Professional Documents
Culture Documents
SURVIVING
FEDCOIN
How to Survive (and Profit) From
Americas Coming Currency Change
SURVIVING FEDCOIN
TABLE OF CONTENTS
Chapter 1 | Introduction............................................................................. 4
Chapter 2 | The Danger of Digital Cash..................................................... 16
Chapter 3 | Surviving Crisis: A 4-Part Solution.......................................... 22
Chapter 17 | Conclusion.........................................................................105
Appendix I.............................................................................................110
Appendix II.............................................................................................118
CHAPTER 1 | INTRODUCTION
CHAPTER 1
Introduction
So many things in life are inevitable.
The world, as Im sure youve noticed, has taken a bizarre turn for the
worse.
In short, this means you have to pay the bank to hold your money.
You see, after years of money printing (or what the economists call
quantitative easing) central banks around the world are running out
of options.
They believe that, in order to keep the economy humming along, they
must interfere.
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CHAPTER 1 | INTRODUCTION
The more someone saves, the more capital he or she has to put to
productive usesto invest in a business, to support research, and so
on.
But, sadly, this is now the world we live in. The new reality.
A lot worse.
Introducing Fedcoin
So what do you do when youve printed trillions of dollars set rates
to zero and the economy is still in rough shape?
Well, if youre a central banker, theres only one answer that makes
sense.
But before we get into the specifics of what exactly Fedcoin is, lets set
the stage a bit more
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CHAPTER 1 | INTRODUCTION
You see, theres one major hurdle that goes along with imposing
negative interest rates.
In Japan, for example, when the central bank set the rates to -0.1%,
safes sold out in certain stores in Tokyo.
I am a bit worried about what will happen next, one Japanese man
told The Wall Street Journal.
In fact, Stanley Fischer, the Vice Chair of the Federal Reserve, said
in early 2016 that negative rates (in other parts of the world) were
working more than I expected. And Fed Chair Janet Yellen said the
Federal Reserve was looking at them.
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CHAPTER 1 | INTRODUCTION
The idea behind Bitcoin was to have a new type of money that was
safe, had a limited supply (to prevent massive inflation), and was
outside government control.
From a price of less than $0.01, it rose to over $1,000 per Bitcoin
back in 2013 and now trades for around $500$600.
Simply this:
That means the Fed could issue its own type of Bitcoinhence the
name Fedcoin.
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CHAPTER 1 | INTRODUCTION
And David Andolfatto, vice president at the St. Louis Fed, actually
proposed Fedcoin (mentioning that exact name) in 2015. Hes
spoken publicly about this multiple times, and says Fedcoin could give
the central bank an added (policy) tool.
How can you have a bank run if you cant withdraw physical money?
You cant!
Thats why we believe its an absolute lock well have some kind of
Fedcoin-like currency in America very soon
Consider:
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CHAPTER 1 | INTRODUCTION
Some of the features we could see with a new monetary system like
Fedcoin are incredibly Orwellian in nature
Perfectly Trackable
Imagine a world where everything you buy (or cant buy) is controlled
by a single card
9
CHAPTER 1 | INTRODUCTION
Civil forfeitures: Today, even if you are not even charged with
any wrongdoing, law enforcement officials can legally seize
your assets (in 2014 alone, federal agents seized more than $5
billionan amount greater than what was lost in every single
burglary in America that year).
Theres already a Federal law that says food stamp recipients cant use
their benefits to buy liquor, cigarettes, or any non-food items.
Now, were not in favor of the welfare program. But the point is, with
Fedcoin you could control everything very easily since, unlike cash, its
a programmable currency. (Fedcoin would likely be administered as
a type of debit card or perhaps as an app on your smartphone but
behind it all it would run like a big computer program.)
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CHAPTER 1 | INTRODUCTION
What if, all of a sudden, the president decides a certain type of gun
shouldnt be purchased by certain people or maybe all guns?
Well, again, once you get rid of cash and use a perfectly trackable
digital currency, it becomes very easy.
And they also control when you can buy thingsjust think of the
legal drinking age.
To help make sure you are able to protect everything youve worked
hard for to be able to purchase the things you want in privacy and
also to come out ahead.
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CHAPTER 1 | INTRODUCTION
Then, in the rest of the book, well go over the 4-step plan Doug
Casey originally created* to prepare for and prosper from crisis.
Chapters 4 and 5 cover the liquidation part of the plan, including the
main sectors most at risk from an investment standpoint right now.
Chapters 6 and 7, the create chapters, talk about how to set yourself
up as an empire builder with a set of crash-proof companies.
Most fiat currencies like the U.S. dollar last only 3040 years. We
are now at 45 years
*For more reading on this 4-part plan, pick up a copy of Doug Caseys bestselling book, Strategic Investing.
Even though this book was published several years ago, the principles in it are timeless.
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CHAPTER 1 | INTRODUCTION
Interest rates are already at zero and the Fed has no more tools left
at their disposal
We also know the central bank has already been in talks with key
leaders in the blockchain community. Janet Yellen held a private
meeting in Washington, D.C. back in June 2016 with three key
blockchain executives, as well as with members of the World Bank
and the International Monetary Fund.
The best time to buy insurance is before you need it. We encourage you
to prepare yourself today while theres still time left to do something
about it.
What is Blockchain?
Blockchain is not a currency, and its not money. Its a technology
thats going to change the way people buy and sell things.
Its more secure, cheaper, and far more reliable than any system of
payment that exists todayincluding cash, checks, and credit cards.
But the store clerks ledger is only for him to see. Youll need a
warrant to see it, even if youre a paying customer. If you do get a
warrant, he might change it before you see it.
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CHAPTER 1 | INTRODUCTION
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CHAPTER 1 | INTRODUCTION
15
CHAPTER 2 | THE DANGER OF DIGITAL CASH
CHAPTER 2
We bank online, shop on our computers, and pay for lunch with credit
and debit cards. Even the stock exchanges are now 100% electronic.
To understand exactly how fragile the financial system is, consider the
damage a major incident, like a successful cyberattack, could cause.
Just imagine
What if all the accounts at a major bank like Wells Fargo were suddenly
erased? What if businesses couldnt process digital payments? What if
your bank told you all records of your life savings had disappeared?
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CHAPTER 2 | THE DANGER OF DIGITAL CASH
If your life savings were suddenly gone, how would you buy food,
water, medicine, and gasoline?
These days, its certainly not a claim to hard assets like gold or silver.
Many local banks dont even have that much cash on the premises!
Just try asking your bank for $25,000 in cash. The teller will say, We
cant give you that much money. And hes obligated to file a report on
any amount over $10,000.
All the money youve earned the hard work, the sweat, the
sacrifice the nest egg youve built to provide for your family
Gone.
In an instant.
Just consider
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CHAPTER 2 | THE DANGER OF DIGITAL CASH
The victims included big names like J.P. Morgan, E-Trade, and
Scottrade. Americans trust these companies to safeguard hundreds
of billions of dollars in assets. Yet hackers were able to breach their
security and steal personal data on over 100 million customers. The
hackers also manipulated stock prices.
The hackers have used the stolen data to set up false bank accounts,
credit card accounts, and gambling accounts at online casinos.
In fact, even the U.S. Federal Reserve is not immune from these hacks.
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CHAPTER 2 | THE DANGER OF DIGITAL CASH
Since that book came out, Doug has appeared on CNN, Time, NBC
News, Forbes, Regis Philbin, and Charlie Rose. Phil Donahue even
devoted an entire show to his work.
Its not a matter of will it happen. Its a matter of when it will happen.
And, like any crisis situation, it will be too late to do anything about it
after it hits.
The government and the banks dont want anyone to broadcast the
facts were sharing with you. They dont want you to question the
system, because the system is unstable. It rests largely on confidence.
And confidence can disappear overnight.
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CHAPTER 2 | THE DANGER OF DIGITAL CASH
If you and your fellow citizens dont have confidence in the safety of
money, all hell would break loose.
You see, our money isnt backed by gold like it was in the past. Our
monetary system is built on confidence and confidence alone.
If lots of people questioned the safety of the system and pulled their
money out, it could trigger a nationwide run on the banks, a stock
market collapse, and a currency crisis.
They want you to wear blinders. They dont want you asking
uncomfortable questions.
