Here’s What the Next Gold Bull Market Will Look Like

Posted on June 5th, 2015

UBS gold bars with mirrorsBy Jeff Clark, Senior Precious Metals Analyst

We measured every bull cycle of gold stocks and found there have been eight distinct upcycles since 1975.

We also discovered something exciting: Only one was less than a double. (A second was 99.9%.)

Even more enticing is that the biggest one—a 601.5% advance in the early 2000s—occurred just after a prolonged bear market.

And our current bear market is longer than that one. Read More..

Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse

Posted on May 20th, 2015

Bank bad bankBy Doug Casey, Casey Research

You’re likely thinking that a discussion of “sound banking” will be a bit boring. Well, banking should be boring. And we’re sure officials at central banks all over the world today—many of whom have trouble sleeping—wish it were.

This brief article will explain why the world’s banking system is unsound, and what differentiates a sound from an unsound bank. I suspect not one person in 1,000 actually understands the difference. As a result, the world’s economy is now based upon unsound banks dealing in unsound currencies. Both have degenerated considerably from their origins.

Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely. Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money. Read More..

Run Away from the Economic Tsunami

Posted on December 12th, 2014

GreenspanBy Dennis Miller

This warning comes from “Big Al” Greenspan, age 88. He’s been in the news a lot lately, speaking with Gillian Tett of the Financial Times at the Council on Foreign Relations and at the New Orleans Investment Conference. After reading several reports of both events, I spoke with Casey Research colleagues who’d attended the conference and asked, “Did Big Al really say this, this, and this?”

Their response was crystal clear: “Yep! That’s exactly how I saw it and what I took his remarks to mean.”

Mr. Greenspan is issuing a warning to anyone who will listen, ‘fessing up to things many of us thought might be true. His candor reinforces many of my worst fears:

  • The Federal Reserve is raining money down from the heavens to fund unprecedented government spending and to keep the banking system solvent.
  • The credit needs of the US government are so huge that if the Fed didn’t add liquidity to the system, the private sector would be choked out, unable to afford to borrow money.
  • An inflationary bonfire is just a spark away. Big Al likened the money supply to kindling awaiting a match to ignite an inflationary explosion.

The Fed’s Real Job

Greenspan made it clear that the Fed’s mission is to help fund US government spending and to defend the banking system. In his talk at the Council on Foreign Relations, he also mentioned coordinating with other central bankers throughout the world.

In essence, the Federal Reserve functions as a low-interest Visa card with no spending limit. The Fed enables a spendaholic government, dealing it trillions of doses of its drug of choice.

Frankly, Janet Yellen inherited a mess. When she talks about the Fed’s role in combating inflation and promoting unemployment, it’s window dressing. When push comes to shove, the needs of the US government and big banks take priority. As long as government spending continues, the Fed will continue to feed the beast with cheap money—just like Big Al says.

On Government Debt

While US government debt is reportedly in the $17-trillion range, that’s a drop in the bucket compared to its real liabilities. On top of Social Security obligations and unfunded pension promises, Big Al also reminds us that no one knows what the Fed’s true liabilities are because it has essentially guaranteed the liabilities of too-big-to-fail entities.

All this means that the US government cannot satisfy its debts without inflating the US dollar at a much greater rate than most of us could imagine.

He Who Has the Gold

Unlike Ben Bernanke, who’s likened gold to an ancient relic, Big Al sees things differently, stating: “Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it. Greenspan went on to discuss tapering and agreements with central banks, confirming that gold serves a very important role in monetary reserves.

All this reminds me of the other golden rule: “He who has the gold makes the rules.” Russia and China must believe that, given their buying habits over the last few years.

Warning Recap

Let’s review Big Al’s warning. The Federal Reserve’s primary mission is to support out-of-control government spending. To do so it’s “created” trillions of dollars. Regardless of who is in office, politicians can’t help themselves. Spending will continue. If the Fed tries to reverse the trend, there will be a significant market event. If it keeps doing what it’s doing, significant inflation is inevitable.

A lot of people will be hurt. Seniors and savers, particularly those holding the majority of their wealth in US dollars, are standing on the seashore so they can get a better view of the tsunami. There is a better way.

The day will come when the inevitable becomes imminent. I fear for those who ignore or refuse to accept the warning. Anyone who holds gold and/or other inflation hedges likely isn’t shocked by what Big Al is saying. For everyone else, don’t ignore Greenspan’s warnings—they are crystal clear.

If you’re one of the seniors or savers who’s standing at the shoreline, watching the tsunami come in but unsure of where to run, we can show you a path to safety. Every Thursday my team and I share timely, no-nonsense financial strategies for risk-adverse investors in our free weekly e-letter, Miller’s Money Weekly. Sign up here to start receiving your free copy now.

The article Run Away from the Economic Tsunami was originally published at millersmoney.com.

http://www.millersmoney.com/go/uergw-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Home Healthcare Cuts Threaten 500,000 Jobs and Put Female-Owned Businesses at Risk

Posted on October 3rd, 2014

Health Insurance Obama Obamacare by Larry Wright, CagleCartoons.com

By Dennis Miller

That title wouldn’t make for much of a campaign slogan, and yet, it’s the natural outcome of one particular politician’s promise. As the editor of a retirement-focused newsletter, most of the notes I receive about the Affordable Health Care Act, or Obamacare, are first-person accounts of how a reader’s change in coverage or cost is affecting his finances. These (mostly sad) stories prompted several discussions with Andy Mangione, vice president of government relations of the Association of Mature American Citizens (AMAC). Andy serves as the lead legislative and government contact for AMAC in Washington, DC. He’s also responsible for national grassroots outreach and developing strategic partnerships.

