The Golden Bottom

Gold Scents

Today I’m going to follow up on my last article “Are commodities at a major turning point”.

If commodities and gold are ready to reverse then the first thing that has to happen is the dollar needs to form a top. I think that may have occurred on November 7th when the last employment report was released. Notice how the dollar formed a key reversal on that day, that was retested Friday and failed, forming a bearish engulfing candlestick.

dollar retest

Considering that the daily cycle is now on day 22 and late in the cycle timing band, the odds are good that the reversal Friday marked at least a daily cycle top in the dollar index. If that’s the case then the euro’s daily cycle should have bottomed. Looking at the euro chart it does appear that the euro bottomed on November 7.

euro

Now the question is are we looking at just a minor daily cycle rally to be followed soon by another lower low, or is the intermediate trend about to reverse? If the intermediate trend is about to reverse, then the euro is going form a right translated daily cycle (rally for more than 12 days) which would force the dollar into a stretched decline that may generate a failed daily cycle even though it is currently right translated (topped after day 12). While the odds are against a right translated cycle producing a lower low it does happen rarely, and I’m starting to think it might be setting up to happen in the dollar index. I think we could see the euro rally until the December employment report, which would correspond with the dollar forming a daily cycle low also on December 5 (stretching the current daily cycle to 36 days).

currency cycle expectations

If this unfolds as I have described then both currencies would produce a minor corrective move and then continue the intermediate trend reversal. Notice in the chart below the pattern that would form if this scenario plays out.

head and shoulder patterns corrected

As I have been saying all along, the May bottom in the dollar just did not look like a major three year cycle low to me. On top of that over the last 9 years the euro has developed a very distinct two year cycle, which makes me wonder if the three year cycle in the dollar is evolving into something different. If that’s the case, and the euro is about to put in a major 2 year cycle low, then the dollar is about to form a major multi-month, or possibly multiyear top.

multiyear currency cycles

So how does this relate to commodities you ask? Well as long as the dollar continues to rally commodities are probably going to continue to struggle. But if the euro is putting in a major multi-month, or multi-year bottom, and the dollar a major top, then it’s likely, as I discussed in my previous article, that the CRB is forming a slightly early 3 year cycle low right here and now.

US dollar commodities cycles

So how does this affect the gold market you ask? Well if the dollar is in the process of putting in a major multi-year top (which I think it’s safe to say no one is expecting at this moment) then it is possible that gold just put in a final bear market bottom. Yes I have been expecting gold to make a final bottom next summer, and that is still a very strong possibility, but based on that two year cycle in the euro, there is a credible possibility that the bottom I was expecting next summer is occurring right now.

With Friday’s reversal and rally, gold is now flashing signals that an intermediate bottom may have occurred on November 7. Starting with the weekly charts we not only have a weekly swing (the first confirmation that an intermediate bottom has formed) but also a bottoming pattern with two hammer candlesticks in a row.

gold hammers

Another sign that something may have changed is the false breakdown below multi-year support. The last time this happened in 2013 gold collapsed in a waterfall decline. This time the break of support has been quickly reversed. As I have noted in the past this is often how major trends reverse as big money will create an artificial technical breakdown (to trigger stops and create a massive liquidity event) to produce the conditions necessary for them to enter very large positions. Unlike me and you these institutions can’t just click a mouse and enter positions. They need a panic selling event to bring enough shares into the market so that they can take multi-million or even billion-dollar positions.

technical breakdowns

And speaking of entering large positions, note the volume on the triple leveraged mining indexes. Almost 20 billion dollars worth of shares have changed hands over the last two weeks in just GDX and GDXJ, and that doesn’t even include the triple leveraged funds.

NUGT

jnug

For no other reason than the dollar is due for a move down into its daily cycle low the metals should rally next week. Here’s what I’m going to look for to tell me if the rally is the beginning of a new intermediate cycle and possibly a new cyclical bull market.

First: If gold has put in an intermediate cycle low then the miners are going to produce a very large move this week, somewhere in the neighborhood of 7-10%. A recognition candle stick that signals that the smartest and most nimble players in the market are convinced a bottom has formed and have taken positions.

miners weekly recognition candle

Second: In order for gold to generate a major trend change the currency markets also have to complete a larger degree trend reversal. The rally in the euro will be key. If it rallies enough next week to challenge or break its intermediate trend line that will provide confirmation that the currency markets are reversing.

euro intermediate trend line

So watch these two charts next week and they will tell us whether or not this is just a short-term bounce in gold with one more lower low to follow later in December, or if the metals have completed a major multi-month bottom, or maybe even a final bear market low.

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WTI Crude Oil on the Move $112 Next Stop

The energy sector has surged during the last two months which can be seen by looking at the XLE Energy Select Sector Fund. If crude oil continues to climb to the $112 level, XLE will likely continue to rally for another few days or possibly week as energy stocks are considered a leveraged way to play energy price movements.

Another way to look at this info is through the USO United States Oil Fund. This tracks much closer to the price of oil. The only issue is that many ETFs that “try to track” an underlying commodity is in how the funds are built. They own multiple contracts further into the future which does not exactly provide us with the short term news/event driven price movements in the current front month contract as they should.

