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Doug Casey on the Disturbing Trend to Tax Savings and Eliminate Cash

tax on savings

 

 

 

 

 

 

 

 

 

International Man: Let’s start with the basics. What exactly are negative interest rates? Could they exist in a free market without state intervention?

Doug Casey: Right now, over $17 trillion of bonds, and a lot of bank accounts—especially in Europe—are offering negative interest rates. It’s something that can only exist in Bizarro World, something that’s really a cosmic impossibility in a normal world. It’s especially true since almost all the world’s banks are zombies—bankrupt. Fractional reserve banking—which is only possible in a world where central banks control the money supply—is intrinsically unsound.

The economy is head over heels in debt. If things slow down—as they do now, due to the hysteria over The Virus—lots of loans will go into default. It won’t be because of The Virus itself, however. Coronavirus is just the pin that broke the bubble.

Negative rates are a political phenomenon, not a market phenomenon. It’s quite amazing to see bankrupt governments issuing negative rate bonds. It’s what’s been called return-free risk.

The whole financial world is in a bubble because of the trillions of currency units created since the crisis unfolded in 2008. Bonds are in a hyper bubble—the worst possible place to be. They’re a triple threat to capital—interest rate risk, currency risk, and default risk. And, again, at negative rates, they are truly a return-free risk.

Negative interest rates are being enforced by governments and central banks for several reasons.

First of all, governments are so head over heels in debt that they can’t afford to pay actual market-based interest rates.

If the US government, for instance, was paying even 6%, historically a more or less normal interest rate, on its $23 trillion of debt, that would be about $1.5 trillion a year in interest. That, just by itself, would more than double the current annual deficit.

That’s one reason governments like negative interest rates: it disguises their bankruptcy. They live on borrowed money. Tax revenues are nowhere near adequate to fund their spending—not to mention that spending is going to skyrocket while their revenues plunge for the foreseeable future.

Another reason governments like negative interest rates is that they encourage people to consume as opposed to save, which is also bizarro-world stupid. The only way you grow wealth is by producing more than you consume and saving the difference. The problem is that in today’s world the way to save is in currency in a bank account. If the currency loses value simultaneously with negative interest rates reducing the number of units, savings will drop.

If you’re penalized for saving, you’re going to do less of it. You’re going to go out and spend the money now on a bigger house, a new car, or perhaps a wild party. This is one reason why Third World countries never progress on their own. Their currencies are unstable, worthless, and not worth the trouble of people saving them. So, they never develop a capital base. It’s why poor people with bad habits stay poor.

From every economic point of view, negative interest rates are pure destruction. They make everything worse for prudent savers and better for profligate borrowers. But printing money and lowering rates are the only things that central banks can do to ward off a deflationary collapse. Their actions will only deepen and lengthen the Greater Depression.

International Man: Exactly. By using the force of government to create the conditions for negative interest rates, central banks are giving the signal that the cost of money is less than nothing. They are really stealing the prosperity of the future.

Doug Casey: That’s right. People have to realize that the government does not represent “we the people”. The government is a discrete entity, as separate from society as General Motors, General Electric, or Google. They have their own interests. There’s no “us” benefitting from all this.

Government is a parasite, it’s not your friend. It’s a dead hand on society. Propaganda has made people think it’s necessary. Many people love the government, however, because it gives them free stuff that’s taken from some and given to certain voters.

International Man: President Trump has repeatedly called for negative interest rates. Do you think the US will see negative interest rates?

Doug Casey: Anything is possible because the US government has its back up against the wall. Worse, the people themselves think government is a magic cornucopia. They all want it to “do something.”

And they’re capable of doing absolutely anything. Why? The people employed by the US government and the Fed actually believe the Keynesian claptrap. It’s a secular religion to them.

Plus, Trump himself is truly an economic ignoramus. Now, as I say that, let me hasten to add that the good thing about Trump is he’s a cultural conservative. That’s why he gets a tremendous amount of support from the red counties. I think that that’s fine, but from an economic point of view, he’s dangerous. He’s an authoritarian with a touch of megalomania, and he’s capable of anything.

Anything’s possible in this country at this point. Not least because Boobus americanus seems to want “strong leadership.”

International Man: Since negative interest rates can only exist from state intervention, they are just a euphemism for a tax on savings. What impact do you believe they will have on the economy as they discourage savings and capital formation?

Doug Casey: The longer it goes on, the sooner the countries that have negative interest rates are going to start looking like Third World countries. One of the reasons Third World countries are backward is that they don’t have any domestic capital. Why not? Because there aren’t domestic savings. And it takes capital to build things.

Governments are actually destroying the foundations of society with their current policies. It will take a while to happen in the West, because of the tremendous amount of capital that’s been accumulated and saved up over hundreds of years. But sure, they can absolutely destroy it. The Romans did it 2,000 years ago. The Venezuelans and Argentines are showing how to do it today.

That said, borrowed money and artificially low interest rates feel really good at first.

