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There is a Wall of Silence separating you from some of the best performing investments in the world today. Some of these investments are hidden from you because of obsolete regulations and others purely out of ignorance (since most brokers are primarily salesmen, not true investment analysts). Even more are kept from you for the purpose of protecting the self interests of Wall Street. This virtual information blackout on these top-performing alternative investments could be costing you a fortune. As you’ll learn in this report… ...

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Published By: The Sovereign Society Table Of Contents Forbidden Investment #1: The Black Book Of Go Beyond Your Local Bank ...and Reap as Much as 24% on a CD p. 3 Forbidden Investments: Forbidden Investment #2: Top Performing Funds Your Broker Can’t Tell You About p. 4 Secret Securities that Forbidden Investment #3: Crush Stocks in Stocks Step Aside to Make Way for the Next Great Bull Market: Bull and Bear Markets Commodities p. 8 Forbidden Investment #4: Forbidden Profits from the Fall of The Dollar p. 10 Forbidden Investment #5: Profit from Market Turmoil with Select Gold Stocks p. 12 The #1 Investment of the World’s Wealthiest 1%. p. 14 By: The Sovereign Society Research Team
Publisher: The Sovereign Society Five Catherine Street Waterford, Ireland E-mail: info@thesovereignsociety.com Link: www.sovereignsociety.com Copyright ©2003 The Sovereign Society All rights reserved. Copying any portion of this publication or placing it on any electronic medium without publisher's written permission is prohibited by law. Violators risk criminal penalties and $50,000 damages. This publication is sold with the understanding that it does not render legal or other professional services or advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Readers who have general questions about this publication or its contents, or suggestions for future editions, may contact the author at the above address or via e- mail. The Black Book of Forbidden Investments Page 2
There is a Wall of Silence separating you from some of the best performing investments in the world today. Some of these investments are hidden from you because of obsolete regulations and others purely out of ignorance (since most brokers are primarily salesmen, not true investment analysts). Even more are kept from you for the purpose of protecting the self interests of Wall Street. This virtual information blackout on these top-performing alternative investments could be costing you a fortune. As you’ll learn in this report… Three excellent investments, the Merrill Lynch International World Gold Fund, up 307% since September 2000, the Ashmore Emerging Market Liquid Investment Fund, recording 75% during a period in which the S&P 500 dropped 44% from 2000 to 2002, and the Man-AHL Diversified PLC fund, up 367% since inception in March 1996, all far outperformed the market. Yet the chances of your hearing about them on CNN are slim to none. Two other investments recommended by The Sovereign Society during the bear market gained 897% and 1894% in a period of less than two years. But most Wall Street firms think these investments are too “sophisticated” for you (yet they’re not much more complicated than trading a stock). Another three Sovereign Society investment recommendations rocketed 51.84%, 55.54% and 147.79% in a period of just 14 months… yet they’re just not the type of “headline” Internet or biotech stocks the media prefers to report on… And yet still another investment is up 410% through both the bull and bear markets of the last seven years, as of October 2003… however, until recently, this type of investment was effectively reserved only for the very rich. In this report, I’ll introduce you to some of the best performing “forbidden investments” your broker never told you about. And it truly is only an introduction, because as a member of The Sovereign Society, you can now expect these kinds of elite global investment recommendations every month in The Sovereign Individual monthly newsletter. Let me begin by showing you how a “conservative” investment recommended to Society members last year that resulted in 24% annual returns… Forbidden Investment # 1: Go Beyond Your Local Bank… and Reap as Much as 24% on a CD! The bursting dot.com bubble, bulging U.S. trade deficit and slowing economy are cracking the foundation of the dollar’s global power. Meanwhile, many European, Asian and Latin American economies have much stronger economic fundamentals than the over-indebted US economy. The era of the dominating dollar appears to have come to an end. For investors this could either mean disaster or rare opportunity. For years, foreign capital inflows buoyed U.S. stocks, bonds and the dollar helping support America’s credit- addicted economy. It was self-feeding; a stronger dollar meant greater foreign confidence in U.S. investments and more buying. A falling dollar now threatens foreign holders of U.S. investments as it reduces or wipes out returns when converted back into their home currency. This exchange-rate risk, combined with other bearish forces, is The Black Book of Forbidden Investments Page 3