What does this mumbo jumbo mean? Well, it means funds like USO and the highly respected UNG, and VIX ETFs… (just joking about the highly respected part), fail to track the underlying commodity or index very well when it comes to short term price movements. This means, you can nail the timing of a trade, and the commodity or index will move in your favor, yet your fund loses money, or goes nowhere…

Let’s Focus on the Technicals Now…

WTI crude oil has formed a bullish ascending triangle pattern from March to May of this year. The breakout to the upside is bullish and should be traded that way until the chart says otherwise. This breakout and first pullback must hold, or I will consider it a failed breakout. So if price dips and closes 2 days below the breakout level, it will be a major negative for oil in my opinion.

The range of the ascending triangle provides us with a measured move to the upside which is $112. Typically the first pullback after a breakout can be bought. The first short term target to scalp some gains would be $109, and at that point moving your stop to breakeven is a wise decision. Trading is all about managing capital and risk, if you don’t, then the market will take advantage of your lack in discipline.

Looking further back on the chart, you can see the double bottom formation also known as a “W” formation. Once the high of the “W” formation is broken the trend should be considered neural or up.

Also note that the RSI (relative strength) has been trending higher for some time now. This means money is rotating into this commodity. This is in line with my interview this week with Kerry Lutz and my recent article talking about the next bull market in commodities and the TSX (Toronto Stock Exchange).

clfutures

WTI Crude Oil Trading Conclusion:

In short, oil has some extra risk around it. The recent move has been partly fueled by news overseas. So at any time oil could get a lift or take a hit by news that hits the wires. I tent to trade news related events with much less capital than I normally do because of this risk.

Happy Trading!

WANT MORE TRADE IDEAS?
GET THEM HERE: WWW.THEGOLDANDOILGUY.COM

 

Chris Vermeulen

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

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‘The Birth of a New Bull Market’

The Birth of a New Bull Market

By Jeff Clark, Senior Precious Metals Analyst

If I asked you why you think I’m bullish on platinum and palladium, you’d probably point to the strikes in South Africa, the world’s largest producer of platinum. Or maybe the geopolitical conflicts with Russia, the largest supplier of palladium. Maybe you’d even mention that some technical analysts say the palladium price has “broken out” of its trading range.

These are all valid points—but they’re reasons why a trader might be bullish. When the strikes end, or Russia ends its aggression, or short-term price momentum eases, they’ll sell.

And that will be a mistake.

Because underneath the headlines lies an irreparable situation with the PGM (Platinum Group Metals) market, one that will last at least several years and probably more like a decade. This market is teetering on the edge of a supply crunch, one more perilous than many investors realize. As the issues outlined below play out, prices will be forced higher—which signals that we should diversify into the “other” precious metals now.

The basic problem is that platinum and palladium supply is in a structural deficit. It won’t be resolved when the strikes end or Russia simmers down. Here are six reasons why…

#1. Producers Won’t Meet the Cost of Production

The central issue of the striking workers in South Africa is wages. In spite of company executives offering to double wages over the next five years, workers remain on the picket line.

Regardless of the final pay package, wages will clearly be higher. And worker pay is one of the biggest costs of production. And the two largest South African producers (Anglo American and Impala), which supply 69% of the world’s platinum, are already operating at a loss.

Once the strike settles, costs will rise further. Throw in ongoing problems with electric power supply, high regulations, and past labor agreements, and there is virtually no chance costs will come down.

This dilemma means that platinum prices would need to move higher for production to be maintained anywhere near “normal” levels. Morgan Stanley predicts it will take at least four years for that to occur.

And if the price of the metal doesn’t rise? Companies will have no choice but to curtail production, making the supply crunch worse.

#2. Inventories Are Near the Bottom of the Barrel

One reason platinum price moves have been muted during the work stoppage is because there have been adequate stockpiles. But those are getting low.

Impala, the world’s second-largest platinum producer, said the company is now supplying customers from its inventories.

In March, Switzerland’s platinum imports from strike-hit South Africa plummeted to their lowest level in five-and-a-half years, according to the Swiss customs bureau.

Since producers can’t currently meet demand, some customers are now obtaining metal from other sources, including buying it in the open market.

As inventories decline, supply from producing companies will need to make up the shortfall—and they’ll have little ability to do that.

#3. The Strikes Will Make Recovery Difficult and Prolonged

Companies are already strategizing how to deal with the fallout from the worst work stoppage since the end of apartheid in 1994…

  • Amplats said it might sell its struggling Rustenburg operations. Even if it finds a buyer, the new operator will inherit the same problems.
  • Impala said that even if the strike ends soon, its operations will remain closed until at least the second half of the year.
  • Some companies have announced they may shut down individual shafts. This causes a future problem because some of these mines are a couple of miles deep and would require a lot of money to bring back online—which they may balk at doing with costs already so high.
  • It’s not being advertised, but a worker settlement will almost certainly result in layoffs since some form of restructuring will be required. This could trigger renewed strikes and set in motion a vicious cycle that further degrades production and makes labor issues insurmountable.

#4. Russian Palladium Is Already in a Supply Crunch

When it comes to palladium, Russia matters more than South Africa, since it provides 42% of global supply. Remember: palladium demand is expected to rise more than platinum, due to new auto emissions control regulations in Asia.

But Russia’s mines are also in trouble…

  • Ore grades at Russia’s major mines, including the Norilsk mines, are reported to be in decline.
  • New mines will take as long as 10 years to come online. It could take a decade for Russian production to rebound—if Russia even has the resources to do it. This stands in stark contrast to global demand for palladium, which has grown 35.8% since 2004.
  • Russia’s aboveground stockpile of palladium appears to have dwindled to near extinction. The precise amount of the country’s reserves is a state secret, but analysts estimate stockpiles were 27-30 million ounces in 1990.

