How Obama's Debt Reduction Plan
Will Impoverish Millions of Americans
and Cause the Greatest Transfer of
Money in Modern History
More money will change hands in this decade than at any time in the last 100 years.
People who don't protect themselves risk losing everything to deceptive government policies, but those who take action now will be on the receiving end of a historic shift of wealth...
Keep reading to learn how to become one of the recipients...
Dear Fellow Investor,
The US government is working hard to resolve the national debt crisis... but not in ways you might think.
Frankly, what they're doing should be outlawed.
Obama and his cronies are trying to reduce all that debt – an unsustainable $14.84 trillion dollars – through fueling the number-one enemy of the economy: inflation.
The result will be millions of Americans losing most of their hard-earned assets.
Granted, the government could also pare down debt through tax hikes and big spending cuts, but those are politically unpopular. Raise taxes, and people get angry about smaller paychecks... slash spending, and those who lose jobs or benefits from cut entitlement programs take to the streets.
If inflation falls too low or inflation expectations fall too low, that would be something we would have to respond to because we do not want deflation.”
Ben Bernanke, Federal Reserve Chairman
(Just look at what happened in Greece when the government implemented austerity programs to help pay down its debt – Athens was wracked with riots, looting, and arson.)
No, our leaders would rather take what seems to be the easy way out. They perceive inflation as being the most politically painless way of staving off the fiscal mess we're in.
But it will cause more pain than you can imagine...
How Washington is robbing your savings
Our politicians are using a number of different stimulus and bailout programs to try to inflate away the national debt, including getting the Federal Reserve to create money in order to buy US Treasuries. Although these programs differ from each other in intricate ways and go by a number of different names, their core purpose is to increase the total money supply.
And increase it they have.
As the following chart shows, since 2000 the Federal Reserve has more than doubled the amount of money in circulation – known as M1 – from about $1 trillion to $2.1 trillion (M1 also includes notes and coins, travelers' checks, demand deposits in commercial banks, and negotiable order of withdrawal deposits at credit unions and other non-banking institutions).
But M1 is just a small portion of the total amount of money that the Fed has pumped into the economy.
Take a look at this Federal Reserve chart of M2 (M2 includes M1, plus savings deposits in banks, time deposits of less than $100,000, and individual money-market deposit accounts).
U.S. Economy: Production Stalls on Autos, Housing Starts Drop”
Bloomberg Businessweek, May 17, 2011
How Increasing the Money
Supply Causes Inflation
Let's suppose a country's economy produces $1 billion in goods, and that each of these goods costs $10, making for a total of 100 million units (100 million x $10 = $1 billion).
Now let's further suppose that country doubles its money supply, but there's no change in economic output.
There would still only be 100 million units of goods, but twice as much money chasing them.
The eventual but inevitable result – a doubling in price to $20 for each unit.
You would now have an economy worth $2 billion, but the number of goods (and real usable value in the economy) would be exactly the same.
Bottom line: Twice as many dollars in an economy makes those dollars worth half as much unless there is a corresponding rise in economic output.
As you can see, the overall supply of money in the economy has increased by about 633% since 1980 – from $1.5 trillion to $9.5 trillion.
Imagine if you had the ability to magically increase your bank account by over 600%. It would be a lot easier to pay off your bills, wouldn't it?
Well, in effect that's our politicians' grand plan – use huge infusions of new dollars to pare down debt and fund government obligations.
But all this extra money in the economy will eventually cause higher prices. The reason is that there are many more dollars chasing the same amount of goods and services than existed before. This wouldn't happen if there was a corresponding increase in economic production, but that is definitely not the case.
The following chart of the US Dollar Index (a measure of the dollar's value relative to the exchange rate of six major world currencies) shows the dollar has dropped about 35% during the past decade.
As long as the government continues to inflate the money supply, this trend will continue...
This decrease in value reduces the purchasing power of every dollar you're holding in savings and investments. It's nothing short of sneaky politicians in Washington ROBBING you in order to pay for their out-of-control spending.
