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Two Safe Ways to Profit From the "Alibaba Shockwave Effect"

In the mid-1990s, I was fortunate to meet and start working with an Upstate New York money manager named Anthony M. Gallea.

The relationship began when I attended and wrote stories about some of the investment seminars he periodically held for prospective and existing clients. He then became a “source” for some of the investment stories I periodically wrote for Gannett Newspapers. And we ultimately collaborated on a pretty successful book about “Contrarian Investing” that was published by Prentice Hall.


Along the way, Tony shared some pretty important snippets of investing wisdom…

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    Investing in Silver: States Support Move to Metals as Dollar Weakens

    Investing in silver and gold has become more attractive since the U.S. dollar just doesn't have the clout it once did.

    Fears over where the dollar is headed - especially with continued money printing from the central bank - has pushed safety-seekers into investing in silver and gold. Demand has also pushed gold and silver prices to new highs.

    The idea of using gold and silver as an alternative currency has spread as the metals have grown more valuable.

    In fact, worries that the U.S. dollar is on the cusp of a collapse have lawmakers from more than a dozen states (up from just three in the past few years) seeking approval from their state governments to either issue their own alternative currency or use gold and silver as a currency for settlement of state-related transactions.

    Rep. Glen Bradley, R-NC, who introduced a currency bill in 2011, told CNN Money, "In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System... the State's governmental finances and private economy will be thrown into chaos."


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  • Load Up On Gold and Silver as Bernanke Dives Off the Deep End I first thought U.S. Federal Reserve Chairman Ben Bernanke was being deceitful when he denied the existence of inflation - but now I'm beginning to think he's simply delusional.

    Anyone who watched or listened to Bernanke's Oct. 4 congressional testimony must have reached the same conclusion.

    "Persistent factors continue to restrain the pace of recovery," Bernanke said. Then the Fed Chairman promised to consider yet more stimulus "to promote a stronger economic recovery in a context of price stability."

    The irony, of course, is that we don't actually have price stability, but Bernanke refuses to believe this - thus the added stimulus. And that says nothing of the fact that the first $2 trillion of "stimulus" did little or nothing for the overall economy.

    This is the same kind of delusion that led the Fed Chairman to proclaim in 2007 that the "the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."

    So, with a delusional central bank chairman, an anemic economic recovery, and every indication that prices across the board will continue to soar higher, there's really only one place to put any loose change you have lying around: gold and silver.

    Bernanke's Blunder

    Back in May, I said gold and commodity investments were attractive for two primary reasons:

    • First, global monetary policy was - and still is - very stimulative. Commodities, especially gold, tend to do very well when interest rates are well below inflation.
    • Second, rapid growth in emerging markets has created a new wave of middle class consumers. Those new buyers are increasing demand - and therefore prices - for industrial commodities.
    Of course, following the market turbulence of the past few months, the picture has changed somewhat. While growth in China and other emerging markets remains quite rapid, it appears to be slowing a bit. That has dented demand for industrial commodities. Prices have dropped as a result. Copper, for example, has fallen to about $6,900 per metric ton, from more than $10,000. However, unless the emerging market economies go into a full-blown recession - and I don't expect they will - I would anticipate some recovery here.

    On the other hand, monetary policy has gone in the opposite direction - becoming even more stimulative. Bernanke intends to keep short-term interest rates near zero until mid-2013 and he's undertaken a $400 billion "Operation Twist" program to bring down long-term interest rates. Both of these measures have increased monetary stimulus at a time when inflation is already running close to 4%.

    That brings us to this week, when Bernanke decried the progress in the economy and indicated that the Federal Open Market Committee (FOMC) would consider even more monetary stimulus - even though three of the group's members are solidly opposed to the idea.

    $5,000 Gold - $150 Silver

    So far the only thing the Fed's loose monetary policy has succeeded at doing is pushing gold and silver prices steadily higher.

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