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CHAPTER 2 | THE DANGER OF DIGITAL CASH
Note: For information on some of the steps you can take to protect
your digital presence, please refer to the Appendix.
21
CHAPTER 3 | SURVIVING CRISIS: A 4-PART SOLUTION
CHAPTER 3
The alarm clock is plugged in but it looks like the power is out.
But last week, the Federal Reserve flipped the switch on its new
digital currency, Fedcoin.
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CHAPTER 3 | SURVIVING CRISIS: A 4-PART SOLUTION
The local government also could only accept Fedcoin now for all
payments.
Youve got access to email and a web connection with your phone, so
you can see theres an emerging crisis.
The situation described above hasnt happened yet. But others just like
it have.
But theres a way to protect yourself. To prepare for any crisis, Doug
has created a four-part formula. Its something he swears by. It has
helped him protect his wealth in times of chaos And its also helped
him make millions in times of financial crisis.
In the following sections, well walk you through each of these steps
in detail. You can read these in order or skip ahead to the chapter of
your choice. If youre looking for the most important things you can
do to protect yourself against a currency change like Fedcoin, make
sure you skip ahead to the Consolidate section.
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CHAPTER 3 | SURVIVING CRISIS:SURVIVING FEDCOIN
A 4-PART SOLUTION
24
CHAPTER 4 | RAISE CASH
CHAPTER 4
Raise Cash
As we saw in the last chapter, the transition from our current money
system to a digital currency like Fedcoin might not be a smooth one.
Major glitches trip up even the smallest companies when they merely
change software providers. A change to the payment system of the
entire U.S. economy would be several times more dangerous. Add to
that the most dangerous fact of all it would be administered by the
government.
Chances are very high a crisis would ensue. In fact, even if Fedcoin
doesnt happen for some time, chances are very high well see some
kind of crisis in the near term.
Doug, for example, believes we will soon be exiting the eye of the
hurricane we entered in 2007, and that well soon see its trailing edge.
Its going to be much more severe, different, and longer lasting than
what we saw in 2008 and 2009, says Doug.
In order to prepare for crisis, there are simple, concrete steps you can
take right now.
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CHAPTER 4 | RAISE CASH
Well, many people hold a significant part of their wealth in the stock
market. In a minute, well discuss the key sectors most at risk where
you might want to trim down. But, first, lets take a broader view on
liquidation.
You see, theres a good chance you have too much stuff at home.
Take an inventory of all your assets. Old clothes, furniture, tools, cars,
bikes, electronics, and even properties. Chances are you have hoarded
too many things over the years.
If youre like most people in the U.S., your garage looks like a storage
unit. Your basement is unlivable. And you have a storage unit which is
costing you money.
Start selling now. More than likely you have at least $1,000$5,000
worth of stuff sitting around unused.
Call your neighbor. Call your friends. Organize a yard sale. Put stuff
on Craigslist or eBay.
Whatever you cant sell, give to your favorite charity. Items given to
charity might qualify for tax deductions (see your accountant).
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CHAPTER 4 | RAISE CASH
Just liquidate now while there is a market for all of these things.
When the crisis hits, everything will be worth much less. Everyone
will be trying to sell their stuff to put food on the table.
People will be desperate for cash. And their standard of living will be
lower. This desperation will create huge opportunities.
Youll be able to buy many assets cheaper. And youll be ahead of the
game.
People have been living above and beyond their means. Its one big
reason the world is $60 trillion more in debt now than before the
global financial crisis.
Cut back now while you can. Because it will be too late when the
depression hits.
Youll feel 100% better after liquidating excess stuff and cutting
expenses. And youll be in a much better position to take advantage of
opportunities that the crisis will bring.
After you liquidate all the stuff you can, think about liquidating
some of the stocks you own. But which stocks should you sell? In
a moment, well tell you the four stock market sectors most likely
to lose huge amounts of investor money as times get tough. If you
own stocks in these sectors, youll want to plan on selling as soon as
possible.
Before we get to that, lets cover why the cash youll be generating
will be extremely importantand could help make you wealthyas a
crisis unfolds
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CHAPTER 4 | RAISE CASH
You see a huge red sign. Its sitting directly in front of the store where
you normally buy suits. It says, Today Only Save 90%.
The sales clerk tells you, with a noticeable degree of urgency, theres
one catch Cash only. The credit card machine does not work and
the store needs cash quickly.
If you walked into this situation, youd realize pretty quickly its a great
opportunity. These suits normally cost $1,000 each. But today, theyre
$100. For a fraction of the regular price, you could have enough suits
to last a decade.
Most people today walk around without any cash on hand. If they
encountered a situation like this theyd be a spectator watching the
lucky ones with cash scoop up the deals.
People dont feel like they need cash. Its risky a robber could steal
your wallet and your cash. Debit and credit cards offer some degree of
security. If stolen, one phone call cancels and replaces them.
But having cash gives you options. In a tight situation, cash is more
powerful than plastic.
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CHAPTER 4 | RAISE CASH
This type of market panic comes along about once a decade. Its
usually caused, at least partially, by government manipulation.
Take low interest rates, for example. During the last economic
downturn, the Fed lowered interest rates to effectively 0%. It was an
unprecedented move
The day of reckoning will come. When it does, markets will get a
wakeup call. If you have cash on hand, you can take advantage of
prices you wont see again for years.
Just take a look at the following chart. It depicts the price of Silver
Wheaton Corp (SLW), a company we recommended buying in the
July 2016 issue of The Casey Report.
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CHAPTER 4 | RAISE CASH
If you had cash on hand and bought SLW shares when everyone else
panicked you made over 1,700% over the next 30 months.
And the next panic is right ahead of us. So now is the time to raise
cash.
As we write in late 2016, the stock market is near all-time highs. But
the economy has slowed to a pace usually seen just before a recession.
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CHAPTER 4 | RAISE CASH
Typically, it flirts with 50, recovers, then tumbles into recession. That
happened in 2015. In 2016, the ISM started falling again after a brief
recovery.
Instead, you want to sell stocks that are the most sensitive to changing
economics. Companies like the ones we describe in the next chapter.
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
CHAPTER 5
1. Companies that sell want not need luxuries to the lower and
middle class.
Take, for example, Signet Jewelers Ltd. (SIG). Signet is the parent
company of popular jewelry stores like Zales, Kay, and Jared. It sells
jewelry to the masses. And most of the purchases are financed using
credit.
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
As you can see in the chart below, Signets stock has had a
tremendous run. If we enter an economic downturn and consumers
lose easy access to credit, the companys business will suffer. Its stock
could fall in half.
Stocks that depend on easy credit make great potential sell candidates
when youre raising cash. When the good times get started again, you
can usually buy them back at a fraction of their current price.
2. Car Retailers
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
When the easy credit slows down, people will drive their old cars
longer. They will fix these cars instead of trading them in for a new
car. This is bad for car dealers. They have tremendous expenses
maintaining dealerships, salespeople, and expensive service centers.
CarMax Inc. (KMX) is one of the countrys largest used car retailers.
The company buys cars from consumers, reconditions them, and puts
them on the lot for sale.
During boom times, its a great business. But when trouble shows up
on the horizon, it means dark days ahead for all car dealers. During a
downturn, most customers have less options. They also often have less
income.
Further, used car retailers like CarMax hold used car inventory as
their primary asset. As the massive boom trend of leasing cars slows
down and begins to unwind, the used car market will be flooded. The
value of used cars will fall. Meanwhile, customers in the market for
those cars will have less borrowing power in a recession. Its a double
whammy for used car retailers. And its likely to happen at just the
wrong time.
New car dealers suffer a similar fate. Its common for car
manufacturers to fill dealer lots with new cars on credit. Dealers
typically have several months of low-cost financing from
manufacturers, allowing them to display and sell cars before actually
paying for them.
But when sales slow, this amounts to a huge liability for dealers. Doug
and E.B. Tucker visited a Chevrolet dealer recently that offered 84
months of 0% financing. Seven years of free time to pay for a car is
about as easy as it gets.
Car sales hit a record in 2015. But if the easy credit slows down, sales
will suffer.
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
AutoNation Inc. (AN) and Penske Automotive Group Inc. (PAG) are two
other good sell candidates. These companies are well managed but even
the best managers cant survive when sales dry up. Stay out of these stocks
at a time like this.