But the really horrible part of all this is that most Americans – most people worldwide, for that matter – are clueless about how to protect themselves from this government-sponsored thievery.
You sure can't protect yourself by dutifully depositing your money in the bank. Do that and you'll watch its value dwindle away... perhaps to nothing.
Make no mistake – your hard-earned cash won't simply disappear. Every day it will simply be worth less.
But there's an investment strategy that actually increases your purchasing power in this inflationary environment.
Investors who implement it will acquire assets that appreciate as the dollar declines (and if history is any guide, that appreciation could be breathtaking).
I want you to be one of those investors – not like most of your friends and coworkers, who will sit idly by and watch inflation rob them of everything they've ever worked for.
The strategy to get the assets I'm talking about isn't complicated. It isn't new, either. In fact, investors used it during the Great Depression to create fortunes...
How a few smart investors quintupled
their investments... while most portfolios shrank 60%
In September 1929, the Dow peaked at 381.17. Six years later, it was 127.27 – a loss of 66.7%.
If you had invested $10,000 in the Dow in 1929, by 1935 it would have eroded to $3,330.
But not all markets tanked during the Great Depression. Some – like the resource sector, which traditionally thrives in crises – performed well, with gold and gold miners leading the pack.
How big will the coming
wealth transfer be? No one knows, but consider this statement from David Stockman, President Reagan's budget advisor, as quoted in CBS News:..
"In 1985, the top five percent of the households, wealthiest five percent, had net worth of $8 trillion, which is a lot. Today, after serial bubble after serial bubble, the top five percent have net worth of $40 trillion," he explained.
"The top five percent have gained more wealth than the whole human race had created prior to 1980."
- Homestake Mining was $80 a share in 1929 and shot up to $495 in 1935, gaining 519% during a time of soup lines and dramatically falling living standards (plus, stockholders collected $128 in dividends during that time – $56 in 1935 alone!).
- Shares of Dome Mines were $6 apiece in 1929; by 1933 they had skyrocketed to $39.50, a gain of 558%.
Your $10,000 investment in each of these stocks would have yielded $65,800 for Dome Mines and $61,900 for Homestake... a far cry from the $6,670 loss you would have suffered by throwing your 10 grand at the Dow.
As you can see, those who had invested in these mining companies were on the receiving end of a tremendous wealth shift.
History repeats itself in 1973-1974, devastating the Dow... and rewarding
During the next great US stock market crash of 1973-1974, the Dow lost 44.6% of its value, from 1043.80 on January 3, 1973 to 577.60 on December 6, 1974.
During this time, inflation rose from 3.65% to 11.03%, reducing the purchasing power of every $10,000 to $8,897.
But once again, gold mining stocks performed extremely well.
The Barron's Gold Mining Index, which was comprised of the best mining stocks of the day, shot from 43 to 147, a gain of more than 260%.
Think about it. During a severe bear market when the Dow took a nearly 50% haircut... during a period of high inflation that stole 11% of your money's purchasing power... you would have turned every $10,000 investment into $26,000 just by holding your mining index shares for just under two years.
Now let's fast forward to today...
Current conditions are ripe for another huge transfer of money into the accounts of resource investors
On September 29, the Dow fell 778 points for its biggest one-day drop ever. The result – a loss of $1.2 trillion in market value.
The situation today is eerily similar to 1929 and 1973... yet things are actually far worse.
None of the nasty economic issues that caused financial markets around the world to tank in 2008 have been resolved. Quite the opposite, in fact...
- The eurozone is spiraling out of control, with a default by Greece all but certain.
- US debt is approaching $15 billion, with unfunded liabilities at $61.6 trillion* and growing by the day.
- Governments around the world are continuing to destroy their currencies by creating more money out of thin air, hoping against hope to inflate their way out of debt (according to the CIA's World Factbook, 10 countries were saddled with public debts of over $1 trillion in 2010, including $8.5 trillion for Japan, $2.4 trillion for Germany, and $2.1 trillion for Italy).
