration know that the euro's ultimate aim is by necessity to slowly attract foreign investors and central banks to the euro and away from the dollar. But they also know that an explosively upward rocketing euro will wreck the Europeans' major economies in a heartbeat. As a result, "The U.S. game is to allow the dollar to drop lower - and faster that the Europeans' fragile economies can tolerate!" according to economist Alex Wallenwein, Editor & Publisher of "The Euro vs Dollar Currency War."

"In the meantime," Alex continues, "China and the Muslim nations are playing another game, altogether. Every time the dollar drops, they are buying gold. The lower the U.S. lets its currency fall, the more temptation the Asians feel to dump their U.S. debt holdings, as they see their U.S. "assets" depreciate with every tick lower by the dollar on its journey into forex 'Hades.' At some point, this temptation will become overwhelming. The U.S. is currently betting that the Asians' point of no return comes after that of the Europeans. I don't think that's a safe bet to make."

Bloomberg news reports; "India and Russia have reportedly been selling U.S. assets, as well as petrodollar-rich Middle Eastern investors. China, which has $515bn of reserves, was also said to be selling dollars and buying Asian currencies in readiness to switch the renminbi's dollar peg to a basket arrangement, something Chinese officials have increasingly hinted at. Any re-allocation could push the dollar sharply lower and Treasury yields markedly higher."


"Is there hope for the recovery of the U.S. dollar? If not, what will happen?" write Jack W. to My answer..."Hope is based upon faith, and faith is based upon confidence and substance, at least in the financial world."

Today's dollar, devoid of any substance, is purely symbolic of the American dream. Sadly, U.S. dreamers are no longer working hard and saving, but instead, spending hard and borrowing more.

The U.S. debt limit must soon be extended from $7.6 Trillion to infinity, or else the "strong dollar" era must soon end. The dollar today faces two major foes in the near term; The Euro and Gold -- both of which benefit from the dollar's demise, but Gold alone is the ultimate form of money.

When confidence in the U.S. dollar finally does collapse, we will experience the deepest recession in decades, along with runaway cost of living increases (inflation) which will turn millions of American dreamers from princes to paupers...unless they have converted some symbolic money (dollars) into substantive money (gold). Read more in Chapter One of my book..."Substance Over Symbolism: The Folding, Spindling & Mutilating of America's Money System" free online at


If we could step back into the early 1920's, a $20 bill and a $20 gold piece worked exactly the same in our economy. It used to be that you could go down to a local men's shop and buy a beautiful three-piece suit with either a $20 bill or a $20 gold piece.

Now lets accelerate ahead in history 85 years later to 2005.

Let's say you walk into a clothing shop with a $20 gold piece and a $20 bill, and what happens? Well, with a $20 paper bill you'd be lucky to find a nice tie, but a $20 gold piece, even in the worst condition is worth $500, still ample enough money to buy a nice suit today.

Did the $20 paper bill maintain buying power? No! If you look at American history, it illustrates that gold will always outperform it's paper counterpart over the long haul.

Do you want to have all of your money in paper, or should you have a little of your money in real money-- gold?

Today may be on of the best (and last) great opportunities to convert some of your paper dollars into gold, before your dollar-denominated portfolio suffers another 40% decline in value over the next four years-- as the government continues to allow a declining dollar to create a falling U.S. standard of living.


The total U.S. national debt has now topped 7.6 TRILLION. The buying power of the U.S. dollar has now dropped to just 2 CENTS since the FED began printing in 1913.

*No wonder twenty-five cent gasoline is now two dollars!
*No wonder a new car that was under $10,000 is now $30,000.
*No wonder no political party can stop inflation -- it's built into the American financial credit-debt-based lifestyle.

Debt and credit has become America's drug of choice "Buy now - pay later," has become the new mantra of the last 40 years, but it has put a heavy burden upon our money system, our communities and our families.

The modern disintegration of the family, teenage suicide, rising divorce rates and bankruptcy and just a few of the visible casualties of putting present wants before future needs and can be traced back to debt/credit abuse. I say let's ...1) Admit that debt is America's greatest drug problem today, and then 2) Start living within our means by either spending less or earning more.

Sadly, few Americans are prepared to face the coming debt crisis with a solid financial house that is not built on a paper foundation, or real estate valuation on paper. Gold is the monetary anti-drug because it doesn't feed the credit habit. It's a 100% pure asset!