3. Homebuilders
To make things worse, a homebuilders largest asset is its land held for
development. This means large tracts of land purchased and prepped for
homesites.
These companies often invest tens of millions in roads, water, sewers, and
basic utilities preparing new neighborhoods for construction. If the economy
slows midway through this process, it can be stuck with expensive lots.
After close to six years of economic recovery, homebuilder stocks have been
flying high. Things cant get much better. Thats why they make a great
candidate for raising cash.
Another homebuilder to stay away from at a time like this is William Lyon
Homes (WLH). The California-based company may survive a decline in
home sales but its stock may not.
These companies have big financial commitments and often heavy debt
loads. If sales slow, their stocks often fall in a hurry.
4. Airlines
Warren Buffett said it best: Investors have poured their money into airlines
and airline manufacturers for 100 years with terrible results. Its been a
death trap for investors.
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
Thats also when airlines expand fleets, buy back stock, buy
competitors, and increase dividends.
This is a mistake.
When the economy slows down again, airlines desperately need cash.
But because they spent it all during the good times, theyre often
broke (or close to it).
Because of this, airlines have spent the last 100 years in a boom, bust,
binge, and purge cycle. Just like Warren Buffett said, theyre a death
trap for investors.
Thats why right now is a great time to sell airline stocks. Business cant
get much better. And it can get a lot worse.
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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY
As you pick through your current stock holdings looking for things to
sell, focus on the businesses that struggle the most in recession. The
ones that only make sense during boom times should be your first to
hit the auction block. Remember, sell now while prices are high and
before its too late.
Selling stock before a downturn is difficult but its too late to raise
cash once the downturn comes. Imagine how hard it would have
been to sell stocks in 2007 or early 2008. If you told people you were
selling, theyd say you were going to miss out on all the good times.
But selling and holding some cash gave you enough money to buy
several times the stock you could have just a year before.
So that ends Part 1 of the plan. You want to liquidate things you dont
need and stocks that could soon fall fast.
37
SURVIVING FEDCOIN
38
CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
CHAPTER 6
As Doug says, There is cause and there is effect. You dont want to be
the effect of somebody elses cause. You want to be the cause for everything
in your life. That implies working for yourself. At least turn your present
employer into a partner or an associate.
For example, think about how hard it is to find good service or a good
contractor. People and businesses are desperately looking for high-
quality and consistent contractors.
Contact your network. Go through the yellow pages. Call them all
and offer your skills to help them improve their businesses. Go to
Upwork.com or Freelancer.com and set up a profile offering your
skills.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
Figure out the skills you can offer. Give consumers what they need.
And watch your bank account increase.
If the opportunities are greater in the next state over, go there. For the
adventurous, Doug believes the best place to make a fortune from a
small asset base today is Africa.
Heres an idea from Doug For your next vacation, book a trip to
Cameroon, Togo, Gabon, Zimbabwe, or Angola. Go through the Yellow
Pages in the capital and meet everybody who is anybody. The chances are
good youll come up with several deals in the first week alone. If you cant
find the time, send your kid whos just out of school and idiotically thinks he
may want to misallocate time and money getting an MBA. This idea alone
should be worth a million dollars.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
Over the next 25 years, J&J grew from $11 billion in sales to $74
billion in sales. It also increased its dividend payment every single
year. The dividend increased through recessions, bear markets, and
terrorist attacks.
By 2015, the J&J owner watched the value of his stake grow by
1,321%. He was earning an annual yield of 42% on his original
investment. And he made all this money by owning one of the worlds
best businesses.
You might think of ADM as a farming company. But its not. The
company is a diversified agriculture product and chemical company. It
buys crops from farmers and uses those crops as raw material to make
other products.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
This kind of food sells even better during hard economic times. Even
when the economy is bad, people need to eat. Thats why businesses
that help mass-produce inexpensive food are nearly recession-proof.
Theyre the kind of companies we want to own for a long time as
empire assets.
But the key to creating wealth with empire assets is to buy these
businesses at great prices.
Consider what happened during and after the 1999 and 2000 stock
market peak.
Back then, the stock prices of good companies with solid future
prospectslike Wal-Mart and Microsoftwere wildly expensive.
Stock prices often reached 50, 60, or even 90 times earnings. People
who purchased shares back then paid bad prices. They had speculative
fever. They didnt focus on getting good value for their investment
dollars.
Keep in mind, the underlying businesses were still very sound. Those
businesses were still growing. But the stock prices got so out of whack
that investors who overpaid suffered horribly. It took a long time for
the stocks to work off their extremely overvalued state.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
View your stock, bond, real estate, and commodity purchases just
like you would view buying a house, car, phone, or even groceries.
Dont be a sucker and overpay. Make sure you get good value for your
investment dollar. Hunt for bargains. Those bargains typically come
during periods of crisis.
Buffetts secret was having plenty of cash in a time of crisis. You see,
eventually, the economy always rebounds. And folks who bought great
assets cheap make a fortune.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
For example, right after the 2008 crisis, you could have bought stock
in Starbucks and made more than 1,900% on your money. Or you
could have bought shares of Apple in late 2008 and made as much as
966%.
In the coming crisis, many stock prices will likely be cut in half. And
there will be great opportunities to make money. When a stock price
falls by half, you can buy twice as many shares for the same amount of
money.
Thats why you want to stalk great businesses now, while we wait
for the full-blown crisis to hit. By creating a shopping list of world-
class, empire-building companies, youre positioning yourself to buy
large chunks of shares at cant lose prices.
DG sells basic goods to the masses. Its a one-stop shop for basic life
essentials like baby formula, bread, soap, and paper towels. When the
great financial unwind hits, DG will be left standing.
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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY
Remember, you can make a killing in the stock market by just buying
things when everyone else is running scared, selling anything they
can sell. It is possible to build significant wealth by making only a few
smart buying and selling decisions. Instead of actively trading, spend
that time studying quality businesses like the ones we profile in the
monthly issues of The Casey Report. Build a shopping list, or a wish
list, of companies youd like to own at much lower prices. Those low
prices show up about once a decade make sure youre ready to take
advantage of them.
Since were on the topic of creating wealth, heres a unique idea from
Doug Casey on the subject
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
CHAPTER 7
After all, for every buyer, theres a seller (and vice versa). The same is
true for the economy, where a case can be made for both good times
and bad times at almost any juncture.
How can you hedge yourself against being on the wrong side of the
market? By using hedge strategies which are surprisingly little-
known, though theyre almost always lower risk and have higher
potential than pure long or short positions.
As fashions change, the first tend to become last and the last to
become first. This was recognized in biblical times, and its equally
certain in the investment markets. Regardless of the overall direction
of the market, relatively overpriced stocks tend to decline and
underpriced securities tend to rise. Indeed, both movements often
happen at once.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
Suppose, for instance, you like the prospects of Stock X. Youre sure
the underlying company will do well. But youre afraid of the market
as a whole, which could take Stock X down despite the company
prospering. How do you solve the dilemma of whether to buy or to
wait?
If your assessment is correct, it will not make any difference how the
market in general, or the industry in particular, does. Youll make
money as long as X does better than Zwhether they both go up or
they both go down. And, if their prices move in opposite directions,
you can make money on both and double your profits, even while
youve reduced your risk.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
Value is relative, not absolute. In other words, you want a position not
only because of what it is, but because of what price it is. For instance,
in October 2017, gold is a good buy at $1,240 and the S&P 500 at
2,500 is not; so I suggest owning gold and short selling U.S. stocks.
Several years from now, if gold is at $4,000 and/or the S&P 500 is at
1,000, Ill almost certainly be inclined to say the exact opposite: buy
the S&P 500 Index and sell gold.
Its never a question of how many dollars you can get for something
you want to sell. The real question is how many shares, or contracts,
or acres, you can exchange it for. It might, for instance, be hard to say
whether corn is cheap or dear at, say, $4 a bushel unless you know
what to compare it with. But we know that wheat usually sells for
about twice the price of corn and soybeans for about triplebecause
of factors like production costs and protein content. If soybeans sell
for $6 while corn is at $4, you can be pretty sure corn is dear, at least
relative to beans. By selling corn and buying beans, youre likely to
make money.
