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The Daily Reckoning | Sunday, October 9, 2011 ------------------------------------------------------- Protecting you and your own in a world truly gone mad, Readers weigh in on Utah's move toward a sound money, Plus, all the past week's reckonings, archived for your guiltless consumption... ------------------------------------------------------- Expert Breaks His Silence — LIVE — on Wednesday, October 19 at 7 PM This noted expert will reveal how YOU could turn this historic market into consistent gains. It doesn’t matter if markets shoot up or crash down. Even beginners can learn to profit like pros using this expert’s secrets. To get the password to access this LIVE event — just click here. Seeking Security in a Post-Collapse Economy Joel Bowman Back in Buenos Aires, Argentina... The title of today’s feature column — The Perfect Stock for a Dangerous World — hints at something very important about the times in which we live. Note that the title was not, “The Perfect Stock for a Happy, Safe World,” or “The Perfect Stock when Times are Boring and Predictable.” No. Investors today must acknowledge and adjust for all manner of risk above and beyond what is usually on the table. The era of market calm — where steady, reliable growth was the name of the game — seems to have subsided. In its place we see geopolitical risk as far as the horizon. Chokepoints in any one of a dozen major regions around the world threaten to ignite exactly the kind of crises that spread like wildfire through dry underbrush. Monetary woes in the eurozone capture headlines almost daily, oscillating from complete catastrophe to temporary bouts of “we’re saved again” delusion. Balance sheet Armageddon looms in the United States. There is talk of China’s miracle, double-digit growth being sawed in half within a few years. Knock on effects for resource-based economies would be dire. Political uncertainty beleaguers the Middle East and North Africa, where entire governments have already fallen...and more teeter on the precipice of total collapse. Protesters throng the streets in capital cities around the world. They square off against states, each side threatening — and pursuing — escalating levels violence if demands are not met. And that’s all before you get half-way through the morning news. You can probably think of plenty more tipping points just off the top of your head. Undeniably, we live in uncertain times. A changing of seasons...a transfer of power...a period of destruction before creation begins anew. In the meantime, a growing number of individuals are actively seeking an “insurance policy” against imminent chaos. They recognize opportunity abounds post-collapse...but they also want to preserve the necessary resources to capitalize on it when the dust finally settles. Some see their safety in gold. Others in sustainable farmland. Still others in international diversification of their assets. It is to all these points, in general, and the last, in particular, that we speak today. You might have seen in recent Daily Reckonings an invitation to join us in November for a special investment/lifestyle conference. Long time Daily Reckoning friend, Doug Casey, is hosting a gathering of like minds at his Estancia de Cafayate project in Salta, one of the northern provinces of Argentina. The project, a modern day “Galt’s Gulch,” is a place where freedom lovers can safely ride out what Doug calls the “Greater Depression.” Here’s a picture of the place... We’re expecting attendees from around the world, forward looking individuals who know what’s coming down the pipes and who want to prepare accordingly. But places are limited... Your editor will be in Salta, with a handful of Agora Financial Reserve members, in November. We’ll drink wine from the on-site vineyards (pictured above), ride horses, survey the property and local town...and talk world economics and geopolitics with fellow Reckoners. We’d love to see you there too. If you haven’t yet viewed the invitation, you can do so here. But again, places are limited. The invitation goes offline at midnight tonight. We hope you can join us. Click Here for More Information: ESCAPE TO CAFAYATE — NOVEMBER 9 — 13, 2011 And now for that feature column. Here’s Chris Mayer with the week’s best... [The Perfect Stock for a Dangerous World originally appeared in these pages on October 3, 2011] The Daily Reckoning Presents The Perfect Stock for a Dangerous World Chris Mayer I was in Manhattan a few days before the 10th anniversary of Sept. 11. There were reminders of the upcoming anniversary all over the city. The date inspired a lot of reflecting on how America has changed since that horrible day. When I arrived in New York City, I didn’t intend to find an investment theme that