Take a look at reserve sales today:

Many analysts believe that since palladium reserve sales have shrunk, Russia has sold almost all its inventory. As unofficial confirmation, the government announced last week that it is now purchasing palladium from local producers. This paints a sobering picture for the world’s largest supplier of palladium—and is very bullish for the metal’s price.

#5. Demand for Auto Catalysts Cannot Be Met

The greatest use of PGMs is in auto catalysts, which help reduce pollution. Platinum has long been the primary metal used for this purpose and has no widely used substitute—except palladium.

But that market is already upside down.

Palladium is cheaper than platinum, but replacing platinum with palladium requires some retooling and, on a large scale, would worsen the supply deficit.

As for platinum (which does work better than palladium in higher-temperature diesel engines), auto parts manufacturers are expected to use more of it than is mined this year, for the third straight year.

Some investors may shy away from PGMs because they believe demand will decline if the economy enters a recession. That could happen, but tighter emissions controls and increasing car sales in Asia could negate the effects of declining sales in weakening Western economies.

For example, China is now the world’s top auto-producing country. According to IHS Global, auto sales in China are projected to grow 5% annually over the next three years. PricewaterhouseCoopers forecasts that sales of automobiles and light trucks in China will double by 2019. That will take a lot of catalytic converters. This trend largely applies to other Asian countries as well. It’s important to think globally when considering demand.

The key, however, is that supply is likely to fall much further than demand.

#6. Investment Demand Has Erupted

Investment demand for platinum rose 9.1% last year. The increase comes largely from the new South African ETF, NewPlat. At the end of April, all platinum ETFs held nearly 89,000 ounces—a huge amount when you consider it was zero as recently as 2007.

Palladium investment fell 84% last year—but demand is up sharply year-to-date due to the launch of two South African palladium ETFs, pushing global palladium holdings to record levels. And like platinum, there was no investment demand for palladium seven years ago.

Growing investment demand adds to the deficit of these metals.

The Birth of a 10-Year Bull Market

Add it all up and the message is clear: by any reasonable measure, the supply problems for the PGM market cannot be fixed in the foreseeable future. We have a rare opportunity to invest in metals that are at the beginning of a potential 10-year bull run.

Platinum and palladium prices may drop when the strikes end, but if so, that will be a buying opportunity. This market is so tenuous, however, that an announcement of employees returning to work may be too little, too late. We thus wouldn’t wait to start building a position in PGMs.

GFMS, a reputable independent precious metals consultancy, predicts the palladium price will hit $930 by year-end and that platinum will go as high as $1,700. But that will just be the beginning; the forces outlined above could easily push prices to double over the next few years.

At that point, stranded supplies might start coming back online—but not until after major, sustained price increases make it possible.

The RIGHT Way to Invest

In my newsletter, BIG GOLD, we cover the best ways to invest in the metals themselves (funds and bullion), but for the added leverage of investing in a profitable platinum/palladium producer, I have to hand the baton over to Louis James, editor of Casey International Speculator.

You see, most PGM stocks are not worth holding, so you have to be very diligent in making the right picks. Remember, the dire problems of the PGM miners are one reason we’re so bullish on these metals. However, Louis has found one company in a very strong position to benefit from rising prices—and its assets are not located in either South Africa or Russia.

It’s the only platinum mining stock we recommend, and you can get its name, our full analysis, and our specific buy guidance with a risk-free trial subscription to Casey International Speculator today.

If you give it a try today, you’ll get three investments for the price of one: Your Casey International Speculator subscription comes with a free subscription to BIG GOLD, where you’ll find two additional ideas on how to invest in the PGMs.

If you’re not 100% satisfied with our newsletters, simply cancel during the 3-month trial period for a full refund—but whatever you do, make sure you don’t miss out on the next 10-year bull market. Click here to get started right now.

The article The Birth of a New Bull Market was originally published at caseyresearch.com.

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A Potential Catalyst for Precious Metals

Precious Metals continue to be in a long bottoming process that began last summer. Though many quality juniors have already bottomed and while GDX, GDXJ and SIL probably won’t see new lows, the broad sector as a whole is struggling to push out of this long bottoming process. Traders always say price is all that matters and who cares about fundamentals or the why. However, the most astute traders and investors look beyond a simple tool or single sphere of analysis. With respect to precious metals, negative real rates and the direction of inflation are the driving forces. Deflation is a catalyst for precious metals because policy makers react by suppressing real rates. Rising inflation is a catalyst and especially when it causes real rates to go negative or more negative. I will explain why this could be the catalyst for the revival of precious metals sector.

Commodities generally move together but some lead and some lag. In a deflationary catalyst situation, precious metals and gold specifically lead the rest of the sector. Examples of this include but are not limited to 1931, 2000-2001 and 2008. Yet there are instances of precious metals lagging after major bottoms. The best example is 1976. A smaller example is during 2004 when precious metals corrected but commodities kept moving higher. We’ll get to 1976 later but first lets examine the present.

