Doug Casey: Is a US-Iran War Inevitable?
Interviewed by Louis James, Casey Research
US-Iranian saber-rattling or impending shoot-out? In his usual, candid manner, contrarian investor Doug Casey talks about why he believes it’s serious this time… why the US is the greatest threat to peace today… why Iran might move towards a gold standard… and what smart investors should do.
L: Doug-sama, I’ve heard you say you think the US is setting Iran up to be the next fall guy in the wag-the-dog show – do you think it could really come to open warfare?
Doug: Yes, I do. It could just be saber rattling during an election year, but Western powers have been provoking Iran for years now – two decades, really. I just saw another report proclaiming that Iran is likely to attack the US, which is about as absurd as the allegations Bush made about Iraq bombing the US, when he fomented that invasion. It’s starting to look rather serious at this point, so I do think the odds favor actual fighting in the not-too-distant future.
L: Could they really be so stupid?
Doug: You know the answer to that one. We’re dealing with criminal personalities on both sides, and criminals are basically very stupid – meaning they have an unwitting tendency to self-destruction. One thing to remember is that most of those in power in the West still believe the old economic fallacy that war is good for the economy.
L: The old broken-window fallacy. Paraphrasing Arlo Guthrie, it’s hard to believe anyone could get away with making a mistake that dumb for that long. Continue reading
A New Reason Gold Stocks Will Soar
By Jeff Clark, Casey Research
There are a number of reasons why many of us believe gold stocks will shoot for the moon before this bull market is over – they’ve done so many times in the past… the gold price still has a long way to climb… and producers are generating record revenue and profits. But I think there’s another reason why gold stocks will soar – one that hasn’t dawned on many in the industry yet.
The premise for my theory first lies in how gold itself is viewed. Some investors see gold as strictly a commodity or the infamous “barbarous relic.” This group sees no compelling reason to buy the metal and so own little to none. Others view it as a play on a rising asset or because of supply and demand imbalances; they buy while those reasons are positive and sell when they turn negative. Still others view gold as a store of value, an alternative currency, or a hedge against inflation; they tend to buy and hold.
Ask yourself why you own gold. Is it because it’s just another asset that offers diversification? Are you buying because it’s going up and someone like Doug Casey thinks it will continue doing so? Or is it due to a genuine concern about the dilution of your currency, both now and in the future? Continue reading
When Will Gold Reach a New High?
By Jeff Clark, Casey Research
Some investors are frustrated and a few are worried that gold seems stuck in a rut. This stall in price has happened before, of course, but since 2001 it’s always eventually powered to a new high. Unless one thinks the gold bull market is over, it’s natural to wonder how long might we have to wait before seeing another new high.
Absent some sort of global shock that sparks another rush into gold (easily possible in today’s climate), I think the answer may lie in examining the size and length of past corrections and how long it took gold to reach new highs afterward.
It makes sense that big corrections would take longer to reach new highs than small ones, but I wanted to confirm that assumption with the data. I also wanted to determine if there were any patterns in past recoveries that would give us some clues that we can apply to today.
Gold set a record on September 5 at $1,895 an ounce (London PM Fix) and to date has fallen as low as $1,531 (December 29), a decline of 19.2%. In order to determine how long it might take to breach $1,895 again, I measured how long it took new highs to be mounted after big corrections in the past.
The following chart details three large corrections since 2001, and calculates how many weeks it took the gold price to a) breach the old high, and b) stay above that level. Continue reading
Was 2011 a Dud or a Springboard for Gold?
By Jeff Clark, Casey Research
2011 was remarkable in many ways for the precious metals markets. Gold soared to new highs in early September, hitting at an intraday record of $1,920/ounce on the fifth. Silver screamed to within a hair of $50 on April 28. Corrections ensued, and the metals ended the year on a disappointing note for silver and an underwhelming note for gold. Equities for the sector were down, to way down for junior ventures, logging their worst annual return since 2008.
Here’s a table of 2011 returns from most major asset classes: Continue reading
Why Has Gold Been Down?