The idea is to pick out very cheap stocks or commodities to buy, and
very dear ones to sell simultaneously, with the intention of protecting
yourself from general market moves. Buy and sell respectively equal
dollar amounts of each and wait for the inevitable without caring
whether the market in general booms or busts.
An Example
In 1991, I recommended such a hedge in the thrift industry. It
provides an ideal illustration of the principle.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
GlenFed had about $16.5 billion in assets and $950 million in stated
capital, which was satisfactory on the surface. But about 80% of its
capital was debt, on which the interest clock continued to run. At
the same time, almost any portfolio losses could quickly wipe out
shareholders equity since non-performing assets were already over
$700 million, and in Californias depressed real estate market, it was
clear they could easily suffer large losses. In addition, GlenFed owned
numerous hotels, shopping centers, and business parks through a
subsidiary, the very worst things to be in at the time. It was all for sale,
but there were no bidders because it seemed likely that the Resolution
Trust was going to wind up with GlenFeds properties and potential
buyers could get them more cheaply later.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
The hedge worked out well. GlenFed crashed 80%, from $5 to $1, while
Continental rose to $22, where it was bought out by Crestar Bank. I
wound up making more money using a hedge than I would have simply
being right about Continentaland I took much less risk, to boot.
Given this bearish outlook, most U.S. stocks are likely to be money-
losers in the coming years. Although most financial advisers would
gasp at the notion, its a perfectly reasonable strategy to avoid owning
U.S. stocks today.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
If you have $30,000 invested in positions that profit when prices rise
and $30,000 invested in positions that profit when prices fall, you
have a market-neutral portfolio.
And if Lockheed Martin drops 10% but Bank of America also drops
15%, you also make $500. (Thats a $1,000 loss on Lockheed Martin
and a $1,500 gain on Bank of America.)
The only way you lose on this market-neutral position trade (often called
a pairs trade) is if Bank of America outperforms Lockheed Martin.
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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO
Although I think most industries will struggle in the bad times ahead,
a handful of industries could actually do quite well. Whatever you
choose to do, the most important thing to keep in mind is this:
Not losing money is a worthy goal. In a bear market, the guy who
wins is the guy who loses the least. Hes the guy who has cash at the
bottom. Hes the guy who buys assets from desperate sellers. Hes also
the guy who ends up owning the best assets.
52
SURVIVING FEDCOIN
53
CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS
CHAPTER 8
Youre about to learn the most critical steps we recommend you take
today to survive a currency change like Fedcoin. But not just Fedcoin,
any crisis.
In this section, well share how much cash and gold (plus another
alternative currency) you should have on hand to ensure your wealth.
Well also reveal how to make sure you have the basic necessities your
family needs to survive.
Holding Cash
While a government-implemented digital currency like Fedcoin could
render the current U.S. dollar irrelevant, its still important to keep
some cash around for your crisis fund.
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CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS
But a crisis fund needs to be held in physical cash. Since banks and
brokerage firms can be inaccessible for weeks, they cant offer ready
access to the funds you need.
Now, while no one knows for sure how a currency change like
Fedcoin would take place, it seems unlikely the government would
outlaw ALL cash. Our best bet is that $5, $10, and $20 bills will
remain in circulationeven if tattered and harder to come by.
Its more likely that the $100 bill slowly fades away with no new
scheduled printings (thats what happened with higher-denomination
U.S. bills like the $500 and $1,000 banknotes).
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CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS
You can store the cash in a safe, in a public storage container, or bury
it in a waterproof container in your backyard. Later in this section,
well discuss in greater detail the best places to store your cash.
Well, if a crisis lingers, many items could sell out fast at local stores.
And anyone with basic necessities will begin selling them at huge
premiums.
Having cash makes sure your family has access to everything you
need.
So thats the first part of the Consolidation step: make sure you have
enough cash on hand.
56
CHAPTER 9 | GOLD
CHAPTER 9
Gold
If a currency change like Fedcoin takes place, youll want to preserve
the purchasing power of your money with gold.
You see, unlike stocks, bonds, and paper currencies, gold holds its
long-term value. Its held its value during countless crises. And people
around the world have used it as money for thousands of years.
You can put a 1 ounce gold U.S. Eagle in your pocket, fly halfway
around the world, and sell it in local currency. It has universal value.
Owning gold is also one of the only ways to prevent the government
from having total control over your financial life.
Thats one reason cash and gold are important: Because they allow for
financial privacy.
Gold lies outside the control of central banks like the Fed. That makes
it harder for the Fed to confiscate or tax your wealth during a crisis.
(More on this later.)
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CHAPTER 9 | GOLD
Buying Gold
Now, there are many ways to invest in goldyou can buy gold
bars, coins, paper gold ETFs, as well as foreign and domestic
storage programs, to name a few. Each of them has advantages and
disadvantages.
Gold Bars
PAMP
Johnson Matthey
Engelhard
Credit Suisse
Heraeus
of gold. 5 ounce
100 gram
1 ounce
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CHAPTER 9 | GOLD
Premium refers to the amount a dealer charges over the actual value
of the gold youre buying. For example, a plain 1 ounce gold bar might
have a premium of $20. That is the dealers profit. If the price of gold
is $1,350 per ounce, then the bar would cost $1,370.
The same dealer might sell you a 10 ounce bar for $5 per ounce over
the price of gold. That means the dealer would make $50.
You see, large gold bars can be fake. The larger the bar, the more
incentive a crook has to create a counterfeit copy. Counterfeit gold
bars are not common, but there have been documented cases of
fraudulent gold bars being sold to unsuspecting buyers.
10 ounce gold bars are a common size to begin thinking about the
possibility of counterfeits. Kilogram bars (35.3 ounce) also carry risk,
as does anything larger.
Bullion Coins
A bullion coin is a coin valued primarily for the gold it contains.
These coins are often called common, and differ from higher-priced,
rare collectable coins, which well discuss later.
Like bars, bullion coins also come in various weights, but the most
popular coins contain 1 ounce of pure gold. (Most also contain a small
dose of copper for the sake of durability.) The coins normally trade at
a modest premium to the value of their bullion content. Premiums on
smaller coins are usually larger.
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CHAPTER 9 | GOLD
Gold coins allow you to store tremendous wealth in a small space. The
gold in the picture a few pages back is worth over $13,000. It weighs
only 10 ounces andstacked on top of each otherthe coins barely
breach 1 in height.
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CHAPTER 9 | GOLD
Coin dealers usually pay sellers the current price of gold for these
coins. Buyers can typically get them from a dealer for $50$100 per
ounce over the current price of gold.
These coins are also generally not worth faking. Con men prefer to
fake higher-value gold products like collectible coins and gold bars
instead.
But even among like-minded people, there is some debate about the
best gold coins to hold.
Im coming to the conclusion youre better off with smaller coins, say oz.,
which are the size of regular pocket change. Recently, in two countries in
South America, and one in Africa, when the X-ray machine saw about
10 1 oz. silver coins in my carry-on, they investigated. It was no problem
because they were silver. But the agents were looking for golda word
to the wise. And further anecdotal evidence that the gates are closing on
multiple fronts.
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CHAPTER 9 | GOLD
The good news is, buying any size gold coin serves the same purpose.
However, it is important to stick with common coins.
You can buy gold coins and bars online through dealers or with a local
dealer. But either way, its important to find a reputable dealer
The things to watch for with all dealers are total costs (including
product, shipping, and insurance) and availability; if a dealer claims it
will take several weeks to locate the product, contact someone else.
(Note: We do not make a commission on any gold coins you buy from
this website.)
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CHAPTER 9 | GOLD
Sadly, however, many people who are adding gold to their portfolio
right now will face a rude awakening once the crisis hits.
What sets gold apart from other financial assets is that gold is
valuable in itself. Its value doesnt depend on someone else keeping up
their end of a bargain.
A bond is only valuable if the borrower pays you interest and keeps its
promise to pay back the principal.
U.S. dollars only hold their value if the U.S. government doesnt print
too much money.
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CHAPTER 9 | GOLD
When you buy a gold ETF, you technically own the underlying gold.
But thats not the same as owning physical gold. The gold you own
through a gold ETF isnt under your control. You have to rely on the
ETFs custodian company to store it and keep it safe. You have to
trust that the gold is really there.
The largest gold ETF, SPDR Gold Shares (GLD), does not allow
physical delivery of gold. So you have to take the custodians word for
it when he says its yours.
