As I write Gold is down $3.00 at $966 (nearest futures month). It is still holding around the $960 to $965 support levels. However, I want to assert this, Gold is in a long term upward trend. The only thing that would change my thinking would be a close under the $880 which represents the bottom level of the long term uprward channel. We may however in the short term see a correction downward to even as low as $900 to $910. I will be watching very closely as this may be a “bear trap” in an upward market. One thing however I am somewhat of a contrarian. Last week almost every analyst under the sun was touting Gold as the ONLY investment. When I see that I get very nervous and know that a correction is about to happen. For those who remember the day silver hit $50 oz., Walter Cronkite announced on his evening new that “It’s time for everyone to go out and buy some silver”! The very next day the silver market tanked like a lead balloon. So a little downside action here will be a good thing to shake out the “nervous nellies” and “johnny come lately’s” out of the market. Because I have seen it time and time again as soon as that happens “Kaboom” the market takes of and does not look back. I will be watching very carefully here and will let you (those who have subscribed to this blog and are following me on twitter), when I get out of the DGP trade. I got in at $890 oz and think a little patience here will pay off. Given the current state of things Gold could still easily hit $1050 this week as well as have a price correction. Be sure to subscibe in the top right corner and/or follow me on twitter to be kept up to date…
The best investment in my opinion right now is to continue accumulating the Junior and Mid-tier Gold and Precious Metals mining companies. Once again there are many still selling at or near book value levels. Remember to choose companies who currently have production or are about to start producing. One exception might be those companies who have made some big strikes, are sitting on huge “proven” reserves, and have plenty of cash and financing to bring those reserves into production in the future. Another play is to investigate “Warrants” which give you the right to buy a stock at a given price for a certain timeframe. There are many out there which could give your portfolio a couple of “home runs” gains of 2-3000%. Either way do your own good due diligence, check the companies out, their balance sheets, prospectus/s and consult your own financial advisors before making any trades.- Good Investing! -jschulmansr
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Panic=Gold – Seeking Alpha
Source: Hard Assets Investors
It’s axiomatic that gold has a role as safe haven for many investors. That this is largely a matter of collective psychology is irrelevant – it has worked for centuries, and it’s unlikely to stop working tomorrow.
But lately, gold been more than a mere market hedge; it’s been a panic hedge.
Current Gold
Gold briefly nudged over the $1,000 mark to $1006.43 on Friday, February 20, before settling back down to close at $993.25. It was the first time since last March that gold crossed the insignificant but satisfyingly round $1k level. Technical geeks would point out that it’s still below the high of $1012.55 hit March 18th, but that’s splitting hairs.
Of course, gold didn’t stay above $1,000/ounce for long last March; it quickly reversed course and traded down all year, before bottoming at $712.41 on November 20th. Since then, gold has risen 39.4%; it was up 13.4% in January alone.
The last time I wrote about gold (Demanding Gold) was just before that November bottom. Back then I discussed the underlying demand for gold – because one of the great things about commodities is that ultimately, they’re always about supply and demand. And with the gold-bug’s most important supply and demand report out for 2008, it’s the perfect time to revisit the subject. (The full link to the World Gold Council’s Supply and Demand Statistics for Q4 and Full Year 2008 report is here.)
Looking At Demand
Gold demand can be broken into three main areas of interest – jewellery, which accounted for roughly 58% of identifiable demand in 2008, industrial and dentistry demand, and finally identifiable investment demand.
On the whole, gold saw demand grow 4% from 2007 to 2008, but the picture is a bit more complex than just that.
Not everything was rosy for gold in 2008. As we predicted, jewellery demand was down significantly. In 2007 around 68% of gold demand was attributed to jewellery consumption. In 2008, that number dropped to 58%.
At the end of December, The World Gold Council released a report entitled “What Women Want: Global Discretionary Spending Report 2008“. In it, the WGC details the values and significance different countries attribute to gold jewellery and why people buy it. One new thing the study uncovered is that gold jewellery is now competing with items such as cell phones and other everyday items for discretionary spending.
The report also states that “confidence that gold will hold its value has waned,” reflecting in part the volatility gold prices have experienced in the past year. With gold rising and falling by 30% in a single year, it’s no wonder people are feeling less comfortable with it as a store of value.