Andy is AMAC’s man on the scene in Washington, and he kindly agreed to sit down for an interview on the significant budget cuts to home health care that have been made as a result of Obamacare. I’ll let Andy get into the details.

Dennis Miller: Welcome, Andy. Thanks for taking the time to educate our readers on the latest goings-on in Washington.

Andy Mangione: My pleasure, Dennis.

Dennis: Andy, let’s get right to it. I know you’re very concerned about how cuts to home health care will impact seniors. This is no longer a theoretical problem. I’d like to ask a two-part question: Can you tell our readers a bit about your organization and how these budget cuts will affect “mature American citizens?”

Andy: Dan Weber, a private citizen, founded AMAC as an alternative to and competitor of AARP. AMAC is a right-of-center, conservative member benefits and senior advocacy organization for Americans age 50 and older. AMAC offers many of the same benefits and services as AARP. The biggest difference, though, is our approach to advocacy. AMAC is a member-driven organization. We do not sit in a boardroom and determine our stance on issues unilaterally. We take our marching orders from our members. They determine the issues that I bring to Washington, DC and help us to determine our policy and issues positions.

We have over 1.2 million American members living in all 50 states. We add approximately 1,000-2,000 new, dues-paying members each week.

I think it’s important to describe the Medicare home healthcare recipient before getting into the cuts. The average age of this beneficiary is 82. Two-thirds live below the federal poverty level, and they have chronic illnesses like heart disease, COPD, and diabetes. These are Medicare’s oldest, sickest, and poorest beneficiaries. Most of these folks reside in rural areas, and the majority of them are women.

The $22 billion cuts over four years to Medicare home health care will mean these homebound seniors will have to seek care outside of their homes. The cuts will also devastate the home healthcare sector. And where will the money from these cuts go? To fund subsidies on the insurance exchanges and to expand Medicaid—two key components of Obamacare.

Sick Seniors Forced into Nursing Homes

Dennis: I recently wrote an article about long-term care insurance, which many refer to as nursing home insurance. I pointed out that a major provision of long-term care is home health care, which is actually “avoid nursing home insurance.” If the government is cutting back on money for home health care, what options will be available for those who need care?

Andy: They’ll be forced to receive care in nursing homes or other institutional settings, which greatly increases their cost and negatively affects their healthcare outcomes. Also, keep in mind that most recipients of Medicare home health care reside in rural areas and do not have the same choices for nursing home or other institutional care that those who live in urban areas do.

Dennis: Won’t that further overload hospitals and nursing homes, which in turn will add to the overall costs?

Andy: Absolutely. Medicare home health care saved the Medicare program $3 billion over the last three years. Expenditures for non-Medicare home health care will definitely rise since these patients will be treated in nursing homes and other institutions.

Dennis: I don’t know of anyone who, given a choice, wouldn’t prefer to stay at home for care. What impact will these budget cuts have on the home healthcare industry?

5,000 Home Healthcare Companies to Collapse by 2017

Andy: The Centers of Medicare and Medicaid Services (CMS) looked at these cuts and estimated that nearly 500,000 jobs in the home healthcare sector will be lost. They also estimate that 5,000 home healthcare companies will become insolvent as a result of these cuts by 2017.

Dennis: You touched on something I hadn’t thought through before: the significant impact these cuts will have on working women and small-business owners. What can people do now? The budget cuts have already been passed. Is it too late?

Andy: It’s not too late. H.R.5110, the SAVE Medicare Home Health Act, was recently introduced to rescind these cuts and replace them with commonsense accountability for home healthcare agencies, which would increase the quality of care for patients. The House will vote on the budget-neutral H.R.5110 in the fall, and if it passes—and it has a good chance of doing so—then it’s on to the Senate.

90% of the businesses that provide home health care are small businesses. And, as I previously mentioned, CMS estimates that 5,000 of these businesses are at risk of closing their doors as a result of these cuts. Women own the majority of these businesses, and the majority of their employees—the nurses and other allied health professionals who provide care—are also women. CMS also estimated that 500,000 of these jobs are threatened by these cuts.

Also, the vast majority of the patients receiving home health care are women. Any way you evaluate it, these cuts to home health care disproportionately affect women in a very negative way.

Dennis: I’d like to ask one question on a different topic. When I’ve written about Obamacare in the past, I’ve received three forms of feedback. The first was genuine concern, and the second was political criticism. Third, I heard from a large group that basically has a hard time believing it. Their sentiment was: That just could not happen in America!” How do you respond to people who are having a hard time believing that Obamacare is going to have a major and possibly negative impact on their lives and their health care?

Andy: I would say that elections have consequences. Not only can this happen in America, it already has happened! President Obama burst onto the national scene promising hope and change and certainly delivered on the “change” promise. Only it was not the change that most Americans were seeking.

Like it or not—and AMAC members most definitely do not like it—Obamacare is now the law of the land. All is not lost, though. There’s always another federal election every two years, when Americans have the opportunity to right the ship and elect people who identify with their values and beliefs. Get involved and research candidates before giving your precious vote to an articulate, attractive candidate who looks great in a suit. Take the time to find the substance behind the style.    (my emphasis)

Dennis: Andy, thanks for sharing your boots-on-the-ground input. Hopefully our subscribers will pitch in and let their elected representatives know how they feel.

If you enjoy timely expert interviews like this one, straightforward economic analysis and no-nonsense financial insight, sign up to receive my free weekly e-letter, Miller’s Money Weekly today.

http://www.millersmoney.com/go/udmsw-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Wall Street Admits That A Cyberattack Could Crash Our Banking System At Any Time

Posted on September 5th, 2014

CyberattackBy Michael Snyder

Wall Street banks are getting hit by cyber attacks every single minute of every single day.  It is a massive onslaught that is not highly publicized because the bankers do not want to alarm the public.  But as you will see below, one big Wall Street bank is spending 250 million dollars a year just by themselves to combat this growing problem.  The truth is that our financial system is not nearly as stable as most Americans think that it is.  We have become more dependent on technology than ever before, and that comes with a potentially huge downsideAn electromagnetic pulse weapon or an incredibly massive cyberattack could conceivably take down part or all of our banking system at any time.

