$13 Trillion, $1200, $220, and Other Important Figures

• Coincidence? National debt tops $13 trillion, gold tops $1,200

• The chart that says gold has only begun its epic bull market

• $220 oil? The military orders that could push oil to the breaking point

• Caffeine, Alzheimer’s disease and the research that could fund your retirement

• Readers hurl “BRIC bats” in the mailbag

   As we sat down to write this morning, the cell phone began vibrating against the desk. Alice Gomstyn from ABCNews.com wanted to know what we thought about the national debt crossing the $13 trillion threshold.

Uh… the same as we thought about it crossing $12 trillion less than six months ago. Not good. (You can read the story here.) But what do we know. We’ve been whistling Dixie on this subject for the better part of our adult lifetime. No one really cares except when these psychological boundaries are crossed… tomorrow, it’ll be business as usual.

   For what it’s worth, the U.S. Treasury’s official reading still puts it at $12,989,095,409,531.09 this morning. It appears to update once a day. USDebtClock.org, on the other hand, clocks the debt in real-time. According to that site, the U.S. government already owes in excess of a billion more than $13 trillion.

If you’ve got time this morning for a few scintillating seconds of financial terror, click here and watch the amount each U.S. citizen is on the hook for rise.

   We couldn’t help but chuckle when we read that Moody’s has issued another one of those tut-tut warnings the rating agencies put out from time to time. It goes something like this: “Uncle Sam needs to get his fiscal house in order, or else we might possibly downgrade his AAA debt sometime far in the future.”

Yeah, whatever. For we’ve grown to trust ye so much.

   Another number commands our attention this morning, too. Gold has zoomed back past $1,200 again overnight. Past $1,210, in fact. And sits at $1,214 as we write.

The Wall Street Journal is in the midst of a three-part series addressing the question of whether gold is in a bubble. The series includes this highly compelling chart:

The blue line is the Nasdaq starting in 1990. The red line is the S&P homebuilding index starting in 1995. And the gold line is gold starting in 2001.

If history rhymes, as Mark Twain said, gold is on its way to a “phase three” mania over the next two years.

As usual, we’re much more confident about the outcome than the timing. So think of it this way: When magazine covers tell you to buy gold and CNBC is talking up junior miners with nothing more than moose pasture for assets, that’s the time to think about selling.

(Byron King has a selection of miners worthy of considering today… before the rush. One has a market cap of just $1.6 billion. And both John Paulson and George Soros own shares. Details here.)

   U.S. stocks opened up 1% in the first half-hour this morning, building on yesterday’s late-day rally. The Dow is comfortably above 10,000 again.

No matter that Spanish banks are still a mess. Nor that North and South Korea are blowing each other kisses across the DMZ. Nor that the U.S. housing market is still languishing. Those were all yesterday’s concerns…

Even our friend Marc Faber, who’ll be joining us again in Vancouver in July, says that in the short term, U.S. stocks are oversold. Et tu, Dr. Faber?

   With the retreat of “risk aversion” from the market this morning, oil has moved back past $70, closing in on $71. And the scenario Mr. King has described for a future of $220 oil is getting closer.

This week, The New York Times reported that Gen. David Petraeus, the top commander in the Middle East, has issued orders expanding the role of Special Operations forces throughout the region.

Those orders aren’t limited to current war zones like Afghanistan and Iraq. In addition, they appear “to authorize specific operations in Iran, most likely to gather intelligence about the country’s nuclear program or identify dissident groups that might be useful for a future military offensive,” says the Times.

It was a small detail in the nation’s largest, if beleaguered, paper, but offers further confirmation of the “new war” Byron says is casting an ever-larger shadow over the world’s leading oil-producing regions. If you haven’t read his special report, it’s worth it to help put these news items in context.

   In another Gulf, on the other side of the planet, but still on Byron’s beat… British Petroleum (BP) is deciding whether to go ahead with its latest attempt to stanch the flow of oil from Deepwater Horizon well. The technique is called a “top kill,” in which heavy drilling fluid is pumped into the well, followed by cement.

“If the well won’t take the kill shot,” Byron says, himself a veteran of the oil patch, “then we might see uncontrolled oil gushing for up to three more months. That’s how long it will take two different rigs to drill ‘relief’ wells to intersect the existing hole and pump it full of cement.”

Meanwhile, “every day, as things unfold,” Byron says, “I ask myself how bad this can get for BP. BP management has stated that the company can weather this crisis. But let’s ask it another way. Is BP too big to fail?

“Right now, BP is paying through the nose. So far, BP has spent over $500 million on response-related costs, just in the first month. This deep-water blowout is unprecedented in so many ways – expensive is just one of them. I’ve seen numbers like $10 billion, eventually, just for the out-of-pocket costs for well control and oil spill abatement. Truth is, nobody knows, and nobody will know for many years.

“Right now, the dividend yield for BP is 7.4%. That’s nice, but the high return probably includes the risk that the BP board will – sooner or later – slash the dividend. It would be unseemly for BP to be paying large dividends at the same time that it’s also diverting funds to well control and cleanup costs, not to mention handling damage claims.

“The dividend is no longer safe, in my view.” BP may well be a contrarian’s buy in the near future… but not yet.

