INDIA RISING !

The dawn of the Information Age has allowed, among other things, India's economy to flourish - while providing the West with a seemingly never-ending supply of skilled workers at a fraction of the price it would cost at home. Charles Sizemore explains :

Chances are good that you have found yourself in the following situation:

You call your phone company or credit card bank to ask a question aboutyour bill, and your call is taken by a friendly man with a distinct accent named "John."

After some short pleasantries, John walks you through your billstep-by-step - from a call center halfway across the world in India.

Coupled with the trend in globalization, the communications technology revolution of the 1990s has transformed an impoverished, sclerotic,Soviet-inspired state into a booming center of world capitalism in which businessmen like Bill Gates are greeted with more pomp and circumstance than most visiting heads of state. Despite the economic reforms of the past two decades, India's state sector still resembles the decrepit socialist experiment described above. Perhaps even worse, most of India's roads are in abysmal repair, and the traffic congestion in most cities is bad enough to make Los Angeles rush hour look appealing. Moreover, living conditions for large segments of India's population are appalling. The Financial Times reports that there is one toilet for every 1,500 people in some of the poorer parts of Mumbai (previously known as Bombay).

The good news is that the power of information technology has allowed the new economy to largely bypass the state and its rickety infrastructure altogether. It has also brought unprecedented wealth to India's educated middle class while supplying the West with a vast supply of skilled knowledge workers at a fraction of the price it would cost at home.

This new generation of young professionals is earning and spending at an unprecedented rate for India, and this trend will only continue as they progress through their life cycles - marrying, buying homes, and raising their children - spending ever more in the "keeping up with the Jones's "tradition of Middle America. Even though the country is still in the early stages of its economic modernization, over the longer term India's prospects are brighter than those of China, South Korea and Taiwan. In theJuly/August 2006 edition of Foreign Affairs, Gurcharan Das published an insightful article titled "The India Model" that explains how the country has taken a very different path from most of its contemporaries in Asia.It is one particular development - the emergence of a viable domestic consumer economy - that we at HS Dent find particularly appealing:

"In the past two decades, the size of the middle class has quadrupled (to almost 250 million people)...At the same time, population growth has slowed from the historic rate of 2.2 percent a year to 1.7 percent today - meaning that growth has brought large per capita income gains, from $1,178to $3,051 (in terms of purchasing-power parity) since 1980. India is now the world's fourth-largest economy. Soon it will surpass Japan to become the third-largest.

"The notable thing about India's rise is not that it is new, but that its path has been unique. Rather than adopting the classic Asian strategy - exporting labor-intensive, low-priced manufactured goods to the West - ndia has relied on its domestic market more than exports, consumption more than investment, services more than industry, and high-tech more than low-skilled manufacturing. This approach has meant that the Indian economy has been mostly insulated from global downturns, showing a degree of stability that is as impressive as the rate of its expansion."

This is a crucial point; with most of the developed world facing an unprecedented demographic-induced recession or even depression after 2010,countries that have viable domestic consumer markets should fare much better than those that are focused on exporting to the West. This makes India's growth boom much more durable than that of, say, China. Das's article points out that personal consumption accounts for 64% of India's economy, compared to 58 percent for Europe, 55 percent for Japan, and 42 percent for China. As we have noted in the past, U.S. consumption has hovered around the 70% mark for many years, proving that a country can grow and prosper with a consumption-driven economy. In an economy dominated by services and information - like that of the US today and the one developing in India - savings and capital spending become less crucial to sustaining growth. China saves and then invests an enormous percentage of its GDP in building new manufacturing capacity, which puts China at a real risk for over-capacity and deflation in the event of downturn. India, in contrast, appears to be skipping the industrial phase of its development altogether and moving directly to services and information,thus looking much more "American" than any other developing country.

