Dear Reader,
It’s been quite a week. So much so, I feel the need to step back a bit and fill my lungs with a mind-clearing deep breath.
I refer, of course, to the midterm elections and to the Fed’s latest money bomb. I’ll get back to these issues, as well as the precious metals spike, momentarily.
First, however, I want to briefly touch on the reader reaction we’ve received in response to some of the articles we’ve run over the week, starting with some rather personal musings in last Friday’s edition, titled “Casey’s Gulch.”
Many, many readers wrote supportive emails such as…
I am a subscriber who shares your beliefs, exactly. In addition, I have tremendous admiration for you that you have the courage to express them publicly, risking the disapproval of your subscriber base. Your honesty, integrity and insights are much appreciated. Bill
I’m blushing, and am confirmed in my view that our dear readers are of the best sort of people.
Even so, there were those with a rather less charitable view. And I quote…
If you reject Yahweh and his son Jesus Christ, you will be forced to publicly confess Jesus (Phil 2:11) immediately prior to being cast into the lake of fire, where you will spend eternity with Satan and his demons – tormented day and night -- forever and ever -- in darkness -- with shame and regret.
… Our Lord does not care if you are a good person. His only concern on that day will be whether or not you accepted His son.
To which I can only say, Egads! Gazooks!
(At least I won’t be alone in my torments. Based on the latest data available, there are 6.9 billion people in the world today, of which just 30% are Christians.)
On Monday, in my article End of the Statist Quo, and especially with Sweet, Sweet Schadenfreude and Perspective on Tuesday and Wednesday, I reinforced my skepticism about the true impact of the elections. Especially as they relate to the continuing economic crisis… a crisis we expect will get much worse before it ends.
Again, these articles encouraged a range of opinions, most of them in support of my key thesis that might be summed up as, “Be optimistic if you want to be, but don’t forget to duck!” Wrote one reader…
Today’s Dispatch (Nov 3) really nailed the problem with expecting anything positive to result from this latest election. There is simply no way these new senators and representatives will follow through on their promises if they hope to be reelected.
Yet some of you took a different view…
Saying that Reps and Dems are the same thing is most unfair. Congressmen may be, but Baby Bush King of Cretins is a Republican. Bush turned a Democrat surplus into a huge deficit, Bush is the all-time champion of debt increase, Bush made two useless and criminal wars, which led to a big increase in terrorism, Bush oversaw the mother of all bubbles, under Bush unemployment exploded. Bush ruined America for good, at least for our lifetime. Compare that to Clinton.
While I share the dear reader’s dim opinion of Bush, I do find it interesting that he didn’t close his comments with “Compare that to Obama.”
Some Republican readers, however, took umbrage at my questioning whether the new team in Congress had the political will required to tackle the hard challenges now overhanging the country…
Sorry, I beg to differ. There are plenty of Republicans who advocate more reform than maintaining the status quo on government size and authority. Do not be fooled by the fact that the party's liberal wing, led by the Bush/McCain/Nixon types, has managed to hang on to a few shreds of leadership. They are a declining force. The party is increasingly dominated by much more libertarian types who desire a return to constitutionally limited powers, which would roll back up to 75% of the federal government. This is the position of those like Eric Cantor, who is in line for number two leadership in the House.
Others just plain took umbrage…
This is intolerably childish. If you have some actionable intelligence, something useful, I might consider spending more time here because you are capable of so much more. I know because I have read it. This is exactly why America, at least, is broken. This attitude of, "I want what I want and I want it now, and I don't and won't care about anybody else, it's all about me and my profits," is a tribal mentality that causes extreme sub-optimization. Right now this is part of the problem, not part of the solution.
While I might not like the finger wagging, that dear reader’s comment about “actionable intelligence” brings me – finally – to the point of today’s missive.
All of those emails and hundreds more reflect the fact that when I sit down each morning to write Casey’s Daily Dispatch, I’m writing to somewhere on the order of 110,000 individuals, each of you unique beings with the distinct attitudes, needs, net worth, prejudices, biases, foibles, and quirks that make us humans such a remarkable and interesting species.
Unlike our tightly focused paid research services, which have smaller circulations – and some, like Casey’s Energy Confidential and Casey’s Investment Alert, are quite small for the simple reason that if they were any larger, the buying power they generate would overwhelm the early-stage micro-cap companies followed – this larger free service has a far broader mandate.
Which I would describe as thus:
In addition to those general guidelines, I feel compelled to mention that I view this service as something of a self-indulgence. I read voraciously and have been a steady diarist since my early teens. In the beginning, I shared some of my scribbling on weekly basis as a way to stay in touch with our paid subscribers. Then, over time, it morphed into a daily service that, while it certainly takes a lot more work, I still view as a pleasure to write.
