“I think that's my greatest attribute, the fact that I haven't had experience ruining the country.”

That’s what Peter Schiff said on Morning Joe, the left-leaning MSNBC morning show, as he officially announced his candidacy for U.S. Senator.

Schiff’s recent foray into the mainstream media has been sudden, but equally entertaining. His thoughts have been direct and different which always makes for something interesting.

Schiff explains his reasons for running for Senate:

[Schiff] believes that the massive increases in government spending since the beginning of the recession are actually making the economic disruption worse than it would otherwise have been. He sees another crash on the near horizon.

“What I've decided is that I cannot sit idly by and just watch a trainwreck in slow motion. I think it's important for me to stand up for the American taxpayer, for our country, and try to put a stop to this. [Senator Chris Dodd] represents all that's wrong for Congress.”

Schiff says he is among “a growing number of Americans out there who are fed up with what's going on, who understand that Washington does not represent the solution to our problems but the source of our problems. And unfortunately, the economic collapse that I predicted is going to get a lot worse precisely because of the things that the government has done over the last year to try to solve the problem that they've created.”

Clearly, Schiff’s take on the economy is certainly not very closely aligned with the mainstream, but not too much besides the official white house press releases are.

But as an economist, Schiff may just have a shot. Rasmussen Reports have Schiff within 2% of Dodd. This would be a major upset in the very left-leaning state of Connecticut.

At Q1 Publishing we are looking at things from an investment perspective (we’re investors working towards achieving financial independence). So from an investment perspective, there are two very positive events which could come from this.

The first benefit is the public will continue to realize the government cannot solve a single economic problem. They can only create them.

This has never been made more apparent than when we sat down with Dr. Robert Murphy a few weeks ago. In the interview Murphy goes into great detail about how the specific government actions at the start of and throughout the Great Depression only made things worse. Agriculture price controls reduced food supply, high wage mandates eliminated jobs; sharp increases in taxes eliminated capital available for investment, import tariffs reduced free trade, etc. etc.

Right now it appears the government is doing the exact same thing as in the Great Depression. In just the last few months, import tariffs have been implemented, minimum wage mandates have increased, and states across the country have increased taxes (Feds will follow shortly).

Schiff could be in a position to help shed light on how self-defeating all this is and will – eventually at least – be looked back as huge mistakes.

The second benefit of Schiff’s election could be to gold investors. Schiff has been a “gold bug” for years. And his presence on a national media stage – successfully elected or not – will only help bring more and more public exposure to the gold market.

At the Prosperity Dispatch, our 100% free investment newsletter, we continue to like gold and gold investments. Schiff’s run may help or it may not, but there are a lot of other fundamentals to send gold stocks much higher in the months and years to come.

www.GoldForecaster.com

This is a snippet from a recent issue of the Gold Forecaster with

 Subscriber-only parts excluded.

As the fifth part of this series we now look at this question: “How will Gold Confiscation affect the citizens of other countries, in the event their Central Bank takes their gold?”  

Does the U.S. have rights in other countries, over their [U.S.] citizen’s wealth?

The latest story to hit the headlines in this regard is the matter of U.B.S.   I’m sure all of you have read the details there, so I won’t describe the entire story.   The pertinent point is that the U.S. Taxman asked for confirmation of the names of 52,000 account holders and has received 4,500 only.   Why?

The Swiss government relies on its banking services for a considerable percentage of the nation’s income.   For three hundred years they have provided a home for foreign owned assets and monies.   The have, still firmly in place, Bank Secrecy Laws that ensure that nobody can expose account holders at banks unless they have evidence of criminal activity on the part of account holders.   They have stated clearly in the past that Tax Evasion is not considered a crime.   Illegal exports of wealth that involve a crime [such as diamond smuggling] would lead to the Swiss authorities turning over an account holder’s name.   So, 4,500 out of 52,000, implies that criminal activities were allegedly perpetrated by these account holders and 47,500 were not associated with crimes.   This despite the U.S. Taxman’s objections to U.S. owned money being held in Swiss banks without disclosure to the U.S. Taxman.   Bear in mind that this is continuing!

