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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Monday, October 3, 2005 - Vol. 7 No. 199
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In This Issue:
* COMMENT: Golden Opportunity Is Knocking.
* OFFSHORE: Bermuda Big Business Likes Status Quo. Panama Investing.
* WEALTH: Swiss & Australian Tax Probe. Offshore Scam. Settlement.
* PRIVACY & RIGHTS: ID Theft. U.K. Terror Law. Ugly Americans.
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COMMENT: Golden Opportunity Is Knocking.
Dear A-Letter Reader:
Back in mid-July, I raised a flag on oil - I said it was poised to head
higher quickly, and I wrote a report talking about the forces driving
oil prices and naming 10 stocks I thought would make hay in the oil
markets. That report, "70 Days to Empty," proved dead on, and since the
initial recommendation, those stocks are up 19%...24%... 27%...35%.
Every stock turned out to be a winner - leaving the S&P 500 in the dust
and even outpacing the broad energy sector - and my one short pick
proved profitable as well.
Am I mentioning this to shamelessly toot my own horn? No. I'm bringing
this up because once again, most of Wall Street is ignoring fundamental
forces at work. Once again, there is an opportunity staring you in the
face right now, just waiting for you to seize it.
That opportunity is gold.
* What's the price of gold got to do with the price of crude? A lot!
Global oil revenues increase $300 billion with every $10-per-barrel
price increase in the price of crude. The Middle Eastern culture has an
affinity for gold - in fact, Dubai is becoming a new center of the
global gold trade. They have to put that money somewhere, and a big
chunk of it seems to be flowing into the yellow metal.
Higher oil prices also fuel inflation, which hurts the value of the U.S.
dollar. When the dollar goes down, gold goes up (because it's priced in
dollars). Since the beginning of this year, we've seen gold and the
greenback go up at the same time. That's unusual, but it may be about
to change…
* The Federal Government seems hell bent to make the US greenback
worthless. The bill to clean up after Hurricanes Katrina and Rita will
likely run $300 billion. Meanwhile, we're spending hundreds of billions
in Iraq, an expensive war seemingly without end. Washington's lawmakers
are bristling like razorbacks at the idea of cutting anything from the
larded up $286.4 billion highway bill. And yet this pales in comparison
to the $43 TRILLION in America's unfunded liabilities - a problem the
gutless wonders in Washington refuse to tackle.
To pay for all this, the US will have to issue more debt. The only
thing holding the dollar stable now is that foreigners (individuals and
governments) line up to send us $2.2 billion each and every day. They
consider the US a "secure" investment...for now.
* The global financial system is at risk. Last week the share price of
Fannie Mae, dropped nearly $5 per share (more than 10%) in one day on
news of major new accounting problems - potentially including overvalued
assets, underreported credit losses, misused tax credits, and purchased
insurance policies to hide losses after they were incurred. Fannie Mae
is the #1 source for home mortgage funding in America, financing more
than one in five home loans - it is a major linchpin of the US financial
system. The day the Fannie Mae news broke, gold rallied sharply to end
nearly $7 an ounce higher.
Fannie Mae could be the canary in the coal mine for the problems in the
financial sector. What other kind of problems?
For instance, there's $8.4 TRILLION in outstanding contracts for a
type of debt called credit derivatives. That's up - way, way up from
$919 billion at the end of 2001. Banks like JP Morgan and Citicorp are
bundling debt in creative ways as market players swap risk with
abandon. You don't have to be Cassandra to see that another situation
like Long Term Capital Management - which nearly brought the global
financial system to its knees in 1998 - has the potential to rock the
financial world.
Maybe we'll get lucky and we won't see a crisis in the global financial
system - I'm fine with that. But there are enough forces driving gold
higher that it is becoming a must-buy very quickly…
* Global supply/demand squeeze is getting worse! According to the World
Gold Council, India's gold demand soared 17.6% in 2004, from 547 tons to
643 tons. And the demand is accelerating. In the first quarter,
India's gold demand roared higher by 72% year over year. China,
meanwhile, is no slouch. Its gold consumption jumped 13% in 2004. And
in the next five years, China's gold sales could soar to 600 tons
annually, the World Gold Council says.
Meanwhile, gold production in 2004 declined by 114 metric tons - the
biggest annual fall since World War II. This year, gold production will
be lucky to stay flat. In the face of surging demand and global
financial instability, that's a recipe for much higher prices.
Whether you take my particular advice or not, don't ignore what's about
to happen in gold. Sure, gold already had a great run. The yellow metal
is up 86% since April of 2001. The "conventional wisdom" crowd on Wall
Street will tell you now's the time to sell gold - while at the same
time they're trying to sell you shares of helium huffing tech stocks
with no earnings, no dividends, and no real value.
My advice: Tell the conventional wisdom crowd to take a long walk off a
short pier. If you aren't invested in gold yet, don't worry - you
haven't missed the boat. Sure, it would have been nice to buy gold
stocks when they were dirt cheap. But even though gold recently hit a
17 year high, you can buy undervalued gold miners now and watch them go
much higher.
Gold mines aren't the only way to buy gold, of course. In my report, I
talk about five ways to buy gold. I tell you about six forces poised to
drive gold much, much higher. I name five stocks and one precious
metals fund I think are on the launch pad.
Start buying gold! My target is $600 an ounce by the end of 2006. If
you didn't believe me on oil, don't ignore me on gold.
Follow one of these links to read my Gold Report right now.
A-Letter readers click here .
Sovereign Society Members click here .
Best wishes,
SEAN BRODRICK, Investment Director
The Sovereign Society Ltd.
E-mail: seanbrod@bellsouth.net