If I borrowed $1 million tomorrow morning, I could have a wonderful party for the next year. My standard of living would be artificially higher for a while. But when the time comes to pay it back, it’s going to be genuinely lower, and for a long time.

That’s exactly what the West is doing right now, living out of saved capital and mortgaging its future. That’s what negative interest rates encourage.

International Man: How will negative interest rates impact the average person? Will bank deposits be subject to negative interest rates in the US?

Doug Casey: Well, it would be stupid. When I use that word, incidentally, I mean “showing an unwitting tendency to self-destruction.” A pity, but it could happen.

Artificially low interest rates—or perhaps negative interest rates—drive people out of cash and liquidity and into speculating in the financial markets. It can affect the average person positively for a while, maybe artificially doubling the size of his retirement nest egg. That is, until the bubble bursts, and he loses a very real 90%. It’s a disaster.

There are absolutely no good consequences to manipulating interest rates in either direction.

Money is the lifeblood of the economy, and interest rates are the price of money. It practically guarantees that the Greater Depression is going to be worse than even I thought it would be.

International Man: Do you think it’s possible that people will pay to have their money in a bank account?

Doug Casey: Well, if we had a sound banking system—which we don’t because it’s a fractional reserve system—there would be two very separate and distinct kinds of bank accounts. They’re separate businesses, actually.

One with demand deposits where you pay the bank to store your money safely, paying for the privilege of writing checks against it. In the past, you had to pay banks for the privilege of storing your money—gold—and writing checks against it.

The other kind of bank account is a time deposit, which is totally different. That’s where you leave your money with the bank for a certain period of time at a fixed interest rate, so the bank can lend it to somebody for a fixed interest rate—for a matching amount of time.

Let’s say they give you 3%, and they lend it for 6%, capture the 3% spread as their profit, risk reserves, and so forth. That’s the way a time deposit bank account should work. And that’s how it worked before central banking and fractional reserves.

Historically, you paid the bank money for a demand type deposit, and you got a return—with some risk—on a time deposit. But those distinctions have been totally lost. Banks now lend out demand deposits. It’s equivalent to Allied Van and Storage lending out your furniture.

International Man: How does the growth of negative interest rates coincide with the trend towards eliminating cash?

Doug Casey: They dovetail perfectly. They go hand-in-glove with each other.

Countries all around the world are moving towards eliminating cash. For example, in Sweden, it’s very hard to get cash. In China, it’s very hard to get cash. Everybody transfers funds electronically, without any form of physical money. All money is in digital bank accounts. A negative interest rate of, let’s say, 1% means that you’re really being taxed 1% in addition to everything else.

It’s even worse than that, though, because when cash vanishes, you have zero privacy. Everything has to go through your bank account. They know precisely what you’re buying, what you’re selling, from whom, what you own—unless you’re going to barter, the way things were done in prehistoric times.

It‘s a catastrophe from the point of view of personal freedom, and another reason why everybody should have a significant store of gold coins, preferably small ones, a quarter ounce or less. And silver coins, too. Silver is a great bargain right now, at a roughly 120:1 ratio with gold.

If they eliminate cash and we go to an entirely digital currency, they‘re in total control of you, because you won‘t be able to do anything, go anywhere, or buy anything without the direct or indirect approval of the authorities.

International Man: What can people do to protect themselves?

Doug Casey: There are two things you can do at this point.

One, you should buy precious metals, in your own possession, or stored securely in some offshore location, so that you‘re diversified politically and geographically as well.

Second, now is an excellent time to speculate in gold stocks. With gold in the $1,600 area, every active gold mine in the world is coining money. In fact, their margins are increasing with the collapse of oil prices, since fuel is a major cost, on the order of 20% for most mines.

And at some point soon, fund managers who now don‘t even know that gold or gold stocks exist, are going to pile in to gold stocks.

There are so few of them, and the market caps are so small, that it‘s going to be like trying to funnel the contents of Hoover Dam through a garden hose. Mining is a crappy business, but right now, it’s a super speculation.

There are no guarantees, but it‘s as good a speculation as I can think of right now.

Those are the two things that you should own. And they both revolve around gold.

Editor’s Note: Unfortunately, there’s little any individual can practically do to change the trajectory of broke governments in need of more cash. There are still steps you can take to ensure you survive the turmoil with your money intact.

New York Times best-selling author Doug Casey and his team just released a guide that will show you exactly how. Click here to download the free PDF now.

 

A True Story: How I Ended Up Next to $8 Million Worth of Tequila

Note from Dudley Pierce Baker, founder of Common Stock Warrants and Junior Mining News.
I am the Dudley/Daniel referred to the this article below and yes, it was an incredible day with E.B. Tucker and John and especially meeting Felipe, the owner of G4 Tequila. Being the nature of competition I guess, E.B. did not mention that I have a stock warrant service. We chatted about warrants, others in the business, where we see the markets going and of course, tequila.

CASEY DAILY DISPATCH - Casey Research
Editor’s note: Today, we’re bringing you a classic story from our very own E.B. Tucker.

