Special Investors Report

Two train crashes and the
end of retirement in
Australia as you know it

Dear Reader,

Bullet train
Mangled Wenzhou bullet train just two months before the metro crash in Shanghai
On Tuesday 28 September, 2011, at 2:51pm in Shanghai — a city of 23 million people — two subway trains crashed into each other.

It happened on Line 10 of the metro system, just before the Yuyuan Gardens stop.

Authorities blamed a signal failure. Some news agencies reported it was due to a power failure.

248 people were injured in the crash. Yet it barely rated a mention in the foreign press.

Indeed, in a city of 23 million people and a country of 1.2 billion, a subway fender-bender isn't news.

It's a statistical probability.

Shanghai alone gained 9 million new residents in 2011...with a predicted 7 million more to come by the end of 2012. These are mostly farmers streaming in from the rural provinces to find work and get rich in China's wealth revolution.

When you have that many people moving that fast over new roads and new rails, accidents are bound to happen.

In another accident two months earlier in July, two high-speed trains crashed near the eastern-central Chinese city of Wenzhou.

Again, signals along the track were blamed. But the crash sparked a public outcry. Chinese officials were accused of building these railways far too quickly and cutting corners with safety.

Over in the next few minutes I'll show you how the signal failures in China's subway and train accidents are not isolated incidents.

In fact, they are a metaphor for the biggest economic danger China faces today...one that could end the retirement dreams of millions of Australians — including you.

All the signals I'll show you are flashing bright red, warning you danger is ahead.

The biggest crash of all is coming

I hope you read this report to the end. Because despite the evidence I'm about to show you, few people in Australia take these signals seriously.

People think this China boom will go on forever.

They are wrong.

In a 2011 Reuter's poll of 30 economists, not one predicted China's growth rate would go below 8% in 2012.

BHP Billiton's chairman Jac Nasser echoed this bullish consensus late last year. He told investors that China's boom was not a temporary thing but a 'structural shift'.

He said, 'Unlike a gold rush, this structural shift will not suddenly disappear, rather it will continue to drive long-term demand for minerals and energy.'

The head of Australia's Treasury Department, Martin Parkinson, agrees. In an October 2011 Financial Review article he wrote, 'we [the government] believe the outlook for China is strong and that a "hard landing" is unlikely.'

In the first half of 2012, China's economic growth rate slipped below 8%. Just six months prior, no economist thought that possible.

Since Jac Nasser's comments in late 2011, BHP has put many major expansion plans on hold.

And the Australian Treasury won't pull in anywhere near as much revenue as it initially forecast from the Mineral Resources Rent Tax because coal and iron ore prices have tanked as China slows.

So why were all 30 economists, Jac Nasser, and Martin Parkinson dead wrong?

As this letter will make clear, the China boom of the last five years — and the demand it created for our resources — also created an enormous illusion of wealth.

It allowed China to spend billions on an elaborate infrastructure investment programme designed not for profit...but to keep the illusion of economic growth going, for the benefit of its citizens.

It's also lured many Australian investors into believing that Chinese demand for our natural resources was real and economically motivated.

As you'll read, this demand is bogus.

This is already starting to dawn on some investors. People are slowly realising that money they're relying on to fund their retirement — from their investments in mining stocks — may not be there when they give up work.

The recent falls in Aussie the stock market gives us a clue about where investments are headed. Consider...
  • Since the post-GFC peak in April 2010, the ASX is already down 12.3%.

  • In the last few months investors have dumped BHP and Rio — these share prices are now at their lowest levels since mid-2009.

  • On top of that the average Aussie house price has fallen more than 10%.
In this report I'll show you why this is happening and what it means.

None of it is a coincidence.

More importantly, I want to show you that understanding a very specific China risk — and how it came about — will give you the chance to protect your wealth and make a lot of money in the process.

That's right, there's also an opportunity here.

In fact, it's a major opportunity...the kind that comes around once every few generations...

The kind that could send a unique group
of stocks soaring over TEN TIMES
what they trade for today

My name is Greg Canavan.

People who know me will realise I don't make these kinds of claims very often. I'm a conservative, deep value investor.

I'm intensely focussed on preserving wealth. I believe the first step to making money, is to not lose it.

But over the last nine months my research has shone a huge light on this situation...and the opportunity coming out of it.

In short, I've discovered a fatal flaw at the heart of Chinese capitalism.

And it's led to a series of decisions within Beijing that could come to a head in the next 12 months.

As China's leaders desperately try to deal with this crucial strategic error...they've set in motion a financial force that will have a dramatic impact on your investments.

This force could destroy many of the investments that have profited so handsomely during the resources boom of the last decade.

But there's more...

As I'll show you, China's calculated gambit to escape the consequences of its economic error could lead you to one of the greatest bull markets of all time in one specific asset.

To explain, I want to tell you a story.

It involves history and the quest for power.

Ultimately, it reveals how China plans to 'fix' its fragile financial system...and in the process turn the entire global economy on its head.

Bottom line: for better or worse, China has changed its growth strategy.

If you don't change the way you invest too...you could lose everything

China's previous policy has been great for Australian resource companies.

And because resources make up such a huge part of the Aussie market, this boom in Chinese demand has been great for investors too.

