There in the sub-title is the grand secret of investment success. The only problem today is that everything is low, so what should you choose? Let’s look at the possibilities:

Residential Real Estate: You can only buy low if we are near a bottom. Residential real estate has another year or two before prices will bottom out and turn around, working off the huge inventory of unsold homes. That is not a candidate for a low buy yet; later it might be.

Stocks: They’re obviously way down and, of course, Wall Street wants you to buy. However, other than certain selected industry groups, growth mutual funds and the Dow Industrials are big-time losers because they will go lower.

I like a few industry groups: Uranium Mining, Gold and Silver Mining, Oil-Service Companies (that make and service drilling rigs), certain Oil-Income Trusts (Canadian) which can yield as high as 14 percent because of some peculiarities in Canadian tax law, if you pick the right ones. (More details to follow.)

Bullion and Coins

Gold and Silver: Avoid futures contracts; they are a big no, no. They are too volatile, and the metals can temporarily move against you as little as five or ten percent and wipe you out. Gold and silver are down substantially. If you bought a month or two ago based on my or anyone else’s recommendation, you are under water and are probably mad about it.

These investments are all low. The important question is which is most likely to be near a bottom and to come back big time? Gold and silver and their equivalent mining stocks lead the pack.

Many have emailed that they are mad at me because gold and silver are down. I personally am cheering. I would like to see silver as low as $5 and gold near $500 because then you could buy lower and could make a lot more money when you sell high.

So I want the metals lower and cheaper.

My subscribers are no different than everyone else. You only want to buy when things are going up and they are hot, and you want me to make short-term calls. In fact, I’ve had several emails from people who objected because I didn’t publish over the last month, but want me to publish every week.

I’m not in the short-term call business. I know that gold and silver in past bull markets, such as the 70’s,were occasionally down as much as 30 percent for as long as a year or so on the way to new highs. Making short-term calls is a fool’s errand, and I won’t do that. I am only interested in long-term results.

I will not publish every week as some have suggested. I tell you what I think you ought to do. If I change my mind, I’ll let you know. Remember, long-term calls will always be The Ruff Times’ mission.

Shortages

One of the real problems is the apparent contradiction between huge shortages of bullion at coin dealers and falling prices. Why?

Every coin dealer is having trouble getting bullion to sell to you. You would think that shortages would drive up the price, but let me explain how metal prices are currently functioning.

They are currently driven by paper silver and gold, which are basically the futures contracts. When commodities were booming, a lot of companies, including banks and big corporations, were buying commodity funds by the billions, which included gold and silver futures contracts.

When the current crisis developed with balance sheets disappearing because real estate had caved in and so did the mortgage-based bonds, banks especially were forced to liquidate these commodities to raise cash to meet their statutory requirements for liquidity.

Banks were big investors in the commodity funds, and when they liquidated the funds (the paper gold and silver futures) very little bullion changed hands, but the price was driven down by the sale of the futures contracts.

What happened then is that basically the market was split. It should theoretically be driven up by people buying bullion, as dealers were swamped with orders that they couldn’t fill because they couldn’t get the metal. These shortages did not drive up prices because the futures were down big time, and that determined the price.

Gold and silver have even fallen below some mining- production costs. Several mines have had to shut down or limit production. The shrinking of new supplies coming on the market and the shortages at the coin dealers, who in many cases can only take orders and deliver weeks from now, have created a fierce potential upward pressure that eventually will reassert itself.

So not only can we buy low, but we can buy a product that is poised for a massive upswing. Especially silver, because industrial users must buy to meet their needs. Eventually when the big corporations and banks are through liquidating their commodity funds, the supply and demand fundamentals will again be driven by bullion. They are loaded for a massive bull market.

Buy low, sell high! It’s lower than you will see again in your lifetime. Forget the fact that you are temporarily under water. The way to come back is not to abandon the market or stop buying when it is low.

Buy low, sell high!

How to Live Your Life and Invest Your Money

No matter what changes in Washington, many things are still under your control and will be perhaps for decades.

These are things you can do now independently of how the government acts.

Assume that saber-tooth inflation is in your future. It may take a year or so before it is really obvious. Right now we are going through a deflationary period, and the government hates deflation with a passion. The only way they know how to deal with deflation such as we have now is to throw money at the problems. The process of creating all the money they are throwing will create price inflation eventually as the money works through the system.

Ironically, deflation sows the seeds of inflation because of how congress will respond. Creating money is inflationary, as inflation is at all times and all places a monetary phenomenon. Rising prices are only the end result of the government creating money.

How do you prepare for inflation?

1. Have a commodity storage program. You don’t necessarily have to buy a commercial food-storage program, although that will be very helpful. We have associations with people who can help you (Karen Varner at 801-225-0948 or Martens at 800-824-7861).

   Inflation will rekindle rising gas and oil prices after the current major decline is over. Trucks will have trouble paying for fuel so they go can go to the back doors of stores to replenish the shelves after the shoppers have descended on the stores like a plague of locusts every day.

