The Fed’s Stealth Tightening

The Fed’s Stealth Tightening

By Bud Conrad, Chief Economist

As expected, the Fed tapered its purchases of mortgage-backed securities on Wednesday to $15 billion per month and its purchases of longer-term Treasury securities to $20 billion per month.

That means total monthly purchases, which were $85 billion last year, are now down to $35 billion. That’s a significant cut.

The Fed also cut the range of its full-year 2014 real GDP growth forecast, from 2.8% – 3.0% down to 2.1% – 2.3%. That was no surprise, considering that GDP in Q1 was negative 1%, and it may have been a bit of a warning.

Those who are familiar with my work know my no-confidence stance on Fed prognostication. But just to make my opinion clear: I think the Fed is in the business of obscuring the truth. Official inflation numbers vastly understate actual price rises:

  • Housing in California is back to its pre-crisis peak;
  • Stocks are at record levels;
  • Food prices jumped 0.7% in May alone; and
  • Anyone who drives knows that a tank of gas is far more expensive than it was a year ago.

The Fed’s claim that inflation is contained and that there is no need to raise interest rates is just a show put on for people who believe the government. If we applied a more accurate inflation rate to GDP calculations, real GDP would not be growing at all.

My point is that the Fed and the media tell us things are better than they actually are. Meanwhile, the Fed is taking secret actions that reveal where Yellen and friends really think the economy might be headed.

The Fed’s New Tool: Reverse Repo

Traders have used Repurchase Agreements (“repos”) for decades. A repo is essentially a collateralized loan. A borrower sells government securities to a lender and buys them back later at an agreed-upon date and slightly higher price. The lender takes on very little risk to earn a small amount of compensation while it holds the government securities as collateral.

Repos can last for any amount of time, but they are often ultra-short-term. Overnight repos are the most common.

The Fed has announced that it’s using “reverse repos” as a new tool to manage monetary policy. Don’t let “reverse” confuse you: Reverse repos are just a way the Fed soaks up cash from financial institutions. The Fed is the “borrower,” swapping its Treasuries for banks’ cash. You might call it the opposite of quantitative easing: reverse repos drain money from the financial system.

The Fed can also use repos to add money to the system, as it did in the early stages of the 2008 Credit Crisis:

By netting repos with reverse repos, we can see their combined effect on monetary policy over time:

As you can see, the Fed is quietly using reverse repos to drain the money supply. Remember, this is on top of the taper. Net, the Fed is being less accommodative than most are aware of.

How Repos Fit into the Fed’s Balance Sheet

The following chart illustrates how the Fed’s liabilities (sources of funding) changed dramatically during the financial crisis.

The Fed funded and continues to fund its quantitative easing programs with bank deposits. Here’s the rundown on how that works:

  1. The Fed creates cash from thin air.
  1. The Fed buys Treasuries and mortgage-backed securities (MBS) from banks with that freshly minted cash.

The Fed pays banks 0.25% interest as an incentive to keep the new cash on deposit at the Fed.

That huge $2.8 trillion in deposits is a risk source, because the financial institutions could withdraw those funds at any time, if they think they can generate better returns than the 0.25% interest that the Fed pays.

Reverse repos are also a source of funding for the Fed: they provide cash for the Fed to continue purchasing Treasuries and mortgage-backed securities.

Though reverse repos are only a small portion of the Fed’s balance sheet, they are important. As the growth of the yellow “deposits” has trailed off, reverse repos have picked up much of the slack.

In effect, the Fed has sopped up $200 billion in the last nine months in “stealth tightening.” I use the word “stealth,” because most investors, and even most Fed watchers, aren’t aware of the effects of reverse repos.

You’re probably wondering, “What’s the Fed’s ultimate plan here?”

I think that the Fed is using reverse repos to build up a hidden source of funding so that it can unwind its tightening quietly, if need be. The Fed now has $200 billion in “ammunition” that it can deploy without much (or any) fanfare, because nobody is following this closely. “Reverse Repos” isn’t the headline grabber that “Quantitative Easing” is.

As a side note, notice that the Fed’s capital is so small that you can barely see it. If the Fed were a bank subject to market forces, the slightest negative surprise would render it insolvent. But of course, it has a monopoly over the printing press, so it needn’t worry about such things.

One last reason the Fed might be secretly building a rainy-day fund: As my analysis in the newest issue of The Casey Report demonstrates, foreigners have recently stopped lending money to the US. That’s a huge problem for a country that had a $111.2 billion trade deficit in the first quarter alone, and will spend half a trillion more dollars than it takes in during 2014.

As I said earlier, the Fed has been very quiet about this repo program, so we can only surmise what its true motivations are. But as the US government’s lender of last resort, the Fed may be raising this source of cash so it can lend more money to the US government as foreign lending continues to dry up.

In conclusion, the credit crisis of 2008 changed our financial system in many ways. Whether this latest repo experiment is just another Band-Aid on the money balloon or something more, it’s well worth keeping an eye on.

You can find my data-driven analysis in every single edition of The Casey Report. Start your 90-day risk-free trial now to read the current issue plus two more, access all of the current stock picks, and peruse the archives before deciding if The Casey Report is for you. If it’s not, no problem—just call or email for a full and prompt refund. Click here to start your no-risk trial subscription to The Casey Report straightaway.]

The article The Fed’s Stealth Tightening was originally published at caseyresearch.com.

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What Is Worse Than Being at Risk?

What Is Worse Than Being at Risk?

By Dennis Miller

You may have heard the old adage: “What is worse than being lost? Not knowing you are lost.” In that same vein: What is worse than being at risk? You guessed it! Not knowing you’re at risk.

For many investors, portfolio diversification is just that. They think they are protected, only to find out later just how at risk they were.

Diversification is the holy grail of portfolio safety. Many investors think they are diversified in every which way. They believe they are as protected as is reasonably possible. You may even count yourself among that group. If, however, you answer “yes” to any of the following questions, or if you are just getting started, I urge you to read on.

  • Did your portfolio take a huge hit in the 2008 downturn?
  • Was your portfolio streaking to new highs until the metals prices came down a couple years ago?
  • Do oil price fluctuations have a major impact on your portfolio?
  • When interest rates tanked in the fall of 2008, did a major portion of your bonds and CDs get called in?
  • Are you nervous before each meeting of the Federal Reserve, wondering how much your portfolio will fluctuate depending on what they say?
  • Has your portfolio grown but your buying power been reduced by inflation?
  • Do you still have a tax loss carry forward from a stock you sold more than three years ago?

There are certain lessons most of us learn the hard way—through trial and error. But that can be very expensive. Ask anyone who has a loss carry forward and they will tell you that the government is your business partner when you are winning. When you are losing, you are on your own.

The old saying rings true here: “When the student is ready to learn, the teacher shall appear.” Sad to say, for many investors that happens after they have taken a huge hit and are trying to figure out how to prevent another one.

Alas, there is an easier way. Anyone who has tried to build and manage a nest egg will agree it is a long and tedious learning experience. The key is to get educated without losing too much money in the meantime.

Avoid Catastrophic Losses

The goal of diversification is to avoid catastrophic losses. In the past, we’ve mentioned correlation and shared an index related to our portfolio addition. The scale ranges from +1 to -1. If two things move in lockstep, their correlation rates a +1. If the price of oil goes up, as a general rule the price of oil stocks will also rise.

If the two things move in the opposite direction (a correlation of -1), we can also predict the results. If interest rates rise, long-term bond prices will fall and generally so will the stocks of homebuilders.

At the same time, a correlation of zero means there is no determinable relationship. If the price of high-grade uranium goes up, more than likely it will not affect the market price of Coca-Cola stock. So, your goal should be to minimize the net correlation of your portfolio so no single event can negatively impact it catastrophically.

General Market Trends

An investor with mutual funds invested in Large Cap, Mid Cap, and Small Cap stocks may think he is well diversified with investments in over 1,000 different companies. Ask anyone who owned a stable of stock mutual funds when the market tumbled in 2008 and they will tell you they learned a lesson.

Mr. Market is not known to be totally rational and many have lost money due to “guilt by association.” When the overall stock or bond market starts to fall, even the best-managed businesses are not immune to some fallout. While the Federal Reserve has pumped trillions of dollars into the system, there is no guarantee the market will rebound as quickly as it has in the last five years. The market tanked during the Great Depression and it took 25 years to return to its previous high.

If you listen to champions of the Austrian business cycle theory, they will tell you the longer the artificial boom, the longer and more painful the eventual bust. Mr. Market can dish out some cruel punishment.

Diversification is indeed the holy grail, but there are some risks which diversification cannot mitigate entirely. No matter how hard you try to fortify your bunker, sooner or later we will learn of a bunker buster. There are times when minimizing the damage and avoiding the catastrophic loss is all anyone can do.

Sectors

Allocating too much of your portfolio to one sector can be dangerous. This is particularly true if a single event can happen that could give you little time to react. While no one predicted the events of September 11, people who held a lot of airline stocks took some tough losses. Guilt by association also applied here. After September 11, the stocks of the best-managed airlines, hotels, and theme parks took a downturn.

When the tech bubble and real estate bubble burst, the stock prices of the best-run companies dropped along with the rest of the sector, leaving investors to hope their prices would rebound quickly.

Geography

One of the major factors to consider when investing in mining and oil stocks is where they are located. It is impossible to move a gold mine or an oil well that has been drilled. Many governments are now imposing draconian taxes on these companies, which negatively impacts shareholders. In some cases, this can be a correlation of -1. If an aggressive government is affecting a particular oil company, other companies in different locations may have to pick up the slack and their stock may rise in anticipation of increased sales.

