Welcome to the Room - September 15, 2006

David Galland, Partner, Casey Research
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Last Updated: September 08,2006

Dear Subscribers,

Trying to keep one eye on the news seems to be getting harder by the day. That by virtue of the fact that there are just so many interesting things to take notice.

For instance, just this week the items that caught my attention include…

  • The Navy has a rule that sailors with debts exceeding 30% of their incomes are unable for overseas deployment. Since 2000, the number of sailors whose security clearances were canceled due to debt problems has risen 1,600%.


  • Last week, on a trip to China, Venezuela’s President Hugo Chavez announced several new deals that will, among other things, create two joint ventures with Chinese state-owned companies for the purpose of producing oil from Venezuela’s Orinoco Basin and trot it off to China to the tune of around 500,000 barrels a day. Said one knowing soul, “For American’s oil interests, this could be the marriage made in hell.”


  • Speaking of our Chinese competitors, they have openly played their political card in Africa, informing the poor citizens of Zambia that if they decided to vote a pro-Taiwan opposition candidate into power, they might have to do without the hundreds of millions of capital that China has promised to invest. Never much for political sensitivity, expect more of this sort of thing.


  • Waves are being made by one apparently intelligent though politically motivated critic who has called into question the well-established tendency for the reigning administration to push, pull and massage even large numbers in order to make things appear sunny. One Jim Cooper, a Rhodes Scholar and Harvard Law School Graduate who oddly decided on a career in politics, now serving as representative of the great state of Tennessee, used his education to do some number crunching on the Bush Administration's official budget and came to the conclusion that they were understated by an order of magnitude. Using numbers from the official U.S. Financial Report, released by the Treasury Department, he finds that the true national debt is $49 trillion, significantly higher than the $8.3 trillion reported by the current administration. Tellingly, that number has more than doubled over the past five years. Other tidbits include the fact that, last year, the government paid $327 billion in interest. And, despite its comments to the opposite, the true 2005 deficit was $760 billion, not the $318.5 billion reported by the administration.


  • Chevron, Devon and Statoil announced a discovery of what could be a sizable new oil reservoir in the Gulf of Mexico. The early estimates are that it could contain as much as 15 billion barrels of oil. That’s the good news. The bad is that the reservoir is located between 1.3 and 5.3 miles underwater. Meaning the development of the well will take years and require risking hundreds of millions of dollars that could be wiped out in a single hurricane. Without oil over $50 a barrel, the oil companies wouldn’t even think about trying to develop this. The net impact on the oil supply side of the equation is, at this point and for many years to come, nil.


  • A report this week reported that labor costs in the U.S. rose 4.9 percent in the second quarter after gaining 9 percent in the first quarter, the biggest back-to-back increase since 2000. As discussed here last week, labor costs are the single most important component of the cost of things. Keep an eye on this space.

But what most caught my eye, because it is of some personal and professional import, is that gold is getting a bit beat up, yet again. Moving to just below $610 from a recent high of over $650.

Are Doug and I concerned? At the risk of being cavalier, the answer is “not at all.”

That’s because volatility in gold (and silver) is inevitable as they work their way higher. So, paying too much attention to it, other than to watch for opportunities to buy more quality stocks on the pullbacks, really serves no useful purpose.

How can we be so sanguine about even the steepish drops? For the answer, take a tour back through the archives of the International Speculator for the last year or so. What you’ll find is a rock-solid argument why the bull market in gold is all but inevitable (I would leave off the modifier “all but,” but only death is truly inevitable).

And we here at Casey Research aren’t alone in our views. Even Rick Rule, the head of Global Resource investments and one of the most conservative resource stock investors in the business today told me a couple of days ago that he is expecting things to get wild on the upside in gold stocks in the near future.

As Doug has often commented, the time to buy is when you are not feeling bold, and the time to sell is when you are feeling overly bold. Based on the emails we’ve received this week, any number of our subscribers are not feeling particularly bold just now, but are rather concerned that despite the imminent end of the quiet summer season, gold and gold stocks aren’t taking off.

To which we can only caution patience and taking the time to read through the archives of the International Speculator in order to keep these gyrations in perspective.

And there’s one more thing you should seriously consider doing while the opportunity is still available…

Register today for the Casey Vancouver Gold & Silver Stock Summit
featuring the Explorers’ League Honorees Vancouver, British Columbia October 15 & 16, 2006


Unlike any other precious metals conference you may have attended, the limited-attendance Casey Summits are structured from the ground up to give you a rare and profitable opportunity to learn from, and rub elbows with, exactly the right people.

In addition to Doug Casey and a slate of leading resource stock investors and professionals, the Summit offers you a rare opportunity to meet with and learn from the world’s most accomplished mine finders and developers…. the EXPLORERS’ LEAGUE HONOREES.

The early registrations for the Vancouver Summit are well on track for repeat of the sell-out we experienced for the Chicago Summit.

If you are at all interested in participating in this uniquely profitable event, click on the link just below to learn more and to sign up using our secure online registration form.

http://www.regonline.com/Checkin.asp?EventId=101607&RegTypeID=77485


If you are at all interested in attending, don’t wait to reserve your spot at the Casey Vancouver Gold & Silver Summit.

Given where we are in the fast-developing bull market, this very timely event should offer you the biggest possible returns on the time and money you’ll invest in order to attend.

We look forward to spending time with you in Vancouver.

That’s it from here, for now.

Thank you for reading and for subscribing…





David Galland
Managing Director
Casey Research, LLC.

Sep 08, 2006