Inflationary Armageddon Survival Guide

Three Ways to Make Money From The Governments Money Printing

Are you ready for the Inflationary Armageddon ? As Im sure youre aware, starting in July 2007, the financial markets entered one of the most severe crises in history. And as the Crisis of 2008-2009 unfolded, the Feds (the Federal Reserve, Treasury Department, and the Federal Government) tried to prop up the financial system with numerous interventions. A brief recap of their moves are as follows: The Federal Reserve cutting interest rates from 5.25-0.25% (Sept 07-today) The Bear Stearns deal/ Fed taking on $30 billion in junk mortgages (March 08) The Fed opens up various lending windows to investment banks (March 08) The SEC proposes banning short-selling on financial stocks (July 08) Hank Paulson gets a blank check for Fannie/Freddie but promises not to use it (July 08) Hank Paulson uses the blank check with Fannie/ Freddie spending $400 billion in the process (Sept 08). The Fed takes over insurance company AIG (Sept 08) for $85 billion. The Fed doles out $25 billion for the auto makers (Sept 08) The Feds kick off the $700 billion Troubled Assets Relief Program (TARP) with the Government taking stakes in private banks (Oct 08) The Fed offers to buy commercial paper (non-bank debt) from non-financial firms (Oct 08) The Fed offers $540 billion to backstop money market funds (Oct 08) The Feds agree to back up to $280 billion of Citigroups liabilities (Oct 08). $40 billion more to AIG (Nov 08) Feds agree to back up $140 billion of Bank of Americas liabilities (Jan 09) Obamas $787 Billion Stimulus (Jan 09)

And thats a BRIEF recap. Everyone knows the US has a debt problem. And there are only two ways to deal with a debt problem. 1) Sell off assets to pay off debt 2) Inflate the debt away

The Feds chose Option #2. They chose to try and inflate away our gargantuan debts. Were not talking about millions or even billions of dollars either. Were talking about TRILLIONS. Now, $1 trillion is a tough number to get your head around. Heres a little visualization to help youImagine you had a stack of $1,000 bills. $1 million would be a stack eight inches high. $1 billion would be over 800 feet high (think of the Washington Monument). And $1 trillion would be a stack 142 MILES high. You simply cannot throw this kind of money around without creating an Inflationary Armageddon . As scary this sounds, its already begun. Take a look at the Federal Reserves Adjusted Monetary Base (an easy way to reference the Feds money printing):

To give this chart some perspective, in Feb. 2008, the Federal Reserve pumped $30 billion into the financial system to prop up Bear Stearns. Compared to the Feds printing orgy of the last 8+ months, that $30 billion is now a microscopic bump (see the slight ripple above 2008-02 on the chart above). Put another way, the Fed is pumping its brains out, having more than doubled the US monetary base in the last two years. Make no mistake, there is an inflationary storm brewing in the US that will make the early 80s look like a picnic. IRAs, 401Ks and other consumer savings will be obliterated as the dollar plunges to record lows. However, all is not lost. Ive identified three investments that will all soar when the inflationary storm takes hold. Ive detailed all three in this report.

Investment #1: Make 150% or More With the Ultimate Inflation Hedge
Nothing protects against inflation like GOLD. Gold was, is, and always will be THE ultimate storehouse of value. Mankind was prizing this stuff during the prehistoric period, long before the concept of stocks, mutual funds, or paper money even existed. Now, I know what youre thinking, gold has already risen from $250 to $900 an ounce, how much higher can it go? Much, MUCH higher, my friends. No investment ever goes straight up or straight down. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50% (see the chart below).

As you can see, from mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December 74 to August 76. After that, it began its next leg up, exploding 750% higher from August 76 to January 1980.

Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March 08. At one point, it even fell to $700, a 30% retraction. Granted, it wasnt a full 50% retraction like the one that occurred from 197476. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance. If we were to go by the historic pattern of the gold market in the 70s, gold should experience upwards resistance for 19 months after its first peak today. Golds recent peak was $1,014 in March 08 (roughly 14 months before the writing of this report). If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in golds bull market in the 70s). However, judging from the Feds money printing, the next leg up may come even earlier. You should consider taking advantage of this fact to load up now by either buying actually physical gold or the Gold ETF (GLD). When it comes to investing in actual physical gold or gold bullion, there are several key rules you should always follow: Only buy from a dealer you know and trust. Always keep your gold in your possession. That is, do not entrust its storage to someone else. Treat your bullion like a savings account, not an investment trade. Only buy gold investments that you could easily liquidate during an emergency.