During ordinary times, the gold likely is there. But one of the reasons
we own physical gold is to protect against an extraordinary event: a
monetary crisis.
A gold ETF will not protect you during a monetary crisis. A gold
ETF is not a substitute for owning physical gold. Gold ETFs will not
protect you in a time of crisis like physical gold will. And again, even
during non-crisis times, you cannot access the gold you own through
a gold ETF.
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CHAPTER 9 | GOLD
These coins are often encased in plastic by a ratings agency. The rating
agency assesses the condition and authenticity of each coin, then seals
it in a plastic case. A watermarked seal on the plastic case displays the
companys ratings.
Pricing for these coins boils down to three things: rarity, condition,
and demand.
Think of it like two Mickey Mantle rookie baseball cards One thats
been stored in a bank vault protected by a plastic case since the 1950s
is more valuable than one thats been stuffed behind the credit cards
in your wallet.
Heres the real trouble with numismatic rated coins: you must pay
significantly more for them than regular coins. Youre getting the
same amount of gold, but numismatics cost more because of their
collectible value.
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CHAPTER 9 | GOLD
Now, with common gold coins, the price moves dollar for dollar with
the price of gold. So if the price of gold falls 20%, common gold coins
get 20% cheaper. On the other hand, for the same 20% in the price of
gold, the price of a collectible coin might fall 25%30%. So if you pay
extra for a collectible coin, its likely to lose value faster than a regular
coin during a period of falling gold prices like in 2011 to 2015.
If you decide to buy collectable gold coins, be sure you know what
youre getting into. Paying a fair price isnt the only concern with
collectables. Fraud is much more common in the rare and collectible
coin market. The collectible coin market is much more complex than
the market for common gold coins. This complexity can give thieves
and con men cover to fleece unsuspecting buyers.
Rare or collectible coins can turn out to be fake. Or, if the gold is real,
sometimes the rarity rating is not. Thats why we recommend buying
common, recognized, government-minted coins like the ones we
mentioned earlier. Buying these common coins nearly eliminates the
risks weve described here.
Given that our main reason for owning gold is to keep our money
safe, it doesnt make sense to speculate with collectables unless youre a
seasoned purchaser. And, in a crisis, youll want commonly recognized
coins.
If you buy gold using a credit card, bank draft, or wire transfer, youve
created a permanent electronic record of your transaction that the
government can access.
Worse yet gold dealers must now keep detailed records, addresses,
and other information on buyers.
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CHAPTER 9 | GOLD
As we told you earlier, when the crisis comes, gold will hold its
value unlike digital currencies like Fedcoin.
Thats why theres a good chance the government will try to take gold
from you or prevent you from buying it altogether.
Many people own gold through a fund like Sprott Physical Gold
Trust (PHYS) or Central Fund of Canada (CEF). The former will
give you physical gold in exchange for your shares, once a month, if
you own enough shares. The latter wont give you the physical gold.
Worst of all, most gold ETF owners buy gold through SPDR Gold
Shares (GLD). As we mentioned earlier, this ETF does not allow you
to access your gold.
If you bought gold from a dealer and paid with a wire transfer, the
banking regulators have plenty of documentation. Theyll likely let you
keep the gold. But they could make it illegal to trade. And they could
control what you do with your gold with a punitive tax.
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CHAPTER 9 | GOLD
Something like a 90% tax on the value of every coin you sell isnt out
of the question. (Hard to believe? During World War II, income tax
reached a high of 94% for certain individuals and lets not forget
how AIG employees faced a 90% tax on their bonuses following the
recent financial crisis.)
So, how can you go about (legally) buying gold in a way the
government cant track?
Youll likely pay a little bit extra buying gold coins with cash at the
jewelry store. But if youre worried about the government knowing
every detail about all the gold you own, consider buying at least a bit
of gold with cash at your local jewelry store. However, the window of
opportunity is closing quickly. In fact, this sign was recently posted at
a local store:
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CHAPTER 9 | GOLD
Paper cash is hard to track. So, little by little, governments are getting
rid of it. The $6,000 limit will soon be $1,000. The local jewelry shop
is the last place you can buy gold without the government tracking
you. Take advantage of it while you still can.
69
CHAPTER 10 | SILVER
CHAPTER 10
Silver
Just like gold, silver will help preserve your wealth in times of crisis.
In fact, in our opinion, it is the #1 alternative currency to own for
everyday purchases during a crisis.
You see, silver is safer to carry around. Flashing a gold coin during
a monetary crisis is like wearing a Rolex while walking around the
projects at night. Someone might think, There must be more where
that came from and follow you home.
Its better to carry silver coins in your pocket and keep your gold
hidden at home. Plus, an ounce of gold will be worth $2,000, $3,000,
or more during a crisis. Thats far too valuable to exchange for
everyday goods and services.
Both gold and silver are stores of value. Owning them will preserve
your wealth through even the worst monetary crisis.
Everyone should own some silver. The most common silver coins are
1 ounce American Silver Eagles and 1 ounce Canadian Silver Maple
Leafs. Like the government-minted gold coins we discussed earlier,
these silver coins are instantly recognized anywhere in the world. If
youre new to buying silver, American Eagles and Canadian Maple
Leafs are a great place to start.
The history of paper currencies tells us one thing They are printed
until they become worthless.
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CHAPTER 10 | SILVER
224 years ago, the Coinage Act of 1792 established the silver dollar
as the unit of money in the U.S. All dimes, quarters, half-dollars, and
dollars contained 90% silver.
This act completely debased the value of our coinage. From 1965 on,
new dimes and quarters would contain no silver. And in 1970, the
government removed the rest of the silver from the other coins like
the half dollar.
Now, coins that once contained 90% silver are known as junk.
Meanwhile, we use a paper dollar backed by nothing. Its worth less
than .06 ounces of silver as money today.
But this creates a huge opportunity for savvy investors because coin
collectors dont see a lot of value in junk silver.
This allows you to buy these types of coins at much smaller premiums
than something like Silver Eagle coins.
Junk silver is the perfect investment for protecting your wealth during
a financial crisis. It is one of the best ways you can hedge against
inflation.
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CHAPTER 10 | SILVER
For example, in 1964, a quarter was worth 25 cents. Today, its worth
almost 14 times as much.
Junk silver was used as currency for 173 years. And if the dollar
becomes worthless, it will be used as currency again.
Junk silver also has one critical advantage to gold and silver coins
its a far more practical store of value.
It will be tough to pay for milk and bread with a 1 ounce silver coin.
Right now, an ounce of silver is around $20.
The cashier may not have enough change in the register during a
crisis. The guy standing next to you in line probably wont have any
change either.
When the crisis hits, you stand a good chance of being a victim
with that kind of money in your pocket. Remember, people will be
desperate. And willing to do just about anything to put food on the
table.
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CHAPTER 10 | SILVER
So you could buy a bag of 10,000 dimes, 4,000 quarters, or 2,000 half-
dollars. Each one of those bags will contain about 715 ounces of silver.
A bag of $1,000 face value junk silver would cost you around $15,000
today.
Just be aware that the price of silver is volatile. The prices used in this
example could be a lot different by the time you read this.
Just like with gold coins, you can buy silver online or with a local
dealer. But either way, its important to find a reputable dealer.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
CHAPTER 11
How do you do it? With a few supplies and some easy steps.
PVC pipes are cheap, easy, and effective containers. Theyre the white
pipes used for plumbing. Buy some pipes, a couple of end caps, and
some pipe sealant. You can find them at any hardware store. If youre
unsure, ask the hardware store clerk. Hell give you exactly what you
need. But dont tell him what youre using it for.
Slide your cash, gold, or silver in the pipe, then cap and seal both ends.
When its time to remove your cash, you can easily cut off one end
with a hacksaw.
If you dont want to make your own container, you can buy one for less
than $50. Simply search the web for airtight waterproof container.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
And make sure one person you trust knows where this is. A trusted
attorney might be a good choice to safeguard this secret. If you have a
tragic accident, youll want your loved ones to know where your cash,
gold, and silver is.
This may seem old-fashioned. But its still one of the most practical
ways to keep some physical cash, gold, and silver. Itll be safe from fire.
Burglars ransacking your home will never find it.