India's demographics are slowly beginning to look more American. After decades of high birthrates and overpopulation, the country appears to be shifting away from the typical "Third World" population distribution in which perpetually high birthrates insure that the most productive members of society (primarily those aged 20 to 64) are a relatively small percentage of the population. The expense of raising this abundance of children (and the manpower taken out of the workforce to care for them) is an impediment to the development of a modern consumer economy, for better or worse.

Now, as more join the ranks of the middle class, Indian mothers are having fewer children, yet spending far more money on the ones they have, buying the basic consumer products that earlier generations simply had to do without. To see why this matters to the economy, think of it this way : profit margins are higher for store-bought disposable diapers than for home-made swaddling cloth. Add baby clothes, toys, and private piano lessons to the list of items purchased outside rather than produced at home, and it becomes obvious very quickly that a middle class lifestyle contributes far more to the economy than a traditional peasant one.

The leveling of the Indian birth rate is both an indication of the rise ofthe middle class as well as a contributing factor in its development. As India's birthrate continues to decline, the population distribution should start to look more and more like that of the US, circa 1964 (at the end ofthe American Baby Boom). Expect India to boom as its enormous young population begins to move through its Spending Wave over the next 40-50years much like the American Baby Boomers of the post-war generation.

India's clout in the world economy will also continue to grow for another important reason. Unlike China, (whose total population is projected to peak around 2030) and Europe, Russia, and Japan (whose total populations have already peaked) India will continue to grow until approximately 2065.

Despite the overwhelmingly bullish case for India over the coming decades,it is important to remember that India is still an underdeveloped country and is at a much different stage than many other countries labeled as developing," such as South Korea or Taiwan. Per capita income is still pitifully low, on par with Iraq or Cuba, and India's government is certainly not immune from the occasional populist rash of anti-globalization sentiment.

It's unlikely that India would ever follow the example of, say, Venezuela, but there will definitely be setbacks that rattle investors. Even the United States, with its long tradition of free trade, has fallen into this trap recently, as the political grandstanding that killed the Dubai Ports deal in early 2006 made abundantly clear. Any political maneuvering in India or one of its major trading partners that undermines free trade could cause ugly - though most likely temporary - setbacks. India also has an unresolved conflict with Pakistan that could erupt into war at a moment's notice.

Needless to say, India is volatile. The world-wide stock correction of this past summer that sent the S&P 500 down 8% ; took a full 30% cut out of Indian stocks. For this reason, while we are enthusiastic about India's prospects, Indian stocks must be viewed with extreme caution and are best bought after substantial corrections.

Power of Gold

by Bill Bonner and Addison Wiggin

Mr. James Surowiecki wrote a wise and moronic piece on gold in the New Yorker. His wisdom is centered on the insight that neither gold, nor paper money are true wealth, but only relative measures, subject to adjustment.

"Gold or not, we're always just running on air," he wrote. "You can't be rich unless everyone agrees you're rich."

In other words, there is no law that guarantees gold at $450 an ounce. It might just as well be priced at $266 an ounce, as it was when George W. Bush took office for the first time. Since then, a man who counted his wealth in Kruggerands has become 70 percent richer.

But gold wasn't born yesterday, or four years ago. Mr. Surowiecki noticed that the metal has a past, just as it has a present. He turned his head around and looked back a quarter of a century. The yellow metal was not a great way to preserve wealth during that period, he notes. As a result, he sees no difference between a paper dollar and a gold doubloon, or between a bull market in gold and a bubble in technology shares. "In the end, our trust in gold is no different from our trust in a piece of paper with 'one dollar' written on it," he believes. And when you buy gold, "you're buying into a collective hallucination-exactly what those dot-com investors did in the late nineties."

Pity he did not bother to look back a little further. This is the moronic part. While Mr. Surowiecki looked at a bit of gold's past, he did not see enough of it. Both gold and paper dollars have histories, but gold has far more. Both gold and dollars have a future. But, and this is the important part, gold is likely to have more of that, too.