Were we in Zurich we could simply walk up to the gold counter at UBS and walk out with several gold bars in a briefcase. Regrettably no such accommodations exist in the US. So you need to find a dealer. I highly recommend Parker Vogt of Camino Coins. Parkers firm has been dealing bullion for well on 50 years. And Parkers one of the best in the business. For one thing, he refuses to store gold for his clients; Its their gold, I have no right to hold on to it, he comments. I receive absolutely no compensation what so ever for recommending him. Hes just someone Ive worked with in the past and trust. You can contact Parker at: Parker Vogt Camino Coins 1301 Broadway Burlingame, CA 94010 Phone: 800-348-8001 or 650-348-3000 Fax: 650-401-5530

Consider buying some gold during this cooling off period for the precious metal. If youre uncomfortable buying actual bullion you can buy the Gold ETF (GLD). The ETF trades at a ratio of 1:10 for gold prices. So if Gold is trading at $900, the ETF will be at 90. Action to take: Buy some gold bullion or the Gold ETF (GLD). Remember, during its pullback in the 70s, gold fell 50%. This time around it looks to have bottomed at 30% off its peak. But be forewarned that there is the potential for gold to experience some continued downward pressure and perhaps even test $800 again. So if you do buy now, I suggest buying on dips. Get a taste below $900. If gold falls to $800, consider buying more for a lower average price.

Investment #2: Where Investing Legend Jim Rogers is Putting His Money Now
Do you know Jim Rogers? The legendary investor first went to work on Wall Street with $600 in his pocket in the late 60s. In 1970, he and George Soros founded the Quantum fund: one of the greatest investment funds in history. Between 1970 and 1980, the Quantum fund returned 3,365%, outperforming the S&P 500s performance of 47% by an enormous margin. On an annual basis, Rogers and Soros produced average returns of 38%. Rogers then retired with millions in his bank account at the ripe age of 37. Since then, hes taken two trips around the world, the first on a motorcycle, the second in a custom-made Mercedes. Still managing his own money, Rogers has used his on the ground knowledge of foreign markets to make numerous major calls. He went long stocks in 1982 when everyone was still bearish. Stocks more than tripled in the five years following this. He also went short before the market crash in 1987. However, his most famous call was the commodities bull market that began in 1999. At that time, everyone thought hed lost his mind. Commodities had done nothing in 15 years. The Dow Jones Commodities Index hadnt been revised since the 1960s. and Reuters hadnt revised its commodity index since the 1930s. With no decent options available, Rogers decided to launch his own commodities index. He did so August 1, 1998. He then took off on his second world trip as chronicled in Adventure Capitalist. Since that time, the Rogers International Commodities Index has risen 164%. In contrast, the S&P 500 is DOWN 30%. And Jim believes were just getting started.

Historically commodities have always done well during periods of high inflation. And Jim, like myself, believes the Feds moves are highly inflationary. In fact, I borrowed the term Inflationary Armageddon from one of Jims interviews with CNBC. Jim said, "We're setting the stage for when we come out of this of a massive inflation Armageddon ," Jim has publicly stated that he is looking to get all of his money out of the dollar in the coming months. Hes also continually buying more commodities. And one segment in particular interests him. Agricultural commodities. Its not difficult to see why. You only make big money by buying investments that have been ignored for years. And few investment classes are as unpopular as agricultural commodities (when was the last time someone you knew opened a sugar plantation or soy bean farm?) Its not mere anecdotal evidence either. Inventories for corn, wheat, and soybean are all near 40-year lows. Other soft commodities like cotton, sugar and coffee are at historically low inventories too. So theres very limited supply. And its only going to go lower. The credit crisis has made it a lot more difficult for farmers to get access to credit for fertilizer. And low commodity prices have made it no longer economical to grow certain crops (I personally know of a large farm that will not be planting any corn this year for the first time in 60 years). Yet, while supplies are dwindling, demand is growing rapidly. From 1974-2005, the worlds population grew by more than 1.1 billion people. Initially, most of them and the rest of the world for that matter werent eating anything resembling a western diet. For example, in 1980 the average Chinese consumer lived off $1 a day. However, as emerging markets economies began to expand, so did the diets of their citizens. In 1985 the average Chinese consumer ate 44 pounds of meat per year. Today, its more than doubled to 110 pounds. Now, it takes 17 pounds of grain to generate one pound of beef. So grains demand is soaring... But land is limited. In 1989,worldwide arable land was 1.6 billion acres. Its 1.6 billion acres today. Its the perfect set up for any investment: dwindling supplies and growing demand. The inflationary Armageddon will only be adding gasoline to the fire, pushing agricultural commodities to record highs. As Jim Rogers puts it, God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in

