Editor`s rant - Paul Mladjenovic

Many of you already know that I am a big critic of the politicians in Washington. Both parties have done tremendous damage to our economy. Their latest effort, the $787 billion `stimulus` plan (signed into law Feb. 2009) should be called `Porkzilla` since it benefits our bloated government but does little (nothing?) to actually benefit the private economy that supports it. When you add up the interest on this hideous monstrosity then the cost easily soars over $1 trillion. Yikes! You and I and our neighbors and our children will pay dearly for this grotesque spending binge. It will be paid for through current taxes, future taxes and/or.INFLATION.

Inflation is nothing more than stealth taxation since it is really a hidden tax within the cost of goods and services. Inflation is a cruel, regressive tax because it hurts poor and lower-income people the most. The long-term impact for all of us will be very bad.

Will this plan (at the very least) have any short-term impact such as with job creation? The best jobs are those that are tied to productivity such as in the creation of goods and services. Good jobs come from business growth and expansion. I challenge anyone to read the plan as it was passed and find any money in it tied specifically to business start-up or business expansion.

The proponents of the plan tell us confidently that it would `create or save` 3.6 million jobs. If you do the math, each job would cost us $218,611 ($787 Billion divided by 3.6 million jobs). In the private sector, $218,611 could easily create 3 (or more) jobs. In other words, we could easily end up losing over 6 million jobs in the private sector!! Good Grief!

The bottom line is that this government program (and others in the pipeline) simply corroborates one of my main forecasts; an inflationary depression is heading our way.

It`s time to be prepared.not scared. Start by reading the next sections.

7 Things to do Right NOW to Protect your Prosperity
March 31,2009 - by Paul Mladjenovic
Copyright 2009. Paul Mladjenovic. All rights reserved.

Watching the policymakers in Washington is not fun and I do not find it good sport. It is really quite unctuous but I have to watch because it is my business to do so. Everything they do will affect me, you, the people we love and millions of our neighbors. Right now the public is still reeling from economic and financial shockwaves that have rocked us during the past 12 months. As I write this, the stock market is enjoying a brief bear market rally but please keep in mind that it will be temporary.

Nothing emanating out of Washington will solve our economic problems. They only have the ability to make matters worse. MUCH worse. A few years ago I told my clients, my students and readers that I expect an inflationary depression. I get into greater detail in my recent seminars. The latest data and political events make that forecast a greater likeliehood. The politicians and bureaucrats have failed to learn the lessons of history. Let me summarize them:

• When you have too much debt.stop borrowing! You can not borrow your way out of debt. If too much spending, consuming and borrowing gets you into economic trouble then you can`t get out by yet MORE spending, consuming and borrowing. Is this so damn hard to understand?! Who thought this crap up? (see next item)
• The `brilliant` John Maynard Keynes was a crackpot and his flawed economic policy ideas were (and are) grotesquely stupid. History tells us to discard his quackery NOT to embrace it as we are doing now.
• Higher taxes hurt the economy while tax cuts help the economy This is not just a nice idea or some dopey slogan. it is common sense and reality has proven this point time and time again. At this point, even if taxes tripled in America it wouldn`t make a dent in the trillions they`ve been squandering recklessly. Look. Americans are hurting so why not let them keep more of their hard-earned money?
• The most common collapse in economic history is a currency collapse A currency collapse occurs when a government prints a currency into massive OVERSUPPLY. It is first called inflation and if you continue it is called HYPER-inflation. Our government is spending trillions now and is planning to spend trillions more.
• The second most common collapse in history occurs when government gets too big Remember that government (good or bad) gets its resources from the economy. Economies collapse under the massive, bloated bureaucratic weight. It has happened with communism (such as Yugoslavia, the Soviet Union, etc.), fascism, etc.

In various degrees and in uneven ways, the above 5 lessons are being ignored RIGHT NOW. This is very sad. Just because the politicians and bureaucrats are not learning their lessons doesn`t mean that we shouldn`t learn our lessons. We have to take control of our own situations. Doing the right things now mean that you can not only survive their wretchedly stupid policies but also that you can thrive.

I think that most of the talking heads on TV are generally clueless which tells me that millions of us are getting bad information. That, in turn, means that millions will get hurt in some way. Let me give you an example.

In 2005, in both my seminars and my newsletters and essays, I warned that the housing bubble would pop and the shockwaves would not only hurt those directly involved in real estate but many indirectly through financial meltdowns that would affect Wall Street such as pensions, mutual funds and other financial institutions. A student in my seminar said - Hey.you`re wrong! Real estate experts such as Bob Vila and Donald Trump say that there is no bubble and that the real estate market will be fine. Why should I listen to you?

