Our new houseguest...

 I was at my desk yesterday afternoon when I heard a sound like so many footsteps coming through the walls of the house. Out on the porch, I witnessed a torrent of hailstones the size of marbles. As I stood there, a brown-and-white English Springer Spaniel came down the sidewalk. She looked miserable in the storm. I called her over, under the protection of the covered porch. She shook hard, and a pound of hailstones flew in all directions. She's sweet-natured, gentle, and happy.

After the storm, we toured the neighborhood to try to get her back home. No luck. She spent the night with us. She's lying on the floor next to me as I type this. She's well-fed (and then some!) and has a healthy-looking coat. Someone must be missing her...

Or maybe, as my wife suggested, the former owner removed her tags and abandoned her in the park. My wife heard the number of abandoned animals is rising as many people lose their homes and can't have pets in their new living space. Or they can no longer afford dog food and vet bills. Others lose their homes... and don't have any place to go. I wonder, if the economy is improving, where are all these dogs coming from?

If folks can't care for their pets, they certainly can't afford to buy giant TVs or computers, either. Best Buy sold fewer TVs and computers during the holiday season, and its net income fell 16% last quarter. The decline would have been worse without the growing global obsession with phones that let you watch movies on a two-inch screen.

 On Tuesday, we noted the recent exodus of various Middle Eastern leaders. Today, we note the resignation of Portuguese Prime Minister José Sócrates. Call me an optimist, but this feels like an Atlas Shrugged moment, with some of the world's plunderers losing their jobs as their larcenous schemes unravel. Running a tyrannical government is a dicey game these days... whether it's the tyranny of human rights abuses or the tyranny of a huge fiscal debt and high taxes to support a welfare state.

Portuguese austerity talks broke down yesterday, and Sócrates resigned. Now the country will need an estimated $100 billion bailout. The market expects Ireland to default (Irish bonds are now yielding more than 10%). Citigroup recommended buying credit default swaps (CDS) on Irish government debt (CDS pay off in the event of default). And Moody's cut the credit ratings of 30 Spanish banks. (Spain is one of the most troubled European nations.)

 The collapse of the euro is a more popular topic lately. Even Warren Buffett weighed in today... "I know some people think [a euro collapse] is unthinkable... I don't think it's unthinkable," Buffett told a CNBC interviewer. "You can't have three or four or five countries that are in effect free-riding on the other countries. That won't work over time – they have to get their fiscal houses in reasonable harmony."

Buffett believes we'll see "huge efforts" to save the euro. We imagine they'll be similar to the huge efforts being made to save the dollar. We also imagine, as falls the dollar, so falls the euro. Both patients will perish from the medicine that purports to be their only hope.

Despite all the bad news, the euro gained against the dollar today. Maybe the market expects "huge efforts" to save the euro to come from the United States... We can't see any other explanation for today's currency move.

 At least gold and silver are acting as they should in the midst of a monetary crisis. Today, gold hit a record price of $1,448.60. And silver is up 2.4% to more than $38 an ounce (its highest price in over 31 years).

 Steve recommended Silver Wheaton in the October 2010 issue of True Wealth to profit from the rise in silver. Silver Wheaton is a royalty company. It pays gold mining companies cash up front for a claim on their silver (often a byproduct of gold mining). It gets the silver that comes out of the mine for only $4 an ounce. It sells that silver at market. After the deal is struck, Silver Wheaton simply cashes checks. Here's what Steve wrote about the company last year:

With silver surpassing $38 an ounce, Silver Wheaton's margins have exploded. And so has the share price. True Wealth readers are up more than 64% on the recommendation in five months.

 Gold and silver have had an incredible run. Gold has increased every year for 10 straight years. But I think they're both buys right here. Porter does, too. And Eric Sprott, one of the world's best resource investors, is buying. He thinks he's going to triple his money – at least.

 We previously covered resource investor Eric Sprott's claim that the world is out of silver (if you haven't already read that piece and seen the accompanying video, you definitely should). Sprott holds around 70% of his fund in gold and silver. Fittingly, he puts out some of the best precious metals research we've seen.

 Rumors are circulating that the large gold exchange-traded funds (ETFs), world governments, and the International Monetary Fund (IMF) don't own all the silver they claim. And the world governments are suppressing the gold price. Sprott tried to test that theory...

Last April, he started a physical gold bullion ETF with the ticker "PHYS." Around the same time, the IMF announced it would "shortly" begin selling the 191.3 tonnes of gold remaining from the program initiated in September 2009. Sprott tried to purchase a chunk of this gold from the IMF.

 The IMF wouldn't sell the gold to Sprott, saying it would violate many of the organization's policies (including provisions only permitting gold sales through a qualified agent). There's only one agent, but the IMF wouldn't reveal who it was. We don't know if there's a global conspiracy to suppress the gold and silver prices. Honestly, it doesn't matter. Precious metals will rise because the world is drowning in debt (debt it can't repay). If there is manipulation, it'll just add fuel to the fire.

 Another interesting fact about one of Sprott's ETFs... The Sprott Physical Silver Trust ETF (PSLV) is now trading at almost a 23% premium to net asset value. In other words, investors are paying 23% more than the value of the underlying silver to own shares in this fund. We're not buying shares at those prices... but I'm still buying silver coins. It wouldn't surprise me one bit to see them triple in value in the next year or so.

Sprott is right about the world running out of silver. With the world's reserve currency being printed willy-nilly by the trillions, we're running out of everything. That's how it works. When it's impossible to run out of money, you're constantly running out of everything else.

 New 52-week highs (as of 3/23/11): CARBO Ceramics (CRR), Calpine (CPN), Cytori (CYTX), iShares Silver (SLV), EV Energy Partners (EVEP), SandRidge Energy (SD).

 "A few months ago you gave very good logical arguments in favor of buying SLW. A few days ago, based on an off hand opinion of Warren Buffet, you recommended selling it. Today it went up over $2 a share and is again approaching an all time high. How do you account for it? Please re examine your records and tell us what you think based on logical study." – Paid-up subscriber R.B.

Goldsmith comment: Both Steve Sjuggerud and Matt Badiali have Silver Wheaton in their recommended portfolios. And neither has sold in the last "few days." Perhaps you're confusing Porter's comments about Silver Wheaton being on his "black list," with a sell recommendation. 

 "Is there an ETF Fund that you can use to short bonds? If so would please let me know. Also all of you guys are doing a GREAT JOB, i look forward to all of your rethoric, very nice, let all of the dumb asses know that they need to suck it up and face the facts that are staring them in the face, we are headed for a major nose dive with the Gov. big spending program. H:}ow stupid can anyone be to think this is the correct thing to. Go get em team. Thank you for letting us express a few thought now and then." – Paid-up subscriber M. Case

Goldsmith comment: Porter has placed a bet against bonds in his letter. It's one of his biggest themes. To learn more about his advisory, and find out how he's playing a fall in the bond market, click here.

 "As a new subscriber, I did take your advice on Pulte (PHM), per today's column. I initiated the short at the 8 and change level you recommended; and yes, this was a first time equity short position for me. As a bond trader, I find your opinions and common sense insight refreshing and on the mark." – Paid-up subscriber Joseph Lombardi

Regards,

Dan Ferris and Sean Goldsmith

Medford, Oregon and Baltimore, Maryland

March 24, 2011

Our new houseguest... Best Buy customers tapped out... Another politician out of work... Europe's bad credit... Buffett: The euro can crash... Steve's SLW call... Sprott tests the market...