grew directly out of the events of Sept. 11. I stumbled on it, by accident, at the Gabelli 17th Annual Aircraft Supplier Conference. My beat is financial markets. So I don’t want to write a treatise on all the ways America has changed in the last decade. But I do want to focus on one important way it has. It directly affects our next investment idea, which is a remarkable company doing some extraordinary things. The stock ought to easily double in 2012 if management can come anywhere close to hitting the numbers it laid out. Let me go back a few days before the conference. I happened to watch an episode ofFrontline, called “Top Secret America.” It’s based on the work of Dana Priest and William Arkin. I admire Priest, who is a legendary reporter at The Washington Post. Her expertise is on matters of intelligence and the “war on terror.” What Priest uncovered as part of a near two-year investigation was a secret America growing up in the wake of Sept. 11. After Sept. 11, America’s intelligence, surveillance and counter-terrorism agencies basically got a blank check to fund their efforts. The CIA got a billion dollars right away. So did the National Security Agency (NSA). “What we found in the years immediately after Sept. 11 was that the existing agencies grew enormously,” Priest says. “They doubled in size, many of them, and new organizations were created as well, big ones.” There was a boom in new agencies geared to fighting this new war. Consider that in 2002, there were 34 new organizations created to work at the top-secret level. In 2003, government created 39 more; in 2004, 30 more; in 2005, another 35; and more each year since. “Every year,” Priest goes on, “more than two dozen, sometimes three dozen, entirely new federal organizations dedicated to counterterrorism [were] being created after Sept. 11.” And each agency, after its creation, grew and grew. One example is the Office of the Director of National Intelligence. The DNI started as 11 people in the Old Executive Office Building. In short order, it grew to a couple of hundred people and moved to a bigger building. It had two floors in the massive Defense Intelligence Agency building. Still, it grew. “So they moved to some of the priciest real estate in the Washington area,” Priest says. “And now they are gigantic — 500,000 square feet, five Wal-Marts stacked on top of each other.” At the conference, the big topic of discussion was defense spending. Everyone is expecting defense-spending cuts. They are inevitable. And this will affect many of the companies at the conference because they have large defense businesses. But there is one aspect of defense spending that isn’t going go to go down. In fact, broader government spending on intelligence and surveillance and covert warfare is only to go up. What’s going to be cut are the traditional battlefield programs. The big stuff: Tanks. Submarines. No one is going to let the air out of a ballooning secret America. “No one’s talking about turning them off,” Priest says. “It’s not like they’ve got mobile trailers that they’re up in, and then when the floods recede, they’re going to take them away.” The rules also changed, greasing the skids. Government made it easier to higher contractors to skirt the slow process of hiring more federal workers. Now, when they want to grow quickly, they turn to the private sector. Priest talks about how the big defense contractors — CACI, Lockheed Martin, L-3 — and others saw this boom in intelligence, surveillance and the like. The “war on terror” is not one that needs tanks and submarines and fighter jets. It needs to gather information. It needs to analyze that information. It needs surveillance equipment. Smart weaponry. Unmanned drones. It’s a top-secret America. Priest talked about how she discovered that nearly a million people have top-secret clearance. That’s 2.5 times the population of Washington, D.C. There are 1,900 companies and 1,100 federal organizations that work at the top-secret level. It also seems independent of political affiliation. President Obama has shown an affinity for the covert, as David Ignatius reports in a column titled “The Covert Commander in Chief.” Obama stepped up the pace of Predator drone attacks over Pakistan. He approved the raid on Abbottabad that killed Osama bin Laden. He has favored the covert on many other occasions. “The president appears to be ratcheting up intelligence and paramilitary operations,” Ignatius writes, “even as he withdraws uniformed troops from Iraq and Afghanistan.” All of this costs a lot of money. I am not going to pass judgment on what’s happening here. You can decide for yourself. I would encourage you to read Dana Priest’s and William Arkin’s work. There is a lot out there on the web, too, in addition to a book, plus the Frontline