George W. Bush is the first U.S. president in history to confront what experts across the political spectrum describe as an impending "fiscal catastrophe' tight around the corner: Social Security and Medicare underfunding.

Today's astronomical federal debt is coming due just as the Baby Boomer generation will begin to collect Medicare, Medicaid and Social Security. This wave of change is so enormous that many economists agree that it may trump GW Bush's promises of ... more tax cuts, health care reform, let alone the urgently needed 2,000 new US/Mexico border/immigration inspectors!

"Chilling" and "infeasible" are the words U.S. Comptroller General David Walker uses to describe the budget outlook. Perhaps the best word to describe America's looming debt/credit crisis is irresponsibility -- at all levels.

The size, role, and intrusion of today's Federal government would be unfathomable from our founder's perspective. It was the dream of our forefathers that "government" would start first within each citizen, aka "self government." That means putting out future goals ahead of our present wants.

My question? How will our kids and grandkids survive during the coming inflation - when the U.S. dollar collapses under the weight of OUR generation's entitlements ... deficits... and DEBT! It will begin to happen by 2010, in just about five short years, unless something is done now.


"Social Security, on its current path, it headed toward bankruptcy. And so we must join together to strengthen and Save Social Security. Your money will grow, over time, at a greater rate than anything the current system can deliver and your account will provide money for retirement over and above the check you will receive from Social Security,"

-President George W. Bush
State of the Union Address, 2/2/05

I want to applaud GW Bush's courage to take on Social Security reform, the so-called untouchable "third rail" of politics. In his State of the Union Address, president Bush placed Social Security reform at the very top of his agenda, officially putting it ahead, in importance, of the war in Iraq. This was his first State of the Union as a second-term president, and a vast contrast to the address three years ago in which he prepared the American public for the war on terror and also seemed much less confident.

Although his speech revealed few details of his reform plan, a central element relies on younger Americans investing some agreed upon percentage of their payments into private, government-approved accounts that would be invested in "qualified investments." Only those born after 1950 would be eligible to do so.


Instead of dividing the nation, as politicians so often do, I think the issue of Social Security reform could actually be an enormous vote-getter for both the Republican and Democrats alike IF they will unite behind a marketable plan, such as the H.R. 4851 proposed by Rep. Paul Ryan (R. Wis.) and Sen. John Sununu (R., N.H.) with no benefit cuts and no tax hikes. (Also known as the "Social Security Personal Savings and Prosperity Act")

Under Ryan's proposal workers would be able to shift to their personal accounts 10 percentage points of the current 12.4% Social Security payroll tax on the first $10,000 of wages each year ($1,000) and 5 percentage points on all taxable wages each year into their personal accounts. This would come to an average contribution of 6.4 percentage points among all workers.

Serious Social Security reformers must make the case to workers in terms of their financial benefits from private accounts. The Ryan-Sununu bill would give workers higher monthly benefits of 30-40 percent over their retirement years according to the research of Let Freedom Ring, Inc. who has developed a new new tool for long term analysis called "The Templeton Curve."

The Templeton Curve was named for Dr. John M. Templeton, Jr., the son of Sir John Templeton, founder of the Templeton Funds, who was recently hailed by Money magazine as the "greatest stock picker of the [twentieth] century." This tool can help to chart the cash flow impact of any Social Security proposal. The span of time measured is seventy-five years. The basis for the Templeton Curve is the cash flow analysis portion of the "Financial Effects" studies performed by the Office of the Actuary of the Social Security System.

So far, only two reform Social Security reform proposals have been scored according to this Templeton Curve system by the Office of the Actuary: The Ryan-Sununu Bill, also known as the "Social Security Personal Savings and Prosperity Act" and the Kelber-Stenholm proposal, also known as "The Bipartisan Retirement Security Act."

For the first time, the Templeton Curve makes it impossible to see the effects of these various complex proposals in terms that are easy to grasp, both visually and conceptually.

As you can see, the Ryan-Sununu Bill is the winner hands down over the long haul.

"A good man leaves an inheritance for this children's children." -Proverbs 13:22

The good news is that George Bush wants private investment accounts to be the centerpiece of any reform plan. These private investment nest eggs five workers financial security that comes with personal ownership. Mr. Bush also wants to put the Social Security system on a sounder financial footing by erasing at least a portion of the long-term unfunded liability of the system. Today, those liabilities - the promises to pay benefits above and beyond the payroll tax collections - exceed $10 trillion. Medicare's unfunded liability is even more daunting, somewhere near $34 trillion, according to Forbes.

