Editor`s Rant by Paul Mladjenovic 11-19-07

With Thanksgiving near, I think about what that means for me and the people I care about. I am very thankful that my family is OK. I am very grateful for all the things in my life; both the good and even the challenging.  I thank God for everything and I pray that we all take a moment to figure out that all of us have a good life and that we have much to be grateful for. Certainly this is true when compared to the rest of the world. There are places that are right now suffering greatly for various reasons such as war and grinding poverty. If I am serious about "prosperity" as both a concept and as a goal, then I should do what I can to extend this to as many people as possible. You may not be able to change the world but you can certainly have a positive impact in your personal corner of it. As we will soon be facing a new year that will be a major election year (ugh), I feel that one of the most important things I can do for prosperity is to remind people to embrace and spread the idea of freedom.

Why freedom? What does it have to do with prosperity? Everything! It is no coincidence that free societies are generally more prosperous than non-free ones. It is no coincidence that the countries with the least freedom have the most poverty. When you read the headlines about the various economic problems across the domestic and international landscape, it should occur to you that nine times out of ten, the root cause of that difficulty is government; the leading cause of diminished freedom. From government we get a maelstrom of economic termites (taxes, regulations, controls, war, etc.) that eat away at the house of freedom which is the home of prosperity. Therefore, we must seek ways to shrink government. When election time comes, vote for those that seek to limit or shrink government. Cutting taxes and limiting government programs are a small start.

In the meanwhile (unless election day 2008), every issue of my newsletter will mention organizations and resources that seek to increase freedom and shrink government (along with the usual articles and resources to help you prosper). In this issue, I will highlight again a fantastic video that I want everyone to view, download and pass along. Every issue of the Prosperity Alert will continue to present this video entitled "The Philosophy of Liberty".  The folks at the International Society for Individual Liberty (www.isil.org) have done a great job with this superb video.

Please view it (and/or download it) here: http://philosophyofliberty.blogspot.com/

And by all means share it with as many people as possible because I want all of us to have future Thanksgiving Day feasts that we can be more thankful and more grateful for more prosperity that benefits all. I wish the Good Lord's blessings to all of you!

Regards, Paul Mladjenovic

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Call me direct at 201-585-0239 thank you! Paul Mladjenovic

Silver and Gold - Happy Days are Here Again!

By Peter Degraaf

Oct 11 2007 9:33AM
www.stockcharts.com

An excellent commentary by Peter De Graaf (reprinted with permission):

It will never cease to amaze me how many people who call themselves 'gold bugs', still don't believe that the current gold move is for real. They worry about the central bankers, the plunge protection team, the COT's and goodness knows who else.

It's time to step away from the 'daily noise' and look at the fundamentals, and then see if the 'technicals' line up alongside, to provide confirmation.

The fundamentals are incredibly bullish!

• The money supply worldwide is increasing about seven times faster than the supply of newly mined gold.
• Much of the gold listed as inventory by central banks, has been leased out, yet still shows up as physical gold.
• The gold at Fort Knox has not been audited since 1953!
• New gold discoveries are few and far between.
• Every gold mine is a 'depleting asset'. Once it's gone, it's gone.
• Due to rising energy prices, the cost of exploring and mining is making some projects uneconomic, even at 740.00/oz. In addition a lot of mining equipment is on 'back order' – tires, trucks etc.
• There is a shortage of qualified mining experts. The good ones are all employed, and due to the fact that the industry went through a bear market from 1981 – 2001, not enough people graduated with mining degrees, to replace those who are now retiring.
• Even if a new supply of gold were found tomorrow, it would take many years, dozens of permits, and possible court challenges from 'tree huggers' before this new supply could come to market.
• There are several billion more potential buyers (think jewelry), on the planet who were not part of the consuming public in 1980, when gold rose to 850.00
• Two of the fastest growing economies are China and India. It just happens that both of these groups of people have a love for gold. The middle class in both of these countries is growing by leaps and bounds.
• Adjusted for inflation, today's gold price of 740.00 compares to just over 300.00 in 1980 dollars.  GOLD IS CHEAP!