episode. Some of their work is mind-blowing. If you were to start talking about this stuff at a dinner party, your friends would think you were a conspiracy theorist. But this is real. I mean, we’re talking about massive nondescript buildings in the Washington area that might be one or two floors up, but go 10 stories down. One of the guys on TV said they have shops and restaurants down there “just for them.” I’ll never look at the Washington suburbs in quite the same way again. What are they are all doing? No one knows for sure. Anyway, my main focus here is how we can invest intelligently to secure our own financial futures, given the world as it is. And the above mark an unmistakable trend and a big change from the way we used to think of defense and security in a pre-Sept. 11 world. This will have an impact, positive and negative, on a slew of companies. But I have a favorite that will benefit from the proliferation of top-secret America. It is, as far as I know, the only pure play on the theme. Out of consideration for the subscribers of Mayer’s Special Situations, I can’t reveal the name of the company. But here’s a hint: It was one of the company’s that presented at the Gabelli conference. Regards, Chris Mayer, for The Daily Reckoning Joel’s Note: Join the Mayer’s Special Situations email list and get an inside look at the back page — which includes ALL of the companies Chris has recommended to his readers...along with price action, per cent gain/loss since recommendation, research notes, in- depth analysis and more — right here. Chris’ next alert is due out this coming Friday. Little-known “loophole” could triple investing income In 1986, Ronald Reagan signed a little-known “loophole” into law. Today, the special “10-86 Payback Plans” it created are allowing some Americans to collect as much as three times the income that regular bonds and stocks pay. We’re talking solid yields — without even touching the stock market. Click here now for all the details. ALSO THIS WEEK in The Daily Reckoning... Opportunity Now By Chris Mayer Gaithersburg, Maryland Such thinking also tends to force some perspective. I think the world is full of opportunity. I think it is a great time to be an investor. Of course, with the constant onslaught of depressing news out there, it’s not always easy to remain alert to these opportunities. Recently I received an email from a reader of my Capital & Crisis newsletter. I thought the email echoed pretty well some of the concerns investors have right now, so I’d like to take the opportunity to address a few of those points today. Invest In What The Kids Are Doing... By Peter Charles Everybody wants to find the next Google to invest in. Eric Schmidt, the CEO of Google, says put your best people in mobile. That’s an interesting concept. So what he’s trying to say is mobile is the future. Mobile is where technology is going. Basically, it’s because everything that you do that can be digitized is going toward mobile. Whether it’s voice, music, entertainment, information, everything is going toward mobile. So if Eric Schmidt, who runs one of the most significant technology companies on the planet, is basically saying put your best people in mobile, maybe as investors, we should be putting our best technology dollars into mobile. Gold is Not in a Bubble...Yet! By Jeff Clark Jeff Clark, editor of BIG GOLD, caught up recently with Mike Maloney, founder of GoldSilver.com to get his latest thoughts on the gold and silver market. Was the recent selloff in the precious metals sector the beginning of the end of the Great Gold Bull Market? Or merely the end of the beginning? Mike’s perspective may surprise you... The Eight Marks of Fascist Policy By Llewellyn H. Rockwell Jr. John T. Flynn, like other members of the Old Right, was disgusted by the irony that what he saw, almost everyone else chose to ignore. In the fight against authoritarian regimes abroad, he noted, the United States had adopted those forms of government at home, complete with price controls, rationing, censorship, executive dictatorship, and even concentration camps for whole groups considered to be unreliable in their loyalties to the state. WAKE-UP, OR DIE BROKE! Washington and Wall Street are sneakily siphoning away your hard earned wealth to fill their own coffers. Why are they doing it? (The truth will make you sick to your stomach...) How are they doing it? (They’re banking on American stupidity...) Can you stop them? (Yes, but it’s not how you’re thinking...) For the answers to all these and more, click here now... The Weekly Endnote... Last week in this space we included a few notes from Daily Reckoning friend, Ron Hera, on the Utah Monetary Declaration. (You can view the entire text here.) As we suspected, Fellow Reckoners had plenty to say on