Demand on the jewelry front appears to be price elastic. In India, the largest consumer of gold jewellery, demand in the fourth quarter more than doubled compared to Q4 of 2007. While this would seem to buck the year-long numbers, it’s likely due to the fact that lower gold prices occurred precisely at the time of the Diwali festival – a peak gold-buying time in India. In 2007, gold prices were high during the festival, which depressed demand. For the full year of 2008, jewellery demand in India dropped 15%.
China was one of the only countries that posted an increase in demand for jewellery, up 8% from 2007. Much of this demand was for 24-karat jewelry, which commonly implies jewellery purchases that are doubling as investments.
The Big Stick: Gold Bugs
According to the World Gold Council report, gold demand for investment rose from 663.7 tonnes in 2007 to 1090.7 tonnes in 2008 – a somewhat staggering year-on-year increase of 64.3%. Retail investment – things like bar hoarding, official coins, medals/imitation coins and other kinds of retail investment – almost doubled, going from 410.3 tonnes in 2007 to 769.3 tonnes in 2008. That gives some credence to the wide scale anecdotal evidence throughout the year that gold coins were virtually impossible to obtain in many countries.
Exchange-traded funds and similar products also showed a large increase, from 253.3 tonnes to 321.4 tonnes (a 26.9% increase). This trend has continued into 2009. The SPDR Gold ETF (NYSE: GLD) – the largest physical gold trust – now has 1,028.98 tonnes in its vaults. This is a trust that started 2009 with 780.23 tonnes, meaning its gold horde has risen 31.9% in less than two months. To put that in perspective, 249 tonnes is over 10% of the total amount of gold mined in all of 2008. This acceleration happened almost entirely in a dramatic surge mid-February.
Net-net, however, if you offset the huge rush in gold investments with the significant drop in jewelry demand, the net gain in tonnage terms was just 4%.
There is, however, another way to look at things. When viewed through the (occasionally depressing) lens of the dollar, gold demand seems endless:
Gold Supply in Flux
With the demand part of the picture in hand, it’s time to turn to supply. The third quarter of 2008 saw a huge supply deficit with demand far outreaching supply. In the fourth quarter, supply rose 19%, almost entirely due to an increase in gold scrap. Yes, that’s right: Those late night commercials offering to buy your old tangled gold necklaces were on to something, and people were selling.
Scrap sales for 2008 ended up 17% higher than 2007, and that along with slightly higher total mine supply just about offset lower central banks sales so that in the end, 2008 ended the year with only 1% less total supply than 2007 – practically even.
The moral of the story is simple: supply and demand remain incontrovertible laws. The unbelievable demand vs. the stagnant (mine) and dwindling (central bank) supply created a vacuum, and a new source came on line to fill the need. Thus, at least indirectly, gold went from the scrap heap into brand new shiny gold coins, just when the market needed them the most.
Which brings up the question: how long can consumers fill their own demand through scrap? And what price level is needed to support the tremendous scrap levels already in place?
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Five Weeks of Silver Backwardation – Seeking Alpha
By: Trace Mayer of Run to Gold.com
During an interview with Contrary Investors Cafe on 24 February 2009 I discussed both gold backwardation and silver backwardation. After the interview I was asked why more commentators are not discussing this issue. I do not know.
Regarding money there are two competing views: (1) money is determined by the market or (2) chartalism which asserts that ‘money is a creature of law.’ Governments can only manage money if they create it. Obviously, the market determines money because money existed before governments were created.
Regarding gold there are two competing paradigms: (1) gold is a commodity and (2) gold is money. Paradigm (1) asserts that gold is a hedge against inflation and there is no monetary demand for gold. On the other hand, paradigm (2) asserts that gold is a hedge against currency collapse and the primary demand for gold is monetary. I subscribe to the second paradigm and assert that at all times and in all circumstances gold remains money.
WHAT IS SILVER’S ROLE
Under which paradigm does silver fall? Is silver a commodity or is silver money? For a commodity to be money its primary demand must be monetary.
