TIMBERRRR!

Let me be the first to go on record stating that the markets are due to fall very shortly, for several reasons. For one, tomorrow marks the full moon which typically commences the sell-off.

This sell-off is confirmed today with the news that Bank of America reported a 3Q loss and the firing of more than 3,000 employees. Japanese financial powerhouse also reported a smaller loss, nontheless, it would worry Japanese investors and might start the autumn correction that investors had expected a few weeks earlier.

Bank of America isn't the only American firm to see substantial loss, Merrill Lynch reported huge 3Q losses and a downgrade from Moody's.

What does all of this mean? It means that these big financials will make the markets tumble and we'll see a correction. In a few weeks we'll have another buying opportunity that will push the markets substantially higher until a recession begins in 2008.

After the correction, precious metals stocks will soar.

YOUR 2007 INVESTMENT GUIDE

Jan-Feb 2007

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." --Warren Buffett

Growing wealth starts by first understanding money. It doesn’t take a PhD in economics at Harvard Business School, it simply requires an examination of history, trends, and the knowledge of how the extremely wealthy are able to have continuous growth in wealth. What separates successful investors from everyone else is both knowledge and ability to take risks. As you've most certainly heard, no investment is without risk. Furthermore, minimizing the risk will bring you continuous success.

This guide will give you certainty about where you should put your money if you want continuous growth, without being a stock market expert. Our recommendations give you options that will allow you to leave your money alone and let it work for you--without having to worry about a poor economy, recessions, inflation, a stock market crash, or company failures.
Understanding How Money Works

The demise of the US Dollar is inevitable. For proof one need only look at the 95% decline in the currency’s purchasing power since the creation of the Federal Reserve (the Fed). You read correctly--the dollar is 95% more worthless since the Fed started controling it--and this is by no accident. The dollar, like any other currency or fiat money is subject to inflation. This is due to the ability of Central Banks to incessantly print money. Since most currencies are not convertible to hard assets and are simply payments for debts, every single dollar you own is equivalent to having a line of credit with interest. Yes, you pay interest on every dollar you spend because the Fed, and any other Central Bank, charge the people for rendering the service of managing the country’s currency.
(Please see the History of Fiat Money)

A central bank is the main factor in a currency’s value. For example, when the Japanese central bank wanted to attract investors to the Yen it lowered interest rates to zero, a move widely seen as detrimental. Nonetheless, foreign investors took advantage of the interest rates to borrow from the central bank. This action increased the value of the Yen by decreasing the currency's supply. In addition, since the Yen could only be used in Japan, investors put it right back into the Japanese economy—mostly into the stock market. Japanese consumers took the opportunity to take out loans to start businesses or buy cheap property,
Most central banks take the opposite approach with the lure of modest interest rates to spur the buying of bonds. Iceland, for example has attracted people to its currency with its 13 percent rate.

Supply and Demand are the most significant factors in the value of a currency. The more confidence investors have in a currency, the larger the demand will be. This has become more or less a measure of a country’s or an economic region’s economy, debts, and budget deficits. Thus it’s no surprise that nations with horrible economic conditions such as Zimbabwe have a base currency worth only a fraction of a US penny; and nations such as Switzerland, which manages a tight budget, a steady stream of exports, and a phenomenal private banking system has had a continuously increasing unit of currency. Notwithstanding, as long as investors hold a currency, usually in the form of bonds (which are paid interest not charged), a currency will be sustained or even appreciate, i.e. its purchasing power would increase in the world market. As such, the economically stricken US is able to maintain a strong currency because investors and national foreign reserves (principally China and Japan) keep vast sums of US bonds.
Thus, if investors begin to abandon a currency, you had better do the same.

The value of a currency fluctuates daily because of the increased popularity of the foreign currency exchange market (Forex). These small fluctuations are set by traders who rely on market indicators to make predictions about the direction in which a currency will go. Their predictions are based on what actions they assume will be taken by others en masse. The most heavily traded ones have historically been stable and held by investors such as: the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), Great Britain Pound (GBP), Canadian Dollar (CAD), Swiss Franc (CHF – for Confederati Helvetia Franc), Australian Dollar (AUD), and New Zealand Dollar (NZD). Others such as the: Norwegian Krone, Mexican Peso, the Swedish Krona, and South African Rand have been somewhat stable, but are not widely held or traded. Having previously been pegged to the US dollar, the Chinese Yuan Renminbi (CNY), Hong Kong Dollar (HKD), and Russian Rouble (RUB) have only recently gained popularity in the Forex market..
Remember the Central Banks are managed and invested into by private bankers—profit is key. You must expect the value of that currency to decrease over time. If it didn’t, then they wouldn’t make money! It’s well worth restating that since the Fed took charge of the US dollar, its value has depreciated by 95%!

Thus your first plan must be to hedge off inflation just to save the money you already have. Perhaps you already do this with a bank account that pays interest or a bond—but these rates won’t grow your money. Your money is under attack from the Fed’s interest rates and the world’s growing rejection of the dollar. Thus real inflation is not just 3-4% but more like 6-8%.

I. Good Hedges (Moderate Yielding Alternatives)

David Bloom, global currency research and strategy chief at HSBC in London, stated that Central Banks have so much in currency reserves that they don’t know what to do with them. They are buying a wider range of currencies than ever and diversifying across a wider range of asset classes than ever before too.