This week, the mainstream news is reporting on an attack on our major banks that was so massive that the FBI and the Secret Service have decided to get involved.  The following is how Forbes described what is going on…

The FBI and the Secret Service are investigating a huge wave of cyber attacks on Wall Street banks, reportedly including JP Morgan Chase, that took place in recent weeks.

The attacks may have involved the theft of multiple gigabytes of sensitive data, according to reports. Joshua Campbell, supervisory special agent at the FBI, tells Forbes: “We are working with the United States Secret Service to determine the scope of recently reported cyber attacks against several American financial institutions.”

When most people think of “cyber attacks”, they think of a handful of hackers working out of lonely apartments or the basements of their parents.  But that is not primarily what we are dealing with anymore.  Today, big banks are dealing with cyberattackers that are extremely organized and that are incredibly sophisticated.

The threat grows with each passing day, and that is why JPMorgan Chase says that “not every battle will be won” even though it is spending 250 million dollars a year in a relentless fight against cyberattacks…

JPMorgan Chase this year will spend $250 million and dedicate 1,000 people to protecting itself from cybercrime — and it still might not be completely successful, CEO Jamie Dimon warned in April.

Cyberattacks are growing every day in strength and velocity across the globe. It is going to be continual and likely never-ending battle to stay ahead of it — and, unfortunately, not every battle will be won,” Dimon said in his annual letter to shareholders.

Other big Wall Street banks have a similar perspective.  Just consider the following two quotes from a recent USA Today article

Bank of America: “Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.”

Citigroup: “Citi has been subject to intentional cyber incidents from external sources, including (i) denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches, which aimed to obtain unauthorized access to customer account data; and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. For example, in 2013 Citi and other U.S. financial institutions experienced distributed denial of service attacks which were intended to disrupt consumer online banking services. …

“… because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or proactively address these methods.”

I don’t know about you, but those quotes do not exactly fill me with confidence.

Another potential threat that banking executives lose sleep over is the threat of electromagnetic pulse weapons.  The technology of these weapons has advanced so much that they can fit inside a briefcase now.  Just consider the following excerpt from an article that was posted on an engineering website entitled “Electromagnetic Warfare Is Here“…

The problem is growing because the technology available to attackers has improved even as the technology being attacked has become more vulnerable. Our infrastructure increasingly depends on closely integrated, high-speed electronic systems operating at low internal voltages. That means they can be laid low by short, sharp pulses high in voltage but low in energy—output that can now be generated by a machine the size of a suitcase, batteries included.

Electromagnetic (EM) attacks are not only possible—they are happening. One may be under way as you read this. Even so, you would probably never hear of it: These stories are typically hushed up, for the sake of security or the victims’ reputation.

That same article described how an attack might possibly happen…

An attack might be staged as follows. A larger electromagnetic weapon could be hidden in a small van with side panels made of fiberglass, which is transparent to EM radiation. If the van is parked about 5 to 10 meters away from the target, the EM fields propagating to the wall of the building can be very high. If, as is usually the case, the walls are mere masonry, without metal shielding, the fields will attenuate only slightly. You can tell just how well shielded a building is by a simple test: If your cellphone works well when you’re inside, then you are probably wide open to attack.

And with electromagnetic pulse weapons, terrorists or cyberattackers can try again and again until they finally get it right

And, unlike other means of attack, EM weapons can be used without much risk. A terrorist gang can be caught at the gates, and a hacker may raise alarms while attempting to slip through the firewalls, but an EM attacker can try and try again, and no one will notice until computer systems begin to fail (and even then the victims may still not know why).

Never before have our financial institutions faced potential threats on this scale.

According to the Telegraph, our banks are under assault from cyberattacks “every minute of every day”, and these attacks are continually growing in size and scope…

Every minute, of every hour, of every day, a major financial institution is under attack.

Threats range from teenagers in their bedrooms engaging in adolescent “hacktivism”, to sophisticated criminal gangs and state-sponsored terrorists attempting everything from extortion to industrial espionage. Though the details of these crimes remain scant, cyber security experts are clear that behind-the-scenes online attacks have already had far reaching consequences for banks and the financial markets.

In the end, it is probably only a matter of time until we experience a technological 9/11.

When that day arrives, will your money be safe?    (my emphasis)

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/wall-street-admits-that-a-cyberattack-could-crash-our-banking-system-at-any-time

Paper Gold Ain’t as Good as the Real Thing

Posted on February 14th, 2014

Investment In Gold As Gold Bullion_9526103By Doug French, Contributing Editor

For the first time ever, the majority of Americans are scared of their own federal government. A Pew Research poll found that 53% of Americans think the government threatens their personal rights and freedoms.

Americans aren’t wild about the government’s currency either. Instead of holding dollars and other financial assets, investors are storing wealth in art, wine, and antique carsThe Economist reported in November, “This buying binge… is growing distrust of financial assets.”

But while the big money is setting art market records and pumping up high-end real estate prices, the distrust-in-government script has not pushed the suspicious into the barbarous relic. The lowly dollar has soared versus gold since September 2011.

Every central banker on earth has sworn an oath to Keynesian money creation, yet the yellow metal has retraced nearly $700 from its $1,895 high. The only limits to fiat money creation are the imagination of central bankers and the willingness of commercial bankers to lend. That being the case, the main culprit for gold’s lackluster performance over the past two years is something else, Tocqueville Asset Management Portfolio Manager and Senior Managing Director John Hathaway explained in his brilliant report “Let’s Get Physical.

