Dave Gonigam – July 30, 2012
- Ben Bernanke’s “spectacular job”… candid confessions from resource pros… Bill Bonner’s suspicion of the number zero… and other surprises from the final day at Vancouver
- The best time to buy into emerging markets… and two “sunrise economies” worth a look
- Three X factors that could move markets this week… and the possibility of a 12.9% gain by Friday
- Brokerage bankruptcy begets — get this — a copyright lawsuit… readers lash out at Doug Casey… an art gallery faux pas… and more!
“I think Ben Bernanke’s done a spectacular job.”
Not the sort of remark you’re accustomed to hearing at the Agora Financial Investment Symposium… but the final day’s sessions on Friday delivered several surprises.
In fairness, Cranberry Capital’s Paul van Eeden prefaced the above remark by saying, “If you look at the job a central banker has to do…” That is, Bernanke has performed superbly within the confines of a central banker’s mandate: Avoid catastrophic deflation at all costs.
In 2008-09, so many debts on the balance sheets of the banks were going to “money heaven” that $1.4 trillion of “QE1” had the effect of merely keeping monetary inflation within historical norms. After $600 billion of QE2 in 2010-11, said Mr. van Eeden, “QE3 is not necessary from a monetary perspective.”
This is highly relevant to the price of gold: “The gold price anticipates future events,” he said. It anticipated QE1 and 2. “I think gold has peaked, I think the fear has subsided. I don’t believe the U.S. is facing any serious inflationary threat. Bernanke has shown himself very capable of preventing monetary deflation.
“I think it would be perfectly rational for the gold price to decline over the next five years.”
Not so for junior gold stocks, he says: They’re already beaten down so badly that “if you have a five-15-year time horizon, you can spend the next two-five years buying some of the highest-quality mineral exploration stocks in the world at very depressed prices.”
Gold begins a new week where it began last week, around $1,619. Silver, however, has quietly hoisted itself above $28.
“I made the substitution mistake,” conceded resource guru Rick Rule, in another mild surprise during Friday’s session.
Rick posed the question to the “resource round table”: What mistake did you make during the last bull cycle in resources that you’re determined not to repeat the next time?
Newsletter editor Brent Cook — who focuses on junior gold explorers — said he gave in to temptation when he sold big gainers, substituting other juniors.
“In retrospect,” Rick chimed in, “the best substitution was cash.”
Other remarks from the resource round table…
- Newsletter editor Matt Badiali: “I am significantly concerned about the price of oil. I think it’s going to crash. I’ve been shifting my focus away from my comfort zone.” In his case, that means looking into a uranium play
- Oil executive Marcio Mello disagrees, pointing to falling production in Mexico and Nigeria
- Brent Cook on the possibility of a 2008 rerun: “I’m personally sitting on half cash”
- Byron King on the same possibility: “I’m not focused on investing for the apocalypse. A lot of people are going to go down with that ship, and they won’t let it go down. What I see out there, I meet these wonderful people who are doing great things. They’re finding all this good stuff.”
Still Byron’s on guard for black swans, especially what he calls a “fracking Fukushima” — a massive disaster that, say, destroys an entire town’s water supply. No guarantees, but all the same, it can’t be ruled out. “Nobody expected the Deepwater Horizon spill, either.”
The key to investing in emerging markets: Buy after a financial crisis, said the always-popular Karim Rahemtulla.
Karim says you’re best off bypassing the BRIC nations and looking for the next Vietnam. When he visited, the stock market was down 70%, in the midst of a financial crisis, with rampant inflation. “But what was happening on the ground was not reflective of that. People were walking around, doing commerce at 7:00 a.m. Maybe 10% of Vietnamese are invested in the stock market. It means nothing to the person on the street.”
Vietnam ended up the top-performing emerging market in 2011. “It is still cheap,” he says.
Karim identified one absolute no-no to investing in emerging markets… and he suggested a strict time horizon that might surprise you. He reveals all on our exclusive collection of recordings from last week’s conference.
Go for the “sunrise economies,” advises Leopard Capital chief Doug Clayton.
Vietnam is too far along for him. Clayton’s firm — backed by heavyweights, including Marc Faber — aims to be the first fund that enters a country. He’s active in post-Khmer Rouge Cambodia and post-earthquake Haiti.
Now he’s eyeing two other countries. Burma — or Myanmar, if you prefer — is “like Thailand 40 years ago, China 30 years ago and Vietnam 10 years ago.”
His other favorite is the one that’s also gotten Chris Mayer’s attention — Mongolia. “Mongolia could be the Saudi Arabia of Asia,” says Marc Faber.
“Every number used by economists is a lie,” said Bill Bonner, delivering the valedictory talk.
“I’ve turned sour on numbers, I no longer trust them.” He finds zero particularly suspect, for reasons that brought down the house.
But the raucous laughter masked many uncomfortable truths that Bill touched on during a wide-ranging and fast-moving 35 minutes. “Most of the world is slowing down. For the last 50 years, we’ve seen declining growth rates. Birth rates are at a 25-year low. Energy use and GDP growth are both going down.”
“What if,” he posited, “something’s going on that’s not subject to policy?” That is, something that can’t be moved by printing more money and introducing more credit.
Contra Mae West, “too much of a good thing is a disaster,” Bill suggests — whether it’s government, or credit creation or numbers themselves.
The endgame Bill lays out is something you’ll want to give serious thought to. It was a fitting conclusion to a week of thought-provoking and highly profitable guidance from an all-star lineup of expert speakers.