But it's also exposed just how dependent our share market is on one or two sectors.

Take a look at the six companies below and you'll see what I mean. These are amongst the largest companies on the ASX 200:

Name Sector
BHP Billiton... Materials
Rio Tinto... Materials
Commonwealth Bank Australia... Financials
Westpac Banking Corp... Financials
ANZ Banking Group... Financials
National Australia Bank... Financials

The combined value of these companies makes up 43% of the entire Aussie stock market. In other words, BHP, Rio and the Big Four Banks don't just make up the market...they practically are the market.

And their profits — and consequently your investment returns — rely on China's continuing growth.

But let me ask you this...

If some of China's biggest importers don't make money...how much longer can Aussie resource companies continue to enjoy big profits?

In fact, it's the most important question you can ask today:

How will these Aussie firms even survive once it's widely known that's China's economic model is fatally flawed?

The plan already set in motion by the Chinese almost guarantees that the next 10 years won't be as good as the last 10 years for these companies.

What I'm about to tell you could save
you tens of thousands of dollars
over the next five years

It's what I'm advising my friends and family to do right now with their personal wealth...and it's what you can do as well.

But I urge you to act quickly and decisively.

You see, China knows that a business model where companies don't make profits is unsustainable.

And it is already pursuing a new strategy.

It will lead to a fundamental change in the world's financial markets.

But if you know what its new strategy is...you could become very wealthy in the coming years.

I believe I've figured out what China's doing.

In the next few minutes you'll see how there's one sector — and a few unique investments within it — poised to soar over the next five years.

They could go up anything from 100% to 1,000% from their currently very low levels.

I'll explain what these investments are...reveal why they're set to rise as China's government implements its new strategy...and what you must do to take advantage.

But first, you need to know exactly what's going on...

The Chinese banking system is
more dangerous than Spain,
Italy and Greece — COMBINED

For most of the 30 years since the start of the country's 'Reform Era' in 1978, China grew by following one simple growth strategy:

Sell things cheaper than everyone else.

This one single idea turned the country into an export powerhouse — the biggest manufacturer in the world.

It was also the single most important factor in Australia's 21-year stretch of economic prosperity without a recession.

By selling things cheaper than everyone else, China's leaders achieved their most important goal.

It wasn't an economic goal.

It was political.

The activity generated by China's export machine — even when it was not profitable — ensured employment in the factories for millions of farmers moving to the cities from the country.

You see, in China it's always been about jobs, not profits.

And for a simple reason...

People with jobs are too busy to cause any trouble.

As long as the Communist Party of China (CPC) could deliver jobs to the millions moving to the cities, it guaranteed political and social stability.

That stability is pretty important in a country where over 500 million people have moved into cities in the last 30 years.

It's the largest mass-migration in human history. Social stability has always been a much more important goal to the CPC than profits.

But now this strategy has reached its end, as I'll show you shortly.

Don't get me wrong. China's transformation has been remarkable.

Gleaming new cities now stand where rice paddies lay before. Towering skyscrapers fill a once empty skyline. Their National Highway 010 alone would stretch across the whole of Europe — from the west coast of Portugal all the way to the Ural Mountains in eastern Siberia.

China built everything...from new bridges to railways, high-speed train networks, roads, airports, shopping centres and vast housing complexes.

On the surface this all looks like a once-poor country working hard to become prosperous.

But there's another side to this story...

A much darker side

One of the most basic mistakes you can make about China is thinking that it's performed an economic miracle.

It hasn't.

In fact, if you take only one thing away from this presentation, let it be this:

China's expansion is POLITICALLY — not economically — motivated.

The last few years haven't been about sustainable economic growth at all. It's been about political stability...at any cost.

Beijing has one motive: maintaining the power of the Communist Party.

Doing this requires maintaining social stability.

And that means putting wages in people's pockets — even if it's totally unprofitable to do so.

For example, in a recent article in China's leading business magazine, Caixin, a manager at an unnamed steel company said:
    'We're under a lot of operating pressure right now. Because it's related to employment, we cannot just cut production. We're now in a situation where we lose several hundred yuan on a ton of steel.'
This is what I mean when I say that in China 'people come before profits'.

And this is what dawned on me in February after meeting my friend in Sydney.

Making money is not the number one priority for China...

Maintaining a high level of employment is.

It's absolutely critical you understand what this means.

If Chinese business operated by the normal rules of capitalism and had to run at a profit, it's likely their demand for key Aussie resources would be much lower.

In fact, if profits came before social stability, there would have been no commodity boom at all!

That's why, if you have even a shred of interest in your future financial security, I urge you to take this warning very seriously:
    → Chinese demand for Aussie resources is not real. It's fake. And it could be taken away just as easily as it's been manufactured.
Now you may be wondering how this is even possible.

In a normal capitalist system, businesses that run regular losses go out of business.

It's simply not sustainable.

That is, it's not sustainable UNLESS the entire banking system of a country is mobilised to support a political goal.

I believe that's what's happened in China.

In fact, the International Monetary Fund's first ever review of the Chinese banking system late last year proves this is exactly what's happened.