Hathaway points out that the wind is clearly in the face of gold production. It currently costs as much or more to produce an ounce than you can sell it for. Mining gold is expensive; gone are the days of fishing large nuggets from California or Alaska streams. Millions of tonnes of ore must be moved and processed for just tiny bits of metal, and few large deposits have been found in recent years.

Production post-2015 seems set to decline and perhaps sharply,” says Hathaway.

Satoshi Nakamoto created a kind of digital gold in 2009 that, too, is limited in supply. No more than 21 million bitcoins will be “mined,” and there are currently fewer than 12 million in existence. Satoshi made the cyber version of gold easy to mine in the early going. But like the gold mining business, mining bitcoins becomes ever more difficult. Today, you need a souped-up supercomputer to solve the equations that verify bitcoin transactions—which is the process that creates the cyber currency.

The value of this cyber-dollar alternative has exploded versus the government’s currency, rising from less than $25 per bitcoin in May 2011 to nearly $1,000 recently. One reason is surely its portability. Business is conducted globally today, in contrast to the ancient world where most everyone lived their lives inside a 25-mile radius. Thus, carrying bitcoins weightlessly in your phone is preferable to hauling around Krugerrands.

No Paper Bitcoins

But while being the portable new kid on the currency block may account for some of Bitcoin’s popularity, it doesn’t explain why Bitcoin has soared while gold has declined at the same time.

Hathaway puts his finger on the difference between the price action of the ancient versus the modern. “The Bitcoin-gold incongruity is explained by the fact that financial engineers have not yet discovered a way to collateralize bitcoins for leveraged trades,” he writes. “There is (as yet) no Bitcoin futures exchange, no Bitcoin derivatives, no Bitcoin hypothecation or rehypothecation.”

So, anyone wanting to speculate in Bitcoin has to actually buy some of the very limited supply of the cyber currency, which pushes up its price.

In contrast, the shinier but less-than-cyber currency, gold, has a mature and extensive financial infrastructure that inflates its supply—on paper—exponentially. The man from Tocqueville quotes gold expert Jeff Christian of the CPM Group who wrote in 2000 that “an ounce of gold is now involved in half a dozen transactions.” And while “the physical volume has not changed, the turnover has multiplied.”

The general process begins when a gold producer mines and processes the gold. Then the refiners sell it to bullion banks, primarily in London. Some is sold to jewelers and mints.

“The physical gold that remains in London as unallocated bars is the foundation for leveraged paper-gold trades. This chain of events is perfectly ordinary and in keeping with time-honored custom,” explains Hathaway.

He estimates the equivalent of 9,000 metric tons of gold is traded daily, while only 2,800 metric tons is mined annually.

Gold is loaned, leased, hypothecated, and rehypothecated, over and over. That’s the reason, for instance, why it will take so much time for the Germans to repatriate their 700 tonnes of gold currently stored in New York and Paris. While a couple of planes could haul the entire stash to Germany in no time, only 37 tonnes have been delivered a year after the request. The 700 tonnes are scheduled to be delivered by 2020. However, it appears there is not enough free and unencumbered physical gold to meet even that generous schedule. The Germans have been told they can come look at their gold, they just can’t have it yet.

Leveraging Up in London

The City of London provides a loose regulatory environment for the mega-banks to leverage up. Jon Corzine used London rules to rehypothecate customer deposits for MF Global to make a $6.2 billion Eurozone repo bet. MF’s customer agreements allowed for such a thing.

After MF’s collapse, Christopher Elias wrote in Thomson Reuters, “Like Wall Street cocaine, leveraging amplifies the ups and downs of an investment; increasing the returns but also amplifying the costs. With MF Global’s leverage reaching 40 to 1 by the time of its collapse, it didn’t need a Eurozone default to trigger its downfall—all it needed was for these amplified costs to outstrip its asset base.”

Hathaway’s work makes a solid case that the gold market is every bit as leveraged as MF Global, that it’s a mountain of paper transactions teetering on a comparatively tiny bit of physical gold.

“Unlike the physical gold market,” writes Hathaway, “which is not amenable to absorbing large capital flows, the paper market, through nearly infinite rehypothecation, is ideal for hyperactive trading activity, especially in conjunction with related bets on FX, equity indices, and interest rates.”

This hyper-leveraging is reminiscent of America’s housing debt boom of the last decade. Wall Street securitization cleared the way for mortgages to be bought, sold, and transferred electronically. As long as home prices were rising and homeowners were making payments, everything was copasetic. However, once buyers quit paying, the scramble to determine which lenders encumbered which homes led to market chaos. In many states, the backlog of foreclosures still has not cleared.

The failure of a handful of counterparties in the paper-gold market would be many times worse. In many cases, five to ten or more lenders claim ownership of the same physical gold. Gold markets would seize up for months, if not years, during bankruptcy proceedings, effectively removing millions of ounces from the market. It would take the mining industry decades to replace that supply.

Further, Hathaway believes that increased regulation “could lead, among other things, to tighter standards for collateral, rules on rehypothecation, etc. This could well lead to a scramble for physical.” And if regulators don’t tighten up these arrangements, the ETFs, LBMA, and Comex may do it themselves for the sake of customer trust.

What Hathaway calls the “murky pool” of unallocated London gold has supported paper-gold trading way beyond the amount of physical gold available. This pool is drying up and is setting up the mother of all short squeezes.

In that scenario, people with gold ETFs and other paper claims to gold will be devastated, warns Hathaway. They’ll receive “polite and apologetic letters from intermediaries offering to settle in cash at prices well below the physical market.”