How can supporters of Social Security reform make a more popular case for private investment accounts?

I suggest seven strategies:

1. STRESS THAT SOCIAL SECURITY REFORM SAVE- NOT COSTS-MONEY. The creation of private investment accounts is said to cost $2 trillion, but it saves $11 trillion in later years, Since young workers eventually will receive their benefits from their private accounts, government will no longer bear the obligation to pay those benefits. Wouldn't most Americans invest $2 now to get $11 back in 20 years.

2. STRESS THAT THE SOCIAL SECURITY CRISIS IS FAR FROM IMAGINARY. Ever since Paul Krugman of the NY Times wrote the Social Security isn't broken, this has become the rallying cry of the left. But many analysts find just the opposite. Even the Social Security Administration's own actuaries see doom and gloom if reform steps aren't taken now. It's simple math! Interestingly, My. Krugman called Social Security a "ponzi scheme" back in 1986.

3. EXPOSE OPPONENTS FOR WANTING TO RAISE TAXES If benefits are not cut, and private accounts not created, the only option is to raise taxes on workers to cover gigantic funding shortfalls. The option of doing nothing now, really means raising taxes a lot, later.

4. STOP TALKING ABOUT BENEFIT CUTS IN THE FUTURE. Trimming Social Security benefits in the future risks an enormous political backlash against the reformers in both parties. The truth is that personal accounts for Social Security will allow Americans to have higher, not lower retirement benefits. Cutting social security benefits to get private accounts is like "paying for tax cuts" with other tax hikes.

5. MAKE THE ACCOUNTS BIG AND MEANINGFUL. Big accounts, like the 6.4 percent accounts under Ryan-Sununu will accumulate large amounts of dollars quickly. There large accounts thus help lower the long-term funding problem because workers will no longer need to draw on promised benefits.

6. STRESS PRIVATE OWNERSHIP AND CONTROL. The issue of Social Security is not so much about financial viability as it is about who should control your money? The worker or the government. Private accounts empower workers with control of their own money. That is a power free-market concept.

7. ALLOW RETIREMENT ACCOUNTS TO INCLUDE QUALIFIED TANGIBLE ASSETS. If the government were to allow the same type of investments that are currently allowed in individual IRA accounts, then U.S. gold and silver coins could serve as a hedge against a falling dollar, rising interest rates and a stagnant of falling stock market, as Dr. Ray Lombra illustrated back in 1998 for a Congressional Study.


GW Bush won the Social Security debate during the presidential campaign by talking about core American values: private ownership, fiscal responsibility, worker empowerment, and caring for the future of our children and grandchildren. This is how reform triumphs over rhetoric. Fellow conservatives endorsing The Ryan-Sununu Bill, including Newt Gingrinch, The Heritage Foundation, CATO Institute, Steve Forbes and many more.

The most difficult issue is to convince Democrats that we should move away from a Welfare State and toward a Freedom State. Thankfully, Mr. Bush is smart to take his arguments to the people -- who can then pressure Democrats to support it.

Critics of privatization are concerned that Wall Street today NEEDS the boost from trillions of dollars of Social Security's money into the speculative markets to help prop up the stock market, the U.S. dollar and help cover the United States' bulging current account deficit. This is simply not the case. While it may have a positive effect on capital markets it does allow you to control your money.

I suggest that any privatization plan allows the inclusion of U.S. gold coins as a safe haven for stock market uncertainty -- and which has also proven over the last 5 years to have an excellent growth potential, rising over 60%.

Bottom line: We must do something now, or make out kids face the consequences later. I say we do it now, as president Bush said, for the sake of "The State of Our Kids Union"! (see Social Insecurity Special Report)


I recently read that nearly two million Americans filed bankruptcy last year! That's about one in 100 Americans who are caught in what I call "the credit trap."

The fact is, credit can be an asset, when used in moderation for productive enterprise AND when paid off promptly. But credit's darker side, DEBT, can be a terrible curse when it is used for personal consumption by those without self-control to live within their means.

Bankruptcies have doubled in the last decade! Credit allows us to acquire things today based on the presumption that we can pay later, but this is a very dangerous presumption.

