Optimism and Opportunity Abound!

by Addison Wiggin & Ian Mathias

  • Could the BP spill be… good? Marcio Mello, Byron King offer rare perspective on the Gulf crisis

  • More optimism hits the Investment Symposium… opportunities from Patrick Cox and Frank Holmes

  • Euros conduct bank “stress tests”… your guide to analyzing the results

  • Plus, the age-old question: Gold or gold miners?

  “This disaster in the Gulf will bring so much joy, such great future for the U.S.!” Marcio Mello begins today’s 5. If you are unfamiliar, Mello is the geological legend responsible for Brazil’s massive deep-water oil discoveries in the last few years. He shared his thoughts at our Investment Symposium yesterday…

But before you read them, have you ever seen Italian television? A Mexican talk show? If you have, then you can picture Mello bounce around the room with wild, infectious, almost cartoonish enthusiasm. This was by far the most charged presentation this week… a great show:

“There are no disasters. There is no bad news — only opportunity. BP is not bad news. Accidents happen, but oil drilling is the safest operation in the world. This is the first accident there EVER! The global energy industry drills 1,500 offshore wells a year with no accident.

“Thousands of barrels of spillage a day is a great sign! Look at how much oil could have been produced if they didn’t have this accident. There is so much oil deep in your Gulf of Mexico that America is so blessed. There is so much, one day it will be hard to believe in Peak Oil. It is great news.”

It was almost impossible to not get caught up in Marcio’s bullishness… hear it for yourself here.

  The one real lesson to learn from BP, says Mello, “is people. I put all my money in the right people. People… that’s it. Countries, government, assets, NO… put your money in good people and you will never lose. Who?”

Crowd responds: “People.”

“I can use data, I can use history, I can use good sense. But when I doubt, I always put my money in the one thing that never fails me. Say it with me:”

An excited crowd responds: “People!”

Mello: “No… s**t… oil!”

“It was a failure of imagination,” Byron King adds, “that brought about the explosion and sinking of the Deepwater Horizon and the subsequent well blowout in the Gulf of Mexico.

“Before the DWH exploded and sank, the insurance industry rated the risk of such an event as zero. Zero? As in no large deep-water drilling vessel would ever sink.

“In a sense, looking back over the decades, it was almost easy to imagine big, expensive, well-built drilling rigs would never blow up and sink. It sure fooled the normally flinty insurance industry.

“Also, considering the track record of operations, it was easy to believe that deep-water wells would never blow out. It apparently fooled the engineering and regulatory community. Surely, no one was ready to deal with the current GOM blowout. As I've noted many times, in the past couple of months, we've witnessed decades of R&D all compressed into an emergency-level time frame.”

  Perhaps Marcio and Byron’s “on the brighter side” outlook infected the Symposium yesterday. After two days of rather dark commentary on the Western world, Thursday was ripe with opportunity and optimism:

  “This is the greatest period of innovation and investor opportunity in history,” our breakthrough technology analyst Patrick Cox boldly forecast. “The market is so depressed and we have so much pent-up, bottled-up technologies waiting to come to the forefront.

“Look back at the Great Depression — Motorola, HP, Xerox and Texas Instruments began during the worst of that era. Neoprene, TV, radio, home refrigerators and nylon all boomed out of the depths of the Depression

“We have sets of technology today just as transformational and obvious as those.

“Historic scientific breakthroughs are happening this year, and they will be in textbooks in 100 years. I’m talking about reversal of developmental aging in normal human cells. The ability to program the body at the cellular level. Stem cell technologies. RNA interference.

“If you have any ability to invest in transformation technologies, I urge you to do so. These techs are going to change the world in ways no one is prepared for.”

  “What is so profound in this world,” Frank Holmes beamed, “is where countries are so poor but there is so much hope… that is all upside, for an investor and for the people there.” Talk about optimism: Frank began his presentation with pulsating house music, insisting the crowd stand up and dance for a second, “like they do in India!” Suffice to say, Frank sees investment potential in emerging markets.

“Thailand, Indonesia and Columbia have been the best performing markets so far this year, and no one is talking about them.


“12 years ago, Indonesia was a basket case. Today, it is a top economy. Mainland China is now outsourcing to Indonesia. This country has made its mistakes, and now it is poised to prosper.” Indeed, making consumer products for the world’s fastest growing economy isn’t a bad gig:

For the actionable advice from Frank… and Patrick Cox… and Byron King… and Marcio Mello… and about 20 other Investment Symposium speakers, you have to check out the MP3/CD set. For what you get, it’s a screamin’ deal. Here’s a closer look at their presentations, and some details on the audio set.