The chart below plots the major commodity groups with the sector as a whole (CCI) at the bottom. Note how the CCI and all groups (except precious metals) peaked from the end of February 2011 to April 2011. Yet precious metals didn’t peak until around Labor Day 2011. Today we see that the CCI has clearly broken out of its downtrend and ended its bear market. Note how the 80-week moving average, formerly resistance has become support. It makes sense that because precious metals peaked last in 2011, they will lag the initial recovery of the commodity sector.

may14commods

This is something that occurred at during the 1976 bottom. This next chart plots gold and the CRB index, which is today’s CCI. The CRB peaked before gold in 1974 and bottomed not too long after gold peaked. When gold bottomed in summer 1976 the CRB was trading well off its bottom. After gold bottomed it quickly regained its leadership.

may15edCRBGoldOverlay

Circling back to the present, there are technical and fundamental reasons why precious metals are lagging and why that could continue until a final bottom is confirmed. Precious metals peaked months after the rest of the sector in 2011. Thus, they should lag the initial recovery. On the fundamental side, rising inflation appears more likely than deflation. CPI and PPI have ticked up in recent months. May’s PPI was at an 18-month high. In addition, credit growth in the US which declined from 5.7% in summer 2012 to below 2.0% at the end of 2013 has since increased to 4.0% and a one year high. Furthermore, Reuters reports that the Fed said banks eased their commercial lending standards in recent months and this resulted in higher demand for credit. Banks also eased lending standards on consumer credit and auto loans. Prices are starting to tick up, credit growth is picking up and banks may slowly be easing lending standards on consumers.

We can see a potential catalyst which could help drive a sustained recovery in precious metals. Over the near-term, the sector remains mired in a long and arduous bottoming process. Gold and Silver were firming to start this week but both were rejected at their declining 50-day moving averages. Meanwhile, the stocks haven’t done much of anything. The onus is on the bulls as the short-term prognosis continues to be bearish. Nevertheless, we are excited. First, we see a potential macro catalyst evolving which is supportive and gives us more confidence to buy. Second, we know that lower prices in the coming weeks will provide a tremendous, low risk opportunity to put more money to work. As I wrote last week, I am looking at JNUG (3x long GDXJ) as well as several juniors I believe have exceedingly strong upside potential over the coming quarters and years. In any event, be patient over the coming weeks and let this final selloff run its course. If you’d like to know which stocks we believe are poised to outperform after this next low, then we invite you to learn more about our service.  

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

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The Most Anticipated Oil Well of 2014

The Most Anticipated Oil Well of 2014

By Marin Katusa, Chief Energy Investment Strategist

Large international oil companies (IOCs) and the largest national oil companies (NOCs) are all anxiously watching an oil well that’s being drilled by a North American company in a little, out-of-the-way country in Europe.

In fact, this country—Albania—has recently garnered so much attention from Big Oil due to the results of the elephant potential of this oil deposit that the Albanian Energy Ministry just decided to establish an open-tender system for the next round of sales of blocks with major oil and gas potential. If you’re not familiar with it, “open tender” is an auction process where the highest bidder gets the land blocks.

The Energy Ministry wouldn’t do this unless the demand were significant, and when Doug Casey and I visited the region recently, we were very impressed with its world-class potential. We’re both excited to see the oil well results that are slated to come out within the next few months—so are the IOCs and NOCs, and so should you.

To share our excitement, Doug and I thought it would be a great idea to literally bring you into the room to see and hear what we see and hear—and thanks to modern technology, I present to you today the Casey Energy Report (CER) Crossfire.

One of the few times I filmed a CER Crossfire was with Keith Hill from Africa Oil. It’s not something I do regularly—only when I’m really excited about a company. The company we have on CER Crossfire today, Petromanas Energy (PMI.V), is chasing world-class, elephant oil deposits, but rather than deepwater Africa (like Keith did with Africa Oil), it’s drilling deep onshore in Europe.

As you will hear me discuss in the video, the last time I’ve seen a company chasing deep world-class oil deposits with this kind of massive upside was Africa Oil.

Shell, one of the largest IOCs, is paying almost all of the US$70 million this oil well costs to drill to earn its 75% share of the project, and it will do the same with the next well. We haven’t seen such a high reward-to-risk ratio in a long time.

So, rather than reading a long missive, I invite you to watch this edition of the Casey Energy Report Crossfire with Glenn McNamara, the CEO of Petromanas. I think it will definitely be worth your time.

 

 

Now You Can Take the Lead… We Make It Simple

We expect great things from this company. You can read our ongoing guidance on Petromanas and our other top energy stocks every month in the Casey Energy Report. In the current issue, for example, you’ll find an in-depth field report on the Europe trip Doug and I took, what we learned at our site visits, and which companies are poised to benefit most from the budding European Energy Renaissance.

There’s no risk in trying it: If you don’t like the Casey Energy Report or don’t make any money within your first three months, just cancel within that time for a full, prompt refund. Even if you miss the cutoff, you can cancel anytime for a prorated refund on the unused part of your subscription. You don’t have to travel 300+ days a year to discover the best energy investments in the world—we do it for you. Click here to get started.

The article The Most Anticipated Oil Well of 2014 was originally published at caseyresearch.com.

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Are You Prepared For the Coming Collapse?

Meltdown America – Are You Prepared For the Coming Collapse?

By Casey Research

“I think we are in the early stages of the end of the West,” says Jeff Opdyke of The Sovereign Investor in an eye-opening new documentary from Casey Research called, “Meltdown America.” This free, 28-minute video gives you a sober look at the coming collapse of the United States, the most indebted nation in the history of the world. You’ll see why stock market crashes, rampant unemployment, and widespread poverty are only the beginning. Your comfortable way of life could be taken from you in an instant. Here’s a sneak peek of what awaits:

To watch the full documentary and hear the harrowing and true stories of three people who survived economic and political collapse in Zimbabwe, Yugoslavia, and Argentina, simply click here. You’ll discover how their powerful stories of hardship foreshadow what’s happening in the U.S. Best of all, this stunning video is completely free to watch.