E.B.’s not just a successful investor. He knows the importance of getting away from your desk… and he’s gone on numerous adventures abroad.

That’s why we had to share his tale from Mexico again. Along with his analyst John Pangere, E.B. got a behind-the-scenes look at a tequila distillery… and winded up meeting a stowaway and an IRS agent.

You can find out more below…


How I Ended Up Next to $8 Million Worth of Tequila

By E.B. Tucker, editor, Strategic Trader

E.B. Tucker

I went to Mexico in February with Strategic Trader lead analyst John Pangere.

After spending a few days in the ritzy Polanco neighborhood of Mexico City, John and I headed for Jalisco state to check on one of his personal investments.

Prior to joining my team, John was working as an analyst focused on private investments. He worked on financing for a startup company that planned to import a new premium tequila from Mexico. He learned the tequila would be new to the U.S., but the family producing it was fourth-generation.

They called the product G4.

John and his father Ross got involved in the upstart distribution company as passive investors. Over time, they got more involved. They met the man behind the exceptional product and ended up taking over the entire business.

To be clear, John is not involved in producing tequila. He merely has the right to coordinate its distribution in the U.S. and Canada. In the U.S., that means choosing which distributor in each state will comply with the local laws and get the product behind the bar or on the liquor store shelf. If the product takes off, it can turn into an impressive royalty business with a remarkably low overhead.

And recently, John asked if I wanted to go down to rural Mexico and check on the distillery.

Of course I did.

And I ended up in rural Mexico with an intoxicated stowaway and a former IRS agent in a rental pickup truck…

 

We took an early flight into Guadalajara from Mexico City. The plan was to get out to the distillery and back to the airport in one very long day. In retrospect, it was somewhat ambitious.

A Fourth-Generation Tequila Distiller

Having been to almost every part of Mexico looking at gold and silver mines, I’m not at all afraid of traveling there. In fact, in all of my trips I have never once run into trouble. Most Americans cringe when you mention visiting the country. I will rent a pickup and head off to parts unknown without thinking twice.

We took off from Guadalajara heading north, then east, looking for a town called Arandas. Once we found it, we headed down a smaller road to Jesús María. After that, we hit a dirt road looking for the agave plantation.

Agave is the key ingredient in tequila. Besides water, it’s the only ingredient.

The plant looks like a giant pineapple. The core grows in the dirt, while the thick green leaves flare out above. Tequila makers only use the heart of the plant and discard the leaves.

I had seen plenty of pictures of agave plants. After George Clooney invested in Casamigos (which sold for close to $1 billion), tequila ads started popping up everywhere. The ads for premium tequila often show pictures of agave fields.

These big-flared agave plants shown in premium ads are deceptive. Bigger is not always better. Similar to grapes for wine production, the size of the plant does not matter. Weather, rain, and altitude all affect how the agave plant looks as it grows. Time in the ground also varies. Some growers harvest plants in just a few years, while others wait close to a decade.

A skilled tequila distiller knows to ignore the size, shape, and color of an agave plant and focus on just the sugar content. A fourth-generation tequila distiller, like the man pictured below, does it instinctively.


Me, John, and our local gringo friend Dudley with fourth-generation tequila distiller Felipe Camarena

The first thing Felipe Camarena said to me when we met was, “Excuse me; I’ve been drinking a little since Saturday.”

…We arrived on a Tuesday.

Camarena produces tequila in the same region as his father and grandfather did. It’s in his blood… And he had a lot of it in his blood when we met.

The quality of a premium tequila rests solely on the distiller’s instinctive skill. As I mentioned, agave and water are the only ingredients. The rest is art.

I am not a drinker, so I didn’t know a lot about tequila when we arrived. I asked Felipe to arrange a full tour of his operation, start to finish. I wanted to see how the product goes from agave plant to bottle.

Tequila – From Plant to Bottle

The first step in the process is harvesting agave. The distiller is going for the optimal sugar content. Too young, too old, too large, or too small, and the wrong mix of agave can cheapen the process.

The agave arrive without leaves. Field workers remove those with a machete. Again, picture a pineapple without the leaves on the head.

Next, workers at the distillery use machetes to split the agave in half.


Agave plants ready for processing

As far as the workers at the distillery, most speak English and have a technical background. These guys are very sharp. It’s part of what makes premium tequila stand apart from bottom-shelf junk.

The agave plant has very high sugar content. That sugar is what the distiller wants. To extract it, he has to cook the plant and then crush it, which produces a juicy syrup that starts the distillation process.

After workers split the agave in half with a machete, they remove the heart, which you’ll notice littering the ground in front of the split agave pictured above. This heart makes the product bitter if it’s cooked with the rest of the plant.

With the agave plants split, workers load the halves into a stone cooking furnace. This is the traditional way to cook agave. Some mass-market tequila makers use an acid bath to extract sugars from agave. It’s faster and cheaper. If you’ve never had tequila, you wouldn’t know the difference. If you have, there’s no going back.


