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Why I'm Keeping My Portfolio in Maximum Defense Mode By Tom Dyson We walked around a swamp, jumped over a fence, and then hid in the bushes next to the departure track. There was an intermodal train here. It carried container boxes and semi-truck trailers. It was two miles long and looked like it might depart at any minute. We rushed to find a ride. We chose a flat car with a semi-truck trailer on top. Hobos call these wagons "piggy backs." We slid between the trailer's wheels and waited for the train to leave. You should always wear black clothes when you're jumping a train. My friend was wearing white sneakers. When a yard worker drove slowly along the train inspecting the brakes and the air hoses, he spotted my friend's shoes poking out from behind the truck tire. "Hey!" yelled the worker. "Get down from there!" We crawled out from under the trailer's axels and jumped off the train. Three yard workers were standing next to the train, pointing flash lights at us. Freight railroads are among the most economically sensitive businesses in America. They transport all the most important goods and commodities in the economy... like chemicals, coal, lumber, grain, new cars, oil, and chemicals. When activity increases on the rails, you know the economy is improving. When there's no hustle and bustle in the rail yards, it's a recession. We went to a yard in south Jacksonville operated by the Florida East Coast Railroad. The tracks run between Jacksonville and Miami. This railroad runs six container trains a day in each direction, and we were hoping to catch a ride. As the railroad workers escorted us out of the yard, I took the opportunity to ask them about business... "It's horrible," said one. "I can't believe how many people they've fired." "How much has business fallen?" I asked. "A lot," he answered, figuring it had dropped more than 20%. "On the TV, they say the economy is recovering. Have you at least seen some improvement?" I asked. "Nope," he said. "It's leveled out, but it's definitely not getting any better." Right now, the newspapers and the magazines are proclaiming the recession is over and the stock market is in a new bull market. But the message from the freight yards south of Jacksonville is different. Judging by how things are going there, the economy has stopped getting worse, but isn't yet recovering. Until I see some improvement in the railroad business, I'll continue to consider the rally in the stock market a bounce in a bear market. I'll keep my newsletter's portfolio in maximum defense mode. We're holding pipeline companies with 10% dividends. These companies transport, process, and store natural gas... but they don't own it. They collect fees no matter what. We've loaded up on bonds. These bonds trade on the stock market and pay 8% yields. We'll get 100% of our principal back when the bonds mature, just like a loan. We're buying insurance companies. Insurance rates are about to enter a bull market. These insurance companies are loaded with cash, so they are among the safest investments in the stock market right now, yet they have 25% a year profit potential. Finally, we'll sell covered calls. We'll earn 15% income from stock market volatility, without taking any credit risk. The workers dropped us off at the entrance to the freight yard and I apologized for the inconvenience we had caused them. "Next time don't wear white shoes," they said. Good investing, Tom  The No. 1 Reason I Don't Trust This Market Don't Trust the New Rally Until You See This Signal The dollar fell to its lowest level in almost a year on Tuesday as a rally in gold prices above $1,000 an ounce and fresh concerns over its reserve status weighed on the US currency. Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ said the dollar's near-term prospects did not look particularly encouraging. "Gold has just broken through the $1,000 level and this along with the dollar index approaching its lows may well encourage another wave of speculative dollar selling," he said. The dollar index, which tracks its progress against a basket of six major currencies, fell to a low of 77.398, breaking through the lows it hit in early August to fall to its weakest level since September 30 2008. – Financial Times Japan's incoming government is likely to favor spending and tax policies that may cause a surge in government borrowing and higher long-term bond yields, said international economist Carl B. Weinberg. The election win by the Democratic Party of Japan "will set in motion spending plans and tax cuts that will destabilize Japan's public finances," Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said in an e-mailed response to questions. "A catastrophic breakdown of Japan's public-sector finances will be the biggest story ever to hit the world economy in our times, eclipsing the current financial crisis," Weinberg said. – Bloomberg How to Retire on Your Gold A unique type of gold investment (there are only 3 in the entire world), that has a history of paying as much as 32,000% over an 18 year period. Click here for the full details... If The Stock Market Falls, Will Precious Metals Stocks Fall Too? Saturday, September 5, 2009 Gold to Stay Above $1,000 This Time Around Friday, September 4, 2009 Know This and You'll Never Have to Worry About the Market's Next Move Thursday, September 3, 2009 Super-Safe 11% Income Right Here Wednesday, September 2, 2009 This Popular Trade Is a Comfort Trap Tuesday, September 1, 2009 A new way to play gold The Chinese government has secretly created a new type of government-backed gold investment. 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