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« Are We Missing Something? | Main | High River Gold Target Price of $2.48 »
Friday
Dec182009

The Eye of the Storm

Eye of the storm


By Louis James, Senior Analyst/Editor, Casey’s International Speculator

At a recent Casey Research editors’ meeting, the team took on the question of whether the somewhat steady recovery since last February’s washout bottom in the broader markets had any of us thinking that the recession might be over. The gathering of minds included: Doug Casey, Managing Director David Galland, CEO Olivier Garret, Casey Chief Economist Bud Conrad, Senior Energy Analyst Marin Katusa (my counterpart on the energy side), myself heading the metals division, and several other editors.

Doug’s guru-vision remains locked on the disaster channel. The U.S. economic problems, he says, remain so profound and, if anything, have been worsened by the government’s actions, that Americans are headed for a significant lowering of their standard of living.

As this reality unfolds, it will send out shock waves that will impact much of the world: the Greater Depression.

And the next step, Doug believes, will be a change in interest rates. The Bright Boys in DC will resist doing this, but while they seem willing to let the dollar slide to ease their mounting debts, they don’t want it to crash. They may soon be forced to raise interest rates. When that happens, Wall Street usually moves in the opposite direction – which could be the end of the “Things Aren’t as Bad as We Thought” rally of 2009.

Bud Conrad – in proper, responsible chief economist-style – considered the question carefully and conceded that there do indeed seem to be many “green shoots” now, but still concluded that conditions will continue deteriorating. He sees the government deficits in the driver’s seat, the main variable to keep a watch on.

As the U.S. government persists with its spending spree, valiantly dousing the deficit fire with more debt-gasoline, it will continue destroying the dollar, and that will push ever more people into gold.

A year ago, Bud predicted that gold would top $1,150 by year-end 2009. His call was bolder than most forecasters’ – but he was right. Looking at the numbers today, Bud’s new baseline 2010 forecast is for gold to top $1,450. He sees a “possibility of further international instability or currency debasement as adding to that baseline.” In plain language, Bud’s confident that resource stocks of all sorts will, on average, benefit greatly from the demise of the U.S. dollar.

Somehow, I can’t shake the image of Bud singing Don’t Fear The Reaper with Blue Öyster Cult for back-up… but that’s really more like something Marin would do.

Speaking of Marin Katusa, he commented that there is money to be made in the current rebound environment, but speculators should be extremely cautious: “You should know you’re dancing with the devil in the pale moonlight. You need to make sure you know the dance steps: get in early and exit before you get the dip by the devil at the end of the song.” (Marin not only has made huge amounts of money for our subscribers, he sings in a rock band, so he knows what he’s talking about.)

My own thinking has evolved into seeing 2009 as being like the eye of a monstrous storm.

The sky has cleared substantially, and the sea looks amazingly calm, given what we’ve just been through. But it’s not over yet; the trailing edge of the storm always delivers the most damage, and that’s yet to come. Anyone fooled into abandoning shelter is taking a terrible risk.

This doesn't mean we should stay huddled in our huts, however – it makes more sense to go out, restock supplies, repair what damage we can, and get ready for the deluge to come. The renewed fury of the storm will sink many more ships, but it will also make vast fortunes for those who invest in the ships that survive and even thrive in the tumult.

Essential strategy: For the near term, buy only an initial “tranche” (portion of your desired position) in the most storm-proof (cash-rich) companies you can find – ideally with great discovery or development stories that will deliver exciting news regardless of market conditions – and hold a good chunk of cash in reserve for the next big buying opportunity.

Nothing goes up in a straight line, as share prices over the last month have amply demonstrated. There are some great picks that have been heading up all year that are now paused in their advances. Any more correction in precious metals could put them on sale, temporarily, offering great buying opportunities with a lot of the technical (e.g., discovery) risk removed from the plays. You’ll kick yourself if you don’t have any cash on hand to take advantage of them – and kick twice as hard if you paid too much for a large whack of something that goes on sale.

Worried about sitting on cash with the U.S. dollar in a death spiral? Remember: gold is also cash, highly liquid, and with terrific speculative upside to boot.

With gold having just corrected sharply (as I predicted it would in Casey’s International Speculator), gold is unquestionably the best investment we can recommend right now – fluctuations aside, it has nowhere to go but up for quite some time. Perhaps as long as a decade.

That, plus our essential “eye of the storm” strategy as above is what we’re recommending to all our subscribers – and indeed to all investors around the world who want to not only survive the trailing edge of the financial storm still to come, but thrive because of it.

While gold has gone up 38% since last December, junior gold stocks can provide even greater gains than the yellow metal itself. Currently, for example, Louis is following eight juniors that have all the right conditions to become takeover targets by gold majors… which would drive share prices through the roof. If you want to get in early, this is the time: with our special holiday offer, you’ll save $400 on a one-year subscription of Casey’s International Speculator – but only until midnight, December 18. Hurry up and click here to learn more.

Got a comment then please add it to this article, all opinions are welcome.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.



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Reader Comments (6)

can someone from london sign up for the news letter.I get the fleet street letter in london for 79 pounds for a year & receive loads of offers on systems with very smart copy writers promising the earth. Your letter even with the discount seems quite expensive. Can this really be justified.

Kind Regards.

December 21, 2009 | Unregistered CommenterMatthew

Matthew,

No matter where you are you can sign up for the letter, however OPTIONTRADER gives signals on options trading on US exchanges.

We are not selling a system, simply trading signals on options according to how we see the market. The service gives clear BUY/SELL signals on specific options contracts with suggested weightings, eg. BUY $10 Feb-10 Calls on ABC Ltd. and allocate 10% of your options trading portfolio to this trade.

Please follow the following two links to see our trading record, whether the service is worth is cost its up to you.

http://www.gold-prices.biz/busy-times-for-optiontrader/

http://www.gold-prices.biz/an-update-on-our-premium-options-trading-service/

If you have any more questions, just ask.

December 21, 2009 | Unregistered CommenterGold Prices

We are a little nervous of so called take over targets and tend to ignore the buzz that surrounds them. Some take overs are conducted in secret and appear out of the blue others are trailed but the premium is usually built in by then so there isn't a lot of upside left.

However don't let us put you off you may be onto a winner – please let us know how you get on with them as we are sure that it will be of interest to our readers.

All the best

December 22, 2009 | Unregistered CommenterGold Prices

Bob,

Lots of talk about DGC (TSX) being a takeover target.

My gift to you for the season.

I own IRC prior to the surge. Only tiny volume.

December 22, 2009 | Unregistered Commenterep

ep,

Thanks for the present we have added Detour to our watch list for now. Consolidation is the only way for some of the bigger companies to add ozs in the ground, so we will see just what develops.

December 23, 2009 | Unregistered CommenterGold Prices

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