Like gold, for thousands of years silver functioned as money in the market. The term dollar, as used in Article 1 Section 9 Clause 1 and the Seventh Amendment of the US Constitution, is defined as 371.25 grains of fine silver under Section 9 of the Coinage Act of 1792. Governments stockpiled billions and billions of ounces. However, on 24 June 1968 the United States government defaulted on their silver certificates. Over the decades, silver, like gold, has been demonetized in ordinary daily transactions. Supposedly there are large stockpiles of gold in central bank vaults. Unlike gold there are no reported large above ground stockpiles of silver stashed in central bank vaults. Additionally, a large portion of silver demand is industrial as it is used in cell phones, refrigerators, dental equipment, computers, etc.
Therefore, it appears that silver is confused about its role. In other words, silver functions as a commodity and as quasi-money.
FIVE WEEKS OF SILVER BACKWARDATION
While similar, there are differences between future and forward contracts. For example, future contracts are traded on exchanges, use margin and are marked to market daily. In contrast, forward contracts are generally traded over-the-counter (OTC derivatives) and are not marked to market. Therefore, forward contracts are subject to greater counter-party risk than future contracts.
Because the primary reason backwardation arises is counter-party risk and because forward contracts are impregnated with greater counter-party risk than future contracts, therefore it is highly likely that backwardation would appear in the forwards markets before the futures markets.
This is precisely what has happened. While the COMEX silver futures contract have not been in backwardation the LBMA Silver Forward Mid Rates have been in backwardation for five consecutive weeks. Of particular interest is the 6 month contract.
SO WHAT?
What does all this mean? Well, I think the backwardation reflects the market’s uncertainty of silver’s role as money. The chronic silver backwardation began on 8 December 2009, the same day I wrote about gold in backwardation, and silver was priced about $9.60. Currently silver is trading about $13.82. Predictably, the gold/silver ratio is narrowing. If the backwardation persists it will be interesting to see if silver’s price in illusory FRN$ continues rising.
In my opinion, as the great credit contraction grinds on and intensifies, the commodity silver will reassert itself as money and eventually currency. As I mentioned during the interview with Contrary Investors Cafe what would be really interesting is if the central banks decide to start hoarding silver!
In the meantime it may behoove those who are bullish towards silver to increase the pressure on physical silver delivery. For example, I purchased some beautiful Austrian philharmonics at the Cambridge House Investment Conference and Silver Summit over the weekend. The beautiful coin cost $20 which was an amazing $5.50 over spot.
While there are cheaper ways to purchase physical silver bullion, like GoldMoney, these huge premiums over spot beg the question: What is the real silver price? With the specter of counter-party risk driving silver into backwardation if there is a failure to deliver then it will likely cause the silver price to shift from the COMEX just like a failure to deliver would cause the gold price to shift from the COMEX.
Bottom line: Do not get caught with your paradigms down!
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Doug Casey: What to Do in “The Greater Depression” — Seeking Alpha
Source: The Gold Report
Bullion and oil appear in the lineup of power players that Doug Casey thinks investors can count on as the world slips deeper and deeper into what he calls the “Greater Depression.” Despite the raging economic storm and Doug’s doubts that Western civilization’s governments will take the actions needed to quell it, though, the Chairman of Casey Research is nowhere close to calling the game. In fact, he sees silver lining in the clouds of crisis—opportunity—and expresses optimism that technological advances, coupled with capital rebuilding once over-consumption runs its course, will prevail eventually. The Gold Report caught up with the peripatetic author, publisher and professional international investor between polo matches in New Zealand, one of several nation-states he calls home from time to time.
The Gold Report: You’ve been discussing what you’re calling “crisis and opportunity,” and in fact have a summit by that same name coming up in Las Vegas next month. Could you give us a high-level overview of what you foresee?
Doug Casey: We’ve definitely entered what I describe as the Greater Depression. It’s not coming; it’s here. It’s going to get much, much worse as far as I’m concerned and unfortunately, it’s going to last a long time. It doesn’t have to last a long time, but the root cause is government intervention in the economy and everything they’re doing now is not just the wrong thing, it’s the opposite of what they should be doing. It’s almost perverse.
The distortions and misallocations of capital and the uneconomic patterns of production and consumption that have been going on for over a generation need to be liquidated and changed, but everything the government’s doing is trying to maintain these patterns. So it’s going to be horrible. In addition, the government is necessarily directing more power toward itself with all of its actions. If I were you, I’d rig for stormy running for a good long time.
TGR: By “a long time,” do you mean a couple of years, a decade, a generation?
