Is Gross backtracking?...

 On April 11, Bill Gross announced his short position in Treasury bonds. And he did so in a bold way... calling congressmen "skunks," ridiculing Washington's inability to cut entitlement spending, and bashing the U.S. government's general fiscal disaster.

On a call with Bloomberg last week, Gross curbed that language (Treasurys of all maturities are up 0.49% this month, the most since August), saying, "I could join the dealers and say the 10-year's not going to go to 4%, so what am I left with? I'm left with an under-yielding, less-than-inflation security. I have better choices. As a firm, we're not going to put up with it."

Gross is saying his short position on Treasurys is not an all-out attack on the government. He just prefers the alternatives. "This 'no Treasury' thing is simply a demonstration of vigilance on the part of PIMCO that says these bonds aren't worth what others appear to think they're worth," Gross said. "And we prefer another menu, that's all."

 One investor, another outspoken government critic, is joining the trade... In an interview with the Economic Times of India, Jim Rogers said he plans to short U.S. government bonds "sometime in the next few weeks [or] months." His reason is simple... Massive global debt and money-printing will lead to higher interest rates. And he expects the Fed to resume printing money shortly after the current round of quantitative easing (QE2) ends:

Rogers is also still bullish on silver and agriculture. "Silver has certainly gone up a lot in the last nine to 10 months. There is no question about that," he said. "But remember, silver is still 10% below where it was 31 years ago. I bet you do not know many things 10% below where they were 31 years ago. Silver has been going up but on a historic basis… It is still very depressed."

 News out of China sent silver and gold soaring today. Century Weekly magazine, citing unnamed sources, said China is planning to diversify its $3 trillion in reserves into energy and precious metals. Silver futures for May delivery climbed as much as 8.2% to $49.85 today. The January 1980 record for silver, when the Hunt Brothers tried to corner the market, is $50.35. Gold reached $1,518.32 an ounce.

 Last week, we noted Glencore's upcoming IPO as a sign of at least a temporary top in the commodity markets. Today, Barrick Gold, the world's largest gold company, agreed to buy copper producer Equinox Minerals for $7.69 billion in cash – besting an offer from China's Minmetals Resources. Barrick CEO Aaron Regent said, "This is a unique situation. It's very rare that assets like this come on the market." The market didn't like the news... Shares of Barrick fell more than 5%.

 While the U.S. government still doesn't see inflation, some of our country's largest operating companies certainly do. Paper-product giant Kimberly Clark, maker of Kleenex and Huggies, announced a 9% decrease in first-quarter earnings. The company also doubled its estimate of raw material inflation for 2011. Kimberly Clark estimated costs for key raw materials would be between $450 million and $550 million (up from $200 million-$250 million). The company said it would raise prices and cut overhead (lay people off) to combat rising input costs.

 Last week, McDonald's also blamed inflation for squeezing its margins. Despite improved first-quarter earnings, shares of McDonald's fell last week on fear rising prices would hurt future margins. The company said it expected food prices to rise about 4% this year. And it's considering raising menu prices to pass the increases along. In addition to price increases for its input goods, McDonald's also warned about inflation in terms of its borrowing costs. It expects interest-rate expense to increase 5%-6%. McDonald's also predicts an effective tax rate of 30%-32%, up from 29.3% last year.

 Most investors who are worried about inflation are sticking to short-term paper or avoiding bonds all together. So you may have been surprised two months ago when Porter wrote, "Learning to invest in and value corporate bonds is the single most important thing we could ever teach you."

As Digest readers know, Porter is a huge fan of True Income, our corporate-bond investing advisory. He gave it an "A++" in the most recent report card. Editor Mike Williams' True Income portfolio returned 33.5% last year with a win rate of nearly 91%. The key to Mike's success in bond investing is simple... He only buys deeply discounted bonds from companies with more than enough assets to cover liabilities.

If you invest in bonds the way Mike does, you can beat inflation. For example, Mike's latest recommendation will pay readers an 8.8% cash yield. Including capital gains on the bond, he expects readers to earn nearly 12% a year. Where else can you find that kind of return in today's market? More importantly, where else can you find that kind of return with such a safe security? If you still haven't signed up for True Income, we urge you to do so today. You will receive a generous discount if you sign up before midnight. Click here to learn more... 

 New 52-week highs (as of 4/22/11): None... Markets were closed.

 Lots of positive feedback in the mailbag today. The booze must have been flowing over the weekend. Send us your thoughts to feedback@stansberryresearch.com.

 "I wanted to echo the comments regarding those who complain about not enough free advice. Really... My only regret is not finding S&A years earlier. The investments I have made from your advice are trending at 25%-plus. Not too shabby for taking some advice and doing my own homework... Imagine that... You might have to do some work yourselves! It's a free country, not happy with the report move on. Good luck with finding the honesty and integrity of these folks." – Paid-up subscriber Kevin Clarke

 "As a new subscriber, first, let me say that so far, I feel I've made a good investment in your newsletter and advice. Second, I am 53 years old, and I have NEVER been more angry at a politician than when the President said that the 'the fortunate who have taken so much from America need to pair their fair share.' I get the class warfare part, that is age-old liberal blather, but, to say the rich TAKE FROM AMERICA!!!! As if he was elected to protect the wealth of America and hand it out as only he sees fit! Does the socialist tag fit him better than his supporters are willing admit? Yes, I think it does!

"I ran my own company for 7 years selling the US Automotive Companies. In 2004, Tower Automotive filed chapter 11 on me and it cost $200,000. In 2006, had a $1 million project going to GM when I first heard the words 'bankruptcy' and 'GM' in the same sentence. I had a second mortgage on my house and credit card debt to the max.

"I was successful. My equipment saved GM millions of dollars in prototype vehicle welding. Each prototype car costs $1 million to build. Screw up the welding and the cost is $1M for the car and $6M to rerun the crash test. My equipment cut set up time to zero hours, it improved quality and it decreased production hours by 50%! I earned my money based on what I gave to the customer using my own personal risk, 30 years of engineering knowledge and commitment! I took nothing from anyone!

"So, now I have a new plan; it is time to take (profit if you are a conservative) from the Government by leveraging their own insanity! Clearly, the liberals are going to drive us off of an economic cliff; there is money to be made. Oil, Gold, Interest rates and other investments should be very interesting. Maybe I will buy what is left of GM in ten years when they head to court again!" – Paid-up subscriber Patrick Grimes

 "Tell Kit Marshall to get a life somewhere. Silver has been a Godsend for me!" – Paid-up subscriber Frank V.

 "I woke up early today and was reviewing my accounts. The first bullion trade I put on was a buy write on SLV recommended by Jeff Clark. That was Jan. 2009. I have added up my profits from gold, silver, royalty companies and miners (excluding dividends) since then. I ballpark my average invested capital (excluding margin on put selling) at about $230,000. My profits as of Friday's close are $425,000. I know its been a good bull run but I would have been shaken out on the pullbacks if not for the strength of your company's research." – Paid-up subscriber RL

Regards,

Sean Goldsmith

Baltimore, Maryland

April 25, 2011

Is Gross backtracking?... Rogers to short Treasurys in the 'next few weeks'... China to buy energy and precious metals... Sign of a top in commodities... Kimberly Clark sees inflation... McDonald's does, too... A subscriber makes $425,000...