triggering “dollar dumping.” During the bear market of 2002-03, this caused dollar-denominated investments to fall farther and faster than would otherwise be the case. Today, it’s hurting the prospects of US bonds and could soon hit US stocks again if the US stock market rally loses steam. So how do you turn this crisis into opportunity? One straightforward way to cash in on a falling dollar is to invest directly in a foreign currency that is appreciating against the dollar. In June of 2003, The New York Times reported that US investors in a New Zealand CD would have earned 24% in the prior 12 months. That’s because the CD paid just over 4% and the New Zealand “kiwi” appreciated almost 20% against the dollar at the same time. But this was not news to members of The Sovereign Society. As a matter of fact, the President of Everbank, the bank that offered this CD, had spoken at Sovereign Society conferences the year before that article appeared. So Society members were able to take advantage of this opportunity as well as similar opportunities in commodity- based currencies strengthening against the US dollar—from the Australian dollar to the Canadian dollar. Everbank does not only offer currency investment in New Zealand, but a total of 17 different foreign currencies and even 6 accounts that collect currencies with a common economic or geographic theme (an example would be countries who’s economies are very focused on energy). For more information on foreign currency accounts, visit www.everbank.com or call 888-882-3837, option 7. You may also e-mail them at worldcurrency@everbank.com. From here, we will reveal four more profitable classes investments that are either overlooked or actually censored on Wall Street. These can provide you with a far better balance of investments that don’t correlate with the US stock market, allowing you to profit in both bull and bear markets. Forbidden Investment #2: Top Performing Funds Your Broker Can’t Tell You About Business Week recently reported that all 500 of a special class of mutual funds posted positive returns in the 2nd quarter of 2003. While most American investors were losing their shirts in this bear market since 2000, all of these funds were posting positive returns. What’s more? Over 96% of them had double-digit gains, and when you look at the last five years as of August 2003, many have posted triple-digit returns… Aberdeen Asian Smaller Cos. Warrants, a UK fund has posted a 674% gain since 1998. Gresham House, another UK fund has followed suit posting a 668% return. Prosperity Cub Fund was not far behind, gaining 506% since 1998, all during a serious bear stock market in the U.S. Remember, these funds are perfectly legal to own. There are no government regulations restricting you from having these in your portfolio. So, what’s the problem? More like, “who’s” the problem? These Wall Street executives and their SEC tails have made it basically impossible for you to find out about these funds... The Black Book of Forbidden Investments Page 4
Why? Because they’re “offshore funds.” They are managed from countries outside the US, like Switzerland, Hong Kong and England. And, while most of these financial centers have far stricter corporate regulations than the scandal-haunted Wall Street – U.S. “regulators” are convincing Americans that they are actually “protecting” them by enforcing regulations that hide these investments from American investors. The truth? These funds are a threat to the U.S. mutual fund’s enormous amounts of “money under management.” The industry has persuaded U.S. lawmakers to bar offshore funds from advertising in the U.S. In turn, they have found a way to trap you into U.S. funds and sharply reduce your choices - all so they can save their own money… In the three months leading up to this report, CA Funds Thailand Classic posted a 141% return. But did you hear about this fund on CNN or read about it in your latest edition of Money Magazine? What about RP Selection Europe, which reported a whopping 85% gain in only a six month period? Continuing on, in just the last five years, as of August 23, 2003… Scottish Oriental Smaller Cos. Warrants, a UK fund is up 382% Korea Europe Fund, another UK fund gained 338% Korea Open Fund (Off) reported a 331% return... Just imagine if these kinds of returns had been in your portfolio over the last three years – instead of being trapped in scandal-plagued U.S. stocks and funds, you could have grown wealthier during the bear market. Offshore hedge funds carry some very unique attributes that make them attractive for U.S. investors. Some of the advantages of these funds make them absolutely critical to your portfolio in the interest of having it well balanced. The key advantage of hedge funds is that they can significantly reduce risk. Repeated studies have shown that portfolios that are diversified internationally tend to offer higher risk-adjusted returns than funds concentrated just in the U.S. or any other single country. What’s more, certain offshore funds can further reduce risk by using investment techniques that are not available to the majority of U.S. funds. Offshore hedge funds, for instance, can reduce market risk by not only going long but also short selling selected securities. By going offshore, you also have a far greater number of funds to choose from. Of more than 80,000 funds trading worldwide, only about 10,000 are registered in the United States. You are missing out on 70,000 funds that may very well be acing the bear market! Many offshore funds also use futures to mitigate risk—a technique that is not available to standard U.S. funds. That’s because U.S.-registered stock funds can’t shift their focus to the futures market without going through a lengthy paper filing process to obtain clearance. By the time they get their clearance, it’s too late and the offshore funds have already profited and moved on... Yet another major benefit: offshore funds offer foreign currency diversification. They are able to take diversification to a higher level. Not only are you balancing your portfolio with different stock markets whose performance may not correlate to that of the U.S., you are also able to diversify with currency as well. How well do these techniques work? The Black Book of Forbidden Investments Page 5