E.B. inside the agave oven

The stone oven I’m standing in holds 27 tons of agave. That’s about 24,500 kilograms… or over 54,000 pounds. Each 10 kilograms of agave plant loaded into this oven will ultimately produce about one liter of tequila. That means this fully loaded oven will turn into around 2,500 liters of tequila on the store shelf.

The cooking process takes two days. The first day is the actual cooking, with heat applied through the floorboards below. You’ll notice (in the photo above) the plants are strategically packed so that warm air can circulate through them. The second day, the agave sit in the oven without heat, which allows them to cure.

After two days in the oven, the cooked agave go into a stone pit that looks like a small loading dock. A homemade steamroller crushes the cooked agave, sending the sugary extract into a fermentation area.

It’s All About the Water

Tequila is essentially fermented agave and water… But not just any water.

Felipe Camarena uses three sources of water to make his tequila: rainwater, spring water, and deep well water. He wouldn’t tell me how much of each, but I gathered he mixes on instinct, not formula.

The agave and water mixture heads to fermentation tanks for five days. Then, it goes into a still.

The still hasn’t changed much since people made hooch in the woods during Prohibition. The copper pots shown here have a copper coil running through them that looks like a corkscrew.


Stills turn fermented agave and water into clear alcohol

The operator turns up the heat, making steam from the fermented agave and water mixture. The condensation from that steam drips into the stainless steel tanks in the middle. The distiller tests the alcohol throughout the process to make sure it meets purity standards.

The finished product is clear tequila, also called “blanco.” Some of that heads straight into a bottle and onto a truck. It’s ready to drink.

The rest of the blanco tequila goes into barrels for aging. It turns into three different types of tequila, depending on how long it ages in the barrel. Each barrel holds 200 liters.


E.B. in front of $8 million worth of barrel-aged tequila

G4 sells four types of tequila:

  • Blanco – Ready to drink immediately
  • Reposado – Aged at least six months
  • Añejo – Aged at least 18 months
  • Extra Añejo – Aged at least three years

The longer the tequila ages, the darker it becomes. The Extra Añejo is good for sipping, while the blanco goes in the blender at a pool party.

John’s investment in the tequila business is in good shape. He’s especially taciturn when it comes to discussing specifics. I did manage to get an admission that after its first full year, case shipments to U.S. distributors were up triple-digits in the first quarter.

Back in Florida, I bought several bottles at the local liquor store as gifts for friends. They told me the product was exceptional.

If you’re inclined, the company’s website has a locator that lists restaurants and stores that carry the product.

The Stowaway and the IRS Agent

Things got a little tricky when we tried to leave the distillery.

For starters, we had another gringo in tow, named Dudley. He goes by “Daniel” in Spanish. After I told a friend about the upcoming trip, he introduced us over email.

Daniel moved from Texas to Guadalajara in the late 1990s. He jumped at the chance to come see the distillery with us. He said he loves tequila. I was glad to have him, figuring if we ran into trouble in the Mexican interior, six fists give better odds than four.

About halfway through the drive, Daniel pulls out his IRS badge. Granted, he retired years ago and came to see the agency for what it is. I told him the only difference between the mafia and the IRS is that the mafia headquarters doesn’t fly a big American flag.

Since John barely drinks and I don’t drink at all, we left Daniel to do all the tasting with Felipe. He did great. So great in fact, that Felipe didn’t want us to leave. Determined not to spend the night in the hills of rural Mexico, I told John, “We’re leaving.”

Felipe wasn’t having it and got in the rental pickup truck with us. There’s no reasoning with a man who’s been making tequila for 50 years and drinking it for a week straight. He nearly tore the truck apart looking for a cigarette lighter before we could pacify him with the promise of a stop at the next crossroads.

Things worked out great in the end. We had some of the distillery staff rendezvous with us in Jesús María for an early dinner. Then, we had to tell Felipe we’d be back in a minute and make a run for the car. If we hadn’t, I think we’d still be there today.

Felipe Camarena is a man whose life’s work is making some of the best tequila in the world. Of course, he wants his guests to stay and enjoy sipping it with him for days on end. He’s passionate about his product and it shows.

If you do run across G4 Tequila at a restaurant or your local store, give it a try. It’s nice to know where it comes from.

Regards,

signature
E.B. Tucker
Editor, Strategic Trader

Having a US Passport Is No Longer an Advantage

Doug Casey on Why Having a US Passport Is No Longer an Advantage

 

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International Man: In recent years, record numbers of Americans are renouncing their citizenship. What is going on here?

Doug Casey: Well, it used to be that having a US passport was a tremendous advantage. But over the years, it’s turned into an albatross around the necks of the people who own one.

America is the only major country in the world that taxes its citizens no matter where they live.

Even if an American moves abroad—he never returns or even sets foot in the US again—he’s obligated to file taxes and, at best, can get a $100,000 or so exemption on earned income.

That makes it extremely costly to be an American. But on top of that, the US government forces Americans to file many forms having to do with their foreign financial dealings. And they’re precluded from buying various assets or investing in various countries.