The whole idea of loaning credit, then charging interest on the loan is as old as recorded history. This first recorded credit issuers were found in Babylon -- when men began exchanging their productive labor and tangible goods for credit receipts issued by Babylonian bankers on clay tablets. There receipts became the "money" of the day, similar to our paper "dollar" money systems.

My point is that the temptation of the credit trap is not new. Today, as in ancient Babylon, merchants and banks continuously tempt us to cast caution aside and center into debt to gratify our immediate wants and needs. When we sign a promise to pay for an item on credit, we are voluntarily giving up our God-given rights of life, liberty, and private property to the creditor. We are, in essence, pledging our future to serve another master ... DEBT, despite the historical warning. "You cannot serve two masters."

Are you caught in a credit trap? There are many good resources out there to help you avoid it or help you get out of the credit trap. Use them!

My deep concern is that, as a nation, we are on the verge of seeing our whole economic system collapse unless "We the people" begin to shun debt and start sacrificing to save. Let's be bold enough to say "NO!" to non-productive debt so that we won't have to face the upheaval of going bankrupt, either personally or nationally.

Understanding 3-D economics in the 21st century means that we should begin to shun debt, send a message to our local, state and federal government to shun deficit spending and avoid having all your assets in dollars -- in favor of tangible assets like gold and silver coins. Remember: true wealth means living within your means with contentment. -CRS

Craig R. Smith is president and CEO of Swiss America Trading Corporation, one of the largest and most respected firms in the U.S. since 1982. Craig has proven his dedication to education and public service in very tangible ways.

Jan. 14, 2005

Some of the sharpest minds on Wall Street are betting that you'll make more money in metals than Microsoft in the next few years. The new bull market is in stuff, not stocks, they say.

We are talking about land, oil and gold, the commodities that once made John Jacob Astor, John D. Rockefeller and the Hunt brothers very rich men.

Stocks have languished the past five years, but commodities -- real assets that you can touch, see or taste -- have soared. The Commodities Research Bureau index, which measures a basket of commodity prices, has gained 36% since the end of 1999. The Standard & Poor's 500-stock index, which measures the performance of a basket of high-quality stocks, is down 20%.

A soaring commodities cycle can go on for "years, if not decades," says John Brynjolfsson, manager of Pimco Commodity Real Return Strategy fund, one of the few mutual funds that invests in commodities futures.

That means we could be in the early stages of a seismic shift in the financial markets: a bull market in commodities that could last another 10 years. A rip-snorting market in sugar, steers and steel would send shivers through Wall Street. "When you have a bull market in commodities, you don't have one in stocks," says Jim Rogers, co-founder of the Quantum fund, a high-octane hedge fund.

That has sent investors flocking to commodities. Volume on the commodities exchanges is soaring. Trading in agriculture futures at the Chicago Mercantile Exchange rose 15% last year. Overall commodities trading rose 31%, vs. 12% for the New York Stock Exchange.

For the most part, investing in commodities is a route the well-off take to greater wealth. Already, the latest commodities run-up is creating new generation of land and oil barons among the USA's richest people. But even little-guy mutual fund investors are being lured by the call of gold, coal and real estate.

Learning from the past

The last big boom in commodities began in the 1960s, as late as 1982, when the cycle was almost finished. Many of the nation's self-made millionaires -- people such as Marvin Davis and T. Boone Pickens -- had made their money in assets such as land or oil. One of the most popular TV shows of the era, Dallas, was centered around an oil baron, the nefarious J.R. Ewing. But by 1999, most of the wealthiest had made their money through initial public offerings of telecommunications, software and computer companies.

Now, five years later, talk about a change in fortune: Most of the 45 new members of the 2004 Forbes 400 list of the nation's wealthiest people made their fortunes not through stocks but stuff such as natural resources, hotels, shoes and sandwiches.

Dan Duncan, for example, made his $4.2 billion in natural gas. Leonard Blavatnik for his $2.4 billion in oil, coal and real estate. Evgeny "Eugene" Markovich Shvidler rode oil to his $1.8 billion. Only four of the 2004 newbies made their fortunes in technology.

Suddenly, investing in commodities no longer seems quite as unsavory to investors, and they are drawing a lot of people with a lot of money.

The number of commodity pools -- Mutual fundlike vehicles for investing in futures - -has soared to 3,500 from 1,714 five years ago. "Five years ago, if I showed our products to 100 clients, we'd have 20, 30 new investors," says Craig Cauddle, whose Liberty Funds Group in Lubbock, Texas, puts together commodities pools. "Today, it would be closer to half, maybe even higher."