The expression, "as rich as Croesus," is of ancient origin. The king of historic Lydia is remembered, even today, for his great wealth. Croesus was not rich because he had stacks of dollar bills. Instead, he measured his richness in gold. No one says "as poor as Croesus." We have also heard the expression, "not worth a Continental," referring to America's paper money during the Revolutionary War era. We have never heard the expression, "not worth a Kruggerand."

Likewise, when Jesus said, "Render unto Caesar that which is Caesar's," he referred to a denarius, a coin of gold or silver, not a paper currency. The coin had Caesar's image on it, just as today's American money has a picture of Lincoln, Washington, or Jackson on it. Dead presidents were golden back then. Even today, a gold denarius is still about as valuable as it was when Caesar conquered Gaul. America's dead presidents, whose images are printed in green ink on special paper, lose 2 percent to 5 percent of their purchasing power every year. What do you think they will be worth 2,000 years from now?

A few years before Jesus, Crassus, who had made his fortune on real estate speculation in Rome, decided to put together an army to hustle the east. Alas, such projects almost always meet with disaster; the attempt by Crassus was no exception. He was captured by the Parthians and was put to death in an unusually cruel and costly way. He did not end his days with paper money stuffed down his throat, and certainly not dollar bills. No, they poured molten gold down his gullet-or so the story has it.

Gold has a long history. And during its history, many was the time that humans were tempted to replace it with other forms of money- which they believed would be more convenient, more modern, and most importantly, more accommodating. Gold is hard to find and hard to bring up out of the earth.

By its nature, the quantity of gold is always limited.

Paper money, by contrast, offers irresistible possibilities. The list of bright paper rivals is long and colorful. You will find hundreds of examples, from assignats to zlotys, and from imperial purple to beer suds brown. But the story of paper money is short and predictable. Since the invention of the printing press, a new paper dollar or franc can be brought out at negligible cost. Nor does it cost much to increase the money supply by a factor of 10 or 100-simply add zeros. It may seem obvious, but adding zeros does not add value.

Still, the attraction of being able to get something for nothing has always been too great to resist. That is what makes goldbugs so irritating: They are always pointing it out. Even worse, they seem to enjoy saying "There ain't no such thing as a free lunch," which comes as a big disappointment to most people.

Once people were able to create money at virtually no expense, no one ever resisted doing it to excess. No paper currency has ever held its value for very long. Most are ruined within a few years. Some take longer.

Even the world's two most successful paper currencies-the American dollar and the British pound-have each lost more than 95 percent of their value in the past century, which is especially remarkable since both were linked by law and custom to gold for most of those years. For the dollar, the final link to gold was severed only 34 years ago.

Some paper currencies are destroyed almost absentmindedly. Others are ruined intentionally. But all go away eventually. By contrast, every gold coin that was ever struck is still valuable today, most have more real value than when they first came out of the mint.

Central bankers reported in early 2005 that 70 percent of them were increasing their reserves of euros. As for the world's erstwhile and present reserve currency, the dollar, they seemed to have, not growing reserves, but growing reservations. We also have reservations about the dollar. Whatever it is worth today or tomorrow, we are sure it will have less worth eventually. That it is not regarded as worthless already is remarkable. The average dollar is nothing more than electronic information. It exists thanks only to the ability of digital technology to keep track of it. Relatively few dollars ever make it to paper, and many of them end up in the pockets of Russian drug dealers and African politicians. Most dollars in most people's accounts are not even graced with the image of a dead president; when the end comes, they won't even be useful for starting fires.

It is imperial vanity that keeps the dollar in business. And it is vanity that will make it worthless. Economists want money they can control. Central bankers want money they can debase. And politicians want money they might get their mug on. The trouble with gold is that it turns its back on world improvers, empire builders, and do-gooders. It is money that no central bank promotes and none destroys. It is money that exists only in a tangible form, a real metal-a number on the periodic table.

