Revolt in Vancouver

July 29, 2013

  • Revolt in Vancouver: Attendees stage final-day rebellion against our Symposium’s “last hurrah”
  • 80% of junior miners gone in the next year? Brent Cook on what it will take to survive
  • Triple your money in 10 years? One expert shows you how to get from here to there with limited risk
  • U.S. sitting on decades of natural gas supply: An easy way to play the gas glut for maximum gains
  • Companies cost-cutting their way to higher share prices… highlights from our resource round table… is Molson’s different stateside?… and more!

  All that was missing were the torches and pitchforks.

At the start of the final day of the Agora Financial Investment Symposium, the genial Rick Rule nearly launched an insurrection in the British Columbia Room at the Fairmont Vancouver.

“How many of you would like to see this conference continue in its four-day format?” he asked on Friday. A sea of hands rose across the room.

“How many of you would prefer two days?” The number of hands was something you could count on one hand.

  This binary choice oversimplified the matter… but the response is hard for us to blow off.

As we’ve mentioned all month, we went into the 2013 Symposium with the intention of it being our last. After 14 years, the last 10 in Vancouver, Addison Wiggin and the rest of our leadership team concluded we could better serve our readers by holding shorter events, focused on specific topics, in a wider variety of locations. That included a two-day resource-focused event in Vancouver next year.

Now that we’re settled back in Baltimore, we’re engaged in soul-searching. We’re also carefully reviewing every one of the evaluation forms submitted by this year’s attendees.

Wrote one reader who’s been to five previous events: “The news of probably terminating the Symposium in Vancouver set a ‘downer’ mood throughout.”

Said another who’s been to every Symposium we’ve held: “I like having a balanced conference that includes both speculative/resource investments and core holding (value, dividend, income, growth, etc.) investments. If Agora chooses to have only focused resource or income/core holding, etc., conferences, I will be looking for another place to get my education.”

A few dissenters were gasping for a breath of fresh air. From someone for whom this was Symposium No. 3: “Let the old standby speakers retire. They are the same old message and delivery. Boring. It’s like an ‘old boys’ club’ while the world is changing at a rapid rate. Forget Doug Casey. Bring in his top 10 youngsters instead.”

  So as Symposium stalwart Barry Ritholtz is wont to say at his blog, “What say ye?”

We want to hear from you, whether you’ve been to every Symposium or none at all: If you were with us last week, here’s one more chance to sound off. If you were with us in years past, but not recently, we want to hear why. If you’ve never been with us in Vancouver before, what would tip the scales and make you want to come to an event of ours?

Meanwhile, we have much else to pass along from the final day of the Symposium Friday… after we touch on the Monday morning numbers.

<  The major U.S. stock indexes are in the red as the week begins.

Blue chips are holding up best: The Dow is down about a third of a percent — a shade above 15,500 — while the Russell 2000 is down about three-quarters of a percent.

Gold is nearly steady at $1,330. Crude is firming at $104.90.

  “The U.S. stock market is becoming fully valued,” Sprott’s David Franklin suggested to the Vancouver crowd.

Operating earnings sit at record highs — not because of growth, but because of cost-cutting. With the market trading at 15 times forward earnings, “you have to believe either the next guy’s going to pay more, or that they’ll keep cutting their expense line.”

So Franklin is looking for bargains within Sprott’s resource universe. Uranium is the “biggest opportunity in resources today,” with prices at nine-year lows and supply from decommissioned Russian nukes coming offline at the end of this year. “That’s 20% of supply, gone.”

And don’t overlook silver, says Franklin: With India’s steep import duties on gold, rich Indians are going to Dubai for gold… while the Indian masses are grabbing silver. India’s silver imports totaled 1,000 metric tons in June. If that pace keeps up, India alone will snap up half the world’s annual production.

  “This is an unsustainable business without new economic deposits,” says geologist and newsletter editor Brent Cook, taking a hard-nosed look at the “junior” gold mining sector.

“Economic” is the key word. Gold stocks tended to move in tandem with the bullion up until early 2011. Then miners’ costs started getting in the way. The old metric of “cash costs” no longer tells the story. Now it’s “all-in sustaining cash costs” — including everything from overhead to taxes. Thus, margins are vanishing.

Deposits are harder to find, and regulations are getting tougher. A discovery that took four years to bring into production in 1995 can take up to 20 years today. Result: As many as 80% of those little juniors trading on the Toronto Venture Exchange could be history by this time next year.

So Brent has redoubled his efforts to find the survivors: “Economic deposits,” he says, “will be extremely valuable in the future.”

Institutional investors hire Brent at $1,200 a day for his guidance… but he’s always been generous with the Vancouver audience, sharing a half-dozen or more quality junior picks. The count this year: seven, including five that follow the lucrative “prospect generator” model that measurably reduces your risk. Just one of these companies could be the proverbial 10-bagger that pays for your Symposium recordings many, many times over.

Now’s the time to move, too: The price goes up after midnight tomorrow night. Grab the best available price while you can.

  “I think we’re seeing a separation now,” newsletter editor Matt Badiali added of the juniors. “Companies with quality assets are getting a bid.

“We may be seeing a bottom in the quality assets, but there’s a helluva storm coming for the rest of them.”

Mr. Badiali took part in a five-way resource round table along with the aforementioned Messrs. Cook and Franklin, along with our own Byron King, and moderated by Rick Rule.