By Jeff Clark, Casey Research
After all, in spite of some short-term fixes, there remains no real resolution to the sovereign debt issues in many European countries. We’re certainly not spending less money in the US, and now we’re bailing out Europe via currency swaps with the European Central Bank. Shouldn’t gold be rising?
Yes, but nothing happens in a vacuum. There are some simple explanations as to why gold remains in a funk. Continue reading
Are You Tempted to Sell, or Eager to Buy?
By Jeff Clark, Casey Research
It wasn’t a fun week for gold. By the close on Friday, the metal was down 6.7% (based on London PM fix prices), the biggest weekly decline since September. It got downright irritating when the mainstream media seemingly rejoiced at gold’s decline. Economist Nouriel Roubini poked fun at gold bugs in a Tweet. Über investor Dennis Gartman said he sold his holdings. CNBC ran an article proclaiming gold was no longer a safe-haven asset (talk about an overreaction).
While the worry may have been real, let’s focus on facts. Have the reasons for gold’s bull market changed in any material way such that we should consider exiting? Instead of me providing an answer, ask yourself some basic questions: Is the current support for the US dollar an honest indication of its health? Are the sovereign debt problems in Europe solved? How will the US repay its $15 trillion debt load without some level of currency dilution? Is there likely to be more money printing in the future, or less? Are real interest rates positive yet? Has gold really lost its safe haven status as a result of one bad week?
And one more: What is the mainstream media’s record on forecasting precious metals prices? Continue reading
What Gold Supply Crunch?
By Louis James, Casey Research
We have reported on changes in global gold demand, from booming investment demand in Asia to European and US debt concerns that have re-solidified gold’s long tenure as the ultimate safe-haven asset for turbulent times. In fact, with investment demand from private and institutional buyers continuing to grow and central banks increasing their gold reserves, total demand reached a record US$57.7 billion in the third quarter of 2011. Quite astounding.
But what’s happening on the supply side of the equation?
The most important source of gold supply is mine production – which is responsible for about two-thirds of the total – followed by recycled gold. While recycled gold is the reason supply is inelastic, new production has more predictive power since it can reflect shifts in industry conditions and investor sentiment.
Starting with a bird’s-eye view, take a look at global gold production since 1900. Continue reading
The ABCs of Re-hypothecation in Gold and Securities Markets: What You Need to Know
By Kevin Brekke, Casey Research
A new polysyllabic term has entered the Wall Street lexicon and is sweeping through the investing world like a brush fire through a dry canyon: “hypothecation.” With its connection to the MF Global bankruptcy and aftermath, it engenders the kind of fear a homeowner might feel while monitoring the approaching flames.
The rise of hypothecation as the lead suspect in the MF Global tragedy has caused a fair bit of confusion about what, exactly, it is – and is not. Proving the idiom that nature abhors a vacuum, the blogosphere has weighed in with all manner of explanations, many of which have been less than accurate.
In an attempt to help our readers get to the heart of the matter, we will briefly review hypothecation – what it is and how it is used – and do so in plain English.
There is considerable ground to cover here, so we will get right into it, starting by defining the term, then discussing the role hypothecation played in the demise of MF Global before turning our attention to the question in the minds of many gold investors – was MF Global re-hypothecating gold bullion? Finally, we’ll have some closing thoughts on the potential implications for us as individual and institutional investors going forward. Continue reading
Gold Stocks: Still a Bargain
By Jeff Clark, Casey Research
We’ve been saying since September that gold producers are undervalued, and here are some data that show just how extreme the undervaluation is.
The following chart measures the stock prices of major and intermediate gold producers against their Net Asset Value, based on the daily price of gold. In the simplest terms, a company should be worth more as the product it sells rises in price faster than the cost of those sales. In this case, gold has doubled in price over the past three years while costs have not kept up, dramatically increasing the intrinsic value of a reasonably well-run gold producer. Yet look what the stocks have done when measured against this higher value. Continue reading
Pullbacks in Perspective
By Jeff Clark, Casey Research
If you’re bullish about the long term for gold and silver, it’s mouthwatering to watch them undergo a major correction after taking earlier profits that added to your deployable cash. For a little historical perspective on pullbacks, consider the following charts. Continue reading