RP Selection Europe was able to use these very benefits to recently post a return of 85% in a period of just six months. In just the last five years ending August 23, 2003… Parvest China C, a fund you will likely never hear CNBC talk about, posted 440%... Turner Micro Cap Growth compounded a 324% gain… Russian Prosperity Fund reported a 313% gain… Orbis Africa Equity Fund recorded a 312% increase, all in just a 5 year span… Offshore funds deserve to be in every investor’s long-term global asset allocation plan because the best of them have proven their ability to protect capital in all markets with less risk than your average common stock. The Sovereign Society offshore fund experts have offered a list of the three most promising offshore funds you may want to consider for your portfolio. Please note that these investments should only be in your tax-sheltered retirement accounts, such as IRAs—or in an offshore variable annuity. (Go to the Members-Only section of the Society website to learn more about offshore variable annuities. – http://www.sovereignsociety.com/usr/misc/Annuity.pdf) Washington has made these offshore funds very tax-inefficient to own, demanding that US investors pay taxes on gains from the fund each year, whether the gains are realized or not. Yet by owning these funds in a retirement account or variable annuity, you eliminate that tax disadvantage. 1. MERRILL LYNCH INTERNATIONAL WORLD GOLD FUND Based in Luxembourg, the Merrill Lynch World Gold Fund is ranked #1 in the offshore gold fund sector since 1994. In 1998, Merrill Lynch acquired the assets of Mercury Asset Management, a British fund manager based in Luxembourg. The Merrill Lynch World Gold Fund began managing assets back in late 1994 under the Mercury banner and today manages $1.7 billion in assets. MLIM World Gold Fund is a truly diversified global gold stock mutual fund. MLIM World Gold holds a collection of mostly large-cap and mid-cap producers from South Africa, Canada, Australia, the United States, Latin America, Russia and China. In addition to gold stocks, which represent 87% of assets, MLIM World Gold also holds platinum stocks (6.2%), diamond stocks (3.1%) and silver equities (1.3%). MLIM World Gold Fund has blown away its peers over the last 11 years, even during the late 1990s gold bear market. Since December 1994, MLIM World Gold Fund has earned 21% per annum versus an average of less than half that rate of return for the median offshore gold fund. Over the last five years, MLIM World Gold Fund has gained 28.3% per annum. No other offshore gold fund comes close since 1998 beating MLIM World Gold Fund. Since September 2000, just as gold bullion was forming a bear market bottom, MLIM World Gold has gained a cumulative 307% versus only 241% for the median offshore gold mining fund. MLIM World Gold Fund continues to win offshore performance awards. Morningstar Europe has accredited this gem with a 5-star rating since 2000 while Standard & Poor’s has awarded the Fund a #1 ranking in its sector of offshore gold funds over the last 12 months, and 3 and 5-year periods. The Black Book of Forbidden Investments Page 6
Minimum investments start at $5,000 or EURO 5,000. Visit http://www.mliminternational.com or call Luxembourg at 352-342-0101. ISIN dealing number: LU0055631609 (US$ share class). 2. ASHMORE EMERGING MARKET LIQUID INVESTMENT FUND The Ashmore Group is widely recognized as the premier emerging markets fixed-income manager in the world since 1992. Spawned by former employees of Australia and New Zealand Bankcorp, Ashmore is a highly skilled group of analysts specializing in emerging market credit and risk analysis. The group currently manages $6.8 billion dollars and has nine offshore funds available to retail investors in Luxembourg and Guernsey, Channel Islands. The flagship product of the group, Ashmore Emerging Markets Liquid Investment Fund (EMLIP), has enjoyed incredible long-term consistency since launch in October 1992. Over the last 11 years, EMLIP has gained 20.47% per annum versus 13.87% for the benchmark J.P. Morgan Emerging Markets Bond Index. EMLIP is ranked #1 in its sector over the last three, five and ten years for all offshore emerging market debt funds. EMLIP has suffered only one losing calendar year since 1992 (1998) and has outpaced all major fixed- income aggregates since 1992, and even the S&P 500 Index. Since 1992, the S&P 500 Index has gained 12.91% per annum with three consecutive calendar year losses from 2000 to 2002. Ashmore EMLIP has investments diversified across most major emerging market countries, including Brazil, Turkey, Mexico, Russia and smaller countries in the benchmark index such as Indonesia, the Philippines, Colombia, Uruguay and Venezuela. The portfolio incurs very low monthly volatility and has a high monthly profitability ratio in excess of 90% since 1992. From 2000 to 2002, Ashmore EMLIP gained a cumulative 75.7% versus a loss of 44.4% for the S&P 500 Index. Despite the deep bear market for common stocks over this brutal 36-month period, the Fund provided traditional portfolios with key diversification from an asset class with negative correlation to equities. Ashmore EMLIP has gained 29.4% in 2003 (through 10/22) versus 18.1% for the J.P. Morgan Emerging Markets Bond Index and 19% for the S&P 500 Index. Minimum investments start at $25,000 in Guernsey or EURO 25,000 in Luxembourg. Visit http://www.ashmoregroup.com or call London at 44-207-557-4131. ISIN dealing number: GB0000242932 (US$ class). 3. MAN-AHL DIVERSIFIED PLC Ranked as the top-performing single advisor in its class since 1996, Man-AHL Diversified PLC has earned impressive returns over the last eight years. Man-AHL is part of the Man Group, the world’s largest hedge fund and managed futures organization with a combined $28 billion in assets. Man Investments is based in Pfaffikon, Switzerland, the world’s hedge fund hub since 2002. Since inception in March 1996, Man-AHL Diversified PLC has earned a cumulative 367%, or 21% per annum. The Fund earned impressive bear market profits from 2000 to 2002, averaging 16.7% per annum versus a loss of 44% for the S&P 500 Index. Man-AHL Diversified PLC has never suffered a calendar year loss since inception. Man-AHL Diversified PLC offers global investors a product with negative correlation to common stocks, and low correlation to bonds. The Fund trades exclusively in futures and options markets, 24 hours per The Black Book of Forbidden Investments Page 7