DC: This is, in some ways, uncharted territory. Let me say that for the long run I’m very optimistic. Why? Two things act as the mainsprings of progress. Number one is technology and that’s going to keep advancing, so that’s very good. Second is capital and savings. Individuals will solve their own problems and, therefore, they will stop consuming more than they produce, which is what they’ve been doing for years, and they’ll again start producing more than they consume. The difference is savings; that builds capital.
So technology and capital are going to solve the depression. But the government can do all kinds of stupid things to make it worse. Look at the Soviet Union. They suffered a depression that lasted 70 years from its founding. Look at China. The whole reign of Mao was one long economic depression. That could certainly happen in the U.S., too, where the government misallocates capital in such a way that technology doesn’t advance as it could and people can’t build individual capital the way they would. I’m optimistic, but anything can happen.
TGR: But didn’t China and the Soviet Union have governmental structures very different from those in Western Europe and the U.S., and those structures allowed for more intervention? Are you projecting that we might slip into an era where Western civilization will allow their government to run themselves like the Soviet Union and China did?
DC: It seems to be going in that direction. Of course, Europe is going to be hurt much worse than the U.S. Europeans are much more heavily taxed and much more heavily regulated. The average European is much more reliant upon the state psychologically as well as economically. So it’s all over for Europe and this doesn’t even count the problems that they’re going to have in the continuing war against Islam, which are much more serious for Europe than they are for the U.S. So, no, Europe is fated to be nothing but a source of houseboys and maids for the Chinese in the next generation.
TGR: So do you think that societies in Western Europe—and even the U.S.—will allow themselves to be governed in the same fashion as the Soviet Union and China were during their depressions?
DC: Oh, totally. I don’t see why that would not be the case. Even Newsweek says we’re all socialists now. That seems to be the reigning ideology. In addition, psychologically, the average American—just like the average European—looks to the government to solve things. This is very bad. Most people are unaware that Homeland Security, which is one agency that should be abolished post-haste, is building a 400-acre campus in southeast Washington, D.C., where initially they’re going to put 25,000 employees. That’s as many as the Pentagon has and with 400 acres, Homeland Security has a lot more room to grow. Ironically, the property is at the site of St. Elizabeth’s Hospital, the first federal insane asylum in the United States. Once a bureaucracy has a piece of real estate and builds buildings, it’s game over. They’re just going to accrete and grow and grow, so that’s one indication. The trend is clearly in motion.
It’s all over for the U.S. In fact, let me say this. America doesn’t exist anymore. What is left is not even these United States. That was decided in the 1860s. It’s the United States. America, which is basically an idea, a concept, is dead and gone. The United States is just another of 200 awful little nation-states that have spread across the face of the earth like a skin disease. There’s no longer any difference that I can tell between the U.S. and any other country.
TGR: How would you describe the concept that America was based on that is now gone? And is there another country in the world embracing that concept? Will there be a new America?
DC: No, there is no other place. I’ve been to 175 countries and lived in 12. My feeling is that the best thing that you can do is set your life up so that you’re not to be considered the property of any one government. You might have a passport or several passports and, therefore, that government thinks they own you. But if you don’t spend time in a country, practically speaking, there’s nothing they can do about it.
So, no, there is no real haven for freedom in the world today. The best you can do is go where the governments are so unorganized that they can’t control you effectively. That’s one reason I like to spend time in Argentina. They have an incredibly stupid government, but they’re also very inefficient and ineffective. So it’s wonderful as a place to live. I also spend time in Uruguay, because it’s a tiny little country with no ambitions to conquer the world. The nice thing about New Zealand, where I am now, is that it’s a small country, only 4 million people, lots of open land. It’s got some severe problems, but it’s pleasant. I think the U.S. is going to be the epicenter of a lot of problems in the years to come.
TGR: Few of our readers are probably in positions where they could live in 12 different countries, but they have amassed assets here in the United States. What advice would you give them to safeguard those assets?
DC: The key is to remember that we’re going to have a long and deep depression, so most things that worked well over the last 20 years are unlikely to work well in the future. I’d been predicting the real estate collapse for a long time. It’s still got a way to go, too, because a lot of real estate debt remains that has to be liquidated. There’s a lot of leverage out there and there’s been a huge amount of overbuilding. So it’s far too early to get into real estate, at least in North America or Europe.