I respect those two very much and they are indeed experts at what they do. I will never argue with them about home improvements or how to construct a glitzy tower. But I do stick to what I know intimately and that is the economy and its affect on what I educate others on (such as the stock market). In March I turned 50 and it was also the 28^th anniversary of my business. In addition I was born in a communist country (socialist Yugoslavia) and we fled it in 1963. Watching from a safe distance in America, we saw Yugoslavia attempt its own `stimulus plan` in 1989 which only ignited an inflationary depression. Social chaos and conflict ensued. This brings yet another ominous point that our policy makers need to learn from history:

Cause and effect:

From economic disintegration comes. social disintegration.
This is a short list but these can be done easily, painlessly and immediately:

1. For 401K plans, IRAs and other pension plans Get all stocks, ETFs and mutual funds to be switched to `human need` investments. In other words, make sure the stocks and funds in your accounts should be primarily (only?) in those investments and vehicles tied to `human need` such as food, water, energy, consumer staples, grains, etc. Talk to your financial advisors or pension administrators about making the changes.

2. Sell other stocks or use `trailing stops` As I write this, a nice bear-market rally is going on in the stock market. Use this as an opportunity to sell stocks in vulnerable sectors (such as cyclicals and consumer discretionary). If you are not sure, then at the very least use `stop loss orders` or `trailing stops`. I cover them in detail in the book Stock Investing for Dummies (the 3^rd edition is now available). Most brokers can easily implement these orders for you.

3. Accumulate gold and silver bullion (coins or bars) that will help to act as insurance in an inflationary environment. Since the beginning of the decade, gold and silver have nearly tripled while the stock market is way down. Gold and silver bullion coins (for example) are easy to buy and sell and they are a good diversification away from paper assets such as stocks and bonds. No one has ever had to `bail out` precious metals.

4. Accumulate cash positions in savings accounts or treasury money market funds. This should act as an emergency fund or cash cushion. You should have the equivalent of at least three months (or more) worth of gross living expenses safely tucked away.

5. Savings Bonds such as the `I` & `EE` – are safe vehicles and perfect for small investors. EE savings bonds can be bought for as little as $25 and their rate is tied to interest rates while I bonds` interest rate are tied to the official CPI. I bonds can be bought for as little as $50. Get more details at your local bank. Savings bonds are issued by the US Treasury, are free from state & local taxes and are very safe. They may not beat the real-world rate of inflation but they are much better than long-term, low-interest, fixed-rate vehicles such as standard bonds.

6. Downscale all nonessentials See what you can cut out of your budget. Eating out just 1 time less per month (for example) could easily save you $1,000 per year. All of us can find something that we can cut or reduce in our budgets.

7. Set-up a pantry At this time, non-perishable foods (such as canned soups) are still very inexpensive. Stock up! When inflation goes into double-digits (and I think it will) you will be glad you did. With interest rates so low and inflation in the wings, having non-perishable foods and beverages on hand is an easy winner in your budget.

No.it`s not complete but it`s a good start. I don`t tell you anything that I don`t do myself. I personally live a modest lifestyle and yes we keep a pantry, etc. Yes, there is more to know and more to do. I spend a lot of time in my seminar, `The $50 Wealth-Builder` informing people that even modest steps can go a long way to protecting you and you hard-earned money.

While the economic environment is `deflationary`, take the 7 steps listed above seriously and get them done because we have no idea exactly when the inflationary depression will hit but a serious analysis of current economic and political events tell us unequivocally that it is coming.

It`s better to be many months too early than a day too late. So consider the next step.

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Silver`s Crunch Time Coming.. Ted Butler

Editor`s note: This essay was reprinted with permission from James Cook and his firm, Investment Rarities. I think that we are getting closer and closer to some shocking upside for silver. Those that are in silver (such as bullion and silver-related securities) should benefit very well.

TED BUTLER COMMENTARY - March 16, 2009 - Crunch Time?

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

It is one thing to analyze on a long-term basis, and quite another to make short-term predictions. There is no doubt in my mind that silver is a rock solid long-term investment opportunity, with an absolutely spectacular risk to reward ratio and value. It`s just a matter of time before silver is priced substantially higher. As I try to point out week after week, the rise in the price of silver is inevitable. That`s all that should matter to long-term investors. Silver is the ultimate buy and hold.

Asked when this dramatic silver price rise will take place, I have always answered that the exact timing is impossible to know, even though prices have already climbed substantially over the past few years. The important point is that prices are still depressed, principally due to the manipulation, offering the long-term investor an attractive entry opportunity. Still, silver is a very interesting topic to many of us, and it is hard not to try to consider the short-term factors. That`s why, for instance, I study the COTs.

I have always been convinced that the price of silver, when it moves to true value, will make that move with a violence that will shock most observers. It will not be a "normal" market move. It will be as unprecedented as much as the true meaning of that word allows. You had better be positioned before the move commences, because it will be extremely difficult to jump on board at attractive prices once the move has begun. Those who have talked with me personally about this, will confirm that I always say that when the real move comes, they will not have to ask me if this is the real move. They will know it simply by observing the price action. It will be unmistakable. Therefore, it is natural to attempt to anticipate when such a move may begin.

