Dear Fellow Investor,

My name is Sean Rashid.

I'm not a stock analyst. I'm not a newsletter editor. I'm not an investment professional of any kind.

I'm a private investor, like you.

And just like you... over the years, I've subscribed to a number of investment newsletters and trading advisories... because I want to protect the value of my investments... to buy companies that will gain greatly and rapidly in value with as little risk as possible. Again, just like you.

But now, I'm worried about the future—the future of the markets, the future of the American economy and, hence, the future of my investments.

For months now the Dow, the S&P, and the Nasdaq have been swinging back and forth between triple-digit gains and knee-weakening losses—twice, three times a week!

Market volatility of course has its advantages, particularly for seasoned and aggressive traders—but not so much for retirees or those planning for and approaching retirement.

If the stock market today were a swimming beach, there'd be red flags posted up and down its entire length... warning swimmers not to go into the water: Rip Tides Present.

Of course, the young, the inexperienced, the glory seekers, the treasure hunters, they'll ignore the dangers, the inherent market risks—and gleefully jump in. And many of them will drown.

Well, I'm not particularly young. I'm not a pirate. Nor am I a "damn the torpedoes" glory seeker.

I'm also... Not an Idiot!

I can read. And so can you...

According to The Wall Street Journal... the first-quarter earnings for companies in the Standard & Poor's 500-stock index dropped 26% compared with the same period last year—the third consecutive quarter of falling profits, something not seen in almost seven years!

According to the American Association of Individual Investors (AAII)... 68.64% of its members are bearish about the market— surging 15% from its last most recent reading.

Right off the bat... does this sound like there'll be a bull market—a sustainable rise in share prices—anytime soon?

Okay, put on your seat-belts... let's continue...

We’ve now had three consecutive quarters of negative corporate profit growth: the 3rd and 4th quarters of 2007 and the 1st quarter of 2008. Note: the last time we had just two consecutive quarters, the market fell 16%.

Adding Insult to Injury—Now Comes the FALL!

Even if the economy was in great shape, and everything was coming up roses... consider the "seasonal effect" of being in the market right now...

...Had you invested $10,000 in the S&P 500 every May 1st starting in 1950 and then sold everything on October 31 of the same year... your initial position would only be worth $10,026 today.

Put another way... by investing only from May through October, a $10,000 stake invested in 1950 would have made just $26 in 57 years.

In contrast... $10,000 invested in the S&P 500 on November 1st and sold on April 30th ... would have grown to $372,890.

Are you still thinking this is a good time to be in the water...?

The American Consumer is Bailing—Heading
for Higher Ground!

All told, 70% of our economy (GDP) comes from consumer spending. And if consumer spending dries up... the economy will shrink, wither and die—and the stock market and your investments with it.

The writing is already on the wall...

•	The U.S. Department of Commerce reports... real consumer spending increased at just a 1% annual rate in the first quarter—its slowest growth in seven years... and spending on durable goods... decreased 6.2%.
•	According to the University of Michigan Confidence Survey... US consumer confidence is at a 28 year low.
•	According to the AARP... 27% of American workers aged 45 and older are putting their retirement on hold.
•	The U.S. Labor Department reported... the U.S. unemployment rate jumped to 5.5% in May—the biggest increase in seasonally adjusted unemployment in 33 years.
•	Non-farm payrolls fell by 49,000, the fifth consecutive decrease, and total unemployment rose to 8.5 million—one million more Americans than this time last year.
•	And... food stamps usage has soared. In Chicago, 1.3 million people are now using food stamps.

Flushing Us Deeper and Deeper Down the Drain
More Bad News about the Housing Crisis

Yes, the devastating impact the housing bust has had on the economy and the stock market is old news—but did you know, rather than getting better—as some pundits would have you believe—it's actually getting worse... a lot worse...

And don’t forget... the success of the American economy... and the floor beneath our own comfort and prosperity.... has been due in very large part to the real estate sector and all its supporting industries. As the real estate sector goes... so goes you and I, and our investments...

According to The Wall Street Journal... mortgage lenders and investors owned about 660,000 foreclosed homes in April... up from 493,000 in January and 231,000 in January 2007.

According to the Mortgage Bankers Association... more homeowners headed into foreclosure in the first three months of 2008 than at anytime since 1979.