day. Over 100 global contracts are regularly traded, including long-term and short-term interest rates, global stock indexes, currencies and commodities. The Fund engages in long/short trading strategies, often profiting from market trends that are either rising or declining. For example, since peaking in late January 2002, the U.S. dollar has declined sharply versus major foreign currencies. The Fund has been actively shorting the dollar for over 18 months. Unlike equities, which require an expanding economy to encourage profit growth, managed futures funds like Man-AHL, actually thrive on downside market chaos. Though capable of earning net profits in any market environment, the Fund has earned huge bear market gains each month stocks plunged, starting in 2000. This negative correlation to equities serves traditional portfolios well by diversifying assets and boosting performance in all markets. The Fund, however, is extremely volatile. It is not uncommon to record a monthly gain or loss of 10%, or more. Since volatility is a prevalent theme, investors are advised to limit their exposure to managed futures to a maximum 10% of their portfolio. Minimum investments start at $30,000. Visit http://www.maninvestmentproducts.com or call Switzerland at 41-44-415-3636. ISIN dealing number: IE0000360275. Those are strong and proven funds that we highly recommend. They have a solid track record, excellent management and a very promising future. Now let’s move onto another investment area that is resulting in very large profits for Sovereign Society members lately—yet where your broker may be leaving you completely in the dark. I’m talking about commodities… Forbidden Investment #3: Stocks Step Aside to Make Way for the Next Great Bull Market: Commodities No one can argue that the 1990s belonged to common stocks. However, that era has come to a bitter and ugly end. This decade is showing much more promise and reward for commodities. The three major commodity indexes have all posted significant gains over the last 24 months. From its low in October 2001, the benchmark Commodity Research Bureau (CRB) Index has gained 65.59% through the end of October 2003 versus the –1.14% that the S&P 500 Index shows. Another natural resources index, the Rogers Commodity Index, soared 80% over a period of five years in which the S&P 500 reported a loss of 9%. And the Goldman Sachs Commodity Index (GSCI), heavily weighted in energy futures, has gained 43% since January 2002 versus the –7% for the S&P 500. A new bull market is now under way for commodities and you are at the perfect time to dive right in. As the Fed fights hard to boost the economy, hard assets are going to continue to power ahead for the upcoming years. Despite gains in recent years, commodities are still cheap when adjusted for inflation. As an independent asset class, they provide key portfolio diversification with negative correlation to stocks and bonds. Over the last three years, most global stock markets have plunged while commodity indexes have all appreciated. Protracted conflicts and wars, rising inflation as the Fed combats deflation and a plunging U.S. dollar are all going to contribute to a hefty reward for hard assets. The Black Book of Forbidden Investments Page 8
We have chased down the three best commodities investments for you and we believe the timing to get involved could not be better… 1. The Oppenheimer Real Assets Fund Class A: This fund is the best way to invest in the highly accredited Goldman Sachs Commodity Index (GSCI). This index is diversified across most key natural resources including energy, base metals, livestock, agricultural and precious metals. This fund invests in securities that imitate the performance of commodities. Based on where the economy is in the business cycle, this fund allocates assets to certain commodity sectors. This way, the fund provides investors the opportunity to add additional diversity and growth potential to their long- term investment portfolios. The Oppenheimer Real Assets Fund invests most of its assets into the Goldman Sachs Commodity Index with some discretionary trading to compliment its passive style. Just from May 2002 to the end of October 2003, the Oppenheimer Real Assets Fund has recorded gains of 33.57%. The minimum investment is US$1,000. For more information, see http://www.oppenheimerfunds.com or call 1 (800) 525-7048. 