Many governments around the world have become very aggressive with environmental regulation, costing the industry billions of dollars to comply. If you want to invest in companies that burn or sell anything to do with fossil fuels, you would do well to understand the political climate where their production takes place.

Investors who prefer municipal bonds must make their own geographical rating on top of the ratings provided for the various services. States like Michigan and Illinois are headed for some rough times. I wouldn’t be lending any of them my money in the current environment no matter what the interest rate might be.

Currency Issues

Inflation is public enemy number one for seniors and savers. One of the advantages of currencies is they always trade in pairs. If one currency goes up, another goes down. If the majority of your portfolio is in one currency, you are well served to have investments in metals and other vehicles good for mitigating inflation.

Tim Price sums it up this way in an article posted on Sovereign Man:

“Why do we continue to keep the faith with gold (and silver)? We can encapsulate the argument in one statistic.

“Last year, the US Federal Reserve enjoyed its 100th anniversary. … By 2007, the Fed’s balance sheet had grown to $800 billion. Under its current QE program (which may or may not get tapered according to the Fed’s current intentions), the Fed is printing $1 trillion a year. To put it another way, the Fed is printing roughly 100 years’ worth of money every 12 months. (Now that’s inflation.)”

It is difficult to determine when the rest of the world will lose faith in the US dollar. Once one major country starts aggressively unloading our dollars, the direction and speed of the tide could turn quickly.

Interest-Rate Risk

The Federal Reserve plays a major role in determining interest rates. Basically they have instituted their version of price controls and artificially held interest rates down for over five years. Interest-rate movement affects many markets: housing, capital goods, and some aspects of the bond markets. While it also makes it easier for businesses to borrow money, they are not likely to make major capital expenditures when they are uncertain about the direction of the economy.

While holders of long-term, high-interest bonds had an unexpected gain when the government dropped rates, their run will eventually come to an end as rates rise. Duration is an excellent tool for evaluating changes in interest rates and their effect on bond resale prices and bond funds. (See our free special report Bond Basics, for more on duration.)

While interest rates have been rising, when you factor in duration there is significant risk, even with the higher interest offered for 10- to 30-year maturities. Again, having a diversified portfolio with much shorter-term bonds helps to mitigate some of the risk.

Risk Categories of Individual Investments

While investors have been looking for better yield, there has been a major shift toward lower-rated (junk) bonds. Many pundits have pointed out that their default rate is “not that bad.”

At the same time, the lure of highly speculative investments in mining, metals, and start-up companies with good write-ups can be very appealing. There is merit to having small positions in both lower-rated bonds and speculative stocks because they offer terrific potential for nice gains.

So What Can Income Investors Do?

There are a number of solid investments out there that offer good return, with a minimal amount of risk exposure and that won’t move because of an arbitrary statement by the Fed. It’s not always easy to find them, but there is hope for people wondering what to do now that all of the old adages about retirement investing are no longer true.

There are three important facets of a strong portfolio: income, opportunities and safety measures. Miller’s Money Forever helps guide you through the better points of finance, and helps replace that income lost in our zero-interest-rate world—with minimal risk.

This is where the value of one of the best analyst teams in the world comes into focus. We focus on our subscribers’ income-investing needs, and I challenge our analysts to find safe, decent-yielding, fixed-income products that will not trade in tandem with the steroid-induced stock market—or alternatively, ones that will come back to life quickly if they do get knocked down with the market. They recently showed me seven different types of investments that met my criteria and still withstood our Five-Point Balancing Test.

My peers are of having holes blown in their retirement plans. While nuclear-bomb-shelter safe may be impossible, we still want a bulletproof plan.

This is what we’ve done at Money Forever: built a bulletproof, income-generating portfolio that will stand up to almost anything the market can throw at it.

It is time to evolve and learn about the vast market of income investments safe enough for even the most risk-wary retirees. Some investors may want to shoot for the moon, but we spent the bulk of our adult lives building our nest eggs; it’s time to let them work for us and enjoy retirement stress-free. Learn how to get in, now.

The article What Is Worse Than Being at Risk? was originally published at millersmoney.com.

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Junior Mining Stocks to Beat Previous Highs

Junior Mining Stocks to Beat Previous Highs

By Laurynas Vegys, Research Analyst

Despite last week’s pullback, the precious metals market is off to an impressive start in 2014. Gold is up 10.6%, silver 4.3%, and the PHLX Gold/Silver (XAU) 17.1%. Gold, in particular, had a great February, rising above $1,300 for the first time since November 7, 2013.

This has led to some very handsome gains in our Casey International Speculator portfolio, with a few of our recommendations already logging triple-digit gains from their recent bottoms.

Why Junior Gold Mining Stocks Are Our Favorite Speculations

One of Doug Casey’s mantras is that one should buy gold for prudence, and gold stocks for profit. These are very different kinds of asset deployment.

In other words, don’t think of gold as an investment, but as wealth protection. It’s the only highly liquid financial asset that is not simultaneously someone else’s obligation; it’s value you can liquidate and use to secure your needs. Possessing it is prudent.

Gold stocks are for speculation because they offer leverage to gold. This is actually true of all mining stocks, but the phenomenon is especially strong in the highly volatile precious metals.

Most typical “be happy you beat inflation” returns simply can’t hold a candle to stocks that achieved 10-bagger status (1,000% gains). In previous bubbles—some even generated 100-fold returns. And we may see such returns again.

It’s Not Too Late to Make a Fortune

Here’s a look at our top three year-to-date gainers.

What’s especially remarkable is that all three of these stocks shot up much more than gold itself, on essentially no company-specific news. This is dramatic proof of just how much leverage the right mining stocks can offer to movements in the underlying commodity—gold, in this case. Two of the stocks above are on our list of potential 10-baggers, by the way.

So have you missed the boat? Is it too late to buy?

Looking at the chart, two bullish factors jump out immediately:

  • Gold stocks have just now started to move up from a similar level in 2008.
  • Gold stocks remain severely undervalued compared to the gold price. A simple reversion to the mean implies a tremendous upside move.

Now consider the following data that point to a positive shift in the gold market.

  1. After 13 consecutive months of decline, GLD holdings were up over 10.5 tonnes last month. The trend is similar to other ETFs.
  1. Hedge funds and other large speculators more than doubled their bets on higher gold prices this year.
  1. Increase in M&A—for example, hostile bids from Osisko and HudBay Minerals to buy big assets.
  1. Apollo, KKR, and other large private equity groups have emerged as a new class of participants in the sector.
  1. Gold companies’ hedging of future production—usually a sign of insecurity among the miners—shrunk to the lowest level in 11 years.
  1. China continues to consume record amounts of gold and officially overtook India as the world’s largest buyer of gold in 2013.
  1. Large players in the gold futures market that were short have switched to being long.
  1. Central banks continue to be net buyers.

To top it off, there’s been no fallout (yet) from the unprecedented currency dilution undertaken since 2008—and we don’t believe in free lunches.

The gold mania train has not yet left the station, but the engine is running and the conductor has the whistle in his mouth. This means…

Any correction ahead is a potential last-chance buying opportunity before the final mania phase of this bull cycle takes our stock to new highs, well above previous interim peaks.

In spite of the good start to 2014, most of our 10-bagger gold stocks are still on the deep-discount rack. And you can get all of them with a risk-free, 3-month trial subscription to our monthly advisory focused on junior mining stocks, the Casey International Speculator.

If you sign up today, you can still get instant access to two special reports detailing which stocks are most likely to gain big this year: Louis James’ 10-Bagger List for 2014 and 7 Must-Own Stocks for 2014.

Test-drive the International Speculator for 3 months with a full money-back guarantee, and if it’s not everything you expected, just cancel for a prompt, courteous refund of every penny you paid. Click here to get started now.

I hope you will take advantage of this opportunity in front of us—while shares are still relatively cheap.

The article Junior Mining Stocks to Beat Previous Highs was originally published at caseyresearch.com.

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Check your credit score and deal with the discrepancies all by yourself

Credit score and the report are in a way the indicators of your financial well being. It is therefore essential that you understand how they work and learn the ways to get any of the discrepancies removed from them for your own benefit.

Credit score is a three digit numerical number which is very important for a person as it decides that whether you will be provided with finance or not. Lenders decide to lend money after looking on your credit score whether it is good or not. It is good for you that you check your credit score twice or thrice a year. You must have seen on internet or television advertisement regarding free credit report and scores.

There was a time when very few people where aware as to what the credit scores are and the way they influence our lives. However, with the passage of time and the coming in of the recession where majority of people were faced with a crisis situation, credit score is now at the forefront and the much talked about topic in the financial world. Everyone is aware of the way it influences an individuals financial credibility and also how important it is to deal with them in time.

Looking at the high number of cases of bad credit, the government is also keen to let people know about their credit score and educate them about the ways it affects them and the ways to deal with them and maintain high credit scores. In an attempt to make it easier for the common man to access their credit reports the government initiated an act whereby all the bureaus are required to offer free credit access to all the individuals once in a year.

To make things simpler here are some of the ways which can help you deal with your credit score and know exactly where you need to approach to get hands on your credit report.

Deal with your credit score

There are many ways to check your credit score but the best one is annualcreditreport.com in which you can look at your credit score for free once a year and after that you will be charged with $8 for each agencies where you will check your credit score. It gives this service free for the first time without any terms and conditions. One can get the access within no time by accessing the information trough the website and can take timely steps to catch hold of any errors in the report.

If in case you have used your free credit check service then you have  another option of viewing your credit score by going personally to the credit reporting agencies or you can go to myfico.com to look for your credit score which will charge you $15 for per report. If in case you are just planning to look for your credit score then it will be advisable that you go with only one agency and if you are viewing your credit score to improve it then it will be good for you to look for all three credit reporting agencies.

