Junior miners start with a claim, a geologist, hope, some spare change, and then a press release. A speculator’s job is to provide the spare change to the companies with good prospects, and at the right time.

What is the right time for us?

Pierre Lassonde co-founded Franco-Nevada and later served as president of Newmont Mining. During decades of financing and owning mining companies, he’d noticed that junior miners’ perceived market values follow a repeatable arc. That arc is now called the Lassonde Curve.

Learn the curve and you will know when to be excited and when to be bored.

The Lassonde Curve applies most directly to junior miners that have one primary target. Here’s an idealized version of it, with approximate locations of the various standard milestones.

Stage One: The Discovery Spike

A company raises a little money, picks some pretty rocks from the ground (grab samples) and maybe drills a couple of holes. A few ridiculously high grab sample assay results, or a high-grade intercept on a drill core, provide the meat for a press release, and the stock doubles.

At this point the company owns an interesting piece of land. It does not own a mine. Nobody knows how big the deposit is, whether the metal can be recovered at a profit, or whether a government will grant a permit. Speculators arrive first, retail traders follow, and the price rises on hope.

Here’s the key: the peak often comes on the best news the company will release for years. Buyers at the top are paying as if the mine already exists. Pure hope. But there is no mine and won’t be for a long time. After discovery, the average mine takes about 15 to 18 years before it produces. If it ever produces. Most discoveries never become producing mines.

Stage Two: The Orphan Period

After the early speculative peak, the work turns dull. More drilling, mapping the structure, running metallurgical tests, filing for permits, and commissioning studies. There are occasional press releases that few read.

The speculators sold near that earlier peak and went off to seek the next discovery. The institutions have not arrived, because they need risk they can model, and this project is still an unpredictable gamble. The stock has few owners. The price slides, often to a fraction of its peak.

Dilution contributes to this slide. A company with no revenue pays for its geologists and drill rigs and lawyers and consultants by selling shares. When the price is low, it must sell more shares to raise the same dollars. The existing holder watches his slice shrink twice: once from the falling price and again from the growing share count.

Dilution is not inherently bad if the money raised creates more value than the dilution costs. But that value increase is often not recognized during this stretch of time.

This stretch is the orphan period. The Valley of Despair is the bottom. The press releases keep coming. The buyers do not.

During the orphan period the asset gets better while the stock gets worse. The geologists are turning a discovery into a deposit, and the market is paying nothing for the progress. Patience gets tested and patience loses—which is why the stock price falls. Other people’s impatience is the second opportunity for a speculator to come in. But beware, because that orphan period can last years.

Stage Three: De-Risking and the Climb

A positive feasibility study is the point at which the valuation of the company might rise faster than the dilution of the shareholders. It provides a clearer picture of the capital required to build a mine, operating costs, and potential returns. Permits arrive. Each box checked removes some risk, and funds with compliance departments get the numbers they need to fill in boxes on a spreadsheet. A company that cannot finance construction, or sell itself to a company that can, will stall at this stage for years or go under altogether. So the balance sheet should get as much attention as the geology.

The climb (if it occurs) is steady and mostly unglamorous. Financing closes, construction begins, and the price climbs in a slow staircase. Takeover interest picks up along the way. The major miners burn through reserves every year, and they would rather buy a de-risked deposit than find one. Acquisition premiums tend to land in this stretch.

Stage Four: Production

First pour and finally some cash flow. Analysts publish models, and generalist funds buy. The market begins valuing the company on demonstrated production, operating costs, and cash flow rather than speculation about what might be underground. The dull stretch is over. Investors finally see a return.

For the few projects that get this far, the company’s market cap can climb above the discovery spike. A working mine with cash flow is worth more than the market’s best guess at a discovery. The early multiples are gone by now. The biggest gains go to those who bought in the valley and held through and beyond the build decision.

Why the Curve Exists

The curve is a chart of the company’s perceived market value. At the initial speculative spike nothing is known, and the stock price is based on buyers’ imaginations. In the valley, the risks are being resolved one at a time, but the buyers who demand proof don’t yet have enough. The market begins requiring evidence of economic viability and financing in addition to geological proof. Each study and permit converts a guess into a fact, and the price moves when enough people believe that there is profit, not just gold, in them thar hills.

Perceived market value is what the market believes the whole company is worth. In numbers, that is the share price multiplied by the number of shares outstanding. Value is subjective, and the crowd’s perception of a junior swings between hope and despair as the facts arrive. We draw the curve this way. It is often drawn as share price, and the two can diverge.

As I mentioned, during the valley, a company with no revenue keeps selling new shares to pay for drilling and studies. By production, the share count can be several times what it was at the spike. The company’s total value can then end above the spike while the price per share ends below it. A rising curve does not promise a rising stock price. Before you buy, check the share count, the warrants and options outstanding, and how the company plans to pay for the mine.

Using the Curve

First, know which stage you are buying. A stock at the discovery spike needs quick action, but only a small position, because most drill programs never turn into a mine. Take a Casey Free Ride if the stock doubles, or, better yet, bail out entirely and take your profit on the spike. If you came in with a private placement, you hopefully have warrants. If so, you still have a fork in the steak without tying up cash.

If the stock is in the orphan period, the Valley of Despair, you can likely be patient.

Second, a low price does not make a stock good. Doug Casey‘’s 9Ps analysis exists to differentiate a potential mine from a likely zombie: the people running the company, the politics of the jurisdiction, the quality of the property, and the rest of the checklist.

Third, don‘’t confuse the curve with a clock. The curve is idealized. It tells you where a company might be in its lifecycle, not when. The Valley of Despair can last years, and a stock can fall much further before the market recognizes the progress being made.

Real stocks wander off the curve for dozens of reasons, and many never leave the first stage. The line in the picture is smoothed. The stock market is a jagged mess.

Where we like to enter

We speculate in carefully selected drill plays as early as possible, watch them closely, and usually sell during the speculative peak. Buy lowish and don’t forget to sell highish. Warrants keep us in the game, at no extra cost, which is why we like private placements.

We then watch the stock decline and go through the Valley of Despair, then we perhaps come back in as the curve starts to rise, before an impending mine build decision.

The Lassonde Curve is a guideline, not a rule. Some companies never get past the discovery spike. Others spend years in the Valley of Despair, and many never climb out. But understanding the cycle helps us recognize when the market is pricing hope, when it is pricing despair, and when it is finally pricing a mine. Our job is to know the difference—and to have the patience to act when the opportunity presents itself.

Paid subscribers get our monthly stock recommendations and the full portfolio, with positions analyzed based on their 9Ps. Upgrade and see the work behind the picks.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Here in the US, most of us shifted from daylight time to standard time over this past weekend. Most of us had the opportunity to sleep an extra hour. For free! More sleep means more health, more ability to tolerate stress, more consolidation of what we learned the previous day.

It’s a wonderful thing.

Of course, that hour was never free. We just borrowed it. We’ll have to pay it back in March. You know that. I know that.

But just for a moment, I am going to think like a Democratic Socialist:

Why not give us a free hour every night?

I mean, just think of the benefits. Who doesn’t want an extra hour of rest?

Just turn back the clocks every night of the year at 2 AM and make it 1 AM.

365 nights a year.

Viva the Greater Good!

If I were a Democratic Socialist type, I would vote for anyone who promoted it.

It isn’t on the ballot tomorrow. But that same sort of thinking is on the ballot in various states in the US. And that sort of thinking already has been adopted in New York City and much of Europe.

Doug Casey calls it stupidity.

He has two definitions for stupidity. The first definition is predicting the immediate and direct consequences of an action but not the indirect and delayed consequences. The other definition is an unwitting tendency toward self-destruction.

Tomorrow, people will go to the polls in the US to vote between two choices: giving more power to their government to do what the Republican politicians want to do, or giving more power to their government to do what the Democrat politicians want to do.

There is no viable choice on the ballots for taking power and money away from the politicians and reserving that money and the power to the individual people.

In some places, including Alaska and Maine, there is Ranked-Choice voting. You get to vote for several candidates and rank them in order of your preference.

What I would prefer is a Ranked-Disgust voting. That would be more consistent with the reality out there. Each candidate would start with 100 points (you know, equity and all) and then lose points based on the voter’s ranking of how disgusting each candidate is.

Or instead of going to vote, I can go to veto. Just changing a couple of letters around. On the ballot, I used to write-in Mickey Mouse. Everyone else was voting for a Mickey Mouse too. I just used the correct name. But voting for Mickey Mouse is not truly a veto. Most would say it’s a waste of a vote. Perhaps it’s better to give your vote for the lesser of two evils. You will still end up with more evil, sure, but less of more evil.