As a result, it says, China's banks are facing a 'steady build-up of financial sector vulnerabilities'...
    'The system is becoming more complex and inter-linkages between market, institutions, and across international borders are growing. In addition, informal credit markets, conglomerate structures, and off-balance sheet activities are on the rise...

    'If several of these risks were to occur at the same time...the banking system, could be severely impacted.'
Put simply, loans from government-controlled banks have allowed China to temporarily suspend the laws of capitalism.

I say temporarily for a very good reason. At some point in the last three years, China's leaders realised this economic strategy was leading straight to a disaster.

Specifically, it created two huge problems.
  • The first was a banking system bloated with bad loans.
  • The second problem was huge exposure to the US dollar.
Everything China has done since it realised its huge economic error has been designed to solve these two problems.

The original strategy worked quite well, for a while...

The banking system provided these companies with cheap loans. And China's State Owned Enterprises used these funds to create employment, as per the government's directive.

But there's only so long companies can survive without making a profit — even in China.

For example, 2011 Angang Steel, China's second largest steel producer, made a loss of over 2 billion yuan.

That's $340 million dollars down the pan in a year of record steel production.

The problem is obvious: it's been producing far more than it can ever hope to profitably sell...for far too long.

Angang Steel is now haemorrhaging money.

And it's not just the steel industry that operates this way...
  • China's Ministry of Railways lost 7 billion yuan in the first quarter of 2012, according to a ministry financial statement released on 2nd May.

  • The once thriving shipyard industry along the Yangtze River is sinking fast. 'We haven't received a new order in 2012, and we had only four orders for ships last year,' says Chen Junfu, Chairman of Jiangshu Jiuzhou Shipyard Co. Ltd.

  • In fact, according to the World Bank, one in four of China's state-run firms lose money. Yet they get preferential treatment by state owned banks (that's all of them), even when they're in financial distress.
Well as you're about to see, years of loaning huge sums to loss-making firms has finally caught up with China.

Add up all the local government debt — mostly loans made by Chinese banks to governments for infrastructure projects — and you have one of the most fragile and vulnerable financial systems in the world.

As the New York Times reported last year...

'[This] could set off a wave of loan defaults and hobble [China's] banking system'

According to Zerohedge if there are enough defaults, many lenders could exit the market...

'This could result in a credit contraction in the economy which may lead to incomplete projects, fire sale of assets by developers, depressed property/land prices, stress on bank balance sheets and ultimately a possible capital flight as investors/depositors lose confidence in the banking system...'

This is the next phase of the Financial Crisis.

Forget Greece, Ireland, Italy and Spain. China's banking system is sitting on enormous sums of non-performing loans.

This threatens China's entire financial system and social stability.

The question is: what is China doing about it?

And even more importantly, what will it mean for you?

China's plan...revealed

I believe with 100% certainty that the Chinese government has already put in place a plan to mitigate the fallout from its economic crisis.


Remember, the growth strategy achieved one important political goal: full employment and social stability.

But it created two massive financial problems: massive bad loans in the banking system...and a huge exposure to the US dollar.

China's answer to both problems has been the same:

Buy up as much physical gold as it can get its hands on.

In other words, I believe China is quietly trying to 'corner' the gold market.

Don't worry, I'll explain what this means and why they're doing it.

But if that sounds far-fetched now I guarantee it won't by the time you're finished reading.

I've been piecing together this story for the last six months. I have proof this is what's happening right now.

Understand: This move by China will cause some gold investments to skyrocket...and others to plummet.

Over the last few months I've been researching a few unique gold investments with this scenario in mind.

If this interests you, I'll give you complete access to my full research.

The timing couldn't be better.

Because the extent of China's economic situation is already starting to unravel...

China led us into a boom — now
watch it take us OUT

China's ability to produce record exports and manufactured goods was never driven by actual demand.

It was driven by China's political goal for social stability and full employment.

The result is that China has far too much productive capacity. It has far too many businesses making goods at a loss.

Eventually...a business making goods at a loss will reach crisis point.

And that's exactly what's happening in China right now.

The Sydney Morning Herald reports:
    'Mountains of iron ore at Chinese ports used to be a sign of a booming Australian resources sector, but it has turned into a source of headaches for Chinese commodity traders who are struggling to find buyers for their stockpiles of red dirt.'
The Port of Qingdao, for example — through which a seventh of all iron ore imports to China pass — has even run out of space to take in more goods.

The stockpile of ore has hit 15 million tons and is still growing.

According to one truck driver, this year is 'far worse than last year — hardly any business.'

You can see the problem...

Nearly 50% of China's entire GDP is invested in resource-intensive infrastructure projects, without any regard for a return on investment.

Infrastructure projects create jobs and produce a tangible achievement.

But from an investment point of view, borrowing money to create an asset that fails to generate a real return for investors is the equivalent of economic suicide.
    In short, the Chinese government has been lending money hand-over-fist to keep wholly unprofitable businesses afloat.

    They employ heaps of people to make heaps of stuff.

    But no one is buying it anymore.
In my view, this is textbook misallocation of capital at the end of a credit boom. My view, by the way, is grounded in the study of Austrian economics. I'll tell you more about that later.

But I can assure you of this: there's only one outcome from here...