The last method of viewing your credit score is not a good option and experts recommend people to go with the first two options but not with this option as it’s very expensive. In this method they ask for your credit card number and allow you to view your credit report for a specific period of time and after that they start charging you monthly with some amount which will be added on your credit card bill. That is why it is very expensive method and you’ll get many complaints of customers for this website.

Loans and the credit score

Here are some reasons that why you need to check your credit score often

As you enter on a weight lose program then you generally notice that you have to keep on checking your weight regularly as to look whether it is decreasing or increasing, in the same way credit score is your financial health for which you have to keep on looking that whether your credit score is increasing or decreasing. If in case it’s decreasing then you have to take certain measures to improve your credit score as lenders decide by your credit score whether to lend you money or not.

Here in this article you’ll know further as to why credit score should be monitored.

You must have noticed that there are many people who face financial hardship. People usually blame bad economic condition behind their reason of getting in deep debt. But the actual reason for getting into deep debt is their bad financial management.

It is important for a person to keep on looking for their credit score time to time and if in case they find it getting decreases then they should find some measures to improve their credit score. Usually people look for their credit score when they need to borrow some money. Looking for credit score only while applying for loans for people with bad credit  is not the right thing; a person should keep on checking their credit score to be safe from further problems in getting approval for loan.

The most important reason for looking of your credit score is to be safe from identity theft. Usually it has been noticed that your identity is stolen and the n a loan is taken on your name. so that is why credit check is important as it will keep  a track on your fiancé and if there will be any miss movement by your name then you can easily track it and look out for measures to be safe from it. If in case your identity is stolen and someone else took a loan on your name then you your credit score will get lowered and if there will be no repayment of loan then your credit score will get affected negatively.

Another thing which states that there is necessity of checking your credit score time to time is to take out measures for repairing your credit score. Credit score is repaired slowly so you have to keep on looking on your credit score to find out ways by which you can get your credit score improved. People think that if they pay the monthly minimum balance of their credit card then their credit score get improved but the fact is it get lowered. To improve your credit score it is important for you to pay off your payday loans no credit check balance in full. It is important for a person to hold a strong credit score as every further financial decision by lenders are given on the basis of your credit score only.

Even you should keep on checking your credit score to look out for any type of errors in your credit report. Even sometimes there are times that credit reporting agencies enter some wrong information in credit report because of which your credit score is lowered down. You can track this wrong information and then you can report this mistake to credit reporting agencies with documents as a proof then your credit score will get repaired.

With all the knowledge about dealing with your credit report with you, all you need to do is to take the right approach and also take on the bureaus with a strong follow up in place to deal with all the discrepancies you have in your credit report. Learn how to assess the information in the credit report and deal with them at the earliest if you want to see your credit score in the top limits well above 700.

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9 Secrets for Successful Speculation

Doug Casey’s 9 Secrets for Successful Speculation

By Louis James, Chief Metals & Mining Investment Strategist

When I started working for Doug Casey almost 10 years ago, I probably knew as much about investing as the average Joe, but I now know that I knew absolutely nothing then about successful speculation.

Learning from the international speculator himself—and from his business partner, David Galland, to give credit where due—was like taking the proverbial drink from a fire hose. Fortunately, I was quite thirsty.

You see, just before Doug and David hired me in 2004, I’d had something of an epiphany. As a writer, most of what I was doing at the time was grant-proposal writing, asking wealthy philanthropists to support causes I believed in. After some years of meeting wealthy people and asking them for money, it suddenly dawned on me that they were nothing like the mean, greedy stereotypes the average American envisions.

It’s quite embarrassing, but I have to admit that I was surprised how much I liked these “rich” people—not for what they could do for me, but for what they had done with their own lives. Most of them started with nothing and created financial empires. Even the ones who were born into wealthy families took what fortune gave them and turned it into much more. And though I’m sure the sample was biased, since I was meeting libertarian millionaires, these people accumulated wealth by creating real value that benefited those they did business with. My key observation was they were all very serious about money—not obsessed with it, but conscious of using it wisely and putting it to most efficient use. I greatly admired this; it’s what I strive for myself now.

But I’m getting ahead of myself. The reason for my embarrassment is that my surprise told me something about myself; I discovered that I’d had a bad attitude about money.

This may seem like a philosophical digression, but it’s an absolutely critical point. Without realizing that I’d adopted a cultural norm without conscious choice, I was like many others who believe that it is unseemly to care too much about money. I was working on saving the world, which was reward enough for me, and wanted only enough money to provide for my family.

And at the same instant my surprise at liking my rich donors made me realize that—despite my decades of pro-market activism—I had been prejudiced against successful capitalists, I realized that people who thought the way I did never had very much money.

It seems painfully obvious in hindsight. If thinking about money and exerting yourself to earn more of it makes you pinch your nose in disgust, how can you possibly be effective at doing so?

Well, you can’t. I’m convinced that while almost nobody intends to be poor, this is why so many people are. They may want the benefits of being rich, but they actually don’t want to be rich and have a great mental aversion to thinking about money and acting in ways that will bring more of it into their lives.

So, in May of 2004, I decided to get serious about money. I liked my rich friends and admired them all greatly, but I didn’t see any of them as superhuman. There was no reason I could not have done what any of them had done, if I’d had the same willingness to do the work they did to achieve success.

Lo and behold, it was two months later that Doug and David offered me a job at Casey Research. That’s not magic, nor coincidence; if it hadn’t been Casey, I would have found someone else to learn from. The important thing is that had the offer come two months sooner, being a champion of noble causes and not a money-grubbing financier, I would have turned it down.

I’m still a champion of noble causes, but how things have changed since I enrolled in “Casey U” and got serious about learning how to put my money to work for me, instead of me having to always work for money!

Instead of asking people for donations, I’m now the one writing checks (which I believe will get much larger in the not-too-distant future). I can tell you this is much more fun.

How did I do it? I followed Doug’s advice, speculated alongside him—and took profits with him. Without getting into the details, I can say I had some winning investments early on. I went long during the crash of 2008 and used the proceeds to buy property in 2010. I took profits on the property last year and bought the same stocks I was recommending in the International Speculator last fall, close to what now appears to have been another bottom.

In the interim, I’ve gone from renting to being a homeowner. I’ve gone from being an investment virgin to being one of those expert investors you occasionally see on TV. I’ve gone from a significant negative net worth to a significant nest egg… which I am happily working on increasing.

And I want to help all our readers do the same. Not because all we here at Casey Research care about is money, but because accumulating wealth creates value, as Doug teaches us.

It’s impossible, of course, to communicate all I’ve learned over my years with Doug in a simple article like this. I’m sure I’ll write a book on it someday—perhaps after the current gold cycle passes its coming manic peak.

Still, I can boil what I’ve learned from Doug down to a few “secrets” that can help you as they have me. I urge you to think of these as a study guide, if you will, not a complete set of instructions.

As you read the list below, think about how you can learn more about each secret and adapt it to your own most effective use.

Secret #1: Contrarianism takes courage.

Everyone knows the essential investment formula: “Buy low, sell high,” but it is so much easier said than done, it might as well be a secret formula.

The way to really make it work is to invest in an asset or commodity that people want and need but that for reasons of market cyclicality or other temporary factors, no one else is buying. When the vast majority thinks something necessary is a bad investment, you want to be a buyer—that’s what it means to be a contrarian.

Obviously, if this were easy, everyone would do it, and there would be no such thing as a contrarian opportunity. But it is very hard for most people to think independently enough to risk hard-won cash in ways others think is mistaken or too dangerous. Hence, fortune favors the bold.

Secret #2: Success takes discipline.

It’s not just a matter of courage, of course; you can bravely follow a path right off a cliff if you’re not careful. So you have to have a game plan for risk mitigation. You have to expect market volatility and turn it to your advantage. And you’ll need an exit strategy.

The ways a successful speculator needs discipline are endless, but the most critical of all is to employ smart buying and selling tactics, so you don’t get goaded into paying too much or spooked into selling for too little.

Secret #3: Analysis over emotion.

This may seem like an obvious corollary to the above, but it’s a point well worth stressing on its own. To be a successful speculator does not require being an emotionless robot, but it does require abiding by reason at times when either fear or euphoria tempt us to veer from our game plans.

When a substantial investment in a speculative pick tanks—for no company-specific reason—the sense of gut-wrenching fear is very real. Panic often causes investors to sell at the very time they should be backing up the truck for more.

Similarly, when a stock is on a tear and friends are congratulating you on what a genius you are, the temptation to remain fully exposed—or even take on more risk in a play that is no longer undervalued—can be irresistible. But to ignore the numbers because of how you feel is extremely risky and leads to realizing unnecessary losses and letting terrific gains slip through your fingers.

Secret #4: Trust your gut.

Trusting a gut feeling sounds contradictory to the above, but it’s really not. The point is not to put feelings over logic, but to listen to what your feelings tell you—particularly about company people you meet and their words in press releases.

“People” is the first of Doug Casey’s famous Eight Ps of Resource Stock Evaluation, and if a CEO comes across like a used-car salesman, that is telling you something. If a press release omits critical numbers or seems to be gilding the lily, that, too, tells you something.

The more experience you accumulate in whatever sector you focus on, the more acute your intuitive “radar” becomes: listen to it. There’s nothing more frustrating than to take a chance on a story that looked good on paper but that your gut was warning you about, and then the investment disappoints. Kicking yourself is bad for your knees.

Secret #5: Assume Bulshytt.

As a speculator, investor, or really anyone who buys anything, you have to assume that everyone in business has an angle. Their interests may coincide with your own, but you can’t assume that.

It’s vital to keep in mind whom you are speaking with and what their interest might be. This applies to even the most honest people in mining, which is such a difficult business, no mine would ever get built if company CEOs put out a press release every time they ran into a problem.