Will the U.S. Taxman have any chance of exposing the 47,500 account holders?   The agreement made between the Swiss and U.S. Authorities clearly tells us NO!   This defines for us, the extent of “financial sovereignty”.   Without Swiss government support, the U.S. Taxman cannot overrule Swiss Banking Secrecy Laws.   All that is left to the U.S. Taxman is prosecute suspicions at home and attack locally [U.S.] owned assets by U.S. citizens, but then he needs proof positive to be able to do so.   This does not appear to be available in the case of 47,500 secret Swiss Bank Accounts.   So the solid conclusion we can draw is that Jurisdiction rules!

Having said that, please know that gold holding companies [At home and abroad], which have U.S.-owned gold, have agreed to disclose account holders to the U.S. Authorities and will not go against the U.S. Authorities.   So generally now, Swiss Banks will not entertain new U.S. account holders.   For instance, Julius Baer holds gold in its physical fund only for non-U.S. citizens.   So just holding gold overseas is clearly not enough!

[We are working on a solution to this problem right now!]

For citizens of other countries.

Citizens in other lands face the same governmental claims on their income and capital.   The main difference is that, should you leave that country to live elsewhere, your local taxman considers only the income and capital you leave at home to be under his Jurisdiction.   So long as you reside in that country [usually for more than 3 years] your worldwide wealth is under his Jurisdiction.

There have been attempts by governments to force the repatriation of foreign assets, but this has often pushed citizens to leave the country and abandon their home nationality.   The developed world has, in the past, exerted a more efficient grip on its citizen’s wealth, but all nations do their best not to be too draconian, except in the dark days of extreme money conditions.   When these have persisted, they have gone to any lengths to control citizen’s wealth, even to the extent of taking ownership control of assets left behind by departing residents. i.e. You have to ask their permission to use your own money even at home, while you live elsewhere.

Don’t think for a moment that such moves cannot happen again.   To remove the possibility of the seizure of gold, the world must be a far different place to the one we see now.   There will have to be complete governmental and citizens acceptance that global interests override national ones.   Likely?   If you see this, you will likely see a squadron of pigs circling the White House at the same time.

That is why the gold Exchange Traded Fund, The Ultimate Gold Fund has been designed to accommodate U.S. gold owners, holding their gold in Switzerland, in a manner that is intended to prevent their gold from being confiscated!

The Final Part will be next week : –

Make sure you follow this series and other fundamental gold matters in the:

Gold Forecaster

This regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. 

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

There are a lot of “safe haven” assets. Over the past twelve months some of them have proven their true worth.

For instance, U.S. Government bonds soared as stocks tanked last fall. They have even done well over the past month as more and more investors get worried about the strength of the rally.

Meanwhile, gold, the ultimate safe haven asset and a popular inflation hedge, was hit hard during the credit crunch and has since resumed its strong uptrend.

This creates a very odd situation where bonds, which don’t do well when inflation is high, and gold, which does well when inflation is high, are both doing well at the same time.

The gold/bond conundrum could be signaling something much worse than regular inflation, it could be signaling outright currency debasement.

Dennis Gartman sums it up in I Don’t Like Gold, Bond Rush:

It is a very weird week when you see gold going up and the bond market rallying. One cannot have a warm and fuzzy feeling.

I don't like it when I see gold going higher, but you have to be long [gold].

At Q1 Publishing we agree completely. Of course, we may not see the run-up in bonds holding up, but the one in gold certainly has a lot more room to run.

All of our investment research continues to see massive inflation – with the real potential for currency debasement - ahead. It’s going to be a very good situation where investors buy gold and gold stocks for profit and protection.

Up, up, and away…

That’s how gold stocks moved today. The Market Vectors Gold Miners ETF (NYSE:GDX) climbed nearly 10% today. And the move was exceptionally strong. The ETF, which tracks the major gold stocks, opened about 2% higher and steadily climbed to close up almost 10%.

The exceptionally strong move in gold stocks was propelled by a $20+ surge in the price of gold.

But we have to wonder whether this surge in gold stocks will end up going the way of every other gold rally in the past year and a half, if not how sustainable the rally is, or how much in gains to expect in the short-term if this is the last great buying opportunity in gold.

Strength and Sustainability

Back in January, gold stocks were terribly undervalued relative to gold.

In our “Trade of the Year” we looked at how to play the undervaluation of gold stocks relative to the price of gold. We looked at the price of gold – as tracked by the SPDR Gold ETF (NYSE:GLD) – relative to the value of gold stocks – tracked by GDX, Gold Miners ETF mentioned above (Gold/XAU is more popular, but it has much more exposure to volatile silver stocks).