China's miscalculation will end like all others — in a massive asset bust.

The stakes couldn't be higher
for Australian investors

Most Aussies were oblivious to the Global Financial Crisis of 2008.

Terms of trade
Ours was the only country in the western world that didn't enter a technical recession, thanks largely to Chinese demand for our resources...and a government that handed out millions in cash.

But it was China's massive 2009 stimulus efforts that leaked into the Aussie economy and bailed us out.

In each of the charts to the right, you can see that in 2008, just as commodity prices (especially coal and iron ore) were correcting...and just as Australia's record terms of trade began coming off the boil, China revved up the engine with a huge cash injection into their economy.

As a result, Australia is now entering its 21st straight year of economic expansion.

So let me ask you this...

What effect would a sudden and violent downturn in China's economy have on Australia?

We're so hooked on the China growth story...and so frightened we might miss out on making a lot of money... we invest heavily in the Aussie firms who supply China with raw materials, without really paying attention to the story behind the headlines.

Many of us have made huge 'all-in' bets on China sustaining rapid economic growth...either intentionally because we see a bull market we want a piece of, or unwittingly as passive investors in the share market.

As I said, we think it's a simple story about a developing country striving for prosperity...we believe demand for our resources will just keep going up...and that there's no simpler case for investment on the planet.

It's like Hugh Hendry, CEO of hedge fund Eclectica Asset Management, told the Financial Times in May:
    'There is a near consensus that China will supplant America this decade. We do not believe this.

    'Those taking big bets on several more years of rapid Chinese investment growth are vulnerable to big losses.'
That's especially the case here in Australia. We can't throw our cash down quickly enough.

But this is money you are counting on to help you out in retirement.

That's why I hope you'll forgive me for being blunt: Even if I'm only half right that this growth is politically motivated...
  • Australian jobs will disappear...

  • The ASX — already down 16% in three years — will fall off a cliff...

  • The Aussie dollar will nosedive...

  • The already-faltering housing market will collapse...

  • Overextended borrowers will default on their mortgages, directly hitting the bottom lines of the Big Four Banks...

  • And most resource stocks will tank — fast.
It will dwarf what happened to our economy after the 'GFC'.

The worrying thing is, if resource exports to China collapse, most Australian savers, investors and retirees don't have much else to fall back on.

But look, it's not all bad news...

China might be going bust, but
there's no need for you to go broke

I know this is a lot to take in and some of it sounds depressing, but please don't worry, because there's a way out of it.

Red Alert Report
I've created a special report to show you that way. It's called Red Alert: What You Must Do To Survive and Prosper in the Coming China Crash.

The aim of this report — which I've spent months researching and writing — is to give you a big picture understanding of what's really going on in China right now...and how it could lead you directly to a few sound investment opportunities.

As I've said, these investments are related to the gold market.

I know...gold has had a huge run, jumping more than 500% in the past decade.

But believe me, as China's new plan gathers momentum, this early run is going to be a mere afterthought.

I'll be surprised if gold does not reach $5,000 or $6,000 an ounce in the next few years (you'll see why in just a moment).

Of course, the most obvious thing you can do to protect yourself and take advantage of this is buy some physical gold.

This is what some of the smartest money managers in the world are doing right now.

Prominent hedge fund managers like George Soros, David Einhorn and Kyle Bass have all taken huge positions in gold, and I think you'd be crazy not to do the same.

But how should you do it? How should you store it? Where will you get the best deals?

I reveal everything in Red Alert.

But that's really only part of what you'll discover in this report...

I've identified six more key 'survive and prosper' investments that I believe should be the cornerstone of any successful Australian wealth-building strategy over the next five years.

They represent a specific and targeted precious metals allocation for your share portfolio.

In my view, they are the most important investments you can make right now in the face of China's faltering economy... and what the Chinese government plans to do about it.

I'll explain why in precise detail — and why you should act on this information as soon as you possibly can.

In fact you'll see how — even in the coming China-led turmoil — you could grow your wealth from this unique group of investments poised to soar during this predictable yet devastating turn of events.

You can access my Red Alert briefing right now and review my analysis over the next 60 days — completely obligation free.

Or keep reading...

Because in order to know where the opportunities will be...you need to know how China got to this point...and how it plans to use gold to save itself.

This is where the major opportunity
for you will be over the next five years

Remember Beijing's key motivation is social stability.

When the Global Financial Crisis kicked off in 2008 that stability was threatened.

Faced with a collapsing export market, China's leaders ordered their banks to lend...to local governments, to the big State-Owned Enterprises, to property developers.

Essentially, it created its own boom to replace the US consumption boom.

The result is a banking system rife with bad loans.

If you add up all of China's debt — existing central government debt, local government debt, Ministry of Railway debt, etc. — some observers reckon China's debt-to-GDP ratio could be as high as 80%.

That's dangerously high for a developing nation.

But still, doesn't China own trillions of US dollars saved in reserve?

Yes. They do.

In fact, that's what most people point to when they talk about China...their $3.73 trillion in foreign currency reserves.

But as you'll see in Red Alert, all those dollars they've built up over the last 30 years are nothing but a by-product of the old, flawed growth strategy.

Mainstream pundits talk about this pile of money as if it's an asset.