A mine, from exploration to production to reclamation, is a nonstop flow of problems that need solving. But your brokers want to make commissions, your conference organizers want excitement, your bullion dealers want volume, etc. And, yes, your newsletter writers want to eat as well; ask yourself who pays them and whether their interests are aligned with yours or the companies they cover.

(Bulshytt is not a typo, but a reference to Neal Stephenson’s brilliant novel, Anathem, which defines the term, briefly, as words, phrases, or even entire books or speeches that are misleading or empty of meaning.)

Secret #6: The trend is your friend.

No one can predict the future, but anyone who applies him- or herself diligently enough can identify trends in the world that will have predictable consequences and outcomes.

If you identify a trend that is real—or that at least has an overwhelming amount of evidence in its favor—it can serve as both compass and chart, keeping you on course regardless of market chaos, irrational investors, and the ever-present flood of bulshytt.

Knowing that you are betting on a trend that makes great sense and is backed by hard data also helps maintain your courage. Remember; prices may fluctuate, but price and value are not the same thing. If you are right about the trend, it will be your friend. Also, remember that it’s easier to be right about the direction of a trend than its timing.

Secret #7: Only speculate with money you can afford to lose.

This is a logical corollary to the above. If you bet the farm or gamble away your children’s college tuition on risky speculations—and only relatively risky investments have the potential to generate the extraordinary returns that justify speculating in the first place—it will be almost impossible to maintain your cool and discipline when you need it.

As Doug likes to say; it’s better to risk 10% of your capital shooting for 100% gains than to risk 100% of your capital shooting for 10% gains.

Secret #8: Stack the odds in your favor.

Given the risks inherent in speculating for extraordinary gains, you have to stack the odds in your favor. If you can’t, don’t play.

There are several ways to do this, including betting on People with proven track records, buying when market corrections put companies on sale way below any objective valuation, and participating in private placements. The most critical may be to either conduct the due diligence most investors are too busy to be bothered with, or find someone you can trust to do it for you.

Secret #9: You can’t kiss all the girls.

This is one of Doug’s favorite sayings, and though seemingly obvious, it’s one of the main pitfalls for unwary speculators.

When you encounter a fantastic story or a stock going vertical and it feels like it’s getting away from you, it can be very, very difficult to do all the things I mention above. I can tell you from firsthand experience, it’s agonizing to identify a good bet, arrive too late, and see the ship sail off to great fortune—without you.

But if you let that push you into paying too much for your speculative picks, you can wipe out your own gains, even if you’re betting on the right trends.

You can’t kiss all the girls, and it only leads to trouble if you try. Fortunately, the universe of possible speculations is so vast, it simply doesn’t matter if someone else beats you to any particular one; there will always be another to ask for the next dance. Bide your time, and make your move only when all of the above is on your side.

Final Point

These are the principles I live and breathe every day as a speculator. The devil, of course, is in the details, which is why I’m happy to be the editor of the Casey International Speculator, where I can cover the ins and outs of all of the above in depth.

Right now, we’re looking at an opportunity the likes of which we haven’t seen in years: thanks to the downturn in gold—which now appears to have subsided—junior gold stocks are still drastically undervalued.

My team and I recently identified a set of junior mining companies that we believe have what it takes to potentially become 10-baggers, generating 1,000%+ gains. If you don’t yet subscribe, I encourage you to try the International Speculator risk-free today and get our detailed 10-Bagger List for 2014 that tells you exactly why we think these companies will be winners. Click here to learn more about the 10-Bagger List for 2014.

Whatever you do, the above distillation of Doug’s experience and wisdom should help you in your own quest.

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What GM, GS and XOM Do, So Does the Broad Market

Over the years working with professional traders I found it interesting how each individual has their bellwether stock they follow to gauge the stock markets trend and identify reversals before they take place.

About 10 years ago I traded with a floor trader who swore that whatever GS (Goldman Sachs) did the market followed. Another said he only used XOM (Exxon Mobile), while Stan Weinstein says GM (General Motors) was the stock to follow.

While each of these traders have been highly successful with their bellwether stock, I wanted to cover these in more detail and show you have to get the best of each of their strategies working for you. This will help you properly time the market, identify the overall market health and at which point you should be getting long or short stocks in your portfolio.

Watch this quick video below:

If you would like to successfully trade both bull and bear markets then join my trading and investing newsletter today and catch the next hot sectors for 2014 using my ETF Trading Strategies.

Chris Vermeulen
www.TheGoldAndOilGuy.com

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

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A Golden Rocket – Best of the Breed

Gold and gold stocks have be stabilizing for months and have been quietly rising. Many gold stocks are up 30% even 50% in the past three months. The $HUI AMEX Gold Bugs Index is up over 30% from the lows.

If you think you have missed most of the move already you are wrong. The truth is most of the biggest rallies in stocks take place after a basing pattern with 30 -50% or more has formed. This is signaling massive accumulation in gold stocks and its happening right now by the institutions.

So in this exclusive report I want to share one golden rocket stock pick which I feel has huge upside potential “IF” the precious metals market and miners can breakout of this stage 1 pattern it has formed.

One thing that excites me is about precious metals and gold stocks is the fact that we have heard nothing about gold, silver or mining stocks in the media for months… almost like the big institutions have told the media to avoid putting the spot light on it until they accumulate all they can in terms of physical bullion and stock shares.

This is the same for a few other sectors I have been watching build massive stage 1 bases in over the past few months and will be investing and actively trading them also once they break out of the basing stage.

Gold Stock Trading & Investing Success Formula

1. KISS – Keep It Simple Stupid! – Non one likes or follows complicated trading strategies

2. Understand and know how to identify the four market stages – Read My Book: Click Here

3. Know why and how stages must be traded for timing your entry, profit taking and exits.

4. Scan the market for the top performing sectors and focus on stocks/ETFs within those sectors.

5. Review all stocks and funds to meet setup criteria and trade only the best looking charts primed to start a new bull market (low overhead resistance nearby, strong relative strength, strong volume on breakout, 30 week SMA moving up etc..) Get this done for you: Click Here

6. Sit back, watch and monitor position for possible change in the stage, to adjust stops and identify profit taking levels.

Golden Rock Stock Pick

The chart below is top quality gold stock which has all the characteristics of a big winner. Just to be clear, I normally do not mention individual stocks within public reports. I am not compensated in any way to post this report. This is nothing more than my technical outlook on a stock and not investment advice. I do plan on buying some shares of this company this week or next.

Gold Forecast – Gold Stock Picks

Golden Rocket Conclusion:

While it still my be a little early for precious metals to bottom, it looks as though the stage (pardon the pun) has been set for a precious metals bull market to start. As they say, there is always a bull market somewhere… the key is finding it and taking the proper action.

If you want simple, hassle free trading and investing join my newsletter today.

Chris Vermeulen – www.TheGoldAndOilGuy.com

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

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Are student loan consolidation a better idea?

Consolidating multiple debts by means of the consolidation loan is always a welcome decision for the students as it comes with a lot of benefits. However, one must not forget that these loans are required to be repaid and they are only restructured as a result of the consolidation decision.

Whether you have been careless or very careful, given the current economic scenario you have all the chances of taking multiple loans. There are very few parents who will be able to completely fund their children’s education given the cost involved in the same. Apart from this one cannot fund their complete education by the Federal loans because they have their defined cap limits. Federal student loans for bad credit  are the government sponsored loans which are meant to provide support to the students who belong to the lower income group. In order to facilitate more and more student government has put a cap on the funds which can be utilized for the same. This is done keeping in view the limited funds that are available for the purpose.

However, in the light of the above facts one can find that the Federal loans are not going to be sufficient to offer them the desired funds for education in the current scenario. Students therefore have to take loans from the private lenders to suffice their needs. This automatically forces one into the multiple loans mode and looking at the circumstances it is difficult to avoid it also.

Multiple loans can help one complete their education but with them comes a lot of responsibilities too. Each loan has its own repayment cycle which needs to be followed. There are separate interest rates on these loans and they add up to a large amount of extra money to be given to the lenders. Each loan will have a different due date and one has to make the repayments accordingly. This means that there is a likelihood that one can miss on the payments too.

In order to get rid of the multiple debts one can go for the consolidation process. Under this all the debts are repaid by taking a new larger loan, which is referred to as the consolidation loan.

However, getting a consolidation loan might not be an easy process since there are a lot of people eyeing the same. Moreover given the current economic situation the number of people with bad credit has been increasing continuously. So before taking a consolidation loan one should understand all the inherent dynamics, eligibility criteria, advantages and the disadvantages of the same.

Eligibility Requirements
you are eligible to consolidate loans:

  • If you are not enrolled in any school, i.e. You have completed your education.
  • If you are not able to make payment for your loan. Or you are in loan’s grace period.
  • If you are not having a bad repayment history or you have done justice to your current debts.
  • If your loan range between $5,000-$7,500 in loans

You have to keep the fact in your mind that you can consolidate loan which is in your name you cannot consolidate someone else’s loan with your loan. For example you took a loan for your education on your name but your parent also took a loan for your education, if you think to consolidate these two loans you will be barred from doing so. You cannot consolidate your own loan with the loan which your parents took for you.

Advantages of consolidating your loan

These are some advantages of consolidating your loans:

1. Simplify your payment dates. When you have more than one student loan, then you have to make more than one payment in a month which is difficult to remember the dates but by consolidation you have to make just one payment in a month which is easy to remember and check.   

2. It Extends repayment term. When you feel that you are facing many         difficulties in paying off your loan by a change in your income and expenses you think of consolidating your loan so that you can lengthen the time period of your loan. New amount and time is given to you to repay your loan with a new interest rate.