Who wins the election?

Not us.

Here’s some advanced math. The winner of an election is determined by this formula:

TV+FV+VSFTOG

Where TV is the number of true votes received.
FV is the number of fraudulent votes received.
And VSFTOG is the number of votes stolen from the other guy.

The winner is the one who has the highest sum of TV+FV+VSFTOG.

The math is no more complicated than that. Democracy has always been this way.

Get over it. If the Democrats cheat more than the Republicans, the Republicans need to be one helluva lot better at earning true votes. Starting wars probably isn’t the way to earn those true votes.

Tomorrow in the US we will be choosing between keeping Congress under the control of Republicans (who have been able to do little to codify the efforts of cutting the federal bureaucracy but have not gotten in Trump’s way), or putting it under control of the Democrats, who will get in Trump’s way constantly. If Democrats win, we will all be relying on Trump’s veto to prevent them from burning down the last vestiges of what was once America.

Trump is the type of guy who needs to be seen as the hero. Trump probably sees that a Democrat-controlled Congress will provide him an opportunity to be a hero. He’s had to do everything by executive order anyway, and that won’t change with a Democrat-controlled Congress. So as the new Congress starts passing stupid bills, Trump will stand as the wall preventing those stupid bills from becoming law.

Hero!

Kamala Harris, as dim as she is, was able to see that impeaching Trump would be bad for the Democrats.

But, if the Democrats win, they won’t be able to control themselves. They’ll go on an impeachment binge. Maybe some Republicans in the Senate will vote to convict Trump and the two-thirds will send him out of the White House. Maybe. If that were to happen, two things will occur.

1) Doug will win his bet that Trump won’t finish out his term, and

2) The Democrats will realize they’ve been hoisted by their own petard. They will suddenly realize they have no viable platform other than hating Trump. So they will go full-on panic to aim their well-lubricated hate machine toward Vance, jamming that throttle to the floor. I bet Vance and his wife will not enjoy that.

If Trump tries to stay in the White House after a conviction by the Senate, all bets are off.

And if Trump is out of the White House and no longer a useful target, all the Democrats have left to campaign on is the type of thinking that would lead to us setting our clocks back by one hour every night of the year.

You know, for the greater good.

Tomorrow’s election, the cheating that will occur, the wailing and the tears of the losers, the rabid celebrations of the victors, perhaps a bit of violence here and there, all of it will be there to watch on wide screen TV.

I think I will watch South Park instead. Or maybe Team America, World Police.

Or maybe just go straight to Idiocracy.

John
John Hunt, MD
Editor, Doug Casey’s Crisis Investing

P.S. Whoever wins tomorrow, the dollar will lose a little more value against everything except other crappy fiat currencies. That is an outcome I will bet on, and it is why we own gold and the companies that dig it up. If a friend forwarded this to you, join the free list. If you already read us for free, the paid tier is where we show what we own and why. Here’s where to click.

Carnage.

That’s what yesterday’s markets seemed like to many of us here at the New Orleans Investment Conference, and most anywhere else. Is this blood in the streets? Not really. But it is the type of day that makes you question your thinking. Questioning is fine, wise, worthwhile. After all, maybe the other guys are right. Maybe we’re wrong.

Or maybe we are right, but not yet. That’s the usual mantra. The market can stay irrational longer than we can stay solvent? Or we’re right, but those in the wrong are controlling all the levers and they can pull those levers harder and keep their basket-case inflation-addicted economy chugging on longer. Or, perhaps, we are right and what we’ve been predicting all along is happening now, dammit.

Or it is just another day in our volatile sectors of the market, in a world that is itself volatile, and this is an opportunity to buy what we are right about.

So this month’s issue for paid subscribers reviews the theses underlying our choices for investment and speculation, to evaluate whether they still seem correct.

But given that optimism is an attractive trait, I’ll also present an investment opportunity that is worth keeping our eyes on and beginning to deploy money into.

Almost daily, we perform our own due diligence on individual junior miners—the drill results, the balance sheets, the management teams. This month I’m teaching about a company that can do that work for us, structures the deals, and hands us the result in a single TSX Venture-listed stock. This stock is not for everyone. But it is well-suited for the non-accredited investor, whose access to warrants is otherwise restricted by the governments’ paternalistic controls.

Over the years it has gradually—and until recently, quietly—become a warehouse of junior mining warrants—powerful instruments in resource finance and in a portfolio. Doug has talked for three decades about the optimum portfolio for a resource bull market: not a basket of common shares, but a basket of long-dated warrants on every credible junior. Warrants, collected during private placements and particularly in PIPEs (Private Investment in Public Equity), are free sweeteners offered at a time when a company needs your money.

If you aren’t in a position to buy into private placements in junior miners—and most people aren’t—then the way to obtain warrants might be to buy them on the open markets. If you can. But in our sector, most warrants are not tradeable. They aren’t on the open market. So it is difficult for most people to create a portfolio that Doug considers to be optimal.

But there are ways to do it now. Today will be a different kind of discussion than usual. I’m not suggesting you underwrite a single exploration play, nor will I introduce a new sector, nor talk about using option strategies.

Instead, I’m letting you know why I have put confidence in a team that each year sees hundreds of financings, cherry-picks the ones worth backing, structures the warrant terms so they might pay off, and recycles the proceeds. Putting your money into this ticker gives stock-picking control to that team. In exchange you get diversification across hundreds of juniors, professional deal access that non-accredited investors will never see, and a management team and insiders with 45% ownership riding alongside yours. I love when incentives are aligned.

If you want to know more about this company, as well as see our full Crisis Investing portfolio, with a sector-by-sector analysis and a summary of each company’s monthly activity, please become a premium subscriber.

If you are a premium subscriber, read on.

Read more

Until a mine is built, a junior has one product to sell: its own shares.

Part 1 covered the rock and the paperwork. This letter covers how a junior raises capital, the terms it offers investors, and the tax complications that arise on either side of the border. Most of the deals we see are Canadian companies, so the focus of this letter is there. I hope the Aussies and occasional Europeans forgive me.

The Money

Private placement. Shares sold directly to selected investors, usually at a discount, to fund the company’s next program. Maybe a PIPE (private investment in public equity). Most junior capital is raised this way, and it is where a speculator can buy at or below the market and get warrants as well. The early raises are pure speculation, raising money to convert hope into hope plus a treasury.

Accredited investor. A permission slip to partake in private placements. In the US, an individual qualifies with income above US$200,000 (US$300,000 with a spouse) in each of the last two years and a reasonable expectation of the same this year, or a net worth above US$1 million not counting the home, or by holding certain securities licenses. Canada’s tests run in Canadian dollars: net income above C$200,000 (C$300,000 with a spouse), financial assets above C$1 million net of related debt, or net assets above C$5 million. The US thresholds were set in 1982 and have never been adjusted for inflation. The premise is that wealth equals sophistication. It doesn’t.

Unit. The package sold in most private placements: one share plus a warrant, or a fraction of one. “Units at C$0.50 with a full warrant exercisable at C$0.75 for two years” means you pay C$0.50 for a share and the right to buy another at C$0.75 until the warrant expires.

CAD vs. USD. Most Canadian juniors report results, price placements, and set warrant strikes in Canadian dollars. Their US over-the-counter (OTC) tickers trade in US dollars. A US speculator therefore holds two bets: the stock and the exchange rate. Gold and copper are priced in US dollars while Canadian salaries and diesel are paid in Canadian dollars, so a weak CAD fattens a Canadian producer’s margins and thins a US holder’s returns when converted home. For US taxes, each purchase and sale has to be converted to US dollars at the rate on the trade date.

Brokered vs. non-brokered. A brokered placement is sold through an investment dealer, who takes a commission, often 7% plus broker warrants. A non-brokered placement is sold by the company itself, sometimes paying a finder’s fee to whoever brings in the money. Brokered deals tend to be bigger, and more due diligence is applied. Non-brokered deals tend to be cheaper for the company, with less disciplined analysis undertaken by those who invest.

Bought deal vs. best efforts. In a bought deal, the dealer buys the whole offering up front and carries the risk of reselling it. Dealers buy only what they’re confident they can sell, so a bought deal says something about demand. In a best-efforts deal, the dealer sells what it can.

Warrant. The right to buy another share at a fixed price before a set date, often attached to a private placement unit. It represents a potential dilution for existing shareholders, and potential funding for the company. Unlike buying shares on the open market, exercising a warrant puts money directly into the company treasury. Some warrants trade in markets. Most don’t.

Acceleration clause. A warrant term that lets the company shorten the warrant’s life if the stock trades above a set price for a set number of days. Holders then exercise or lose the warrant. The company gets its cash early. You lose the remaining time value of the warrant.

