by Howard Ruff
There in the sub-title is the
grand secret of investment success. The only
problem today is that everything is low, so what
should you choose? Letís look at the
Residential Real Estate: You can only buy low if
we are near a bottom. Residential real estate
has another year or two before prices will
bottom out and turn around, working off the huge
inventory of unsold homes. That is not a
candidate for a low buy yet; later it might be.
Stocks: Theyíre obviously way down and, of
course, Wall Street wants you to buy. However,
other than certain selected industry groups,
growth mutual funds and the Dow Industrials are
big-time losers because they will go lower.
I like a few industry groups: Uranium Mining,
Gold and Silver Mining, Oil-Service Companies
(that make and service drilling rigs), certain
Oil-Income Trusts (Canadian) which can yield as
high as 14 percent because of some peculiarities
in Canadian tax law, if you pick the right ones.
(More details to follow.)
Bullion and Coins
Gold and Silver: Avoid futures contracts; they
are a big no, no. They are too volatile, and the
metals can temporarily move against you as
little as five or ten percent and wipe you out.
Gold and silver are down substantially. If you
bought a month or two ago based on my or anyone
elseís recommendation, you are under water and
are probably mad about it.
These investments are all low. The important
question is which is most likely to be near a
bottom and to come back big time? Gold and
silver and their equivalent mining stocks lead
Many have emailed that they are mad at me
because gold and silver are down. I personally
am cheering. I would like to see silver as low
as $5 and gold near $500 because then you could
buy lower and could make a lot more money when
you sell high.
So I want the metals lower and cheaper.
My subscribers are no different than everyone
else. You only want to buy when things are going
up and they are hot, and you want me to make
short-term calls. In fact, Iíve had several
emails from people who objected because I didnít
publish over the last month, but want me to
publish every week.
Iím not in the short-term call business. I know
that gold and silver in past bull markets, such
as the 70ís,were occasionally down as much as 30
percent for as long as a year or so on the way
to new highs. Making short-term calls is a
foolís errand, and I wonít do that. I am only
interested in long-term results.
I will not publish every week as some have
suggested. I tell you what I think you ought to
do. If I change my mind, Iíll let you know.
Remember, long-term calls will always be The
Ruff Timesí mission.
One of the real problems is the apparent
contradiction between huge shortages of bullion
at coin dealers and falling prices. Why?
Every coin dealer is having trouble getting
bullion to sell to you. You would think that
shortages would drive up the price, but let me
explain how metal prices are currently
They are currently driven by paper silver and
gold, which are basically the futures contracts.
When commodities were booming, a lot of
companies, including banks and big corporations,
were buying commodity funds by the billions,
which included gold and silver futures
When the current crisis developed with balance
sheets disappearing because real estate had
caved in and so did the mortgage-based bonds,
banks especially were forced to liquidate these
commodities to raise cash to meet their
statutory requirements for liquidity.
Banks were big investors in the commodity funds,
and when they liquidated the funds (the paper
gold and silver futures) very little bullion
changed hands, but the price was driven down by
the sale of the futures contracts.
What happened then is that basically the market
was split. It should theoretically be driven up
by people buying bullion, as dealers were
swamped with orders that they couldnít fill
because they couldnít get the metal. These
shortages did not drive up prices because the
futures were down big time, and that determined
Gold and silver have even fallen below some
mining- production costs. Several mines have had
to shut down or limit production. The shrinking
of new supplies coming on the market and the
shortages at the coin dealers, who in many cases
can only take orders and deliver weeks from now,
have created a fierce potential upward pressure
that eventually will reassert itself.
So not only can we buy low, but we can buy a
product that is poised for a massive upswing.
Especially silver, because industrial users must
buy to meet their needs. Eventually when the big
corporations and banks are through liquidating
their commodity funds, the supply and demand
fundamentals will again be driven by bullion.
They are loaded for a massive bull market.
Buy low, sell high! Itís lower than you will see
again in your lifetime. Forget the fact that you
are temporarily under water. The way to come
back is not to abandon the market or stop buying
when it is low.
Buy low, sell high!
How to Live Your Life and Invest Your Money
No matter what changes in Washington, many
things are still under your control and will be
perhaps for decades.
These are things you can do now independently of
how the government acts.
Assume that saber-tooth inflation is in your
future. It may take a year or so before it is
really obvious. Right now we are going through a
deflationary period, and the government hates
deflation with a passion. The only way they know
how to deal with deflation such as we have now
is to throw money at the problems. The process
of creating all the money they are throwing will
create price inflation eventually as the money
works through the system.
Ironically, deflation sows the seeds of
inflation because of how congress will respond.
Creating money is inflationary, as inflation is
at all times and all places a monetary
phenomenon. Rising prices are only the end
result of the government creating money.
How do you prepare for inflation?
Have a commodity storage program. You donít
necessarily have to buy a commercial
food-storage program, although that will be very
helpful. We have associations with people who
can help you (Karen Varner at 801-225-0948 or
Martens at 800-824-7861).
Inflation will rekindle rising gas and oil
prices after the current major decline is over.