3. Lowering the current interest rate. If you are making payment of more          than one student loan you have to give certain interest on that loan, but if you consolidate your loan you have to pay just one loan whose interest rate will be less than whatever you had before the consolidation.

4. Variable to fixed-rate loan system. If you are paying a private student loan with variable interest rate you can consolidate your loan which will have a fixed rate system.

5. The monthly payment gets low. When you consolidate your student loan it generally extends the loan term which means that the monthly payment of the loans will decrease and you will be entitled to a higher monthly disposable income.

6. Alternate repayment plan. Consolidation loan helps you to select any other alternative repayment plan if you are not in a condition to stick to a plan which you choose earlier. For example you took the standard repayment plan but now you cannot pay the fixed amount and you want to change your repayment plan to extend the repayment plan then you can consolidate your loans with no credit check and choose the repayment plan which suits you well.

7. Borrower benefits. There are some lenders who offer some good deals.

And if your lenders don’t offer you good deals you can consolidate your loan with that lender you will provide you some good deals. These good deals include some discounts or low interest rate etc.

Some disadvantages of loan consolidation.

  • The large loan repayment amount is there to be paid off after consolidation. There is no reduction in the overall debt status. It is only restructured which many people fail to understand and is the main reason for the failure of these loans.
  • It extends your payment duration which means you will pay your loan for the long term.
  • You lose benefits which are provided to you from your current lender like discounts rebates.
  • Chances of penalties charge to you by borrowers.
  • You lose the grace period from your borrower if you are consolidating your loan in your initial period of grace.

Be aware of Fraudulent Lenders:

You should be careful when you consolidate your student loan as many lenders make fraud while consolidating your student loan. Like when you are applying with any lender for consolidation they will offer you interest rates which they measure from the average of your old interest rates. They generally round up that interest rate to close to 1/8% of your interest rate which will seem like a lower interest rate than the old one’s but exactly it is equal to the old interest rate which you were paying it earlier.

Conclusion:

Consolidation of the student loan is not for everyone. You may face many issues while consolidation of your student loan. But however it is beneficial for those students who have plenty of loans on them. Sometime consolidation charges a bit higher rate from any other loan. You should be clear with all terms and conditions of various lenders before consolidating your student loan.

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Why Unemployment Rates Matter to Your Retirement

Why Unemployment Rates Matter to Your Retirement

By Dennis Miller

My biological clock is ticking—as is yours and everyone else’s. With each passing day, you are either moving closer to or further past the day you quit working full time. Baby boomers are retiring at a rate of 10,000 per day and will continue to do so for the next 17 years. Whether you count yourself among that group or not, understanding where economic data—such as unemployment rates and inflation—come from will make you a better investor and savvier retiree.

The Federal Reserve has some laudable goals. Its current mission includes inflation control and employment promotion, and it uses data from the Bureau of Labor Statistics (BLS) and the Departments of Labor and Commerce to formulate policy. Investors look at those same numbers, try to anticipate what the Federal Reserve might do, and invest accordingly.

On unemployment, the Fed notes:

“(I)n the most recent projections, FOMC participants’ estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 5.8 percent. Though a variety of factors influence the level of unemployment in the economy, the Federal Reserve makes monetary policy decisions that aim to foster the lowest level of unemployment that is consistent with stable prices.”

And on inflation:

“The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment. … The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.”

And here is how the Fed evaluates inflation when making policy decisions:

“(P)olicymakers examine a variety of ‘core’ inflation measures to help identify inflation trends. The most common type of core inflation measures excludes items that tend to go up and down in price dramatically or often, like food and energy items. … Although food and energy make up an important part of the budget for most households—and policymakers ultimately seek to stabilize overall consumer prices—core inflation measures that leave out items with volatile prices can be useful in assessing inflation trends.”

Hmm. There are many fallacies in that approach. Sometimes the premise or data is incorrect. Many times the Fed has made predictions that were totally incorrect and then had to jump in to try to clean up the mess when unforeseen bubbles have burst.

Debunking the statistics. The graph below shows the official BLS unemployment statistics. In December 2004 the unemployment rate was 5.4%. Since then it has gone from a low of 4.4% to a high of 10% in October 2009. The current reported rate is 6.7%.

The Federal Reserve committed to holding interest rates down until the official unemployment rate hit 6.5%. Mike Meyer, vice president at EverBank, weighed in via the Daily Pfennig:

“Based on this official number, the job market is getting a lot better. There’s only one big problem: the official number doesn’t really reflect the health of the labor market.

That probably explains why the Fed has moved away from the 6.5% target. Last November, former Fed chief Ben Bernanke said that short-term interest rates might stay near zero ‘well after’ the jobless rate falls below 6.5%. … It seems even the Fed has realized the official unemployment rate is flawed.”

Meyer also notes that many believe the reason unemployment numbers are dropping is because baby boomers are now rapidly retiring; however, the number of workers over age 55 has actually increased over the last five years.

The key to understanding unemployment rates is the Labor Force Participation Rate—meaning the percentage of the population that’s employed. When the BLS calculates the unemployment rate, it doesn’t consider a person whose unemployment benefits have run out and is no longer looking for a job to be unemployed. I guess that means if everyone quit looking for a job, the unemployment rate would be zero?

Meyers went on to write:

“The drop in the number of people who are looking for a job has helped bring the unemployment rate down. In fact, some economists estimate that if the LFPR was at the same level where it was before the recession (66.4% in January 2007), the unemployment rate would be 11.75%.”

Other think tanks like Shadow Government Statistics publish their own unemployment statistics:

“The decline in the headline U.3 unemployment rate, from 7.0% to 6.7%, was not good news. The large drop in the number of unemployed mostly reflected people becoming ‘discouraged’ and being statistically removed from the headline labor force, instead of finding jobs and returning to work. The increasing flow of discouraged workers through the broader U.6 measure, into the ShadowStats-Alternate Unemployment measure, boosted the ShadowStats unemployment rate to 23.3% from a revised 23.1%.”

We know the Federal Reserve was committed to holding interest rates low until the official unemployment rate dropped to 6.5%. That would tend to indicate people were back at work, the economy was improving, and the market could absorb higher interest rates without putting us back into a recession. Now the Fed has backed off on that commitment and is signaling it will hold interest rates down well after unemployment falls below 6.5%.

What difference does it make? For those who are investing their life savings—which they can ill afford to lose—it makes a lot of difference. There’s no point in arguing about whether unemployment is 6.7% or 23.3% or anywhere in between. What matters is how those numbers affect our investments decisions—and the decisions of others.

If the economy is doing well, that means companies are hiring and profits are increasing. It’s a good time to be heavily invested in the stock market. If the economy is not thriving and people are not working, then businesses will suffer, and many will fold. Retirees can ill afford to put a major portion of their nest eggs into the market based on a false premise. The risk is much too great.

How many of our favorite restaurants have shut down since the 2008 crash? In a down economy, business suffers and so do investors—eventually. The Federal Reserve, with its various stimulus programs, is just kicking the can down the road.

If data from the government or the private sector are unreliable—or suspected of being so—we’re investing in the unknown. Investors will move cautiously and spend less freely because they’re worried about an uncertain future.

What about inflation? The Federal Reserve has deemed a 2% inflation rate good for the economy. Inflation is a hidden tax that hurts seniors and savers immensely. If you invest in a Treasury bond paying 2% and inflation is 3%, when your bond matures you have more money in the bank but less buying power. Keep it up and you can kiss your lifestyle goodbye a lot quicker than most folks realize. Go to any potluck dinner in a 55-plus community and you will hear folks complaining about how expensive things are getting.

The Consumer Price Index is used to calculate inflation. Many people think the CPI is based on a constant basket of commonly purchased goods, with the current prices adjusted from year to year. That is inaccurate; the BLS has changed its formula many times.

Why does that matter? For one, the CPI is the basis for Social Security increases every year. Many Social Security recipients have noticed their Medicare premiums increase faster than their Social Security checks. The government has a great financial incentive to keep the official CPI number as low as possible: the lower the number, the less it has to pay.

The Federal Reserve uses many measures to calculate the impact of inflation; they just happen to exclude food and fuel, for example. That makes it hard for investors who happen to eat and drive to grasp the relevance of the numbers.

This is damn important for investors! Why? Interest rates rise during times of high inflation, which dramatically impacts the yield on government-backed securities and top-quality bonds. It’s because of inflation—and inflation fears—that savvy investors have backed off from safe, fixed-income investments. Right now, they’re a surefire way to make sure your money does not last forever.

The Fed’s zero-interest-rate policy (ZIRP) means that if you invest in US Treasuries, you will likely lose ground to inflation. That’s good for the government and bad for investors.

The BLS website has a handy inflation calculator. Most people are told to plan for 30 years of retirement. If you retire at age 65, make sure you have enough to make it to 95—and probably much longer.

According to the BLS calculator, something that cost $10,000 in 1983 will now cost $23,389.26. That presents quite an investment challenge—considering the Federal Reserve has been printing a trillion dollars a year for the last several years. Who knows what the inflation calculator will look like 30 years from now?

The market is currently trading in anticipation of what the Federal Reserve is doing (called “sentiment”) as opposed to the true growth of the economy and success of the individual businesses (called “fundamentals”). That, coupled with a great level of distrust in our government, our currency, and the role of the Federal Reserve, affects each and every investment we make.

In the meantime, the biological clocks of baby boomers continue to tick. The headline numbers for unemployment and inflation are for the benefit of the politicians, not investors. That’s why we’re dedicated to showing investors how to safely invest in today’s market. We have no choice but to put our money into investments that are riskier than the previous generation did. Still, there are safety belts available to minimize risk.