Hold period. In Canada, most private placement shares can’t be resold for four months, although some shares carry no hold at all: shares sold under a prospectus, a LIFE offering, or a rights offering, and shares from a warrant exercised more than four months after the warrant was issued, since the clock starts on the warrant’s issue date. US buyers face a separate US restriction: a year under SEC Rule 144 for most Canadian juniors, or six months if the company files reports with the SEC. Once the Canadian four months pass, a US holder might be able to sell on the Canadian exchange through a Canadian broker (if he has one) after some paperwork to remove the restrictive legend. Prices can sag when the hold expires. There is no guarantee—none whatsoever—that the stock price will be, four months or a year hence, above the private placement price. That will depend on the market as a whole and any catalysts/milestones that the company plans and accomplishes in that period. Often there are none.

LIFE offering. Canada’s Listed Issuer Financing Exemption lets a listed company raise money from the public with free-trading shares (in Canada) and no hold period. Most anyone can buy, accredited or not. A US buyer still needs a US exemption, and his shares are restricted under US law.

Rights offering. The company offers new shares to its existing shareholders first, in proportion to what each owns.

Fully diluted shares. Shares outstanding plus every option and warrant that could become a share.

Burn rate. Cash spent per quarter. Divide the treasury by the burn rate to help predict the next required financing. Is the company blowing money on unnecessary overhead? Is management paying themselves well with your money while they do diddlysquat? Will there be a catalyst reached to (hopefully) increase the value of the current shares before the next raise?

Dilution. What happens to your slice when more paper is sold and the pie is cut into more pieces. Every junior dilutes. The question is whether the dilution buys ounces in the ground worth more than you lose from dilution.

NSR royalty. Net smelter return—a percentage of revenue paid to a royalty holder off the top, profit or no profit. Junior miners offer it as a way to get control of land for cheap, or to get cheap money into the treasury today, but it becomes a permanent claim on revenue tomorrow.

The Deals

Strategic investor. A major miner or large fund that takes a stake, often 9.9% to 19.9%, frequently with the right to keep its percentage in future financings. Strategic money is a vote of confidence from people who read technical reports for a living. It can also be an exit in waiting. Getting such investments is good push for the stock price.

Insider ownership. How much of the company management and directors own. Shares bought with their own money, in the market or in a placement alongside you, are skin in the game, and they align management’s interests with yours. Options granted as pay are a free lottery ticket for management. They aren’t free for you: when exercised, they dilute your shares.

Rollback. A share consolidation: ten old shares become one new one. The share count shrinks and the price rises in proportion. Warrants consolidate too. A consolidation may be accompanied by the sound of warrant value being sucked into a vacuum.

Shell. A listed company with a ticker and little else, used as a cheap vehicle for reverse takeovers so that a new entity can become public with less hassle. The reduction in hassle comes at the cost of giving the shell’s current owners some of the potential future value. Shells that have a mine vended into them often become shells again, but with luck and skill, they can start producing.

Just a bit on the taxman

For Canadians (keeping in mind that I’m not Canadian)

Flow-through shares. Canadian shares that pass lucrative exploration tax deductions through to the buyer. Buyers pay a premium for the deduction, then sell quickly. Only useful for certain Canadians.

Charity flow-through. A Canadian structure that stacks two tax breaks. A high-income Canadian buys flow-through shares at a premium, collects the exploration deduction, then donates the shares to a charity and collects a donation credit as well. The charity often sells the shares at once, at a discount, to a buyer lined up in advance. The company gets the richest price of any tranche. US investors can’t use it.

Hard-dollar shares. The ordinary, non-flow-through shares in a placement, also called hard money. No tax deduction attached, so they price below the flow-through tranche. These are the ones US investors buy.

For US Persons

PFIC. Passive Foreign Investment Company. A pile of oppression by the IRS, wrapped in paperwork. A mass of stupidity the purpose of which is to screw you if they ever get an inkling to do so. A foreign corporation is a PFIC if 75% or more of its income is passive, or 50% or more of its assets produce passive income. Even though they weren’t the intended target of the IRS and Congress, many Canadian explorers fit this bill, since their only income is interest on their treasury. Making a Qualified Electing Fund (QEF) election in the first year you own a PFIC lets a later gain be taxed as a capital gain, if the company provides the annual statement the election requires. This is a complicated area of US tax law. We aren’t tax advisors. And we mean it when we recommend talking to your accountant. It’s best not to ask for any tax advice from me, because you’ll just get a rant.

That’s Part 2. Part 3 will cover the mine economics, the market, and the method that ties all three letters together.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Doug has been raising this topic since 2016:

Doug: “There’s a good chance we’re actually gonna go over the precipice.”

His argument is structural. Every problem gets a new layer of people to solve it, and the layer never goes away after the problem does. Things get bigger, more top-heavy, more corrupt and less resilient. He compares it to the collapse of the Bronze Age and the start of the Dark Ages after Rome.

Two kinds of rioter

France is the epicenter, but the riots have spread to Brussels, Spain, Portugal, Albania and Italy. They started as student protests and turned into what the press calls cost-of-living riots.

Doug sees two groups in the streets who agree on almost nothing: Islamists who want to impose their own law, and native French radicals raised on socialist ideas. What holds them together is a common enemy.

Doug: “The enemy is Western civilization and Western values. They don’t like the very things that have given them all the good things in the world.”

I pointed out that the shift from exclusive to inclusive is part of it. Exclusive implies you earned something. Inclusive means you get it because you exist. Doug took that straight to the guaranteed annual income: “Everybody can’t be a consumer. You’ve gotta be a producer.”

We don’t live under capitalism

Here’s where Doug surprised me a little. He’s somewhat sympathetic to the rioters’ dissatisfaction, because he thinks they’re angry at the right thing and blaming the wrong one.

Doug: “We don’t live in a free market capitalist society. We live in a fascist society.”

He’s careful to define his terms, because nobody else does. Capitalism means you’re free to produce and consume with no constraints from the state, and, as I added, no aid from it either. Fascism keeps private ownership but the state controls it through taxes and regulation. Socialism means the state owns it outright. Communism is the bottom of the slope. By that definition, “the whole world is economically fascist at this point.” I’d add public-private partnerships to the list.

The rioters’ problem, as he sees it, is that they want to jump out of the frying pan into the fire.

The list

Doug brought a list of what makes Western civilization unique, the things he thinks both sets of rioters want to destroy: free thought, free speech, free markets, limited government, individualism, rationality, liberty, progress, privacy, property rights, the rule of law, and industry and enterprise.

He remembers the chant from his own college years, though he never joined the crowd chanting it:

Doug: “’Hey, hey, ho, ho, Western civ has got to go.’ So they’re pretty much getting what they want today.”

My view is that the rioters are only the tip of the spear. Most ordinary people I meet are bothered by these values and want more government, on the right as much as on the left. So there’s no real opposition.

The Pentagon is preparing. Are you?

This is the part of the episode I’d want people to hear. In the same week, the UK told its citizens to keep three days of food, water and cash on hand. Japan issued the same three-day warning. Then a Pentagon plan leaked, approved in September, that calls for every US military base to be self-sufficient for 90 days in food, water and energy, because the grid can’t be relied on.

The three-day warnings are just talk. The 90-day plan is real work and real money, including small modular reactors on base. Doug sees a silver lining there. I’d rather see them in civilian areas.

The US didn’t tell its citizens to prepare. It said it needs to prepare. Matt Bracken put it best in a meme I shared on the show: if the grid goes down, do you think the military will let hungry civilians onto the base?

Doug: “No, no chance. No way.”

The grid is more fragile than people think. Knock out a handful of key facilities and the custom parts take years to replace. And AI is now finding serious holes in software, which means water plants and power stations are exposed in ways we haven’t seen before. Doug’s view is that modern war is “people war”:

Doug: “If I wanted to destroy the country, that’s what I would do. I wouldn’t try to build some complex super bomber to overcome the B2.”

The next catalyst

I think the next catalyst is an attack on Iran after the midterms, aimed at infrastructure, with Iran promising to hit Gulf oil facilities and cut undersea cables in response. Doug says it can serve no useful purpose. I don’t think it’s about nuclear weapons at all. I think the goal is regime change and a failed state, another Syria.

I know of two people who were recently asked if they were worried about the war. Both answered, “What war?” If the oil supply takes a lasting hit, they’ll find out fast.

