A story I’ve been warning about for years is making sensational headlines right now.

It’s a story most people don’t realize could make a huge impact on all of our portfolios in a number of ways.

Read more: Food Crisis II http://dailyreckoning.com/food-crisis-ii/#ixzz1C3uR4teB

According to PhysOrg.com, two Italian scientists from the University of Bologna have taken on one of physics’ historically most discredited concepts, cold fusion, and have actually succeeded in creating a sustainable reaction. Aside from the major implications of the energy market should this be validated and recreated (an issue that buried the original Cold Fusion discovery by Stanley Pons and Martin Fleishmann), one of the more economically important side effects of this purported rediscovery is that one of the byproducts of the reaction is none other than recently uber-bubbleicious copper. One wonders what the implications for the copper supply and demand curves (and equilibrium price) would be should the reaction documented by Andrea Rossi and Sergio Focardi be proven to not be a hoax. Is modern day alchemy the only thing that can dethrone copper from its historic price highs?

In this issue

• While you were sleeping: mixed start to the week

• Loonie tunes up: the Canadian dollar continues to trade above “par” vis-à-vis its bigger brother to the south

• Muni update: talk in Congress of a broader bankruptcy bill that would give the states the power to adjust their pension obligations and rework union contracts

• Auto sales hanging in well

• The herd effect: bullish sentiment at extreme level and we have a dangerous investing backdrop otherwise known as groupthink

• Obama gaining some serious ground

• Getting big: looks like large-cap stocks are about to take the baton away from the higher-risk small-cap group

• Staying at home: we continue to advocate a core position in Canadian securities considering how treacherous the overseas climate is proving to be

• Bonds still having fun: our long standing call on bonds remains intact

Please read on … HERE

With gold and silver getting hit hard today, King World News interviewed James Turk out of Spain. When asked about the recent action Turk commented, “The last time we spoke Eric, the two key overhead resistance levels I mentioned were $1,400 for gold and $30 for silver. I expect that we will be probing those resistance levels in the near future. The real question in my mind is whether we can take out these resistance levels on the first attempt, or whether the market needs to trade sideways longer in order to build more of a base.”

Turk continues:
Regardless, the risk here is not being in the market, because once these resistance levels are taken out, both metals are ready to explode to the upside. Right now, over here in Europe, the periphery countries such as Spain and Portugal are changing the way they borrow. Their bankers are putting together a syndicate of lenders so that neither country has a failed bond auction. The net effect is not only are they trying to paper over the sovereign debt crisis, now they are trying to hide it behind closed doors with these gimmicks.

Another slight of hand which has been getting a lot of attention recently is the accounting shenanigans by the Irish central bank. The unexplained build-up of other assets on its balance sheet suggests to me that they are playing a very dangerous game. Instead of allowing Irish commercial bank assets to contract to meet the decline in deposits at those banks, the authorities are relying on accounting deception.

If the bank run on Ireland continues, which is likely, the other assets on the Irish central bank’s balance sheet will not be able to be used to obtain liquidity from the ECB, thus potentially leaving Ireland in an illiquid, precarious monetary position. Interestingly, one would expect to see these steps from a country prior to that country exiting the Euro altogether. The question then becomes, is Ireland setting up to leave the Euro?

All of these indicators are simply bullish underpinnings which are paving the way for the next leg higher in both gold and silver.”

This has been a fascinating bull/bear battle in gold and silver. The bears are making a move here, it will be interesting to see who prevails in the end.

Marc Faber, the editor of the Gloom Boom & Doom Report newsletter, is on the record with a fresh prediction that U.S. and European stocks will outperform emerging stock markets.

The Swiss-born, pony-tailed economist who enjoys the Asian style of life and Mao memorabilia expects emerging stock markets to succumb to headwinds as the result of inflation during 2011.

Faber opines the confluence of the U.S. Federal Reserve and European Central Bank unprecedented debt monetization activities have flooded capital fleeing into commodities–raising substantially the cost of living to lower per capita purchasing parity countries–as the root cause.

Faber’s latest prognostication comes on momentum of his previous call in March of 2009 of a stock market bottom—which, at the time, was a scary call to make amid panic of the real potential of a bona fide global meltdown.

Moreover, his correct calls to sell equities prior to the 1987 stock market crash and the 2000 tech stock crash have cast Faber as an investment guru—with humor and anti-establishment flair as an added attraction to his firm grasp of economics, markets and affects of central banking on investor portfolios.

Contrary to what could be construed as a “recovery” in the U.S. and Europe by his latest prediction, Faber believes otherwise, suggesting enough money printing by central bankers will eventually raise economic metrics as the legendary Austrian economist Ludwig von Mises observed and taught during the days of Maynard Keynes:

“It would be a serious blunder to neglect the fact that inflation also generates forces which tend toward capital consumption. One of its consequences is that it falsifies economic calculation and accounting. It produces the phenomenon of illusory or apparent profits.”

–Ludwig von Mises

In the spirit of von Mises’ teachings, Faber warned not to “underestimate the power of money printing” as the foundation of his trademark contrarian outlook in April 2009 of an imminent powerful stock rally ahead.

So how do investors play Faber’s latest call?

Faber likes commodities, especially oil, as means of protecting wealth from currency debasement (inflation) and fiat paper wars between debtors and creditors. The spot price for oil under the Euro-U.S. coordinated monetary plan to raise nominal GDP will raise prices paid by consumers during the war, explains Faber.

Right out of economics 101, Faber points to the most likely commodity to rise in price during a currency war to the bottom. Oil.

While oil production struggles to satisfy global demand in 2011—this according to Energy Information Agency—the double whammy of tight oil supplies and an inflated currency in which much of the world trades for the black gold are solid “fundamentals” for a rise in its price, which Faber and others such as famed commodities investor Jim Rogers clearly agree upon.

Within the oil sector, a basket of oil service stocks (OSX) has outperformed the West Texas Intermediate Crude (WTIC) and major producers as measured by the XOI by approximately 53% and 67%, respectively, since the crushing bottom in the oil price of the fourth quarter in 2008. Oil service companies should enjoy positive investor sentiment during the bull market in oil, analysts say.

And what if central banks of emerging economies substantially raise interest rates to curtail inflation and GDP growth overseas?

Emerging stock markets will under-perform anyway due to an implied lower earnings profile, Faber suggests. Either way, he says, these stock markets will under-perform the U.S. and European markets.

But Faber doesn’t see a global recession ahead to change his recommendation to move money into the oil patch, nor does he see a stop to the money printing from debtor nations anytime soon.