As the editor of the Silver Bear Cafe, I spend most of my time researching current events. I explore the markets, the war, precious metals, the Federal Reserve and energy. In this weekly column I will attempt to condense the week's events and examine how the news might affect your pocketbook. JSB

On the war front

According to Dr. Paul Craig Roberts,

Last week I posted Mr. Roberts essay entitled How Americans Were Seduced by War. I believe his essay to be a "must read" for all concerned patriots.

Financial Markets

By appearance, the DOW was essentially flat in 2004. If you had $100,000 going in, you had $100,000 coming out. The rub is that the original $100,000 is now worth 25% less due to devaluation. The stock market actually crashed in 2004!

I believe that a lot more of the same will occur this year. If you are just now waking up to the realities of "the game", get your money into non-dollar-denominated issues, (read in; companies valued in strong currencies) that are involved with timber, fresh water, all metals, minerals, and energy.

Being diversified in terms of the "investment universe" also means holding assets in different jurisdictions. It only makes sense that an investor would want to hold accounts outside the U.S. I am well aware that this has become increasingly difficult, and, under pressure from the U.S. authorities, some Swiss banks are extremely reluctant to accept such accounts. (If they do accept such accounts, they must not give U.S. residents advice by telephone, fax or e-mail; therefore, almost full discretion or periodic visits may be advisable.)

Singapore is, however, a viable and safe alternative to Switzerland. Still, the fact that the U.S. authorities have made the opening of overseas accounts so difficult should serve as a warning signal of things to come.

EverBank’s FDIC-insured World Currency Deposit Accounts and CDs – denominated in any of the world major currencies, including the euro, Swiss franc and New Zealand dollar – offer you an incredibly simple and efficient way to invest in to many attractively priced currencies.

Simply exchange your dollars for the currency or currency basket of your choice, and receive interest rates several times as high as those offered on dollar deposits.

Or for more information call 1.888.882.EVER (3837) and remember to mention the "Silver Bear Cafe" when applying!

Our economic freedoms are being systematically pilfered. if you snooze, you lose.

Precious Metals

All metals are precious. Some are obviously more precious than others.

Sino Silver Corp. (SSLV.OB) is a new company with a lot of promise. A recent deal cut with the Chinese government positions this company to rapidly expand in 2005 - 2006. The stock is currently trading for $2.00 per share. Keep your eye on this one.

This next one is a speculators dream. it's a penny stock with a whole lot of upside potential. The company is producing gold for around $200 per ounce. At the time of this writing the stock was selling for $.07 per share.

Eurasia Gold Corp. (EGX.V)
2215 - 120 Adelaide St W
Toronto ON Canada M5H 1T1
Phone: 1(416) 504-2899
Fax: 1(416) 504-2729
Email: eurasia@eurasiagold.com

As I have been shouting for the last two years, commodities are where your money should be. Although I am still very bullish on gold and silver, (most especially silver), the markets are manipulated and as a result, can be very scary.

Steel, on the other hand is like the blue chip sector in metals. Everyone needs it, uses it, depends on it everyday. A quick look at Companhia Vale do Rio Doce's, (CVRD), chart illustrates dynamic growth. The stock doubled last year, and is up another 7% this morning.

Steel product prices nearly doubled in dollar terms last year due to strong demand and steel makers agreed a month ago to a 127 percent price increase for coal, which is an important energy source for steel makers.

Iron ore prices will probably rise another 20 percent in 2005 after increasing 19 percent last year.

Companhia Vale do Rio Doce (RIO) is one of three largest iron ore miners in the world, along with Anglo-Australian miners BHP Billiton Ltd. and Rio Tinto Plc, and is the biggest exporter of the three.

This Brazilian company is straining to boost production so it can take full advantage of the surge in demand for iron, the main ingredient in steel.

China's insatiable appetite for steel is expected to rise by 10% -15% this year and several Japanese auto makers have already cut back production as a result of supply shortages and increasing prices.

Invest in the steel sector. The three issues described above are ringers. Also start paying attention to coal.

Energy

JOSEPH, one of history’s more inspired economic pundits, famously predicted seven years of great plenty, followed by seven years of famine, in the land of Egypt. How fitting, then, that the latest meeting of the 11 members of the Organization of the Petroleum Exporting Countries (OPEC) should be held on the banks of the Nile, for the cartel is entering its seventh year of bounty from the oil markets. From a trough in the winter of 1998, oil prices have since risen more than fourfold. OPEC members will reap a windfall of over $300 billion this year alone.

But in the spirit of the Biblical Joseph, OPEC is now making provision against a possible reversal of its fortunes. The riches of the autumn have already faded. A barrel of light, sweet crude, which sold for over $55 in October, fetched less than $49 on Wednesday—and the dollar itself (the currency in which oil prices are almost always denominated) is not what it was. OPEC fears that prices overshot in the autumn and that its members oversupplied the market in response. At its meeting in Cairo on Friday December 10th, members agreed to restrain their output by about 1m barrels per day (bpd), thus reinstating the official quota of 27m bpd, which they have all but ignored in recent months. The decision took effect on January 1st but will probably not be fully implemented until February.

