An Open Letter to the Victims of Bernie Madoff

Dear Bernie Madoff Victims,

I see that $2.48 billion in total recovered funds are in the mail to you.

Checks ranging from $1,784 to $526.9 million were mailed this week to 1,230 of you, according to trustee Irving Picard. The average payout is $2.02 million.

I am writing to you about another scam you may fall for and where you may put the money you are about to recieve. But, this time there will be no chance for recovery of lost funds.

You see, I would imagine that after the Madoff experience, you will probably want to act as conservatively as possible with your money. Many advisers will tell you to put your money into long-term Treasury securities. Many people are doing this, but it is a trap.

Money is pouring into Treasury securities and yet there is little yield. Further, many sophisticated investors are warning that the government has nowhere near the money to pay the outstanding debt as it comes due (given escalating payouts for social security and medicare, coupled with ever climbing government overall spending.)

The former Treasury insider Pippa Malmgren is warning that almost all governments will have to default on their debt.

Don't get caught up in this. It's going to turn into a much bigger scam than Madoff's. It will hurt hundreds of millions of people. It will make Madoff look like a small time pick pocket.

The default will come in a tricky fashion, most likely by the government (through the Federal Reserve) printing up new dollars that will result in the decline in the value of the currency and government securities. The way to protect yourself from this possibility is to own gold and silver.

There's also the possibility that the government may do a standard type default and just pay pennies on the dollar for debt outstanding. There's great debate between many economists and investment advisers as to how the default will come, through standard default or inflation. I say prepare for both, that it is impossible to know at this time which scenario will develop.

If the standard default occurs, the best protection will actually be cash. Cash will be king. Although
 it is a quirky investment, I  believe the best cash investment is nickels. This protects you against a standard default but also has upside if price inflation dominates. Since nickels are mostly made of copper, if price inflation heats up, the value of copper will climb and eventually the copper in nickels will be worth more than five cents and the nickels will climb in value the same way old silver coins started to climb in value during the last great inflation in the 1970s.

The Roosevelt dimes, which were minted from 1946-1964, and freely circulated as change into the early 1970s, now trade for above their silver value, which is now $2.49.

Don't think for a minute that an investment in nickels is a poor person's investment. It works for the poor and the wealthy. One Texas billionaire has bought and stored $1 million in nickels.

You can order the nickels from your bank.

Bottom line: Trust metals, which can't be freely printed like the government can print paper. You were conned once by a smooth talker. Don't get conned this time by the likes of Obama, Geithner and Bernanke.

Good luck.

Bob Wenzel