Click here to watch this full-length documentary right now.

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Doug Casey’s Coming Super-Bubble by Louis James

Doug Casey’s Coming Super-Bubble

By Louis James, Chief Metals & Mining Investment Strategist

In many of my conversations with legendary speculator Doug Casey since the crash of 2008, Doug has talked about a coming super-bubble.

Everything Doug has studied about human nature, history, and economics—from Roman times right up to the present—has him absolutely convinced that the global economy is headed for high inflation, with a very real potential for hyperinflation in the US.

Ben Bernanke’s panicked deployment of squadrons of cash-laden choppers has been emulated around the world. The Bank of International Settlements estimates that global debt markets now exceed $100 trillion.

The laws of economics—maybe even physics—say that this inflation, whenever it arrives, must have consequences… and that those consequences cannot be avoided forever.

The easiest consequence to predict, and the one we’re betting heavily on, is that the price of gold will move higher. Much higher. That move will in turn ignite a bubble in gold stocks and, as Doug likes to say, a super-bubble in junior gold stocks.

Jeff Clark, editor of our BIG GOLD newsletter, recently illustrated what such a super-bubble can look like, citing figures from several historic bull markets. I hesitate to repeat any of his figures because the right junior stocks’ gains when the market goes bubbly are, frankly, hard to believe. However, it is a fact that quite a few junior stocks achieved the much-vaunted 10-bagger status (1,000% gains) in previous bubbles, and some even returned 100-fold.

Here’s the essential reason why junior mining stocks are Doug’s favorite speculations.

Let’s start at the beginning: Doug’s mantra is that one should buy gold for prudence and gold stocks for profit. These are very different kinds of asset deployment.

It’s particularly important not to think of gold as an investment, but as wealth protection. It’s the only highly liquid financial asset that is not simultaneously someone else’s liability. Every ounce of gold you physically possess is value in solid form—there is no short to your long. Come hell or high water, it is value you can liquidate and use to secure your needs. That’s why gold is for prudence.

Gold stocks are for speculation because they offer leverage to gold. This is actually true of all mining stocks and, more broadly, of stocks in commodity-related companies; they all tend to magnify the price movements in the underlying commodity. But the phenomenon is especially strong in the highly volatile precious metals.

Allow me to illustrate—and in an effort to avoid seeming overly promotional, I’ll show how gold stocks’ leverage works on the downside as well as the upside. Bad news first: here’s a chart showing how gold retreated during October and November of 2008, the worst two months of that year’s crash for mining stocks. Also shown are an index of gold juniors and our own portfolio performance. This was, of course, a terrific time to buy, resulting in spectacular gains over the next two years.

Now the good news: here’s a chart showing the performance of the same three things in January and February of this year, which saw a major rally in the gold sector.

 

 

 

Here’s one more, with a particularly telling point to make. This is the stock price of ATAC Resources (ATC.V) over the same time period as the chart above. The point I want to draw your attention to is that the company had no major news during the time period shown. It’s a Yukon gold play, buried deep under the famous snows of the Great White North, so there’s no exploration under way, and there won’t be until the snow melts weeks or months from now.

 

This third chart shows in one simple yet powerful way exactly why Doug loves buying these stocks when they’re on sale and selling them when they go into bubble mode. ATAC essentially did nothing and still shot up over an order of magnitude more than gold. Note that while this third chart looks like the second, the scales are quite different. (ATAC, by the way, is part of my special report, 10-Bagger List for 2014, that details nine companies I believe could show 1,000% or more returns this year. Note that the report was written before the big move upward you see in the chart above.)

It’s worth emphasizing that ATAC’s performance this year is just on a rebound from recent lows—imagine what a stock like this could do when Doug’s super-bubble for gold stocks arrives.

But what if it doesn’t? Or worse—what if we already missed it?

I remember a conversation with Doug back in 2011, when gold rose to within reach of $2,000 per ounce. Many mainstream analysts said gold was in a bubble. I told Doug I couldn’t understand why anyone would listen to analysts who’ve called the gold trend wrong every year since the current bull cycle started. I remember Doug chuckling and saying: “Just wait and see—this is barely an overture.”

I am certain Doug is right. That’s not because he’s the guru, nor because I’m a nutty gold bug, but because no government in history has ever multiplied its currency base without sparking serious and often fatal inflation. That’s a fact, not an opinion, backed by enough data to make me extremely confident in predicting what lies ahead for the US dollar, even if I can’t say exactly when we’ll reach the tipping point.

Since that 2011 interim peak, as we all know painfully well, gold has backed off on par with the correction in the middle of the great 1970s gold bull market. But economic realities require that the market turn around and head for his long-predicted super-bubble in junior mining stocks before too long. That makes the correction the last, best time to build a substantial position in the stocks best positioned to profit from the coming bubble.

And now Doug is saying that he believes the upturn is at hand. He expects a steadily rising market for a year or two, perhaps more, but not many more, culminating in a market mania for the record books.

Our market does appear to have bottomed. It may take a while to go into its mania phase, but it’s already heating up. No one is going to want to be short when this train leaves the station—and the conductor has blown the whistle.