Youre very likely to hear more about this term in the coming years,
or at least the act of pulling money out of the bank and storing it on
your property.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
But that exposes your assets to the risks mentioned before. The first
risk is thieves.
Most burglars only spend about two minutes looking around once
theyve broken in. They go to the master bedroom first, and they look
for easy-to-grab valuables.
There are many ways to hide cash inside your home. The methods
below use clever concealment tactics to hide and protect your cash.
Vacuum Cleaner
If you have an old vacuum cleaner you dont use, you can store a large
wad of cash, silver, or gold inside the vacuum bag.
Curtain Rods
Flower Vase
Hide your money in an opaque flower vase. You can top it off with a
bouquet of artificial flowers.
Home/Office Printer
If you have a home or office printer, open up the front as if you are
going to change the ink. Even on small models, youll find a large
amount of unused space inside the printer.
Wall Plates
Heres a sneaky tricklook at one of the wall plates where the cable
for your TV and Internet attaches. If you unscrew this plate, youll
find a cutout in the drywall behind it.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
You can apply a strip or two of tape to an envelope full of cash, and
slide it through this hole. Use the tape to stick the envelope behind
the drywall. Screw the wall plate back in place, and youre set.
Please note: Although you can do the same with a regular electric
outlet, I dont recommend it. The exposed outlet could shock you. A
cable outlet is much better because theres no risk of electric shock.
And therell be more room to fit your hand behind the wall.
If you dont have a suitable wall plate in your home, you can buy one
for a few dollars at any hardware store. It doesnt matter if theres
actually a cable running to it. Just cut out a small piece of drywall near
the floor and install the wall plate as if it were real. No one will know
the difference.
If your ductwork and plumbing are not exposed, you probably have
suspended ceiling tiles (called a drop ceiling) in your basement.
Thats even easier. You can pop up a ceiling tile and lay envelopes of
cash on the adjacent tiles. (Slide the tile back into place when youre
done, of course.)
Diversion Safes
Diversion safes keep your money safe by blending in with the rest of
your normal household dcor. Even when its right in front of a thief.
Were talking about things like books, clocks, lights, and lint
rollers. Most of these are also relatively inexpensive ($20 or less is
typical). Amazon has a wide selection of diversion safes disguised as
everything from Morton Salt containers to bookshelf dictionaries.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
The tricks we just described are excellent ways to avoid losing some
of your valuables during a home invasion. Thieves are unlikely to
consider these places. However, they have a couple of drawbacks.
One, they dont protect your assets from fire. And two, if thieves
discover your money, these tricks wont stop them from making off
with it. If your house burns or a thief discovers your hiding place, you
may lose your cash, gold, or silver.
Furthermore, people make three big mistakes when buying safes for
their homes:
If youre at home and are robbed at gunpoint, burglars will ask you
where your valuables are. You can point to the dummy safe.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
In either case, the burglar thinks he has the most valuable thing in the
house and leaves.
Little does he know, you have another real safe where most of your
cash, gold, and silver is.
Having a dummy safe in plain sight should send the burglar on his
way. But in case he decides to take another quick look around, make
sure you hide and conceal your primary safe.
For example, if its in your bedroom closet, stack some boxes around
it. Put a bookshelf in front of it. Throw some blankets and pillows on
and around it.
On the small chance the burglar does find your concealed safe, you
want to make sure its bolted to the floor. That way, he cant cart it off
to break into later.
Dont fool yourself into thinking you dont need to fasten your safe
because its big and heavy. A burglar can easily use a handcart or dolly
to move it.
The goal of a safe is to protect your stash from fire and burglary. It
does so with seals, insulation, steel construction, and a locking door or
lid.
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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER
Note that fire resistance depends on insulation and the right kind of
seal. A safes insulation keeps hot temperatures from burning cash.
Fire seals expand when heated to prevent fire, water, or smoke from
entering the safe.
80
CHAPTER 12 | AN ALTERNATE ASSET TO HOLD
CHAPTER 12
In this case, the most common luxury watch could come in handy as a
bargaining tool.
We dont recommend rushing out to the local mall to buy one of these
unnecessary luxuries. In fact, at fixed MSRP retail prices of around
$9,000, theyre grossly overpriced.
But you can keep an eye out for used models in jewelry stores or gold
dealers. Oftentimes, these stores will take them on trade and stick
them in a case. If youre patient, you can find a good deal.
E.B. Tucker, for example, purchased several Rolex watches for himself
and as gifts while in Switzerland in early 2016.
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CHAPTER 12 | AN ALTERNATE ASSET TO HOLD
Rolex sets the price at which retailers can sell its products. The
company is very strict about this. It also takes into account the value
of the currency in each country.
But in 2016, the Swiss franc dropped unexpectedly in the first quarter.
Rolex does not rush out to change prices in this case. By buying
Rolexes from one of the oldest dealers in Switzerland using U.S.
dollars, E.B saved 19%.
82
CHAPTER 13 | STOCKPILINGTHE BASICS
CHAPTER 13
StockpilingThe Basics
By E.B. Tucker
How long could you live without power, water, gas, or food?
A currency change like Fedcoin could bring about chaos. And I want
to have the basics on hand. So Ive simply prepared for the worst at
minimum expense.
The storm was so bad, it caused the worst flood in 100 years. It
knocked down so many trees, city workers could not clear the
wreckage to get to damaged infrastructure for days.
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CHAPTER 13 | STOCKPILINGTHE BASICS
But it could get worse. Imagine a crisis where you cant access any of
your money, turn your power on, or use city water.
Id like to share with you my plan for surviving without any help from
my local municipality, access to the grocery store, online delivery, or
even a gas station. In fact, I dont need to go anywhere for as long as
14 days.
Step 1 Protection
In a crisis, otherwise moral people get desperate. They need to survive.
As things get worse, they will do things they normally wouldnt dream
of.
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CHAPTER 13 | STOCKPILINGTHE BASICS
Its often called the baby Glock. But dont let that name fool you.
This 9mm semi-automatic handgun delivers deadly force under the
worst operating conditions.
Step 2 Hydration
Humans can survive a lot longer without food than without water.
Water is an essential survival tool.
While most people keep bottled water at home, they dont keep
enough. They still rely heavily on tap water for cooking and drinking.
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CHAPTER 13 | STOCKPILINGTHE BASICS
For the last few years, Ive had my water delivered in glass bottles
from a natural spring in Arkansas. It sounds like a luxury only the
super-rich could afford. But its quite affordable. And in a crisis, it
could save my familys life.
Since the water comes from a natural spring, its loaded with minerals
like magnesium, calcium, and potassium. Its delicious and a great
alternative to bleached, boiled, chemically treated city water.
The company also rents me this useful hot and cold dispenser for $1
per month.
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CHAPTER 13 | STOCKPILINGTHE BASICS
Step 3 Food
While it is possible to survive on strictly water for days on end its
unpleasant.
These people will likely never eat this food. Its expensive and it takes
up a tremendous amount of space.
I can have at least two meals a day for up to two weeks with just the
food in my pantry right now. I dont need power or city water to cook
either.
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CHAPTER 13 | STOCKPILINGTHE BASICS
Youre probably wondering how Ill boil rice or heat the curry without
using my stove. Its a valid concern since both gas and electric services
might not be on.
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CHAPTER 13 | STOCKPILINGTHE BASICS
For years, Ive volunteered to fry turkeys for a local recovery center
on Thanksgiving and Christmas. The frying equipment is incredibly
simple and takes up very little space in my storage shed.
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CHAPTER 13 | STOCKPILINGTHE BASICS
Once its full, add in 40 grams of ground coffee. Let that sit for
23 minutes before removing the flame. When the heat disappears,
the coffee flows through a cotton filter back down into the bottom
container, which detaches to become the serving pot.
If you cant be without your favorite brand of liquor for a few days,
keeping a few extra bottles could come in handy. It could make
waiting out a crisis much more pleasant. Things like having enough
soap or a flashlight would be useful too.
To sum up, dont worry about buying tons of canned goods or special
meals for a crisis. Just make sure you have staple meals that dont
require refrigeration.
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SURVIVING FEDCOIN
91
CHAPTER 14 | HOW TO BE A RATIONAL SPECULATOR
CHAPTER 14
The word speculation gets a bad rap in the media. It sounds reckless
and downright irresponsible. Words associated with speculationlike
shortages, wars, and price manipulationdont help.