It's not.

It's debt. US debt!

Do you think China would be able to swap their US Treasury debt for actual US assets?

Not a chance.

And this is the crucial thing you need to understand.

In reality, the US owes more debt to the Chinese than they can ever hope to repay...and the Chinese have nothing more than enormous existing I.O.Us they can neither get rid of, nor collect.

In short, China knows it's screwed.

And that's why...

The old Chinese growth model is DEAD

Up until now the China boom has been great news for Aussie investors — especially resource investors.

Many Australians have made high-stakes bets that this boom will continue without being in full possession of the facts.

But unless you take a moment to read the facts, mark my words: you will lose those bets.

That's why I created my Red Alert report.
  • I'll show you exactly how I think the next few years will play out...

  • I'll show you what this means for the Aussie miners, the banking sector and the housing market...

  • I'll show you how to align your portfolio as this trend plays out...
The first thing you need to know is what China plans to do next.

What can it actually do about its debt problems?

Not much.

China's going to have to go through some lean years as its economy adjusts and rebalances.

As I've said, this will have a crushing effect on the profits of most Aussie resource stocks...and the knock-on effect to our economy as a whole won't be pretty.

But Beijing can mitigate some of the fallout...and ensure the foundation of its economic structure remains intact.

You see, I believe China has a grand plan to support its fragile economy and untangle itself from the Western banking system.


By secretly accumulating gold

Its ultimate aim?

To force a major upward revaluation in the gold price...and set in motion a global transfer of wealth on a scale never seen before.

This is what I mean when I say China is trying to 'corner' the gold market.

Sound like a stretch?


But you only have to look at what China is actively doing right now and the evidence is overwhelming.

Although not reported in the mainstream press, it is common knowledge in the gold watching community that gold and silver prices are 'managed' by Western central banks.

I won't go into the complexities of how this is done in this presentation.

But believe me...the Chinese know it is happening.

And while prices remain held down, the Chinese are buying.

Consider this cable, prepared by the US Embassy in Beijing, and sent back to officials in Washington, DC...

The embassy was responding to a report about China's National Foreign Exchanges Administration. Wikileaks revealed the cable last year (emphasis added is my own):
    'China's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold.

    'They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency.

    'China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB
    [China's currency].'
Of course, that's what the government is saying.

It's more telling to look at what the government is actually doing.

Again, the evidence is overwhelming...
    #1: First of all, China's government is quietly hoarding massive amounts of gold...and banning exports
In 2007, China became the world's largest gold producer. It's maintained that position ever since.

In 2011 it produced 355 tons of gold, ahead of Australia, which produced 270 tons.

But not one single ounce of China's new supply made it onto the gold market.

Every single mined ounce within its borders has to be sold to the government by law. It's an effective ban on gold exports.

China's last announcement on its official gold holdings was in April 2009, when it revealed a near doubling of its reserves to 1054 tons. That was the first announcement since 2002.

But with Beijing absorbing all its domestic production and more, you can bet its reserves are now much, much higher.
    #2: Second, it's encouraging its own citizens to transfer their personal savings into gold
For decades Chinese citizens were barred from owning physical gold, under penalty of imprisonment.

Now, they are actively encouraged to buy it.

China's state-owned TV network broadcast ads for its people to own gold. Locals can now even buy gold bars at ANY Chinese bank in the entire country.

If you don't think that's strange, try buying gold at your local bank and watch the weird look you get from the cashier.

But perhaps even more telling...
    #3: China's positioning itself to take on the international gold markets
Right now, London and New York are the global centres of Western banking and financial power.

Beijing is quietly working to throw its weight into the mix.

In June 2011, it announced plans to open something called the Pan Asia Gold Exchange (PAGE).

The plan for the PAGE market is to provide 100% gold- and silver-backed futures contracts...priced in yuan.

This would be an absolutely huge development.

It would change the way gold is traded forever.

According to gold expert James Turk, 'the potential effects cannot be underscored enough — PAGE is clearly preparing the world for a Chinese world reserve currency.'

Now I don't think China's planning to take over the world's reserve currency...not yet anyway.

With its closed capital market and a small and poorly functioning bond market, it couldn't even if it wanted to.

But clearly, the Chinese government is determined to make gold a much bigger part of their financial strategy in the coming years.

So where is all this headed?

Prepare for China's global
currency 'Endgame'

Within the next five years, I believe China will announce updated gold reserves...

This will probably be in the region of 5,000 tons...making it the second largest official owner of gold in the world.

And it will send the price of gold soaring.

All attempts by the West to hold prices down will prove futile.

China will probably make this announcement on a weekend. By the time trading resumes, the gold price will have 'gapped up'.

My guess is that $5,000 an ounce is entirely probable, if not higher.

In effect, wealth would instantly transfer from bondholders to gold holders.

This revaluation would neutralise the losses China would incur on its FX reserves.

It would also provide a windfall for all the Chinese citizens who took The Party's advice and accumulated gold and silver...thus offsetting the outrage resulting from the loss on the $3.73 trillion dollars of US debt sitting in its banks.

If China plays it right, it might just manage to maintain a stable society...and change the rules of the global financial system to its benefit.