It won’t be inflation that drives up the gold price but the unwinding of massive amounts of leverage.

Americans are right to fear their government, but they should fear their financial system as well. Governments have always rendered their paper currencies worthless. Paper entitling you to gold may give you more comfort than fiat dollars.

However, in a panic, paper gold won’t cut it. You’ll want to hold the real thing.

There’s one form of paper gold, though, you should take a closer look at right now: junior mining stocks. These are the small-cap companies exploring for new gold deposits, and the ones that make great discoveries are historically being richly rewarded… as are their shareholders.

However, even the best junior mining companies—those with top managements, proven world-class gold deposits, and cash in the bank—have been dragged down with the overall gold market and are now on sale at cheaper-than-dirt prices. Watch eight investment gurus and resource pros tell you how to become an “Upturn Millionaire” taking advantage of this anomaly in the market—click here.

http://www.caseyresearch.com/go/vytq3-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC. 

One Speech Too Many

Posted on February 3rd, 2014

Tuning Out Obama

By Alan Caruba

I didn’t take notes while President Obama gave his State of the Union speech. There was no need to.

There was a time when the SOTU was a just a letter sent to Congress, but in the era of radio and television, Presidents took advantage of the opportunity to be seen and heard laying out their priorities and asking Congress to fulfill them.  Since then they have become little more than laundry lists and rarely memorable.

More people will watch a sporting event than tuned in to listen to Obama. In five years he has probably given more speeches than several previous Presidents combined. His first term felt like an extension of his election campaign with one speech following another and soon enough his reliance on a Tele-Prompter became a joke.

Suffice to say that Obama has given one speech too many. Or is that one hundred speeches too many?

A second term, according to the political pundits, is usually a more subdued time as a President seeks to get a few “legacy” pieces of legislation passed and, by then, most people have taken their measure of the President, either liking or disliking him. A President’s popularity or approval ratings usually decline.

Obama’s refusal and failure to work with Congress, combined with the disaster of Obamacare that was passed with only Democratic Party votes and, even then, required Chicago-style bribery and pressure, has seen not just his approval begin to slip away, but it includes the whole of Congress.

Obama’s assertion that he will use executive orders to get his way is simply an admission that he has failed to work with Congress and intends to continue as his second term shapes up to be one of increased resistance. Earlier presidents faced with a Congress whose power was held by another party used persuasion and compromise, but Obama uses neither.

In late January a Gallup poll revealed that “The enduring unpopularity of Congress appears to have seeped into the nation’s 435 congressional districts, as a record-low percentage of registered voters, 46%, now say that the U.S. representative in their own congressional district deserves re-election. Equally historic, the share of voters saying most members of Congress deserve re-election has fallen to 17%, a new nadir.”

It’s worth noting that the 17% who say most of Congress deserves re-election is well below the roughly 40% that has been around for decades and Gallup says “Typically, results like these have presaged significant turnover in Congress, as in 1994, 2006, and 2010. So Congress could be headed for a major shake-up in its membership this fall.”

There’s a history lesson in the 1994 election which occurred when Bill Clinton was President. It marked the greatest victory of the Republican Party since 1980. The GOP picked up 54 seats in the House of Representatives and 8 seats in the Senate. The issue that drove this change was Clinton’s advocacy of a change in the nation’s healthcare system. The Democrats did not learn anything from that defeat and Obama doubled-down on it.

While the media naturally focuses on the President, many Americans appear to have made a shift to Republicans because, at present, there are 30 Republican governors in America. Since Obama took office, Republicans have picked up a net nine governorships. In 24 of those States, Republicans control the legislatures. Democrats have similar power in just 12 States. So, at the State level, voters have already demonstrated their preferences.

A Wall Street Journal-NBC poll published on January 28, the day of the SOTU speech, revealed a nation “increasingly worried about (Obama’s) abilities, dissatisfied with the economy, and fearful for the country’s future.”

Large majorities of respondents said they want the White House and lawmakers to focus on job creation and early-childhood education, and a slimmer majority favored increasing the minimum wage.” Just over half expressed an interest in “reducing income inequality.” Obama is appealing to the “low-information” voters these days, but the majority understands that only a growing economy can address the need for more jobs.

The survey found that just over half of Americans disapprove of the President’s performance, with 43% approving, a trough that remains little changed since the early summer. Nearly six in 10 say they are uncertain, worried or pessimistic about what he will do with the remainder of his presidency. Disapproval for Congress, too, is near its all-time high.”

The midterm elections in November are likely to change Congress by adding many more Republicans in the House and enough in the Senate to give the GOP control of Congress. That will eliminate the chokehold that Harry Reid, the Democratic Senate Majority Leader, has exercised to kill more than a hundred and fifty pieces of legislation sent by the House to repair the nation’s stagnant economy. It will likely override the President’s veto power.

Obama’s SOTU will receive a cascade of political analysis, but if the polls are any indication, the public is far less interested in another Obama speech than they are in getting the kind of change the nation really needs to grow its economy and address its problems  (my emphasis)

By Alan Caruba for Facts Not Fantasy

By permission Alan Caruba

Alan Caruba writes a daily post at http://factsnotfantasy.blogspot.com

© Alan Caruba, 2012

“Gold Stocks Are About to Create a Whole New Class of Millionaires”

Posted on January 30th, 2014

Gold Bars In A Stack_25573121By Jeff Clark, Senior Precious Metals Analyst

Bear markets always end. Has this one?

Evidence is mounting that the bottom for gold may be in. While there’s still risk, there’s a new air of bullishness in the industry, something we haven’t seen in over two years.

An ever-growing number of industry insiders and investment analysts believe the downturn has come to a close. If that’s true, it has immediate and critical implications for investors.