As it becomes increasingly obvious just how much purchasing power government-caused inflation is stealing from everyone, more and more investors will seek to protect their assets through buying gold and the companies that mine it... just like they did during the Great Depression and in the early 1970s.
But the festering global economy isn't the only reason gold and gold producers are poised to surge. There's another element at play – a rare occurence that I'm absolutely convinced will help you reap rewards in select mining companies that will dwarf the gains made in previous decades.
It's an anomaly in the precious metals sector that's going to accelerate the coming wealth shift. This anomaly will enable you to leverage the government's crackpot deficit reduction plan to huge gains.
But it's imperative that you position yourself immediately or you'll lose this historic chance...
The anomaly in the metals market that
can change your life
Here it is: Gold mining companies are underperforming gold itself by a wide margin.
This situation is highly unusual – mining stocks typically outperform gold by 3 to 1. And from 2001 to near the end of 2007, they did even better, outgaining the yellow metal by 5 to 1.
The following chart shows what I mean. It compares gold producers, as measured by HUI (the Amex Gold Bugs Index, shown by the red line), to the SPDR Gold Trust ETF (GLD, in blue), which is designed to track the price of gold:
|Gold stocks outperformed physical gold
by 5 to 1 from 2001 through 2007
But it's totally different today – this historical trend has completely reversed! Gold is now outperforming mining companies by a margin of about 3.6 to 1, opening up a rare opportunity for massive profits.
The next chart – again comparing gold producers, as measured by the Amex Gold Bugs Index in red, to physical gold tracked by the SPDR Gold Trust ETF in blue – provides a stark illustration...
|Gold stocks are lagging gold by 3.6 to 1 –
A rare divergence overdue to correct
What Big Investment Funds and Metals Analysts Are Saying About the Potential of Gold Mining Stocks
If money decides it has to come into this space, it's going to be like Internet stocks in the '90s, except that mining stocks are going to have real fundamentals.”John Embry, Chief Investment Strategist for Sprott Asset Management
Our analysis suggests that most of the gold producing companies appear undervalued... we recommend an overweight position in gold equities…”Dundee Capital Markets
I'm looking for gold stocks in general to be re-priced… Mining stocks will be producing great earnings, while the rest of the economy is stalling out...That to me will be very positive for mining stocks...”Tocqueville Gold Fund
We recommend investors take advantage of the strengthening precious metal prices by accumulating gold and silver equities.”Raymond James/Canada
Our analysis indicates that gold stocks are reflecting a gold price in the $1,200-$1,300/oz range.”Bank of America/Merrill Lynch
Many (gold companies) are still buidling models based on $1,000 gold. So to me, there's a lot of value still within the gold sector that has not been realized.”Blue Phoenix CEO John Licata
There is a substantial opportunity to buy healthy gold mining companies at historically low prices compared to gold...”US Global Investors Chief Investment Strategist Frank Holmes
While there's no guarantee this divergence will reverse, big investment funds – like Dundee Capital Markets and HSBC Global Asset Management – as well as many precious metals analysts are convinced it will...
“Gold and gold stocks offer protection that is going to become more valuable in the months ahead. It's possible that the long-awaited period, when gold stocks outperform bullion, is coming soon. ”
– BMO Financial Analyst Don Coxe
The bottom line: If – as the experts expect – gold mining stocks revert to the historical norm of outperforming gold by 3 to 1 (or shoot up to 5 to 1 like they did from 2001 through 2007), you'll be sitting on gains that will easily protect you from the government's insane plot to cut the deficit by destroying the dollar.
But not if you stay on the sidelines.
If you're not positioned when the divergence between gold and gold miners ends, you will have effectively lost your best chance to both protect your assets from government thievery and leverage their deceptive policies to new wealth.
But you can't just buy any gold producer and expect to make money.
You have to get answers to important questions like these before you buy a single share:
- How sound is the company's management?
- How successful has it been at turning promising properties into producing mines?
- Does the company have the capital – or access to it – to pursue development plans?