What to do about it

Do what the bases are doing. Look at what your household depends on, ask what happens if it goes away, and build buffers. Doug’s caveat is that getting your money in the right place helps, but it may not matter much if the system itself goes down. That’s why I have a farm. If money is no good, we still eat. Doug has bees, dairy cows, chickens and pigs. I’m planting tomatoes this week. If you have a little room, plant a garden.

Also in this episode

The CEO who wants up to a 100% inheritance tax, why Doug respects the Democrats more than the Republicans, Michael Moore’s poll on how much government Americans want, Doug’s 1964 shock at Georgetown, digital currencies and “conditional access,” Brazil’s split and the Bolsonaro saga, and Terrorist Time, the fourth novel Doug and John Hunt are writing.

Doug is at the New Orleans Investment Conference through Oct 31, which he has called his last US conference. Got a question for Doug? Head to crisisinvesting.com, click “Ask Doug” at the top, and post it. And if you want to know what we’re actually buying while all this plays out, upgrade to Crisis Investing.

Best wishes from Uruguay,
Matt

A junior mining news release is written in a dialect. A speculator needs to know the lingo.

The vocabulary takes more than one letter to present. This is Part 1: the rock and the paperwork. Part 2 covers the money. Part 3 covers the economics and the markets and the methods. I figure I will revise and update these, in part based on your comments and suggestions, and turn them into a PDF to help new subscribers (and old ones) orient to the language.

The Rock

Assay. The lab result. A sample goes in, a number comes out. Everything before the assay is guesswork, opinion, hope or hype, depending on who’s saying it. And the data, when they come, are often used to promote the guesswork, opinion, hope and hype.

Grade. Metal per tonne of rock: grams per tonne (g/t) for gold and silver, percent for copper and zinc. One gram per tonne of gold is a paperclip’s weight of metal in 1,000 kg (a metric tonne, about 2,205 pounds) of rock.

Intercept. A stretch of drill core with enough target metal to brag about (or at least bother to mention), reported as “X meters of Y g/t.”

True width. The actual thickness of the mineralized zone, as opposed to the distance the drill happened to travel through it. A hole drilled down the length of a vein produces a spectacular intercept that may be worth little. If the release omits true width, ask why.

Cutoff grade. The grade threshold used to decide which material gets included in a resource estimate or mine plan, given specified technical and economic assumptions. Lower the cutoff and the reported resource may grow, but the additional material may be uneconomic to mine and process, especially if metal prices fall or costs rise.

Recovery. The percentage of metal the mill can pull out based on metallurgy/testing. Metal the rock won’t surrender isn’t going to turn into cash.

Circuit. The sequence of equipment the ore passes through in the mill: crushing and grinding, followed by recovery using gravity, flotation, or leaching. A gold mill might use gravity to capture coarse gold, then a carbon-in-leach (CIL) circuit, where cyanide dissolves the gold and activated carbon captures it from solution. Every additional processing step adds complexity and may add capital and operating costs. It may also improve recovery. A conventional circuit can reduce technical risk; an unusual circuit may introduce another thing that has to go right.

Strip ratio. Tonnes of waste moved per tonne of ore in an open pit. Lower the better. A high strip ratio can be more of an earthmoving enterprise than a mine.

Oxide vs. sulfide. Near surface, weathering oxidizes the rock, and oxide gold is easy to process. Deeper down, sulfide ore needs grinding and often flotation or more. Many deposits are oxide on top and sulfide below, and the economics change at the boundary.

Refractory ore. Gold locked inside sulfide minerals where cyanide can’t reach it, or ore laced with carbon that grabs the dissolved gold before the plant can (“preg-robbing”). Freeing it takes roasting, pressure oxidation, and other methods, all of which add expense.

Heap leach. Crushed ore stacked on a lined pad (a very big lined pad!) and sprinkled with dilute cyanide solution that dissolves the gold over weeks or months. Commonly used for oxide ores.

Nugget effect. Coarse gold scattered unevenly through the rock, so two samples a foot apart can assay wildly differently. Deposits with a strong nugget effect are hard to estimate and easy to oversell.

Visible gold. Gold you can see in the drill core. It makes a fine photograph for a news release.

Grab sample. A bit of rock a geologist picked up that looked like it might hold a lot of metal. It has slightly more meaning than that. But only slightly.

Metal-equivalent grade. Several metals converted into one number, such as gold-equivalent (AuEq) or copper-equivalent (CuEq), at prices and recoveries the company chose. Useful for comparing projects. Also a convenient place to hide a weak primary grade.

Greenfield vs. brownfield. Greenfield exploration hunts where no mine has been. Brownfield exploration hunts near existing mines or old workings.

Deposit types. Porphyry deposits are huge, low-grade copper-gold or copper-molybdenum systems that need billion-dollar mines. Epithermal veins form near surface from hot fluids and can be high grade and narrow. Orogenic gold forms along major faults in ancient mountain belts and supplies much of the world’s gold. Knowing the type tells you roughly what kind of mine is needed.

The Paperwork and the Data

NI 43-101. I love regulators. This is Canada’s rule for disclosing scientific and technical information about material mineral projects. Written disclosure identifies the Qualified Person responsible for the information. Drill-result releases have additional requirements, including reporting true widths when known. US SEC registrants follow Regulation S-K 1300 for mineral disclosure, while Australian-listed companies follow the JORC Code. The systems use comparable resource and reserve categories.

Qualified Person. An engineer or geoscientist with at least five years of experience relevant to the deposit type and the work being reported, in good standing with a recognized professional association. Some reports require a QP independent of the company. When the QP is also the company’s VP of Exploration, there is going to be some bias, some malincentive, some concern. But it’s common.

Resource vs. reserve. A mineral resource is a concentration of mineralization estimated from geological evidence and sampling, with reasonable prospects for eventual economic extraction. Resources are classified by geological confidence: inferred (least), indicated, and measured (most). A mineral reserve is the economically mineable portion of a measured or indicated resource, after applying the relevant mining, metallurgical, economic, environmental, and other modifying factors. A pre-feasibility or feasibility study must support the determination. Measured resources can become proven or probable reserves; indicated resources can become only probable reserves. Inferred resources can’t become reserves at all. Inferred ounces are mostly hope. Proven and probable reserves are used for planning a mine.

Historical estimate. An estimate made by a previous owner, often before NI 43-101 existed, that no Qualified Person has since verified as current. A company may mention it with a disclaimer but can’t treat it as current. A historical estimate tells you where to drill, but not the value of the rock.

PEA, PFS, FS. Preliminary Economic Assessment, Pre-Feasibility Study, Feasibility Study. Each one provides more confidence than the previous. A PEA may be based just on inferred resources, but comes with a big caution. The feasibility study is a key determiner of the mine build decision and the funding needed for it.

That’s Part 1 of this lexicon, and enough for today. Part 2 covers the money terms: how juniors raise it, how they spend it, and what the taxman takes on the way out.

Paid subscribers see all of these words applied as we consider companies in this sector and as we follow the companies in our portfolio.

I hope this helps. Send it on to friends who are new to the sector and suggest they subscribe. I will send out Part 2 of the lexicon soon.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Helium is the third most abundant element in the universe—after hydrogen and stupidity. But it is rare on Earth, because when it gets out of the crust and into the air, it rises up through the atmosphere and leaves the planet.

On October 23, Energy Secretary Chris Wright designated helium a critical material. The Department of Energy has noticed helium. We should notice it too.

Where It Comes From

Helium is made by nuclear fusion in stars, and by radioactive decay on Earth. Uranium and thorium in ancient granite released alpha particles, and an alpha particle is a helium nucleus. It picks up two electrons and becomes an atom of helium-4. Granite a billion years old has been slowly making helium for a billion years.

Helium dissolves poorly in water. When a stream of methane, nitrogen or carbon dioxide moves through the rock, the helium leaves the water for the gas and rides along. The gas rises until a seal stops it: salt or dense evaporite rock over a structural trap. The seal has to be exceptional, because helium atoms are small enough to slip through rock that holds methane. These structural traps are rare.

Commercial helium is usually a byproduct of natural gas production. Most natural gas carries well under 0.1% helium. Fields above about 0.3% begin to be worth stripping for helium. The helium-rich ones share four things: old uranium- and thorium-bearing basement, a carrier gas to move the helium, a tightly sealed trap, and enough time for it to build up.

Natural gas burned without stripping sends its helium up the flue and out into space.

What Helium Is Used For

Helium boils at a lower temperature than any other element and is chemically inert. Superconducting MRI magnets generally depend on liquid helium. Semiconductor manufacturers use helium for heat transfer and process control. Rocket makers use helium to pressurize propellant tanks. Welders and fiber-optic manufacturers use it in controlled atmospheres. Utilities use it to detect leaks. Deep-sea divers use helium in breathing mixtures to reduce gas density, and doctors use helium-oxygen mixtures to help patients breathe through obstructed airways. Grocery stores fill balloons with it, and people occasionally inhale one lungful to make their voices sound ridiculous.