The real move in silver will come when a wholesale physical shortage is at hand. When that shortage comes, no one can stop the silver price explosion. Not the silver users, not JP Morgan, not the US Government. Further, I have always thought that any signs that the wholesale shortage was at hand would likely to be subtle, as opposed to being clear for all to see. When the signs of the real move are clear to all, when the wholesale silver shortage is truly upon us, it will clearly be too late for all to capitalize on those signs. This will develop very quickly, with little time to react. All we`re likely to get are subtle signs, not personal invitations to buy. The trade-off is that subtle signs can turn out to be false readings. So we are forced to be hypersensitive to the signs of a developing wholesale shortage in silver. We can play it safe and wait for the inevitable shortage to hit and say I told you so afterward, or we can stick our necks out and point to the signs while they are still subtle and maybe false.

With that caveat, let me tell you some of the signs I see of an impending silver wholesale shortage. Some of these signs are micro, meaning very specific and detailed. Others are macro, much broader. The main micro sign that we may be entering into a wholesale silver shortage is the appearance of an inversion or backwardation on the COMEX. For the past week, the nearby current delivery month of March has closed at a premium to the next major delivery month, May. What this means is that buyers are willing to pay more to get immediate delivery of wholesale quantities of silver. It means wholesale silver is "tight."

While not completely unprecedented, this inversion in the March contract is rare enough to command attention. It`s not just the premium of the March futures contract to the May contract that is unusual, it`s also the pattern of deliveries that suggests genuine tightness. The buyers have to wait for deliveries, where they didn`t have to wait so long in the past. Conversely, the sellers seem reluctant, or unable to make physical deliveries with the ease they demonstrated in the past.

What`s somewhat ironic is that there was a tremendous amount of discussion over the past few months about backwardation and potential delivery troubles in the past December contract. None of those threats came to fruition. Now, with very little public discussion or warning, delivery tightness and backwardation seem to have arrived.

Other micro signs include the very recent announcements of production disruptions at two of the world`s largest silver refineries, the MetMex complex of Penoles in Mexico and the La Oroya facility owned by Doe Run Peru. MetMex declared a force majeure on silver contracts due to a strike, while La Oroya ceased production due to non-payment to concentrate suppliers and a subsequent credit line cancellation. These circumstances may prove short-term in nature, but if anyone could imagine a more bullish announcement for silver than these two facilities suddenly being shut down, I`d like to hear it. That prices plummeted today on this news is so bizarre that it can only be explained by manipulation.

On the macro side, there are also very strong signs that the wholesale physical silver shortage is here.Over the past few months I have been writing about the impending decline in silver mine production as a consequence of declines in base metal production. http://www.investmentrarities.com/weeklycommentary10-27-08.html

http://www.investmentrarities.com/12-30-08.html

More than 60% of all silver mine production comes as a result of byproduct mining of three base metals, copper, zinc and lead. With the collapse of the world economy and the subsequent decline in industrial consumption of all commodities, the inventories of base metals grew dramatically. After all, it is a lot easier for an industrial consumer to quickly cut consumption than it is to shut down a mine. Therefore, in the time lag before mine production declines sufficiently to match the new lower level of industrial consumption excess metal is produced and flows into inventories. That is exactly what we`ve seen over the past six months. Inventories of copper, zinc and other base metals exploded in size. (Silver inventories grew as well, but all the excess silver was gobbled up by investors, as discussed previously).

Now there are signs that base metal mine production has fallen enough to match the lower level of demand. Those signs can be found in the recent flattening out and decline in copper, zinc and lead inventories at the London Metal Exchange. After growing non-stop for months, inventories at the LME have stopped growing in the past few weeks. This suggests a current balance between supply and demand for copper, zinc and lead. Of course, if inventories start to grow rapidly again, this flattening out in inventory growth will have been a false signal. But assuming that mine production of copper, zinc and lead has now been reduced enough to prevent inventories from growing, then the conclusion for silver is clear. Silver mine production has also been dramatically reduced. This can only add to the wholesale silver shortage, as investment demand is still surging.

Allow me to summarize what all these micro and macro signs of wholesale shortage mean to silver investors. Quite simply, it means that the price of silver should explode soon. Either that or all these signs must reverse direction. You must remember that the manipulation is a manipulation of price. The price is the only thing wrong, or out of kilter with everything else that exists in silver. The price is the aberration. If the silver price today was $50 or $100, everyone would see the tightness in wholesale silver. But because the price is $13, very few see it.

The good news is that of all the factors that matter to silver, it is the price itself that can change quicker and more radically than any other factor. More good news is that nobody can prevent a wholesale shortage. No matter how powerful they may appear to be. This is about physical supplies, not how many paper contracts can be sold short. Additionally, if we are entering into a wholesale silver shortage, then nothing could prove that the silver market has been manipulated more than this. Let`s face it, the regulators maintain that all is well in silver and that the price is at a free and fair level. Nothing will expose that lie like a wholesale shortage.

If the short-term signs I see, both micro and macro, are true representations of what is occurring with supply and demand, then it may be crunch time in silver. If that`s the case, buckle up and get ready for the ride of your life.

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