This should tell you something. Follow the trends. The laws of supply and demand, as you will learn, are still fundamental in economics despite the tricks that Central Bankers use to manipulate the system. If central banks are buying a certain currency or commodity, then the supply of that entity will decrease and the price will concurrently increase.

Our foreign currency picks are in ever-increasing demand (except one). The USD is presently being dumped at a higher rate than at any time in its history.

A. Commodity-based Foreign Currency

Your foreign currency holdings could make up about a meager amount 15 percent of your entire portfolio, of which 100% is commodity-based. It is not for investing purposes, but first and foremost as a hedge against the ever inflating USD and an alternative to hard assets and commodities. Some successful investors use no foreign currency at all.
The advantages to having commodity-based foreign currency are that it can be readily exchanged for a local currency. It can be put into a checking account for safe keeping and would be easily accessible with a Visa/Master/Cirrus debit card.

The Major Currencies

1. GBP (£) (increasing in demand)

Guess who’s back? The British Pound Sterling is once again an investor’s choice. After having plummeted for years, it has recently received the spotlight. Last year it outperformed all the major currencies against the dollar with a rise of over 14%. Since 1993, it has done quite well, having appreciated substantially at a rate of 40%. It also rose against 15 of the 16 most traded currencies.

The ride to the top has been all but smooth, which has kept investors away—probably intentionally. I believe the Pound is secretly dethroning both the USD and the Euro as the primary currency of international commodities trade. Since 1975 the Pound has been behaving like commodities and much like the Swiss Franc—although more exaggeratingly. I liken this to the opening of British Petroleum’s North Sea facility in the 1970’s (http://news.bbc.co.uk/onthisday/hi/dates/stories/november/3/newsid_2538000/2538155.stm). At that time we mysteriously saw an end to the gold standard (closed by Nixon) and a shift to gold fixing in London. If you look at the £/$ historical chart, you’d see that the Pound peaked in 1981, slumped in 1985, then peaked in 1991 and 1992, and finally slumped in 2001—just as seen by other commodities. Thus it has become clear to me that the Pound has also replaced the Swiss Franc, as the clearest fiat representation of commodities. This is a great reason to hold it for the long run.

A strong currency usually hurts exporting nations, but the UK won’t be affected at all. You’ll recall that one thing that sets the UK apart from its Western competitors is manufacturing, which has long left the nation. Manufacturing and the exporting of the product is why it serves a country’s best interest to have a weak currency. This is what has made Japan strong in the 40’s to 90’s, it’s what is currently making Chinese and Korean imports the most omnipresent in the world. But Britain has no interest in having a weak currency. Without manufacturing, its economy is booming and Britain is now the financial center of the world. Its economy is expected to keep growing at a healthy 2.5% For example, since 2005, investment in the London Stock Exchange grew faster than any other bourse in the developed world. At the same time the nation has become the seat of commodities trading. (http://www.bloomberg.com/apps/news?pid=20601102&sid= aIyFdNTTusjI&refer=uk)

The Bank of England’s approach might be to make the Pound the most valuable in order to attract investment. This idea makes perfect sense primarily because the managers of the Fed, whose USD is undoubtedly doomed, also control the Bank of England. Its chief owners are N.M. Rothschild, based in London; J.P. Morgan and Kuhn & Loeb (The Rothschild representatives in NY); Chase Manhattan, Lehman Bros, and Lazard. As long as the world is using their currency, they are in business and control.

Unfortunately, investors are still held back because Britain, like America, is a debt-ridden nation. On a smaller scale, Britons are more indebted than are the Americans. Nonetheless, the great Austrian economist Ludwig von Mises noted, "Even the richest country can have a bad currency and the poorest country a good one." Investors are paying attention to the Pound’s trends and are jumping on board.

It’s also worth mentioning that of all the major currencies, the Pound is the only one whose foreign reserve holdings have steadily increased over the past decade. In fact, foreign currency holdings for the Pound have accelerated since 2003 by an impressive 54% whilst holdings for both the Euro and the USD have declined. So much so that the Pound has finally surpassed the Yen as the world’s third most held reserve currency.

The following economically astute nations and are leading the way in making the Pound a reserve currency:
Italy 24% (up from 0% in 2004!)
Iceland 15% of its reserves in pounds
Switzerland 10%
Sweden 10%
Poland 10%
Norway 9.7%
Nations such as Syria, Latvia, and Ukraine will reportedly add pounds to their reserves.

Since demand is increasing, we are very bullish on the Pound in spite of what the financial analysts are saying. The great Merrill Lynch and Goldman Sachs have it wrong year after year--and people still pay a fortune for their help.

2007 forecast: The average should be roughly $1.97 and should increase along with commodities in mid-Spring and December to close to $2. Data supports our theory of a topping the Pound’s 1998 high of $2.01.

Our recommendation: Yes, every central bank is owning more Pound Sterling, but how long will this continue? We don't believe it will be for long. Last year we recommended the Pound when the big brokers were saying "no." Since then and even in the beginning of 2007 it has increased significantly, but should stop when investors realize that it's not worth holding. Again, demand is up because of central bank buying so we're still bullish on the Pound for 2007

Best way to obtain it: On the NYSE, symbol FXP or by opening an Everbank.com account in Pounds.