Let me be absolutely clear...

This is going to affect you in
two significant ways

First, it's going to continue to drive gold prices much higher in the years to come...to levels that are quite unimaginable today.

And it's going to make some gold and precious metal investments extremely lucrative over the next few years.

Some of these investments could jump anything from 100% to 1,000% from their currently very depressed levels (I'll tell you more about these in a second).

That's the good news.

The bad news is that the investments that have worked for you for the last 10 years, simply won't work for the next 10 years.

Just think about what China is doing here...

Instead of trying to create a DEBT-based reserve currency like the US, it's attempting to build a TRADE-based currency backed by gold.

If China can achieve this, the world's financial system will morph from a US dollar standard — based entirely on debt — to one characterised by trading bloc currencies...backed by gold.

Ultimately, the goal is to reduce its reliance on toxic western debt.

But the subsequent fall in demand for Aussie resources will be devastating for our economy and stocks in general.

Look...I realise this is a big idea. They don't get much bigger.

But it's only by stepping back and really looking at what's happening that you realise how unsound the financial world — and the world of money — is right now.

And that's really the aim of this letter. To show you how to...

Invest as soundly as possible

From: Will Simpson
Sent: Thursday, 22 March 2012 1:59 PM

Dear Greg,

You have no idea how good it was to find your newsletter. A friend who I ride bicycles with, passed on your site and I have been an avid reader and subscriber.

Please keep up the good work, I am sure it is difficult and frustrating at times. But you are an important part of my life.

Kind Regards

William Simpson

It's a very good philosophy to adopt right now.

And it's why in early 2010 I founded my investment advisory newsletter, Sound Money. Sound Investments.

What do I mean by 'sound money' and 'sound investments'?

Well, as I said at the start of this presentation, I'm a deep value investor.

The difference between a stock's intrinsic value and its market value is at the core of my investment philosophy.

When there is a lot of irrationality and fear in the market...the gaps between the true value and the market value of many stocks widen.

I aim to exploit those gaps by buying great stocks well below their true value.

I first put this method to test in the market while working for a small division of a big bank that did equities research.

Later I used this same method to personally invest, starting with $100,000 capital.

I soon discovered a flaw in the thinking of most value investors.

Many of them advocated 'bottom-up' research — that is, they ignore the macro climate and just focus on a company's 'fundamentals'.

But 'Austrian' economics — a little known school of economics based on common sense and human behaviour — has taught me that central bank and government policy has a major impact on the 'fundamentals'.

In short, you can't remove a company from its position in the world and analyse it separately.

So I started to approach value investing in a very unorthodox way.

I start by taking a macro outlook — this is the 'sound money' element of my research.

Value traditionalists scoff at this. For them, news-flow, central bank intervention and geopolitics are meaningless noise.

But I'm convinced you invest more soundly if you can link the two:

Get a macro perspective and then — with that pointing you in the right direction — undertake a 'forensic' value analysis to find the best stocks.

This is how I pick 'sound investments'. (I won't go into how I do it here. If you'd like to take a look at my research, it's all waiting for you. Simply scroll down and click where is it says 'Subscribe Now' at the bottom of this letter.)

Once you have a shortlist of stocks based on your big picture analysis, you put everything under the microscope — no matter how obscure.

If value is there, you'll squeeze it out of a company's balance sheet and income statements soon enough.

Right now I believe you simply have to choose your investments in line with what's playing out in China.

Of course, most people just don't 'get' this idea.

And they will do nothing.

But doing nothing right now will leave you — and your wealth — really vulnerable.

Do you want your future financial security determined by the political whims of the Chinese government?

I certainly don't.

The bottom line is: if you care about your retirement and your family's future you have to change the way you invest now.

As Kevin Mahn, Chief Investment Officer for of Hennion & Walsh Asset Management, who in March scaled back his clients' China allocation, recently said...

Red Alert Report
'Investors need to understand the risks.'

Kevin is absolutely right.

As I've said, I've put together a briefing called Red Alert: What You Must Do To Survive and Prosper in the Coming China Crash.

It comprises three distinct chapters.
  • The first explains how China got to where it is today, why all the signals point to a crash...and what it means for Australia.

  • The second chapter shows you exactly what China is doing to rescue its failing economy. You'll discover parallels from history that make Beijing's motives remarkably clear...and gold's role in its survival.

  • Finally, the third chapter deals with the investment implications...and what you should do urgently to address any imbalances in your portfolio that will become shockingly apparent by the end of this year.
I'll send this report to you right now for you to read.

It's yours to print off and keep with my compliments.

All I ask in return is that you take a look at the research I do in my newsletter, Sound Money. Sound Investments., for the next 60 days, on a completely no-obligation trial basis.

But before you do, let me quickly give you a very brief summary of the action I think you need to take right now.

As you'll see there are three simple stages.

The first is to protect what you've got.

The second and third moves are to learn how to position your investments to maximize your returns — as safely as possible — as this inevitable China trend plays out.

So let's look at how to accomplish all these things right now, starting with...

Red Alert Move #1:
Protect what you've got

The first thing you need to do is rebalance your assets.

I'll show you how to do it.

I believe that successful asset allocation trumps stock picking every time as a guide to overall long-run returns.