•	Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 in May of last year.
•	One in every 483 U.S. households received a foreclosure filing in May.
•	Nationwide, one out of every four sales between January and March was a distress sale—a sale forced upon the owner, typically because he's no longer able to afford his mortgage payments.
•	Residential investments fell at an annual rate of 25.5%—the fastest drop since late 1981—and have now declined for 9 straight quarters.
•	In April, 692,000 single-family homes were built—falling 42%—compared to the same period a year ago—the lowest level since the last serious recession of 1991.
•	Private residential housing construction dropped by 2.3% in May—the 26th consecutive monthly decline.
•	Builders slashed spending on housing projects by 25.5%, on an annualized basis, in the first quarter—the most in 27 years!

Does this sound like the economy is on the mend—that your investments are safe and that the financial markets will be rebounding and heading higher?

The Ultimate Slap: Our Government in Denial...
Suffering from Delusions of Grandeur

He'll Tell You... "...Expect a recession that's worse than any we've seen in the last 25 years." -- Jamie Dimon, CEO, JP Morgan Chase

Never mind that we're already in a recession (despite what some strict literalist economists might say)... the biggest threat to our current and future prosperity—and to our investments right now—is INFLATION!

But rather than confronting inflation, the government puts lipstick on that overstuffed pig.

The Government's Favorite Recipe for Cooked Books

The Fed has altered its measure of inflation twice in the last 30 years... and each time it chose to make a purse out of a sow's ear.

Based on its pre-1983 measure— the measure the Fed used before it started altering reality—inflation today would be close to 12%.

Just look at the chart below:

Different Ways of Measuring Inflation

Yet, for the Fed to announce what everyone already knows—that the way it measures inflation is irresponsible, stupid and idiotic—would mean admitting it’s been cooking the books—manipulating economic data—and conspiring to commit outright fraud!

Still More Smoke and Mirror Shenanigans in Washington...

The 100% Government-backed Federal Home Loan Mortgage Corporation (Freddie Mac), the nation's second largest mortgage originator, recently announced a lower than expected 1st quarter loss of $151 million... which, characteristically, pushed its share price up more than 9%.

But... Freddie didn't beat estimates by producing real profits—it did it through creative accounting—it cooked the books!

Had it not, Freddie would've had to report a 1st quarter loss of over $1.7 billion.

Amazingly... Freddie actually admitted it was cooking the books!

Here's an excerpt form a recent conference call it held:

Analyst: There is a headline out there that you have level 3 assets of $157 billion. I was just wondering, is that true and is that related at all to the markups of the 1.2 billion gain?

Freddie Mac: No, it is not. We made a determination in the first quarter that given how widely the pricing we were getting on the ABS (asset-backed securities) portfolio that it no longer made sense to leave it in level two. So we essentially moved the entire ABS portfolio into level three.

Now, if you're not familiar with US accounting principles, financial firms break assets into three categories: Level 1, Level 2, and Level 3.

Level 1 assets are extremely liquid and thus are priced by the market, e.g., stocks, bonds, etc.

Level 2 assets are slightly illiquid, but still have regular market pricing, e.g., municipal bonds.

Level 3 assets are so illiquid they have no market pricing and thus are valued using the firm’s own models, whatever they may be.

Put another way... Level 3 offers the greatest potential for accounting fraud. There is no oversight of these assets. The company can simply value them at whatever it pleases.

That's why Freddie Mac moved its entire asset-backed security portfolio to Level 3.

Its reasoning: the pricing the market was giving these securities varied too much. In other words... when the market was responsible for figuring out how much these assets were worth, the price fluctuated dramatically, providing the potential for major losses. So Freddie moved these assets to Level 3, where the market no longer had any say in their value.

It's an accounting hoax—one that the grand hoaxer and scammer, Charles "Ponzi" Bianchi (the developer of the "Ponzi Scheme"), would be proud of.

And yet, despite the government's pre-meditated distortions... its skewed view of right and wrong... and its denial of reality...

No One in their Right Mind will Deny the Hurt You and I
are Feeling

USA Today reports that food inflation is the highest it's been in almost two decades—driven by bad weather... growing food demand in developing countries... surging fuel prices... and the increasing use of food crops to produce biofuels.

Even Bill Gross of PIMCO, manager of the world's largest bond fund, says inflation is now a real threat to the U.S. economy, and that government statistics are "not reflecting reality at the checkout counter."

Indeed, go to the supermarket and see for yourself... this year alone...