2. Euro (€) (stable in demand)

We have loved the Euro because we started saving it in 2002 when it was roughly at par with the dollar. Now worth about $1.32, it’s 32% more valuable today. We also quadrupled our Euro holdings in December 2005 and now it’s 12% more valuable.

Europe is quickly replacing America as the world’s top consumer and its currency shall reflect that—especially as soon as it becomes the world’s premier reserve currency.
Since Iran, Venezuela, and Syria have announced attempts to accept Euros for barrels of oil, the currency is poised to increase in value. Couple that with the announcements that UAE, China, and other nations would begin increasing their Euro reserves (http://www.bloomberg.com/apps/news?pid=20601085&sid=aYu33BUndkwg&refer=Europe)

Europe is swiftly becoming a creditor to the US and Africa, and the zone has seen more investment in the past 5 years than the US. What’s more is that with the further expansion of the currency into new Euro zone member states such as Czech Republic and Poland, the supply of euros will only decrease thus propping up the currency.

2007 forecast: An average of $1.32, should reach a mid-Spring high of $1.35 and rebound to that price in December. Thus a slower year for the Euro.

Our recommendation: If you haven't already got it, you missed out on profits; however, it will still be a great inflation hedge and will likely replace the dollar as the de facto currency of international trade.

Symbol (FXE) on NYSE. For information go onto www.currencyshares.com or open an Everbank.com account in Euros

3. CHF (not increasing in demand)

We love the Swiss Franc because of its overall long term stability. Year after year, it has increased in value against the dollar. Sure, within the past year it has been outperformed by other currencies, but for the past 30 years it has grown against the dollar by a rate of 107.5%! Even since 2002 when it was trading at $0.59, the franc is 42% more valuable today. Having appreciated by 8% since last year is far better than any US bond could do. Every major investor has investments in Switzerland and thus the Swiss franc—you should as well. It is a true fiat hedge against inflation. It definitely follows the direction of commodities and will continue to increase against the dollar.

2007 forecast: An average price of about 1.19F/$, should reach a mid-Spring high of 1.17F/$ and rebound to that price in December. Because of the popularity of the Euro and Pound, the Swiss Franc has lost its ground as a reserve currency and has been appreciating at an ever slowing rate.

Our recommendations: Buying the CHF at $1.24-1.25 is a bargain. Buy immediately or in mid March. In a few years, we expect it to be on par with the USD. You don’t need it, but if you must, it should make up a small portion of your foreign currency holdings as it will undoubtedly remain an inflation hedge against the USD. We refer the Pound or the Krona for higher returns.

4. AUD (stable demand)

As the world’s second largest gold exporting country, Australia’s currency is undoubtedly tied to commodities. Thus far it has appreciated by more than 8% against the USD and since 2002 has increased by 50%, outperforming all other major currencies! Its economy is just as robust having one of the lowest unemployment rates, being in the middle of a housing boom, and having benefited from hosting the Olympic Games in 2000.
2007 forecast: Perhaps a bit slower growth at around 7.5%. Will definitely surge after the next gold bull run.

Our recommendation: If you must, buy it now; by the end of 2007 it will be at par with the Canadian Dollar. It's definitely a good inflation hedge against the dollar and it's dependence on precious metals will guarantee that, but profiting from it is probably over.

Minor Currencies:

1. SEK (increasing in demand)
With a 55% appreciation since 2002 and a year-to-date increase of more than 16%, the Swedish Krona is our top pick for currencies. This currency is strong but not because of a link to commodities. It is a very stable nation; it remained neutral in at wartime since the Napoleonic wars. Now its economy is diversified albeit bereft of high priced commodities; it does, however, have timber, iron ore, fish, and hydropower. It is a major engineering center for the production of autos, cellular phones, and computer parts. Like Switzerland, it too has become a major banking center. Unlike Switzerland and the Euro Zone, Sweden’s GDP is growing at a rate of over 4%, has lower unemployment, and has a huge account surplus.

Currencyshares Swedish Krona Trust is an ETF for investing in the currency (FXS) on www.currencyshares.com

2007 forecast: More upswing.
Our recommendation: If you want a minor currency—the SEK is blemish free.

2. NOK (stable demand)

Perhaps the most difficult currency to obtain, the Krone has long pleased investors. For one, it has appreciated against the dollar by 9 percent during the past year. Since 2002, it has increased by a whopping 48%. The Krone is another commodities-based currency since oil and fatty fish are mainstays of the Norwegian economy. In fact, Norway has for a long time been the world’s third largest oil exporter. Thus it comes as no surprise that the currency spiked in late 2001 along with oil and gold.

2007 forecast: More brisk appreciation

3. CNY (increasing in demand)

China’s currency which had long been pegged to the dollar at about 8.276 CNY/$ was finally allowed to float in 2005 and has since grown to 7.90 CNY/$--a modest appreciation of 6 percent. At this two year rate, it serves the investor no purpose to hold Yuan except as a simple hedge against inflation (bear in mind that the USD rate of inflation is about 3% per annum).

The Yuan should be increasing at a far faster pace, but the Chinese Central bank is exercising tight control in order to ensure that its exports are cheaper than its competitors.’ In spite of this, no one can be sure when the currency will make a run. We can surmise that it could be sooner than later as international pressure is mounting for China to take the shackles off of its currency. In actuality when investors begin widely trading the Yuan will we then see a major appreciation.

