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Where I Would Invest Stock Market Profits Right Now

By Chris Weber, editor, The Weber Global Opportunities Report
Saturday, November 3, 2007

The stock market is a wonderful discounting mechanism.

It usually signals a downturn in the economy months before that downturn comes about.

But the market has – so far – kept above its August 16 lows. I am ready to sell my U.S. stocks if they fall below that. If this happens, it would signal that there are real problems in the market.

I've gotten many comments from readers of my advisory who own U.S. stocks and have made nice gains with them in the past few years. Yet they are quite worried about holding them in light of what seems to be a terrible economic climate coming.

To them, I recommend to the extent that you worry about any investment, sell it. You don't have to sell everything. Maybe you can just sell half your holdings. Or give them all a very tight trailing stop, of maybe 3%. Life is too short to have to worry about your money.

Now, what to do with that cash?

If I felt I didn't have enough in the gold or silver area, I would put the cash there.

Only two months ago gold was under $650. This week, it touched $794. Before this bull market is over – and I see it lasting well into the next decade, the 'teens – it would not surprise me to see gold at $3,000 and silver at $187.50. For silver, this would require a 1,211% increase from today's price, versus a 277% increase for gold.

But please keep this in mind: Whenever you get such breathtaking bull moves like the ones we've recently seen in the metals... well, it wouldn't surprise me if they took a rest or even consolidated.

That said, my next target of $850 is closer than ever. It's less than 9% away. And it's only a matter of time. We could be seeing a historic fall in the U.S. dollar. For the world's mightiest economic and military power to have a currency collapsing and mired in debt, that would be something truly new under the sun.

The last time the gold price was so high and the dollar was so low was during the late 1970s. Back then, the dollar was pulled back from the brink by two things. First, Fed chairman Paul Volcker drastically raised interest rates and reduced monetary growth. Second, the U.S. dollar had no alternative as a major world currency.

But today, these things are not present. Today's Fed chairman is being pushed to lower interest rates. And the euro is up and running as a potential currency competitor to the dollar.

There's one other difference. Back in the late 1970s, the U.S. was not the world's biggest debtor nation. It was actually the world's largest creditor. But now, covered in debt, the U.S. is in a very vulnerable position.

The ultimate beneficiary of this situation will be gold. It is not easy to find and mine new gold – not nearly as easy as creating more money and credit.

So if the stock market is making you nervous, take some profits, down to your comfort level. And for those people who have been waiting to buy the precious metals, please do so.

The best way to do this is to own actual gold and silver, through collectable coins. You can also buy gold and silver through the stock market's exchange-traded funds (ETFs). These are a good way to take a position in the metals, which you can buy through any regular broker.

Good investing,

Chris Weber

Market Notes



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