Now for some exciting charts:

Featured is the GDX, gold ETF. The green arrow points to an upside breakout, from a pennant formation (blue lines). Very bullish!  The RSI is rising again after having eliminated some excess bullishness (blue arrow). The MACD is preparing to turn up again (black arrow). The 50DMA has just completed a 'golden crossover' with the 200DMA (blue and red lines). Both moving averages are rising (green oval).

Featured is the HUI index of unhedged gold and silver mining stocks. The green arrow points to an upside breakout from a flag formation. This is usually a very reliable bullish signal, and sets up a target at 490! (That's 490!)

The blue arrow points to the RSI turning back up in support of the move. The black arrow points to the MACD which is about to turn positive again. The 50DMA and 200DMA (red and blue lines in the middle of the chart), are in positive alignment and both are rising. IT DOES NOT GET MUCH BETTER!

Featured is the XAU mining stock index for those of you who prefer this index instead of the HUI. The picture is just as bullish as for the HUI. An upside breakout from a bullish flag (green arrow), the RSI and MACD rising in support (blue and black arrows), and the 50DMA and 200DMA (green oval), in positive alignment and rising. The target here is 215!

Featured is the chart that compares the XAU mining index to the gold price. When this chart pattern is rising, it indicates that gold and the gold shares are in 'rising mode'. We are looking here at another bullish pattern called: "Cup with handle". The blue arrow points to the handle. We can see it not only in the index itself, but also in the supporting indicators, RSI and MACD. This is very unusual, and the upside breakout pointed to by the green arrow, is a very bullish signal.

This last chart compares HUI gold stocks to XOI oil stocks. The trend from March till July favored oil stocks. Then in July, the trend turned in favor of gold stocks again. This trend is now well established, having moved back above the 200DMA (solid red line). The two supporting indicators are positive (blue dashed lines). This tells us that, while oil is rising, pulling oil stocks up along with it, gold stocks can be expected to rise even faster.

Summary:  The signs are pointing to much higher gold and silver prices, this is most likely the start of our annual "Christmas rally". Now, if gold should drop five or ten dollars, caused by an attempt on the part of traders who are short, (to force the market down so they can cover their short positions), don't send me your Emails, telling me I was wrong, instead get in there and buy!  Don't miss this train!

Peter Degraaf

Disclaimer: Please do your own diligence.  I am not responsible for your trading decisions.
Happy trading!

Peter Degraaf is an on-line stock trader.  He has over 50 years of investing experience.  He issues a weekly Email alert for his subscribers.  For a 60 day free trial, please Email   him: ITISWELL@COGECO.CA, or visit his website www.pdegraaf.com

They Have Got to be Kidding

By Peter Schiff

Nov 2 2007 9:38AM
www.themarkettraders.com

Yesterday, as the dollar fell to new record lows and oil and gold prices surged to new highs, Wall Street remained fixated on wholly meaningless government data that managed to report the lowest inflation in the last half century. These bizarre numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient U.S. economy had shrugged off the problems in the housing and mortgage markets. However, the government's ability to make "economic growth" magically appear is based purely on statistical finesse. 

To arrive at this rate, the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that's less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration.  With oil priced at almost $100 per barrel, gold futures trading over $800 per ounce, the dollar hitting record lows, and the Fed printing money like it is going out of style, the government has the nerve to claim that current inflation is the lowest it has been in half a century. Unbelievable!

Just in case there is some confusion, the government adjusts nominal GDP gains using the GDP deflator, which represents the inflation rate during the time period being measured. This is done to strip inflation out of the GDP calculation so that only real growth gets counted: not nominal gains that result purely from inflation.

The consensus estimate for 3rd quarter GDP growth was 3.4%. The reason we beat that number was that the government adjusted the nominal 4.7% gain by a mere .8%. Had the government assumed a higher rate of inflation, say 2.6% (identical to the rate used to deflate second quarter GDP,) the 3rd quarter gain would have been only 2.1%, well shy of the consensus forecast. My guess is that inflation is actually running at an annualized rate closer to 10%. Therefore using a more honest deflator, the U.S. economy is actually contracting, which would explain the recent anecdotal evidence provided by various economic polls, voter dissatisfaction and consumer sentiment numbers. In fact, if one simply measures U.S. GDP using gold or any other currency, it is clear that we are already in a recession.