(In fact, Doug Casey just published a new book called Speculator. Its
an enlightening story of gain, loss, and everything that happens in
between. The book is available on Amazon.)
Also, and most importantly, the best speculators risk a small amount
of money for a huge potential payout. This is the opposite of what
some people dorisk a huge amount of money hoping for a small
payout if everything goes right.
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CHAPTER 14 | HOW TO BE A RATIONAL SPECULATOR
The best thing is you dont have to have credentials from Wall Street
to do it either. Anybody can be a rational speculator.
Reading this book is a clear sign that you are willing and ready to
learn. Youve already inventoried your knowledge, skills, and abilities.
Now its time to put them to use
One market thats set to create a fresh pack of millionaires right now
is the gold mining and silver mining sectors.
As we told you earlier in this book, gold and silver will help protect
your wealth. Theyre insurance against becoming poor in a financial
wipeout.
93
CHAPTER 15 | GOLD STOCKS
CHAPTER 15
Gold Stocks
Gold stocks are shares of companies that produce gold. These
companies dig up the ore that contains the metal and sell it to refineries.
Gold stocks offer leverage to the gold price. Thats the reason to hold
them. By leverage we mean the stock of a company mining gold will
move up much higher than gold itself.
Gold Digger produces gold for $1,000 per ounce. If the gold price is
$1,200 when they sell, Gold Digger makes a $200 profit on every ounce.
Now lets say the gold price rises to $1,300. Now Gold Digger has a
$300 per ounce profit ($1,300 - $1,000 = $300).
But look at what happened to their profit: it grew by 50% while the
price of gold only increased by 8.3%.
Put another way, Gold Diggers profit went up $100 per ounce, from
$200 to $300. And the company didnt do anything different.
Thats with a modest jump in the gold price. If gold rises to $1,500,
Gold Diggers profit would grow by a whopping 200%.
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CHAPTER 15 | GOLD STOCKS
Compare this to Apple. Its profit margin in its most recently reported
quarter was 23.9%. Thats impressive. But it doesnt compare to the
profits the average gold producer will see when gold starts to rise
again. This is why gold stocks often rise two to three times more than
the price of gold.
Below, weve listed historical returns for gold producers during four
separate cycles when gold boomed: 19791980; 19811983; mid-
1990s; and 20012006. These are not hypothetical returns. They are real.
Gold more than tripled during this period. But gold stocks more than
quadrupled.
This wasnt the only time gold stocks surged From 1981 to 1983,
the gold producers in the following table returned over 85% on
average. And this happened in less than two years.
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CHAPTER 15 | GOLD STOCKS
There was another boom in the 1990s. While gold rose 8%, the
average gold producer went up more than 200% Thats 26 times
more. Thats leverage.
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CHAPTER 15 | GOLD STOCKS
Another big run up in gold stocks happened in the 2000s. Gold rose
158%, but gold stocks soared over 400%.
While many things can affect a gold companys stock price, an increase
in the price of gold (even a small one) can lead to enormous profits.
Heres why
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CHAPTER 15 | GOLD STOCKS
Ecuador is home to one of the richest mines found in the last decade.
The company that discovered it sold the project to an experienced
gold producer. But before this company started mining, the local
government increased taxes and royalties. Their demands were so high
that the mine never began production.
Because of the increased taxes, the producer couldnt make any money.
The mine is still sitting there today, idle. The company had no choice
but to shut down production. They couldnt move the mine to a more
favorable jurisdiction.
Companies in most other industries can move if they run into this
problem. If the local government tries to shake down a crew filming a
movie, they can pick up and film somewhere else. Actors and sets are
mobile. Gold mines are not.
Theres another big reason gold stocks are not long-term holds: If you
want to make lots of money in this sector, you must know where we
are in the cycle
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CHAPTER 15 | GOLD STOCKS
We charted the major cycles for gold stocks from 1975, when gold
again became legal to own in the U.S., to present. Eight distinct cycles
played out during this time.
As you can see, gold stocks cycle up and down repeatedly. And the
percentage gains for those who buy at the bottom of a cycle can be
downright mouthwatering.
Mining stocks caught a break in early 2016. During the first half of
the year they outperformed nearly every other sector in the market.
This is an opportunity.
And it means gold stocks are entering an upcycle. The profits could
be spectacular. As the pattern shows, triple-digit gains are common
during an upturn. Of the past eight cycles, gold stocks more than
doubled during six of them. And they shot up 99.9% in a seventh.
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CHAPTER 15 | GOLD STOCKS
Dont rush in all at once, and dont buy after a big run-up. There are
always pullbacks.
Our basic strategy is to buy when gold is falling, not rising. We want
the best price we can get so we can make as much money as possible.
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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY
CHAPTER 16
A royalty company does not deal with the substantial challenges most
miners face. Environmental issues worker strikes tax increases
these are not issues for a royalty company. This makes royalty
companies less risky than traditional gold mining companies.
Today, with gold prices relatively low, many mining companies need
cash. Franco-Nevada has used this to its advantage to make several
profitable deals, including its silver royalty on the Antamina mine.
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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY
IAG is the best of both worlds. A premier mid-tier company has its
sights on becoming a major in the next few years.
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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY
Lower production costs mean more profit for shareholders. And thats
assuming a flat gold price. Its important to remember that IAG is not
a high-flying exploration stock. Its a bona fide gold producer. If gold
stalls for a few months before rising, IAG will continue to chug along
producing a marginal profit and its share price will go nowhere.
But eventually, the gold price should soar taking shares of IAG with
it.
[Please note: We own IAG in our Casey Report portfolio. Check our
portfolio for buying specifics.]
Silver moves much more aggressively than gold. In the past, silvers
moved up to three times as much as gold when metals rallied.
First Majestic spends just over $10 to get an ounce of silver out of the
ground. Last quarter it produced a record 3.1 million ounces. Every
dollar silver moves means several million in additional profit. By our
count, the company should produce upwards of 5 million ounces per
quarter by the end of the decade.
Silver mining stocks are the most volatile stocks we know. When
theyre down, the down never seems to end. When theyre up, they
make you feel like a genius. Were sticking with silver and with First
Majestic.
[Please note: We own IAG in our Casey Report portfolio. Check our
portfolio for buying specifics.]
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CHAPTER 17 | CONCLUSION
CHAPTER 17
Conclusion
In this book, weve taken a look at how to protect ourselves (and even
profit) from a potential currency change.
Weve laid out a 4-step plan. Given you specifics. And laid out our
case as to why we believe these are the absolute best things you can do
to prepare.
But information alone wont get you very far. Not if you dont act upon
it.
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CHAPTER 17 | CONCLUSION
Now, in this book, we have postulated that the next currency change
will lead to something like Fedcoin, which would essentially be a
digital-only currency.
Well, in our eyes, it seems like a very natural and logical progression
for central bankers to take. (In fact, as weve previously noted, one Fed
member has stated as much himself.)
Just think
With a digital-only currency, you dont have to worry about bank runs
anymore.
And, not only that If people had accounts directly with the Fed
then the Fed could set interest rates directly in your account even
choosing to implement negative rates (which is really a TAX) if they
so choose.
Impossible?
Consider:
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CHAPTER 17 | CONCLUSION
In Louisiana, House Bill 195 restricts the use of cash to buy certain
secondhand goods. J.P. Morgan has banned cash in safe deposit
boxes for certain clients. And former Secretary of the Treasury Larry
Summers has publically stated that we should get rid of the $100 bill.
Now, one cannot predict with 100% accuracy how a situation like this
will unfold
Will they keep the current U.S. dollar and introduce Fedcoin as a second
alternative currency?
Will they ban the current U.S. currency outright or perhaps just stop
circulating large bills?
Or maybe theyll simply convert our current money supply onto the
blockchain in the name of national security and gradually remove all
paper currency.
But what we do know is this: Never in the history of the world has a
fiat, paper-only currency like the U.S. dollar survived. Most have a
lifespan of 3040 years.
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CHAPTER 17 | CONCLUSION
You can sit idle and wait for the change to happen and see a drastic
devaluation of your savings as a result (not to mention the total
potential loss of financial privacy that could ensue)
Steps that will benefit you regardless of what the future holds.