  European banks have the world’s attention today. The results of a much-hyped “stress test” will be published, which supposedly scrutinized 91 separate European lenders. Just like they were here in the U.S., euro traders are cynical with the whole charade… either the results will be better than expected and the test will be shrugged off as a government PR campaign or they’ll be bad, which will simply confirm the suspicions we’ve all felt already.

“You don’t want to have anything to do with the eurozone until the smoke clears on this,” Rob Parenteau urges. “We’re going to have stress test results, but we don’t know what the test was. It sounds to me like people have fingers on the scales… phony baloney. How can this create confidence among investors?

“No matter what, these banks literally cannot raise capital. All of this is going to come to surface in the next few months… it’s all going to get me a lot cheaper.”

  Nonetheless, stocks waited with bated breath today for the stress test results. With no major economic data hitting the tape, there’s wasn’t much else to fret about anyway. The S&P 500 opened a little bit higher on good earnings from Ford, but the market was clearly waiting for word from Europe. We’ll let you know how it all panned out on Monday.

  Currency traders seem to know what’s coming. The euro was down a full cent versus the dollar early this morning. As we write, it’s at $1.28. 

  Gold has kept to a tight range all week. The spot price is just below $1,200 today, roughly where it’s been for most of July.

  “Thanks for the great information,” a reader writes from the heartland of Iowa. “The Symposium speakers seem to like farmland. I have been a farm real estate broker since 1980. Currently, the most productive farmland in this part of southeast Iowa and west-central Illinois is back to near the peak of May 2008. The dip was short-lived in late 2008 and early 2009. However, now there are very few properties for sale. Very few properties selling, either (I am also a certified real estate appraiser). Highly productive corn/soybean land has recovered, but not much for sale.”

The 5: Indeed, farmland and agricultural investments are a popular theme at this year’s conference. More than one speaker has given a nod to Potash (POT).

  "Doug Casey makes a very intelligent and thorough set of recommendations,” one reader writes of Doug’s suggestion to — in essence — abolish the U.S. government. “They cannot be implemented soon enough.”

  “Doug Casey's third recommendation,” another recalls, “was to withdraw the military from other countries and to reduce it by 95%. The second part of the suggestion would be disastrous. With current unemployment rates for young persons likely in excess of 20%, the last thing the U.S. needs is more unemployed, disillusioned, disenfranchised youth on home territory.”


  “I was wondering if I could ask a question that might find its way to Doug Casey or some other gold expert,” our last reader writes. “Many, if not most, analysts that recommend miners talk about leverage to gold. But what about the prospect of taxes? Recently, we saw in Nevada a proposal for windfall profits taxes against miners. As the government seeks new ways to fund their spending addiction, I suspect we'll see more of this type of thing, and if commodities, especially gold, blast off, then wouldn't you expect to see more of this kind of thing? Couldn't that adversely affect the stock prices of miners?

“I recently read somewhere about a period during which gold took off, but the miners actually saw stock price declines, so according to this writer, miners don't always leverage the price of gold. And if they get hit with taxes, how many investors will there be to bid up the prices of miner stocks? As for the juniors, if credit becomes increasingly hard to come by, won't the juniors be among the hardest hit, since they won't have had a track record and so will be seen as higher risk?

“Finally, miners will face the same kinds of costs other companies will. So wouldn't bullion or physical metal be the best and safest place to have one's money?”

The 5: Both Doug and Rick Rule have said more than once that the mining business, especially junior/exploratory mining, is a terrible prospect. Most of them never make any money, and the few that do are like “a burning match,” Doug said Wednesday.

So if you’re looking for “safe,” we’re comfortable speaking for Doug and Rick by saying don’t buy miners. Except for very large, blue chip miners, they are notoriously volatile and hard to value… which is what makes them such fantastic speculations. For Doug and Rick’s favorites, see today’s P.S.

Thanks for following along this week during our annual Investment Symposium. Just as we were about to publish today, Marc Faber and Bill Bonner were preparing to take the stage and issue their closing remarks. We’ll give you the full wrap-up back in Baltimore on Monday.


Ian Mathias

The 5 Min. Forecast

P.S. You are running out of time to get the Symposium MP3/CD set on the cheap. After this weekend, the price will jump significantly. So if you want high-quality recordings of each and every presentation — along with all our speaker’s favorite stock picks and investment themes — pre-order today and save a few bucks.

P.P.S. Our Roving Reporter Aaron Gentzler has been doing a bang-up job this week capturing the essence of the Investment Symposium. You can catch his latest report here… it's a great summary of each presentation and the vibe here in B.C.


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