Similar illusions are created in other numbers, such as retail sales, corporate earnings, and stock prices, which are all rising merely as a result of actual inflation being higher than the official reports.  For example, higher retail sales reflect consumers paying higher prices for the products that they buy.  They may in fact be buying less stuff, but are paying more for it. Further, part of the gains result from tourists using their appreciated foreign currencies to buy products cheaper here than they can in the own countries. I have heard about Canadians checking into U.S. hotels with empty suitcases, crossing the border to indulge in weekend shopping sprees.  

Corporate earnings, particularly those of multi-nationals, are padded as their foreign currency denominated earnings translate into more dollars when those earnings are repatriated. However, such gains are illusions, as companies merely earn more dollars of diminished value for the goods they sell. The actual volume of exports does not necessarily improve much, as evidenced by weak industrial production and manufacturing employment. When those additional debased dollars are paid out as dividends, they confer no real increase in global purchasing power to shareholders.  

Similarly, just as inflation causes prices to rise for goods and services it causes stock prices to rise as well. Though such gains may be less than the actual increase in the cost of living, as long as the government gets away with using bogus CPI numbers which fail to fully reflect inflation, Wall Street takes credit for nominal gains as if they were real.

However, as ridiculous as the phony GDP number was, yesterday's biggest joke was a report on global competitiveness put out by the World Economic Forum in Davos, Switzerland, which ranked the U.S. economy as the world's most competitive. To arrive at this conclusion, the forum has obliterated the obvious under a mountain of theory.  In determining country rankings, the WEF weighed strengths in their "12 Pillars of Competitiveness", including: institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation. Completely ignored however are the measurable results of competitiveness, notably a trade surplus and a strong currency.

It is as if the WEF decided to judge a weight loss contest without using a scale, by instead focusing only on mental attitude, dedication, perseverance, and nutritional education! As a result the prize is awarded to the fattest contestant. Based on the empirical evidence of a gargantuan trade deficit, staggering global indebtedness, and a declining currency, the United States is clearly not the most competitive economy in the world.

For a more in depth analysis of the tenuous position of the American economy, the housing and mortgage markets, and U.S. dollar denominated investments, read my new book "Crash Proof: How to Profit from the Coming Economic Collapse."  Click here to order a copy today.

Peter D. Schiff

President
Euro Pacific Capital, Inc.
10 Corbin Drive, Suite B
Darien, Ct. 06820
phone 203-662-9700
toll free 888-377-3722
email schiff@europac.net
web www.europac.net

FREE mini-report on financial & economic resources:

In case you missed it, here is the link to a free mini-report with some of my favorite resources to help you with your prosperity:

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Some Reminders on Upcoming Events:

1. THE OLMC INVEST-A-THON - On January 5 &6, 2008, I will be doing a fund-raising event for Our Lady Mount Carmel in Tenafly, NJ (there website is www.olmc.us). It will be an "Invest-a-thon" where I do two full days of investing & money-making seminars. It should be a lot of fun and the seminars are priced very low so that anyone can participate to learn more about stocks, ETFs, retirement planning, options, home business start-up and much more. The proceeds will help benefit a wonderful school and I am thrilled to do it! There will be more details in the next issue of the Prosperity Alert. I hope that you can attend. It is only about 20 minutes from the George Washington Bridge and it is a great way to start off the new year. Bring a friend!
2. PRECIOUS METALS INVESTING FOR DUMMIES - It is done and I can hardly wait to see it! The book will be in the bookstores and at Amazon.com. With the precious metals market red-hot the book is coming out just in time.
3. PROSPERITY CONFERENCE – MARCH 2008. this is the follow-up to the Financial Vortex. It will be loaded with great speakers and profit-making strategies for 2008 and beyond. Details coming in the prosperity Alert soon!

Thanks for reading this issue. I look forward to sharing more great stuff to help you with your prosperity. Regards, Paul Mladjenovic.

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