For some of these uses, the Department of Energy’s notice calls helium non-substitutable. Presumably that means at any price. Even a price set by the government.

A Century of Price-Setting

The Army built the first extraction plant in 1915 to strip helium from natural gas. The Helium Act of 1925 banned exports of the gas as a national defense resource. Germany, shut out of American helium, filled the Hindenburg with hydrogen.

The government then ran the helium business for most of a century.

You just know that’s gonna work out well.

The Bureau of Mines fixed the price at $35 per thousand cubic feet in 1961 and raised it to $37.50 in 1982. A fixed price in an inflating currency punishes anyone who might have produced the gas. Decades of government-administered pricing taught users that helium was cheap and gave producers little reason to look for more.

By 1995 the program owed $1.4 billion. That was back when a billion dollars meant something. Bill Clinton signed the Helium Privatization Act of 1996 to wind it down. Obama signed the Helium Stewardship Act of 2013 to continue the sell-off.

In 2024 the government sold the last of the reserve—storage field and all—to a single buyer, the German-owned industrial gas company Messer.

For reference, one industry estimate puts the cost of extracting helium at $90 to $415 per thousand cubic feet, depending on how much helium the feed gas holds. Richer gas costs less to process.

2026: The Qatar Shock

Qatar produced about a third of the world’s 190 million cubic meters (about 6.7 billion cubic feet) of helium in 2025, most of it at Ras Laffan, the world’s largest LNG complex. Drone and missile strikes hit Ras Laffan beginning March 2. Later reports said the damage would take years to repair and would cut Qatar’s annual helium exports by about 14%. The closure of the Strait of Hormuz stranded cargo already loaded. Spot prices roughly doubled.

Russia’s government under Vladimir Putin imposed helium export controls in April that run through 2027. In July, China’s Ministry of Commerce banned helium exports.

Helium-3

Helium-3 is the rare light isotope, and Earth has almost none of it. Commercial supply comes from the decay of tritium in the nuclear weapons stockpile. Demand jumped after September 11, because it is used in radiation monitors at ports. U.S. inventory fell from well over 200,000 liters in 2001 to between 43,000 and 48,000 by 2010. Prices ran above $2,000 per liter.

The uses today are narrow and valuable. Dilution refrigerators, which reach temperatures below 0.01 kelvin and sit inside superconducting quantum computers, need helium-3. One manufacturer’s model required about 15 liters. Neutron detection has been the biggest use by a wide margin. Pulmonologists will remember hyperpolarized helium-3 MRI of the airways, although much of that work moved to xenon-129 when helium-3 went scarce. Fusion researchers talk about helium-3 as a fuel, which is decades away at best.

At more than $2,000 per liter, helium-3 is among the most valuable gases anyone sells. It occurs in natural gas in tiny amounts, measured in parts per billion.

Gas rich enough in helium-4 to be a business may carry the helium-3 as well, but the small quantities mean that it adds only fractional value.

What the Critical Designation Does and Does Not Do

The Department of Energy’s notice says helium supply is at risk of disruption and cites semiconductors and advanced energy technologies. The designation opens the door to more federal financing for helium producers and more regulation and monitoring. It does not create new funding, and it does not shorten the permitting time.

Here’s what it could mean for American developers and producers.

Capital. Projects with drilling finished and land secured are best placed to use federal financing, if it materializes.

Offtake. Chipmakers and industrial gas companies now want North American helium.

Plants. Purification and liquefaction capacity limits U.S. output as much as geology does. The scarce asset may be the plant, not the gas. Richer gas, as noted earlier, needs less plant to make product. A promising deposit is not a business until the operator can purify the gas and deliver it to a paying customer.

Risk. Government could take over the whole helium shebang again. If the Strait of Hormuz reopens and Ras Laffan restarts, spot prices will fall. A designation does not make a project economic. Subsidies attract people who build for the subsidy. Subsidies don’t end well.

It took the Earth a billion years to put this gas into traps we can drill economically. And it took the politicians of the federal government a geological millisecond to profoundly distort the economics and create barriers to production.

Because stupidity is more common than helium.

We have an interesting helium developer moving toward production that we’ve held a position in. We are considering it for the Crisis Investing portfolio, and if we decide to add it, we’ll let our paid subscribers know. Subscribe here.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Disclosure: Some of us at Crisis Investing directly or indirectly hold shares in the helium company mentioned above. The company has not paid us or given us anything of value for this coverage. We may buy or sell shares at any time.

Note from John: HydroGraph is in the Crisis Investing Portfolio. The following is reproduced from HydroGraph’s press release issued today. It applies only to Canadian shareholders who hold HydroGraph…

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Two years ago, Axcap Ventures was a C$40 million gold explorer selling shares for pennies. This month, SSR Mining agreed to buy it—now renamed Roxmore Resources—for about C$655 million, plus shares of a new small explorer provisionally called SpinCo, with closing expected in December 2026.

Our paid subscribers got to enjoy this ride

VIP and Founder members. On October 29, 2024, we presented to VIPs a place in Axcap’s private placement alongside Doug Casey. Axcap was a public company, and therefore this placement is considered a Private Investment in Public Equity, known as a PIPE.

The offer was open to accredited investors only. The price was C$0.20 per unit. This was pre-consolidation. Post-consolidation (1:10) the cost basis works out to C$2.00/unit. Each unit carried one share plus a “free” five-year warrant with a strike price that, after consolidation, also is C$2.00. A holder of a warrant can exchange that warrant plus C$2.00 for a share of Axcap (now Roxmore) any time during the five years. At a share value of C$6.75, those warrants are substantially in the money.

Paid subscribers. On October 31, 2024, we presented Axcap to all paid members, suggesting they consider buying some in the open market up to C$0.24 and more at C$0.19 or lower. Those are pre-consolidation prices too, so multiply that by 10 for the Roxmore cost basis.

The win

A VIP unit purchased for C$2.00 is now worth C$6.75 in shares, plus the value of its warrant. If the warrants are cashed out for the difference between the share value and their C$2.00 exercise price, as Roxmore’s recent announcement suggests, each warrant would be worth about C$4.75. That would put the combined value at roughly C$11.50 per original C$2.00 investment—a 5.75x multiple (or 475% gain), before taxes, plus whatever value the SpinCo shares ultimately have. The acquisition has not yet closed, so these figures remain subject to the transaction’s completion and final terms.

An open-market buyer taking the position at an average near C$2.00 got a 3.4x multiple (or 240% gain), not as much of a win because they didn’t get the warrants. But a nice return.

Subscribers who bought Axcap/Roxmore may have taken a Casey Free Ride (CFR). When a stock doubles, we often sell enough shares to recover the cost basis and hold the rest. Members who took a CFR had recovered their original cost before this buyout deal was announced. VIPs would have kept roughly half their shares and all their warrants. Depending on whether and when someone took the Casey Free Ride, their precise return could be less than the maximum.

This was a speculation that has worked so far

Roxmore is a fine result. We like those. But lots of speculations don’t work out. On the one hand, speculating in the junior resource sector is not for the faint of heart. On the other hand, it sure can be fun, as long as we only speculate with funds that we can afford to lose.

We like PIPEs because we usually get the benefits of warrants, plus a public market to sell into once the hold period ends. That’s different from speculating or investing in private companies, where liquidity is poor or nonexistent.

Consider upgrading

Paid membership gets you our stock recommendations, detailed lessons about junior resource speculating and other helpful information. VIP membership adds invitations to private placements for accredited investors that we have put through our 9Ps due diligence. We expect to identify more placements in the coming year. If that kind of research suits you, you can upgrade from this link.

If not, please keep reading our letters, which we do hope you find worthwhile, and send them off to those you care about.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

This letter discusses a completed private placement and a proposed acquisition that has not yet closed. It is not an offer or solicitation, nor is it personalized investment advice. We cannot promise that the stocks we discuss will perform well or that any PIPE we present will produce a return. That’s not how speculation works. But we like to find good speculations. And we practice what we preach.

Article I, Section 7 of the Constitution says all bills for raising revenue shall originate in the House of Representatives.

Toss that right in the sewer.

The US Constitution is now little more than a rhetorical weapon for those not in power to use against those in power, while those in power ignore it. Four years later, reverse the parties, same crap.

Despite the Constitution, the most reliable revenue source in modern America originates not in the House, but at the Federal Reserve.