"Gold goes up and down, just like other kinds of money," say economists. Which is true. "You can protect yourself from inflation in other ways," say the speculators. True again. "Gold pays no dividends or interest," say the investors. True. Nor will gold cure baldness or add inches to your most private part. Even as money, gold may not be perfect. But it is better money than anything else. Gold was around millions of years before the U.S. dollar was invented. It will probably be around a billion years after. This longevity is not in itself a great recommendation. It is like buying a suit that will last longer than you do; there is no point to it. But the reason for gold's longevity is also the reason for its great virtue as money: It is inert; it yields neither to technology nor to vanity.

The world improvers will always be with us. They will spend more than they have, boss other people around, and generally make the world a worse place to live. They will offer proposals like those of Thomas L. Friedman. The nice thing about gold is that it is so unresponsive. It neither laughs nor applauds. Gold is money that no central bank promotes and none destroys.

Paper money is a handy tool for the world improvers. They use it like politicians use civil service jobs and generals use heavy bombers-to get their way. Whatever the vapid ideal du jour, it takes money to pursue it. Given enough money, the poor can be fed and housed. The middle classes canbe given free medical care and low-cost loans for houses. The upper classes can be given contracts and favors. Enemies can be summoned up,bombed, and reconstructed. Bread, circuses, war-the imperial program costs money.

How to get more money for these great new programs, these marvelously worthwhile ideals, these fabulous public spectacles? Gold flatly refuses to cooperate. It doesn't even give a reason. Instead, it stays as mute and reticent as a dead man in front of a television. No matter how persuasive the advertising, the man is not going to go for it.

Paper money, on the other hand, barely needs encouragement. Start up the presses! Lower the interest rate! Relax reserve requirements and lending standards! Sell more bonds! Create more paper! Paper money is ready to go along with anything. Like George W. Bush, it never met a boondoggle it didn't like. Sooner or later, it ends up as worthless as the projects it was meant to pay for.

Gold is merely the subversive investor's way of protecting himself.

Speculation as a fine art

- An Early Trend Follower

by Dickson G. Watts.

Mr. Watts was President of the New York Cotton Exchange between 1878 and 1880. For all those that whine today about supposed changing markets, keep in mind Mr. Watts is from the 19th century, a time long before the CNBC daily hype machine.

What is Speculation?

Before entering on our inquiry, before considering the rules of our art, we will examine the subject in the abstract. Is speculation right? It may be questioned, tried by the highest standards, whether any trade where an exact equivalent is not given can be right. But as society is now organized speculation seems a necessity.

Is there any difference between speculation and gambling? The terms are often used interchangeably, but speculation presupposes intellectual effort; gambling, blind chance. Accurately to define the two is difficult; all definitions are difficult. Wit and humor, for instance, can be defined; but notwithstanding the most subtle distinction, wit and humor blend, run into each other. This is true of speculation and gambling. The former has some of the elements of chance; the latter some of the elements of reason. We define as best we can. Speculation is a venture based upon calculation. Gambling is a venture without calculation. The law makes this distinction; it sustains speculation and condemns gambling.

All business is more or less speculation. The term speculation, however, is commonly restricted to business of exceptional uncertainty. The uninitiated believe that chance is so large a part of speculation that it is subject to no rules, is governed by no laws. This is a serious error. We propose in this article to point out some of the laws in this realm.

There is no royal road to success in speculation. We do not undertake, and it would be worse than folly to undertake, to show how money can be made. Those who make for themselves or others an infallible plan delude themselves and others. Our effort will be to set for the great underlying principles of the "art" the application of which must depend on circumstances, the time and the man.

Let us first consider the qualities essential to the equipment of a speculator. We name them: Self-reliance, judgement, courage, prudence, pliability.

1. Self-reliance:

A man must think for himself, must follow his own convictions. George MacDonald says: "A man cannot have another man's ideas any more than he can have another man's soul or another man's body." Self-trust is the foundation of successful effort.

2. Judgement:

That equipoise, that nice adjustment of the facilities one to the other, which is called good judgement, is an essential to the speculator.