2. Chicago Mercantile Exchange Holdings (CME-NYSE). The CME is the world’s second largest exchange. The CME has four major product areas: interest rates, stock indexes, foreign exchange and commodities. The Merc is home to three popular exchanges, with record trading volume in 2002 at 558.4 million contracts valued at $328.6 trillion dollars. This represents the largest notional value traded on any futures exchange in the world. The CME trades futures and options in four key areas: interest rates, stock indexes, foreign exchange and commodities. Since stocks peaked in 2000, the CME trading volume has rocketed 185%. At the Merc, trading volume in February 2003 was a robust 34% higher than just 12 months before then. But perhaps one of the more interesting differences between the NYSE and the CME is the current price of a seat on both exchanges. In March of 2003, a seat at the NYSE sold for $1.5 million compared to $400,000 at the CME. The value of CME's seat price has remained virtually unchanged over the year prior to March 2003, compared to a $250,000 decline for a NYSE seat. The bear market has ripped into prices on the Big Board, but the ongoing bull market in commodities and derivatives trading should drive Merc seat values through the roof in the 2000s. What is driving volume growth at the CME? A combination of factors, including a new uptrend for commodities since October 2001, the lowest interest rates in over forty years and more investors seeking hedging strategies to offset losses in any particular trade, especially in currencies and stock indexes. Through the 3rd quarter of 2003, the CME has surged 63 % from its IPO price 10 months earlier. Earnings in 2002 rose 38% over the previous year and earnings for 2003 should show earnings growth again in the 30% range. But the profits thus far are nowhere near what we anticipate for the Merc by 2010. By then, we expect Merc profits could rise four-fold. The CME is listed on NYSE and can be purchased through your local broker. We recommend placing a 15% stop-loss on your purchase price. For more information on the Chicago Mercantile Exchange, The Black Book of Forbidden Investments Page 9
please visit www.cme.com. 3. Rogers Raw Materials Index Fund: Jim Rogers (the founder of this index) is one of the world’s most perceptive global investors. He created the Rogers Raw Materials Index in 1998; since then, the fund tied to the index has blasted higher, earning 14% per annum as global equities have plunged. The index has soared a cumulative 113.28% since inception in July 1998 (as of October 2003) versus a loss of 6.58% for the S&P 500 Index. The fund invests in all commodities, including agricultural commodities, livestock, base metals, energy and precious metals. The largest constituent weighting in the Rogers Index belongs to the energy sector. Investing in the broad array of commodities contracts provides two important characteristics: The large number of contracts and underlying raw materials offers "diversification" and the global coverage of those contracts reflects the current state of international trade and commerce. In short, allocation of a portion of your portfolio to commodities may reduce overall volatility even while providing the opportunity to profit from soaring demand for commodities. The Rogers Raw Materials Index Fund is an excellent way to play this trend. The fund is offered both domestically in the U.S. to accredited investors, and offshore in the Cayman Islands, starting at US$50,000. For more information, call 1 (800) 775-9352 or +1 (441) 295-8617. Please ask for Mr. Andrew Young. As we continue to further diversify your portfolio with investments you won’t hear about on Wall Street, another great opportunity lies in the currency markets... Forbidden Investment #4: Forbidden Profits from the Fall of The Dollar As mentioned earlier in this report, many Sovereign Society members were able to make 24% returns by investing in a simple investment such as a New Zealand CD. In addition to those more conservative strategies for profiting from a falling dollar, The Sovereign Society has used foreign currency speculative trades to bring in far greater returns. In fact, two of our trades during the bear market resulted in gains of 897% and 1894%. However, before we get into the details of how you can target the same types of opportunities, let me go into a little more detail about why we strongly urge you to invest in select foreign currencies. The US Dollar has tripped and fallen into a major bear market. The US trade deficit is growing at more than $1.5 billion a day, as the federal deficit is estimated to exceed $500 billion by 2004. At the same time, the federal government has gone from surplus to deficit in just two years and the deficit is growing every day. In total, the public debt is now nearly $7 trillion! It is even worse than the mid ‘80s, when soaring twin deficits undermined the dollar and it lost nearly 50% of its value in less than three years. However, you don’t have to stand by and watch while the value of your US assets plummet. There are ways you can turn this potential catastrophe into a hefty profit opportunity. In April of 2001, The Sovereign Society correctly anticipated the negative impact the debt-inducing “War on Terror” would have on the dollar. We recommended buying 62-cent Swiss franc calls that gave the holder the right, but not the obligation, to buy long Swiss franc futures (covering 125,000 Swiss francs) at 62 cents, and recommended paying US $1,500 or less for each option. Because you did not have an obligation to buy Swiss francs, your maximum risk on the trade was US$1,500 plus transaction costs. The Black Book of Forbidden Investments Page 10