An educated investor who reads more than the headlines, understands what is really going on, and does not invest emotionally can still enjoy retirement.

Our Bulletproof Income strategy is designed to give conservative investors the best possible returns with minimal risk. Our Bulletproof Income portfolio is designed to provide safe income—well ahead of inflation—with good diversification and safety belts to protect you and your money. If you haven’t done so, I would urge you to sign up for a no-risk subscription ($99/year). Sign up and receive a copy of my book, Retirement Reboot, all of our special reports, and our monthly issues. If you decide we’re not for you, cancel within the first 90 days and receive a full refund, no questions asked. Feel free to keep the material you’ve downloaded as our thank you for taking the time to look us over. Click here to learn more and get started today.

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5 Red Flags to Notice When Working with an Advisor

5 Red Flags to Notice When Working with an Advisor

By Dennis Miller

You don’t have to be an expert at ferreting out a bad financial advisor; if you were, you probably wouldn’t need one in the first place. Thankfully, you don’t need to become an expert in finance to spot the red flags. We’ll go over a few key warning signs here.

Credentials and Experience

Financial advisors often have all sorts of certifications and association memberships. While many of them sound impressive, they’re actually not terribly difficult to acquire. For example, the Series 7 Test, which allows one to sell securities, is just a 250-question, multiple choice exam; one only has to answer 72% of the questions correctly to pass. Another key test, the Series 66, is only 100 multiple choice questions. These aren’t difficult hurdles to jump over.

For this reason, many advisors are not highly proficient in their trade, despite what the certifications imply. I know of someone who went to take the Series 7 Exam and told about meeting a young shoe salesman there. The shoe salesman realized that he had quite a skill in sales, so he decided he could make more money selling mutual funds than shoes. He passed the test on his first try with no prior financial experience.

We don’t want to demean all financial advisors, but this isn’t an unusual case. Most of these kinds of advisors end up at firms that follow the suitability standard—a less than optimal code of professional conduct. Professional firms that adhere to a higher, fiduciary standard would likely weed them out fairly quickly. They have a reputation to protect and can ill afford an employee of questionable ethics.

Certainly, some credentials are tougher than the Series 7, such as the Certified Financial Planner, but that still doesn’t guarantee a truly knowledgeable person. Nonetheless, the more credentials and certifications an advisor has, the better. He at least shows a willingness to learn and invest time in becoming a better advisor.

What about the advisors with actual degrees in business or finance? This isn’t a guarantee of quality either. Many a commencement speaker has referred to a degree as an opportunity to go into the world and learn. A degree in finance or business may get a person in the door of a professional firm, but one still has to learn everything in this industry from the ground up. A degree is good, but it doesn’t necessarily give a huge edge.

There’s absolutely no reason to settle for a freshly minted advisor; the more years in the industry the better. There are plenty of advisors begging for your business. Many of the top professional firms do not hire anyone who does not have a good track record of experience.

Many of the captive houses are losing a lot of their top people. They are looking for firms that are truly independent, where they can apply their skills and experience for the remainder of their careers. Demand more credentials and experience and be wary of brand new advisors.

Fees and Expenses

When it comes to fee structure, character matters over credentials. Whether you’re someone’s first client or their thousandth, he can just as easily pull the wool over your eyes with fees. You should always seek low-fee fund options. Ask for low-fee funds as well as exchange-traded funds (ETFs) and index fund options.

Professional financial advisors can go to either extreme. Some actually have a contract that stipulates anytime your money is invested in a fund where they receive a commission, that commission is credited back to your account. Other firms will take those commissions and use it to enhance the personal compensation of the advisor.

Asking your advisor to show you ETFs and low-fee fund options is a subtle test. If he or she pretends that high-fee mutual funds are the only options, then that’s definitely a red flag. In some situations, a higher-fee fund might make sense, but the advisor better have a damn good reason for it. It is our responsibility to ask for and listen to the reason and then decide for ourselves if it makes sense.

So, what’s a reasonable expense fee for a mutual fund? According to the Investment Company Institute (ICI), the actual average rate paid by mutual fund investors was 0.77% in 2012. That goes to show that investors are staying clear of the higher-fee funds. They are seeking out cheaper mutual funds, and even cheaper ETFs and index funds.

Equity funds will have slightly higher fees than money market funds and bond funds, so be aware of this difference. You might pay more than average for aggressive growth strategies or international equity funds. On average, these will charge 0.92% and 0.95% respectively. If you’re pursuing these strategies, give your financial advisor a little leeway – but not much.

Load fees are also important to understand. I’ll share a short description of various load shares, but the main takeaway is that you want a no-load fund. Think of load shares as a sales tax on your fund purchase – not a good thing.

The only situation where a load fund might be good is when you plan to hold shares for a very long time – close to a decade. Load funds will have a high upfront fee, but the annual fees are typically a bit lower, so if you’re in the fund for the very long run, they might work out. However, unless you’re committed to a very long-term investment, we suggest no-load funds.

  • Front-End Load Shares – typically called Class A Shares.

    With these funds, you pay a percentage of your assets when purchasing the fund. The maximum one can be charged by law is 5.4%, which is an enormous amount. Think about it. You’re down 5.4% on day one. However, many investors get a discount through employer-sponsored retirement plans, so the average front-end load share paid for an equity fund by the average investor is 1%. Going through a financial advisor, it will likely be slightly more. Match that with a 0.77% average annual expense fee, and you’re still considerably behind right off the bat.

  • Back-End Load Shares – typically called Class B Shares.

    As you might have guessed, you pay a percentage of assets when redeeming the fund rather than at purchase. However, the fee will often decrease the longer one holds the shares. Essentially, the mutual fund company wants to get your money one way or the other, through years of annual fees or through the back-end fee. Either way, you’ll end up paying.

  • Level-Load Shares – typically called Class C Shares.

    These shares are a combination of back-end load shares and no-load shares. The back-end fee will be lower than regular back-end load shares, but the annual fee will be higher.

  • No-load shares

    As the name suggests, there is no back-end or front-end load fee here. However, the annual fees are slightly higher. Unless you plan to hold a fund for nearly a decade, you will save money by going with a no-load fund. As more people are figuring this out, they are flocking to these funds.

Some advisors will want to put you into the front-end or back-end funds. That’s how they get a cut of the deal. However, you should insist on a good reason why, and ask for a much cheaper fund or ETF alternative. If push comes to shove, you can always ignore your advisor and call the mutual fund company directly to purchase the no-load funds. That might seem like a mean thing to do to your advisor, but then again, charging someone unnecessary fees sometimes as high as 5.4% isn’t nice either.

Remember that understanding these fees and other product alternatives isn’t just about cash in your pocket. It’s about understanding the character of your advisor. If he’s not getting you the best deal available, then that’s certainly a red flag.

Check for a History of Fraud

This one seems like a no-brainer, but we’ll make it easier with links to several sites that track advisor and broker improprieties. Here are a few places to check:

  • The Financial Industry Regulatory Authority (FINRA)

    This organization is the same one that administers the Series 7 Exam. Its search tool lets you find out how long an advisor has been registered and if he has any history of incidents. It will even tell you whether or not someone has been fired. Once you’ve selected an advisor’s name, make sure to click on the detailed report link which specifies everything from a complete employment history to descriptions of specific damages and incidents.

    You can also look up information about individual firms such as their assets under management and the size of their average client.

  • SEC Investment Advisor Public Disclosure

    This is another site with much of the same information as the FINRA site.

  • North American Securities Administrators Association (NASAA)

    This site has a couple of interesting ways to find out more about offenses in your state. First, you may browse its contact list of state regulators, or you may also view its list of state enforcement websites.

Excessive Trading

Since some advisors are paid on commission, they have an incentive to constantly make trades, a practice also known as “churning.” When a broker is constantly pestering you with reasons to buy and sell, this can be a little obvious. However, there are other areas where they can trick you into buying or selling more than necessary. For example, they can insist on regularly fine-tuning or rebalancing your portfolio to make sure all the allocations are even. If a portion of your portfolio has really become overweight or underweight from gains or losses, this might be appropriate; but rebalancing your portfolio on a monthly basis for very small changes just isn’t necessary. This practice can trick a lot of people since it seems sincere and appears to make sense.

Your portfolio should need rebalancing only once or twice a year, or when there’s been a large move up or down in the market. Otherwise, an attempt to rebalance is suspect.

No Research Department

One of the benefits of big-name companies is that they come with extensive, professional research departments. As a result, their recommendations come from proper due diligence. If you have more questions about a certain company, the advisor can find out more about the investment through the equity research department.

However, this might not always be the case with small, independent financial advisors. Although many don’t have full research departments, they can still pay for research from other sources. If a company doesn’t have a source for research, you should be concerned about the quality of its recommendations.

Sure, some investments might still be appropriate without a full research department. For example, if the advisor recommends extremely diversified funds, then this really isn’t a problem. But if your advisor is recommending purchases of Microsoft, Coca-Cola, and IBM but really has no research to back these recommendations, that’s a problem.

We want to reinforce that we should delegate – not abdicate – our nest egg to a professional financial advisor. Trust is paramount. There are many good professionals available who have earned their clients’ trust year in and year out. That is the advisor we all are looking for. While watching out for these five items doesn’t guarantee a good financial advisor, it certainly will weed out the worst apples.

It can be difficult to find a financial advisor who will always come to you with the cheapest and best options. Some financial advisors have all the wrong incentives in place. However, knowing their compensation structure and the other available options helps to keep you in the driver’s seat.

Keep in mind that some advisors are fee-based or don’t receive commissions or kickbacks from mutual funds, so they necessarily avoid some of the conflicts of interest mentioned above. You can search for fee-based advisors in your local area on The National Association of Personal Financial Advisors (NAPFA) website. This is a good place to start, but make sure you still get a clear explanation of a prospective company’s fee structure.