Forecast for 2007: More slow growth; perhaps a high of 7.70 and an average of 7.75 CNY/$
Our recommendation: If you must, get it now while its cheap. It’s all uphill from here.

How to get foreign currency?

Go there and get it. If you’re going abroad on business or for pleasure, use an ATM (which are generally free in Europe) and take out Euros, pounds or francs. Since we began investing whilst working in Europe, we were fortunate enough to be paid directly in Euros, to have a bank account, and easy access to both Britain and Switzerland.

Trade directly in the States. It would certainly not be smart to spend money to travel just to obtain a currency when you could easily visit a local exchange bureau in the US. Remember that their fees/rates are excessive and outrageous so try to find someone who has recently returned from abroad and is willing to trade for dollars at the market rate. Using craigslist.org or another apparatus, should put you in touch with someone who fits such criteria.
You could also open an Everbank.com account in CNY.


Other Risky Currencies – Unstable but poised for long-term growth

1. Thai Baht (stable demand)
Americans know very little about Thailand, so allow me to enlighten you. Thailand is one of the most stable countries the world has ever seen. Its royal family is one of the longest serving and its government, before the recent bloodless coup, had gone uninterrupted since 1782 or about the time when the United States was founded. As the only Southeast Asian nation to avoid European colonization, Thailand is a testament to strength and stability. Although “democracy” arrived only in the 1980’s, the country had never experienced civil war—just bloodless coup d’états to spark regime change. Recently, Thailand’s military overthrew the government in yet another bloodless overtaking. Yet the country is still as functional and robust as it previously had been.

Recent Thai economic growth has been at a robust 6 percent per annum. Thailand has more arable than any of its neighbors (excluding China, of course) and uses 55% of it for rice production—a true bread basket for the region. The country’s production of rubber, lead, natural gas, and tungsten ensure that investment will continue to follow.
The Baht has appreciated briskly since 2002 at 23% against the USD. Since this time last year, it has increased by more than 14%.

Forecast: Expect January to be very bearish or weak for the Baht as investors regroup and regain confidence in the Thai economy; this would be an excellent opportunity for would-be buyers.

Our recommendation: It’s always a good to geographically diversify your forex holdings. It may be near impossible to obtain in the US, but if not, hold a modest sum.

2. Brazil Réal (increasing in demand)

Although it suffered a 40% decline in the Fall of 2002, the Réal has still appreciated nearly 5% against the dollar. George Soros warned investors prior to the Brazil’s 2002 elections that if Lula da Silva were to win, the Réal would plummet. As usual, his predictions were correct and were coincidentally coupled with the Mexican and Asian financial crises whereas the Réal took a speculative nose dive. Before the fall, the currency was in a brief period of growth that ended about 7 years of recession. Be that as it may, after the 2002 decline, the currency’s value has increased by 79%--what a major rebound! (http://www.globalpolicy.org/globaliz/politics/0920lula.htm) (http://www.economist.com/World/la/displayStory.cfm?story_id=1177451&CFID=5815766&CFTOKEN=3e5ba26-d448d8ae-9ea0-4ce7-8e18-31b43069ead8).

2007 forecast: Its spectacular rebound and continued growth at a about 4% this year confirms the Réal as a great hedge against the USD and as a profit maker . As a commodities-based currency, we’re comfortable that the Réal will continue to grow, albeit at a slower pace. Its commodities are growing with new oil and natural gas finds, continued growth in soybean production for bio fuels, timber, iron ore, and coffee. The nation is also an emerging steel and automobile producer. Like China, Brazil finds it in its interest to maintain a weaker currency so as to attract foreign capital. Therefore expect a slower growth for the year to come. Another round of at least a 10% is in order. It may also help you decide by stating that Warren Buffet has continuously recommended holding the currency.

Recommendation: Remember that the currency is not at all the most stable and it might be possible to get a cheaper Réal at more turbulent times. If you must, then the beginning of the year has usually been the cheapest time to buy.

II. Commodities

Commodities are any hard assets. Usually when we refer to it, we mean metals, energy resources such as oil, and foodstuffs such as soybeans. Throughout time, commodities have proven to be the perfect hedge against inflating fiat money. The necessity of oil is obvious. Many are unaware that soybeans and corn are being produced not only for food but for energy as biofuel. Metals such as silver, zinc, and palladium are absolutely necessary for high-tech machinery and automobiles. Investing in commodities will guarantee that your savings would not decrease over the long term.

We recommend that commodities make up the majority of your holdings because commodities represent true wealth. It is something that can be used, exchanged anywhere, and is always in demand. How much depends on what percentage of your earnings you’d like to be assured will maintain or increase in value. Commodities represent the only guarantee. This percentage should be between 33-66%. If your portfolio is small (sub $10K) then commodities should be even more, i.e. 75%. This would undoubtedly guarantee that at the end of the day you would still have significant savings. Remember, the stock market is unreliable and the USD is subject to inflation.

A. Silver - Ag

Many investors shy away from gold and silver because their values have decreased since a 1981 peak. Those investors aren't aware that the peak was purely speculative and despite the decline for the following decades, the long range price has increased.