By the end of February 2003 (in just 11 months), the Swiss franc had climbed to 73.96 cents. If you had exercised your option to buy Swiss franc futures at 62 cents and rolled the futures contracts forward, you would be sitting on profits of roughly $13,450 per option—a return of an impressive 897% - all because of the huge leveraged profit potential of futures. But we weren’t done there…Mark Nestmann, the editor of The Sovereign Individual, did it again when he recommended purchasing 90-cent calls on the euro in May of 2002, under the same conditions as the Swiss franc trade. The price of the option – US$1,250 – was again your maximum risk. By the end of February 2003, the euro had risen to $1.0795. If you had exercised your option to buy Euro futures at 90 cents and rolled the contracts forward, your profit would be roughly $21,312 per option – an incredible 1,894% return. Don’t expect these kinds of recommendations from your local stock broker or the latest edition of Fortune Magazine. Most tend to think that unless you are a multi-millionaire, you don’t qualify for these kinds of trades or that you’re not “sophisticated” enough… But, again, you could have risked less than $1,500 to make each of the above trades. And you could have bought the contracts as easily as buying a stock—and with your risk strictly limited to the amount of your investment. Enormous upside and limited downside on both these trades—those are the characteristics we look for in every investment and trading recommendation issued by The Sovereign Society. Another Opportunity for Triple-Digit, Even Quadruple-Digit Gains Now, if you think you missed those last chances at the big returns, get out your notepad because we just found another opportunity where the profits are just beginning. We are at the cusp of a new inflationary cycle, and this one could be a real whopper. One powered by a weak dollar and aggressive interest rate hikes—as the Fed tries to soak-up liquidity from years of record high money supply "pump priming"—and a global empire-building budget deficit of cosmic proportions. The new inflation cycle even has a head start, with the annualized real Consumer Price Index (CPI) up 2.2% from September 2002 to September 2003. After US forces effectively took control of Iraq, months of fear and inaction by investors transformed into euphoria virtually overnight -- causing interest rates to surge. Billions of dollars have flooded out of bonds, causing interest rates to rise and bond prices to collapse. And there is a long way to go. In 1970, the entire global bond market had a value of only US$776 billion. Today, there are US$40 trillion worth of bonds issued worldwide! To profit from this rise in short-term rates, we recommend buying put options on euro-dollar 90-Day CD Interest Rate contracts. Like bonds, when euro-dollar interest rates rise, the contract falls, so your put options rise in value. We are buying put options because they give us the right but not the obligation to be short. The most we can lose is the cost of the option plus transaction costs. Consider buying March 2005 euro-dollar puts for US$700 or lower while looking for interest rates to rise. Should short-term rates rise to 5% by option expiration in March 2005, each of these puts will be worth at least US$3,750. An increase to 6% makes them worth US$6,250. The Black Book of Forbidden Investments Page 11
Why March 2005? The Fed admitted to planning on keeping interest rates artificially low longer than it normally would to give newly resurgent inflation a slight push. Also, the Fed may keep rates artificially low for a bit longer to build economic momentum in anticipation of the 2004 elections. But, by keeping rates low now, Greenspan is guaranteeing the need for a bigger tightening cycle later. Because of the lag time between the Fed’s actions and their realized economic effects, we are choosing March 2005 for our play on higher rates. How can you get your hands on these Euro-dollar CD options? You can’t buy euro-dollar CD options in your stock account. You need a futures options broker. If you don’t have one already, contact our friend Sue Rutsen at Fox Investments for more details. WATS: (800) 345-7026. Tel.: +1 (312) 528-3494. Sue and her team have been trading foreign-currency options since 1984, and are experts at coaching investors who are new to options. Along with account forms, ask Sue to send you a free copy of the Short Course to Futures and Options, a quick reading guide to successful option strategies. There remains yet another great investment that seems to always produce great returns during a crashing stock market. Over the past years, it has consistently out-run the stock market and should continue with this trend throughout this decade, as we expect the double-aughts to be a volatile time for US stocks… Forbidden Investment #5: Profit from Market Turmoil with Select Gold Stocks As the market plunges you cannot afford to not have a balance of gold or gold shares in your portfolio to protect you. Gold—and especially gold stocks—tend to do very well in a poor stock market. Since 2000, this has been the case again, with gold shares consistently outperforming all other sectors. The drop in the US dollar is one of the main reasons why gold has been rising. It is a well established pattern over the last 30 years that when the dollar goes down, gold goes up. And the threat of a widening war, economic uncertainty, low interest rates, record deficits, a sluggish economy and bearish stocks are just some of the reasons why the US dollar is falling, and these factors are unlikely to disappear soon. Sovereign Society members know gold hasn't been lost, only rediscovered. Clearly, gold is the only 'real money' in the world today. As gold specialist Bart Kitner observed, ”Gold is a currency unaffiliated with any country. Without renewed confidence in the US dollar, gold will outperform it and all other currencies for a long time to come.” In August of 2002, The Sovereign Society investment analysts recommended GoldCorp (GG), Glamis Gold (GLG) and Bema Gold (BGO). From August 2002 through October 2003, GoldCorp (GG) had posted 51.84%, eclipsing the 14.29% returns of the S&P 500. Glamis Gold (GLG) took it one step further, rising 55.54%. And Bema Gold (BGO) blew the market away and posted a 147.79% gain. Investors struggled to make back small pieces of their previous losses in most other market sectors. However these recommendations by The Sovereign Society’s council made it possible for our readers to make high double- and triple-digit profits in a short period of time. We believe, that investments such as GoldCorp, Glamis Gold, and Bema Gold still represent excellent opportunities in today’s market. As long as the economy remains sluggish and the threat of a widening war remains over our heads, gold will continue to surpass the performance of stocks. The Black Book of Forbidden Investments Page 12