other things I think I'm going to make more money in agriculture than I make in precious metals.'' Best of all, Jims set up the perfect agricultural investment for us: the ELEMENTS Rogers International Commodity Agriculture ETN (RJA). RJA tracks the movements of the agriculture portion of Jim Rogers commodity index. As such, it gives broad exposure to a large basket of agricultural commodities including soybeans, oats, sugar, orange juice, coffee, cattle, etc (see the chart below).

Now, as Im sure youre aware, commodities experienced something of a mini-bubble in mid-2008. The primary culprit was oil, which rocketed to $150 from $70 in the span of a single year. However, oils rise also brought up food prices (since the cost of shipping went up), which in turn pulled up agricultural commodities. When the energy bubble popped in July 08, oil lost over 50% of its value in a matter of months. Hundreds of large institutional investors (hedge funds, pension funds, etc) got caught on the wrong side of the trade and were forced to sell positions to cover their losses and meet redemptions. As a result, commodities got slammed across the board. Agricultural commodities were no exception. However, what you may not know is that starting in early 2009, agricultural commodities began a strong bounce thanks to droughts (lower supply) and inflationary fears. Since the beginning of 2009, sugar is up 30%, soybeans recently hit a seven-month high, coffee is rallied 6% in the first week of May, etc. In fact, agricultural commodities have been outperforming stocks since the beginning of 2009 (see the chart below).

With RJA you get exposure to all of these developments and more. Its literally a basket of agricultural commodities hand-picked by Jim Rogers himself. Its also the most diverse agricultural commodities index fund on the market. Take a look at RJAs portfolio compared to its peers: Investment Vehicle Rogers Agriculture Powershares DB Agri iPath Dow Jones Agri Symbol RJA DBA JJA # of Commodities in Portfolio 20 4 7

Its important to note that RJA is not an exchange-traded fund (ETF); its an exchangetraded note (ETN). The primary difference is that instead of owning stocks, ETNs own unsecured notes debtissued by a bank. In this sense RJA doesnt own actual bushels of corn or wheat. Instead it owns paper linked to those assets. The only risk with ETNs occurs if the bank issuing the underlying notes goes under. However, the likelihood of this is virtually non-existent for RJA: the bank backing its notes is the Swedish Export Credit Corporation: an entity 100% owned by the Swedish government. In order for this bank to collapse, the Swedish government itself would have to default. The banks credit ratings are AA+, one step below AAA, the highest rating possible. The risk here is minute however, when it comes to investing you should always consider every risk, no matter how remote. With RJA, weve got broad exposure to the sector Jim Rogers is most bullish on (where hes putting most of his money now). Even better, the fundamentals are lining up in our favor: dwindling supplies and increased demand. The Feds money printing and the coming inflationary Armageddon will only add fuel to the fire. Action to take: Buy the ELEMENTS Rogers International Commodity Agriculture ETN (RJA).

As a final note, the ETN charges a 0.75% management fee. This is a fairly standard fee as far as ETNs or ETFs go.