Even though gold is more popular among investors, silver is the ultimate currency. It has been used more oft than any other valuable entity for trade in history—including gold. Gold is a bit too rare to be used as currency, but silver seems to have been and continues to be the right precious metal for trade. In fact, in French the word, “argent” means both silver and money. To the French and the rest of the world, silver was money; it was used for common purchases whilst gold was used for more valuable ones. Since Breton Woods, silver has increased in value at a greater rate than any other commodity. At that time an ounce was worth a mere 45 cents, now it is hovering around 14 dollars—almost 3000% higher! Gold, on the other hand, is only 1700% higher.

The system of bimetallism has guided economies for at least 2 millennia. The maintenance of a natural gold-to-silver ratio was crucial for the system to work. Historically and scientifically, that ratio has roughly been 11:1--so that's the direction in which it is heading. During the 1940’s the ratio managed to reach nearly 100:1 as the bimetallic system was abandoned and investors preferred gold. Today the ratio is 49:1, much less than it was in the 1940’s. Thus if you saved silver instead of gold for the past 70 years, you’d have been much better off in the end.

Perhaps you wonder how silver ever lost its appeal. Well, when central banks chose to halt bimetallism and use only gold, the people stopped using silver altogether. We’ve already entered a new era for silver. It is now rarer than ever. Big investors like Warren Buffet have seized a huge chunk of the world’s supply and have recently set up a silver ETF—a trading place for the commodity. Silver is also one of the most important industrial metals because it is the best conductor of electricity, Mining companies are reporting their lowest levels of silver discoveries in history. That is partially why since last year, silver has jumped 47%! The next big jump will come when investors who are all too dismissive of the metal and preferential to gold realize that silver is the better investment. When this comes, silver could double its current price. The last big jump will be when non-investors realize that they too should keep the metal.

2007 forecast: Steady for the first quarter then jump by early spring to give investors an opportunity to make money off the metal. This will occur in April or May and will provide you with an opportunity to cash in (at about $17/ounce) by selling a small portion and then reinvesting it when the price normalizes. By the summer, silver price should maintain ground around $14.5 with a year average of $14.

B. Gold - Au

"Gold stands in the way of this insidious process. It stands as a protector of property rights." - Alan Greenspan, Gold and Economic Freedom

Already popular among commodity investors, it undoubtedly grabs all the attention when it comes to precious metals. Everyone should hold some gold. The advantages over silver is that gold is worth more per ounce (requires less storage space), it doesn’t tarnish like silver, it has a very distinct color, and is beloved by far more people than is silver.

Gold does however outperform any fiat currency in times of inflation. Over the past year; it has appreciated nearly 21% against the dollar and reached a high of $725/oz in May, an appreciation of 38% from the year’s low. Since the commodities bull began in 2002, gold has appreciated by 146%.

2007 forecast: Gold and silver generally move in tandem; however, as aforementioned, silver is becoming much rarer and will increase more rapidly. As with silver, look for a boom and bust in mid spring, where gold will be about $775 an ounce. The 2007 average will be about $680.

Gold’s not popular? Now obsolete? Think again. Those ideas are fodder for the ignorant. Commodities are the life blood of any savvy investor—they’ve always been and always will be. It’s a hard asset, a hedge, a profit tool, and an anchor. Even if the markets crashed tomorrow, metals would increase in value and so would commodity stocks. If metals were obsolete, then why are the central banks of China, the UAE, Japan, and others trying to acquire gold now more than ever (news links)? Why has the price taken such a significant leap in the past year? This is because when the dollar falls, the metals will shoot up like stars--and any knowledgeable person or entity knows this. But beginning in 2007, along with silver, gold has proven that it is not just an inflation hedge. It has risen regardless of the actions of the USD.

The dollar and commodities have an inverse relationship with the dollar—or any currency not fully linked to them. Now, more than ever, confidence in the dollar is low—extremely low. Several central banks have announced efforts to decrease dollar holdings (news links) and some oil producing countries, namely Iran, Venezuela and Syria have already begun accepting euros for oil payments (news links). This is the first time since 1944 that oil could be bought in a currency other than the dollar. It is painfully more apparent that the US is no longer the economic empire. Its era is done. One thing is certain: those holding US dollars will be left behind as the currency tumbles, be it by a large margin or a small one, as has been the case after the fall of the other modern empires using fiat currency…Britain and Germany. Hopefully the fate of the Americans is more like the former as opposed to the latter.

Best way to save silver and gold

By far, the single best method of saving silver and gold is to own coins. Coins provide the easiest way for potential buyers to verify authenticity and create a separate market for the type of coin itself. In other words, you can sell back your silver or gold to people interested in the metal or to those interested in the specific coin itself. The most popularly traded coins are the American Eagle bullions, European Francs, Canadian Maples, British Sovereigns, South African Krugerrands, and Chinese Pandas. You have the best chance of buying these types of coins as close to the market price of gold as possible. You almost always end up paying a tiny retailer’s commission. Consider that commission the investment and the market price of the metal as a simple transfer of your dollars to a hard commodity.

Local coin shops are valuable but charge a high commission. Since Ebay.com identifies its sellers (and shows feedback) you can use it as safe and insured way to obtain a coin. The sheer volume of competition forces most prices of bullion coins to be near the market rate.
Many people find rare coins at bargain prices at estate auctions. I have personally found extremely rare coins advertised by unknowledgeable sellers on craigslist.org who just wanted to make a quick buck.