When it comes to the US dollar, inflation is not something that just happens. Officials at the Fed and the banks together choose to create inflation, and the US government politicians are thoroughly complicit. There are real people, making real decisions, who create inflation.

Why would they do this?

Because inflation is revenue for the government and the banks. It creates no new wealth. It just sneakily takes it.

So where does that wealth come from?

Inflation, as we Austrians use the word, means the addition of new currency units. Rising prices are but one of the effects of inflation. The net effect of inflation is that every single day, anyone who saves in dollars has some of their wealth transferred to those who have debt. And the biggest debtor in the world is the US government and the politicians and bureaucrats that run it. So they are the biggest beneficiaries of inflation.

And I do mean “They.” The US government is “They.” It most certainly isn’t us. And we’d have to be naïve, stupid or in denial to think it is.

It’s easy to spend other people’s money

The Federal Reserve’s stated target is a 2 percent price level increase per year in its preferred PCE index. They call it “2% inflation,” in their Keynesian-speak. Regardless, at compounded 2 percent, a dollar buys half as much in 35 years. That is, effectively, a hidden 50 percent tax on every dollar you hold, ratified by no elected representative of the people. The Constitution wouldn’t allow it. But then the Constitution is toast.

Tax increases put legislators’ votes on the record in a way they can’t conceal. And given that increased taxation appeals only to highly vocal morons, tax increases cost more votes than they gain.

But the politicians do love spending. And if they can’t tax, they move to borrowing. Borrowing invites a debt-ceiling fight, which is a momentary and occasional cage fight with a guaranteed outcome: various political players extort other political players in order to gain handouts and grift.

When the Treasury starts to borrow too much and the demand for loans outpaces supply, the Federal Reserve will step in. They create new currency units and use them to buy up previously sold bonds in the secondary market (with the primary dealers earning their piece of the action). This frees up resources, directly and indirectly, that are then used by the banks and their customers to buy the new Treasury debt.

Everyone is happy, right?

Not really. Everyone other than government and the big banks is screwed.

The tax code has its own tricks

Inflation isn’t the only way the government extracts wealth without officially increasing tax rates.

In the 1970s a pay raise that matched the CPI lifted families into higher brackets without any real increase in income. Congress thus could milk their milk cows for more taxes, without seeming to raise tax rates. Indexing of the brackets did begin in the 1980s, but it was indexing to the CPI, which we all know is bogus. In 2017 the Tax Cuts and Jobs Act switched the index to chained CPI, which usually rises more slowly than the unchained CPI. So that’s even worse.

Capital gains were never indexed. Buy a stock at $100 and sell at $200 in twenty years, after prices have doubled, and you are not only no richer, you are actually poorer. The Internal Revenue Code taxes the $100 of inflated gain, at up to 23.8 percent (including the Obamacare tax). That is $23.80 owed on a profit that does not exist. Let’s do this math another way. You tie up your $100 for twenty years, and after taxes, you get the real equivalent of only $88.10 at the end, a loss of 11.9%. The federal government took your profits and then some. Your state government likely takes some more. That sucks.

Of course you could just stick the $100 in a mattress. If prices doubled, their intentionally created inflation would cut your savings by 50%. So you are left with a choice of losing 50% or of losing 11.9%. So most people take the 11.9% loss and buy stocks. That demand bids stock prices up, and the IRS taxes the inflated nominal gain when you sell.

That’s what inflation does. The dollars that feed the voracious spending appetite of the politicians? They come from you.

No lobby for the price level

Why does such a horrible system survive? It bears repeating: inflation isn’t just happening. There are real people intentionally creating inflation. Why are we not pulling out pitchforks, torches and marching on the Federal Reserve?

It’s all about incentives.

Benefits of inflation go to the government and the people and private sector businesses that feed off the government trough. And those people notice and organize and lobby and bribe and connive and conspire, because it is worth it for them to do so.

But the costs of inflation spread across everyone else, who do not fight back. They don’t understand inflation, because they’ve been gaslighted by Keynesians for their lifetime. They don’t get taught what inflation truly is because the teachers have no clue. I mean NO clue.

A cost spread thin, and in a form few recognize and fewer can explain, doesn’t trigger a fight. It triggers complacency. No pitchforks come out.

After all, the only thing we can count on is Death and Taxes. And Inflation.

Every other tax has a lobby to oppose it because for every other tax you have to write a check or see it sucked out of your pay. But the price level just happens, so we are told. It’s inflation, so we are told. Nobody is responsible, so we are told. We are told that 2% is the target rate. What we aren’t told is that the target is 2% because that is what we fools will not only tolerate, but actually celebrate as an accomplishment.

Nobody in Washington has a reason to oppose a tax (inflation) that sends no bill and that most people don’t understand enough to place blame for. Inflation lets the politicians spend more and therefore have more power to do whatever it is they want to do. The big banks all win from inflation too. The Fed is deeply intertwined with the big banks. All the incentives of the people who choose whether to inflate or not inflate are aligned toward … inflation.

So there will always be a strong tendency to inflation (although it might get punctuated by brief periods of credit deflation as the Fed might lose control here and there).

The Federal Reserve and federal government are institutions that bleed you, both with declared taxation and taxation that comes in the form of inflation.

Where you can, opt out by owning things the printing press cannot make more of. A home with a long-term fixed-rate mortgage. Gold keeps pace with inflation (over the long term). The companies that produce gold profitably even at lower metals prices can be wicked profitable at higher metals prices. A kilowatt-hour of electricity is not diluted by the inflation.

That is why Crisis Investing focuses where it does. Premium subscribers see every position. I hope you join us.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

A few weeks ago we hosted Silver Pony Resources (CSE: PONY / OTC: PONIF) on Doug Casey’s Experts Roundtable. If you missed it, you can watch it here:

Doug Casey's Experts Roundtable

A $15 Million Silver Bet With the Answer Three Weeks Away

Silver Pony Resources is a C$15 million company that went public on July 24, holds 37,000 hectares of a silver district that produced by candlelight and donkey in the 1890s and has barely been touched since, and just finished its first drill program. The assays start landing in early October…

Listen now

a month ago · 39 likes · 8 comments · Matt Smith @ Crisis Investing, Edmond Bugos, Dominic Frisby, E.B. Tucker, and Doug Casey

At the end, Doug told management: …

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Almost nobody can predict when the bottom arrives, except the pundits, who claim to have done so after the fact.

But they didn’t either.

I routinely make the suggestion to hold cash positions: for emergency funds and to take advantage of stocks that go on sale from time to time. Cash loses to inflation, of course, but it gains buying power as asset bubbles burst. And with the bums controlling government purse strings and the bums controlling the Federal Reserve printing presses, asset bubbles tend to grow and burst.

Cash is already doing work as an emergency fund. But as you accumulate it beyond emergency fund needs, how and when do you put cash to work? Invest it all at once and nothing is left for the downturn. Wait for the bottom and you will assuredly miss it, because the bottom is only visible in hindsight.

Stock forecasts are less accurate than weather forecasts

Friedrich Hayek explained that the knowledge needed to run an economy is scattered among millions of people, and changes by the minute. That’s why central planning is so lousy, because no one knows everything needed to optimize the supplies to meet the demands. Timing a market, or a market sector, or even an individual stock requires knowledge that is unobtainable to various degrees: what interest rates will do, what bureaucrats will do, what management will do, what the president will do, what terrorists will do. And all the things that might happen that you have never even considered. As for buying at the bottom? No committee knows the answer and neither do I.

So what to do?

Be happy every day in Dullsville

Dollar-cost averaging provides a nice boring answer. You convert a fixed number of currency units into assets at regular intervals, whatever the price. $200 converted to pooled gold every Friday. $200 traded for stock in a company every Monday. Dull.

Say a stock trades at $10, falls to $5, stays at $5, then climbs back to $10. You invest $100 at each of the four stops. You now own 60 shares, bought for $400, an average cost of $6.67. The price finished exactly where it started. But you are up 50%.

Your average cost is the harmonic mean of the prices paid, which is never higher than the plain average price of $7.50.

When prices rise, you are happy because your net worth has risen. When prices fall, the $200 buys more shares and you can be happy (albeit more quietly) because you get to buy more shares cheaper. Just imagine: as long as you always have your cash needs for the next year adequately stocked, you can be happy every day, regardless of which way the market is moving. Being happy is good.

Volatility is just fine

Volatility becomes your friend, as long as in the long run (or your planned time horizon), your stock prices go up. The investor who put everything in at once watches a falling market and feels the loss. The investor averaging in watches the same ticker tape and sees a sale. Same prices, same headline, opposite feeling. A down day makes it possible to convert the same amount of crappy dollars into a larger number of shares of a company that you want to own.