There are other disadvantages too because of the aggressive foreign policy stance that the United States has taken, certainly since World War II: invading numerous countries.

If a terrorist takes over an airplane or hotel, it’s unlikely that they’re going to want to execute all the Mexicans or all the Latvians; chances are they’ll want to single out people who carry US passports.

Actually, there are no longer any advantages to being an American and lots of disadvantages.

I say that, recognizing that being born and raised in the US, at least up to now, has been a tremendous advantage. But that has nothing to do with carrying the US passport. It’s a fortunate accident of birth, because the US has historically been the freest country in the world, but that is changing.

International Man: Even if Americans leave the US and never set foot in it again for the rest of their lives, the US government still will tax them. It’s the only country in the world that has this type of tax system and can enforce it.

Stock & ETF Trading Signals

The tiny, impoverished African country of Eritrea also taxes its citizens this way. But unlike the US government, it has no means to enforce it. So, it’s not a fair comparison.

What do you make of this?

Doug Casey: That’s right. Of course you can renounce your citizenship, but that’s not particularly easy to do.

It has to be done outside of the United States at a US embassy or consulate. The filing fee is $2,350, and it generally takes a year for them to process the forms. Although the law has changed a couple of times over the years, there’s now a penalty. All of your worldwide assets are assessed, and you have to pay a capital gains tax on the appreciation from whatever your cost basis is.

International Man: Taking a step back, we can see over time that renunciation has become harder and more expensive for Americans.

It used to be free. Then the US government raised the fee to $450. They then increased it to $2,350.

They also instituted the Exit Tax—a tax on unrealized capital gains—and made it increasingly costly.

There are several proposals to make renunciation even more difficult in the years ahead. Perhaps one day it will become impossible.

What’s your take on this?

Doug Casey: There’s no question about it. A couple of years ago, they passed a regulation that, if you’re accused—not adjudicated, but accused—of owing over $50,000 to the US government, your passport can be taken from you. That apparently happened to over 300,000 Americans last year.

I know that for a fact, because I personally know somebody this happened to.

Also, it’s very hard for an American to open a financial account—a bank account or a brokerage account—in almost any other country in the world.

Financial institutions don’t want American business, because, since the US dollar is the world’s currency, the US is in a position to enforce its domestic laws on foreign countries. A foreign bank or broker has to report transactions of its US clients. Nobody wants a US client for that reason. They’re unprofitable liabilities.

International Man: Bankrupt governments always try to control money with capital controls and individuals with people controls.

Take Cuba, for example. After Castro came to power, his government made Cuban citizens apply for exit visas before they left the island. They were not easy to get. The Soviet Union, North Korea, and others have also used similar restrictions.

Preventing people from leaving has always been a hallmark of authoritarianism.

It’s hardly shocking that productive people are fleeing the US tax system. It’s also clear the window to leave is closing.

What does all this signal for the future of the United States?

Doug Casey: The US is on the way to becoming an actual police state. The US government is bankrupt, and the situation is getting worse every year, with minimum annual deficits of a trillion dollars going to two trillion dollars.

The prime directive of any living thing, whether it’s an amoeba, a person, a corporation, or a government, is to survive. And in order to survive, the US government needs more tax revenues. It’s going to make more efforts to keep its milk cows from leaving the country and escaping its tax net.

I have no doubt that the US is behind the various UN efforts to “harmonize” the world’s tax system, so there’s really no place that you can run. And if they move to a completely digital currency, it’s going to be almost impossible at that point to evade their grasp. Using digital national currencies and eliminating physical cash, they’ll know exactly how much you’re earning, how much you’re spending, how much you have. The trend is very bad.

The US government, however, is unique in being able to enforce its will almost anywhere in the world. If you leave a European, Asian, or South American country, there’s really nothing your country can do about it. But the US has actually turned into a global empire—which they’re trying to hold together by force at this point.

Meanwhile, it’s in process of flying apart through centrifugal force. I don’t doubt that within the next 50 years, probably much less, the US is going to break up into autonomous regions or even separate countries. An Hispanic Southwest is certainly going to be one of them. Neil Stephenson’s book, Diamond Age, spells out some possibilities along those lines.

Every day the US Congress is in session, new laws are passed—and every law they pass imposes something else you either must do or must not do. Enforcing that law takes more tax revenue. So of course the beast is going to get bigger and uglier as time goes on. Until it collapses. But that will bring on chaos for at least a while. Which is unpleasant and dangerous.

International Man: Given what we have discussed, what do you suggest people do?

Doug Casey: Your options are becoming more limited all the time.

You could renounce your citizenship, but for purposes of convenience, you’ll need a second citizenship—everybody needs a slave card in today’s world.

I think it’s prudent on the part of anybody, not just Americans, to have a second or third citizenship as a backup, because your passport is not your property—it’s the property of your government, and they can take it away from you.


You’re going to want to have at least one backup. That’s number one.

Number two, while it’s still possible, you’re going to want to diversify your assets to another political jurisdiction. The best way to do this is to buy real estate in a place that you like to spend time in, and have gold or other financial assets put aside in that country or a third country.

