So how should we invest in this market? More on this later.

While I doubt the US will default on its obligations, the mere thought of it is sending chills down every investor's spine. That's because if the US defaults on its debt obligations, the country's economy could contract by 5 percent and stocks could fall by 30 percent. At least that's what Credit Suisse predicts. Not pretty.

We all know the debt ceiling limitation is a political game between the Republicans and the Democrats. The Republicans want to make Obama look bad so he won't get another term. Obama wants to look good, so he gets another term. This reckless battle between the two parties is killing us. Combine that with the summer doldrums and we have a weakened market with no buy-side support.

But as much fear as there is in the market, there are also much bigger opportunities that the retail public is passing up.

I speak with some of the nation's top brokers, fund managers, and deal makers on a consistent basis because I believe that's how you get an edge in the market. All of them are doing deals right now. All of them behind closed doors.

Meanwhile, the retail market is sleeping.

The phones of my brokers haven't stopped ringing - but they're not phone calls from retail clients - those are dead. They're phone calls from deal makers and institutions. That means deals are being done and some hot issues are being worked on in anticipation of the next rally.

I said a few weeks ago that the debt debate will be resolved in the eleventh hour, like it always has (see The Next Big Wave). I still believe that. I am not going to sit here and pretend I can accurately predict politics or what's going to happen around the world. But I am also not going to sit here and be a victim of a political game.

Regardless of what happens in the short term and regardless of what happens during this debt debate, one thing is for certain in my books: Erosion of currencies and fiat money.

Over time, there has been an erosion of currencies and fiat money. It used to be that the Dollar and gold were natively correlated but now what we're seeing a negative correlation, whereby gold is rising over time regardless of what the Dollar is doing.

Generally speaking, we are in a secular bull market for gold and that is typified by gold rising against all currencies, against all fiat money. I liked gold at $800; I still like gold at $1600. Certainly what has been going on in Washington has not given any confidence to fiat money. But this is happening around the world. Not just in the US.

I could easily see gold go to $2000 or more, who knows. At the end of the day, it's all a confidence game. If the global economy continues to waddle along and we see positive growth and nothing cataclysmic happens, we'll see gold slowly trend higher and we'll see stronger oil and commodity prices.

But if we get another problem, like a Lehman brothers scenario or another serious credit contraction, (which is more than likely to happen in the long term because of a major de-leveraging in the global monetary system), we're going to see gold even higher.

Debts have grown to the point where they cannot be paid. Until we see debt levels contained to manageable levels, gold will continue its climb. This could take a few years, it could take more. If we should have a deflationary event, like Lehman brothers, then we look at the real price of gold. For example, what does an ounce of gold buy you...How much oil can I buy with an ounce of gold?

Just take a look at gold prices and what it has done since the Lehman brothers crash. Gold has more than doubled in value, it has become collateral at major banks (see The Banks Are in - Are You?), gold ETF's are exploding in demand, and many states in the US are beginning to adopt gold as a currency (see The Greatest War in History). More importantly, gold continues to reach new record highs - over and over again.

Many seem to think that once we reach an agreement on the debt ceiling, gold and silver will pull back some of its gains. While this may be true, I don't think the impact will be enough to justify worrying about a major decline in gold prices. Even with gold prices anywhere above $1500, or even $1400, there is a lot of money to be made. That's because even at those levels, the miners are extremely profitable.

Of course, there is still a major disconnect between gold prices and the price of gold miners. This is one question that I get asked a lot.

People don't understand gold miners. While it is riskier to own a gold mining stock than to own gold itself, the leverage far outweighs the risk in my opinion - especially at current valuations.

The real price of gold has risen dramatically which also means the profits of the major mining companies are rising very dramatically. While I like the big producers and own them in my portfolio, I am still much more bullish on the juniors or the new producing gold and silver mining companies.

Let me tell you why. The guys at the top, the Barricks, the Goldcorps and the Kinross' are having a hard time replacing the gold they produce every year. In order to keep shareholders happy and attract new investors, they're now having to pay out dividends for the first time. That's the problem with the majors. All shareholders care about is the next quarter. All they care about is increasing production. But when you increase production, you wear out your mine life and quickly need to find other sources to replace it. As a result, they have to go down the food chain and look for smaller companies to takeover.

That's where the new producers and juniors have an advantage.

The new producers and the juniors are the ones that are finding lots of new gold in the ground. That's where I think the real money is going to be made because the senior mining companies have to pay through their nose to add to their reserves. They have to pay five, six, and sometimes eight hundred dollars an ounce in the ground to buy out some of these companies. When you factor in the costs of the acquisition and the costs to take that gold out of the ground, there really isn't a lot of profits left for the big guys.

When you consider that many of the juniors are currently being valued at less than $50/oz of gold in the ground, the potential for gains can be astronomical. Even at a $500/oz buyout price, that's ten times your return on investment with $50/oz valuations. But that doesn't mean every company with gold in the ground is going to be bought out.

The companies that will be bought out are those with great projects in mine-friendly jurisdictions. They are the companies that are near, or along strike, of other current producing mines and deposits. They are the ones with large unproduced resources. Even if they don't get bought out, the possible fact that they could be considered as a takeover target could send shares through the roof.