Commodities pools, as are hedge funds, are designed for high-net-worth investors -- people with net worths of $1 million or more. Typically, those people rely on financial advisers to steer them toward commodities, Caudle says. That's where most of his new clients are coming from.

Institutional money managers, who invest for pensions, trust funds and other big pots of money, are dipping their toes into the commodity pool, as well.

The Harvard Endowment is devoting 13% of its assets to commodities for example, and the Ontario Teachers Pension fund has put about 6% of its assets in commodities. And $25 billion in institutional money is now benchmarked to the Goldman Sachs Commodity Index, up from $8 billion in 2000.

Even small investors are showing interest in commodities. "Everyone has a brother-in-law who bought soybeans and lost his shirt," says Rogers, author of Hot Commodities, an investment book. But a few mutual funds, such as Pimco Commodity Real Return and Oppenheimer Real Asset, have brought limited commodity trading to small investors.

StreetTracks Gold Trust, an exchange-traded fund that invests only in gold bullion, has seen its market value soar to $1.3 billion since its debut in November.

It's no wonder commodities have been pulling in investor money. Prices for commodities have been going through the roof. Oil prices soared as high as $55 a barrel in 2004, up from $32.52 at the start of the year. But oil isn't the only hot commodity these days. Copper has gained 30%; hogs are up 45%.

There are two reasons for the climb in commodity prices:

*Demand is outpacing supply. Consider lead. Its price soared to $976 a ton last year, its highest ever. That's despite the fact that two major uses for lead, as an additive to gasoline and to paint, have disappeared. What's pushing up prices? Lack of supply. Lead production in the USA fell to 237,000 tons the first six months of 2004, from 266,000 tons the first six months of 2003.

"In the 1980s and 1990s, you had people calling you about hot stocks, but not one person called you with a hot lead mine," says Rogers. "But lead mines deplete, and there has only been one new lead mine opened in 25 years. No on has invested in production capacity."

Overall, the USA had 82 active metals mines as of June, down from 92 in 2002, according to the U.S. Geological Survey. Gold production fell to 226 tons in 2003, vs. 331 tons in 1993. Copper production dipped to 1.1 million tons in 2003, from 1.8 million tons 10 years earlier.

And you can't just open a new mine. You first have to find the metal you're looking for. you have to figure out if the location makes economic sense. Then you line up investors and get government approval before you turn the first dirt. On average, it takes five to seven years from discovery to production.

In the meantime, consumption is growing. The war in Iraq is one factor. "Was has never been good for anything but commodities," Rogers says, because the demand for iron, steel, lead and copper soars.

But the biggest driver is China. The Chinese economy grew at a 9.1% rate the 12 months ended in September, the latest data. Its imports rose 39% to $51.1 billion, according to Its total trade (exports and imports) cracked $1 trillion for the first time in November.

*A new inflationary cycle is starting. By definition, inflation drives down the value of paper money but increases the value of real assets.

To create a new inflationary cycle, you have to begin with a surplus of dollars and a shortage of goods. That makes money cheap and commodities expensive. Commodity bulls say that's happening. The Federal Reserve, desperate to head off recession from 2001 through 2002, flooded the economy with money, primarily by making loans dirt cheap.

In addition, we have a massive federal deficit. That, combined with easy money, has weakened the value of the dollar but driven up commodity prices. For example, it now take $1.33 to buy a euro, up from 86 cents in 2002. But gold, the premier real asset, has soared above $425 an ounce from a low of $255 in 2001.

Inflation hawks argue that neither the Federal Reserve nor the bond market will allow inflation to rekindle. But it's tough to snuff out once it gets started, because large segments of the population would love a whiff of it.

Farmers, for instance, are helped because inflation increases the value of their commodities, crops and land. The same goes for mining and mineral companies. Rising inflation is linked to rising employment and higher wages.

Politicians find it hard to muster support for inflation-fighting measures. "It's hard to get the inflation-fighting backbone needed to fight inflation," Brynjolfsson says.

All this signals not-so-good news for stocks. The bottom line is that rising commodities prices mean higher expenses for most companies. Higher expenses mean lower stock prices.

Consider a company such as Kellogg's, the cereal maker. In a period of rising commodity prices, the company would pay more each year for corn, packaging and transportation.