It's the bedrock of how I invest.

This, of course, is not the same as saying that stock selection doesn't matter — of course it does. I'm just saying it's LESS important than the percentage of your portfolio that is made up of stocks. Asset allocation is more crucial than individual asset selection.

It's how your assets are allocated that counts more than what the specific assets are.

It's an approach that has paid off.

Just before the market sell-off began in April 2011, the SMSI portfolio had a 70% cash weighting and over 20% weighting to gold and gold stocks.

Since then the market has sunk like the Titanic while gold has held its ground.

Despite this all gold stocks have fallen along with the market (and this is where the opportunity lies — more on this in a second).

Many investors have already seen their hard-won gains from 2009/10 evaporate. And they've thrown in the towel and exited the market for good.

But have good stocks been sold as well as bad ones in recent months?

Yes, according to my analysis.

In fact, there are a number of investments I believe could help you grow very wealthy in the years to come.

Which brings me to...

Red Alert Move #2:
Take advantage of three unprecedented opportunities to profit

As I've said, the first and obvious thing you need to do is buy gold and silver bullion.

From: Steve
Sent: Thursday, 22 March 2012 5:11 PM


Best newsletter I have subscribed to in 14 years of subscribing to investment newsletters. Your basic investment philosophy is the most coherent I have come across & is the best one to explain current economic circumstances.

I would have appreciated a guide as to how to actually invest & hold physical gold & silver, before stumbling across a bullion dealer in Adelaide.

Please keep up the great work!


Stephen Snelling

If you haven't done this yet, don't worry; it's easy, straightforward, and a lot simpler than most people think.

I recently published a guide to show you everything you need to know. It''s simply called Buying Bullion.

This succinct six-page report explains how and where you can get the best deal on acquiring and storing physical gold and silver. It can be yours right now along with my Red Alert briefing, completely obligation free.

But owning bullion is just the beginning.

There are other ways to diversify and protect your investment wealth that could open you up to the kinds of returns you only see in bull markets.

Be clear: we are not in a bull market now.

But gold certainly is.

And if I'm right about China's new strategy — which I'm certain I am — gold's going higher still...maybe as far as $6,000 an ounce.

That doesn't mean all gold stocks are good buys.

But there are three large-cap Aussie gold producers I believe are showing huge value right now...and should steadily benefit as this story plays out.

My full valuation of these stocks can be yours right now.

But as I've said, there's also a huge opportunity here.

You see the gap between the gold price and gold stocks has never been bigger.

And I believe this sets you up for a windfall in the coming years...

Red Alert Move #3:
Tuck away these three potential
'long-term 10 baggers'...and wait

Three of the stocks in the precious metals allocation of my portfolio are small-cap gold stocks.

I believe they have the potential to do something very special as this big picture China story plays out.

Be clear: I don't know when these stocks could go up. I don't know if they will.

What I do know is that they are chronically undervalued.

They are higher risk too, which is why my recommended portfolio weighting in these stocks is smaller than the rest.

I call these plays 'long-term 10-baggers' because these could be the stocks that will add punch to your portfolio profits, should events turn out as I expect.

Again, everything you need to know about these stocks is in my report, Red Alert: What You Must Do To Survive and Prosper in the Coming China Crash.

Take a 60-day trial of my newsletter today and it's yours.

Immediately after you sign up I'll also send you...
  • Special Report #1: Buying Bullion
This short guide will cover some common questions investors have about buying precious metals and reveal the best place to buy and store gold.
  • Special Report #2: The Art and Science of Valuation
A philosophy, a method and a model — you'll discover what a company's profitability reveals about its true value...and how you can use that knowledge to identify all-but mathematically guaranteed gains.
  • Special Report #3: Eight Simple Steps to Investing Like Benjamin Graham
In this report I reveal eight ways to ensure you never make a big mistake investing in stocks again...I'll show you how to spot the common and costly blunders too many investors make — and how to train yourself to spot bargains every time you invest.
  • Special Report #4: The Definition of Sound Money, Sound Thinking
In this guide I explain how to prepare and protect your wealth — in any economic climate — by building a rock-solid share portfolio of companies trading below their intrinsic value.
  • PLUS this bonus book: How to Buy and Sell Shares for Profit
This concise guide answers the most common questions investors have about buying and selling shares.

You'll learn how to place orders with your broker...which type of brokerage is right for you...the importance of using limit orders...how much to invest, and much more.

Even experienced traders will find something of interest in this valuable resource.

All you need to do to get your hands on all these members-only reports is take a 60-day no obligation trial of Sound Money. Sound Investments.

Every month you'll get my latest comprehensive macro-economic overview of the markets in an exclusive PDF report.

In this briefing you'll also get my detailed analysis on individual securities.

You'll know which Australian stocks I think are currently undervalued — which are overpriced — and why.

More importantly for many Sound Money. Sound Investments members — I provide big picture predictions like the one I've talked about in this report.

The aim of this analysis is to help you invest as soundly as possible, from a historical perspective of where we are in the cycle of money.

Your monthly briefings also give my full portfolio of current buy, sell, and hold recommendations — for you to incorporate into your financial plan as you see fit.

