Armistice Day

I find it easy to feel gratitude toward those willing to make the ultimate sacrifice. Unfortunately, I find it even easier to see power-mongering incompetents like Komrade Obama and Bush the Younger using and abusing these brave souls and sending them to die in faraway places, primarily in the service of their re-election and status in the opinion polls.

Hmmm... What do they all have in common?

Oh yeah, I remember now. If you put "crisis" next to each of them, you've captured most of the ugly side of global financial history for the last 20 years. Asia, Russia, and Brazil all know what it's like to have their currencies and economies blown up. And they don't like it. So they're trying to prevent it from happening again.

They're mostly doing things like raising taxes on foreign investments, eliminating tax exemptions for foreign holdings of domestic bonds, and generally removing incentives and/or placing restrictions on foreign ownership of their debt securities. The idea is to keep their currencies from appreciating, lowering demand for their exports, leading to another economic crisis, and to another currency crisis. I hope they're successful.

How times change. We normally think of these countries as wanting to bring money – especially dollars – into their economies. Now, they're trying to prevent another crisis by trying to keep at least some of that money – especially dollars – out.

In an op-ed for the Financial Times, former Federal Reserve Chairman Alan Greenspan – the man Rolling Stone's Matt Taibbi called "the biggest a-hole in the universe" – accused the U.S. of deliberately weakening the dollar. I don't doubt Greenspan's credibility on the topic. He ought to know about weakening. He participated in more than his fair share of it.

But Treasury Secretary Tim Geithner demurred, saying, "We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy." Wait a minute. I could have sworn Komrade Obama recently told the whole world the Fed's job was to grow the economy. Obama and Geithner are like two criminals who can't get their story straight. In the end, I expect they'll both get busted.

Geithner's official excuse for a weaker dollar doesn't include the trillion and a half dollars the Fed printed last year or its recently announced plans to print another $600 billion this year and next. Geithner said the dollar is down because investors are no longer seeking a safe haven in dollars, which he says is "a sign of greater confidence that... the risks we face are more manageable." Geithner said this change of attitude is "the dominant trend that we see." Makes you wonder where he's looking. In the mirror, perhaps.

The dominant trend I see is investors pouring tens of billions of dollars per year into bonds and bond funds, while gold rockets toward $1,500 an ounce. Investors believe they're avoiding risk by buying bonds. But when the money-printing really gets cooking, they'll get schooled in Economics 101.

Fixed income will get killed as inflation heats up. Fixed income streams don't change. They're fixed! So the less our dollar is worth, the less any fixed stream of dollar payments is worth. The market's view of the future value of fixed-income streams is bond prices. Treasurys lost in 2009 as investors headed away from safety and toward risk. And Treasury prices have risen in 2010 (starting around May) as investors have become more concerned about the value of payments made in counterfeit currency.

For example, in the September 1 DailyWealth, Steve wrote about how pessimistic the market was on stocks. In DailyWealth Premium, he provided research from Jeff Clark saying stocks were a buy... He also said to buy Intel. You'd be up 17% on that trade.

In the October 4 DailyWealth Premium, Steve told subscribers to buy Puda Coal, a Chinese coal company Frank Curzio recommended (more on Puda in the mailbag). You'd be up almost 80% on that trade. And today, Steve told DailyWealth Premium subscribers about one of Matt Badiali's favorite stocks for tax-sheltered income (Buying this stock gets you a nearly 7% yield and exposure to what we think could be the next commodity megatrend).

"She asked me to wait a minute then said 'SIR! Please stop! That is an officer you are approaching.' I told her he needed to be ready to identify himself because I had the drop on him. He then turned on a light and identified himself stating he was an officer pursuing a criminal. I told him he was on my private property and there was no other house or people within 5,000 feet in any direction except traveling on the road.

"We argued about his right to be where he was without identifying himself. When he found out I knew the sheriff personally, he left with his blue lights on." – Paid-up subscriber Bill Prince

Goldsmith comment: Frank's been an incredible addition to the company. In addition to being a great guy and hard worker, his analysis is top notch. Frank has 10 open positions in his Penny Stock Specialist portfolio. Every one is up. I think his best call this year was on Puda Coal, a little-known Chinese coal company. Here's what he wrote in August:

Shanxi is a special area of China because it is home to 260 billion metric tons of coal. That's about one-third of China's total coal deposits – enough to supply the world for about 30 years... Unfortunately, Shanxi is also known for having a terrible safety record... That's why the Shanxi government announced a massive safety initiative that's changing the landscape of China's coal industry.

The new program (made official in 2008) calls for the elimination of 1,500 small and inefficient coal mines in Shanxi. These small producers are required to sell their businesses (most at a huge discount) to a government-appointed consolidator...One of those 28 private consolidators appointed by the government is Puda Coal (AMEX: PUDA). Based on growth potential and valuation, I see shares doubling from current levels over the next 12 months. – Frank Curzio, August 11, 2010, Penny Stock Specialist

Readers are up 63% on Frank's recommendation.

"show me its earnings and projections. Show me it's gross margins. Show me its average sales per store. Show me its % Rx sales compared to its competitors. Mr. Williams as a new subscriber you live in a dream world. Please respond to the above to gain some credibility as an advisor. Tell me how you arrived at Rite Aid as a good investment. I can't wait to hear how you arrived at your conclusions. It certainly makes me wonder if I subscribed to the right newsletter." – Paid-up subscriber Linda Stavis

"As for Peace Lover, his/her numbers are legion in this liberal city where I live. I can identify them infallibly without even speaking to them, so I DON'T speak to them. I maintain a very low-profile, even secret lifestyle hereabouts.

"What I have learned is that the real reason people like Peace Lover deplore my lifestyle is just plain envy. They have never set foot in Argentina or made any similar trip, and never will, and are envious of the fortunate few who do.

"As for Gerald Douglas, my guess is that he has done some bird shooting in Argentina. He certainly knows the score. Indeed, some species of birds that we will be shooting (doves, parakeets, and pigeons) pullulate in enormous numbers, and constitute a plague of Pharaonic proportions. Farmers and ranchers are delighted to have people shoot them. What's more, shooters eat a lot of the birds, especially the ducks. The birds that they are not able to eat are donated to the staff and to the poor." – Submitted by the man hosting The Atlas 400 in Argentina

Regards,

Dan Ferris and Sean Goldsmith
Medford, Oregon and Baltimore, Maryland
November 11, 2010