"When the price of raw materials is declining or under control, companies do well," Rogers says. "When commodities are going through the roof, they don't do as well."

Marc Faber, publisher of the aptly names Internet site, says the world is now at the inverse of where it was in 1981, at the peak of the last commodities boom. Back them, energy stocks made up 28% of the S&P 500, while financial stocks were 7%. Today, energy accounts for 8% of the S&P, while financials are more than 30%. To his mind, it's time for the cycle to tip back toward real assets.

Rogers figures the bull market in commodities started in 1999 but could still have a long way to run. "Six years after the bull market started in 1982, most people were not aware of it," he says. "It usually dawns on people slowly that a bull market in commodities has started." We might be past the dawn of a great commodities bull market. But it could yet be early morning. [Read more USA TODAY articles by John Waggoner at]


Dow Theory Letters 2/2005
Richard Russell, author of the Dow Theory Letters, continues to warn investors that the stock market is headed for trouble, along with the entire economy which he characterizes as being in a state of 'gradual inflation.' So where's an investor to invest?

If both the Dow Jones Industrials and the transports manage to break below their January lows, "I'd probably sit tight with most of my preferreds and bonds, and I'd probably sit with my kid's utilities but with stops under them. When important lows are violated, you just don't (unfortunately) know how much damage lies ahead, and the operative thesis is always -- DO NOT TAKE THE BIG LOSS. The only was to avoid the big loss is to reduce risk, and that means moving toward more cash and moving increasingly out of common stocks."

What about gold in the current environment of gradual inflation? "I never worry about the price of gold. Gold is real money, and it always will be, despite the efforts of the central banks to have you think otherwise. Honestly, I worry about a lot of things, but I don't worry about gold. How about gold stocks? Somewhere ahead gold is going to take off to the upside, and that's where the gold stocks will make up for lost time. Very frankly, I don't think the cycles of Elliott or trendlines are going to tell us when gold is ready to make its move.

"My attitude is that gold made its low in 2002 and recently rose to a 16-year high. You decide how much gold you're willing to hold, and then you forget it. Because inflation is wanted and needed in the US, the long-term trend of the dollar is down. The dollar's decline will be erratic, it will probably take place over years, not weeks or months. Gold can be likened to a Picasso painting or an autographed letter from George Washington or a flawless D-color 10-carat diamond. You just hold it. You don't try to get a quote on it every week. You consider it the safest part of your wealth, and that's it. What do you do with your gold? You leave it to your spouse or your kids or your best friend.

"Gold is true wealth, discovered by expensive methods, brought out of the ground by sweat and capital. Gold can't be manufactured out of thin air by the Fed, and maybe that's the major difference. Nah, I don't worry about gold, if I have to worry, I worry about my dollar denominated assets. No there's something that is legitimately worth worrying about.

"Remember, when this bear market started I wrote that "In a primary bear market, everyone loses, and the winner is the one who loses the least." I'll stand by that statement, and this bear market has hardly begun."

2005: Rare Coins Set For Another Record Year
By Kevin Lipton, KLRC
Feb 2, 2005

2004 was a record year for the coin industry!
More collectors and investors entered the market than anytime in history.

Near the end of the year, one of the cable networks "Shop at home" sold over $1 million in numismatics in one hour of TV time! Their supplier, Silver Towne is spending close to $1 million a month with NGC -- just encapsulating product for the network! Amazing! Kevin Lipton Rare Coins has never experiences a December like 2004 before -- with record sales.

With 2004 behind us, I expect the New Year to perhaps start slowly, was I ever in for a surprise. January was yet another record month at KLRC with sales of over $6 million.

The highlight of the Florida United Numismatic show (FUN) was the sale of a gem-quality set of "$4 Stella" gold coins which sold for a record $2,225,000.00. The FUN show is always a great forecaster for the year. Over $90 million in U.S. rare coins were sold at auctions held in conjunction with the show.

One of the greatest coins which sold was a semi-unique 1866 "No motto" Dollar which sold for $1,207,500. I was the under bidder on this coin. The most intriguing thing about it is the fact that there were five separate bidders between 900k and the eventual sale price! Imagine, five different buyers for the same coin at the $1 million level! Amazing!

Two Brasher doubloons both set new record prices at $2.4 and $2.99 million. The Doubloon was probably the most common gold trade coin used in Colonial America, and one with which every merchant of substance was on intimate speaking terms.

