As Fiat Currency Fails, We Are All Dragged Down. Protect Yourself, While Profiting, Starting Now.
A Single Stock Provides a Great Education in Resource Speculation and Investing
Let me set the table before John takes over.
Most people don’t speculate. They gamble — then call it investing when it works and bad luck when it doesn’t. That distinction is everything in the mining business, the place where a few who understand it grow rich and the masses get fleeced, cycle after cycle, while blaming everyone but themselves.
It’s one reason why I asked Dr. John Hunt to edit Crisis Investing. John is a rare animal: a teaching physician who has started businesses, and understands Austrian economics, sound money, and the chasm between owning a real asset and owning a hope. He doesn’t run with the herd, and he knows the difference between a story worth telling and a company worth owning.
In the letter that follows, John takes one gold stock and uses it to teach the whole game. Depending on how you play the game, you can get separated from your money, or get rich quick, or quit in frustration, or patiently accumulate shares of a company creating value. The company John highlights this month makes a fine teacher precisely because it’s the rarer thing — a real company, with real ounces and real production, that the market has handed us at a speculator’s price.
Read it twice. The lesson alone will make you money. The stock might too.
-Doug Casey
Dear Reader,
Buy Low. Sell High.
I prefer the phrase: Buy Lowish. Sell Highish. It’s more realistic. It conveys the truth that we can’t predict valleys and peaks anywhere near perfectly. Buying Lowish and Selling Highish is success. And it avoids the feelings of disappointment when you don’t catch a bottom or if you blow out your shares before the top.
It should be easy to sell highish, if we just remember to do so and don’t get too cocky. It’s harder to buy lowish. Today, there is an opportunity to buy low. I’m sorry. Lowish.
Every fiat currency in history has died the same death. Not by decree, but by dilution — a slow, administered erosion in which the unit of account is quietly debased to siphon off wealth to fund obligations that politicians pretend they care about. The gold price is the scoreboard. When it runs from US$2,000 to nearly US$5,600 at its January high — and is now at US$4,000 after a hard pullback — that is not gold becoming more valuable. That is the dollar, the euro, the yen and the rest confessing what they are: pieces of crap supported by momentum, ignorance, and the ability of governments to extract wealth from their citizens via force, just as has been done since government was invented. And the assurance that the US will always pay its debts because it can always inflate the currency by printing new currency units.
Fiat currencies move like earthquakes. The pressure builds over years—invisibly but assuredly—until the landmass fractures and the earth suddenly moves. When that happens to the US dollar, an assured result is that gold — the generally honest metric for the value of the dollar — shoots up in dollar terms. Or, as I wish we would all someday say, the US dollar goes down in gold terms.
When the fault moves, it can overshoot for a time and gold might go up to US$5,600, and then pull back for a while as the pressure starts to build again. That the pressure will grow on fiat currency is as certain as a future California earthquake. The power of the printing press is always abused. Fiat currency always fails. The timing of the next big quake is the only question.
The Fed says it targets 2% increase in the CPI each year (they call it “inflation” because they are Keynesians.) Why do they want inflation? There are many reasons, none of them good. But one reason is that they don’t want the pressure to build up too fast while they are printing new currency units (btw, currency printing or money expansion is the actual inflation by our Austrian school definition). The Fed wants the quakes to happen imperceptibly, but by bit, instead of suddenly fracturing. 2% price level increase is what decades of research has proven that we—the great unwashed, the plebes, the capite censi, the sheep, the boiling frogs—will readily tolerate.
By the way, a 2% price level increase is just part of the inflation trickling through the economy from the Federal Reserve’s hose. The economy is supposed to be getting more efficient each year, which in a non-fiat economy would bring the price levels down. So the 2% increase in price levels that hurts us is in addition to the neutralization of substantial productivity-related price reductions that we should have benefited from.
We own bullion as a wealth preserver against the historically proven reality that fiat currencies will fail. We don’t hold gold as an investment. Is it even possible to say that enough times? Physical gold is a wealth preserver, not an investment. If I have an ounce of gold, it matters not (or very little) to me whether that ounce of gold today is “worth” US$5,600 or US$4,000. To me an ounce of gold is worth an ounce of gold.
In fits and starts over the years and decades, gold bullion tracks the debasement of the dollar (or your nation’s coerced fiat currency). To invest and profit from fiat debasement, it makes sense to acquire ownership in companies that pull new ounces of gold out of the ground — particularly a low-cost producer in a jurisdiction that is unlikely to nationalize it (steal it). That is the case for converting fiat currency (so-called cash) into ownership of selected mining companies.
Before the central bank fiat currencies existed, people mined gold to create new money of their own, because gold was the money. But after the onset of fiat, mining gold still provides new money, but also protection against the decline of wealth held in the form of fiat (dollars). Gold has become more important now than it has ever been, as a way to prevent the continual theft of your wealth by governments intent on preserving their power and expanding their control by means of counterfeiting the currency (inflation).
For our paid subscribers this month, I (meaning John) have performed a full analysis on a company that I have watched since its birth (I’m a pediatrician, so watching from birth is in my training). This company also provides an excellent course in resource stock speculation and investment. It’s available to premium subscribers. Consider joining us.
Premium subscribers, please read on.
A gold story de-risked itself, moves toward production, has little promotion. The stock price is far lower while the situation is far stronger. This soon-to-be-producer is worth your attention. Along the way, its price chart will teach us how hope gets mistaken for value while the real value slowly matures and prepares to become cash.