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A whole generation of investors has never seen gold this high. They’re getting a valuable education in gold’s value as a safe haven for wealth. And this is just the warm-up. In the last 48 hours, we’ve seen a sharp correction, and we could see some more. But I have every indication that it’s going to be like all the other gold corrections — another opportunity to buy. Moreover …
All This Is Happening Even Before the Madman of Tehran A new Iran crisis is bursting onto the scene. And even before this crisis, gold’s fundamentals had lifted it to more than double its dog-day lows of the late ’90s. Now, it’s getting a double-goose in the pants from awakening mainstream demand … AND … the potential for a war in Iran. As a result, gold could easily soar to my next two targets: First, $618 an ounce … Then, $740 … And eventually, eclipsing the all-time high of $850 set in 1980. The gold stocks in my Real Wealth Report continue to climb steadily, as they have been doing for months. Just since the first of this year, our gold portfolio has jumped 14%! I Guess I’m Just Not Crazy Enough
It’s the kind of exercise I undertake sometimes to try to get inside someone’s head — so I can get some clue about what to expect next. But try as I might, I could not find anything resembling a rational thinking being. Ahmadinejad is a dangerous, loose cannon. His head seems filled with a jumble of anti-Semitic, anti-Western venom, rabid nationalism, and flaming Islamic fanaticism. The evidence: Over the past few months, Ahmadinejad has outraged the world with these pronouncements:
Ahmadinejad seems to be working overtime to pick a fight, not just with the U.S. but with the entire Western world. The bad news is that I believe he’s going to get his wish. After months of political jockeying, phony diplomacy, and useless economic sanctions — mark my words, we will be at war with Iran. Sadly, there’s not a whole lot you or I can do about it. And, for better or for worse, Iran will be the backdrop to drive gold and energy investments MUCH HIGHER. (More on that in a moment.)
Iran’s Leader Stokes War Exactly why Ahmadinejad wants to start a war eludes me. He’s certifiably delusional if he thinks Iran would come out on top. Iran is not Iraq. This time, the West is less likely to be split between those that are for and those that are against some action. There will likely be a solid alliance of Western forces that can give Ahmadinejad and his hard-line cronies a good thumping — not just the U.S. and Britain and not just a token showing from obligated friends. Even European doves were appalled at the Iranian president’s declaration that “the Holocaust was a myth created by Europeans to justify setting up a Jewish state in the heart of Islam.” That’s a very sensitive topic on the Continent. In Germany, France, Austria, Belgium, Switzerland and several other European countries (and Israel, of course), it’s considered immoral to deny the lessons of the Holocaust, and it’s illegal to deny its existence. French law prohibits selling or even displaying Nazi memorabilia. And just last week, France won a legal battle with Yahoo over blocking the display and sale of “race hate” objects in online auctions. Ahmadinejad compounded the affront by charging that if the Holocaust really did happen (apparently he’s not so sure about this), then it was Europe’s crime, and they should pay the price.
World Indignation Ignored There was a roar of indignation and condemnation that erupted around the world in reaction to his statements. But it didn’t seem to faze him one whit. And to top it off, the head fanatic in Iran, supreme leader Ayatollah Ali Khamenei, backed him up on the call to eliminate Israel. Taking a cue from its boss, Iran’s Foreign Ministry has just announced plans to hold a conference. What’s the conference for? To examine so-called “scientific evidence” about the extermination of 6 million Jews by Nazi Germany. Ahmadinejad gave the conference his blessing by urging the West to be “open-minded” and allow a free international discussion on the “real” aspects of the Holocaust. Amazing. The Big Worry: Iran with the Bomb The Holocaust flap is about words and rhetoric.