3. Courage:

That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau's dictum: Be bold, still be bold; always be bold."

4. Prudence:

The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: "In meditation all dangers should be seen; in execution one, unless very formidable." Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth: "Henceforth the very firstlings of my heart shall be the firstlings of my hand." Think, act, promptly.

5. Pliability:

The ability to change an opinion, the power of revision. "He who observes," says Emerson, "and observes again, is always formidable."

The qualifications named are necessary to the makeup of a speculator, but they must be in well-balanced combination. A deficiency or an overplus of one quality will destroy the effectiveness of all. The possession of such faculties, in a proper adjustment is, of course, uncommon. In speculation, as in life, few succeed, many fail.

Source: Speculation as A Fine Art by Dickson G. Watts

The Fiat Money System - Dr. Bill Veith in studio w/ Alex Jones

Dr. Bill Veith and Alex Jones have a fantastic discussion about the fiat money system in place and controlled by the international banking cartel. Dr. Veith's understanding of the economic system is impeccable and shows in the clarity in which he presents this knowledge. He lays out in layman's terms how the economy is manipulated and how one can protect oneself in an economic colapse by owning gold and silver coins; tangible wealth that can not be deflated. A must see for anyone interested in learning about taking the power back from the illuminati masters of deception.

The Most Important Investment Principle of All

by Porter Stansberry

What I’m going to show you in today’s essay is, I believe, the most important investment principle you’ll ever learn.

If you follow it, as I do with my own money, you will never again have to worry about losing lots of money on any single investment. You will always know when to sell. And you will know how much money you should be investing in the first place.

For many years, I have maintained that 90% of the profits I make come from these “money managing” strategies. Most people think that because I’m a stock picker, my market-beating results stem from fundamental research and the advantage this knowledge gives me.
It’s true: Knowing a lot about a group of stocks helps you find the right ones to invest in, but this will only contribute about 10% of your gains over time. Most of the gains in stocks come from capturing swings in market sentiment.

I’ve found these swings to be, in large measure, impossible to predict. Instead, by using a simple, but reliable, strategy that I outline below, I have found I’m able to profit from the market’s upswings while strictly limiting my downside exposure.

This strategy is actually a two-step process of investing that I follow with every stock, bond, or currency.

Step #1: Letting your winners run and cutting your losses short.

The first and most important principle of speculation is to let your winners run and cut your losses short. And even though the principle is well known, almost no one actually uses it. It’s just too hard emotionally.
When you’ve got profits on the table, every urge tells you “take ’em.” When you’ve got big, ugly losses staring back at you from your account ledger, every emotion says, “hold on – they aren’t losses until you take them.”
Don’t do it. Instead, cut your losers early and often. Remember that you have to have capital to make more money. Nothing sets you back like a large loss. Take many small losses and no big ones and you’ll die a rich man. You can read exactly how to cut your losses with “trailing stops” here.

Step #2: How much to invest in any single investment.

The second principle that applies to every investment has to do with diversified money management.
It doesn’t matter what you’re trading, or investing in. You shouldn’t put too many eggs in any one basket.

As a rule, I never put more than 5% of my total portfolio in any single investment idea.
The whole purpose of using a trailing stop is to prevent what I call a catastrophic loss. A catastrophic loss occurs when any single position in your investment portfolio experiences losses large enough to wipe out your other gains and/or jeopardize your livelihood.
One of the biggest differences between professional investors and amateur investors is the size of their positions relative to their total portfolio. Professionals consider a 2%-3% position enormous. Having 5% of your money in any one position is considered “gun slinging” by most professionals.

Meanwhile, at conferences, when I tell investors they should never allocate more than 4% of their portfolio to any stock initially, people look at me as if I’m nuts.
In fact, I would bet that 99 out of 100 individual investors wouldn’t even know how much money they can afford to invest in a given stock, limiting the position to only 4% of their portfolio. Instead, almost all individual investors measure their position sizes in terms of shares, typically round numbers, i.e. “I own 50 shares.”