Newmont—King of the Gold Hill The Sovereign Society is refreshing our original January 2002 recommendation on Newmont Mining (symbol NEM) which was up 102.90% as of October 30, 2003 from the date of our original recommendation. We are also recommending ASA Limited (ASA) which is up (as of October 30, 2003) 235.65% since the heart of the market crash (October 2000). Newmont Mining is the world’s largest gold mining concern. In February 2002, Newmont completed the acquisition of Normandy Mining Limited and Franco-Nevada Mining Corporation Limited, making it the world’s largest gold producer. NEM continues to show its strength with significant assets and operations in five major continents and an active role in exploring and acquiring gold in the world’s best gold districts. This company is also the largest private sector precious metal royalty owner in the world, managing an equity portfolio valued at approximately $300 million as of the second quarter of 2003. For 2003 alone, Newmont expects to sell between 7.2 million and 7.4 million ounces of gold at total mining costs of between $198 and $208 per ounce—even while the price of gold now sits at $380. NEM is a U.S. traded security on the New York Stock Exchange and may be purchased through your local broker. For more information on Newmont Mining, please visit www.newmont.com. ASA: An Excellent Diversified Play on Gold Mining Companies Even surpassing the excellent performance of NEM, ASA Limited (ASA) topped the gold mining market, posting gains of over 235% in the short period of October 2000 to October 2003. ASA Limited is a closed-end investment company founded in 1958. It invests over 50% of its total assets into common shares of companies that hold a major portion of their business in gold mining and any related activities. ASA Limited holds a majority of its investments in the Republic of South Africa. This provides an added boost to your prospective returns since the South African rand should strengthen against the dollar along with other commodity-based currencies. The company is also permitted to invest up to 20% of the value of its assets outside South Africa and up to 25% into gold and/or gold certificates. The securities held by ASA are for long-term investment purposes only. ASA Limited is trading at a very cheap price, sitting at a P/E ratio of only 5.3, compared to the industry average of nearly 17. In just the past 12 months, as of October 2003, ASA shares have risen 42.27%. Combined with excellent capital gains, ASA Limited has not missed a dividend payment in many years (currently yielding 1.4%). With top holdings of industry leaders such as Newmont Mining, the largest gold mining company in the world, Gold Fields Limited, one of the world’s largest gold producers, and Anglogold Limited, a company with over 19 operations in 8 countries, we expect ASA’s shares Limited to continue on a bull course over the next few years. ASA Limited (NYSE – ASA) is listed on the New York Stock Exchange and can be purchased via your local broker. For more information on ASA Limited and their investment practices, visit www.asaltd.com. Diversify Globally and Across Asset Classes—and Profit in Bull and Bear Markets The Black Book of Forbidden Investments Page 13
In this report, we’ve looked at five classes of investments that Wall Street has effectively hidden from you. And we’ve looked at 10 specific current Sovereign Society recommendations you can add to your portfolio right now to diversify across regions, sectors and asset classes to reduce volatility while increasing potential return. Until today, much of this information was available only to the extremely wealthy and well connected. Yet, as a new member of The Sovereign Society, you can expect to find these types of elite investments every month in The Sovereign Individual newsletter and on a weekly basis in The Sovereign Society Offshore A-Letter, delivered to your email. In the next and final section of this report, you’ll learn about another little-known, top-performing investment class. It has handily beaten stocks for more than 20 years… yet it has also been effectively off limits to the average investor, until now, that is. We cannot reveal the name of this particular investment in this report because it is a current recommendation of Commodity Trend Alert (CTA), one of our premier investment services. Yet you’ll learn how you can try CTA on a risk-free basis and receive a special report on this very special investment. An investment we refer to as… The #1 Investment of the World’s Wealthiest 1% Shh…They Really Don’t Want You To Know... The best investment class by far over the last 30 years is an investment class most people don’t even know exists. They’re called Commodity Trading Advisors, or “CTAs.” CTAs are a very unique breed of hedge fund that typically go long and short the market at the same time. They aim to limit risk, while profiting from rising and falling sectors of the market at the same time. CTAs specialize in trading futures