Failure to get accurate answers to questions like these before investing in any mining company is a recipe for disaster.
Fortunately, you don't have to do all this work yourself.
My method for finding precious metal mining companies ripe for success
I'm Jeff Clark, senior precious metals analyst for Casey Research and editor of BIG GOLD, a precious metals advisory.
You might say gold mining runs in my blood.
I've worked gold claims on my family's land in California and Arizona – as well as a mine in a place that I can't reveal.
(Let me tell you, there's nothing like finding gold in the bottom of a pan or sluice box!)
I got hooked early… and never looked back.
Now I spend my time tracking the market forces behind gold, as well as silver and other precious metals.
My decades of experience have given me an insider's understanding of the gold industry and what it takes to make a mining operation profitable.
Here are some of the things I look for in mining companies…
- Strong Growth Prospects – Companies that are significantly growing production are high on my list of potential buys (they tend to perform better than the more mature companies – and buying before big growth kicks in can bring in hefty returns). One company in our portfolio – and which we're recommending buying again – expects to more than double production by 2015, making it one of the fastest-growing senior gold producers.
- A Minimum of Political Risk – Many countries are hiking taxes and royalty requirements on miners, and some are threatening to nationalize their gold industries altogether (like Venezuela did in August). While no jurisdiction is perfect, we target companies working in countries where politicians are less prone to embrace anti-mining legislation, like a gold royalty company in our portfolio that has 83% of its operations in low-risk political jurisdictions like North America and Australia (we expect its stock price to climb 34% sometime in 2014 – and if gold really takes off... look out).
- Strong Finances or Access to Adequate Financing – Does the company have enough cash to weather a downturn in metals prices, advance its projects, and make acquisitions? Most of our recommended companies have no debt. And one of our companies has $550 million in the bank, more than enough to fund additional mine-development plans. As of this writing, our target on this stock is 44% gain.
We consider it a must for any serious precious metals portfolio.
- Potential Catalysts that Can Drive Prices Higher – Before recommending a stock, at BIG GOLD we always investigate to see if there's anything in the works that can boost prices quickly. If there is, it increases the likelihood of a recommendation. One silver producer we're holding has a new mine that will be going into production by the end of the year, as well as another mine that's just starting production. We expect these and other developments to boost production by over 75% within two years. This stock is a double wating to happen.
- Sound Management – Have they had any big successes? Are they competent and well organized? Do they have experience navigating financial, regulatory, legal and accounting issues? If these questions aren't answered to our satisfaction, we steer clear.
The management team of one of our favorite companies owns 45% of the stock. And considering that it operates in a country of low political risk and has ample cash on hand to fund future mine developments, we're recommending that subscribers load up on more shares now.
Overall, we view gold producers as severely undervalued. And we're convinced that the mining industry is destined to provide the 3-to-1 leverage to gold we've seen in the past.
Getting in on the right gold miners before that happens will not only protect you from unconscionable governmental monetary policies that are stealing from everyone in America – it will provide you with opportunity after opportunity for consistent profits.
As a result, while others watch their money depreciate, your gains will greatly outpace inflation… making you a recipient of the coming wealth shift.
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But none of this can happen if you wait too long to take action.
BIG GOLD will show you exactly what action to take.
And right now BIG GOLD has plenty of actionable recommendations you can take advantage of today.
In fact, we now have 24 recommendations for you – everything from mid-sized gold and silver miners to exchange traded funds (ETFs) designed to track the metals.
The current BIG GOLD portfolio is up 18.8%...
and this is just the beginning
These gains cover the period from April 20, 2007 through June 29, 2012 – a period where the S&P 500 lost 7.4% and the Dow gained a miniscule 0.5%...
And we've made these gains in spite of the 15.7% correction in gold that occurred (from $1,895 on September 5, 2011 to $1,598 on September 26, 2011).
