4 Powerful Megatrends

Yesterday, while most investors were looking the other way, precious metals jumped sharply higher.

Silver was especially strong … catapulting from $9.71 to $10.12 per ounce … busting through its recent peaks … and surging to the highest level in over 22 years.

This is not just a fluke. Its one more sign that confirms everything weve been telling you about including a series of four powerful megatrends that are now converging in one time and place.

Megatrend #1. Oil is being transformed into the worlds economic weapon of choice. Iran, Iraq, and much of the Muslim world is sliding down the slippery slope of political upheaval, popular revolts, and civil war. As a result, the bulk of the planets petroleum reserves are in jeopardy. Oil prices are rising again. Silver and gold are following.

Megatrend #2. Bird flu is spreading even more rapidly. Just a few months ago, anyone warning about this threat was ignored or laughed at. Now, its at or near the top of the news every day in the Wall Street Journal, New York Times, Bloomberg, AP, and many more. The fear only could drive gold higher.

Megatrend #3. Ben Bernankes Fed could soon be firing up the engines of inflation. We fear he aims to run the money printing presses at the drop of a hat with the threat of a housing bust, the threat of decline in the economy … or … worst of all, the threat of the bird flu pandemic. Still more fuel for gold, silver and natural resource prices!

Megatrend #4. The world will soon be switching from wireless to Wi-Fi. This means more high-powered consumers jumping into the world economy, driving resource prices higher. But it also has far-reaching consequences for tech investors: Some major losers and some equally big winners.

Heres our latest update on each …

Megatrend #1
Oil Is Being Transformed into the
Worlds Economic Weapon of Choice

The great powder keg about to explode is Iraq … and with it, any lingering hopes we may have had for stability in the richest oil region of the world: The Persian Gulf. Some facts to consider:

Fact: The Iraqi civil war is not just about one country or one time.

It threatens to drag Iran, Saudi Arabia, Kuwait and even smaller Persian Gulf states into the fray disrupting shipping lanes … shutting down some of the worlds largest oil production facilities … and changing the course of economic history for the entire globe.

The key turning point: Last weeks bombing of the Golden Dome Mosque, in Samarra, Iraq. For millions of Shiites around the world, it was the last straw the break point thats transforming many Iraqi Shiites into a new force for chaos.

Fact: The mosque bombing was not merely an affront to the Shiites in Iraq.

It was also a direct attack on the millions of Shiites in Iran, Saudi Arabia, Qatar, Kuwait and the United Arab Emirates all countries that are among the largest producers of petroleum in the world.

Fact: Iraq is not the only place where oil is being used as a weapon.

Nigeria, a primary source of U.S. oil imports, continues to suffer attacks from militants in its oil-rich Niger Delta region.

Venezuela, also a major source for the U.S., has escalated its threats to cut America off, while inking more oil deals with China, India and elsewhere.

And Iran, still careening toward a major showdown with the West over its nuclear program, is talking ever more loudly about cutting off its huge oil supplies as well.

Consequences for investors: Surging price of oil … which … in turn, is bound to help drive up gold, silver and other commodities.

Megatrend #2
Bird Flu Is Spreading
Even More Rapidly

In a matter of a few short months, the avian flu virus has spread like wildfire … sweeping across continents on the wings of migratory birds … stunning public health officials everywhere.

In February alone, the virus spread to 17 countries. Now, in just the first few days of March, its confirmed or suspected in several more.

Germany: Reugen, the Baltic tourist island where the German outbreak was first discovered, has been a veritable war zone this week.

More than 300 soldiers from the Bundeswehr were deployed. Chemical warfare specialists decontaminated cars and boats leaving the island. German Air Force jets flew overhead to help spot dead birds. But despite their efforts, the virus continued to spread not just to birds but to a domestic cat as well.

France: The H5N1 virus reached a poultry farm in the southeastern region of Ain last weekend. Farmers are in panic. The entire country has been up in arms.

Switzerland: Authorities confirmed the country’s first case of the highly pathogenic strain of H5N1 avian flu the day before yesterday. More cases are being found daily.

Indonesia: The bird flu is reaching more human victims. But unlike most other Asian countries, Indonesia has failed to respond quickly, failed to communicate openly to the public, and failed to stem the spread of the disease, now killing more people there than in any other country in the world.

India: The virus, first found last month in Maharashtra, has leaped over the state border to neighboring Gujarat. Culling operations, previously in 22 villages, have been quickly expanded to 44 a slaughter of a half million birds in that area alone.