Whether it’s resources, or biotech, or emerging markets or plays that react to macroeconomic factors… there’s much for you to chew on. And this year, we offer an added advantage we haven’t been able to before: full high-definition video coverage. Now you can see all the charts, all the names and ticker symbols and all the laugh-out-loud pictures that accompanied everyone’s talks.
We’ve had a phenomenal response to this year’s video offerings; of course, if audio-only is your bag, that’s still available too. But no matter your preference, the window is about to close on the best-available price. After midnight tomorrow, it goes up. We’ll send you a reminder e-mail tomorrow morning, but as long as it’s fresh in your mind, now’s the time to move.
Major U.S. stock indexes are flat as a new week begins. The Dow is at 13,075.
“The markets have surged recently due to better expectations on managing the eurozone,” says Abe Cofnas, introducing his “mock trade” for the coming week. “We have the Federal Reserve meetings Tuesday and Wednesday, the European Central Bank meeting Thursday and U.S. nonfarm payrolls on Friday.”
With that in mind, Abe anticipates September Dow futures to end the week at 12,775 or higher.
On the binary options market Abe follows, the cost of the trade is $88.50. If the trade pays off, it’s good for $100… or a 12.9% gain in five days.
It’s not only ripped-off farmers hoping in vain for recompense from Russell Wasendorf Sr., the head of the bankrupt commodities trading firm PFGBest.
So are the writers of one of the ’70s’ most annoying songs.
Here at The 5, the PFGBest saga is the gift that keeps on giving. Last week, we brought you the story of the silver SpongeBob coins Wasendorf’s firm was hawking… and which are now in FBI custody. Now comes word that The Knack is going after Wasendorf for using a remix of “My Sharona” to advertise his restaurant, called MyVerona.
“Among other things,” reads a Reuters account, “the song was a soundtrack to a video montage shot in the restaurant, including clips of a plate of wood-grilled beef tenderloin, hand-cut pasta and a glimpse of the restaurant’s collection of more than 240 varieties of wine.”
(Warning: Click on the video only if you can handle the song going through your head the rest of the day. The 5 bears no responsibility for any resulting fits of rage…)
The band seeks $150,000 in damages. Good luck collecting, guys: At this point, Wasendorf is still represented by a public defender. Get in line…
“Were Doug Casey’s remarks regarding the elderly in the preindustrial age made in jest?” writes the first of several readers after Friday’s episode.
“In any case, they were disgusting. The point is not that we should eliminate the feeble, but that families should take care of their own and not the government.”
“Such a foolish comment makes eugenics, Hitler and Planned Parenthood sound like solutions for our problems. Human beings are resources, not costs. More importantly, they are created in God’s image.”
“Doug Casey just revealed to us how much he doesn’t know,” says another. “Does he have diaries or other artifacts from such preindustrial cultures as evidence? Perhaps a book by a leading archeologist?”
“Because everything I’ve read about preindustrial cultures is that almost all of them respected their elderly and gave them subsistence even when they were too weak to hunt or gather. Yet he makes such a statement — and you repeat it — as if it is entirely uncontroversial. Such hubris is absolutely breathtaking!”
“I suggest you take a different path to wisdom. The only culture I have associated this ‘ice floe’ story with is the Eskimos. They do not have a culture I wish to emulate. On the other hand, all Western cultures, including our own, have a long history of compassion for the elderly, and our family structures have been a very important means of creating and continuing that culture. That is the culture I wish to emulate.”
“As for Mr. Casey, who seems eager to abandon our shared culture in favor of ice floes and his ‘all taxes are theft’ philosophy, he’s always free to move to an Eskimo village.”
“Doug’s comment is becoming a kind of mantra in the Orwellian world we live in today,” says a third, “but it is an appalling point of view: cold, cruel, merciless and immoral.”
“The notion the only value of a living being is their continued ability to create revenue is disgusting… and fundamentally untrue in its implications. As a young mother, when I could have coldly and mercilessly served myself, I instead served and sacrificed everything without question for the benefit of my children. I love them and am honored to be loved in return.”
“In addition to providing for them, I also provided for my future as much as I was allowed to, according to the economic reality of the time. My future has been stolen, ripped away by criminals masquerading as business people and politicians. The notion of throwing me out into the night when I became elderly is hideous and wrong; it’s wrongheaded as well. Unless or until we actually become robots, this is unacceptable, inhuman and inhumane.”
“Rather, we need to look at the REAL problems of economic criminality: the international central banking cabal, fiat currencies and fractional reserve banking… combined with FUNDING illegal and bankrupting WARS of mass murder and theft, which is the single greatest cause of the impoverishment of our nation, and which is controlled by war profiteers. Let’s have them step out onto the ice floes, shall we? Thank you for your time.”
The 5: We wouldn’t dare presume to speak for Mr. Casey, but we doubt he’d take issue with anything in your laundry list of “real problems.” (He did say, “Bankers are complicit, but government is to blame.”)
We suggest if you want to hear his remarks in full context, you get the full collection of audio and/or video recordings from our Vancouver sessions. In addition to Casey’s provocative comments, there’s a host of actionable investment advice. Plus, the always popular written summary of the afternoon workshops, which get down to the nitty-gritty with dozens of names and ticker symbols.
Just a reminder, the price of these recordings rises by as much as 50% as of midnight tomorrow. Act now for the best available price.
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “The whole room turned to look first at the painting,” writes Jim Amrhein, “then directly at me as though I had a dunce cap on.”
As always, Jim captures a colorful side to the week’s events in Vancouver; for an amusing account of the Thursday night gallery tour and the Friday sessions, give this a look.