the subject. Here are a few of their responses. First up, this one from a Reckoner who'd prefer we didn't print his name... I'm not surprised that the step was taken by Utah to treat gold and silver as money and allow parties to trade goods and services using any agreeable tender. Utah is probably the most conservative Western state. I would bet the next one will be Idaho or maybe Montana. My hope is that Arizona will soon fall in line with them. If several states follow with similar laws, perhaps we can look forward to a federal law. That seems like a long shot to me, but we have a start at least. And this, from another Reckoner, one who wishes to remain anonymous... I was sitting here in my tree house, quite close to the trunk actually when I decided to go out on a limb after digesting the day's information. Utah has drafted and passed a direct slap in the face of the the federal gov't and the federal reserve. They have opened the door for every other state to do the same and make gold and silver the money of the land and maybe the money of the world. This will not be smiled on by the feds or the one world elites around the globe. Expect lawsuits and...maybe even tanks filled with troops that will claim they are fighting for the union just as if it were the civil war all over again. Preserve the world will be their battle cry. If Utah, or any other state gets away with telling the feds that they are now on a gold and silver standard, expect war. Once the feds loose their control of the worthless paper they call money, it is over for them and their power — and that is what they crave most and fear loosing more than death. They won't go down without a fight. Greece is about to leave the Euro and go back to their own currency, albeit a very flawed one just like all fiat currency. This means that Germany, France, the US and the Eurozone in general will have to eat billions in loans and derivatives. Greece borrowed from everyone who would lend to them and that includes us (US) and most of Europe. I believe Germany will protect its sovereignty first and foremost and that it may very well tell the rest of the Eurozone to go to hell or wherever else they are headed, but without Germany. The Fatherland is already printing German marks (yup, really and right now) and bringing out the old marks that have been in storage for the last 10+ years while they were part of the Euro experiment. If Germany has to bail out Greece — Italy, Ireland, Spain and Portugal will expect the same and the Krauts know it. Therefore they will bolt the Euro the minute a Greek default is a sure thing. Greece will default, and Germany knows it so they are just w aiting for the Trojan Horse to be wheeled inside the gates. At that time there will be an enormous flight of money to safety and that won't include US T-Bills, Gov't bonds of any country or anything else US- or Gov't-sponsored around the world. That means gold and silver will be the destination of all who seek safety as paper will continue even more rapidly on its way to being worthless. Silver could hit $60 within a month or there could be a lot of lying, threats, tanks and what not and who knows as governments try to calm the masses and regain control of the world and its money. It may take longer than a month, but I believe you will see silver over $75 an ounce within a year. So, I will now go down my tree and into my bunker where I can sleep with my warm dogs and my cold, but comforting weaponry. Nite all. Sleep well as the world swirls down the twoi-let. Your harbinger of warning and doom. And finally, this...from another private Reckoner... I live in a state adjacent to Utah and I have a curious interest in it's stance on gold and silver. My thinking rests upon the reputation of the Utah Mormon community as a generally fiscally conservative group of people. Because of that I am sure, although I have no specific facts, that the Church of Jesus Christ of Latter Day Saints (The Church) does hold as a portion of their assets a valuable weight of gold and silver, or equivalent. And I believe that it would be ridiculously naive for any political analyst to assert that The Church has not had a strong behind-the-scenes influence in the passing of the most recent legislation promoting gold and silver as legal tender in Utah, and the protection thereof. I further speculate that should "The Feds" pass a gold and silver confiscation law by Executive Decree, or such, that the reception for the Fed Confiscation Team at the Utah state borders would be very chilly, at best. Take the gold from The Church in Utah? Ya gotta be kidding! --- As always, we welcome your thoughts. Email them to the address below and... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning -------------------------------------------------------