SWISS TO DEVALUE THE SWISS
Last Tuesday's announcement by the Swiss to devalue the Swiss franc and put a cap on its value has huge implications for gold. The franc was one of the only currencies seen as a safe haven in times of trouble, along with the Japanese yen and U.S. dollar. However, this devaluation (nearly 20% from its top a few weeks ago) has now shown that the only true safe haven is gold.

Gold cannot be printed and devalued like paper currencies. For example, if you had held Swiss francs you would have lost 20% against the U.S. dollar when the devaluation happened. However, if you owned gold, it climbed over 22% in Swiss franc terms when the devaluation happened! It couldn't be clearer: You must own gold if you are worried about currency devaluation.

The U.S. and European Union are printing huge sums of money to bail out their failed economies. If you take a look at gold in U.S. dollar and euro terms, gold is beating both hands-down. The HUI-to-gold ratio remains at historical levels so, although gold stocks have outperformed bullion over the past month, gold stocks still remain cheap. I think we have just begun a rip-roaring run for these stocks.

We must remember that at $1,900 an ounce gold is pretty overbought. So, a short-term correction in bullion is not out of the question. But don't believe all the talking heads calling gold a bubble. This is nowhere close to the truth. Gold has not run nearly as much as tech stocks, equities, or Japanese stocks at their bubble peaks. Those markets went up thousands of percent whereas gold is only up about 600 percent from its bottom. We still have a lot of room to the upside.

WESTPORT INNOVATIONS (WPRT)
Last Wednesday, Westport Innovations (WPRT) signed a landmark agreement with oil giant Shell. Westport is the largest manufacturer of natural gas engines. It has partnerships with some of the largest engine makers in the world, including Cummins (U.S.), Weichai (China), Hyundai (Korea), and Volvo (Europe). Now, Shell is working with Westport to market liquefied natural gas (LNG) vehicles in North America.

Under the terms of the agreement, both companies plan to develop industry standards for LNG as a new transportation fuel. They will provide proposals to their customers on how they can save money through LNG technologies.

Shell is the first major oil company to back LNG as a transportation fuel. Over the past few months, natural gas giants Encana and Chesapeake have made big investments in building out the LNG vehicle infrastructure. Once the infrastructure is in place, millions of heavy-duty trucks in the U.S. will switch their engines over from diesel to natural gas. In fact, UPS, Ryder, and Waste Management have made the switch to natural gas engines for some of their fleets. LNG as a transportation fuel would significantly knock years – if not decades – off natural gas supply estimates. Westport is just one company that will be a huge beneficiary.

AMERICAN JOBS ACT
The real meat of this $447 billion proposal will see more action on the campaign trail than in the Capitol, setting up Obama's still-unwritten "American Jobs Act" as the focal point of his argument that it is congressional Republicans, not the administration's policies, that are hurting the nation's beleaguered economy.

The stakes are obvious for Obama - his re-election is on the line. But they are just as high for Republican members of Congress who will be on the hook to defend their positions if they stand in his way. Democrats said they liked Obama's fight on Thursday night, and they are about to get more of it. Republicans were careful not to give Obama the ability to cast them as reflexive "naysayers." The President went to Cantor's hometown of Richmond and will be in House Speaker John Boehner's home state of Ohio. He made crystal clear in the speech that he plans to call out Republicans who oppose him all over the country.

Indeed, Obama and his team did little to suggest that he planned to roll up his sleeves and negotiate with Congress - a strategy that failed to produce the "grand bargain" he had sought in conjunction with a debt-limit increase over the summer. For now, Republicans say there's no chance of the whole bill making it to Obama's desk. "If it's all wrapped in one package, that's not going to see the light of day," said Rep. Lee Terry (R-Neb.), who applauded when Obama talked about building American infrastructure rather than that of foreign countries. Asked whether he was concerned about the prospect of the Democratic mayor of Omaha pressuring him publicly, Terry replied: "Fortunately, our mayor just squeaked out a recall [election]."