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CHAPTER 17 | CONCLUSION
Please remember: what we have laid out in this book are the essential
stepsthe foundationyou can take right now to safeguard your
finances from a coming currency change. But this is also just the
beginning.
If youre not already a member of The Casey Report, you can find
out how to subscribe at www.caseyresearch.com/products/the-
casey-report. And, if youre already a member, please keep reading
your issues each month. If were vigilant and take the proper steps,
well survive the next crisiswhether its due to a new currency or
something elseintact and in an even better financial position.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
APPENDIX I
Lessening the visibility of your digital life starts with the most
common stores of information on the Web:
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
The overreach of the War on Terror lends cover for any U.S. agency
to monitor your internet activity. Draconian copyright laws mean
that your personal/business website can be seized at the drop of a hat
under the flimsiest of pretexts. Internet service providers and tech
companies in the U.S. work hand-in-glove with the U.S. government.
Because it is.
If, however, you want to conduct your online activity a little more
freely, you can take steps to keep your trail relatively opaque.
With a small amount of setup effort, you can go about your business
on the Web as usual, yet know that youre just a little harder to see
than most.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
Avoidance = Scrutiny
Note that the very act of taking these steps could raise a red
flag against you. If the government is aware which mechanisms
avoid most of their surveillance, then they likely scrutinize
the people who use those mechanisms. Wouldnt you? Thats
another argument in favor of simply assuming everything done
online is a public record.
There are tools available, like virtual private networks (VPNs) and
anonymized routing protocols that enable you to change your IP
address and thus mask your actual physical location. Some VPN
providers let you select the country in which it will appear you are
based. Although most VPNs are fee-based services, free options are
available, albeit with limitations.
One of the easiest and cheapest ways (its free) to browse the Web
relatively anonymously is to use Tor, if proper precautions are taken.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
With your searching and general browsing covered, the next thing to
consider is the place you keep all your communications.
With your mail stored securely offshore, you can take some comfort
that the NSA or similar organizations arent trolling through the
storage of your provider to read your messages, looking for activity
they might not like.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
An offshore email account isnt always free, though the fees are
generally reasonable. Below are some reputable and relatively
inexpensive options to consider.
Relocating your email offshore is the biggest step you can take to
protect it. However, remember that all communications are two-
party at the least. No matter how much you do to protect your mail
in storage and in transit (all of the above providers ensure your
communication with them is secure while you read your mail), all
is lost if you communicate with people who dont take the same
precautions.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
With your email now stored safely offshore and your messages
transmitted securely even to less-privacy-minded friends and
colleagues, the only remaining area of major concern is your
documents. Just as with your email, your documents are sitting ducks
for online snoops.
The threat to the host for not complying is significant; thus, action is
often taken swiftly and with little or no notice to contest it. There are
safe-harbor provisions to protect ISPs. But only those with deep pockets
and the courage of their convictions can afford to test them in court.
Thats but one of the threats to your operation. Criminal charges, even
if unproven, can result in the seizure of websites and their replacement
with an FBI or even an Immigration & Customs Enforcement
placard. A sure reputation killer, even if youre eventually acquitted.
These may seem like extreme examples, but theyre more common than
you might think. The government can be judge, jury, and executioner of
your business, even if youre just caught up in a simple mistake.
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
Here are the three main components of any online business that
should be internationalized if you have any concern that such risks
might derail your livelihood:
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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
APPENDIX II
Ive been asked Whats the secret of finding winning gold, silver, and
other natural resource stocks? more times than I can even begin to
count. And for over 20 years, my answer has remained pretty much
the same: the Nine Ps.
As youll read, the Nine Ps process is relatively simple and, with a little
practice, you, too, can use them to screen any and all resource stocks
you are considering for your portfolio. At the very least, answering
the questions will give you a much better understanding of the true
potential of a company.
P1: PEOPLE
The first question you want answered is Who are the key players
involved with the company? As is the case with all human beings,
some are more skilled, more honest, and harder working than others.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
To state the obvious, Boy Scout virtues like honesty, thrift, courage,
and diligence are always good traits for your management teams, as
are competence, knowledge, experience, and, perhaps most important,
a track record of success.
In addition to trying to sort out the black hats, a key goal of this exercise
is to find out if investors have made money in their past deals. Or, if
things didnt work out too wellmining is a high-risk business, after
alldid the company at least make an honest attempt to do the right
thing for their shareholders? Remember, nothing succeeds like success.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
P2: PROPERTY
The good news is that you can make a fortune investing in companies
that, for one reason or another, will never go into the production
stage. Its all a matter of timing and knowing when to sell.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
Thats the reason why the bigger and more geologically credible
the prospective deposit, the better. How can you tell an ore body
(definition: a deposit that can be economically mined) from moose
pasture (definition: a large piece of land, usually located in the middle
of absolutely nowhere that is good for nothing better than moose
grazing)?
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
So, when it comes to property, make sure that you are investing in
companies that are chasing elephant-sized deposits that dont
insult your intelligence by pretending that early sampling or gross
value calculations represent anything other than wildly speculative
assumptions and for companies with significant drill results, whose
geological theory makes sense.
Put another way, never forget that you are not investing in this sector
for the joy of seeing a mine builtbut for the spectacular returns
that can be made along the way to finding out whether or not a mine
could be built.
P3: PHINANCING
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
Or, are they going to keep their own corporate treasury intact and
instead look for financing from a deep-pocketed senior mining
company? If so, how much of the company or the rights to future
development on the property will they have to give up?
Armed with the information of who is writing the checks, you then
have to ask yourself, How likely is the company to get the money
they need?
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
Back to the topic of Phinancing: the bottom line is that you need
to clearly understand where the money to move a project forward
is going to come fromand at what cost to you as a shareholder.
This is an important question because running out of money and
being unable to quickly find more at the right price is akin to a giant
TILT on a stock.
P4: PAPER
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
Sure, they might get lucky, but are you really willing to bet your
money on it?
P5: PROMOTION
You can have the greatest product in the world, but still go broke
if no one knows about it is an old business adage that holds true in
mining as well.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
P6: POLITICS
You may wonder what politics have to do with mining, but that would
demonstrate a dangerous navet because politics touch virtually
every aspect of life, in literally every country in the world.
It is for that reason that you will so often see mining projects being
promoted in areas such as Mongolia or Eritreacountries that are
sufficiently desperate for money that they tend to be more tolerant
of the mine aesthetics. (In case you are wondering, almost all new
mining projects now factor in the cost of reclaiming the land once the
mineral deposit has been mined out.)
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
P7: PUSH
Push is the answer to the question: Whats going to move this stock?
And if we can clearly see the Push coming, or see what look like
favorable odds of it happening, we have a basis for speculation on
rapid returns in our desired timeframe (12 months).
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
P8: PRICE
Also on the topic of Price, it is essential that you use rational price
expectations when calculating the potential for your investment.
Ultimately, gold might go as high as $2,000 or even $3,000 an ounce.
But if achieving those high levels will be required in order for your
company to do well, you are taking an unhealthy level of risk. So, ask
yourself: What will this company be worth at $500 per ounce? Will
it be able to justify its current market cap? If the answers are positive,
you may be on to something.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
P9: PITFALLS
While the biggest threat to mining these days usually stems from
(eco) politics, there are many other things that can go wrong in mine
development. Thats where the Pitfalls P comes in.
Here are a few examples of the Pitfalls we look for in our due
diligence process:
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
CLOSING THOUGHTS
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
The metals rise in recent years is a clear sign that the trend is now the
friend of resource stocks. Because there is only a limited number of
quality resource investments available, as the serious money begins to
flood into them, investors who take a position now will be very well
rewarded.
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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION
Doug Casey
E.B. Tucker
E.B. Tucker is the senior analyst for The Casey Report. Each month,
he works directly with Doug Casey in search of a clear view of whats
happening in the world and where to find the best ways to profit.
E.B.s been profiting from crisis for years. In early 2009, he realized
that the U.S. housing bust would create a generation of renters. He
raised money and bought a large portfolio of single-family rental
houses at rock-bottom prices as low as 10 cents on the dollar. E.B.
was also a founding partner and managing director of KSIR Capital
Management, an investment firm focused on gold and silver equities.
He knows the gold and silver business inside and out, having visited
mines in many countries.
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