To sum it up, don’t fall for high fees and big-load funds, and watch for excessive trading. Seek out credentials, experience, and a clean record. Ultimately, an advisor can’t force you into anything. If one offers expensive products, push back and ask for cheaper options, or find another advisor. If you find a good one, hold on to him or her. They are worth their weight in gold.

The Money Forever team is here to help you sift through the rubble and find the exceptional advisors. If you’d like to receive more information on how to find an advisor to prescribe the right financial solutions for you, please check out our special report, “The Financial Advisor Guide.” If you are not already a subscriber, you can still get your own copy HERE.

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Keys to Investor Success – Elliott Wave Theory

Plenty of people will freely offer you advice on how to spend or invest your money. “Buy low and sell high,” they’ll tell you, “that’s really all there is to it!” And while there is a core truth to the statement, the real secret is in knowing how to spot the highs and lows, and thus, when to do your buying and selling. Sadly, that’s the part of the equation that most of the advice givers you’ll run across are content to leave you in the dark about.

The reality is that no matter how many times you are told differently, there is no ‘magic bullet.’ There is no plan, no series of steps you can follow that will, with absolute certainty, bring you wealth. If you happen across anyone who says otherwise, you can rely on the fact that he or she has an agenda, and that at least part of that agenda involves convincing you to open your wallet.

In the place of a surefire way to make profits, what is there? Where can you turn, and what kinds of things should you be looking for?

The answers to those questions aren’t as glamorous sounding as the promises made by those who just want to take your money, but they are much more effective. Things like careful, meticulous research. Market trend analysis. Paying close attention to extrinsic factors that could impact whatever industry you’re planning to invest in, and of course, Elliott wave theory. If you’ve never heard of the Elliott wave, you owe it to yourself to learn more about it.

Postulated by Ralph Nelson Elliott in the late 1930’s, it is essentially a psychological approach to investing that identifies specific stimuli that large groups tend to respond to in the same way. By identifying these stimuli, it then becomes possible to predict which direction the market will likely move, and as he outlined in his book “The Wave Principle,” market prices tend to unfold in specific patterns or ‘waves.’
The fact that many of the most successful Wall Street investors and portfolio managers use this type of trend analysis in their own decision making process should be compelling evidence that you should consider doing the same. No, it’s not perfect, and it is certainly not a guarantee, but it provides a strong framework of probability that, when combined with other research and analysis, can lead to consistently good decisions, and at the end of the day, that’s what investing is all about. Consistently good decision making.

We use Elliott Wave Theory in real time by looking at the larger patterns of the SP 500 index for example. We deploy Fibonacci math analysis to prior up and down legs in the markets to determine where we are in an Elliott Wave pattern.  This helps us decide if to be aggressive when the markets correct, go short the market, or to do nothing for example.  It also prevents us from making panic type decisions, whether that be in chasing a hot stock too higher or selling something too low before a reversal.  We also can use Elliott Wave Theory to help us determine when to be aggressive in selling or buying, on either side of a trade.

For many, its not practical to employ Elliott Wave analysis with individual stocks and trading, but it can be done with experience.  We instead use a combination of big picture views like weekly charts, Wave patterns within those weekly views, and then zoom in to shorter term technical to determine ultimate timing for entry and exit.  This type of big picture view coupled with micro analysis of the charts gives us more clarity and better results.

One of our favorite patterns for example is the “ABC” pattern.  Partially taken from Elliott Wave Theory, we mix in a few of our own ingredients to help with timing entries and exits.  This is where you have an initial massive rally or the “A” wave pattern. Say a stock like TSLA goes from $30 to $180 per share, which it did.  The B wave is what you wait for and using Fibonacci analysis and Elliott Wave Theory we can calculate a good entry point on the B wave correction.  TSLA dropped from $180 to about $ 120, retracing roughly 38% (Fibonacci retracement) of the rally $30 to $180.  The B wave bottomed out as everyone was negative on the stock and sentiment was bearish. That is when you get long for the “C” wave.  The C wave is when the stock regains momentum, good news starts to unfold, and sentiment turns bullish.  We can often calculate the B wave as it relates often to the A wave amplitude.  Example is the TSLA “A” wave was 150 points, so the C wave will be about the same or more.

When TSLA recently ran up to about $270 per share, we were in uber bullish “C” wave mode, and we had run up $150 (Same as the A wave) from $120 to $270.  That is when you know it’s a good time to start peeling off shares. Often though, the C wave will be 150-161% of the  A wave, so TSLA may not have completed it’s run just yet.

Elliott Wave Theory

Knowing when to enter and exit a position whether your time frame is short, intermediate, or longer… can often be identified with good Elliott Wave Theory practices.  Your results and your portfolio will appreciate it, just look at our ATP track record from April 1 2013 to March 3rd 2014 inclusive of all closed out swing positions.  We incorporated Elliott Wave Theory into our stock picking starting last April and you can see the results:

ATP Elliott Wave Trading

Join Us Today And Start Making Real Money Trading – Click Here

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

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What 10-Baggers (and 100-Baggers) Look Like

What 10-Baggers (and 100-Baggers) Look Like

By Jeff Clark, Senior Precious Metals Analyst

Now that it appears clear the bottom is in for gold, it’s time to stop fretting about how low prices will drop and how long the correction will last—and start looking at how high they’ll go and when they’ll get there.

When viewing the gold market from a historical perspective, one thing that’s clear is that the junior mining stocks tend to fluctuate between extreme boom and bust cycles. As a group, they’ll double in price, then crash by 75%… then double or triple or even quadruple again, only to crash 90%. Boom, bust, repeat.

Given that we just completed a major bust cycle—and not just any bust cycle, but one of the harshest on record, according to many veteran insiders—the setup for a major rally in gold stocks is right in front of us.

This may sound sensationalistic, but based on past historical patterns and where we think gold prices are headed, the odds are high that, on average, gold producers will trade in the $200 per share range before the next cycle is over. With most of them currently trading between $20 and $40, the returns could be stupendous. And the percentage returns of the typical junior will be greater by an order of magnitude, providing life-changing gains to smart investors.

What you’re about to see are historical returns of both producers and juniors during three separate boom cycles. These are factual returns; they are not hypothetical. And if you accept the fact that this market moves in cycles, you know it’s about to happen again.

Gold had a spectacular climb in 1979-1980, and gold stocks in general gave a staggering performance at that time—many of them becoming 10-baggers (1,000% gains and more). While this is a well-known fact, few researchers have bothered to identify exact returns from specific companies during this era.

Digging up hard data from before the mid-1980s, especially for the junior explorers, is difficult because the information wasn’t computerized at the time. So I sent my nephew Grant to the library to view the Wall Street Journal on microfiche. We also include information we’ve had from Scott Hunter of Haywood Securities; Larry Page, then-president of the Manex Resource Group; and the dusty archives at the Northern Miner.

Note: This means our tables, while accurate, are not at all comprehensive.

Let’s get started…

The Quintessential Bull Market: 1979-1980

The granddaddy of gold bull cycles occurred during the 1970s, culminating in an unabashed mania in 1979 and 1980. Gold peaked at $850 an ounce on January 21, 1980, a rise of 276% from the beginning of 1979. (Yes, the price of gold on the last trading day of 1978 was a mere $226 an ounce.)

Here’s a sampling of gold producer stock prices from this era. What you’ll notice in addition to the amazing returns is that gold stocks didn’t peak until nine months after gold did.

Returns of Producers in 1979-1980 Mania
Company Price on
12/29/1978
Sept. 1980
Peak
Return
Campbell Lake Mines $28.25 $94.75 235.4%
Dome Mines $78.25 $154.00 96.8%
Hecla Mining $5.12 $53.00 935.2%
Homestake Mining $30.00 $107.50 258.3%
Newmont Mining $21.50 $60.62 182.0%
Dickinson Mines $6.88 $27.50 299.7%
Sigma Mines $36.00 $57.00 58.3%
Giant Yellowknife Mines $11.13 $39.00 250.4%
AVERAGE     289.5%

 

Today, GDX is selling for $26.05 (as of February 26, 2014); if it mimicked the average 289.5% return, the price would reach $101.46.

 

Keep in mind, though, that our data measures the exact top of each company’s price. Most investors, of course, don’t sell at the very peak. If we were to able to grab, say, 80% of the climb, that’s still a return of 231.6%.

Here’s a sampling of how some successful junior gold stocks performed in the same period, along with the month each of them peaked.

Returns of Juniors in 1979-1980 Mania
Company Price on
12/29/1978
Price
Peak
Date
of Peak
Return
Carolin Mines $3.10 $57.00 Oct. 80 1,738.7%
Mosquito Creek Gold $0.70 $7.50 Oct. 80 971.4%
Northair Mines $3.00 $10.00 Oct. 80 233.3%
Silver Standard $0.58 $2.51 Mar. 80 332.8%
Lincoln Resources $0.78 $20.00 Oct. 80 2,464.1%
Lornex $15.00 $85.00 Oct. 80 466.7%
Imperial Metals $0.36 $1.95 Mar. 80 441.7%
Anglo-Bomarc Mines $1.80 $6.85 Oct. 80 280.6%
Avino Mines 0.33 5.5 Dec. 80 1,566.7%
Copper Lake $0.08 $10.50 Sep. 80 13,025.0%
David Minerals $1.15 $21.00 Oct. 80 1,726.1%
Eagle River Mines $0.19 $6.80 Dec. 80 3,478.9%
Meston Lake Resources $0.80 $10.50 Oct. 80 1,212.5%
Silverado Mines $0.26 $10.63 Oct. 80 3,988.5%
Wharf Resources $0.33 $9.50 Nov. 80 2,778.8%
AVERAGE       2,313.7%

 

If you had bought a reasonably diversified portfolio of top-performing gold juniors prior to 1979, your initial investment could have grown 23 times in just two years. If you had managed to grab 80% of that move, your gains would still have been over 1,850%.