The Brasher Doubloons were the only colonial gold coinage issues produced with intent for circulation, and therefore, must be considered among the most important of all colonial coinage. A case can certainly be made that these are the most important American coins, bar none.

Another record price was set for the 1894-S 10c at $1,035,000. (I sold this very same coin just a few years earlier for $625,000).

For the first time in a decade, acceptability of the U.S. rare coin market has never been higher from both investors and collectors.

First hand I have witnessed a complete flip-flop from prospective coin buyers -- from mistrust of physical rare coins (in favor of stocks) to a mistrust of stocks with more trust in physical rare coins!

$20 gold pieces tend to rise on the coat tails of rising gold bullion prices, but it is the truly rare gold coins (with smaller populations) that I think will rise the most.

At every level; wholesale, retail and auctions. I see more retail buyers at auctions shopping for value. Supply is not keeping up with demand, which will drive prices higher in 2005 and beyond.

The average price level of coins sold on TV are rising! Rare coins are selling for thousand each. For example; I know that 300 Kellogg $50 gold coins sold for $3,500 each -- in just days of mass media promotion. These are private issue, very limited supply rare coins to be held for the long term. not just hobby quality coins.

I was surprised to see only a limited quantity of U.S. Gold Commemoratives on the show floor and in the auctions. Gold Commems that were available sold for very strong prices, making it difficult to acquire many choice examples.

For example, it was almost impossible to buy a Pan Pac and Sesqui $2 1/2 at the current price levels. My Gold Commem inventory is at the lowest level in year. One can expect a healthy rise in this market in the first quarter of 2005.

Generic $20 gold coin prices eased in early 2005, as bullion prices have dropped from $450+ to $425. As the year is now underway, I look forward to a great overall coin market.

Buy scarce, U.S. rare coins of the highest quality -- that is my advice for 2005!

New bull market in stuff, not stocks
By Craig R. Smith, CEO, SATC

According to USA Today, "Some of the sharpest minds on Wall Street are betting that you'll make more money in metals than Microsoft the next few years. The new bull market is in stuff, not stocks, they say. We're talking about land, oil, and gold, the commodities that once made John Jacob Astor, John D. Rockefeller and the Hunt brothers very rich men."

So, tangible "stuff" is where the big money is moving and that means we are still in the early stages of a bull market that could last another decade. This is excellent news for the individual investor IF they are willing to first invest some time to learn before earning.


Common sense seems to have become rather uncommon in today's complicated world. Therefore, when faced with financial decision, I find it is best to look at the facts objectively first and discover the truth myself using my common sense. Then, after I am confident in my decision, I often will seek someone trustworthy to see if it makes sense to them as well. This process of using common sense has served me well over the years most of the time.

Common sense says that understanding America's economic future must be based on an accurate assessment of the present, and a working understanding of the past. Today the undeniable economic fact is that America has become a debtor nation, as evidenced by...

  • The world's confidence in the U.S. dollar is faltering, nevertheless they loan us more.
  • The world loans us about $1.8 B per day, totaling about $7.6 Trillion.
  • The U.S. government debt of over $44 Trillion -- between Medicare and Social Security 'Trust' Fund.
  • U.S. personal debt has grown to a staggering $9.3 Trillion

Add it up and we have about $60,000,000,000,000 (Trillion) in acknowledged U.S. debt. Divided by roughly 100,000,000 employed U.S. households and you get about $60,000 debt per household - up from $25,000 just a few short years ago.

My point is that common sense says that borrowing from tomorrow to pay for today is dead wrong -- yet we whistle by the graveyard, pretending that we are "Donald Trump" wealthy -- that is, for appearance sake only. Americans, like the central bankers who pull the big money strings, pretend that they are above the laws of economics. But they, and we, are not. It is this type of U.S. pride that could bring this debt-driven economic house of cards down.


Confidence is defined as believing in someone or something that is trustworthy, OR belief in truth or the reality of fact.

All true money must be derived from a commodity, or at least have a substance to back it up, or it will gradually become fraudulent, or "fiat" money. Over time, public confidence erodes the value of the "money" -- internationally first, then domestically.

Have you seen the chart for the U.S. dollar recently? It does not look like a "strong" dollar to me -- especially if you look at a dollar chart spanning the last 92 years, since the FED first started "helping" the government maintain public confidence in the dollar.