But nowhere on the globe is the danger greater than in …

Sub-Sarahan Africa: The virus, first detected in Nigeria last month, is now in two nations and suspected in many more. This is the event that world health officials have been dreading … because its where the emergence of a worldwide human pandemic is the most likely.

Consequences for investors: Huge new spending by governments and corporations to prepare for the worst … potential disruptions to the supplies of already-tight world resources … and if the threat escalates … a knee-jerk reaction by Fed Chairman Bernanke, the subject of Larrys commentary …

Megatrend #3
Ben Bernankes Fed Could
Soon Be Firing Up The
Engines of Inflation
by Larry Edelson

Fed Chairman Ben Bernanke is fixated on the Great Depression.

Hes a die-hard believer in the theory that, after the Crash of 1929, the Fed messed up big time. Hes utterly convinced that the Fed failed in its primary mission to prevent deflation, its greatest blunder in history.

Think about that for a moment. If you hate deflation, on what side of the fence are you going to fall when it comes to making critical decisions about our nations money supply?

Answer: Youre going to consistently err on the side of pushing out more money to chase scarcer resources. In other words, more inflation probably much more.

Of course, no one knows what Bernankes plans are. But with the circumstances I foresee in the months ahead, here are the kinds of Bernanke tactics you can expect.

Bernanke Tactic #1. Pump money at the drop of the hat.

His own words: The U.S. government has a technology, called a printing press or today, its electronic equivalent that allows it to produce as many U.S. dollars as it wishes at essentially no cost.

Under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

To me, that sounds like a siren call for inflation. It implies that Bernanke is ready and willing to guarantee the flow of easy money by simply running the printing presses! Inflationary? You bet!

Bernanke Tactic #2. Actually set an inflation target.

His words: To ensure that monetary policy stays on track after Mr. Greenspan … the best bet lies in a framework known as inflation targeting …

Problem: If the inflation rate drops below Bernankes target, it means the Fed may be far too hasty in flooding the economy with paper money.

Bernanke Tactic #3. Look the other way while the federal deficit spirals out of control.

Bernanke seems to have no intention of applying pressure on lawmakers to fix the problem. He wont press for tax changes. He wont press for spending cuts. From what I can see, he wont lift a finger to help bring the federal deficit under control.

Bernanke Tactic #4. Let the dollar get crushed. Bernanke believes that, during the Great Depression, a major aspect of the Feds big blunder was that it was overly preoccupied with the dollar, to the detriment of the economy.

Without the [dollar] policy blunder by the Federal Reserve, he says there is little reason to believe that the 1929 crash would have been followed by more than a moderate dip in U.S. economic activity.

This is not a novel theory. But this is the first Fed Chairman to be so obsessed with advocating its underlying thesis.

Bottom line: Ben Bernanke Will Set Off
The Next Huge Wave of Inflation

I fear Bernanke is going to pour money into the system at the drop of a hat. It could be the threat of an oil war. It could be the housing slump thats now getting underway.

But what truly frightens me the most is Bernankes likely knee-jerk reaction to the threat of a bird flu pandemic.

Heck, even if a human pandemic is still months away, just the FEAR of a pandemic could prompt Bernanke to run the money printing presses like a madman.

Just ONE of the consequences: Gold will go through the roof! Other precious metals will leapfrog the yellow metal to the sky.

Megatrend #4
The World Will Soon
Be Switching
From Wireless to Wi-Fi
by Tony Sagami

The megatrends that Martin and Larry have told you about also have a technological side:

While wireless technology is pulling previously disconnected populations into the world economy … Wi-Fi technology is now going to push out wireless, bringing still another big segment of consumers into the fold. Result: Demand for resources will soar further.

Meanwhile, wireless companies will be big losers; Wi-Fi companies, big winners.

Last week, we saw a major example of this megatrend. The newly-merged company combining Sprint and Nextel now the third largest wireless carrier in the U.S. delivered its Q4 results. And it dropped some very important warning signs about the future of the wireless industry.

Warning sign #1: A whopping 55% drop in profits. Profits dropped 55%. The company blamed it on $340 million of merger-related costs. But I think thats a bunch of baloney. Keep reading and Ill tell you why.

Warning sign #2: Slowing subscriber growth. If youve been a reader for a while, you know what I think about this: Most people that want a cell phone already have one. So from this point forward, growth is bound to be slow.

Just listen to the folks at Sprint Nextel. They say theyre going to grow their user base by high single-digit to low double-digit growth in 2006. In other words, were probably talking about somewhere between 8% to 12% growth. With the company selling for twenty-eight times earnings, that kind of growth stinks.

