2004
INVESTMENT SCORECARD

Tangibles outperform intangibles again
Dec 30, 2004

PHX, AZ - (IFN) - Tangible asset investments again outperformed stocks, bonds and CD's in 2004, according to Swiss America CEO Craig R. Smith, who just released his 2004 Investment Scorecard.

Rare Morgan silver dollar investment-grade coins topped the chart with annual growth of 54% in 2004, followed by rare $20 Liberty gold coins at 31%, rare art at 20%, silver bullion at 15%, residential real estate 10%, Nasdaq 9%, Gold 5.4% Dow +3%, Bonds +3% and CD's +2%.

"From a five-year perspective, tangibles look even better," according to Mr. Smith. "Rare $20 Liberty gold coins are now up 230% since the new millennium started, second only to rare art, up 110%."

Real estate prices have jumped an average of 47% since 1/2000, while gold bullion is up 54%. "Who says real estate is the only way to hedge market volatility and rising inflation?" says Smith.

Despite the stellar performance of tangible assets so far in the 21st century, Smith advices a well diversified portfolio should include no more than 25% in tangibles (not including real estate) depending upon your age, income, etc.

On a recent CNN interview Mr. Smith discouraged investors from putting too much into any one area, including gold and silver.

"The real problem with American investors is not owning too many tangibles, but owning virtually none," says Smith. Gold and silver ownership is rising slowly as the public begins to understand that the price of gold/silver reflect the financial big picture -- which has become bloated with debt, overconsumption and lacking savings."

Looking forward, Smith says "Investors are still reeling from the dot com collapse and are looking for a safe, profitable haven for their hard earned cash that tangible assets offer."

2005 ECONOMIC TRENDS

In 2004, dire predictions about Iraq, Russia, China, Social Security, and an impending recession, were almost enough to send even the staunchest optimist fleeing into the safe haven ... but WHICH safe haven?

U.S. investors, whose returns were eroded in 2004 by high oil prices, rising interest rates, sluggish job creation, slowing corporate-earnings growth and modest retail-sales gains, can be forgiven for hoping 2005 will bring relief. But they will probably be disappointed.

According to Smith, "In 2005 I expect the U.S. economy will muddle through without any major changes in the overall fundamental trends of the last year."

* DOLLAR
2004 ends with the U.S. dollar at new lows against the Euro. Currency trading experts agree that the euro should hit $1.50 to $1.60 by the end of 2005 -- amounting to another 15% erosion of U.S. buying power. I think our no-so-precious buck could drop another 30% in 2005 to $1.80 Euro.(see The In-credible Shrinking Dollar Special Report)

* STOCKS
With the S&P 500 just over 1200, the price/peak earnings multiple on the index has returned to 21. Aside from the 2000 bubble peak, this multiple exceeds the valuation seen at any historical market peak including 1929, 1972 and 1987. Sure, stocks may drift higher in 2005, but they remain volatile and could stay rangebound for many years. Advice: Don't sell out of stocks, but look for value- priced stocks and portfolio diversification for 2005 growth. (see: FORGET STOCKS).

* REAL ESTATE
The great housing boom of the early 21st century is looking shaky. Governments are growing nervous about whether prices will hold, and what will happen if they do not. Prices have begun to fall in Australia and Britain, and economists are asking if central banks can prevent a plunge. The housing market would not have to collapse to have a negative impact on the economy. Even a lack of further appreciation could put a damper on consumer spending, both by depressing sentiment and by reducing the money available from refinancings. Advice: Don't sell the farm, but don't borrow against it either. (see: BAT MEAT).

* OIL
The United States demand for oil is up 3.4% ytd in 2004, while average daily imports of crude oil have climbed to a record high of 11 million barrels a day. OPEC is already pumping at its highest level since 1979 and has said it will raise production to 30.5 million barrels per day in November. And yet, prices still rise. Demand is simply swamping available capacity, and that means high oil prices are here to stay. (See: "$5 Gas Coming Soon?").