Last week, Iran broke the United Nations inspection seals on a uranium enrichment facility in Natanz, central Iran. This openly violates a two-year freeze on Iran’s nuclear development. So Iran has thumbed its nose at world opinion. It declared it was resuming its nuclear research. And it set off a potentially dangerous chain reaction of events. Iran says that it’s only interested in uranium enrichment for “peaceful purposes.” It says it’s to advance its ability to produce “much-needed power” from nuclear reactors. I don’t buy that, and nor do most Western leaders. They suspect that Iran’s real intent is to resume atomic research with one overarching goal: To produce nuclear weapons. It’s bad enough that India and Pakistan have nuclear arsenals. Give an atomic bomb to a nut case in Tehran, and we’d be looking at a really bad hair day. U.N. Sanctions Against Iran May Be Next Over the last few days, world leaders have been huddling over the issue of taking the Iran case to the U.N.’s Security Council for possible sanctions. All five veto-wielding members of the Security Council met on Monday to talk it over. The U.S., Britain and France are in favor of referring the matter to the Security Council. Other prominent U.N. members, including Germany and most West European nations, are also behind the move. And just yesterday, France bluntly rejected a request from Iran for more negotiations on the nuclear program. Currently, China and Russia are not quite ready to take the matter to the next level. But sooner or later, however, all five Security Council members are likely to fall into line. Why Sanctions Will Backfire Right now, Ahmadinejad is shrugging off the threat of U.N. sanctions. If it comes to sanctions, he has even threatened he would simply not cooperate with U.N. inspectors who periodically conduct surprise visits to make sure Iran is not working on The Bomb. Yes, Iran does have some vulnerabilities to economic sanctions.
But …
Don’t kid yourself. This is very possible. Indeed …
U.S. Senators Are Already Just this past Sunday, Republican and Democratic senators agreed that the United States may ultimately have to undertake a military strike against Iran. Republican Sen. John McCain of Arizona called the nuclear standoff
In my Real Wealth Report, I’ve been warning you of the coming of the “Big Squeeze.” In my opinion, the squeezing is already here. But with what’s happening now with Iran — and what’s about to happen — the squeeze is going to get a heck of a lot tighter. We’re about to see threats to economic growth coupled with soaring prices for commodities and raw materials AT THE SAME TIME. Oil prices will go through the roof. Yesterday in New York, the March crude oil contract rose as high as $67.50 per barrel, before settling at $66.25. That puts it within close striking distance of its post-Katrina highs.
Don’t be surprised to see a correction beginning at almost any time. But it’s unlikely to end the accelerating escalator this market is riding on. Most corporate profits will get nailed. That’s obvious. For nearly every sector but military contractors and natural resource companies. The real estate market will get killed. It’s already breaking down in several regions of the U.S. But I expect it to get worse. Chief reason: Long-term interest rates will truly start to soar when investors realize a few more hundred billion will be spent on Iran. … and because of slowing economic growth, lenders in a “Big Squeeze” environment do what they have done in the past — they want a higher rate of return to compensate for the various risks. The airline industry — already in shambles — will get killed. Among the Big Three in Detroit, at least one, perhaps two, giant companies could go bankrupt. I stand by all of my portfolio recommendations in Real Wealth Report, which are precisely suited for this kind of environment. Here’s more … 1. Keep a big chunk of your funds safe in money market funds. That is absolutely essential. Of your funds available for investment … 2. Keep a modest percentage in gold bullion, either ingots or bars, or the StreetTracks Gold Fund (GLD). 3. Maintain a solid allocation to my favorite gold mining shares, gold mutual funds and other natural resource investments. See the Real Wealth Report for details. Positions are currently up 42.57%, and headed higher. If you’re not a subscriber, do yourself a favor and subscribe now. 4. Keep a similar allocation in income generating natural resource opportunities such as energy trusts, etc. For funds you can afford to invest more aggressively, go for the big gains that are possible with my more speculative natural resource picks. For example, the small-cap picks of my friend and colleague, Sean Brodrick. (Call 800-400-6916 or read his latest report on The Gold Rush of 2006). Just be aware: He has only 69 memberships slots left. And they’re selling out quickly. Stay safe and God bless!
About MONEY AND MARKETS MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
© 2006 by Weiss Research, Inc. All rights reserved. |
Gold blasted to NEW 25-year highs this week, to $562.
This morning I was trying to think like Mahmoud Ahmadinejad, Iran’s bad-boy trash-talking president.
But there’s something far more worrisome and immediate. And that’s Iran’s determination to pursue nuclear development.
Energy stocks will fly even higher. Already this week, partially in reaction to the growing Iranian crisis, the Oil Service HOLDRS (OIH) we’ve been tracking for you has just jumped to ANOTHER, all-time historic high.