Here's a rundown of how a few of the BIG GOLD stock recommendations are doing…
- Randgold (GOLD), up 152.5%
- SPDR Gold Trust Fund (GLD), up 125.9%
- Silvercorp (SVM), up 52.3%
- Royal Gold (RGLD), 148%
We're also sitting on gains of 54.2% from a Canadian gold and silver fund that holds most of its assets in physical metals, 37.5% from a silver metals fund, and 26.3% from a gold and silver streamer (streamers are companies that pay upfront for gold and silver at a low, fixed price from metals producers).
*Gains as of June 29, 2012
But I believe the biggest gains are still ahead, primarily for three reasons:
- Sooner or later the all the money created – and to be created – by the Federal Reserve will cause serious inflation, which will drive investors worldwide out of the dollar and into gold
- This increased demand for gold will boost the metal's prices… and the prices of solid mining stocks
- Gold miners are severely underperforming the metal itself, even though they historically outperform gold by 3 to 1 (and when that divergence is reversed, stockholders of well-run gold producers will be smiling!)
And don't forget, there are any number of potential "black swan" events that are hovering over the world like storm clouds – the threat of war in the Middle East; looming credit crises in Europe, America, and Asia; and the likelihood of default by an impossibly indebted eurozone country….
If any of the above scenarios come to be, you'll see the price of gold skyrocket.
And when gold skyrockets, those who own solid gold mining stocks will profit handsomely… perhaps spectacularly (and that's the best way to protect yourself from our politicians' short-sighted monetary policies – make sure your profits outpace the inflation they cause).
We intend to get BIG GOLD subscribers in on the action. And we want you to be a part of it…. without risking a single penny.
BIG GOLD – Your roadmap to
profitable resource investing
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- A subscription to our free daily newsletter, Casey Daily Dispatch.
Every issue of BIG GOLD features…
- In-depth investigations into the world's leading resource mining companies Every month we search out proven companies with experienced management, cashed-up balance sheets, and profitable projects with ounces in the ground.
- Easy-reading analysis that gets straight to the point
My monthly explanation of the ever-changing economic forces driving today's accelerating gold, silver, and resource markets.
- Answers to important questions about gold and other resources
I answer all of your questions about…
* How to build and maintain a precious metals portfolio from scratch.
* How to tell when the gold market has reached the bubble stage
* Determining factors that reveal whether a gold producer is "on sale"
* What to look for in a bullion dealer (you definitely want to own some physical
gold and silver) and my Bullion Buyers' Guide in the November 2011 edition of BIG GOLD reveals the best ways to accumulate these precious metals.
PLUS... you get my insider's perspective on the best ways to put together a precious metals portfolio with a minimum of risk. For example, I reveal….
- Which stocks you should buy right now… and at what price
- Which stocks to sell ahead of the crowd... and when
- Which gold stocks to avoid... and why
- The best precious metals funds to invest in
- The pros and cons of gold and silver ETFs
- A list of highly recommended bullion dealers you can trust
- And much, much more, including all the breaking news that has a direct impact on your precious metals investments
Right now you can get BIG GOLD delivered to your inbox every month for a very special price…
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Even better, if BIG GOLD isn't everything you hoped it would be, you can get a full refund any time within the first 90 days (and a prorated refund after 90 days).
No questions asked, no delay, no risk. You either love it or you get your money back.
The sooner you subscribe to BIG GOLD, the sooner you can start defending your nest egg from the wealth-robbing policies of Washington… and the sooner you can set yourself up as a recipient for the coming wealth transfer.
So what are you waiting for? Subscribe to BIG GOLD today!
Editor, BIG GOLD
P.S. Mark my words, the masses will eventually see how governmental inflation is stealing them blind. And when they do, they'll start pouring money into gold mining companies with reckless abandon because they won't be able to afford the metal itself (by then it could be thousands of dollars an ounce).
And don't forget, miners are currently underperforming gold by a wide margin – something that seldom happens. When they revert back to the historical norm of outperforming gold, you will see their share prices explode.
When that happens, you'll want to already be positioned in sound precious metals outfits.
You'll be in for historic gains if you are.