At the time the gold to gold stocks ratio was near a multi-year peak. You could purchase 2.6 shares of GDX for every GLD share. This was well above the long-run historical GLD/GDX ratio which ranges between 1 and 1.5.

Today, the ratio continues to decline (the ratio declines when gold stocks outpace gold). The ratio closed at 2.26 (GLD - 96.19/GDX - 42.48). As the chart below shows, the ratio is working its way back to its lows for the year – which is very good for gold stocks.

So, when wondering if this rally in gold is sustainable, the answer is a resounding yes. In fact, there is a lot more room to run for gold stocks before they reach their 2008 relative norms.

How Much Can We Make Of This Run?

Now, if we look back to early 2008 when inflation was the fear du jour, gold passed $1,000 an ounce, and gold stocks were hot, we can see gold stocks – as a whole – have a lot more room to run.

The GLD/GDX ratio hit a low of 1.75 in April 2008. That means, from this point, gold stocks could realistically climb another 22% from here even if gold doesn’t move another inch. But if we start adding in a rally in gold as well, the short-term potential gets a bit more enticing. A run in gold to $1050 would push the upside in gold stocks up to 42%.

Of course, not all gold stocks are created equal. For instance, these five gold stocks actually climbed a total of 516% in three months and two of them have doubled again in the past few months(get full report free here).

So gold is looking good and gold stocks are looking great at this time.

What Does History Say?

Finally, we can’t forget what else history is telling us.

As many of you know by now, historically, September is the worst-performing month for stocks as a whole. September, however, is one of the best-performing months for gold stocks.

The chart below, as published by Frank Holmes, CEO and CIO of U.S. Global Investors (NASDAQ:GROW), points out how well gold stocks have done in September:

Clearly, September is historically a stellar months for gold stocks.

The Stars Are Aligning

We all know the long-term outlook for gold – unfounded government spending, unprecedented money printing, and the long-run value of the U.S. dollar – but now, the prospects for a short-term run is a very real possibility. Best of all, if the market is going down and the gold stocks are going up, they’re going to attract a lot of the “hot” money.

There are no guarantees in the investment world, but you have to look for high potential opportunities. Gold is shaping up to be one of them in short- and long-term.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Editor’s Note: Andrew has been actively covering the gold market for years. He has traveled to over a dozen different countries across four continents in the past few years looking at gold and other resource projects. Whether it’s in the Arctic Circle on the “wrong” side of the Russian border or the part of Australia tourists just don’t go to, you’ll find Andrew there.

The five gold investments he has identified have significantly outpaced gold and gold stocks as a whole. Not a single one is down while one has quadrupled, one has tripled, and one has doubled. Claim your copy of this free report now.

The global race for lithium is still in the early stages. Successful investors have already started watching the lithium boom closely. Today, we got another major step in the road to lithium batteries becoming standard features in 10% of the world cars.

The world’s largest automaker, Toyota (NYSE:TM), announced it has entered into a deal to buy lithium batteries from a major supplier.

Bloomberg reports: Toyota to Buy Lithium-Ion Batteries from Sanyo, Nikkei Says:

Toyota Motor Corp. will buy lithium ion batteries from Sanyo Electric Co. from about 2011, Nikkei English News said, without citing anyone.

The Sanyo batteries will be used for a new hybrid minivan, the report said. Sanyo is likely to supply batteries for at least 10,000 vehicles a year, the Nikkei said today.

Lithium-ion batteries have higher output and capacity than the nickel-metal hydride type that Toyota uses in the Prius and other hybrids, the report said.

Sanyo isn’t the source of the Nikkei report, Tokyo-based spokesman Hiroyuki Okamoto said. The company’s policy is to provide lithium-ion batteries for any hybrid-car maker that wants them, he said.

This just proves how Japan is on its way to becoming a leader in the lithium battery boom. It won’t be an easy task. The U.S. federal government has already started dispensing its $27 billion in subsidies for the purchase of hybrid car batteries and grants to assist companies build lithium battery plants. Germany is going after it. France has thrown its hat in the ring too.

 Lithium batteries will be a success. They may be better technology, they may not be. But lithium batteries will be so heavily subsidized that they will be a big winner – at any cost.

Stay tuned in on the explosion of lithium battery production in our free investment newsletter, the Prosperity Dispatch.