Historically, the most common substance used as a medium of exchange and a store of value has been gold or silver coins of a standard weight and fineness.

The U.S. Coinage Act of 1792 specifically defined a "dollar" as "one twentieth of an ounce of gold (25.8 grains of 90 percent fine) or a silver coin containing one ounce of silver (421.5 grains of 90 percent fine)."

The Founding Fathers specifically prohibited the federal government from issuing Bill of Credit, (paper money) in the U.S. Constitution.

"Congress shall have Power to coin money and regulate the value thereof... No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts." Art.1 Sec.8 & 10

American's system of constitutional, commodity-based money functioned well in our nation for over 120 years, from 1792 to 1913. The "We the People" made a big mistake - we allowed a privately owned corporation called the Federal Reserve to begin creating paper money instead of gold and silver coins as the Constitution requires.


The Federal Reserve's monetary manipulation began with a promise to create paper money that could always be redeemed for commodity money - gold or silver coin. This 100 percent redeemable money is referred to as fiduciary or "trust money." The creation of fiduciary money assumes that the promise of payment in substance by the issuer is redeemable at some future point. Trust money was used as a medium of exchange even though it consisted largely of an intrinsically valueless substance - paper.

Since the U.S. government was prohibited by constitutional law from issuing this trust money, the Fed - a private corporation - was created to soften and manipulate the economic down-cycles in 1913. The price we have paid is surrendering our substance money (gold) for trust money (credit/debit). In my view, central bankers took the mine... and we got the shaft. Why do I say that?

History has proven time and again that neither bankers nor governments possess the discipline needed to limit the amount of credit (or paper money) to equal the true supply of gold and silver coins. So the supply of paper money (credit/debit) must continually rise.

The result is always disastrous in the long term because the economy suffers through cycles of inflation, deflation, artificial growth, recession and depression. Because U.S. citizens did not protest the use of trust money, out economic system then began to degenerate into untrustworthy or fiat money.


So, what's next? Inflation? Stagflation? Should you adjust you portfolio to reflect this 21st century shift from a "stock-driven era" to a new "commodity-driven era"? USA Today again sums it up well...

A new inflationary cycle is starting ... The Federal Reserve, desperate to head off recession from 2001 through 2002, flooded the economy with money, primarily by making loans dirt cheap. In addition, we have a massive federal deficit. That, combined with easy money, has weakened the value of the dollar but driven up commodity prices. All this signals not-so-good news for stocks. The bottom line is that rising commodities prices mean higher expenses for most companies. Higher expenses mean lower earnings, and lower earnings mean lower stock prices."

In the meantime Kevin Lipton reports that both collectors and savvy investors are snapping up high quality numismatic U.S. coins at record prices and in record volume.

During the last national trade show in Florida, $90M in U.S. rare coins were sold in just 3 days!

As we pointed out in our 21st Century Investment Scorecard, tangible assets that you can touch, see or taste - have soared. While the CRB index of commodities is up 36% since the end of 1999, gold bullion is up 54%, U.S. rare gold coins are up 230%, silver bullion is up 30%, while rare silver coins are up 76%. Clearly the higher quality gold and silver coins have outperformed their bullion counterparts, as we have often told our readers.


In December 2004, The Wall Street Journal published a story, "Investors Flock to Coins Amid Rising Metal Prices" saying ..."Rare coins are starting to attract investors more at home with stock brokers than coin dealers. The interest in coins comes as sophisticated investors are increasingly looking for assets outside of the U.S. stock market, which many market observers expect to post only modest gains during the coming year. In buying rare coins, individuals not only acquire a collectible asset, but they are also getting exposure to precious metals. The prices of gold and silver, from which many popular U.S. coins are made, are both rising smartly...Of course, you don't have to be rich to invest in coins. In fact, the lower end of the market is booming, too. "

Now, if that is not good news for the small and medium size investor, I don't know what is!

Morgan Silver Dollars were the top performing tangible asset in 2004, up 54%! But I believe that the best is still yet to come.

As financial reckoning day approaches, all roads will lead to metals in general, and high quality numismatic gold and silver coins specifically. As for Microsoft, well it may be tops on the NASDAQ, but it will likely play second fiddle to the new bull market in tangibles.

Please take some time to consider the advantages of owning some tangible U.S. gold and silver coins, not just for profit potential, but for safety and privacy. Remember, the proof is in the pudding, not in a paper promise of pudding later.

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