To find out what you could be missing if you don’t invest in junior mining stocks right now, watch Casey Research’s recent video event, Upturn Millionaires—How to Play the Turning Tides in the Precious Metals Market. With resource and investment experts Doug Casey, Frank Giustra, Rick Rule, Porter Stansberry, Ross Beaty, John Mauldin, Marin Katusa, and myself. Watch it here for free, or click here to find out more about my 10-Bagger List for 2014.

The article Doug Casey’s Coming Super-Bubble was originally published at caseyresearch.com.

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How I Intend to Survive the Meltdown of America

How I Intend to Survive the Meltdown of America

By Louis James, Chief Metals & Mining Investment Strategist

It is with a troubled heart that I look at the continued fighting in eastern Ukraine. I worry about my friends and students in the country who may well be in physical danger soon, if the conflict escalates. As an investment analyst, it’s the financial war the Russians seem quite willing to wage that has my attention.

It should have yours as well.

In our just-released documentary, Meltdown America, one of the experts noted that the Kremlin had already made moves to dethrone the US dollar as the world’s reserve currency before the renewed East-West tensions of this year. Putin has openly threatened what amounts to economic warfare as a response to sanctions placed on Russia after its Crimea grab.

Now bullets are flying—can Putin’s financial ICBM be far behind?

Mind you, the US and global economies are on such shaky ground, they could come crashing down without any help from Gospodin Putin.

One of the things that really struck me while watching Meltdown America was the way the writing was clearly visible on the wall in past cases of financial collapse and hyperinflation—but no one wanted to believe it.

That’s the way I see the US today. Life seems so normal and there’s so much wealth even in poorer regions, it’s hard to believe the cracks in the foundation could really bring down everything built on it. And that’s exactly why the cracks never get fixed; people don’t want to see them, and politicians do everything possible to deny they exist. So they widen and deepen until the collapse becomes inevitable—and I believe we have already passed the point of no return.

It’s just a matter of time now.

Gloomy thoughts indeed, but I’m not here to depress anyone. Hopefully, I can help deliver a wake-up call. Perhaps even more useful, I can tell you what I’m doing about it.

Of course, precious metals and the associated stocks are a key part of my strategy. As Doug Casey likes to say, I buy gold for prudence and gold stocks for profit. If I’m right about the economic trouble ahead, gold will protect me, and my gold stock picks will make me a fortune.

But Doug also says that our biggest risk today is not market risk; it’s political risk. He has moved to rural Argentina to get out of harm’s way. I’ve moved to Puerto Rico, a US territory that is rapidly becoming the only tax haven that matters for US taxpayers.

Million-Dollar Condos for Half Price

As I type here in my new home office, I glance up and see waves of Caribbean blue crashing on the palm-lined beach. Surfers are out in force. Scattered clouds add to the already amazing variety of colors in the ocean. I wonder if I will have time to go for a swim before dinner—and I’m amazed yet again to think that it was a shot at lower taxes that brought me here to Puerto Rico.

It seems almost unnatural for me to be able to enjoy so much beauty while saving money, but that’s exactly what I’m doing.

The view from my new home office.

You see, the economy here never really recovered from the crash of 2008. This is very bad news for long-suffering Puerto Ricans trying to make ends meet. When I first came here with my wife to check the place out, locals kept asking us why we were thinking of moving here; jobs are scarce, and something of an exodus is taking place in the opposite direction (Puerto Ricans are US citizens and can travel and work freely anywhere in the US).

But I wasn’t coming to Puerto Rico to sell hot dogs. My income doesn’t depend on the local economy, so its woes are an obvious opportunity for a contrarian speculator like me.

Take the most simple and basic asset class one can invest in as a Puerto Rico play: real estate. The market has been so devastated that million-dollar condos are selling for half price. When we closed on our new place, the seller came up short, and we had other options, so we weren’t willing to pay more. The real estate agents involved were so eager to keep the deal from falling through, they kicked in with their own money to help the seller out.

Personally, I’m not a big fan of gated communities, but for people who are concerned about possible social unrest in the future, it’s good to know that you can buy properties in some of the most posh and secure communities on the island with no money down.

Now, as much as I like a contrarian bargain, and as much as my wife loves the tropical weather, what really brought us here were the new tax incentives the government of Puerto Rico enacted to make the island more attractive to investors and employers.

The critical point here is that Puerto Ricans are exempt from US federal income taxes, even though they are US citizens. They pay Puerto Rican taxes, of course, and those have generally been similar to US taxes, so the island has never been seen as a tax haven before. That all changed in 2012, when Puerto Rico passed Acts 20 and 22.

Act 22

Act 22 is basically a 100% capital-gains tax holiday designed to attract investors to come live in Puerto Rico. Exactly what is included or excluded is beyond the scope of this article, but for me, the important thing is that it covers the stocks I already owned when I moved here on January 1, 2014. Given that the market bottomed at almost the same time, I have no gains to be taxed on for 2013, and will not be taxed for the gains I make going forward—all the way to 2036.

This alone was worth the move to Puerto Rico, in my opinion.

Happily, the application process was simple. My wife downloaded the form and filled it out. I signed it, and a couple weeks later, we got an official tax holiday decree in the mail—no questions asked. I had to accept the conditions of the decree in front of a notary and send in an acceptance form with a $50 filing fee, and that was it. Didn’t even have to hire a lawyer.