* INTEREST RATES
Alan Greenspan once said, "If you want to know where interest rates are going, watch gold." Today the Fed is backed into a corner of their own (money) creation. To attact the $2,000,000,000 per day of foreign capital that the U.S. needs to keep this big "USS DOLLAR" ship afloat, they must raise interest rates. Rising interest rates tend to slow the economy, which has been so overstimulated with cheap money since 2002. Advice: Lock in fixed mortgage rates ASAP, reduce debt ASAP and start saving at least 5-10% of your income ASAP. (see RICH MAN, POOR MAN -Russell).

* INFLATION
Inflation is the one wild card that can whip investment markets into a frenzy, cut your true wealth by half in just a few years and completely derail an otherwise sound investment strategy. In the late '60s inflationary surprises ripped through the stock market, dropping the Dow some 35% ... in the 1970s stocks suffered through a tortuous two-year bear market as inflation spiraled ... in the '80s Paul Volcker nearly plunged the U.S. into a 1920s- style depression when he miscalculated the strength of "runaway" inflation. Now today, after years of relative calm on the inflation front, the risk of grievous error is just as strong as at any point in history. (See: Top Inflation Fighters Tangible).

* GOLD/SILVER
Gold bullion prices, already near 16-year highs, may be headed for the longest rally since Richard Nixon was U.S. president as a falling dollar and renewed concern about inflation boost bullion's appeal as an investment. Gold has climbed 76% since 2001 to about $435 an ounce as U.S. budget and trade deficits widened to records. (see: GOLD'S BIG PICTURE). Gold last rose five straight years from 1970 to 1974, when inflation peaked at an annual rate of 12 percent. Silver bullion is also an excellent value at today's price, just under $7. The best way to participate in the gold and silver markets today is by owning high quality, U.S. rare gold and silver coins. Advice: Make sure that you own some physical gold coins in 2005 and beyond. (see: Morgan Silver Dollar Special Report).

2005: A MAJOR PARADIGM SHIFT

In December '03 Smith wrote, "Four Major Facts Driving The Gold Rush!" and sticks by them in '05:
FACT #1) A DROPPING DOLLAR (reducing OUR standard of living - and our kids!)
FACT #2) TRILLION DOLLAR DEBT & DEFICITS (living on borrowed time & money)
FACT #3) SCANDALOUS WALL STREET BEHAVIOR (fueling a confidence crisis) and
FACT #4) ACTS OF TERRORISM (adversely impacting economies and oil prices).

Smith also suggested, FOUR NEW YEAR'S RESOLUTIONS, and also sticks by them in '05:
1) I WILL NO LONGER TRUST IN THE U.S. DOLLAR AS A STORE OF VALUE -- ONLY GOLD IS 100% TRUSTWORTHY.
2) I WILL NO LONGER TRUST GOVERNMENT TO SOLVE OUR DEBT/DEFICIT CRISIS -- REGARDLESS OF POLITICAL PARTY.
3) I WILL REMAIN VIGILANT TO ALL FORMS OF TERRORISM, INCLUDING FINANCIAL TERRORISM -- IN MEMORY OF 9/11.
4) I WILL NO LONGER TRUST WALL STREET, NOR REWARD SCANDALOUS BEHAVIOR -- INSTEAD, I WILL DO MY HOMEWORK.

"In the 21st century I see a major paradigm shift, leading investors to sell dollar-denominated assets and buy hard assets -- like gold, silver and other commodities. And I am not alone. Dozens of economists and respected financial commentators now agree that "gold is the BUY of a generation!" READ, "THE NEW GOLD RUSH, PT. II INTRODUCTION"

FIVE REASONS U.S GOLD AND SILVER COINS ARE TRUSTWORTHY

1. COINS ARE VERY LIQUID - Reputable dealers offer a 72-hour cash liquidation - unlike stocks, bonds, mutual funds, real estate, etc. which can range from weeks, to months to liquidate.