Much of that pleasure derives from the fact that, with very few exceptions, I really like the Casey Research subscribers I’ve come into contact with. In addition to our face-to-face meetings at summits and in Argentina, not a day goes by that I don’t get some joy out of reading and – when possible, responding to – your many insightful emails. My list of regular correspondents now extends around the globe, from Katmandu and Malaysia, to the UK, Germany, Greece, Australia, New Zealand, etc., etc.
And so my periodic assertion that “together, we’ll get through this” is heartfelt. In fact, I feel sorry for anyone trying to sort through all that’s going on with only the USA Today, Wall St. Journal, or the advice of their broker for guidance.
As some dear readers, including the aggravated individual quoted above, apparently have trouble discerning the actionable information contained in these musings – and especially the discussion of politics that has dominated our musings this week – let me try to connect the dots.
It’s our contention that the outcome of the elections is all but meaningless, given the scale of the unaddressed problems still hanging over the U.S. and global economy. To actually address those problems – versus just talking about them – would require the politicians to literally toss away the playbook. They’d have to be willing to turn their backs on the cries of their constituents, then set about swinging a sharp ax here, there, and everywhere, and continue swinging until they had hacked 50% or more out of the federal budget.
And in the process, they’d have to adopt a new monetary system that assures that never again can government outgrow a strictly limited role of core purposes, or spend more than the tax revenues it raises in supporting that limited role.
This is not a process that can be gently instituted over time… but must be done expeditiously, almost overnight, if it is to have any chance of making it through the political tangle of this degrading democracy.
Only then, only by effectively punching the “reset” button on the American experiment, will the country climb out of the crisis and regain its momentum toward a more prosperous future.
At least that’s the way we see it here at Casey Research, a view that we support with hard data and the clear observation that the trend now in motion leads only to a currency crisis that, in time, will wipe out the savings of anyone not taking steps to protect themselves now.
At this juncture, the nation’s leaders can try to manage the reset, for example by keeping the public informed as to why such deep cuts – and the attendant pain – are necessary if America is to get back on track to a brighter future.
Of course, this is sort of dystopian utopianism will never come to pass. The political system just won’t allow for it.
And so, instead, the reset will only happen as the result of a hard crash – and in the midst of a dangerous panic that could quickly lead to ever more dire consequences.
Now, before you come to the conclusion that I’ve gone mad, I want to provide you with solid evidence that there’s almost no hope that this week’s rearranging of the chairs in Congress will make the slightest difference in turning around the runaway train of government, or the wreck that waits around the proverbial next corner.
The evidence can be seen in a short interview with one of the new Tea Party congressmen now headed into Congress with a purportedly steely determination to turn things around.
Importantly, in this age of unabridged media bias, the interview is conducted by a Fox News reporter, Shep Smith, whom I’ve never seen before (because I avoid the mainstream news), but who can now count me among his fans.
Stop everything, call the family around, and click here to watch the interview.
With thanks to Tom E. for sending that interview link along, I’ll forge ahead.
Which brings me back to the actionable thing.
Imagine if you knew, right now, that big government, with all its attendant big spending and big problems, was going to continue to grow, largely unabated, for the foreseeable future?
How would you structure your affairs? Would you continue to keep most of your assets in U.S. dollars?
Would you view today’s precious metals prices as too high?
Given that the overhanging structural issues we’ve been talking about will have to be resolved before this is crisis is over, would you run out to buy a “cheap” house today? Would you buy financial stocks because some pundit tells you it’s safe to go back into the water?
On the flipside, might you buy gold and silver stocks during the inevitable corrections? If you’ve been trying to sell a property, might you drop the price in order to clear it out and reallocate the capital you can save to an asset class with more upside?
I could go on, but the point is that just as we have been jumping up and down about the need to buy gold and silver for the last ten years, we are now hopping from foot to foot warning you not to be complacent about where we are in this crisis.
If we’re right, and we’re convinced we are, then you can see what’s coming and, more importantly, take active measures to protect yourself and to profit.
Of course, it’s entirely feasible that the government will get tired of seeing its currency compare unfavorably against gold and again make owning the stuff illegal, but so far there have been no signs of that. If there were, then we’d adjust as best we can (there’s a reason that we like foreign real estate as an alternative asset class for the diversified portfolio) – but for now, we have to play the hand in front of us.
And that hand is obvious to us… the worst of this crisis is still ahead… as are some of the biggest profits from anti-fiat currency plays such as those related to precious metals.
It has been a mission of mine this week to make this point clear. If I have gotten through to most of you, then I’ve succeeded.
Of course, some of you may wish to go your separate way, and I would only wish you the very best of luck.
For the rest of you, while I won’t tell you we’ll always be right, you can be sure we’ll always tell it like we see it.
Continuing on with what I hope is useful information, a word is in order about the precious metals.