But act now and beat the last-minute rush. There are no disadvantages and lots of advantages to doing these things.

Editor’s Note: The political and economic climate is constantly changing… and not always for the better. Obtaining the political diversification benefits of a second passport is crucial to ensuring you won’t fall victim to a desperate government.

That’s why Doug Casey and his team just released a new complementary report, “The Easiest Way to a Second Passport.” It contains all the details about one of the easiest countries to obtain a second passport from. Click here to download it now.

Gold Mining Stocks… and the Power of Leverage

Expert: Gold Will Break Its All-Time High


Note from Dudley Pierce Baker, Junior Mining News & Common Stock Warrants

I had the opportunity to visit for several hours with E.B. earlier this year. He is very passionate about his opinions and views on the markets, most of which I agree. E.B. Tucker is also a paid subscriber to my services at http://CommonStockWarrants.com. Perhaps you should also consider a subscription as well because I have many professional investors who want to know which stock warrants are currently trading along with the complete details.

E.B. Tucker

I sat down for half a dozen media interviews earlier this year where I called for $1,500 per ounce of gold in 2019.

In several cases, the hosts nagged me about my prediction, asking if I would stick with it. I did. In August, it hit my target.

Now, the price has retreated a bit since, but gold’s still flirting with $1,500 per ounce, as I write.

Here’s why I’m writing you today: I believe $1,500 is only the beginning for gold.

I expect gold to take out its previous high of $1,900. That’s a 27% gain from here. And I expect that to happen in 2020.

In fact, as I told Kitco News recently, from there I see it hitting $2,200 – about a 47% rise from its current price of $1,492 per ounce.

Today, I’ll share why… and how you can start taking advantage

A Major Gold Rally Is Underway

All of the serious money I’ve made investing came through positioning for a big move and sitting tight. Trading is tough. In and out all the time can work over a short period. But the big gains come from sitting tight and letting the bull market run.

After hitting an all-time high in 2011, the price of gold fell 45% to a low of $1,052 in late 2015.

While the Obama administration and the Federal Reserve experimented with radical money policies, gold stayed stuck. Notice in the chart above it didn’t do much after hitting its 2015 low.

What’s bad for gold is unbearable for gold miners. They commit to projects assuming they’ll sell produced gold for $1,500. Then it falls to less than $1,100. That means the project is bankrupt before it pours the first gold ounce.

That period is over.

I can give you a list of anecdotal evidence as proof. Several large mining firms combined this year in order to survive. These were not bidding war takeovers. CEOs got over their egos and merged to avoid losing their companies entirely.

Political dysfunction and ballooning deficits also set the stage for gold today. The three largest central banks in the developed world recently declared they’ll do anything to stimulate their economies. That’s central bank lingo for “create more money.”

But we need more than strong anecdotes to risk money on the gold sector.

From our view, that’s why the chart of gold is so important. It’s how I determined $1,500 was an important target for gold this year. If it hit that target, which it did, I felt it was a green light to invest more aggressively for higher prices.

The gold chart below goes back to 2014. Notice that after gold hit its low in late 2015 (circled in red), each rally that followed registered a higher low. The pullbacks of 2016 and 2018 (also circled in red) each hit low points higher than the last. To us, this meant it was a matter of time before gold exploded higher.

Breaking $1,500 was the first test. Now, I expect it to correct, which is market speak for rest and get ready for the next leg higher.

That next move for gold will catch mainstream asset managers off guard. As I said above, I expect it to eventually take out its 2011 high. That’s why the current pullback in gold is the perfect time to position for what may come next.

If you haven’t already, the first step is buying some physical gold. If you’re new to gold, start with common 1-ounce coins like the ones offered here by Gainesville Coins.

(I asked Gainesville Coins to create this page as a starting point for Casey Daily Dispatch subscribers who are new to physical gold. We do not receive any compensation from Gainesville Coins for bringing you this offer.)

After owning physical gold, you should consider speculating on select mining stocks, which can provide leverage to a rising gold price.

Let me explain…

Gold Mining Stocks… and the Power of Leverage

The word “leverage” usually means borrowing. That’s not the case at all in the gold market.

If you aren’t familiar with the concept of leverage in gold stocks, here’s a quick example of how powerful it can be…

Say the price of gold rises from $1,300 to $1,400. That’s roughly an 8% gain. If you own physical gold, you’re up 8%.

Now, say a mining company owns a million ounces of gold in the ground, and gold is trading at $1,300. The value of the gold in the ground isn’t simply $1.3 billion (1 million ounces x $1,300 per ounce). Instead, the gold in the ground is worth much less than that, because it will cost a lot of money to extract.

Say it costs the company $1,250 per ounce, all-in, to mine the gold. At a gold price of $1,300, the company has a potential profit of $50 on each ounce of gold.

However, if the price of gold rises only 8% to $1,400, the company’s profits per ounce increase by 200% ($1,400 – $1,250 = $150 profit per ounce). This small move in gold can cause the stock price to increase 40%, 50%, or more.