Doug Casey told me last week: “In my lifetime, the best time to have bought gold was 1971, at $35; it ran to over $800 by 1980. In 2001, gold was $250: in real terms even cheaper than in 1971. It ran to over $1,900 in 2011.

“It’s now at $1,250. Not as cheap, in real terms, as in 1971 or 2001, but the world’s financial and economic state is far more shaky.

“Gold is, once again, not just a prudent holding, but an excellent, high-potential, low-risk speculation. And gold stocks are about to create a whole new class of millionaires.”

Just a couple of months ago, you would have had a hard time finding even one analyst saying something positive about gold and gold stocks—even some of the most bullish investment pros had gone silent.

But that’s changing. Case in point: When Chief Metals & Mining Strategist Louis James and I attended last week’s Resource Investment Conference in Vancouver, we witnessed quite a few very optimistic speakers.

Take Frank Giustra, for example, a self-made billionaire and philanthropist who made his fortune both in the mining sector and the entertainment industry. He’s the founder of Lionsgate Entertainment, which is responsible for blockbuster movies like The Hunger Games, but he was just as heavily involved with mining blockbusters such as Iamgold, Wheaton River Minerals, Silver Wheaton, and others.

I’m telling you, you’ve seen the bottom of the gold market,” he told the rapt audience at the conference, offering a bet to the Goldman Sachs analyst who claimed gold is going to $1,000.

The stakes: Whoever loses has to stand on a popular street in downtown Vancouver dressed in women’s underwear.

Tom McClellan, editor of the McClellan Market Report, stated in a recent interview on CNBC: “The commercial traders are at their most bullish stance since the 2001 low, and they usually get proven right. It’s a hugely bullish condition for gold, and I’m expecting a really large rebound.

“The moment we see a major gold producer announce that it’s curtailing production or it’s going out of business,” McClellan continued, “that’ll be the moment we mark the low in gold. I expect to have one of those announcements any minute. We’re getting down to the production price of gold right now, and they won’t continue producing gold at that level for very long.”

Are they just guessing? To answer that, first consider the historical context of this bear market—it’s getting very long in the tooth:

  • The current correction in gold stocks is the fourth longest since 1879. The decline of 66% ranks in the top 10 of recorded history.
  • In silver, only two corrections have lasted longer—the ones that ended in 1936 and 1983.

Some technical analysts have pointed to positive chart formations, most notably the powerful “double bottom” that can portend a strong upward move. Based on intraday prices…

  • Gold formed a double bottom last year, hitting $1,180.64 on June 28 and $1,182.60 on December 31, a convincing six-month span.
  • Silver formed a higher low: $18.20 on June 28 vs. $18.72 on December 31, a bullish development.
  • Gold stocks (XAU) formed a slightly lower low: $82.29 on June 26 vs. $79.73 December 19, 2103, a difference of 3.2%. However, as our friend Dominick Graziano, who successfully helped us earn doubles on three GLD puts last year, recently pointed out…
  • The TSX Venture Index, where most junior mining stocks trade, has stayed above its June low. In fact, it recently soared above both the 50-day and 40-week moving averages for the first time since 2011.

Meanwhile, Goldcorp (GG) sent a huge bullish signal to the market earlier this month. It decided to pounce on the opportunities available right now, launching a takeover bid of Osisko Mining for $2.6 billion. The company wouldn’t be buying now if it thought gold was headed to $1,000.

As Dennis Gartman, editor and publisher of The Gartman Letter, says, “It’s time to be quietly bullish.”

The smart money, like resource billionaire Rick Rule, is not just quietly bullish, though—they are actively buying top-quality junior mining stocks at bargain-basement prices to make a killing when prices rise.

To make sure that you can invest right alongside them, we decided to host a sequel to our 2013 Downturn Millionaires event, titled Upturn Millionaires—How to Play the Turning Tides in the Precious Metals Market.

Back then, we made a strong case for this once-in-a-generation opportunity—but it was still undetermined when the bottom would be in. It looks like that time is now very near, and we believe it’s time to act.

On February 5 at 2 p.m. EST, resource legends Frank Giustra, Doug Casey, Rick Rule, and Ross Beaty, investment gurus John Mauldin and Porter Stansberry, and our own resource experts Louis James and Marin Katusa will present the evidence and discuss the possibilities for life-changing gains for investors with the cash and courage to grab this bull by the horns.

How do we know the absolute bottom is in? I’ll answer that with a quote from a recent Mineweb interview with mining giant Rob McEwen, former chairman and CEO of Goldcorp:

“I’d say we’re either at or extremely close to the bottom, and as an investor I’m not prepared to wait to see if the bottom’s there because it’s very hard to pick it. Because … if you’re not taking advantage of it right now, you’re going to miss a big part of the move. And when you look at the distance these stocks have to travel to get to their old highs, there’s some wonderful numbers in terms of performance that I think we’re going to see.”

Granted, these voices are still in the minority—but that’s what makes this opportunity wonderfully contrarian. After all, once “Buy gold stocks” is investor consensus, we’ll be approaching the time to sell.    (my emphasis) 

Our Upturn Millionaires experts believe that our patience is about to be rewarded. And when that happens, gold stocks will be easy doubles—and the best juniors potential ten-baggers.

Don’t miss the free Upturn Millionaires video event—register here to save your seat. (Even if you don’t have time to watch the premiere, register anyway to receive a video recording of the event.)

http://www.caseyresearch.com/go/vtt4m-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

The Iranian Deal: What the Big Six Countries Really Have to Gain

Posted on December 4th, 2013

Iran USA deal by Tom Janssen, The Netherlands

By Marin Katusa, Chief Energy Investment Strategist

Over the weekend, the world changed.