This tax break is not available to current residents of Puerto Rico—it’s designed to attract wealthy people to come live on the island, after all—but it’s available to all others who move here, including but not limited to US taxpayers.

Act 20

Act 20 is a tax break on corporate earnings designed to incent job creation in Puerto Rico. The idea is to persuade US employers who might set up call centers in India, or create other similar jobs abroad, to do so closer to home, by offering them a 4% corporate earnings tax rate.

My fellow Casey Research editor Alex Daley has moved to Puerto Rico as well, and we’ve formed a company here that exports writing and analytical services to Casey Research in Vermont. This is the basis of our application for Act 20 tax benefits, which has not been approved yet, but which we understand is close.

If we get our Act 20 decree approved, we’ll still have to pay regular income taxes on our base salaries, but the lower tax rate applied to our corporate income will result in a drastically lower total income tax rate for us as individuals.

I’ll be sure to let readers know when we get our Act 20 decree approved.

All 100% Legal

The beauty of this is that Puerto Rico’s tax breaks are not shady tax dodges set up by entities of questionable legality or trustworthiness, but perfectly legal tax incentives within the US.

Act 20 and Act 22 benefits are available to non-US persons, but they are especially important to US taxpayers because, unlike almost every other country in the world, the US taxes its serfs citizens whether they live in the US or abroad.

In other words, while a Canadian can get out of paying Canadian income taxes by moving out of Canada, a US person cannot escape US taxes by moving to Argentina, or anywhere else—anywhere besides Puerto Rico.

It’s like expatriation without having to leave the US, truly a unique situation.

And it’s a win-win situation; people like us bring much-needed money, ideas, and energy to the island, while getting to keep more of what our crisis-investing strategy nets us. We create jobs, rather than take them. We are part of the solution here, and we’ve been made very welcome.

Is It Safe?

So that’s why I’m here. Whether or not my Act 20 status gets approved, I’m so happy about my Act 22 decree that I’m convinced we did the right thing moving here.

When I tell people what I’ve done and why, most get immediately excited by the idea—and then they balk. The first question they ask is usually: What about crime?

Puerto Rico isn’t a large island, and a good chunk of its three million inhabitants are clustered in and around the capital city of San Juan. Of course there is crime here, as there is in any large city. There are places I would not walk alone at night—just as there are in New York City.

Mexico City, Buenos Aires, La Paz… the capital of any other Latin American country or Caribbean country I’ve been to is much larger, more polluted, and more dangerous than San Juan. In my subjective view, San Juan, with its old Spanish fortifications and amazing beaches, is more beautiful. And you can drink the water here.

Sure, it might be cleaner and safer in Palm Beach, Florida—but it’s a lot more expensive there, it has less charm, and there’s no Act 20 nor 22. It’s a matter of priorities.

When I say this, most people remain skeptical; they read about the economic problems Puerto Rico has and the financial trouble the government is in, and they wonder if things could get worse.

Of course they can—but if Doug is right about The Greater Depression about to envelop the whole world, things are going to get worse everywhere.

Here at least, people are already used to massive unemployment. It won’t come as a shock; it’s never left since 2008.

Another way of looking at it is that since tropical storms hit the island from time to time (southern Florida is much more prone to major hurricanes than Puerto Rico, but they do happen), people here are more prepared for disasters than in many other parts of the US. The better apartment buildings and hotels have their own electricity generators. Nobody can freeze to death here, anyway, and fruit trees grow all over the island.

There’s a lot more I could say, but the bottom line is that I think Puerto Rico is a much better place to ride out a global financial storm than Miami, or Anchorage, or almost any city in between. A self-sustaining farm in rural Alabama might be better, but that’s not the sort of place I want to live.

I Like It Here

That last is an important point: if I have to hunker down to ride out an economic storm, it should be in a place where I like being.

Puerto Rico is beautiful and bountiful year-round. I speak Spanish, but most people in San Juan are bilingual, so that’s not really an issue. Our new flat is blocks from the best schools, shops, and restaurants in town—and even the hospital.

I open the window and the fresh air coming off the ocean carries the sound of waves, sometimes laughing children. There’s more noise pollution during the day, but at night, the city calms down, and we can hear the famous Puerto Rican coquí frogs, which my daughter calls “happy frogs.” Ten floors up, the ocean breeze is cool enough that we have yet to turn on the air conditioning.

The beaches are fantastic, and the clear water makes for great diving. I’ve never been a surfer, but the waves here are famous too, so I’m thinking of trying it out. There’s no end of other things to try out, and the neighboring islands have their own charms to offer as well.

Granted, my wife and I try to be smart about what we do and where we go, but we’ve never felt unsafe here—well, apart from the crazy drivers.

We like it here. We’re happy. For tax reasons, for quality of life, and with the potential meltdown of America in mind, we’re glad we made the move.

Find Out More

Doug Casey’s International Man Editor Nick Giambruno, Alex Daley, and I have coauthored a special report on Puerto Rico’s stunning new tax advantages. The report gets into all the details I didn’t have time or space for here. We cover all the specifics of what, why, and how. The report includes links to the forms you need, as well as recommended resources, from lawyers to realtors.

Whether you’re thinking about expatriating or you’re just tired of paying high taxes, I think Puerto Rico is a place you should consider. I know of no better resource to help you get started than our special report.

For your own health, wealth, and enjoyment, I encourage you to get your copy today.