It’s also way too early to get into the general stock market, for all kinds of reasons. Dividend yields are still extremely low. Earnings are going to collapse. Government bonds are perhaps the worst single thing to be in, because with the government printing up money literally by the bushel basket, the dollar is going to start losing value radically and interest rates are going to start going up radically at some point. So you have to rule out most stocks.
I’m afraid that the most intelligent thing you can do is to own a lot of gold, preferably gold coins in your own possession. And I think speculation in gold stocks makes sense at this point, because gold stocks are about as cheap as they’ve ever been relative to other assets, really, in history. Now is an excellent time to do that as well. But that’s in terms of speculation.
Investment risk is tough enough, but the biggest problem is political risk. That’s what you have to watch out for. That means you have to diversify internationally. This is harder for most people, harder psychologically, and it takes more assets to make international diversification viable. But if you’re in a position to do it, it’s the most important thing you can do.
TGR: Since you mentioned having coins in your own possession, should we assume you’re not a big fan of the ETFs or some of these other paper gold promises, if you will?
DC: ETFs are okay for the convenience that they offer and for significant amounts of money, but gold coins should be first on your list, no question about that. If you’re only talking about $50,000 or $100,000, or $200,000, coins are fine to keep in your own possession. They won’t take up much room and you can put them in some safe place (which, incidentally, is not a bank safe deposit box).
TGR: Are you recommending putting all of your investment in gold into the bullion or are you also recommending some portion in producing junior and explorations?
DC: Both, but look at the stocks as being speculative. Most of your money should be in gold with a bit of silver, too. Silver is basically an industrial metal, but it has monetary characteristics. Now is the time to be very overweight in the metals and I think owning gold stocks is a good idea. They’re very cheap.
TGR: Anything else investors can do to preserve whatever may remain of their wealth?
DC: Owning real estate in some foreign countries is a very good idea—from a lifestyle point of view, an asset diversification point of view, and a possible capital gains point of view, too. They can’t make you repatriate foreign real estate. Having some U.S. dollar cash while we’re going through this deflationary period is very wise as well, but that’s not going to last. Eventually the U.S. dollar is going to reach its intrinsic value.
TGR: Not that you have a crystal ball, but how would you see the rest of ’09 playing out?
DC: Nothing goes straight up or straight down, but it seems that ’09 is going to see much higher gold prices and much lower stock prices and much lower bond prices, too. But remember, the worst is yet to come.
You haven’t heard an awful lot about people losing their pensions yet, but that’s going to happen because what are pensions invested in? They’re mostly invested in stocks and bonds and commercial real estate. All three of those things are disaster areas, and bonds are the big disaster area yet to come. So I think it’s going to be nothing but bad news in 2009. What happened in 2008 was just an overture to what I think is going to happen in ’09 and ’10.
TGR: Even into 2010?
DC: Yes. This isn’t going to be cured overnight, mainly because of what the government’s doing. As I said, it’s perversely exactly the opposite of what they should be doing, which is abolishing all the agencies and freeing up the economy. They’re passing lots of new regulations, they’re going to have to raise lots of taxes eventually, and they’re inflating the currency. So it has to last, at least into 2010. It’s going to be quite dismal, actually.
TGR: And what happens with the unfunded Medicare liabilities?
DC: They’re not going to be funded. They’re going to be defaulted on and, actually, that’s the best thing that could happen. That’s one of the things that should be done now; the U.S. government should default on its debt. This is shocking for people to hear, but it wouldn’t be the first time the U.S. government has done that. It did that almost at its founding in continental days.
This debt represents a tax liability that’s being foisted off on the next generations who have no moral obligation to pay and should not pay. I think as an ethical point, the U.S. should default on this debt. It’s impossible to pay it back, and it won’t be paid back. It’s more honest to acknowledge that bankruptcy now as opposed to pretend it’s going to be paid back. Defaulting even might forestall runaway inflation in the dollar, which would be a catastrophe of the first order. So it’s the smart and moral thing to do, and it’s going to happen eventually anyway. All the real wealth will still be here; a lot of it will just change ownership. The big losers will be those who lent to the State, thereby enabling its depredations, and they deserve to be punished.