Officials from Iran made a deal with six countries (the US, Russia, China, England, France, and Germany)—in exchange for suspending the world’s sanctions on Iran, Iran will curb its nuclear weapons program.

Though it’s only a six-month interim agreement for now, it’s an important first step toward bringing Iran economically closer to the rest of the world.

This is, by any standards, a historic deal (or a historic mistake, according to Iran’s archenemy Israel): the United States and Iran haven’t had diplomatic relations since 1979.

This is like Wile E. Coyote suddenly signing a peace treaty with the Road Runner.

But the more important question is “Why?” Why did Iran suddenly have this change of heart after pounding the table and claiming that enriching uranium is an inalienable Iranian right?

Is it really as the media portrays? Did the tough American and European sanctions placed upon Iran finally bring the country’s leadership to its senses?

As much as President Obama would like you to believe that, we think the answer is far more complicated.

All of these countries have some sort of agenda that they are pushing—and this deal is going to give them exactly what they want. And if you think that this is about “Middle East stability” and “world peace,” there is a bridge I would like to sell you.

There is only one thing on the minds of these countries: oil.

Hitting the Jackpot

It is pretty easy to understand why the Chinese are interested: with the one-child policy being relaxed and a constantly growing population, there is no doubt that they’re looking all around the globe for secure energy supplies. Given that Iran has one of the world’s largest reserves of both oil and gas, it’s the perfect location for China to be drilling.

When Iran begins to open up to the world, the Chinese petroleum companies will salivate at the opportunity to unlock some of the largest hydrocarbon fields in the world. While it is true that they’ll have to compete with companies around the world, the Chinese are known for their deep pockets and willingness to acquire energy reserves regardless of the cost.

What does Europe get?

If Iran is able to start selling oil on the global market again, Europe gets something crucially important: a source of non-Russian oil.

Russia currently has a stranglehold on European oil and gas supplies (something that we have written much about over the past few years). Though Europe is ramping up its own domestic production, a phenomenon we call the “European Energy Renaissance,” it cannot happen overnight. In the meantime, Europe depends on imported oil and gas… and believe it or not, Iran provides a better alternative to the heavy hand of Putin.

Because Iran just wants money for its product, but Putin wants control—both political as well as economic.

The Americans also got something great from the discussions: the continuation of the petrodollar. With a détente around the corner, America can monitor Iran’s activities and quietly make sure that the sale of this oil will be denominated in US dollars. The fact that Iran has constantly tried to shift away from the US dollar for petroleum trades has always been a thorn in the side of the US government. By “working closer” with Iran, America will in fact be able to better keep tabs.

But the biggest winners of the day may have been the Russians and the Iranians—because they can now get access to the biggest prize of all.

There’s no doubt that Russia and Iran are close: due to the sanctions, much of Iran’s military is Russian-built, and there is a great deal of cooperation between the two countries on the oil and gas front.

If Iran does indeed open up its oil and gas fields and invites the multinationals in, it means that the country will have access to the multinationals’ technology—the technology to unlock not only the vast conventional potential that Iran already has… but also the unconventional oil and gas that could dwarf Iran’s current reserves.

We are talking about access to not just billions, but even trillions of barrels of oil.

“Open Sesame”—Unlocking Ali Baba’s Treasure

America, rather than Russia, leads the world in unconventional oil and gas production. But more importantly, they lead the world in the technology it takes to unlock the complicated geology that lies beneath the Earth’s surface.

The ability to extract vast quantities of oil means energy independence or, in the case of Iran, even more oil and gas available for exports and to fill the country’s coffers.

So by inviting “the Great Satan” inside its borders, Iran will be able to acquire this valuable technology and begin to apply it.

And once everything has been built, it would only take a flick of a pen to evict the American companies.

The Russians would also be able to take this technology and apply it within their own borders… so that they can begin expanding their hydrocarbon empire beyond the boundaries of Europe.

It is clear the biggest loser in this negotiation is Israel. There is nothing they can do but stand by and watch. But Israel won’t show its cards until the six-month treaty expires.

The key to how this plays out for the US is how Iran acts the day after the six-month treaty is over. Will Iran continue under the same terms? If not, will Israel tolerate it?

So How Can We Profit?

By investing not in the companies that will be physically producing oil within Iran’s borders, but in the ones that will provide all the necessary services… the picks and shovels of the business, so to speak.

And we already know the ones that the big multinational companies like Shell and Exxon will turn to.

Want to find out which ones? Read all about it in the December issue of Casey Energy Dividends. Sign up now for a risk-free trial and begin profiting from the biggest diplomatic agreement in the past decade.

By Marin Katusa, Chief Energy Investment Strategist

http://www.caseyresearch.com/go/vviw2-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

The Greatest Opportunity in 30 Years

Posted on November 21st, 2013

Mining Stock Bull Market-2399699By Jeff Clark, Senior Precious Metals Analyst

I caught myself daydreaming last week…

It’s October 27, 2008, and Silver Wheaton (SLW) just hit $3 per share. I buy 10,000 shares, more than I’ve ever devoted to any one stock. I sell half when it hits $33 per share and pocket $150,000 after a 1,000% gain. I pay off the mortgage, and my wife quits work—and I still have 5,000 shares…

Not a bad daydream, eh? I don’t know how many investors actually had the intestinal fortitude to plunk down a big lump of cash on a stock at that time—but Silver Wheaton did indeed offer that 1,000% return, and more.

When you look back at the investments that have made the most money over the past few decades, they’ve always been assets that had reached an extreme—an extreme low or an extreme high. Buying gold at $250 per ounce in 2001… buying tech stocks in the early ’90s or Apple Computer at $8 per share in 2003… shorting real estate in 2007 or the stock market in 2008… the list goes on.