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Don’t Keep Your Gold and Silver in the US, Says Marc Faber

Don’t Keep Your Gold and Silver in the US, Says Marc Faber

By

Gloom Boom & Doom Report publisher Marc Faber discusses the fragile state of the US and global financial systems… how rising inflation will affect the average American… how soon the bubble will burst… and why gold and silver will triumph.

Want more insightful talk on your money and investments? Subscribe now to Sound Money in your email, in iTunes, or via RSS. Email iTunes RSS

Here are a few highlights:

“The US is a country that likes to create trouble, but they don’t like to clean up things.”

“We’ve now been five years into the bull market and the US economy bottomed out in June 2009. We already had a crack-up boom—not in the economy of the typical household, but in the economy of the super-well-to-do people, whose asset prices rose dramatically and as a result created a huge wealth inequality.”

“My view would be that we have already printed so much money, and to accelerate it will be bringing about numerous other problems, so my time frame is that the [bubble], maximum, will burst in three years’ time.”

“Once the collapse happens, the power of central banks will be curtailed greatly because people will realize who brought along first the Nasdaq bubble in 1999: The Federal Reserve. Who brought about the housing bubble between 2001 and 2007? The Federal Reserve. And who is bringing now along another great credit bubble and asset bubble? The Federal Reserve.”

“I don’t think that anything is very cheap, but if I have to compare different asset prices, say real estate, stocks, bonds, commodities, gold, art, and so forth—and old cars—then I think that gold and silver [are] relatively inexpensive because they have had big corrections already, and you should not forget that the global bond market now is over $100 trillion.”

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Junior Mining Stocks to Beat Previous Highs

Junior Mining Stocks to Beat Previous Highs

By Laurynas Vegys, Research Analyst

Despite last week’s pullback, the precious metals market is off to an impressive start in 2014. Gold is up 10.6%, silver 4.3%, and the PHLX Gold/Silver (XAU) 17.1%. Gold, in particular, had a great February, rising above $1,300 for the first time since November 7, 2013.

This has led to some very handsome gains in our Casey International Speculator portfolio, with a few of our recommendations already logging triple-digit gains from their recent bottoms.

Why Junior Gold Mining Stocks Are Our Favorite Speculations

One of Doug Casey’s mantras is that one should buy gold for prudence, and gold stocks for profit. These are very different kinds of asset deployment.

In other words, don’t think of gold as an investment, but as wealth protection. It’s the only highly liquid financial asset that is not simultaneously someone else’s obligation; it’s value you can liquidate and use to secure your needs. Possessing it is prudent.

Gold stocks are for speculation because they offer leverage to gold. This is actually true of all mining stocks, but the phenomenon is especially strong in the highly volatile precious metals.

Most typical “be happy you beat inflation” returns simply can’t hold a candle to stocks that achieved 10-bagger status (1,000% gains). In previous bubbles—some even generated 100-fold returns. And we may see such returns again.

It’s Not Too Late to Make a Fortune

Here’s a look at our top three year-to-date gainers.

What’s especially remarkable is that all three of these stocks shot up much more than gold itself, on essentially no company-specific news. This is dramatic proof of just how much leverage the right mining stocks can offer to movements in the underlying commodity—gold, in this case. Two of the stocks above are on our list of potential 10-baggers, by the way.

So have you missed the boat? Is it too late to buy?

Looking at the chart, two bullish factors jump out immediately:

  • Gold stocks have just now started to move up from a similar level in 2008.
  • Gold stocks remain severely undervalued compared to the gold price. A simple reversion to the mean implies a tremendous upside move.

Now consider the following data that point to a positive shift in the gold market.

  1. After 13 consecutive months of decline, GLD holdings were up over 10.5 tonnes last month. The trend is similar to other ETFs.
  1. Hedge funds and other large speculators more than doubled their bets on higher gold prices this year.
  1. Increase in M&A—for example, hostile bids from Osisko and HudBay Minerals to buy big assets.
  1. Apollo, KKR, and other large private equity groups have emerged as a new class of participants in the sector.
  1. Gold companies’ hedging of future production—usually a sign of insecurity among the miners—shrunk to the lowest level in 11 years.
  1. China continues to consume record amounts of gold and officially overtook India as the world’s largest buyer of gold in 2013.
  1. Large players in the gold futures market that were short have switched to being long.
  1. Central banks continue to be net buyers.

To top it off, there’s been no fallout (yet) from the unprecedented currency dilution undertaken since 2008—and we don’t believe in free lunches.

The gold mania train has not yet left the station, but the engine is running and the conductor has the whistle in his mouth. This means…

Any correction ahead is a potential last-chance buying opportunity before the final mania phase of this bull cycle takes our stock to new highs, well above previous interim peaks.

In spite of the good start to 2014, most of our 10-bagger gold stocks are still on the deep-discount rack. And you can get all of them with a risk-free, 3-month trial subscription to our monthly advisory focused on junior mining stocks, the Casey International Speculator.

If you sign up today, you can still get instant access to two special reports detailing which stocks are most likely to gain big this year: Louis James’ 10-Bagger List for 2014 and 7 Must-Own Stocks for 2014.

Test-drive the International Speculator for 3 months with a full money-back guarantee, and if it’s not everything you expected, just cancel for a prompt, courteous refund of every penny you paid. Click here to get started now.

I hope you will take advantage of this opportunity in front of us—while shares are still relatively cheap.

The article Junior Mining Stocks to Beat Previous Highs was originally published at caseyresearch.com.

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