This is why a small increase in the price of gold can cause a gold stock to soar many times that amount.

It’s happened before…

Gold producers boomed during three separate cycles when gold surged: 1979-1980, the mid-1990s, and 2001-2006.

First up, the king of all gold bull markets: 1979-1980…

Gold more than tripled during this period. But gold stocks more than quadrupled.

Returns of Producers From 1979-1980
Company Price on
12/29/1978
Sept. 1980 Peak Return
Campbell Red Lake Mines $28.25 $94.75 235.4%
Dome Mines $78.25 $154.00 96.8%
Hecla Mining $5.12 $53.00 935.2%
Homestake Mining $30.00 $107.50 258.3%
Newmont Mining $21.50 $60.62 182.0%
Dickinson Mines $6.88 $27.50 299.7%
Giant Yellowknife Mines $11.13 $39.00 250.4%
AVERAGE 322.5%
Gold 214.0%

This wasn’t the only time gold stocks ran further than gold itself…

There was another boom in the 1990s. The average gold producer went up more than 200%…

Cambior rose 124%. Kinross Gold returned more than 190%. And Manhattan Gold & Silver skyrocketed over 760%.

All while gold only rose 8%.

Then, another big boom hit from 2001-2006.

Gold returned 158%, while the average gold producer gained over 400%.

Newmont shot up 270%. Gold Fields soared over 500%. And Goldcorp returned over 800%.

As you can see, an increase in the price of gold (even a small one) can lead to huge returns.

Now’s the Time to Take Advantage

You don’t want to be sitting on the sidelines while the motherlode of all gold rallies gains momentum…

Remember, before owning a gold stock, it’s wise to have some physical gold.

Then, you can speculate on higher gold prices by buying gold miners, which gives you the chance to multiply your money in a gold bull market.

You can look into an exchange-traded fund (ETF) like the VanEck Vectors Gold Miners ETF (GDX), which holds a basket of gold stocks.

But the best way to take advantage is by following our advice in my newsletter Strategic Investor. In our core portfolio we have a world-class gold miner that shot up 56% during gold’s move from May to September of this year. This is no penny stock. This multibillion-dollar miner turns a profit and pays a dividend.

The same goes for silver. Our top pick surged 83% over the same period. It too pays a dividend.

In short, now’s the time to strike before gold really takes off.

Just remember, gold stocks are extremely volatile. Like in any industry, the stocks of stronger companies will go up more than those of the weaker ones. As always, never bet more money than you can afford to lose.

It only takes a small stake in the right companies to make a fortune as gold prices rise.

Regards,

[signature]

E.B. Tucker
Editor, Strategic Investor

Why Commodities Are Poised for Their Biggest Rally in 50 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

Justin’s note: Today, we hand the reins to Casey Research’s in-house commodities expert, David Forest, who says commodities are primed for an explosive bull run.

In fact, as you’ll see, this could be their biggest rally in 50 years… and now is the time to take advantage.

Read on to get all the details, including a “one-click” way to get exposure today.


By David Forest, editor, International Speculator

It’s the most important chart in the resource space today…

And it’s telling us that commodities are primed for their biggest rally of the last 50 years.

Why is this the best setup for commodities in half a century?

• Take a look below…

The chart I’m referring to tracks the S&P GSCI – which tracks prices for 24 commonly traded commodities – relative to the S&P 500. We’ve labeled a few important events on it…

When the blue line on the chart is rising, commodities are getting more expensive relative to the S&P 500 – a good proxy for the U.S. stock market. When the line is falling, commodities are getting cheaper relative to stocks.

As you can see, when commodities are at historic lows relative to stocks [green circles on the chart], it’s been a great time to buy.

For instance, two entry points for investors in the past were in 1971 – after we went off the gold standard – and in 1999, at the peak of the dot-com bubble. Between 1971 and 1974, the S&P GSCI rocketed 371% higher. And from 1999 to 2008, it shot up 454%.

• The opposite is true, too…

History shows you don’t want to be loading up on commodities when they’re expensive relative to stocks.

For instance, the S&P GSCI was at an extreme high relative to stocks [red circles on the chart] in 1990, at the peak of the Gulf Crisis, when Saddam Hussein’s army was rolling into neighboring Kuwait. That was a terrible time to be a commodities buyer. The S&P GSCI plunged 70% from the end of September 1990 to December 1998.

Another peak for commodities relative to stocks was in 2008, at the start of the global financial crisis. And again, that was a terrible time to buy commodities. From July 2008 to February 2009, the S&P GSCI experienced a 65% peak-to-trough fall.

• If past is prologue, that means commodities are primed for another explosive bull run…

Today, the ratio of the S&P GSCI to the S&P 500 is 0.91. The average ratio going back to 1970 is 3.9.

In other words, the commodities sector is currently 77% below its average price relationship with stocks over the past half-century. And it’s lower, on a relative basis, than it was ahead of the big commodities rallies in the early 1970s and the early 2000s.