But even a default tomorrow will do no good unless you put the U.S. government into reverse and disband all of these ridiculous, destructive agencies that have grown like a cancer for years. Taxes should be cut 50% to start with, just out of hand. And the defense establishment—it’s a misnomer; it’s not defense at all but rather foments wars around the world—should be cut hugely. Not with a butcher knife; but a chain saw. But none of this is going to happen; in fact, just the opposite. That’s why I’m so pessimistic now that the tipping point’s finally been reached.
TGR: Are we at the tipping point?
DC: Yes, we’ve absolutely gone over the edge. The consumer is no longer in a position to consume. Everybody is going to cut consumption to the bone and hopefully find something to produce instead. It would be better for people to start viewing themselves as producers than consumers. That would be a step in the right direction to get them psychologically more in line with reality.
TGR: In last fall’s meltdown, gold held up, but the stocks didn’t. Quite a few producers and soon-to-be producers, and some companies making discoveries, seem to have bottomed out in November and December. But worry persists in the market. Suppose another shoe drops or another black swan appears? Richard Russell (Dow Theory Letters) and others have been talking about the Dow going down to 5,000. What would that do to the gold stocks?
DC: Gold stocks are also stocks, and the best environment for gold stocks historically has always been when both gold and the stock market are going up. But since the last gold stock bull market came to an end, I think it’s entirely possible to see a bubble develop in gold stocks with all the money being created. I certainly hope so. I’m actually optimistic for gold stocks just because they’re so cheap relative to everything else.
TGR: They have been beaten down.
DC: Yes. And that fact, along with the waves of money being printed around the world and the much higher gold prices we are going to see, could cause a speculative mania to develop in the gold stocks. Nobody’s even thinking about that possibility right now, because they’re so battered. But this is the time to get into the right ones because it’s likely to happen in the future.
TGR: The ’29 crash—which was really the preamble, because ’30, ’31, ’32 and ’33 were certainly bigger—is when gold stocks such as Homestake did their best. How do you see that playing out this time around? Is it different this time or do you expect a similar pattern?
DC: You know what they say, “History doesn’t repeat itself, but it rhymes.” I think that, first of all, the gold mining industry is a much worse industry now than it’s ever been in the past, because just as all the easily defined light sweet oil basically has been discovered, all the easy-to-find high-grade gold basically has been discovered. Most mines that are going into production are low-grade, which means that you have to move a lot of dirt, which means that they’re much more capital-intensive than in the past. So gold mining’s a worse industry from that point of view.
Also, politically speaking, with the rise of the green movement, there are people who don’t want any oil burned, any dirt moved, any trees cut. They don’t want to see anything happen. This makes it much harder to do gold from a permitting and political point of view. We’re in a much higher tax environment than in the past. So it’s a tough industry. It really is. It’s just a 19th century choo-choo train type of industry that interests me only as a speculative vehicle. You’ll notice that gold went from lows of about $300 to highs of about $900 and none of these gold companies are making any money because their costs actually went up faster than the price of gold. So I’m not saying gold mining is a great business. It’s not. It’s a crappy business. Still, we could have a bubble in the stocks. I’m hoping we do.
TGR: Aren’t we going to see a change in that in ’09? Oil, which is one of the large components of that cost, has come down dramatically. A lot of these producers must be locking in oil at these lower prices. Won’t that translate into year-over-year earnings increases for the gold producers?
DC: That’s possible. The producers actually may show increases for the next couple of years. I don’t doubt that. But I don’t think oil will stay where it is. I think oil’s eventually headed back to $150 a barrel or more.
TGR: So why wouldn’t you own oil as well as gold?
DC: It’s a good idea, but we weren’t really talking about oil. I’d say that oil is a good thing to own. Oil is a real buy now. It’s as good a buy at $40 as gold is at $900 right now. Maybe a better buy; who knows?
TGR: If we go into worldwide depression, will oil continue to be a good buy or will it self-regulate around this $40 a barrel?
DC: I am bullish on oil. Although I’m philosophically not very sympathetic to the peak oil theory, I think it’s a geological fact. Also, China and India and the other developing parts of the world don’t use a whole lot of oil now. As they develop, they will to want—and almost need—to use a lot more oil. That’s going to keep pressure up on the demand side. But the supply side actually finally is constrained, so it’s going to mean higher prices. In a depression-type environment, U.S. and Western oil consumption could drop a lot, but the third world would take up most of that slack. So I have to be bullish on oil.
