Published January 06, 2017

This Is “Every Speculator’s Dream”

Editor’s note: Yesterday, Crisis Investing editor Nick Giambruno told us about two stories every investor should be watching right now.

Today, Nick is back to discuss two serious dangers most people haven’t even thought about. He also reveals his No. 1 investment idea for the year.


Justin Spittler, editor, Casey Daily Dispatch: Nick, let’s start with the bad news. What are a couple threats most investors have ignored?

Nick Giambruno, editor, Crisis Investing: I think the petrodollar system could begin to unravel this year. It’s my number one “black swan” event for 2017.

The petrodollar is an arrangement between the United States and Saudi Arabia. It basically ensures that every oil transaction by the Organization of the Petroleum Exporting Countries (OPEC), a cartel of 13 major oil-producing countries, is done in U.S. dollars.

The system has created a deeper, more liquid market for the dollar and U.S. Treasuries. It’s allowed the U.S. government and the average American to live beyond their means for decades.

Most importantly, the petrodollar is the glue that holds the U.S.–Saudi relationship together. But the system, which has been in place since the 1970s, is starting to fall apart.

J.S.: How so?

Nick Giambruno: The geopolitical sands of the Middle East are rapidly shifting.

Saudi Arabia’s regional position is weakening. Iran, which is notably not part of the petrodollar system, is on the rise. U.S. military interventions are failing. And the emerging BRICS (Brazil, Russia, India, China, and South Africa) countries are creating potential alternatives to U.S.-dominated economic/security arrangements. None of this bodes well for the petrodollar.

But Saudi Arabia’s weakening position is easily the weakest link in the petrodollar system today. That’s because the stars are aligning against the Saudi kingdom. The country hasn’t been this vulnerable since it was founded in 1932.

J.S.: What can investors do to protect themselves or profit from the collapse of the petrodollar system?

Nick Giambruno: Gold is by far the best way to profit from the end of the petrodollar.

You see, the petrodollar system was put in place after the U.S. dollar went off the gold standard in 1971. It’s the main reason why the dollar is still the world’s reserve currency.

When the petrodollar inevitably collapses like I expect, it’s going to rattle the global monetary system in a way not seen since the end of the gold standard. And, as you may know, this caused the price of gold to skyrocket from $35 an ounce in 1971 to $850 an ounce by 1980. That’s a staggering 2,300% rise in only nine years. Gold mining stocks, which are leveraged to the price of gold, did even better.

I expect the returns to be at least this great after the end of the petrodollar. We’re talking about a truly once-in-a-generation kind of investing opportunity.

I think this could happen sooner than most people think…

That’s why I laid out a blueprint that explains how to profit from the collapse of the petrodollar system in the latest issue of Crisis Investing. As I explained in that issue, you won’t want to find yourself on the wrong side of history when this happens.

J.S.: Are there any other hidden dangers our readers should know about?

Nick Giambruno: The unsound banking system is a threat most people have never even considered.

You see, most folks assume the banking system is safe. Boobus Americanus thinks he actually owns the money in his bank account.

But that’s not true. Once you deposit cash in the bank, the money is no longer your property. It belongs to the bank. What you actually own is a promise from the bank to repay. It’s an unsecured liability.

In other words, money in a checking account is less secure than cash you would stick under your mattress. Of course, 99.9% of people don’t realize this.

J.S.: Why shouldn’t people trust banks with their life savings?

Nick Giambruno: When you put money in your checking or savings account, you become a creditor of the bank. If the bank gets in trouble, you’re going to get burned.

This wouldn’t be a problem if banks were responsible with deposits they’ve been trusted to look after. But most banks gamble with people’s money. They bet on risky investment fads like mortgage-backed securities. This happened on a grand scale during the last financial crisis.

Of course, we’ve all been told the government will have our back if the banking system runs into trouble. After all, the Federal Deposit Insurance Corporation (FDIC) supposedly insures our deposits up to $250,000. That’s far more money than the average person keeps with their bank. This makes people think their money is safe.

But it’s a false sense of security.

J.S.: Why’s that?

Nick Giambruno: The FDIC only has about $30 billion set aside in emergency funds.

That sounds like a ton of money. But the FDIC insures around $9 trillion in deposits. In other words, the FDIC hasn’t even set aside one penny for every dollar it insures.

There are also at least 36 U.S. banks with more than $30 billion in deposits. If just one of these banks fails, it could completely clean out the FDIC. That’s not even that unlikely, given how leveraged U.S. banks are at the moment.

In short, the global economy is based on unsound banks dealing in unsound currencies. It’s a mile-high house of cards that looks wobblier by the day.

Oddly, these facts don’t seem to shake the confidence the general public and most financial experts place in the banking system.

J.S.: Scary stuff. What can people do to protect themselves?