Think like a pro – think about your positions as a percentage of your portfolio, not as a number of shares. Know the stop loss points of all your positions, at all times.
This doesn’t mean you have to check the stock tables every day.
Follow this two-step principle – by cutting your losing positions, and by minimizing your positions to no more than 4% of your overall portfolio - and I promise you, you’ll see better investment results, immediately.

Good investing,

Porter Stansberry

Pachelbel's Canon Rock

- Guitar work, smooth as silk !

The Empire has no clothes

by Puru Saxena

The United States is widely adored as the world's greatest empire; few realize that the empire has no clothes. As the masses look up to the nation in admiration, they are fooled into believing that it is swimming in wealth; the reality being that it is up to its eyeballs in debt. The U.S. economy is living on borrowed time and judgment day is inevitable. No nation in history has ever managed to escape such economic imbalances, and I suspect the United States won't get away with it either. Let's take alook at how this imaginary cloak has been woven:

The economic recovery since the 2001 recession has been manufactured byexcessive credit-growth and consumption. For the first time ever, acentral bank has purposely engineered a credit bubble with the intentionof bringing artificial prosperity via rising asset-prices. The Federal Reserve dropped interest-rates and the majority of Americans became the proverbial kids in the candy store, unable to resist the temptation of cheap credit. This is evident from the fact that over the past six years,U.S. household debt soared from $6.99 trillion to almost $12 trillion - a staggering increase of 70%!

However, some of today's economists discard this record debt-explosion as irrelevant because the net-worth of U.S. households over the same periodhas surged from $42 trillion, to roughly $54 trillion (largely due to thehousing boom). In other words, due to rampant credit and leverage in the economy, asset-prices have risen much more rapidly than debt levels. But the key question is whether this is sustainable - and at what cost?

In my opinion, asset-prices can continue to rise for a long time if there are willing borrowers - and a central bank armed with an endless supply ofcredit. However, you have to understand that rising asset-prices only givethe illusion of prosperity. The truth is, rapid monetary inflation and credit growth always impoverish a society as money becomes abundant - and therefore less valuable. So, everyone may feel richer as their homes andstock portfolios appreciate in value, but it'd be a mistake to confuse rising asset-prices in an economy with real wealth creation. After all,wealth is a relative concept and if everyone else's homes have also risenin value, how wealthy have you really become?

Given the levels of debt in the United States, I have no doubt that the Federal Reserve wants to keep the game going for as long as possible. Itwill achieve this by continuing to inflate the supply of money and credit.Under this scenario, the U.S. dollar will surely depreciate against other major world currencies, and especially against precious metals whose supply can't be increased at the same pace.

In order to assess the U.S. economy's prospects, the most important issue to understand is that the recent economic expansion hasn't been typical.The U.S. wage growth has been extremely poor and the capital spending by American companies has also been dismal. In fact, real disposable income growth is now almost zero, and over the past five years, capital spending has increased by a paltry 12%. So far, the U.S. consumer alone has carriedthe baton through record-high indebtedness and consumer spending; with home prices no longer appreciating, you have to wonder where the future borrowing-power will come from.

In my view, the United States looks more and more like a bubble economy, a banana republic of some sorts, which is desperate for ever-rising asset-prices for its very survival. Should American home and stock prices stall, let alone decline, the fate of this great bubble will be sealed. Depreciating asset-prices will act like a dagger in the heart of this artificial recovery, so the Federal Reserve must continue to inflate at all costs.

In the United States, the total debt as a percentage of GDP is currently above 300% and at an all-time high. It is worth noting that the last time the United States faced a meaningful contraction in debt relative to the size of its economy, it coincided with the depression years of the 1930's.So, you can bet your farm that Mr. Bernanke & Co. will try their best to avoid a repeat of such a disaster by continuing to aid deficit spending through their ultra-loose monetary policies.

