By Louis James, editor, International Speculator
True story: when I was welcomed to the Casey team in 2004, I barely had two quarters to rub together in my pocket. My credit cards were charged to the hilt. My rust bucket was on its last gasp. My future was very uncertain.
But I was willing to learn what Doug Casey had to teach.
Flash forward to 2008. Thanks to Doug’s lessons, I had a lovely home in the mountains. I was driving a sports car. I enjoyed traveling around the world to be with family and friends (not just work).
When the crash of 2008 hit, thanks again to what Doug taught me, I suffered negligible losses. I was still driving my sports car while others were hawking theirs. Best of all, I was able to see the speculative opportunity in oversold assets. Flash forward again. I now have an even nicer home—on the beach this time. And my net worth has increased substantially.
This matters, because…
A) If I can do it, you can, too.
B) There are opportunities you can take advantage of now, just as I did in 2004 and 2008…and, indeed, am doing again right now, myself.
I can teach you what Doug taught me…
Market Cycles Are Our Best Friends
These words are usually said in exasperation or disgust. Whether it’s bureaucratic stupidity or in-laws in bad moods, predictable = bad. “He’s so predictable!” is an insult.
But for investors, predictability is the Holy Grail.
Whether it’s the price of coffee, a new Apple product, or the next decision by the Fed, if you know what’s coming, you can make a fortune.
The future cannot be known, of course, but some markets are highly cyclical. That makes them very predictable.
It’s like the annual flooding of the Nile. This highly predictable event refreshed the soil, the basis of ancient Egypt’s wealth. The ability of the elite to predict this made them godlike kings of phenomenal wealth and power.
For better or worse, the Nile in Egypt was dammed in 1970 and it no longer floods.
Fortunately for us, resource commodity markets are perhaps the most cyclical markets in the world. No force in the world has been able to stop their floods. This is the key fact used by legendary speculators like Doug Casey to make literally millions of dollars each cycle.
It’s vital to understand this…
Commodity Cycles = Stock Market Time Machine
Imagine what it would be like if you could travel back in time and buy Apple shares when the stock was trading for a dollar. Or if you could travel back to sell Enron, before that scandal broke. Or identify Bernie Madoff’s Ponzi scheme.
When you can predict a market, it’s almost as though you own a time machine.
That’s where the key fact mentioned above comes in: resource markets have a well-established, highly predictable pattern of extreme ups and downs.
Periods of low prices cause mines and other sources of the essential raw materials the world depends on to shut down. Exploration virtually stops. And the resources that stay in production are depleted. This causes shortages, which causes prices to go back up.
Because new mines, oil fields, and such have to be discovered, it takes time for supply to catch up with demand, even with the incentive of higher prices. That makes prices surge dramatically, often hitting new records. Those record prices cause overinvestment and eventually oversupply. And that (you guessed it) causes prices to crash. Then the whole cycle starts over again.
Not all markets that rise and fall are cyclical. Once the market for pet rocks crashed in the 1970s, it never came back. But if the price of something absolutely essential, like oil or iron, crashes, you know it must come back. It’s either that or we all go back to the Stone Age. Literally.
And there’s nothing in the world like knowing what must happen, when you’re an investor.
Take copper, for example. Back at the turn of the millennium, copper was selling for about 70 cents per pound. That was below the cost of production for most mines. But the world wasn’t done with copper. Can you imagine? No copper basically means no electricity. Something had to give, and so it did. Copper shot up to $4 per pound by 2008. It corrected along with everything else that year, then rebounded to more than $4.50 by 2011.
But here’s another key point successful speculators understand: Resource company stocks offer leverage to their underlying commodities.
So, when copper was up 5.7 times in 2008, shares of major copper miner Freeport-McMoRan soared from $3.98 to $58.60. That’s a 1,372% gain. And while copper rose about 2.5 times from 2008 to 2011, Freeport shares shot up four times, from $11.99 to $60.
Fortunately for you, our predictable markets are cycling again. There are opportunities for you now like the ones we had back in 2008, or even all the way back to the very bottom in 2001.
Best of all, speculation is a profession open to all. No formal education, credentials, or licenses are required. But it carries a stigma…
Here at Casey Research, we’re known for taking on unpopular topics: financial crashes, depression, hyperinflation, the alternative economy, and even hoarding. These are all buzzwords that arouse vivid images and strong emotions. Perhaps the most powerful word of all, however, is “speculator.” It sounds so irresponsible. Opportunistic. Dangerous.
Politicians and pundits throw the word “speculator” about so abusively. But few have ever asked what one really is. Most people think a speculator is someone associated with shortages, price hikes, wars, natural disasters, and other calamities. To a degree, it’s true. These things create needs that speculators can meet. It’s also true, however, that a speculator is simply someone who sees or anticipates distortions in the marketplace and takes position to take profit from them. This is possible because a good speculator understands their causes (almost always some form of government action) and effects.
Speculation will be the foundation of dynasties in the turbulent years ahead. The original Baron Rothschild knew how to profit from the politically created chaos of the French Revolution. He became rich and famous by following his own advice to “buy when blood is running in the streets.”
That doesn’t mean speculators are predatory. Actually, they’re humanitarians. When people are desperate to sell their possessions, they appear with cash—the very thing people need most.
When people change their minds and clamor to buy during good times, speculators once again graciously accede to the desires of the majority. Like other workers, speculators try to give their employers what they want. Value is subjective. The price at which something voluntarily trades hands is exactly what it’s worth at the time. Speculators simply give value for value. If they weren’t there to buy and sell, perhaps no one would be, and others would have no alternative but complete disaster.
Somehow, speculators have acquired an image of crass gamblers. It’s a totally inaccurate image, at least for successful speculators. The best speculations are always low-risk. Far from taking risks, speculators search for “sure things.” They tend to be rational and unemotional. The irrational and emotional who take chances don’t last long.
A simple but useful way to think of the speculator vs. an investor is this:
Investors risk 100% of their money in the hopes of receiving a 10% gain while speculators risk 10% in anticipation of earning 100%.
If you are attentive, the longer-term risk/reward profile for the speculator is in an entirely different league than that of the “conservative” investor.
These days, the masses are frantically looking for safe harbors against the gathering storm.
Speculators are accumulating positions in real things people will need and want in the years ahead. That means commodities in general and precious metals like gold in particular. And as I said above, stocks in quality companies delivering these goods can multiply our gains on these moves.
Now is the time to act.
P.S. The moment to make your move is approaching. According to Doug, gold stocks are in the early innings of a “true mania.”
To help you take advantage of this incredible opportunity, Doug’s sharing his “Casey Method” to picking winning gold stocks. To learn more about Doug’s secret money-making strategy—and how to access the top 9 gold stocks to own today—watch this short presentation.