Warning Sign #3: Slowing subscriber growth (Part II). Sprint Nextel ended 2005 with 47.6 million customers, which is roughly an increase of 2 million more customers in Q4.

Do the math. Two million more customers works out to a measly 4.3% growth rate. Thats pretty pathetic and hardly worth getting excited about.

Moreover, among those 2 million customers, 746,000 are the traditional postpay users like my wife, son, and I. We tend to spend much more money with that arrangement. Moreover, we lock ourselves into a one- or two-year contract.

But the rest of the companys new cell phone customers are the prepaid type. These are people who dont have enough money to sign up for a monthly plan, dont want to make the commitment, or both. Worse, many have such bad credit, no company in their right mind would agree to bill them in arrears.

And this is the group providing Sprint Nextel with the bulk of its already-meager growth?!

The biggest warning sign of all: Sprint Nextel warned Wall Street to reduce its 2006 sales expectation from $46.8 billion to $41 billion. So were talking about $5.8 billion or 12% of its business disappearing in a puff of press-release smoke.

Are there any shares of Sprint Nextel in my portfolio? Not a chance! That is also true about Verizon (NYSE:VZ), Cingulars joint venture between AT&T (NYSE:T) and BellSouth (NYSE:BLS), or T-Mobile Deutsche Telecom (NYSE:DT).

Meanwhile …

Sprint Nextel wasnt the only wireless company that delivered quiet but major news last week: Earthlink and Google quietly announced a joint bid to build a Wi-Fi network in the city of San Francisco. Free.

Yup, Google and Earthlink would like to turn San Francisco into a place where anyone could go online from anywhere in the city, whether theyre sitting on a park bench, at a coffee house, or in the comfort of their own home.

I can visualize the scene now: An army of guys, working in twosomes, fanning out all over town setting up Wi-Fi base stations in the San Francisco sunset. But San Francisco isnt even the first town to offer free Internet connectivity. The city of Chicago has hundreds of Wi-Fi hotspots in places like coffee shops, bookstores and libraries.

Meanwhile, several other cities across the USA are in the process of evaluating city-managed wireless plans that would bypass telecom companies and offer services for free or cheaper than currently available.

According to Wi-Fi tracking service Muniwireless, 186 cities including Orlando, Denver, Minneapolis, New Haven, and Portland, Oregon have already announced Wi-Fi initiatives.

Please dont miss this point. The world is switching from traditional wireless towers, which cost several hundred thousand dollars and provide coverage for 5 to 10 miles, to Wi-Fi base stations, which cost as little as one-hundredth of the money, but cover just several hundred feet.

These inexpensive base stations are the future of the wireless industry. And they are the death knell for industries that are based upon expensive cellular towers such as American Tower (NYSE:AMT), Crown Castle International (NYSE:CCI), and SBA Communications (Nasdaq:SBAC).

Consequences: Anybody investing in the big-name, established wireless players that did so well in the 1990s could get burned. Badly.

Meanwhile, the new wireless winners are going to be companies that youve probably never heard of … even companies that dont yet exist.
Where are the best opportunities? Stay tuned because thats my topic for this coming Tuesday.

What To Do Now
by Martin Weiss,
Larry Edelson and
Tony Sagami

These megatrends the transformation of oil into an economic weapon … the rapid spread of bird flu … the revving up of the inflation engines under Bernanke … and the shifting cell phone technology could all have a dramatic impact on your investments.

And this impact is not in the distant future. Its now. So heres what we recommend:

Recommendation #1. Keep a solid portion of your money in cash, ideally using a Treasury-only money market fund.

Recommendation #2. Invest in our favorite precious metals mutual funds.

Recommendation #3. Hold select natural resource investments in energy, alternative energy, basic materials, and other natural resource sectors.

Recommendation #4. Avoid old-world, old-century tech companies, such as major cell phone players.

Recommendation #5. Move quickly into companies set to profit handsomely by helping to protect society from the bird flu pandemic.

Larrys special report Follow The Money 5 Companies That Will Get the Lions Share of The $10 Billion Avian Flu Defense Budget will show you how.

The report will be released tomorrow and sold separately for $145. But right now, its yours free simply by starting or renewing your subscription to Larrys Real Wealth Report for one year ($99). For more information call 800-604-3649 or go to Larrys web page.

You can also skip the details and go straight to the online order page, simply by clicking here.

Best wishes,

Martin, Larry and Tony

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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