As I have stated in several previous editions of Bear Tracks, the Saudi's stated reserves far exceed actual reserves, and what oil they have left will be forever more expensive to extract.

The only oil left to find is underwater. In fact, the planet's proven untapped deepwater oil reserves could more than triple in the next 20 years. The downside to this potential bonanza is that the cost of extraction will increase by a factor of five. Access to these remaining reserves are already being contested. (see; Bear Tracks; It is later than you think.

The global oil supply struggles against the forces of inevitable depletion. What's more, the global balance between supply could become quickly imbalanced if terrorist attacks disrupt supplies.

Strat Petroleum, Ltd., (SPRL.PK), is a Canadian energy company, that, according to their web site,

I see this stock as being risky but with incredible upside potential. Although this pick is not for the "feint of heart", it bears investigation.

I believe that news about oil and gas will forever be entwined with news about the wars. The ever dwindling resources will be harder to find, more highly contested and higher in price. Check out the Silver Bear for news on renewable energy sources.

IMO, any balanced portfolio should include energy issues that are not denominated in U.S. dollars.

The Fed

The last deflation we experienced came in with the 1929 Depression and we survived that, in part, because we were the world's largest creditor nation. We aren't so lucky this time around. Currently the United States is the world's largest debtor nation and a deflation would be the worst of all possible worlds as it would make debt unserviceable. Deflation destroys paper wealth (you can read this as housing) and will cause our "debt bubble" to implode. I'm sure that many of you feel that Mr. Greenspan can work some of his magic and make it all better, but I disagree. Why? It has to do with the fact that we import deflation, largely from Asia as well as from Europe to a lesser degree. It also has to do with the Internet. It's now possible to find the absolute lowest price for just about any item you want to buy and that takes away the pricing power for producers.So the Fed finds itself in a tight spot. It raised rates at the end of June, but now it must adhere to market anticipations with further hikes or run the risk of appearing impotent. That could prove to be deadly for the leveraged speculators who have been encouraged by Fed actions — and inactions — since 1996.

And higher rates may also burst the housing bubble, and unleash numerous problems for government-sponsored mortgage lenders, as well as for young, low-income and minority families who became homeowners in recent years via low down-payments and low mortgage rates.

Delinquency rates have been rising in recent years and the concern is that, since most of these low-income families have negative net-worths outside their homes, continuing layoffs will squeeze them out of the housing market. And as that lack of demand ripples up the move-up market, housing prices from top to bottom will fall in what could be a self-feeding and serious decline leading to the first nationwide drop in housing prices in the post-World War II era.

Financial Survival

Accounts Receivable Tax Building Inspection Tax Building Permit Tax Business License Tax Capital Gains Tax CDL license Tax Cigarette Tax (you don't want to know how much) Corporate Income Tax Court Fines (indirect taxes) Dog License Tax Federal Income Tax Federal Unemployment Tax (FUTA) Fishing License Tax Food License Tax Fuel permit tax Gasoline Tax (42 cents per gallon) Hunting License Tax Inheritance Tax Interest expense (tax on the money)

Inventory tax IRS Interest Charges (tax on top of tax) Liquor Tax Litter Tax Local Income Tax Luxury Taxes Marriage License Tax Medicare Tax Personal Property Tax Real Estate Tax Septic Permit Tax Service Charge Taxes Social Security Tax Road Usage Taxes (Truckers) Sales Taxes Real Estate Property Tax Recreational Vehicle Tax Road Toll Booth Taxes School Tax Self-employment Tax State Income Tax

State Unemployment Tax IRS Penalties (tax on top of tax) Telephone federal excise tax Telephone federal universal service fee tax Telephone federal, state and local surcharge taxes Telephone minimum usage surcharge tax Telephone recurring and non-recurring charges tax Telephone state and local tax Telephone usage charge tax Toll Bridge Taxes Toll Tunnel Taxes Traffic Fines (indirect taxation) Trailer registration tax Utility Taxes Vehicle License Registration Tax Vehicle Sales Tax Watercraft registration Tax Well Permit Tax Workers Compensation Tax

Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids. What the #@*! happened?

Health-care costs are rising 300% faster than wages. Explaining away the impact upon the “Real Economy’s” participants is quickly becoming far less palatable to America’s Working Class. I use that term very loosely to include all Americans not feeding at the top tier of first abuser privilege granted to those with immediate access to "Bubble's“ Liquidity Trough.”

Houses in most locations are not presently a good buy. If you can't buy a house, rent it out, and cover your costs, then it is over priced. As you already know, today, there aren't many houses out there that pass this test. In other words, it's far cheaper to rent a home than it is to buy one.

We are entering a period of civilization where the keyword is sustainability, not growth.

In a world of $100/barrel oil, the weak die and the strong survive.

Very soon, as early as next year, a lot of people here will be glad they held gold and silver

Its not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.