 

This means a junior priced at $0.50 today that captured the average gain from this boom would sell for $12 at the top, or $9.75 at 80%. If you own ten juniors, imagine just one of them matching Copper Lake’s better than 100-bagger performance.

Here’s what returns of this magnitude could mean to you. Let’s say your portfolio includes $10,000 in gold juniors that yield spectacular gains such as the above. If the next boom cycle matches the 1979-1980 pattern, your portfolio could be worth $241,370 at its peak… or about $195,000 if you exit at 80% of the top prices.

Note that this does require that you sell to realize your profits. If you don’t take the money and run at some point, you may end up with little more than tears to fill an empty beer mug. In the subsequent bust cycle, many junior gold stocks, including some in the above list, dried up and blew away. Investors who held on to the bitter end not only saw all their gains evaporate, but lost their entire investments.

You have to play the cycle.

Returns from that era have been written about before, so I can hear some investors saying, “Yeah, but that only happened once.”

Au contraire. Read on…

The Hemlo Rally of 1981-1983

Many investors don’t know that there have been several bull cycles in gold and gold stocks since the 1979-1980 period.

Ironically, gold was flat during the two years of the Hemlo rally. But something else ignited a bull market. Discovery. Here’s how it happened…

Back in the day, most exploration was done by teams from the major producers. But because of lagging gold prices and the resulting need to cut overhead, they began to slash their exploration budgets, unleashing a swarm of experienced geologists armed with the knowledge of high-potential mineral targets they’d explored while working for the majors. Many formed their own companies and went after these targets.

This led to a series of spectacular discoveries, the first of which occurred in mid-1982, when Golden Sceptre and Goliath Gold discovered the Golden Giant deposit in the Hemlo area of eastern Canada. Gold prices rallied that summer, setting off a mini bull market that lasted until the following May. The public got involved, and as you can see, the results were impressive for such a short period of time.

Returns of Producers Related to Hemlo Rally of 1981-1983
Company 1981
Price
Price
Peak
Date
of High
Return
Agnico-Eagle $9.50 $21.00 Aug. 83 121.1%
Sigma $14.13 $24.50 Jan. 83 73.4%
Campbell Red Lake $16.63 $41.25 May 83 148.0%
Sullivan $3.85 $6.00 Mar. 84 55.8%
Teck Corp Class B $17.00 $21.88 Jun. 81 28.7%
Noranda $33.75 $36.38 Jun. 81 7.8%
AVERAGE       72.5%

 

Gold producers, on average, returned over 70% on investors’ money during this period. While these aren’t the same spectacular gains from just a few years earlier, keep in mind they occurred over only about 12 months’ time. This would be akin to a $20 gold stock soaring to $34.50 by this time next year, just because it’s located in a significant discovery area.

 

Once again, it was the juniors that brought the dazzling returns.

Returns of Juniors Related to Hemlo Rally of 1981-1983
Company 1981
Price
Price
Peak
Date
of High
Return
Corona Resources $1.10 $61.00 May 83 5,445.5%
Golden Sceptre $0.40 $31.00 May 83 7,650.0%
Goliath Gold $0.45 $32.00 Mar 83 7,011.1%
Bel-Air Resources $0.81 $1.60 Jan. 83 97.5%
Interlake Development $2.10 $6.40 Mar. 83 204.8%
AVERAGE       4,081.8%

 

The average return for these junior gold stocks that had a direct interest in the Hemlo area exceeded a whopping 4,000%.

 

This is especially impressive when you realize that it occurred without the gold stock industry as a whole participating. This tells us that a big discovery can lead to enormous gains, even if the industry as a whole is flat.

In other words, we have historical precedence that humongous returns are possible without a mania, by owning stocks with direct exposure to a discovery area. There are numerous examples of this in the past ten years, as any longtime reader of the International Speculator can attest.

By May 1983, roughly a year after it started, gold prices started back down again, spelling the end of that cycle—another reminder that one must sell to realize a profit.

The Roaring ’90s

By the time the ’90s rolled around, many junior exploration companies had acquired the “intellectual capital” they needed from the majors. Another series of gold discoveries in the mid-1990s set off one of the most stunning bull markets in the current generation.

Companies with big discoveries included Diamet, Diamond Fields, and Arequipa. This was also the time of the famous Bre-X scandal, a company that appeared to have made a stupendous discovery, but that was later found to have been “salting” its drill data (cheating).

By the summer of ’96, these discoveries had sparked another bull cycle, and companies with little more than a few drill holes were selling for $20 a share.

The table below, which includes some of the better-known names of the day, is worth the proverbial thousand words. The average producer more than tripled investors’ money during this period. Once again, these gains occurred in a relatively short period of time, in this case inside of two years.

Returns of Producers in Mid-1990s Bull Market
Company Pre-Bull
Market Price
Price
Peak
Date
of High
Return
Kinross Gold $5.00 $14.62 Feb. 96 192.4%
American Barrick $28.13 $44.25 Feb. 96 57.3%
Placer Dome $26.50 $41.37 Feb. 96 56.1%
Newmont $47.26 $82.46 Feb. 96 74.5%
Manhattan $1.50 $13.00 Nov. 96 766.7%
Cambior $10.00 $22.35 Jun. 96 123.5%
AVERAGE       211.7%

 

Here’s how some of the juniors performed. And if you’re the kind of investor with the courage to buy low and the discipline to sell during a frenzy, it can be worth a million dollars. Hold on to your hat.

 

Returns of Juniors in Mid-1990s Bull Market
Company Pre-Bull
Market Price
Price
Peak
Date
of High
Return
Cartaway $0.10 $26.14 May 96 26,040.0%
Golden Star $6.00 $27.50 Oct. 96 358.3%
Samex Mining $1.00 $7.20 May 96 620.0%
Pacific Amber $0.21 $9.40 Aug. 96 4,376.2%
Conquistador $0.50 $9.87 Mar. 96 1,874.0%
Corriente $1.00 $19.50 Mar. 97 1,850.0%
Valerie Gold $1.50 $28.90 May 96 1,826.7%
Arequipa $0.60 $34.75 May 96 5,691.7%
Bema Gold $2.00 $12.75 Aug. 96 537.5%
Farallon $0.80 $20.25 May 96 2,431.3%
Arizona Star $0.50 $15.95 Aug. 96 3,090.0%
Cream Minerals $0.30 $9.45 May 96 3,050.0%
Francisco Gold $1.00 $34.50 Mar. 97 3,350.0%
Mansfield $0.70 $10.50 Aug. 96 1,400.0%
Oliver Gold $0.40 $6.80 Oct. 96 1,600.0%
AVERAGE       3,873.0%

 

Many analysts refer to the 1970s bull market as the granddaddy of them all—and to a certain extent it was—but you’ll notice that the average return of these stocks during the late ’90s bull exceeds what the juniors did in the 1979-1980 boom.

 

This is akin to that $0.50 junior stock today reaching $19.86… or $16, if you snag 80% of the move. A $10,000 portfolio with similar returns would grow to over $397,000 (or over $319,000 on 80%).

Gold Stocks and Depression

Those of you in the deflation camp may dismiss all this because you’re convinced the Great Deflation is ahead. Fair enough. But you’d be wrong to assume gold stocks can’t do well in that environment.

Take a look at the returns of the two largest producers in the US and Canada, respectively, during the Great Depression of the 1930s, a period that saw significant price deflation.

Returns of Producers
During the Great Depression
Company 1929
Price
1933
Price
Total
Gain
Homestake Mining $65 $373 474%
Dome Mines $6 $39.50 558%

 

During a period of soup lines, crashing stock markets, and a fixed gold price, large gold producers handed investors five and six times their money in four years. If deflation “wins,” we still think gold equity investors can, too.

 

How to Capitalize on This Cycle

History shows that precious metals stocks move in cycles. We’ve now completed a major bust cycle and, we believe, are on the cusp of a tremendous boom. The only way to make the kind of money outlined above is to buy before the boom is in full swing. That’s now. For most readers, this is literally a once-in-a-lifetime opportunity.

As you can see above, there can be great variation among the returns of the companies. That’s why, even if you believe we’re destined for an “all-boats-rise” scenario, you still want to own the better companies.

My colleague Louis James, Casey’s chief metals and mining investment strategist, has identified the nine junior mining stocks that are most likely to become 10-baggers this year in their special report, the 10-Bagger List for 2014. Read more here.

The article What 10-Baggers (and 100-Baggers) Look Like was originally published at caseyresearch.com.

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This March Everything Could Change

The final countdown has begun…

This month, a little-known company is set to begin a rally that could send its stock soaring 1,000% or more…

Because that’s when this tiny company could release its biggest clinical trial results yet on a groundbreaking new medical treatment.

If the news is positive, which I expect it will be, this will become one of the biggest medical stories of the century…

Because this is the first treatment ever to target the cause of this dreaded disease… rather than just treat the symptoms.

A treatment that could forever change the course of one of our world’s most terrifying diseases…

A disease that cost the world over $604 billion a year to treat and has had NO new treatments approved for over a decade.

Already, this company has soared 97% in the last three months in anticipation of its March clinical results…

But that’s only the beginning of a rally that could bring you gains of 1,000% or more in coming months…

But you must hurry…

Once word gets out on this life-changing medical treatment, your opportunity to maximize your gains will be gone.

So timing is critical here. And time is running out.

Click here for all the details.

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