Also, every week I'll send you a private email to keep you posted on the progress of all the stocks in the SMSI portfolio. I'll tell you whether I think you should buy more, sell, adjust the portfolio weighting or hold the position.

In this email, I'll also pass on any time-sensitive tips, plus reveal details of other investments that are on my value radar.

Remember, you have the next 60 days to see if all these reports and my ongoing research and advice are right for you.

So with that mind...

How will your trial membership work?

First things first, let me tell you that the regular price for an annual membership is $499.

If you're wondering whether it's worth that kind of outlay, let me just ask you a question...

What would you pay right now to learn about a strategy that could save you tens of thousands of dollars over the next five, 10, or 20 years?

To answer that, just think about your children. That's what I do before I make any decision about my money.

Because in the next 10 years you'll be very lucky to do well in the markets.

When I talk about how to survive and prosper in the coming years, the operative word is 'survive'.

If you can survive the next 10 years, your kids and family are going to be very thankful.

There are a lot of people who simply don't understand the big picture forces at play in the global financial system right now.

Many will invest like they've invested for the past 20 or 30 years, believing a bull market is always around the corner.

They are going to lose a lot of capital.

The most important thing you can get out of this presentation is to understand where we are in the bigger picture...and the cycle of economic power and money.

This is very difficult to do when you're down on the ground on a daily basis, bombarded with headlines and information.

It's easy to get swept up in all that information, and not even think about the bigger picture of where we are.

But what if I could show you?

And what if I could show you a 'sound investment roadmap' that could help make you several tens of thousands of dollars in the years that follow...and help you protect and build a retirement you can really enjoy?

Would it be worth $499 then?

I think so.

But I realise you don't know me; so...

I'll make you a very special deal

If you decide to begin your 60-day no obligation trial today, you can take 30% off the full price.

That means you'll pay a special introductory rate of just $349 for your first year of your Sound Money. Sound Investments. membership.

That's all the benefits of membership — for just $6.72 a week for your first 12 months.

From: John Milton
Sent: Friday, 23 March 2012 5:10 PM

Hi Greg,

I retained your letter because it's written in plain English in a form that I could understand without wading through a lot of rhetoric.

Apart from being concise you come across as being genuinely concerned about the investments of your customers and back up your opinions with facts that can only be the result of a lot of hard work on your part. Keep up the good work.

Your faithful customer,


If you'd like to take this deal today, it's on the basis that you pay by credit card and join our auto-renewal service.

That means — if you do decide to stay with me once your 60-day trial has expired — your membership fee will be renewed automatically every 12 months — until you tell me otherwise.

Doing this saves me a fair bit in admin costs, which I'm happy to pass on to you in the form of an annual saving.

So in your second year of membership — and each subsequent year you decide to stay on — you'll pay just $449.

That's a 10% discount to the full publisher's price, guaranteed for life.

Remember there's no commitment whatsoever.

And you'll have the next 60 days to read all the reports I've talked about today...and try my service out.

If you are not happy with anything for any reason...just let me know in that time and you'll receive a full refund for every cent of your subscription, and we'll part as friends.

That's the only way I'll do business.

Now it's up to you

The fact is China is going bust.

Its whole economy has been built on the manipulation of a government hell-bent on staying in power at any cost.

Beijing won't let China go completely broke though.

There's too much at stake.
  • They have already set in motion a grand plan to rescue their dangerously indebted banks...and hopelessly warped economy.

  • The effects of this plan will severely disrupt the balance of global financial power.

  • It will be dire news for the Australian economy.
We benefitted greatly from China's old model of growth...

For the last 10 years our stocks have gone up, our currency has stayed strong, our house prices have tripled and our wages have risen.

I hope you took advantage of the big China-led boom...and cleaned up.

But now the big trend has changed, and that means your investments need to change too.

Since the post-GFC peak in April 2010, the ASX is already down 19%. Over the same timeframe, the Big Four Banks shares are also down (on average) by around 19%.

In the last few months investors have completely dumped BHP and Rio. These share prices are now at their lowest levels since mid-2009. On top of the carnage in the stock market, the average Aussie house price has fallen more than 10% too.

This is no coincidence.

Investors who do nothing to protect what they've built up over the last 10 years...and who don't prepare soon...will lose a lot of money, quickly.

I'll show you exactly how to prepare.

Because if you anticipate China's next move...you could also make an absolute fortune.

By signing up via the 'Subscribe Now' button below, you will receive immediate access to everything I've described in this presentation.

Thank you for your time.


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Greg Canavan
Sound Money. Sound Investments.

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Calculating Your Future Returns: The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you've invested. While useful for detecting patterns the past is not a guide to future performance. Some figures contained in this report are forecasts and may not be a reliable indicator of future results. All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. All figures accurate as of 20/8/2012.

Sound Money. Sound Investments is published by Port Phillip Publishing Pty Ltd. Registered Office: Level 1, 10 Fitzroy Street, St. Kilda, VIC 3182 Port Phillip Publishing Pty (ACN: 117 765 009 ABN: 33 117 765 009) Australian Financial Services License: 323 988. All content is 2005-2012 Port Phillip Publishing Pty Ltd. All Rights Reserved. cs@portphillippublishing.com.au