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

Last week, in a speech delivered to congress, Hon. Ron Paul of Texas began like this;

I have long felt that our foreign policy makers are responding to administration members, of a collectivist mind set, who are attempting to further the New World Order. Last week, Sen. Richard Lugar, R-Ind., asked Condoleezza Rice, during her confirmation hearings, about the Law of the Sea Treaty, (LOST). Her response was that President George W. Bush "certainly would like to see it passed as soon as possible." Assuming she wasn't just making it up, Dubya can no longer claim the mantle of Ronald Reagan's conservative legacy.

LOST was designed to put the Earth's oceans under the control of the UN. The treaty would regulate deep-sea mining, maritime transit, fishing, pollution and oceanic research. It would establish the International Seabed Authority (ISA), which would act as a de facto world court. The ISA would be the first and final judge of deep-sea disputes. It would get into the mining business itself with forced subsidies from private companies. With its cut of profits, royalties and fees, the ISA would also be a redistribute-the-wealth mechanism for "deserving" developing countries. Hooey! It is an undeniable attempt to "claim possession" of all resources under all the oceans of the world.

Ronald Regan, the last conservative President, saw this proposed treaty for what it was and not only repudiated it, but fired the U.S. State Department staff that had negotiated it.

But the first Bush and Clinton administrations attempted to resurrect it and, unbelievably, a revised agreement was signed, but never Senate-ratified, in 1994. There it lay until last October, when Senator Richard Lugar (R-Ind.) suddenly pushed for ratification. (At the Senate Foreign Relations Committee's hearing, where only treaty proponents were invited to testify.)  The New World Order White House recognizes LOST as one more nail in the coffin of our national sovereignty and is openly trying to hasten its ratification.

The basic notion that the sea, and by precedent, space, should be managed by UN collectivist bureaucrats is lunacy. 

Why is George Bush dedicated to upholding the ideals of the United Nations? Could it be that all the Administration's policies, and the policies of the two Administrations that preceded it, be working against American sovereignty? If this is true, then both the Democrats and Republicans are trying to guide us into the trap of globalism. It's clear to me that our Country is being guided by politicians who are working on an elitist agenda that supercedes the U.S. Constitution.

Financial Markets

The markets have been intentionally set up for a fall. As I have stated many times before, they are rigged so that the central bankers of the world can siphon off wealth at will. I believe that the DOW is about to tank. Its been tanking for sometime, but because of the devaluation of the dollar, no one seems to notice.

If your portfolio was worth $100,000 two years ago, and it's now worth $120,000, you may think that you are up 20%. Unfortunately, that $120,000 only has the buying power of $90,000 in inflation adjusted dollars. After you additionally take away another 30% of the apparent $20,000 capital gain for taxes, your buying power has been diminished by another $6300, so you are down to $83,700.

But now it will begin overtly tanking instead of covertly tanking. I see the blue-chip index at 6900 before the end of the year. The only way Greenspan can stave off economic Armageddon is to raise rates precipitously. This action will effectively choke off any growth and result in stagflation. Meanwhile the presses will continue to run, and your equity will continue to dissolve.

Unless you are a card carrying masochist, get out of service equities and into commodity equities. Historically, at the beginning of a recession, the breakfast commodities, (coffee, cocoa, sugar, wheat, oats, rice, etc.), do well, along with unleaded gas, and soy bean oil. I will be putting together a early recession portfolio during the next two weeks. It will be posted in the private dinning room's "Financial Survival" forum.

Precious Metals

The recent correction in the precious metals market has created a brief and exceptional opportunity to pick up bullion and bullion mining shares at bargain basement prices. The purchase of physical bullion should be made for the long term, while speculation in mining equities will provide the most leverage.

Members have emailed me with concerns over the recent declines in the prices of both gold and silver. I remind them that the silver I bought two years ago is up around $2 an ounce, (about 45%), and the gold is up around $72, (about 22%.) Both investments have out performed the DOW and the S&P 500.

Energy

Venezuelan President Hugo Chavez has been aggressively pursuing trade agreements to sell crude and fuel oil to China. He is so motivated to cement ties with Asian markets that he is offering petroleum at discount prices to offset shipping costs and, in turn, make the deal more attractive.

Analysts say Mr. Chavez's policies against the U.S., which buys half of all the oil Venezuela sells, could cut into its oil income and hurt the country's ability to maintain production, which has fallen from about 3.1 million barrels a day in 2002 to about 2.6 million barrels a day currently. Chavez seems willing to allow production slowdowns which would result from severing ties with U.S. markets.

"Sending oil to China might not be economically viable, but Chávez's motives are not always economic," said a diplomat in Caracas.

Venezuela is also in talks with Panama suggesting they reverse the flow of the peninsular pipeline to the Pacific Ocean. That would allow it to send oil to Asia more cheaply.

Venezuela is the world's fifth-largest oil exporter. Any sizable production cutback will put upward pressures on global oil prices.

The Fed

It would seem that "Bubbles" Greenspan has finally owned up to the central role he has played in irreparably screwing up the world's economy. His confession came in the form of a speech entitled, “Current Account”, that was given in London at the Advancing Enterprise 2005 Conference on the night before the February 5th G-7 meeting.

Bubbles’s admission came when he finally admitted connection between the excesses of America’s property market and its gaping current account deficit.

In other words, he concedes that a debt-induced consumption boom has led to a massive current account deficit.

Greenspan targeted the American Consumer as a replacement for the American Producer as the chief contributor to the U.S. economy. To insure the American Consumer would be, at least temporarily, capable of such a task, "Bubbles" lowered short-term interest rates to their lowest level since 1958. He is now saying that it's time to "take away the punch bowl", and by doing so, allow the real estate bubble to burst. Housing prices are about to fall.

The old saying is buy low, sell high. The time for the latter has finally arrived.

Financial Survival

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

Don't spend two dollars to dry clean a shirt. Donate it to the Salvation Army instead. They'll clean it and put it on a hanger. Next morning buy it back for seventy-five cents.

Very soon, a lot of people will be glad they held gold and silver.

Stay tuned for more portfolio recommendations in the Silver Bear Cafe's "Private Dining Room"

 

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.