.

In the U.S., the Dow is down 4% , the Nasdaq about 6%, and the S&P 500 about 5% in a week. European stocks posted their biggest drop since May 2003, and the FTSE 100 in the UK had its biggest 2 day loss in 3 years. On the other hand, in Asia, as of May 11th, the HK Hang Seng index was up 22%, the South Korean index up 55%, the Australian markets up 31%, and China was up 50% before these markets also corrected with the global market correction in the past 7 days.

In addition, the U.S. is allocating $2 billion very soon to shore up its borders, major conflict still is going on in Iraq and Afghanistan, and Venezuela has increased the top royalty rates on oil to 33% from 16.67% after raising this rate from just 1% in October, 2004. In Bolivia, Evo Morales has followed his friend Chavez’s lead, and nationalized his country’s oil and natural gas resources. In Mexico, political unrest, according to subcomandante Marcos, is the worst since 1994 as it nears its next Presidential election. In Iran, the threat of nuclear confrontation with Israel and the United States looms, and returning to the U.S., record trade deficits that won’t turn around any time soon, a falling dollar, and another bad expected hurricane season (due to global warming) is what lies ahead.

So What is an Investor to Do?

Well, sad to say, but I don’t believe the worst is over. The temporary bounce we received mid-week was not the bounce I believe that has yet to come. I still believe that we will see a sharp, steep bounce sometime soon in response to the oversold market. But following that, I still believe that we may see the worst to come. Why? Just read the paragraph above. So in response, I have been shifting significant portions of my client’s into several areas for protection. If you had remained fully invested in these markets before they started tanking I would not recommend panicking and selling out now.

The biggest mistake individual investors make is panicking on market corrections and then buying back in after the market bounces back significantly. That’s the worst thing you could do. Sell low and buy high, but yet millions of investors will make that mistake in response to this weeks actions. But yet if you are mainly invested in Europe and the U.S., you need to rebalance your portfolio now because you will be punished for such short sightedness in the remainder of 2006. In fact, if you liquidated a good deal of assets before the plunge, I would look to buy partial (but not full) positions in some stocks now as a good deal of stocks are on sale right now. It pays to be brave when others are afraid (I think Warren Buffet said that).

Recently a new client transferred over a large portfolio and I immediately liquidated as much as I could, luckily liquidating before the second big drop in the global markets this week. His previous advisor did not own a single stock on the Brazilian, Canadian, London, Australian, Chinese, Mexican stock market. Not even one ADR either. Every single stock he owned was listed on the NYSE or S&P 500. These are the types of portfolios that will get punished over the remainder of the year. I recently read an article about a big producer at another American firm that recently shifted 70% of all his client’s assets into China, but all through Chinese mutual funds. I hate mutual funds, and the thought of owning mutual funds in emerging markets (but that’s an article for another time). People should always own stocks, not mutual funds. Mutual funds are the lazy way out and you’ll get punished for being lazy. It’s just not the way to benefit from these rapid growth markets.

So where should your money go? Due to all the political unrest, I’m looking at the defense sector. Due to continued globalization and the threat of new epidemics, I’m also looking at the healthcare and pharmaceutical sector. And due to all the geopolitical unrest, I’m looking at precious metals. Geographically, I’m looking for continuing opportunities in China of course, as well as some in Brazil, Australia, the U.K. and Canada. And the only U.S. companies I’d invest in other than the defense sector would be companies that have very wide global expansion initiatives. But I can’t discuss all of these ideas, so I’ll discuss one of my favorites –Precious metals.

PRECIOUS METALS

I’m not really sure but large investment firms by and large seem to ignore year after year, precious metals such as gold, silver, palladium, and others. However, in turbulent times, this asset class is one of the most valuable.

It’s not that the news doesn’t report on it. In fact, every night, in financial news reports, the closing price of commodities including gold is reported. However, at the end of the day, very few people ever seem to benefit from investing in the stocks (and not the commodities themselves) that benefit the most during precious metal bull markets.

LESSON #1: The average person does not understand the upside of investing in metals because it has never properly been explained to them

Many myths surround metals that cloud the truth about their value as an investment vehicle. Several of the most widespread myths include the following:

(1)Gold, silver and metals are risky speculative investments.

(2)The best way to buy gold and silver is to physically own the commodity.

(3)Gold is only an investment accessible to the extremely rich.

The definition of speculation according to Webster is the following: “the assumption of unusual business risk in hopes of obtaining commensurate gain”. Speculation is one of the most incorrectly used terms in investing. Investors in general stay away from trying to profit from bull markets in precious metals because of its speculative stigma. However, what is never explained to most investors is that the great majority of risk can be mitigated by employing intelligent analysis and intelligent buying and selling strategies.

Therefore, these investment opportunities should not be rated speculative but more accurately explained as moderate risk, high return opportunities. If you don’t perform intelligent analysis and intelligent buying and selling strategies, then investing in large company stocks, typically described as the “safest” of all investments, can become highly speculative as well. Large companies such as energy conglomerate Enron went belly up and investors lost every penny they had invested in this company. Stocks and bonds invested in “safe” companies such as Ford and Hyundai became risky this year when accounting scandals were uncovered that placed these company’s credit ratings on shaky ground.

Bonds are always described by financial consultants as “safe” investments and financial consultants will buy bonds for the overwhelming majority of their clients if they are over 60 years of age. But right now, bonds are probably one of the riskiest investments you could own. Bond prices go down as interest rates climb higher. Most likely interest rates will head higher from here, so that means the face value of bonds will decline. Bond prices are linked to U.S. dollars. The dollar is incredibly weak now and will possibly even become significantly weaker. And then there is credit risk. Accounting scandals are uncovered everyday.

And in case you’ve forgotten the “high quality” accompanies accused and investigated for fraudulent activity, in 2001 and 2002 alone, these companies included Adelphia, AOL Time Warner, Arthur Anderson, Bristol-Myers Squibb, Citigroup, ImClone, General Electric, JP Morgan, Lucent, Parmalat, Freddie Mac, Duke Energy, Dynergy, Enron, Global Crossing, Halliburton, K-Mart, Merck, Qwest Communications, Reliant Energy, Tyco, Worldcom, and Xerox to name a few. All were accused of falsifying their financials to make revenu