It is pertinent to familiarize yourself with the aforementioned common coin types, i.e. sizes, weights, purity, color, date ranges, and price ranges. The last thing you want is to be ripped off by someone taking advantage of an ignorant collector.

When to buy:

Buy at times when the metal is at a period low. Although in the long run, the metals will increase, they go through speculative periods of highs and lows. A high, similar to the one experienced in May 2006 was pure speculation and was short and sweet. It would have been a perfect time to sell, but an awful time to have started buying. General low periods would be from January to March and July to September, but it is not always the case. When metals suddenly shoot up over short periods of time, don't be alarmed as there is most likely speculation involved.

Always wait until the sudden spike is over. First-time investors tend to jump on the bandwagon during peak times. This will anger you when you see that weeks later you could have bought in at a lower price. The price will undoubtedly decline and stabilize to a more sustainable level. Stock market gurus and currency traders could easily decipher a chart to see when that time would be. A good time would be after a high has shifted to a new low that is even lower than the price before that high.

Search for the best deals for bullion coins. Always seek out the prices nearest the market rate. Use websites like xe.com to keep track of the price of metals on a regular basis. You should know whenever there is a drastic change in price. Such a change would be an overnight gold increase from 625 to 635 or silver from 12.65 to 12.90. These changes may prompt you to buy if you believe the price will go and stay any higher.

Say no to jewelry. It makes a great gift, but a bad investment. If you’ve ever tried to exchange jewelry for fiat you’d know that it’s quite a hassle. First, the jeweler will test the piece for authenticity. Then, he’ll try to assess (subjectively) the gold content and value, if not already marked on the piece. Finally, he’ll offer only a fraction of what you paid for the piece in the first place. Jewelry is simply overpriced metal. It’s extremely rare that the content is 24K which, by the way, is not pure. Most pieces are 14K (especially in the US) and the cost is mostly for the shaping of the metal to it. I’d rather be confident that when I attempt to sell my metal, that I would receive more than the market price. That’s what coins give you—an easily verifiable, above-market, smooth resale.

Perhaps you want to skip the particularities and hoarding of gold and silver bullion and coins. Using a gold or silver ETF would therefore be a great option for you (GLD and SLV). In fact, so far in 2007, these stocks have outperformed the metals to which they correspond. Using the ETF is a much easier way to buy and sell the metal. Besides you're always working with market prices and don't have the hassles of or worries about the physical metal. We recommend owning physical gold and silver for the long term store of wealth and gold and silver ETF shares for short tern profit making.

III. 2007 Stock Investment Guide

Many of our stock picks for 2006 performed extremely well. Picking the best stocks will bring you returns that currency and commodities could never provide in such a short time. Be that as it may, timing is key. You must know when to buy and when to sell--as with any other investment. Warren Buffet and many of the cleverest investors also know that buying unpopular stocks provides the most potential for a short term increase. Buying when stocks are popular and have a high volume subjects you to the risk of decline. Because popular stocks are . more expensive, many smart investors will naturally shy away from them. You should have a similar mentality. Cheap stocks from good companies will provide your surest bet that the price will skyrocket during an industry or market bull.

Because you’re not an experienced investor and would not likely make frequent transactions, it is important to seek out companies that will do well over both short and long ranges. That's why industry is key. Start by picking a few industries. Sure, diversification is great, but to what extent? Every industry in any country will not guarantee an increase. You want to be as sure as possible that your stocks will perform well. We suggest these broad industries: commodities (including energy commodities), new technology, finance, and infrastructure. Having already explained commodities, new technology represents a broad range of sectors such as nanotechnology, fiber optics, and computer simulation, to name a few. These are the hot industries which always include companies that exceed expectations.

Then choose strong economies out of which the companies operate. Limit yourself to a few companies if possible and concentrate your energy upon them. If you follow the trends, you’d see that American companies, for instance, are being outperformed by companies in the developing world—namely China, Russia, and Brazil. Since China and Russia developing rapidly, the former building infrastructure, the latter supplying commodities (i.e. oil and gas). In addition, there are several commodities-based economies with natural resources and successful mining companies such as: Canada, Chile, Australia, South Africa, and the US (the US is not a commodities-based economy but has vast natural resources.

Finally, seek strong companies—ones that have shown tremendous growth in the past, have stable histories, strong financial records, and commitments from their investors. Choose unpopular ones that are relatively cheap (under $10 if possible; if not then under $20 per share) and have increased their prices throughout a given period of time.

For example, last year the companies herein below in these countries performed incredibly. The following list shows information on their companies finances, a key aspect in helping you decide which stocks to buy:
Company Total Return:
Country High Tech Computer (Taiwan) 341%
Al Rajhi Bank (Saudi Arabia) 308%
Vallourec (France) 272%
FinansBank (Turkey) 226%TurkeyDaewoo International 225%South Korea
Five-Year ...
Company Annualized Total Return* Country Sberbank 137%RussiaFinansBank 99%TurkeyUltra Petroleum 95%United StatesPuma 91%GermanyGazprom 90%Russia10-Year ...
Company Annualized Total Return* Country Chico's FAS 68%United StatesInfosys 66%IndiaGazprom 62%RussiaSeverstal 61%RussiaTatneft 57%Russia

You will have noted that, with the exception of Daewoo`` of the companies are in the aforementioned sectors
New Technology
1. GSE Systems (GVP)
This relatively young company develops computer software simulations primarily for the benefit of military and private defense operators. Training simulations has developed into a billion dollar industry.
In 3 months +85%
In 1 yr. from 2006-2007, +424%
The company's stock is poised for further growth given its low price and since it has finally gotten its financial house in order. In one year, it's was one of the best performing stocks on Wall Street.