   “I’m not a physician,” Patrick Cox prefaces our next item, but “I’ve got advice from one of the leading scientists not only regarding Alzheimer’s, but aging in general.”

The advice, in brief, is something we knew would eventually vindicate years of a bad habit: Drink coffee. Yes!

There’s “increasing evidence that coffee and caffeine are of significant benefit in slowing and reducing the impact of Alzheimer’s disease,” according to the head of the American Aging Association and editor of the Journal of Alzheimer’s Disease.

“While the exact pathways that coffee or caffeine impact are still under investigation, several factors appear to play a role in this protective effect, including coffee’s anti-oxidative actions, as well as caffeine’s ability to protect the blood-brain barrier. Based on this, including coffee as part of a balanced diet may be beneficial.”

Oh, yeah. In 2008, we saw a similar pronouncement for the fermented grape. Now we’re good to go from dusk ’til dawn.

The gentleman behind the research also serves on the board of a tiny company on the verge of a huge breakthrough in fighting Alzheimer’s. This latter fact is what has drawn Patrick’s attention, of course. To learn more, check out Patrick’s latest wealth revelation – see his report here.

   “You, obviously, do not understand the technical abilities of U.S. governments,” writes a reader in response to Byron King’s remarks to The Washington Post yesterday about the oil spill. “Obama will just stuff the outlet with dollar bills.”

The 5: Heh. And take them out of circulation?! No way!

   “We just noticed the timing of the 200-person U.S. delegation lead by Hillary and Tim to China this week,” writes another, with a clever sparkle in their eye. “Were you Bill, Chris and Joel their ‘advance team’… or are they the ‘cleanup crew,’ dealing with the aftermath of your visit?”

The 5: Well, we weren’t their advance crew. And we often need cleaning up after we visit any foreign country… including southeast Baltimore… so we’ll leave the rest to your imagination.

   “After spending a few days in the (metaphorical) woods,” writes a third, “I came back to an inbox full of goodies from Agora. One of the things that stands out when reading so many publications in a short time is how excited, how supportive your very fine analysts are of the BRIC countries, most especially China – obviously, as that is where you all are at the moment.

“And by reading so much commentary in said short period of time, a bit of an anomaly begins to appear, namely that these countries that so excite you are led by ‘center-left’ politicians.

“Indeed, all four BRIC countries are themselves “center-left,” to say the least. Yet when your commentaries turn to President Obama, suddenly his “center-left-ness” is cause for scorn and approbation. Cognitive dissonance?”

The 5: You could only derive “cognitive dissonance” from our collection of writings if you thought we gave a rat’s ass about what politicians in any country think.

   “I noted,” writes our last reader with a much more serious question, “that you are still touting First Federal 1/10th-ounce First Strike Panda coins with your link to their ad. I bought 10 of them. I’m not terribly unhappy with my purchase. I won’t send them back.

“That said, following is the wording of the ad (verbatim):

“Well, actually, the coins come with a small certificate from Mr. Bruyer stating that the coins are genuine. Not exactly the same thing. Were you aware of this when you gave these coins your wholehearted blessing?

“I queried them about a copy of the certificate from the China Mint and its answer was, Sorry, the certificate included is the only one you get. Not very satisfying, but at least somewhat honest. N.J. Bruyer – ever hear the words ‘never again’?

“Best regards, and I read The 5 Min. Forecast daily. This matter will not hinder that.”

The 5: It works exactly as the ad states. The China Mint sent a letter of certification to PCGS, a leading independent coin-grading agency. PCGS then certified the coin as being a First Strike. PCGS wouldn’t do so if it didn’t have the letter of authenticity from the China Mint.

First Federal Coin stands behind the certification given by PCGS. The certificate you receive from First Federal with your purchase is acknowledgment of the First Strike designation.

Beyond that, First Federal has a 30-day return policy. As we wrote back in February, “If you need to ‘see it to believe it,’ the sale is guaranteed. Your investment is protected. And all the graders and merchants involved are international companies with sterling reputations and certifications.”

A few coins are still available. But the window of exclusivity for Agora Financial readers closed last night. Now that the general public can buy, there’s no telling how long they’ll last. Here’s where you can get yours. Or if you prefer to hear from Nick and the grading agencies, but missed our Web broadcast with them, you can catch the archived edition here.

Regards,

Addison Wiggin
The 5 Min. Forecast

P.S.: “Sure, the companies will remain profitable,” our Chris Mayer tells Myra Saefong in this MarketWatch.com piece on the super tax being levied on Australian miners, “but the money they have to reinvest is less. The return on mining projects is lowered. The companies and their assets are less valuable.

“In a world where competition is keen all over the place, putting a big tax on mining is a dumb thing to do.”

The super tax is just one more feature of the coming Assault on Enterprise. The center-left plan to exact retribution from any firm or individual who’s benefited from the risk-reward ratio that drives entrepreneurial endeavors. In the common vernacular, they plan to “eat the rich.”

“Yes, we know the empire is in decline,” we paraphrase a friend of ours who hosts a dinner club called the Empire Salon in Washington, D.C. “We just want to talk about it while it’s happening.” In Vancouver this year, we plan to “talk about” the assault on enterprise and how it’s going to impact the business environment for natural resources, energy, banking, consulting, wealth management and, most importantly, your investment strategy over the years to come.