Nicaraguan radio

Nicaraguan radio... The worst is yet to come... How to protect yourself... Update on Rancho Santana... Curzio's latest discovery... Investing like a billionaire... The worst investment we can think of... More True Income... "Is it OK if we pick up Joselito in Masaya?"

We begin the investment portion of today's Digest on a sobering note. This is not our preferred way to start the week. But our job, in addition to alerting you to profitable investment ideas, is to warn you of potential pitfalls… things that can damage your portfolio, your savings, and even your way of life.

The Federal Reserve's decision to monetize U.S. Treasury debt two weeks ago was such an occurrence. While we're not surprised by the move – we predicted this would happen in late 2008 – it does confirm our fears. The Fed's latest move proves it will print money and monetize debt until it considers the economy "back on track." These measures may provide temporary relief (though recent housing and unemployment statistics are proving otherwise). But the result will be disastrous. In the latest Stansberry's Investment Advisory, aptly titled "The Worst is Yet to Come," Porter outlines the current economic situation in the U.S.:

Between March 2009 and March 2010, the Federal Reserve increased the size of its assets by roughly $2 trillion. It refused to disclose exactly what it bought, but claimed the purchases were a mix of triple-A mortgage securities and U.S. Treasury obligations… They roughly doubled the size of the Federal Reserve's balance sheet.

These "emergency" measures are now being extended into an ongoing policy – one that will continue to be beyond the reach of Congress to audit. By rolling these maturing obligations into new U.S. Treasury debt, the Federal Reserve has abandoned its primary responsibility to safeguard the value of our currency. Instead, it is using its powers to facilitate the government's unprecedented peacetime deficit-spending binge…The consequences of these actions are uncertain – but very risky.

The Fed's ongoing direct involvement in the U.S. Treasury market makes our prediction of a coming hyperinflation much more certain.– Porter Stansberry, August 2010, Stansberry's Investment Advisory

Of course, with disaster comes opportunity. In SIA, Porter and co-editor Braden Copeland recommended shorting one company destined to fail. They also recommended going long a super-depressed sector set to rebound (and this company's tangible assets are worth double its current market cap). You can read more on those situations here, or learn more about SIA, here.

In addition to strategic shorts and longs, you should also own gold. We recommend having at least 10% of your net worth in gold bullion. And have plenty of cash on hand in case of emergency. You should also start moving assets offshore. You can do this by storing your gold in a foreign safety deposit box or self-storage unit. You can open a foreign bank account. And you can buy real estate.

Many of our friends are buying property in Nicaragua. It's inexpensive, beautiful, and secluded enough that no one will bother you. For some pictures of our last trip to Nicaragua, check out this Digest. There have been some major developments since then. They're building a completely new clubhouse and common area. They've brought in U.S. restaurateurs to improve the restaurant. Also, the condos in last June's Digest (the third photo) are now complete. Check out the progress…

You can learn more about Rancho Santana at the development's website, here. You can also contact our friend, Marc Brown for details… marcb@ranchosantana.com.

Hard assets like real estate, agriculture, and oil also make great investments during inflation. That's why Phase 1 editor Frank Curzio recently told his readers about Thermogenic Oil. This energy source is much cleaner and more abundant than regular oil. In fact, if we tapped just 2% of the country's Thermogenic Oil reserves, we could fuel the entire U.S. for 2,000 years (based on current consumption). Several states, including Oregon, California, and even Texas, are already starting to extract it as a substitute for regular crude.

Also, tonight is your last chance to sign up for Phase 1 at a huge discount. You won't want to miss this opportunity. Thermogenic Oil stands to become a mainstay of our national energy complex… and make early investors a fortune in the process. To learn the full details, click here…

You may think billionaire hedge-fund managers with their armies of analysts, super-fast trading systems, and virtually unlimited resources are doing something different, or more sophisticated than the average investor when it comes to protecting their assets. They're not…

As we noted previously, hedge-fund managers are pouring into gold. They're also keeping healthy cash positions. In George Soros' case, he's getting money out of the United States. Soros reduced equity holdings in his $25 billion fund to 42% – from $8.8 billion to $5.1 billion. His largest holding is gold. And he recently further diversified out of the U.S., buying 4% of the Bombay Stock Exchange. His investment values the exchange at $800 million. Retail stock ownership in India is low despite the booming economy. Soros is betting that will change.

One thing we definitely wouldn't own right now… 100-year bonds. With corporate borrowing rates at record lows, some bankers are pitching the idea of 100-year bonds. From the Wall Street Journal:

New highs: MFA Financial (MFA-PA), AuEx Ventures (XAU.TO), Seagate Technologies (STX).

In today's mailbag… More positive True Income feedback. When will it end? feedback@stansberryresearch.com.

"Your fellow subscriber's comments about Schwab are half true. In my experience, no phone call is necessary as long as you have the CUSIP code. I have traded bonds easily this way." – Paid-up subscriber Colin Sworder

 "You hit the nail on the head with your comments on congress investigating Roger Clemens. Guess that's what happens when an amateur (liar) testifies in front of the real pros." – Paid-up subscriber Steve Pierce

"I've been very pleased with Mike Williams' in-depth research, and finally did the smart thing and bought his June reco. In ref to the recent feedback from other subscribers about various brokers, I used TD Ameritrade and had no problems, however, the specialist told me 'there's no bid/ask' when buying bonds. He said they have 8 dealers with quotes, and gave me the best price available. Their commission schedule says it's a 'net yield basis,' which for my 5 bond order came to $52 (1.3% of the order total). Don't know how this stacks up to other on-line brokers, but would like to hear from subscribers. Looking forward to purchasing at least 10 of Mike's recos in coming months in equal amounts. I intend to make bonds a major portion of our retirement portfolio, and am looking forward to many years of great recommendations from Mike." – Paid-up subscriber Dave H.