•	The price of eggs is up around 28%.
•	The price of corn is up around 65%.
•	The price of bananas is up around 21%.
•	The price of a 2-liter bottle of soda is up around 10% to $1.33.
•	The price of a 16-ounce bag of potato chips is up around 10% to $3.89.

And how about the price of gasoline...

The Commodity Bubble:
Endless Cycles of Price Manipulation
at the Gas Pump and Beyond

Did you know... hedge funds now have in their portfolios and under their control more than $2.8 TRILLION... and every single one of those dollars wants to be where the big returns are—which is in commodities. And, yes, oil is a commodity.

So, hedge funds are pilling into the commodity futures markets in an attempt to hedge against further inflation, causing a process that feeds on itself over and over again.

More hedging pushes prices up... which calls for more hedging... which pushes prices up higher still...

And that's why you and I are paying over $4 at the pump for a gallon of unleaded—and will probably pay $6 or more by the end of the year—that and the fact that a new oil refinery hasn't been built in the U.S. in the last 30 years.

So even if oil was flowing... and flowing cheaply... we couldn't refine it fast enough to keep up with demand.

No End in Sight—It just Gets Worse and Worse...

As reported in The Wall Street Journal, the average consumer expects prices to rise 5.2% in the next 12 months, the highest expected rise since 1982.

The Economist reports... consumer confidence hit a 16-year low on May 27th—and also noted that Americans haven't been this worried about the future since 1978. Plus, a record number of Americans now expect their incomes to fall.

A poll of 1,002 adults age 45 and over published in the June 2008 AARP Bulletin stated that:

•	69% found it more difficult to pay for essential items (e.g., food, gas, medicine).
•	57% found it more difficult to pay for utilities.
•	52% postponed plans to travel.
•	52% postponed a major purchase.
•	67% reduced the number of times they eat out.
•	67% reduced entertainment spending.
•	26% prematurely withdrew funds from their retirement plans and other investments.

And since, as already mentioned, 70% of GDP is dependant on Americans spending money—which they're not doing in ever increasing numbers—American businesses will suffer... as will the American economy... as will our investments.

In April...

•	A record 80% of retailers missed estimates.
•	The UBS-International Council of Shopping Centers’ sales tally posted a decline of 2.3%, the biggest drop since the index started tracking data.
•	Wal-Mart, retail's 800 lbs. gorilla, posted its biggest monthly decline in 28 years!

And Guess What Happens to the Stock Market
in a Presidential Election Year...

In the fourth year of a presidential cycle, where you have a lame-duck president, the S&P 500 typically underperforms—10% below its normal long-term average—5.2%, inflation-adjusted.

And... the first year of a new presidential term is also unpleasant—underperforming by about 3%.

But... if the party in power changes, in this case, from Republican to Democrat, the first year tends to under perform by 8%.

Not to mention... Barack Obama says he's absolutely committed to almost doubling the capital gains rate—something he will easily accomplish with a Democrat Congress.

So in the coming months, when investors actually realize that Obama will raise the cap gains rate—there'll be a stampede of asset sales—as investors rush to take their profits—the likes of which we haven't seen in a generation—plunging the market to unimaginable lows.

Obama also makes no bones about his plans to go on a tax rampage, too.

Not only will he increase the capital-gains tax rate from 15% to as much as 28%, he wants to allow the 2001 and 2003 Bush tax cuts to expire in 2010, which will effectively raise taxes on Americans by Tens of Billions of Dollars.

He also wants to do away with the $102,000 FICA payroll tax cap... which means anyone making over $102,000 would pay an additional 7% in taxes on earned income.

So when you take all of the above, or just half of the above, into account—no reasonable, rational, clear-thinking human being can possibly conclude that going long in the stock market right now is a bright idea.

And that's why Graham Summers advises all conservative investors, who cannot handle a great deal of risk, or even a little risk, to...

SELL, SELL, SELL!
Get Out of the Market—Go into Cash!

To quote Graham Summers, "We're plunging head-first into one of the most disastrous, high-inflation bear markets in memory. All the major indexes will crash though support levels like bullets through paper come the fourth quarter if not sooner."

And even for the more intrepid investor, he recommends shifting all “uncertain” positions into cash.

As he further states, "Watching a speculative position fall only brings misery. When an investment is based on just hope alone, there isn’t a whole lot to fall back on when it turns against you."

On the other hand, Graham says... "If your analysis is sound, and can stomach your position losing 15-20% of its value—you might then consider averaging down, increasing your position, and thereby lowering your average buy-in price."