With the U.S. consumer leveraged to the hilt, the fate of the U.S. economy now lies with its corporations and its government. For sure, American companies have recently registered great profits and are flush with cash, however; so far they haven't shown any willingness to spend their money - capital spending is non-existent and wages haven't increased in line with the inflation-rate. At least the American government has been more "responsible" by contributing to the economy through the deficit spending program surrounding the various wars being fought - albeit under false pretences!

The world is littered with statistics which, more often than not, are misleading and distort the truth. In this regard, the "official" statistics released by the U.S. establishment are no different. Take the U.S. budget for example. The budget reported in the media claims that the deficit was reduced to $319 billion in 2005. However, the Financial Report issued by the Department of Treasury says it was $760 billion, or over twice as large.

"But how come?" you may wonder. It is fascinating to note that the U.S.budget process meant for general reporting uses accounting procedures that ignore long-term, future obligations such as Social Security and Medicare.The United States keeps two sets of books, only wanting the world to see one of them. The "President's Budget," issued by the Office of Management and Budget and used to develop the annual budget, is based on cashaccounting. The other set of accounts, the "Financial Report of the UnitedStates," issued by the Department of the Treasury, uses a more realistic accrual-basis accounting. It is interesting to note that the U.S. federallaw requires ALL businesses with revenues in excess of $5 million to use accrual accounting, yet the budget figures released to the public don't follow this rule. According to the financial report issued by the U.S.Treasury which takes into account the future obligations of the federal government, the U.S. budget deficit is now at a record-high!

Next, let's review the strange U.S. unemployment numbers released in the media. Since the end of the recession in November 2001, reportedemployment growth is up moderately, which makes it the worst performance during any post-war economic recovery. However, closer inspection reveals that even this small reported growth in employment is an absolute joke.The reported official unemployment figures don't include those peoplewho've given up looking for a job (due to non-availability of jobs),joined a university or taken a part-time job since they can't findfull-time employment. When you add all these people, the real rate of unemployment is closer to 10%.

Finally, the biggest "cover-up" award must go to the officials whodetermine the Consumer Price and the Producer Price Indices (CPI and PPI).These "inflation-barometers" are a total fraud! Remember, the Federal Reserve's biggest motive is to conceal the ongoing inflation and manage the inflation expectations, or else the viability of the Federal Reserve itself may come into question. Therefore, both the consumer and producer prices are massaged, seasonally and hedonistically adjusted to keep inflationary fears under check. So, by keeping the CPI and PPI artificially suppressed via voodoo accounting and understating the inflation menace, the Federal Reserve maintains the public's confidence inthe US dollar as a great store of value. After all, as long as the masses continue to believe in the "inflation-controlling" powers of the Federal Reserve and the other central banks, the more inflation and credit they can create!

In summary, the U.S. economy isn't in good health and eventually themonetary stimulus and injections of liquidity will fail to revive this terminally ill patient. Accordingly, I advise you to minimize your exposure to American assets. On other hand, tangible assets (especially precious metals) and mining stocks represent a great opportunity for the medium to long-term investor. Despite the recent pullback, the long-termbull-market is still intact and I anticipate a rally over the coming six to eight months. Accordingly, this is an ideal time to add to your positions in precious metals as well as mining and commodity-producing companies.

Regards,

Puru Saxena

Editor's Note: Puru Saxena is the editor and publisher of Money Matters,an economic and financial publication available at www.purusaxena.com
An investment adviser based in Hong Kong, he is a regular guest on CNN,BBC World, CNBC, Bloomberg TV & Radio, NDTV, RTHK Radio 3 and writes forseveral newspapers and financial journals. The above is an excerpt from Money Matters, a monthly economic publication, which highlights extraordinary investment opportunities inall major markets. In addition to the monthly reports, subscribers also benefit from timely and concise "Email Updates", which are sent out when an important development in the capital markets warrants immediate attention.

JanaGanaMana -

Inspiring like no other !