Nick Giambruno: Many people put more thought into what reality show they’re going to watch on TV tonight than which bank they choose to be custodians of their savings. Many don’t even realize they have other practical options.

There are banks in stable jurisdictions with low debt that don’t gamble with customer deposits (i.e., your money). Many of these banks are much better capitalized, keep more cash on hand, and are otherwise much more conservatively run than those in the U.S.

These offshore banks are almost always more responsible custodians of your hard-earned savings.

Doug Casey and I describe how you can do it all from home in a free report. And there’s still time to get it done without extraordinary cost or effort, but you need to act quickly. Click here to download the PDF now.

J.S.: What about opportunities? Where do you think people stand to make the most money this year?

Nick Giambruno: If I were putting my own money into something today, it would be uranium, hands down. It simply has the most explosive upside.

Doug says, “When the market wants into gold stocks it's like trying to force the contents of the Hoover Dam through a garden hose. In the case of uranium stocks, it's more like a soda straw.”

Take Paladin Energy. Doug recommended this company during the last uranium bull market, and it leaped from one penny to $10 per share. That’s a 1,000-fold increase.

A $10,000 investment could have exploded into $10 million.

Even the worst-performing companies in the uranium sector delivered 20-to-1 returns during the last bull market.

Uranium can deliver these almost unbelievable returns because of unique supply-and-demand quirks that create colossal bull and bear markets.

J.S.: Hasn’t uranium been in a bear market for almost a decade? What makes you think the market is finally going to turn around?

Nick Giambruno: The price of uranium has plunged more than 85% from previous highs. Longtime readers know Doug often says any asset down more than 90% deserves a look. In this case, uranium is close enough for consideration.

Right now, uranium is selling for far less than it costs to produce. Very few uranium companies are making money. That’s led to a huge decline in global uranium output.

Today, the uranium industry is producing about 50,000 tonnes per year while the global economy consumes about 68,000 tonnes of uranium each year. That means we’re looking at an annual deficit of around 18,000 tonnes.

Global inventories make up the shortfall, but they may not be able to for much longer.

You see, almost no one knows how much uranium is currently in storage. Governments and companies keep this a secret. Most experts I’ve spoken with say global uranium reserves could enter the “danger zone” within a year.

If the price of uranium doesn’t rise soon, some of these mines could shut down. If enough companies fold, lights across the world could go out.

But I don’t see that happening. I think it’s much more likely that uranium prices will surge. It’s the only cure for this brutal bear market in uranium.

J.S.: So we could be looking at a major supply crunch in the near future? What about on the demand side?

Nick Giambruno: It’s picking up. And new nuclear power plants in China, India, Taiwan, and South Korea practically guarantee that this will continue.

China, which currently accounts for 8% of global uranium demand, is expected to overtake the U.S. (29% of demand) as the world’s largest uranium consumer by 2030. The country sees nuclear power as the best way to reduce its huge air pollution problem, since nuclear power is essentially “zero carbon.”

J.S.: Is there anything else that could lift uranium prices?

Nick Giambruno: Definitely. Donald Trump.

As you probably know, Trump is strongly pro-energy. But most people don’t know that he’s pro-nuclear energy. A few years ago, he said, “I’m in favor of nuclear energy, very strongly in favor of nuclear energy.”

Nuclear energy also fits right in with Trump’s “America First” platform. It’s critical for securing the country’s energy independence.

This is huge. You see, nuclear power doesn’t have a great reputation. Many people associate nuclear power with meltdowns at places like Fukushima and Three Mile Island.

But fears surrounding nuclear power are largely grounded in paranoia, not facts.

If Trump can convince the public that nuclear power is good for the country, uranium prices could soar. Shares of uranium companies, which are some of the most beaten-down stocks in the world, could go parabolic.

Overall, I can’t think of another asset with more upside and less risk than uranium. It’s every speculator’s dream, and easily my number No. 1 speculation for this year.

J.S.: Good stuff as always, Nick. Thank you.

Nick Giambruno: Anytime, Justin.


Editor’s note: In November, Nick recommended a world-class uranium company. This stock is already up 19% in just two months.

A month later, Nick “doubled down” on his bet by recommending a second uranium company. Shares of that company, a junior miner, have surged 29% since Nick recommended the stock just over a week ago.

These are huge gains for such short periods. But these stocks could easily rise 5, 10, or even 20 times higher than they have already if uranium prices soar like Nick expects.

Of course, you have get in front of the crowd if you want to have any shot at these kinds of life-changing returns. You have to buy uranium stocks when they’re trading for crisis prices…like they are right now.

You can learn about Nick’s top uranium stocks by signing up for Crisis Investing. Click here to get started.

In case you missed it: Casey Research founder Doug Casey recently sat down with Maurice Jackson of Proven & Probable to discuss his brand-new novel, Speculator. In this interview, Doug also talks about the art of speculation, the institution of government, precious metals, and more. Click here to listen.