Surprising video footage explains Feb. 4 prediction

During the investment summit, I asked E.B. Tucker why he told folks to circle Monday, February 4, on their calendars.

His answer surprised me… And I’m pretty sure it will surprise you too.

Because of the time-sensitive nature of E.B.’s prediction, this presentation will be deactivated tomorrow.

There are lots of other considerations when it comes to buying natural resources.

But if you filter out the noise… and just buy when commodities are historically cheap relative to stocks… you’ll do very well indeed.

An easy, “one-click” way to get exposure today is to buy the Invesco DB Commodity Index Tracking Fund (DBC).

It gives you exposure to the 14 most heavily traded commodities.

You only need to invest a little bit of money to take advantage of this historic setup.

Regards,

[signature]

David Forest
Editor, International Speculator

Why Commodities Are Poised for Their Biggest Rally in 50 Years

 

 

 

 

 

 

 

 

 

 

 

 

Justin’s note: Today, we hand the reins to Casey Research’s in-house commodities expert, David Forest, who says commodities are primed for an explosive bull run.

In fact, as you’ll see, this could be their biggest rally in 50 years… and now is the time to take advantage.

Read on to get all the details, including a “one-click” way to get exposure today.


By David Forest, editor, International Speculator

It’s the most important chart in the resource space today…

And it’s telling us that commodities are primed for their biggest rally of the last 50 years.

Why is this the best setup for commodities in half a century?

• Take a look below…

The chart I’m referring to tracks the S&P GSCI – which tracks prices for 24 commonly traded commodities – relative to the S&P 500. We’ve labeled a few important events on it…

When the blue line on the chart is rising, commodities are getting more expensive relative to the S&P 500 – a good proxy for the U.S. stock market. When the line is falling, commodities are getting cheaper relative to stocks.

As you can see, when commodities are at historic lows relative to stocks [green circles on the chart], it’s been a great time to buy.

For instance, two entry points for investors in the past were in 1971 – after we went off the gold standard – and in 1999, at the peak of the dot-com bubble. Between 1971 and 1974, the S&P GSCI rocketed 371% higher. And from 1999 to 2008, it shot up 454%.

• The opposite is true, too…

History shows you don’t want to be loading up on commodities when they’re expensive relative to stocks.

For instance, the S&P GSCI was at an extreme high relative to stocks [red circles on the chart] in 1990, at the peak of the Gulf Crisis, when Saddam Hussein’s army was rolling into neighboring Kuwait. That was a terrible time to be a commodities buyer. The S&P GSCI plunged 70% from the end of September 1990 to December 1998.

Another peak for commodities relative to stocks was in 2008, at the start of the global financial crisis. And again, that was a terrible time to buy commodities. From July 2008 to February 2009, the S&P GSCI experienced a 65% peak-to-trough fall.

• If past is prologue, that means commodities are primed for another explosive bull run…

Today, the ratio of the S&P GSCI to the S&P 500 is 0.91. The average ratio going back to 1970 is 3.9.

In other words, the commodities sector is currently 77% below its average price relationship with stocks over the past half-century. And it’s lower, on a relative basis, than it was ahead of the big commodities rallies in the early 1970s and the early 2000s.

Surprising video footage explains Feb. 4 prediction

During the investment summit, I asked E.B. Tucker why he told folks to circle Monday, February 4, on their calendars.

His answer surprised me… And I’m pretty sure it will surprise you too.

Because of the time-sensitive nature of E.B.’s prediction, this presentation will be deactivated tomorrow.

There are lots of other considerations when it comes to buying natural resources.

But if you filter out the noise… and just buy when commodities are historically cheap relative to stocks… you’ll do very well indeed.

An easy, “one-click” way to get exposure today is to buy the Invesco DB Commodity Index Tracking Fund (DBC).

It gives you exposure to the 14 most heavily traded commodities.

You only need to invest a little bit of money to take advantage of this historic setup.

Regards,

[signature]

David Forest
Editor, International Speculator

The Strongest Commodities Bull Market of All Time Starts Now


August 15, 2018

Seeing gold and silver plunge recently many investors may be ready to throw in the towel.

That would be a big mistake as many of us continue to believe that ‘the turn’ is coming and will lead us into another bull market in resource shares.

Yesterday our friends at Casey Research came our with their August issue of The International Speculator.and they are very bullish thus their tittle of this issue: The Strongest Commodities Bull Market of all Time Starts Now. Our course, I can not give details from their services other than to say they are bullish, very bullish on the entire commodities complex.

Whether you are a subscriber of Casey Research or my Common Stock Warrants, we and many other newsletters continue to be bullish and see great gains ahead. Yes, many dollars have been lost recently in this sector, but you must be a contrarian investor. If we are not at the bottom, we are damn close, and it is time to get started or add to you current positions.

Be bold, be brave and step up to the plate and you will be greatly rewarded over the next couple of years.

Dudley Pierce Baker
Founder – Editor
http://JuniorMiningNews.com
http://CommonStockWarrants.com

 

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