That changes how you feel during a correction, and how you feel through it decides whether you stay in. The investors who do the worst damage to themselves are those who sell in a panic. A disciplined dollar-cost averager has a plan for falling prices. Rather than joining the panic, he continues buying on schedule from those who are panicking.

Our preferred sectors sure have been volatile, which makes dollar-cost averaging wise in many cases.

The Cash Refills

Your cash does not have to shrink when you dollar-cost average. Several sources can refill it while you deploy.

Other income. Dividends, interest on the cash itself, and income from outside the portfolio, including your wage income.

Spending less. The cheapest source of cash is the dollar you decline to spend.

Options premiums. Selling cash-secured puts pays you to wait for a price you already wanted. If the put is assigned, you buy the stock at the strike you chose in advance, which is a tranche delivered on your terms. Selling covered calls on shares you own pays you while you hold them. The premiums you earn can be deployed in dollar-cost averaging.

Taking Casey Free Rides. When a position is worth double your cost basis, start thinking about taking your cost basis back out (selling half the shares). That restocks cash too.

Dollar-cost averaging into physical gold

Gold’s price reflects the trust the world places in politicians and paper currencies and the available real interest on other competing uses of the money. That trust is very hard to predict in the short term. Dollar-cost averaging doesn’t require you to have the faintest clue about the short term, as long as in the long term, you have confidence that gold will rise against the fiat currencies. It’s a damn good bet that politicians and bankers will continue to debase the currency as much as they can get away with.

But lest we forget, gold fell roughly 45% between 2011 and 2015. An investor who bought it all at the 2011 high waited nearly nine years to get even. One who bought a tranche every week or month through the decline held a much lower average cost when the price turned. Each scheduled purchase converted a depreciating dollar into money that cannot be printed. One caveat on this—for most people, dollar-cost averaging into gold ends up being pooled gold in a vault somewhere, not gold in your hands. So it is not the SHTF type of gold that you keep in your safe or buried in the ground.

What It Costs

It’s conservative. It’s cautious. But there are costs to dollar-cost averaging. Cash on the sidelines debases, while the stock market usually outruns it. Dollar-cost averaging means you may miss out on the return from sticking all your cash in at a low. But on the other hand, you avoid putting it all in at a high.

And then, dollar-cost averaging into a company headed to zero is just a somewhat slower way to lose it all.

So the work comes first. Junior resource stocks can swing 50% in either direction, which suits dollar-cost averaging, provided the company survives in the end. So pick companies that, in the long run, are likely to survive and thrive.

I choose to dollar-cost average into companies that I think have a good future, but for which my ability to predict their short term is poor. Like the drone companies I recommended dollar-cost averaging into by using the Options Wheel strategy (selling puts and calls to generate premiums that then get deployed to buy shares).

In contrast, I choose to place a stake all at once in a company when it is a speculation based on defined near-term catalysts.

You will find me frequently suggesting dollar-cost averaging into a stock pick. Personally, I dollar-cost average every single market day.

Paid subscribers receive a new recommendation most every month—sometimes speculations in which to buy a full position now, sometimes long-term investments to dollar-cost average into. If you are on the free list, consider upgrading.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

A few weeks ago we hosted Silver Pony Resources (CSE: PONY / OTC: PONIF) on Doug Casey’s Experts Roundtable. If you missed it, you can watch it here:

Doug Casey's Experts Roundtable

A $15 Million Silver Bet With the Answer Three Weeks Away

Silver Pony Resources is a C$15 million company that went public on July 24, holds 37,000 hectares of a silver district that produced by candlelight and donkey in the 1890s and has barely been touched since, and just finished its first drill program. The assays start landing in early October…

Listen now

a month ago · 39 likes · 8 comments · Matt Smith @ Crisis Investing, Edmond Bugos, Dominic Frisby, E.B. Tucker, and Doug Casey

At the end, Doug told management: …

Read more

Matt: “And we saw the flash on February 28th. You could see the flash, and you could see all of this happening, but there’s no bang yet.”

Six months ago, my worst case for the Strait of Hormuz was a couple thousand Marines landing somewhere and a bloodbath. I never imagined Saudi Arabia and Yemen at war and the whole thing spreading. Doug says the really worst hasn’t happened yet.

Oil on the ground vs. oil on paper

North Sea oil trades at spot for $136 a barrel. The futures market has it in the $90s. Doug points out that the distillates from a $100 barrel now add up to about $200, “and that’s what really counts.”

To me that gap says something serious is changing. We’re in a Fourth Turning, people are losing faith in institutions, and markets are an institution too.

Doug: “E- everybody has known theoretically that you could not trust politicians, but we always thought we could trust the price reporting mechanisms of markets. And that’s being called into question, uh, at this point.”

I can’t help thinking the oil futures market has become one of Doug’s self-licking ice cream cones, disconnected from reality.

Saudi Arabia is next

What happens when Saudi Arabia can’t export oil and still has to import nearly everything it needs? It needs dollars, and the only thing it can do is sell Treasuries. Doug went a step further:

Doug: “And what happens when MBS, the current crown crown prince, is overthrown? And I think that that’s almost inevitable for several reasons.”

The princes he locked in the Hilton haven’t forgotten, and Yemen turns out to have about 400,000 men under arms. Doug also flagged Egypt as the time bomb nobody is reading about, with Suez Canal and tourism income both at risk.

Israel fatigue

Doug and I have been on an email string for days that goes on and on about Israel. I told him I’ve got Israeli fatigue.

Doug: “I got total Israeli fatigue. I don’t, I don’t wanna know any more about it, and I really don’t care.”

His worry is bigger than that. So many people are fatigued by so many things that it’s setting up “the, uh, psychological overture to World War III, where you figure, ‘Yeah, you know the only solution is to just do a bunch of killing and sort it out that way.’”

The first cracks

Indonesia has gas lines. Doug reminded me it was a founding member of OPEC and is now a net oil importer. I think that’s the first sign of what’s coming for the rest of us. In the US it’ll probably show up as price, but I wouldn’t rule out the government seeing a chance to “better allocate” fuel to the people it considers essential.

Meanwhile, most Americans have no idea. A friend of my wife’s is marrying a man in the National Guard. Asked if he was worried about the war, she said, “What war?”

So how long until the bang? My guess is sometime before the end of March. Doug, a perpetual optimist, gives it a wider range:

Doug: “I think, I think any time in between tomorrow morning and, and a couple years from now, the shit will really have hit the fan.”

That’s why I keep coming back to real things. Energy is tied to economic activity, and you can’t cut off this much energy without a recession, if not a depression.

Also in this episode

Mortgage rates at 7.5% and a bond market that’s “an accident waiting to happen.” Luke Gromen on AI creating a new white-collar rust belt. Billionaires planning how to keep their bodyguards loyal. Why we still recommend Jim Kunstler’s World Made by Hand novels, plus The Mandibles by Lionel Shriver and The Sea King and the Sorceress by Neil Price. The overproduction of elites. Trump’s $5,000 voting video. Doug’s very Doug take on the Fort Hood shooter’s execution: make it pay-per-view, with the money going to the victims’ families. And Monica Lewinsky’s podcast is kicking our ass.

Doug is speaking at the New Orleans Investment Conference, Oct 28-31, and he says it’s likely his last US investment conference. Click here to join Doug. If you’ve got a question for Doug, head to Crisis Investing, click “Ask Doug” at the top, and post it. To get the full picture of what we’re buying, upgrade to Crisis Investing.

Subscribe now

Best wishes from Uruguay,
Matt

Can you expect a corporation, a union, an association, or a government to have a conscience?

The law needs an entity that can pretend to be a person

A company has to make contracts, hold title to land, and sue and be sued. I have no quarrel with that. If the law couldn’t treat it as an entity in its own right, every lawsuit would have to name every shareholder, and the list would change daily. Limited liability is another component. It lets strangers pool money without risking their houses.

The trouble starts when the convenience gets perverted into a pretense that a corporation or other group has a conscience and moral agency. And that no person is therefore to blame when “the corporation” goes bad.

Trouble continues when bad people take the reins of a corporation or other entity, which is, after all, a collective. Collectives are magnets that attract to positions of power the type of people who like to … well … hold positions of power. Hayek taught us in The Road to Serfdom how and why the worst sort of people take control of collectives.

The corporate person has no mind

Ludwig von Mises wrote in Human Action: “A social collective has no existence and reality outside of the individual members’ actions.” A collective, he added, “operates always through the intermediary of one or several individuals.”

That’s the core message in this letter.