Trucks will have trouble paying for fuel so they
go can go to the back doors of stores to
replenish the shelves after the shoppers have
descended on the stores like a plague of locusts
Whenever you go to the store to buy something
you ordinarily buy, donít just buy one Ė buy
five. Donít just buy two cans of tuna, buy a
Donít just change the oil in your car, buy
several quarts of oil and store it away. Store
plenty of diapers and soap. You will be buying
at todayís low prices and consuming at
tomorrowís higher prices. You can save money by
drawing on your storage.
Price inflation will become part of your life.
It may take as much as a year for the money to
work its way through the economy, so we will
probably have to live with a multi-month
deflationary period. Then it will begin to look
like the Ď30s again as unemployment soars and
consumer buying slows.
It is paradoxical that deflation is the ultimate
cause of inflation. Increasing the money supply
to fight deflation will eventually cause rising
prices. It is a natural consequence.
Ignore most mutual funds and many of the giants
of industry. They will be in trouble for years,
maybe decades. But the stock market is not a
monolithic entity; it is made up of industry
groups. Some industry groups will do well.
Take Will Rogerís advice: ďInvest in inflation,
itís the only thing thatís going up,Ē and
several industry groups will benefit from
During the depression of the Ď30s, some industry
groups did very well indeed, while the stock
market in general was down as much as 90
Which groups do I like?
I like gold and silver mining stocks. As a
class, they are at the same levels they were
when gold was only $300 (buy low, sell high). I
like the Uranium Stocks listed in The Investment
Menu because we will finally have scared the
environmentalists into easing up on their
opposition to nuclear power. There are 35
nuclear plants either under construction or on
the drawing board right now, and there is only
half enough uranium above ground to meet their
needs. So uranium miners will have to keep
digging just to meet basic demand.
I like Oil-service Companies. Despite
environmentalistís opposition and Democratic
opposition in Congress to offshore drilling, we
will be doing more of it. The safest bet to
benefit would not be the producers, but the
Oil-service Companies that build and service the
A word about the big oil producers. Iím sure
some of them will do very well, and Exxon will
probably lead the pack. But I donít understand
this sector as much as I should to be able to
pick winners, so you might have some of your
money invested in the leaders of this field.
Canadian Oil-income Trusts benefit from certain
Canadian tax laws. Some of those companies will
yield as much as 12 to 14 percent a year because
their profits are not taxable at the corporate
level, which means they can pay out all of their
profits to investors. The ones that meet that
requirement are the older ones which were
grandfathered when the Canadian government in
its relentless pursuit of income, changed the
tax laws on the newer oil-income trusts. They
grandfathered the old ones.
You can now safely buy a pick-up truck or an SUV
because the price of gas is down, down, down,
and it probably will be for the next year or so.
Some big families need a big vehicle to haul
their whole family or tow their boat as only a
big vehicle can.
Right now you can buy them cheaply because the
car lots are swamped with them, and the car
companies who are always behind the power curve
will concentrate on building smaller cars, even
though at todayís prices you can afford to own
and drive an SUV or pick-up truck. That will not
always be true, because eventually the price of
gas will be back up. But in the next year, the
price of gas is not a major factor in your
Concentrate on family. Your family and your
posterity will live on. Make them your first
priority. The best gift you can give your
children is to love your spouse and let them see
it. Model the ideal traditional family for them.
Teach your children the old-fashioned values. Go
to church and live your religion, whatever it
Liberal forces want to change the nature and
influence of the family on our children. They
are targeting them very specifically.
In the election in California over gay marriage,
the opponents of Proposition 8 relied heavily on
two big lies:
it is assumed that if you were against gay
marriage that you had to be motivated by bigotry
and hatred. Iím against gay marriage, and I am
not motivated by bigotry or hatred, nor are any
of my children. You might even consider gays to
be sinners, but if Jesus taught us anything, it
is that we are to love sinners.
In the Prop 8 battle in California apocryphal
stories were told of Mormon families who
allegedly rejected sons or daughters and threw
them out of the family if they found they were
gay. First, these are rare exceptional stories
with little basis in truth. If that is what a
Mormon family did, they are not living their
religion. You may disapprove of someoneís
behavior, but that does not affect whether you
should love them and appreciate them. There are
positive things to look for in everyone.
The second big lie was that nothing in a new law
would require the schools to teach
homo-sexuality. Thatís true only as far as
sex-education classes are concerned, but as my
daughter has documented in her new book on the
assault on family, every other department of the
school will be influenced by this legislation,
as pushed by ACLU law suits.
My daughter, Sharon, looked with horror upon a
history textbook that was brought home from
Gilbert High School by her children. It
presented homosexuals in the past in a very
positive light, including pedophilia, and the
ACLU will be ready to launch law suits alleging
discrimination of schools that do not give
homosexual marriage equal billing with
Our concern over homosexual marriage relates to
our children. It may be many years before we see
the impact of that. So there are philosophical
grounds supported by social-science research
which says homosexual marriage is a bad idea,
simply to accommodate a tiny minority of a
population at the expense of a large majority.
So treasure your traditional family. Love your
children. Give them your time and pass your
values on to them as best you can so you will
raise up a righteous posterity under very
This is probably the most important piece of
advice I will ever give you. Donít disregard it
simply because it doesnít have a dollar sign
attached to it.