Chinese companies make up a huge percentage of top short-term gainers listed on the NYSE, AMEX, and NASDAQ. Of course, this is due to the developing nation’s explosive growth, the low cost of doing business, and swelling foreign capital.

China is on its way to having the world’s most extensive railroad system for both commercial transportation and industrial use. That means that it is going from having little transportation infrastructure to the most thorough in the world. Undoubtedly, China’s enormous size will make the project last for years on end. Now is the perfect opportunity to own stock in a Chinese railroad company. Our recommendations are as follows:

Guangshen Railway Company Limited (GSH), which has a moderate price, excellent history, and low volume. This means that there is definitely room for growth. This company provides passenger services, food, beverage and other merchandise on board. Remember that this is still a burgeoning industry in China and that few people use the train at all. In 2006, the stock endured steady upward growth from a low of 14.70 to 35.24. That’s a 140% increase! As of late, the stock price has accelerated and is currently growing at about 2.8% daily. All aboard?

As for American companies, there's one shining star: CSX (CSX). The company boasts continued growth and is an excellent choice for a long term investment. CSX remains an essential part of US commerce. Remember that it owns the railroads upon which a great deal of products are shipped throughout the east coast. Since 1980 its stock price has risen from about $3 to $35. That’s an astounding 1066% increase! In 2006, the price increased by 40%; in 2 years, it has grown by 84%--continued growth at about 41% per annum and 2007 won’t be an exception!

In 2006, CSX, the fifth largest railroad in the US, posted record profit driven by a steady influx of demand and good pricing. As a result, operating income is up by 31%
Our recommendations: Wait until the Spring (mid March) when the price historically falls and grab this one.

Mining Companies

With so many choices, it’s easy to pick the wrong ones. Let me make it easy for you. There’s only one stock exchange that has a collection of most of the world’s mining companies, raises the most money for them, and has recently seen quadruple-digit returns of its mining companies—the Toronto Stock Exchange (TSX). Not all of these companies are based or has projects in Canada; but mining is to the TSX as tech companies is to the NASDAQ.
The secret is that immediately following a commodities boom, money returned (from the boom) shifts to small mining companies. The aftermath is quite astonishing:
Toronto Mining companies since 2002
•Carolin Mines up 1,739 % •Mosquito Creek Goldup 971 % •Lincoln Resourcesup 2,464 % •Avino Minesup 1,567 % •Copper Lake Expl.up 13,025 % •Lornexup 467 %•David Mineralsup 1,726 % •Eagle River Mines up 3,479 %•Meston Lake Resources up 1,213 % •Silverado Mines up 3,987 % •Wharf Resources up 2,779 %
Toronto Mining Companies Since 1980’s

The total gains these companies made over a span of several years is simply amazing:
• Cartawayup 26,040 %• Pacific Amberup 4,376 %• Conquistidorup 1,874 %• Corrienteup 1,850 %• Valerie Goldup 1827 %• Arequipa Resourcesup 5,692 %• Farallonup 2,431 %• Arizona Starup 3,090%• Cream Mineralsup 3,050 %• Mansfieldup 1,400 % • Oliver Goldup 1,600 %
As the years pass, the scene changes. Small mining companies are usually gobbled up by others or non-related entities. The trick is to find the best potential mining companies that are small, have proven results, high investor confidence, offer a range of projects.

Don’t look for the aforementioned companies to give you the same results. If you’re like many new investors, you don’t have access to the Toronto Stock Exchange anyway. Thus, we’ve picked some must haves, if you plan to keep up with this year’s commodities bull.

If you want the best returns, contact us to see our 2007 Penny Stock Investment Guide.

Base Metals Stocks


Silver Standard (SSRI)

After a simply remarkable year and a more than 84% increase in stock price, there’s much to love about Silver Standard. This growth has accelerated this year after steady growth. Since 2002, the price is up 1000%!

Headquartered in Vancouver, the company is a booming exploration company with key projects in Argentina, Mexico, Texas, British Columbia, Australia, Peru, and Chile. They also have stake in quite a few mining companies and projects and are planning ventures in China.

Silver isn’t the only thing it mines. Whilst mining diamonds at Snowfield in British Columbia, the company reported a significant gold finding in December 2006.

Our Recommendation: Buy Now! It will only go higher. Just look at the trend:

Dec. 5th - a record high of 31.33
Dec. 11th – a record high of 31.63
Jan. 3rd – a record high of 31.78

Zinifex (ZFX)

The company is now listed on the AMEX so that most of the world has access to it. This is good news to investors who are certain that not only will zinc move in tandem with precious metals, but will likely perform as well as Silver. That's because zinc is one of the most widely used industrial metals. Zinifex, one of the world's leading miners has done a superb job with not only mining, but it's own internal finances. This year, the company reported a ballooning second half 2006 profit that had tripled in value. No wonder why Zinifex's stock has nearly doubled in 2006 and is expected to perform even better this year.