As I write, gold is back in record territory, surging from $1,313 a month ago, to over $1,390 as I write. Paid subscribers to our International Speculator service, which focuses on the junior resource companies – mostly gold and silver – have seen stunning gains in recent months.
To make the point, I just grabbed charts of the recent performance of a handful of the stocks we have been recommending in the International Speculator and pasted them below. While I can’t give you the names of those stocks in this publication – for a couple of reasons, not the least being that it would be a mistake to jump into any stock at this point without the ongoing guidance provided paid subscribers – the picture they paint is of big profits.
Especially when you consider that most investors these days are happy to earn 3%, “sort of” keeping up with inflation.
Now, it’s important to understand a few things at this juncture.
First, while certainly helped along by rising precious metals, there are other circumstances – discoveries, big drill holes, and takeovers, for example – involved with the performance of many of our recommended companies. These are thinly traded stocks, and so when a pivotal event occurs for any of them, they take off – with 100% or better short-term gains not all that uncommon.
But it’s important to remember that most junior resource stocks have little or nothing going for them, and buying indiscriminately will likely end poorly, no matter what the metals do.
While these stocks are certainly getting more attention – 10 years ago no one and nobody had any interest in them – we still are nowhere near the Mania stage. The truth in that can be determined by asking your ten best friends or colleagues if they own gold, let alone junior gold stocks.
The mania will occur only when it becomes as apparent to the rest of the world as it to us that – with the scale of the debt and interest rates bumping along near zero – high inflation is the only politically acceptable option left to the government and its friends at the Fed. Bernanke’s actions this week should have made that point crystal clear and, based on the subsequent action in the precious metals markets, it is obvious that some investors are beginning to “get it.”
In this scenario – and try as hard as we do, we can’t see a more likely alternative – the best way to protect yourself will be in hard assets, most specifically gold and silver, but also oil and other tangibles. And, for leverage, high-quality companies involved in the finding, developing, or producing of those commodities will serve you best.
To state the obvious, I can’t wave a magic money wand over anyone and make them rich – but I can do the next best thing, which is to show you where to go to learn everything you need to know about the best of the best investments in these sectors.
And that is to CaseyResearch.com, where you can sign up for a no-risk three-month trial to any of our publications, including the International Speculator (because of the even smaller, early-stage companies followed in the Casey Investment Alert, that service is currently closed to new subscribers).
If you aren’t willing to educate yourself with a subscription, even when you can receive a 100% refund of your subscription fees at any time in the first three months, then I’m afraid you’ll miss out on the best Casey Research has to offer. And a year down the road, you’ll be kicking yourself at the lost opportunity.
You may view that as a “pitch,” and obviously it is. But with the full guarantee and the amount of information that awaits to you without risk, it’s a pitch I am very comfortable making.
Here’s a link for those of you wanting to learn more and get started today.
For those of you who have already positioned themselves and are now sitting on big profits, what should you do in light of the recent large returns? Sell some or hang on for the mania?
Tough question, but one a lot of you have been asking lately.
To help answer it, here’s a note from Louis James, Casey Research senior metals analyst and editor of the International Speculator.
Time for a Casey Free Ride
Dear readers,
Wednesday’s announcement of a massive new liquidity injection by the Fed is clearly bullish for gold. In spite of some initial weakness that some believe was engineered, the market saw the situation for what it is – a precursor to higher inflation – and sent gold to a new high closing price yesterday, and has pushed it to within pennies of $1,400 in intra-day trading, so far, today.
Now take a look at this chart of percent change in price for gold, the TSX-V, and one of our companies that happens to be at the top of the alphabet.
As would be predicted by anyone who’s watched these markets for any length of time, the TSX-V, where most junior exploration companies are listed, is up more than gold itself. And Alexco shares, representing high-grade silver (which moves with gold), are up even more.
This is typical, and indeed the reason we buy such shares and not just gold or silver itself. The word is leverage.
KEY POINT: markets don’t only go up, and what leverage adds on the upside, it takes with a vengeance on the downside.
So, this note is just a friendly reminder to all our readers that you should take profits when you have them. I’m not referring specifically to Alexco here (though it is up 140% from a year ago), but to any big winners in your personal holdings. If this latest spike has given you your first double or better on any of your shares, we recommend selling half or at least recovering your initial investment.
This does reduce your upside in those shares, should they continue higher, but it completely eliminates any risk you have in the play. Let me repeat that: You still have the same exposure to the upside you started with, and ZERO risk. That’s the Casey Free Ride, and I heartily encourage you to take it.
What to do with the cash? There are plenty more good stocks out there you can buy, and I’m working on more opportunities to report to you soon.
Sincerely,
Louis James
Senior Metals Analyst Casey Research
Sound advice.
While politics was a dominant theme in these missives this week, and in other weeks as well – but only because government has grown to be such a dominant influence in the economy and investment markets – next week we’ll attempt to dial it back a bit.