Most of the juniors are ultimately looking to be bought out, so Byron says “you have to look at the juniors by how they fit into the ecosystem of the big guys.” That is, where are their properties in proximity to projects run by a major? And is that major in a position to attempt a buyout? Some are, some aren’t.

The panel also hit on the sectors each expert sees as the best bargain right now… and they rattled off 16 names worth your consideration.

The resource round table has been one of our most popular recurring features… and you can be the fly on the wall listening in with the Vancouver recordings. Audio files should be ready for delivery to your inbox by Friday, and high-def video access will be ready next month. Make sure you have access now.

  “John Law had power Ben Bernanke can only dream of,” said the Laissez Faire Club’s Doug French, embarking on a historical voyage leading to present-day insight.

Law was “a Keynesian before Keynes was cool” — or even alive. A notorious gambler and womanizer, Law had befriended France’s Duke of Orleans… and by the late 1710s found himself running both France’s central bank and treasury.

Law’s infamous Mississippi Company scheme was, said Doug, an early instance of “quantitative easing” — creating money from nothing to buy government debt. It ended in tears — prices soaring, the small middle class wiped out. Law himself was bankrupted and began traveling across Europe, bumming off friends and gambling just to stay afloat.

Meanwhile, the modern-day Fed is, by Bernanke’s own admission, “learning by doing.” It hasn’t led to hyperinflation, Doug told the Vancouver crowd… but it’s driven assets like farmland, art and junk bonds to insane levels. The middle-class wipeout is taking place in slow motion.

If only Bernanke could meet Law’s ultimate fate…

  “The only investing strategy you’ll ever need,” was the big promise of Marc Lichtenfeld, newsletter editor and author of Get Rich With Dividends.

Marc aims high — a 12% average annual return with dividends reinvested across a 10-year span. That’s enough to nearly triple your money in a decade.

You won’t find those kinds of returns in Treasuries nowadays… but you can find them in many boring blue chips, especially the “Dividend Aristocrats” (firms that have raised their payout every year for at least 25 years) and “Dividend Achievers” (every year for the last 10).

Makes sense when you think about it, Marc says: Management at these firms have to keep up the momentum. If they suddenly left the dividend unchanged after 40 years of increases, there’d be a shareholder revolt and exodus.

Marc named two of his current favorites for that triple-your-money-in-a-decade potential. He’s a dynamic speaker who makes a compelling case: You can see and hear the whole thing with access to the recordings.

  “North America’s built an economic moat with cheap energy,” said the aforementioned Matt Badiali. A moat, as you likely know, is Warren Buffett’s analogy for a barrier that’s hard for competitors to overcome.

For his main talk, Badiali zeroed in on natural gas. U.S. production has zoomed up 26% in the last five years, while the price has fallen 78% in the last eight years. Factories and power plants running on natural gas are enjoying their lowest prices since the 1990s.

Nor, he suggests, will this bounty dry up anytime soon. According to a report from BP, global natural gas shale reserves total 7,060 trillion cubic feet — of which 24% is located in the United States. “That’s 24-65 years of consumption,” Badiali says. Nor does it account for all the conventional natgas out there. “In other words, we have plenty of natural gas.” And prices are likely to stay suppressed.

How to play it? “If you are long nitrogen,” he says, “you’re short natural gas.” Natgas is by far the biggest component of nitrogen fertilizers. And U.S. nitrogen producers have the lowest costs in the world. The most attractive players routinely rack up 50% or better profit margins.

Matt identified three of his favorite players in the sector: This lucrative information can be yours with your complete package of the Vancouver recordings.

  And one more thing from Vancouver…

Your editor’s to-do list last week included a request from his better half — to obtain two bottles of Molson Canadian to share back home. Yes, it’s sold in the States, but to hear some people tell it… it’s just not the same.

The seed was planted in my wife’s mind by novelist Steve Hamilton, whose Alex McKnight mysteries are set in the eastern Upper Peninsula of Michigan. McKnight’s favorite bartender obtains a supply of Molson’s, just for him, from across the St. Marys River in Ontario.

Alas, your editor packs light and unthinkingly stashed the bottles in a carry-on. No go. Shoulda known better. With a short layover, checking the bag was too risky. Got a small case of a British Columbian beer at the duty-free store instead, which was still gratefully received back home.

Symposium roving reporter Jim Amrhein was on the flight home with yours truly. “Is it really true?” he skeptically inquired of the Molson-is-different-in-the-States story.

Seems the question has raged for decades. As far back as 1986, James Robertson, author of the Great American Beer Book, convened an expert panel with Molson samples obtained in Montreal and New Jersey. “The panelists agreed,” according to an account in the Chicago Reader’s Straight Dope column, “the fresh U.S. and Canadian versions were virtually identical, the one difference being that the Canadian stuff, which came in cans, was more carbonated than the bottled U.S. variety.”

Is the formula different below the border?

More recently people on Yahoo Answers claim the alcohol content in Canada is slightly higher. Not a particularly authoritative source, though.

And thanks to the air-travel busybodies, your editor is unable to compare side by side…


Dave Gonigam
The 5 Min. Forecast

P.S. Did you know there’s a squid shortage in Japan? And how it connects with what’s happening in the gold market?

As always, Jim Amrhein’s roving reporter coverage of the Symposium is a perfect supplement to what you read in The 5 — or maybe it’s the other way around. In any event, Jim covers additional ground we could not for the final day of Vancouver, so give it a look.


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