Seabridge Gold (SA)

Another Toronto mining company newly listed on the AMEX, Seabridge is also expected to do exceptionally well this year. Not only did its value double in 2006, since its inception Seabridge has grown continuously in spite of the trends in gold and silver. The company's finances are in good shape as well having reported huge profit increases quarter after quarter.

Silver Wheaton (SLW)

We absolutely love this company for many reasons. For one, This young company holds lots of promise. It’s stock value increased by 69% since last year and by about 240% since its 2005 inception.

What distinguishes successful mining companies from others is: finances and the right acquisitions. Two things that don’t always work well with each other. Despite this, Silver Wheaton has proven itself well.

It has a 14% interest in Sabina Silver
A 17% Stake in Revitt Minerals (which has more than doubled since September 2005)

Our recommendation: Get it now! Although it reached historical highs in November, the decline since then is due to many cashing out. I fully understand this, because for some, when you put everything into a company, you want to at least be able to get a quick return. Don’t worry, there is plenty—or an abundance of room for growth. Since the price is still relatively low, it is absolutely poised for further growth. Expect it's price to nearly double by year's end.

SINO (SINO.ASX)

Unsurprisingly, the news of a recent major gold discovery in China escaped Western media headlines. Notwithstanding, China has wasted no time attempting to extract it so that it can add to its gold reserves. The Chinese government, like others, has finally realized that it is wise to diversify holdings away from the USD with some precious metals. China will soon start buying gold, but when it hasn't--when it does, you'll definitely know. It also contends that it's newest gold find will be a great addition to its reserves. The problem China faces is that it has a lack of technology when it comes to efficient gold mining on such a large scale. Thus, it has commissioned an Australian company, SINO, which has proven to be one of the best miners to handle the project.

SINO's cheap price will undoubtedly double by this year's end after the first leg of the production stage is complete and as precious metals continue to rise in value. We're quite confident that the company's stock price will increase by much more than this.

The tough part will probably be trying to obtain the stock if you don't live in Australia. Some of the high profile brokers will be able to buy the stock on your behalf, but not without charging you dearly. Thus, consider the following smaller and affordable brokers with access to the Australian Stock Exchange:


Southern Copper (PCU)

The company’s financial house is all but in order; however, this year will be more promising

Since 2002, during the commodities boom, PCU saw its stock jump 675%! In the past 2 years it has seen a 147% increase and in the past year, a 60% increase! Copper itself only rose 21% last year and since 2002 has risen by about 315%.

Based out of Phoenix, AZ, Southern Copper holds more copper than any other publicly listed company in the world! Its holdings are in both Peru and Mexico, two stable nations that have historically and continuously been leading silver producers. Copper certainly accounts for the majority of the company’s business, but certainly not all of it. Zinc, silver, and gold are also mined in these mineral rich nations and remain an increasing part of the company's portfolio.

The company’s finances look great as well. With a 36% profit margin, a 55% return on equity, and a 37% quarterly revenue growth rate, there’s no wonder why we love this company!

Our Recommendation: Wait until this drop in prices is complete. If you’d like, snag a piece in March as this period low might also coincide with the company’s report on its Mexican mines.

International Royalty Company (ROY)

It doesn't get better than a metals stock without the risks faced by normal mining companies. This company gets royalties from its investments in a range of mining companies that mine a range of metals. This company has been quite profitable of late and should perform even better this years with the continuing precious metals bull market.

Aluminum Corporation of China (ACH)

Having grown by 31% during the past year, about 84% in 2 years, ACH has proven itself to be a strong and resilient company. In fact, since it was begun in 2002, its value has appreciated by over 280%

After Alcoa, ACH is the world’s second largest aluminum supplier. Aluminum demand growth has exceeded the growth in supply

The Next Agriculture Bull

Newsflash! It’s already begun. You’d only be unaware if you’re not a market watcher. Since last week, corn has jumped 15% on news that the ethanol industry would be using a lot more corn next year than first expected. In fact, the USDA expects corn harvesting to be 20% below normal. Corn now trades for $4 a bushel for the first time since the mid 90’s.

We’re so sure that this is an agricultural bull market because not only is corn ever more necessary for bio fuels, it is increasingly in short supply. Investors have ignored agriculture and farmers have gotten out of the business. Thus, I’m certain that the price could double sooner than we expect.

Last Friday, PowerShares created an Agriculture ETF (DBA). Just like after 2005’s creation of the Silver ETF, supply decreased tremendously. The DBA is composed of corn as well as sugar, soybeans, and wheat, each comprises 25% of the index.

Soybeans are corn farmers’ alternatives. Many of whom choose to harvest either one or the other. Since corn has leaped as such, you can expect the lack of soybean harvesting to do so as well.

Thus investing in the DBA is a well balanced and sound agricultural investment.

Our Recommendation: Buy now as a break in the upward trend has just occurred. The index has rebounded and has continued to trade nicely and should continue as investors realize just how low supply really is.

Other strong ETFs:

iShares FTSE/Xinhua China 25 Index (FXI)



Our picks provide a diverse yet smart set of options. Some like to invest in many, some just pick a few. The point is to diversify somewhat to ensure that overall, you will get return.