and options markets with high leverage. That means they invest in commodity “futures” (agreements to buy or sell a particular commodity at a certain price by a certain date). CTAs can invest in futures on everything from oil, gold and other metals to agricultural commodities, currencies, stock market indexes and bond indexes. Since each of these markets go through bull or bear phases at different times, CTAs have the flexibility to buy into rising trends and sell falling ones. As a result, they’ve out-performed stocks by a wide margin even after the greatest equity bull market of all time. According to University of Massachusetts’s Center for the Study of International Securities and Derivatives, CTAs (as a class) posted 2003% returns since 1980 compared to the 1,398% returns posted by the S&P 500. And yet the very best CTAs have and continue to produce far greater returns. Dunn capital is one of the oldest CTAs. It’s been around since 1974 and its leading portfolio has posted an incredible annual return of 24% since that time. That’s enough to double your money every three years. Every thousand dollars invested in this portfolio in 1974 would be worth over $412,000 today. And yet, Dunn doesn’t even have the best track record among CTAs… Another CTA is headed by the owner of a major professional sports team. And it’s so exclusive that he even forbids the use of its name to “non-qualified” investors. So, for now, I can only refer to it as “Investment X.” Over the past two decades, this investment has returned 30.55% annually since its inception in October of 1984. This CTA hasn’t been around quite as long as Dunn. Yet, nevertheless, those returns would have turned each thousand dollars you invested in 1984 into over $138,000 today. However, the catch was that the managers of these CTAs required elite “qualified investor” status of their investors. But the high-net-worth, high income, and high minimum investment requirements changed when they introduced the first single-manger CTA shares for the retail investor. The Black Book of Forbidden Investments Page 14
Now, all you need is a financial net worth of $45,000 (joint or individual) and annual income of just $45,000. In a few states, the requirements are a $60,000 net worth and $60,000 in annual income. After that, your minimum investment is just $5,000! One of the World’s Most Profitable Investments Is Now Available to You Years ago, if you wanted to invest with Warren Buffett, you had to pay the full freight of the Berkshire Hathaway A shares. With a single A share trading at about $70,000, that put the expertise of the best stock picker in the world out of reach for all but the wealthiest of investors. But then Buffett introduced B shares— offering the same returns, but selling for about 1/35th the price of the A Shares. Similarly, the best CTA in the world over the last seven years has now made the most profitable investment class in the world available to most individual investors. But most will still never learn about it—simply because it’s not the kind of thing the mainstream press tends to write about or brokers get told to push by their bosses. So now, it is possible for you to participate in the #1 investment of the wealthiest 1% with just $5,000… And you get a great deal for that very affordable minimum investment. This particular CTA has more than doubled from June 2002 through October 2003, and it’s up 410% since inception in the spring of 1996. (The S&P 500, by contrast, is up only about 80% in that time.) This CTA, in short, has an unparalleled track record of posting huge profits in both bull and bear markets. In fact, in very rare coverage of this class of investment by a major magazine, Worth Magazine was so blown back by this CTA, it raved…, “Remarkably, its trading has demonstrated a positive correlation to the S&P 500 when the index rises and a negative correlation when the index falls.” But there’s something else equally extraordinary about this investment. The higher returns do not necessarily come with higher risk. Higher Returns While Reducing Portfolio Risk Professor Lintner of Harvard University recently did a study on CTAs. He proved that by adding such commodities investments into your portfolio, you “substantially” reduced risk. A separate study by Managed Accounts backed up Professor Lintner’s findings, showing that CTAs as a class reduce risk in the typical stock and bond portfolio. This particular single-manager CTA portfolio, however—the only top-performing one in the world you can buy for less than $250,000—is at the head of the class for reducing risk. It limits initial risk per trade to no more than 1.5% of total fund assets. It also uses an automated system to monitor volatility in all the sectors in which it invests. This allows the managers to immediately adjust exposure when market conditions change to limit risk. This same automated system assures the fund is invested in a mix of non-correlated investments—so it’s never overexposed to any one commodity or market. Finally, the CTA employs daily stop orders to limit loss and protect profits. The Black Book of Forbidden Investments Page 15
Given the bullish outlook for commodities and the uncertain outlook for US stocks, we expect this CTA to continue to be a superb performer—and certainly to continue to far outpace the stock market—throughout 2004 and 2005. If you would like to learn more about this investment, you can try a guaranteed, no-risk trial subscription to the service. It’s called Commodity Trend Alert and it’s written by Eric Roseman, a veteran analyst and a true expert on commodities investing and global mutual funds. Visit www.commoditytrendalert.com. The Black Book of Forbidden Investments Page 16