Each of those speculations led to massive returns only because the price of the respective asset was either dramatically undervalued and poised to take off or, in the case of the short sales, a bubble ready to pop.

Paradoxically, such opportunities aren’t that hard to find—the truth is, they sprout up all the time. What is hard to find is the type of investor who has the guts to take advantage of those opportunities.

Fact is, most people run from assets that are at an all-time low… and happily buy into stocks that are reaching their peak. As legendary resource investor Rick Rule likes to say, “You’re either a contrarian or you’re a victim.”

When you think about it, the strategy for getting rich—a strategy regularly applied by the Doug Caseys and Rick Rules of the world—is deceptively simple:

  • Find an asset at an extreme (low or high) and determine if it’s headed in the other direction anytime soon;
  • Take a significant position and hold the fort while market forces play out.

That’s all. The difficult part is to muster the courage to hold on when all your senses are screaming that it’s a huge mistake, that your investment will never pan out, that today’s fool (you) is tomorrow’s loser.

If, on the other hand, you don’t mind going where others fear to tread, opportunities practically jump into your outstretched hands.

Here’s the best one I know of right now: gold stocks.

Actually, to say they’re a “good opportunity” is a laughable understatement: Gold stocks are at an extreme low we haven’t seen in over 30 years in this industry.

Let me prove it to you.

An effective way to measure the true value of gold stocks is to compare them to the gold price. Other things being equal, a gold producer selling for $20 per share at a $1,500 gold price is a heck of a lot cheaper than when gold’s at $1,000. (When the price of a product is higher, the stock is more valuable, and vice versa.)

The XAU (Philadelphia Gold and Silver Index) consists of 30 gold and silver stocks and began trading in December 1983. Here are the first 23 years of the Index’s ratio to gold.

XAU Gold Ration Gives Buy and Sell Clues Graph

Any time the ratio reached 0.20 or below, gold stocks were undervalued in relation to gold, and investors who bought at those inflection points made a profit. Conversely, once the ratio reached 0.34 or above, stocks were overvalued and due for a pullback.

For 23 years, from its inception through 2007, the XAU/gold ratio provided fairly reliable feedback for investors.

Now let’s add the rest of the data.

Gold Stocks at Historic Undervaluation Graph

Today, the XAU/gold ratio is at a historic low of 0.07.

To fully appreciate what this means, look at these former lows for comparison:

  • It’s lower than the 2008 gold stock selloff;
  • It’s lower than the “nuclear winter” of the mid-’90s;
  • It’s lower than the very beginning of the gold bull market in 2001.

Right now, gold stocks are like a rubber band that’s being stretched to an extreme. As all rubber bands do, it will snap back. And not just that; based on how extreme the undervaluation has become, they’re bound to be among the most profitable investments of this generation.

A year ago, I pointed out how cheap gold stocks were—and yes, they managed to get cheaper still. But that fact only underscores how vast this opportunity really is.

Current sentiment in the precious metals sector, especially the stocks, is beyond dreary: it’s pitiful. At the Toronto Stock Exchange, where most mining stocks are traded, security guards are now doubling as suicide watchmen. (OK, I made that up.)

What I didn’t make up is that your chances of following in Doug Casey’s or Rick Rule’s footsteps—and making similar breathtaking returns—have never been higher. Upside is at its greatest when even the cab driver laughs at the thought of buying a gold stock.

As conditions return to normal, huge profits will be made… by those who didn’t listen to the investing herd and its mouthpieces in the mainstream financial media.

Is there a guarantee gold stocks will rebound and deliver life-changing profits? I’m sure you’ve heard the “death and taxes” thing, so I don’t have to answer that question.

And there are some scenarios that could conceivably prevent gold and silver from rebounding—possibly killing off the miners for a generation:

  • If billions of Chinese, Indians, and other Asians finally realize that unbacked paper currencies are much more desirable to hold than physical gold and silver…
  • If Ben Bernanke vows never to print another bloody greenback again, and neither does his successor…
  • If Congress unanimously agrees to lower, instead of raise, the debt ceiling and drastically cut all but core spending, for the health of the country and its citizens (I know, don’t make me laugh)…
  • If solar panel manufacturers and dozens of other industries find a valid replacement for silver in their products…
  • If the insane amount of $700 trillion in derivatives circling the world like a cloud of toxic particles suddenly evaporates…
  • If Beijing calls a press conference and proclaims they were mistaken and now feel no need to diversify out of the US dollar, that it’s the one and only reserve currency the world will ever need…

… then we might see that happen. But I’m not holding my breath on any of these. (A phrase about snowballs and hot places comes to mind.)

In the meantime, I bought another gold Eagle last month.

But even if you don’t have $1,300 lying around, you can now add to your bullion in an easy and cost-effective way. I just told BIG GOLD readers of an exciting new program to accrue gold and silver—a program that deducts money from your bank account every month and buys the metal for you automatically.

But the best part is: it’s the first auto-accumulation program that stores metal at an international vault. Every other similar program offers domestic storage only or doesn’t have a service for automatic purchases.     (my emphasis)

Specifically for BIG GOLD subscribers, the company has agreed to lower the minimum amount from $250 to just $100 per month. If you sign up for a risk-free 3-month trial to BIG GOLD today, you can read all about this unique program and get the link to take advantage of this special subscribers-only offer… as well as our portfolio of deeply undervalued gold stocks.

You have 3 months to decide if it’s right for you—if not, for whatever reason, just cancel for a full refund, or a prorated refund after the 3 months are up. Click here to read more about BIG GOLD or start your risk-free trial now.

By Jeff Clark, Senior Precious Metals Analyst

http://www.caseyresearch.com/go/vuu7n-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

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