   Whenever you go to the store to buy something you ordinarily buy, don’t just buy one – buy five. Don’t just buy two cans of tuna, buy a case.
   Don’t just change the oil in your car, buy several quarts of oil and store it away. Store plenty of diapers and soap. You will be buying at today’s low prices and consuming at tomorrow’s higher prices. You can save money by drawing on your storage.

   Price inflation will become part of your life. It may take as much as a year for the money to work its way through the economy, so we will probably have to live with a multi-month deflationary period. Then it will begin to look like the ‘30s again as unemployment soars and consumer buying slows.

   It is paradoxical that deflation is the ultimate cause of inflation. Increasing the money supply to fight deflation will eventually cause rising prices. It is a natural consequence.

2. Ignore most mutual funds and many of the giants of industry. They will be in trouble for years, maybe decades. But the stock market is not a monolithic entity; it is made up of industry groups. Some industry groups will do well.

   Take Will Roger’s advice: “Invest in inflation, it’s the only thing that’s going up,” and several industry groups will benefit from inflation.

   During the depression of the ‘30s, some industry groups did very well indeed, while the stock market in general was down as much as 90 percent.

   Which groups do I like?

   I like gold and silver mining stocks. As a class, they are at the same levels they were when gold was only $300 (buy low, sell high). I like the Uranium Stocks listed in The Investment Menu because we will finally have scared the environmentalists into easing up on their opposition to nuclear power. There are 35 nuclear plants either under construction or on the drawing board right now, and there is only half enough uranium above ground to meet their needs. So uranium miners will have to keep digging just to meet basic demand.

   I like Oil-service Companies. Despite environmentalist’s opposition and Democratic opposition in Congress to offshore drilling, we will be doing more of it. The safest bet to benefit would not be the producers, but the Oil-service Companies that build and service the oil rigs.

   A word about the big oil producers. I’m sure some of them will do very well, and Exxon will probably lead the pack. But I don’t understand this sector as much as I should to be able to pick winners, so you might have some of your money invested in the leaders of this field.

   Canadian Oil-income Trusts benefit from certain Canadian tax laws. Some of those companies will yield as much as 12 to 14 percent a year because their profits are not taxable at the corporate level, which means they can pay out all of their profits to investors. The ones that meet that requirement are the older ones which were grandfathered when the Canadian government in its relentless pursuit of income, changed the tax laws on the newer oil-income trusts. They grandfathered the old ones.

   You can now safely buy a pick-up truck or an SUV because the price of gas is down, down, down, and it probably will be for the next year or so. Some big families need a big vehicle to haul their whole family or tow their boat as only a big vehicle can.

   Right now you can buy them cheaply because the car lots are swamped with them, and the car companies who are always behind the power curve will concentrate on building smaller cars, even though at today’s prices you can afford to own and drive an SUV or pick-up truck. That will not always be true, because eventually the price of gas will be back up. But in the next year, the price of gas is not a major factor in your decision.

3. Concentrate on family. Your family and your posterity will live on. Make them your first priority. The best gift you can give your children is to love your spouse and let them see it. Model the ideal traditional family for them. Teach your children the old-fashioned values. Go to church and live your religion, whatever it may be.

   Liberal forces want to change the nature and influence of the family on our children. They are targeting them very specifically.

   In the election in California over gay marriage, the opponents of Proposition 8 relied heavily on two big lies:

   
   
   

   1. it is assumed that if you were against gay marriage that you had to be motivated by bigotry and hatred. I’m against gay marriage, and I am not motivated by bigotry or hatred, nor are any of my children. You might even consider gays to be sinners, but if Jesus taught us anything, it is that we are to love sinners.

      In the Prop 8 battle in California apocryphal stories were told of Mormon families who allegedly rejected sons or daughters and threw them out of the family if they found they were gay. First, these are rare exceptional stories with little basis in truth. If that is what a Mormon family did, they are not living their religion. You may disapprove of someone’s behavior, but that does not affect whether you should love them and appreciate them. There are positive things to look for in everyone.

   2. The second big lie was that nothing in a new law would require the schools to teach homo-sexuality. That’s true only as far as sex-education classes are concerned, but as my daughter has documented in her new book on the assault on family, every other department of the school will be influenced by this legislation, as pushed by ACLU law suits.

My daughter, Sharon, looked with horror upon a history textbook that was brought home from Gilbert High School by her children. It presented homosexuals in the past in a very positive light, including pedophilia, and the ACLU will be ready to launch law suits alleging discrimination of schools that do not give homosexual marriage equal billing with heterosexual marriage.

Our concern over homosexual marriage relates to our children. It may be many years before we see the impact of that. So there are philosophical grounds supported by social-science research which says homosexual marriage is a bad idea, simply to accommodate a tiny minority of a population at the expense of a large majority.

So treasure your traditional family. Love your children. Give them your time and pass your values on to them as best you can so you will raise up a righteous posterity under very difficult conditions.

This is probably the most important piece of advice I will ever give you. Don’t disregard it simply because it doesn’t have a dollar sign attached to it.

By Howard Ruff
The Ruff Times

*****

Howard J. Ruff, the legendary author and financial advisor, has re-edited and will re-issue his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times Financial Newsletter. This article appeared in the November 7, 2008 issue of The Ruff Times.

The newsletter is much more comprehensive and deals with a broad