When a board votes to ship a product, five people make individual decisions. If three people vote in favor, and that decision is to do something immoral or illegal or stupid, then it is those three people who made the decision to do something immoral. It is not the corporation. The corporation (or any group) is not a moral agent.

Another way to say this: A group cannot decide between right and wrong. Only an individual can.

Some philosophers have argued the other way. They figure that a group counts as an agent if it has procedures for forming beliefs and acting on them. I consider that to be hogwash that provides a convenient excuse for people to avoid responsibility for choosing bad, supporting bad, cooperating with bad, or not fighting hard enough against bad.

Holding a collective accountable

Since a 1909 Supreme Court case, federal law has let prosecutors indict a corporation criminally for what one employee did on the job, even if the act was against company policy. But then comes the problem of punishment. You can’t jail an entity, so the law hits it with a fine.

A couple of problems with this. First, the fine is usually paid to the government, and the victims commonly never see any of it. Second, the fine lands on shareholders who had no vote on the decision and no knowledge of it and no control over it.

Occasionally, the punishment can destroy the company. The accounting firm Arthur Andersen was convicted of obstruction of justice in 2002 and lost its license. About 28,000 people lost their jobs. I doubt 28,000 people in the firm obstructed justice. Arthur Andersen didn’t shred documents. Some individual people did. The Supreme Court threw the conviction out unanimously in 2005. That ruling came too late to un-fire anybody.

In regard to the financial crisis: why were so few senior executives at the largest financial institutions criminally prosecuted for fraudulent conduct connected to the crisis? Individuals made the decisions that helped bring it about, yet criminal accountability at the highest levels was limited.

So the group can get punished for the actions of individual bad actors. And the individual bad actors are often protected from accountability. What can possibly go wrong?

There is this inherent danger in all collectivism. Think socialism, democratic socialism, fascism, Marxism, communism or whatever flavor of groupthink might pop up. Those collectivist concepts are coercive by nature. The corporation, association or union is mostly voluntary collectives. But lack of coercion doesn’t prevent or overcome the lack of individual responsibility and accountability, and the moral hazard, dependency, and corruption that plague all forms of collectivism.

People tend to hate on corporations routinely. They want to tax corporations more. They blame and punish corporations for various ills. They shout about how corporations are greedy.

But corporations aren’t moral agents. It is the individual people who should be judged.

Nuremberg chose to judge the individuals

The judges at Nuremberg faced the problem of the biggest corporate person of all, the state. They had the Third Reich available as a defendant. They declined to indict it. “Crimes against international law are committed by men, not by abstract entities,” they wrote. And then they put the men on trial: Hermann Göring and Albert Speer among them.

Nobody at Nuremberg successfully defended themselves by saying the state did it.

Our role

You and I aren’t going to rewrite corporate law. Corporate personhood is what it is, perverted into something more than it should be.

Collectivism doesn’t just allow more people to be bad. It also allows for stupidity to persist. One of Doug’s definitions of stupidity is when someone anticipates the short-term direct consequences of their choices, but not the indirect delayed consequences. That’s collectivism in a nutshell.

Join us at Crisis Investing, where we endeavor to put people at the forefront instead of collectives. When evaluating a resource company, we examine the people making the decisions, their incentives, their record, and how they treat shareholders. We invite people who lead companies to present at the Experts Roundtable. We put People at the top of every 9Ps evaluation of resource stocks. And we call or email people when we need information about a company.

It’s part of the individualist mentality, admittedly shoehorned into an increasingly collectivist world.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

His World Made by Hand novels are some of my favorite books. Doug is reading them now and compares them to Tolkien.

So I asked him the question I hear most from people who voted for Trump. Where’s the justice? Is anyone who did this going to pay?

Jim: “To cut to the chase, I do think that a number of people are going to be justifiably prosecuted.”

He thinks nothing moves until after the midterms, because the Justice Department won’t touch anything that looks like election interference. John Brennan is due in front of a grand jury, possibly as soon as the 25th. No judge, no lawyers, no five-minute congressional speeches to run out the clock. Obama, he expects, gets named an unindicted co-conspirator at most.

“We need more than a sliver”

The delays have cost the right a lot of faith. Jim knows it. Joe diGenova left the Florida case, Pam Bondi let a year slide, and Dan Bongino went quiet the minute he got inside. Jim’s answer to all of it is the line of the hour, and he said it later in the show:

Jim: “No, we need more than a sliver. We need a healthy, a healthy serving, like a, like a, you know, a 32-ounce sirloin steak of justice.”

He also told people to stop taking the black pill. “And, and it’s not over. It’s not over … yet.” Doug wasn’t so sure, and he made the point I keep coming back to:

Doug: “But the reason they’re untouchable, uh, among others, and there are a number, is that they have loads of information on the dirty characters in DC that are gonna prosecute them. Nobody’s got clean hands.”

Jim’s reply: if they had anything on Trump, Mueller or Jack Smith would have found it in ten years.

The military won’t allow it

This is the part people will argue about. Jim doesn’t think the country gets through the next few years without some kind of collision.

Jim: “I don’t believe the military is gonna allow them to get their hands on the levers of power ultimately.”

He means a Democratic Party that wins the presidency and both houses of Congress. In that case he expects “an extraordinary interruption in American governance.” I asked if that meant a Pinochet moment. “Yep, a Pinochet moment,” Jim said. He thinks a strongman is more likely to come from a cleaned-up military than from Trump himself.

Doug’s take on Trump is different. He’s still looking for someone to take the other side of his bet:

Doug: “Trump won’t complete his term. And there are a half a dozen reasons why that could be true.”

Doug vs. Jim on Iran

This is where the two of them split. Jim backs the strikes. He thinks the regime was never going to negotiate in good faith and that the blockade will starve the IRGC out of power. Doug didn’t let it pass.

Doug: “He launched a, uh, a surprise strike on, uh, Iran in the midst of negotiations. I mean, this is, uh, worse than Pearl Harbor from a number of points of view.”

Doug’s view: bombing a country unites the people behind their government, it’s counterproductive, and the only short-run winner is Israel. Then he asked the question nobody in Washington wants to answer: “But why do we care if Iran develops a nuclear weapon?” Jim had a full answer, and it’s worth hearing both sides. Neither moved.

Half the country

What I asked Jim to explain was the cultural insanity he writes about every week. He traced it to one thing: trust.

Jim: “We would go from being a high trust society to being a no trust society pretty much.”

He was blunt about where that leads:

Jim: “It’s no wonder that, uh, that half the country is literally insane.”

For me, the turning point was the way prosecutors treated the BLM rioters lightly and came down hard on the people who defended themselves. That was the straw that broke the camel’s back for me and made me leave the US.

The oil story nobody wants to hear

Jim wrote The Long Emergency about 20 years ago. I asked him what he got wrong, and he didn’t dodge it.

Jim: “Well, I think I made some mistakes. Uh, you know, shale oil was not even in the picture when I wrote that.”

Shale bought time, but it doesn’t cancel his thesis. The Bakken and Eagle Ford have leveled off, and the Permian is running out of sweet spots to drill.

Jim: “American shale oil is probably a more fragile situation than many people realize.”

His estimate is that the long emergency was delayed 15 or 20 years, not cancelled, and the rest of the world gets it sooner. Indonesia already has gas lines. Europe is one cold winter away from rationing. He does give Trump credit for using Venezuela’s heavy crude to cover what our light shale can’t supply: diesel, heating oil, jet fuel.

For his own money, Jim said he got into gold around 2003, when it was about $300 an ounce, plus silver, and stayed put.

The government wants you to believe the oil is endless. Own the things that get more valuable when it turns out it isn’t.

Also in this episode

Europe tottering, with France, Britain and Merz’s Germany all in trouble, and Jim’s prediction that “the World War III won’t be between, uh, you know, NATO and Russia, it’ll be between Europe and Islam.” Kathy Hochul’s $8 billion on illegal immigrants. Napoleon and the missing “men of quality.” Trump as the Fourth Turning’s “great champion.” The Japan carry trade unwinding. Israel and Gaza. Ukraine, getting out of NATO, and why the deep state makes it so hard. Doug wants Jim back, and so do I.

Jim’s newest novel is Look, I’m Gone. He was kind enough to send me a copy, and I thoroughly enjoyed it. Subscribe to his Substack at kunstler.com.

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Doug is speaking at the New Orleans Investment Conference, Oct 28-31, and he has called it his last US conference. Click here to join him. If you’ve got a question for Doug, click “Ask Doug” at the top, and post it.

To get the full picture of what we’re buying, upgrade to Crisis Investing at crisisinvesting.com.

Subscribe now

Best wishes from Uruguay,

Matt

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