Buy Gold!
Inside Liberty Watch Today - Sept. 12, 2005
Gold is continuing its longest bull market ever, 53 months, yet the conference crowd at last week's Las Vegas Gold & Precious Metals Investment Conference held in Las Vegas was no larger than when the yellow metal was making lows in 2000.
Despite having world-class speakers like Jim Grant, Dan Denning, Doug Casey and Rick Rule the conference attracted less than half the number of people who typically show up to attend local housing seminars. And while gold aficionados tend to be older and quirkier, Las Vegas real estate seminars attract a number of young, nubile ex-cocktail waitresses and strippers who have abandoned their perfectly honorable former professions to hawk houses, raw dirt or mortgage loans.
A few of the presenting mining companies at the conference have figured out that having an attractive female in the booth does generate more interest in company prospects. And if stripping ratios and drilling results are delivered with a charming British accent, all the better.
Jim Dines, the self-proclaimed original gold (and now uranium) bug, took the feminine approach to new heights. The four girls occupying the Dines Report booth looked to be on loan from Hugh Hefner. Dines would have blended in appropriately if he had donned a silk smoking jacket and been puffing on a pipe. The strategy was obviously effective. By the second day of the conference, most mining company presenters directed attendees to their company booths using the Dines booth as a reference point.
While virtually every speaker was bullish on gold, the metal that really had the conference buzzing was uranium. Despite the metal already tripled in price to about $30 per pound, $50 and $100 per pound were mentioned often as price targets. According to the Dines Report website: "Today, there are 441-nuclear power plants on the planet, with many more planned. Japan intends to add 11 more by the year 2010. China will add 24 to 30 by 2020. Even nuclear-wary Britain has faced the reality that they will need 45 additional plants to meet the Kyoto Treaty targets for reducing gases."
Uranium mines don't get permitted overnight. The three-to-ten year process is politically charged. Thus, the growing supply deficit in the uranium market will not be satisfied quickly. Although bullish on the metal, broker Rick Rule, cautioned the crowd to be careful investing in uranium mining stocks. "There are only 12 competent management teams spread over 150 companies in uranium," Rule emphasized. "Most of these guys didn't know how to spell uranium two years ago."
Money manager Adrian Day is also long-term bullish and believes that the uranium market is "not a bubble in search of a pin." The bombastic Dines, described the uranium market as the "biggest thing I've ever seen." He recommends buying the speculative uranium shares, believing they will soar in price in a "major mania" that will dwarf the dot.com craze.
Ian McAvity, who writes the Deliberations on World Markets newsletter, made the interesting point that it was miners looking for uranium in northern Nevada in the 1970's that found the large gold deposits that now generate eight million ounces per year.
Other than economist, author and newsletter writer Mark Skousen, everyone who spoke at the conference were bullish on gold and bearish on the dollar and stock market. Skousen doesn't believe that the dollar will collapse and "is not as bullish on gold as others at this conference." Skousen believes that the stock market is in a secular bull market, while resources are in a secular bear market. According to Skousen, gold has lost its luster as an inflation hedge, with other instruments such as Treasury Inflation Protected Securities (TIPS), commodity index funds, energy funds and real estate now taking its place. "Gold has been marginalized," Skousen said.
Despite gold rising 75 percent in price during this latest bull market, gold miners have not made any money. Thus, mining stocks have not done well. The costs of mining have gone up more than the ore price. The irreverent Rick Rule said that he has been "disabused of the senior gold producers. They lose tremendous amounts of money when the price of gold is low but don't make any money when prices are high." Rule prefers to own companies that find gold and then the do the sensible thing: nothing. Spending money to liquidate your product when the product is going up in price is "felony stupid," according to Rule.
Rule's company Global Resource Investments, Ltd. specializes in junior gold stocks and other natural resource investments. When describing one of his favorite stocks, he warned that the management was "promotionally challenged." The company is "handicapped because they refuse to lie which puts them at a disadvantage when raising funds," Rule quipped.
Doug Casey, who authored the investment classic, Crisis Investing, predicted that the Greater Depression is on its way. Economic depression is when standards of living drop appreciably. Casey identified seven reasons for the coming depression: trade and government deficits, coming trade wars, oil production has peaked, the real estate bubble, high public and private debt levels, a dollar crash, and what Casey refers to as, the war on Islam. Government has created all of these problems. "All government does is take our money and redistribute it incompetently," Casey told the crowd.
Casey is also very bullish on gold and gold stocks. He believes that gold stocks will boom more than internet stocks did.
And when will it be time to sell gold stocks? I suppose when I start seeing the same people that I now see at real estate seminars showing up at the gold conference. That will be the time, and that's a long way off.
Doug French, Liberty Watch Columnist
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