Even some Democrats also said they would wait to see the fine print before signing on. "I will spend the coming days evaluating at this proposal more closely, and will work hard with my Democratic and Republican colleagues to pass a commonsense agenda that creates jobs, restores confidence and rebuilds our great nation – without adding to our exploding debts and deficits," Sen. Joe Manchin (D-W.Va.) said. "This nation cannot afford to take on one more dollar of debt, and I will not support any plan that adds to our crushing debt."

REPUBLICAN FRONTRUNNER
Under a withering barrage of tough questions that left Texas Gov. Rick Perry feeling "like the piñata at the party," the new Republican frontrunner received a bracing welcome to the GOP 2012 debate arena and turned in a surprisingly strong performance that most commentators agreed probably solidified his standing as the GOP front-runner. "Rick Perry did well in the sense that he held his own, proved to be a little more thoughtful than the press had portrayed him," remarked conservative columnist and InsiderAdvantage CEO Matt Towery, "and really scored big on the death penalty at the end."

Perhaps the sharpest exchange of the night came over Perry's description of Social Security in a recent book as an "illegal Ponzi scheme. Former Massachusetts Gov. Mitt Romney moved in to criticize Perry for saying Social Security is a failure. Addressing Perry directly, Romney said: "You can't say that to tens of millions of Americans who live on Social Security, and those who have lived on it. The governor says, ‘Look, states ought to be able to opt out of Social Security.' Our nominee has to be someone who isn't committed to abolishing Social Security, but is committed to saving Social Security. We have always had at the heart of our party a recognition that we want to care for those in need. And our seniors have the need of Social Security."

Pundits generally praised the performances of former House Speaker Newt Gingrich, who again took on the media for trying to sow division among GOP candidates, and Rep. Michele Bachmann, for presenting herself as poised and presidential.

WHY DEMOCRACIES CHOOSE BAD POLICIES
Almost 80% of lawmakers might need to crack open an economics textbook before the congressional recess ends, a new study last Tuesday suggests. The vast majority of members lack an academic background in business or economics, according to a study by the Employment Policies Institute, a nonprofit group that takes a conservative stand on fiscal issues. Only 13.7 percent majored in business or accounting, and 8.4% have an economics degree. "How many members of Congress have an academic background that provided them with a basic understanding how the economy works? The answer, it turns out, is not many," the report concluded.

On the Senate budget committee, five out of 23 members - about 20 percent - have a business/accounting or economics background. And on the House side, eight out of 37 members, or just over 20 percent, hold academic degrees in business or economics fields. The most popular majors among members were government and the humanities, with over half - 55.7 percent - bringing home a degree in those fields. And there are a number of science students in the halls of Congress, with 11.5 percent majoring in science or technology-related fields.

While typically using the undergraduate degree, EPI wrote it classified some members according to their advanced degree if it applied to the study. The study excluded 24 members they did not find a specific degree subject for, and also did not count non-voting representatives.

THE REVERSE MERGER REPORT
A recent issue of The Reverse Merger Report provides a great deal of detail about the market for reverse mergers in the year just passed. Bottom line: pretty much everything was up. Number of deals (246 deals, a 25% increase), number of Chinese deals (81 deals, up 76%, still about one third of all reverse mergers), number of deals including financings (66, about 20% above last year but still only about 26% of all deals) and average size of financing ($5 million, double that of 2009). But while the numbers are good, especially the total deal numbers, let's remember we're comparing against 2009 which was a scary watershed low for so much that is Wall Street.

And the trends are not all good. The number of deals including financings in the second half of the year was half of that in the first half of 2010. What hit in the second half of the year? Mainly, the short selling and class action cases against Chinese companies that started around mid-year. One fund manager said in the RMR that there is now a cloud over the China space. Most think this is not a long term but a short-term issue, as we have discussed ad nauseum. No question the China deals are moving slower, investors are being more cautious and the SEC is applying more scrutiny. The cautious thing is not necessarily bad. We are seeing a "flight to quality" in terms of accounting, law and other advisors, and BGS has no objection to this.

As everyone looks for the "next China," the RMR reports that there was no increase in the number of non-China foreign deals (32 in 2010 vs. 31 in 2009). But Canada dominated with 10 deals, so only 22 deals other than China and Canada last year. So what's next?? Watch this space.