TGR: Are you bullish on any other sectors or commodities?
DC: I’m bullish on agricultural commodities. They ran way up last year and then collapsed again. I think a good case can be made that most of the soft commodities are quite cheap and will go higher, so I’d look at those, too. I think gold definitely, oil in the years to come has the potential to go much, much higher, and the agricultural commodities have a lot of potential.
TGR: Gold appears to be uncoupling from the dollar. Historically, when the dollar was strong, gold would be weak. But we’ve had a couple of recent instances in which both the dollar and gold have been strong. Obviously, we’ve seen a total decoupling of gold from oil. It used to be when oil was running, gold was running and vice versa, but that no longer seems to be the case. Is that just an old wives’ tale or is something going on?
DC: I’ve never seen any necessary relationship between gold and oil, just like there’s no necessary relationship between rice and natural gas, or nickel and soybeans. All these commodities tend to move together, all the currencies tend to move together and stock markets tend to move together, but they all have their own dynamics. I think it makes sense to compare the relative prices of various commodities and see what may be cheap or dear relative to other things based on the fundamentals.
On any given day, somebody may have to buy or somebody may have to sell a huge amount of almost anything. It’s unpredictable and you can’t tell what constraints are out there in the market. I don’t even pay attention to day-to-day fluctuations because they’re just random noise. I watch the big trend. It’s been shown that if you just made one correct trade and stuck with it at the beginning of every decade for the last four decades, you would have realized something like 1,000 times on your money. To me, this is the proper approach to the markets, not to try to second-guess from day-to-day what’s going to happen. That’s foolish because you get chewed up with commissions and bid-ask spreads and double-thinking your own psychology and so forth.
I really just like to look at long-term trends. In terms of long-term trends, you’ve got to be long gold, long silver, long oil; you’ve got to be short bonds. I think that’s really all you need to know. The other things we mentioned such as agricultural commodities and so forth are worthy of attention. But, as I said, I’m not a day-to-day trader. I think that’s very foolish.
TGR: Are these the themes that you and your group of speakers will focus on in Las Vegas?
DC: They are. I certainly want to invite anybody who reads this interview to join us. We put on very small, very classy seminars. They’re not gigantic mob scenes, so it’s possible to get to know individual speakers and fellow attendees in a very collegial atmosphere. I think it’s something that anybody who’s seriously interested in these kinds of things should consider.
The Casey Research Crisis & Opportunity Summit, will be held March 20 – 22, 2009, at the Four Seasons Resort in Las Vegas.
A citizen of the world in more ways than most of us can imagine, Doug Casey, Chairman of Casey Research, LLC, is the international investor personified. He’s spent substantial time in about 200 different countries so far in his lifetime, living in 12 of them (currently New Zealand and Argentina). And Doug’s the one who literally wrote the book on crisis investing. In fact, he’s done it twice. After The International Man: The Complete Guidebook to the World’s Last Frontiers in 1976, Doug came out with Crisis Investing: Opportunities and Profits in the Coming Great Depression in 1979. His sequel to this groundbreaking book, which anticipated the collapse of the savings-and-loan industry and rewarded readers who followed his recommendations with spectacular returns, came in 1993, with Crisis Investing for the Rest of the Nineties. In between, his Strategic Investing: How to Profit from the Coming Inflationary Depression (Simon & Shuster, 1982) broke records for the largest advance ever paid for a financial book. Bill Bonner (The Daily Reckoning) describes Doug as “smart, hard-working, and extremely knowledgeable” with “an instinct about investments that has made him and many of those around him very rich.”
Doug, who now spends more time as an expatriate than he does on American soil, has appeared on NBC News, CNN and National Public Radio. He’s been a guest of David Letterman, Larry King, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin and Maury Povich. He’s been the topic of numerous features in periodicals such as Time, Forbes, People, US, Barron’s and the Washington Post – not to mention countless articles he’s written for his own various websites, publications and subscribers.
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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor/s, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investing decisions and/or investments. – jschulmansr
Analysts said the move was likely to increase talk that countries were set to engage in a bout of competitive devaluation.
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