But this week I felt certain things had to be said, and so I said them. But please don’t misunderstand anything I said this week – none of it was meant to advocate one political party over another. They both got us into this mess, and neither now has the willpower, or even the ability at this point, to get us out without first going through a economic calamity.
While you may think my message as being pessimistic, and it is, unfortunately, I also think it’s realistic.
Vigilance.
And now, because it’s Friday, let’s have some fun!
Zombie Bank
Fat cat bankers, zombies, there’s much to like about this funny video… Zombie Banks! Click here to watch.
Old dog
One day an old German Shepherd starts chasing rabbits and before long, discovers that he's lost. Wandering about, he notices a panther heading rapidly in his direction with the intention of having lunch.
The old German Shepherd thinks, “Oh, oh! I'm in deep doo-doo now!” Noticing some bones on the ground close by, he immediately settles down to chew on the bones with his back to the approaching cat. Just as the panther is about to leap, the old German Shepherd exclaims loudly, “Boy, that was one delicious panther! I wonder, if there are any more around here?”
Hearing this, the young panther halts his attack in mid-strike, a look of terror comes over him and he slinks away into the trees. “Whew!” says the panther, “that was close! That old German Shepherd nearly had me!”
Meanwhile, a squirrel who had been watching the whole scene from a nearby tree, figures he can put this knowledge to good use and trade it for protection from the panther. So, off he goes.
The squirrel soon catches up with the panther, spills the beans, and strikes a deal for himself with the panther.
The young panther is furious at being made a fool of and says, “Here, squirrel, hop on my back and see what's going to happen to that conniving canine!”
Now, the old German Shepherd sees the panther coming with the squirrel on his back and thinks, “What am I going to do now?”, but instead of running, the dog sits down with his back to his attackers, pretending he hasn't seen them yet, and just when they get close enough to hear, the old German Shepherd says...
“Where's that darn squirrel? I sent him off an hour ago to bring me another panther!”
Moral of the story...
Don't mess with the old dogs... Age and treachery will always overcome youth and ambition! And BS and brilliance only come with age and experience.
Add to Your Vocabulary!
Every year The Washington Post Style Invitational challenges readers to alter any word from the dictionary by adding, subtracting, or changing one letter, and to supply a new definition. Here are a selection of the winners:
Cashtration: The act of buying a house, which renders the subject financially impotent for an indefinite period of time
Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.
Bozone: The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.
Giraffiti : Vandalism spray-painted very, very high
Sarchasm : The gulf between the author of sarcastic wit and the person who doesn't get it.
Osteopornosis : A degenerate disease. (This one got extra credit.)
Karmageddon : It's like, when everybody is sending off all these really bad vibes, right? And then, like, the Earth explodes and it's like, a serious bummer.
Decafalon: The grueling event of getting through the day consuming only things that are good for you.
Glibido : All talk and no action.
Dopeler Effect: The tendency of stupid ideas to seem smarter when they come at you rapidly.
Arachnoleptic Fit: The frantic dance performed just after you've accidentally walked through a spider web.
Caterpallor : The color you turn after finding half a worm in the fruit you're eating.
Treasury Direct for Kids!
Our own Jake Weber sent this along…
I was on the Treasure Direct website looking up the date of the original 5-year TIPS auction, when I noticed a section on their website called "Treasury Direct Kids." Out of curiosity, I had to look at what on earth the Treasury website could have for kids – not to mention, how often do children inadvertently find themselves on the Treasury website searching for entertainment? Well, from the video on the homepage, it appears its purpose is to start promoting government bonds to kids at a young age:
http://www.treasurydirect.gov/kids/art/tv/tv_16.htm
John Wayne explaining that the U.S. has been elected sheriff and that we need to buy our freedom, and then Rocky and Bullwinkle explaining how buying government bonds will make you rich enough to buy a 27-bedroom house, were my personal favorites. Put this one in the "scary" funny column. I wonder if SpongeBob Squarepants promoting government bonds will mark the height of the current bond bubble?
I thought I would sign off this week with the following reminder of the importance of keeping things in the proper perspective.
In 1923, Who Was:
1. President of the largest steel company?
2. President of the largest gas company?
3. President of the New York Stock Exchange?
4. Greatest wheat speculator?
5. President of the Bank of International Settlements?
6. Great Bear of Wall Street?
These were considered some of the most successful men in the world at the time.
Now, over 80 years later, the history book asks us if we know what ultimately became of them.
The Answers:
However,
In that same year, 1923, the PGA Champion and the winner of the most important golf tournament, the U.S. Open, was Gene Sarazen.
What became of him?
He played golf until he was 92, died in 1999 at the age of 95. He was financially secure at the time of his death.
The Moral:
Play golf and enjoy life!!
Until Monday, thank you for reading and for being a Casey Research subscriber!
David Galland
Managing Director
Casey Research