Investment #3: Big Profits From the Mother of All Bubbles

US Government debt is in big trouble. For years, the US has been funding its deficits by issuing debt in the form of Treasuries: US Government-back bonds. Because of the USs standing as a world superpower, these investments were considered to be risk-free by buying them, you were essentially betting on the US maintaining its good standing. However, once the Federal Reserve started allowing investment banks and other financial entities to swap their toxic mortgage-backed securities and other financial garbage for Treasuries, the US started broadcasting a message to the world: WE DONT VALUE OUR CURRENCY OR BONDS. This is already having serious consequences on the rest of the world. China and Japan (the two largest holders of US debt) have begun expressing serious concerns about what the Feds are doing. In fact, Chinas premiere has begun hinting that should the US continue down this route, they will not continue to fund out debt: "Whether we will buy more U.S. Treasury bonds, and if so by how much -- we should take that decision in accordance with China's own need and also our aim to keep the security of our foreign reserves and the value of them." And if that comment isnt clear enough, consider the following statement he made at the beginning of May: "We have lent a huge amount of money to the USOf course we are concerned about the safety of our assets. To be honest, I am definitely a little worried." These statements and others like them resulted in Secretary of the State Hillary Clinton flying to Asia to plead with China and other US creditor nations to continue buying US Treasuries. By continuing to support American Treasury instruments the Chinese are recognizing our interconnection. We are truly going to rise or fall together," Clinton said at the US embassy there. Make no mistake if China chooses to stop buying Treasuries, the dollar is DONE. In fact, it may already be happening. According to the New York Times, Chinas foreign reserves grew in the first quarter of 2009 at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter in 2008.

The effect of this is already showing up in the bond market.

As you can see, US 30-Year Notes have begun a steep slide in the last five months. Part of this is China. The other part is investors growing less fearful due to a strong rally in stocks. Depending on how the financial crisis continues to play out, (whether or not China chooses to continue slowing its purchases of our debt) we could see a virtual free fall in the US dollar. And when we do, well profit with the UltraShort Lehman 20+ Year Treasury ProShares (TBT). For starters, do not let the name alarm you, this ETF has NOTHING to do with Lehman Brothers. It simply returns 2X the return of a longer-term bond index Lehman Brothers organized long before going under. Again, it has NOTHING to do with Lehman Brothers. TBT is an inverse fund, meaning its returns the inverse of another index (in this case a long-term bond index organized by Lehman Brothers before it went under). Usually inverse funds return 1X the inverse. Meaning if the underlying index falls 5%, the inverse fund rises 5%. However in the case of TBT, its a double inverse fund, meaning it returns twice the inverse of its underlying bond index. So if long-term bonds fall 5%, TBT returns 10%. If long-term bonds fall 20%, TBT returns 40%. You get the general idea.

Simply put, TBT is a well-diversified means of playing the eventual bear market in longer-term bonds. You get broad exposure to a major trend, without the risk of putting all your money in any single bond short. Looking at the above chart again, you can see that the US-30 Year Treasury has shown strong support at 113 over the last year. As I write, its trading around 122, largely due to the enormous spike that occurred during the financial collapse in October-November: at that time, investors piled into Treasuries as a safe haven. Indeed, this buying binge is what has led to a bubble in Treasuries. Warren Buffett recently warned investors, "When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary." So whenever the 30-Year Treasury finally breaks below 113, the Treasury bubble will have burst. It will be then be time to buy TBT. Action to take: Add the UltraShort Lehman 20+ Year Treasury ProShares (TBT) to your watchlist. When the 30-Year Treasury breaks below 113. Its time to buy.

Three Means of Profiting From the Feds Inflation

With these three investments: Gold, the Rogers Agricultural Commodity Index, and the UltraShort Lehman 20+ Year Treasury ProShares, weve got three means of profiting from the Feds money printing. As I write, the market is still facing the deflationary tide that started when the financial crisis first hit in July 2007. However, at some point the Feds inflationary policies will take hold and the dollar will tank (even Warren Buffett, who is famously against making market predictions, has begun warning investors about the coming inflationary storm). When this happens, all three of the investments we detailed here will explode upwards. You can either buy them now, or put them on your watchlist for when inflation hits. Either way, youve now got a financial survival guide prepared to protect your wealth from the Feds inflationary Armageddon . Best Regards, Paul Learton