2. HISTORIC U.S. COINS APPRECIATE TAX-FREE - Sure gold and silver coins may seem boring to some because they just sit in a safe or depository, but they are also one of the only assets that does not require a monthly tax payment, margin calls, or weeding to maintain their value.

3. GOLD COINS ARE TRUE, UNENCUMBERED WEALTH - Most equity assets are both assets and liabilities at once. Not so with gold or silver coins, they are nobody's liability.

4. GOLD COINS ARE VERY PORTABLE - Unlike most other tangible assets, U.S. gold and silver coins can be transported worldwide in a briefcase - privately.

5. GOLD STABILIZES A PORTFOLIO - According to the World Gold Council, "Gold is an effective portfolio stabilizer during periods of financial stress ... History implies that the upside potential for gold is greater than the downside risk." - 9/10/01, WGC

In sharp contrast to equities, tangible assets are not dependent on; Wall Street corporate earning reports, Fed interest rate and money supply manipulation, consumer spending, government bailouts, or even economic cycles. Add it up and I think you will understand why more and more people are going for the gold.

TO GET UP TO SPEED QUICKLY ON THE 21ST CENTURY GOLD RUSH, REQUEST MR. SMITH'S NEWEST FREE EDUCATIONAL RESOURCE: "CNN REDISCOVERS GOLD".

FLIGHT TO QUALITY ASSETS CONFIRMED BY INSIDERS

Using the financial markets as a barometer of our confidence in the future, the 21st century has so-far marked a historic flight to quality - from symbolism to substance, which Mr. Smith covered in his book, Rediscovering Gold in the 21st Century.

Here are a few quotables from noted economists that will help to explain why the destiny of a currency always rests on the cornerstone of FAITH and CONFIDENCE.

STEPHEN ROACH, Morgan Stanley economist says:
"I fear there is a tear in the fabric of CONFIDENCE that underpins the special role of the dollar -- a tear that is now getting larger under the stresses and strains of an unbalanced world." -Nov. 21, 2003 RMP

RICHARD RUSSELL of Dow Theory Letter:
"Many years ago the dollar “was as good as gold,” since you could turn your dollars into the government and receive gold. Today the government is implying that the dollar is still “as good as gold.” After all, you and I continue to work for dollars, don’t we? Yet today the dollar is simply as good as our CONFIDENCE in the dollar. Intrinsically, the dollar is worth nothing, and dollars can and are printed by the billions every week by the government. Yet by law we must accept dollars because the U.S. government states that they are “legal tender.” Logically, this tells us that the dollar as a store of value is doomed. It’s only a matter of time before the dollar falls, and falls big time [30-40%.]" Source: "2003-04 Economic Fundamentals by Richard Russell."

ALAN GREENSPAN agrees with Russell on the confidence factor:
"Today the dollar is simply as good as our CONFIDENCE in the dollar..." -GOLD & ECONOMIC FREEDOM

JOHN WAGGONER, USATODAY reported back in 2002:
"Gold is a direct bet against the monetary system: Gold investors figure an ounce of gold is always worth something, even if the government is in shambles and currency is worthless. For two decades, the powerful U.S. economy kept the dollar strong and gold prices low. But lack of CONFIDENCE in the financial system and the specter of more terror attacks are pushing gold prices up - and individuals back into the gold market." -"In Uncertain Times, Gold Beckons Again" August 14, 2002

Related Stories:
1-14-05 -- Real assets create real riches -John Waggoner, USA TODAY -- Some of the sharpest minds on Wall Street are betting that you'll make more money in metals than Microsoft the next few years. The new bull market is in stuff, not stocks, they say. We're talking about land and oil and gold, the commodities that once made John Jacob Astor, John D. Rockefeller and the Hunt brothers very rich men.
2004: Top Financial Stories -Month By Month- RMP Editor, David Bradshaw


DISCLAIMER: All of the information in this story is believed to be true, however errors are possible. Past performance is no guarantee of future performance. All investments have risk.

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