Doug Casey’s 9 Secrets for Successful Speculatio​n

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Posted on 17th March 2014 by Administrator in Economy |Politics |Social Issues

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.

Should You Invest in the Marijuana Boom?

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Posted on 3rd March 2014 by Administrator in Economy |Politics |Social Issues

Should You Invest in the Marijuana Boom?

By Dan Steinhart, Managing Editor, The Casey Report

I was planning to explore the investment landscape of the burgeoning marijuana industry today, but it looks like the party’s already over.

Appearing before the Maryland Legislature, Annapolis Police Chief Michael Pristoop testified that 37 people died in Colorado on the first day of legalization from overdosing on marijuana.

What a damn shame. With morbid stats like that, the government can’t possibly allow the legalization trend to proceed any further. People’s lives are at stake!

Except they’re not. Chief Pristoop got those stats from a tongue-in-cheek story in The Daily Currant, a satirical newspaper à la The Onion. He believed it to be legitimate, so he cited it during testimony. Despite the fact that exactly zero people in history have died from overdosing on marijuana.

As you surely know, Colorado and Washington recently became the first states to legalize marijuana for recreational use, joining 18 other states that have legalized it for medical use only. Legalization is gaining steam across the US, and that’s unlikely to change—if only because, other than citing fake facts, opponents of legalization have no argument.

Opposition to legalizing marijuana is dwindling for the same reason that opposition to gay marriage is dwindling: there’s no intelligent reason to oppose either one. Unless, in the case of marijuana, you’re concerned with its potential to cause more car accidents. But if those are your standards, we should criminalize beer, cellphones, and makeup, too.

One thing’s for sure: the investment world is enamored with the idea of a brand-new green industry. As an illustration of exactly how hot this infant sector has become, take a look at this screen shot of an email received by a senior Casey Researcher this week. It’s a news release from a mining company, announcing its intent to “diversify” into the legal marijuana business:

An interesting business decision. I’m not sure what synergies exist between mining and marijuana, nor do I have any particular insight into how Next Gen’s management plans to enter the green business. But I applaud its forward thinking.

Apparently, so does the market. Here’s how Next Gen’s share price reacted to the announcement:

It soared over 300%, transforming from a penny stock into a dime stock in one day. Again, Next Gen didn’t grow earnings, discover a new gold deposit, or accomplish anything tangible. It tripled its valuation simply by announcing its entry into the marijuana business. That’s what I call a scorching industry.

So, should you put some speculative money into the hottest cannabis stock? Let’s take a quick tour around the burgeoning industry to get a picture of its investment prospects, focusing on five factors…

1) Profits Will Plummet

Had Al Capone been born in any other era, he would not have amassed a $100 million fortune. It was Prohibition that allowed him to earn extraordinary returns in the otherwise standard business of providing alcohol to people.

Likewise, legal purveyors aren’t going to earn anywhere near the spectacular returns that criminals enjoyed when marijuana was illegal. Drug distributors can become filthy rich because dealing drugs requires taking extraordinary risks. One misstep and you go to jail. Or worse, the rival Mexican cartel mows you down. That risk premium is why illegal drugs are so expensive, and why marijuana costs $300-400/oz in the US. But it won’t for long.

How can I be so sure? Because we already have a glimpse into the future. Uruguay legalized marijuana in December, and an ounce of the stuff costs $28 there, less than 10% of what it costs to obtain it the US.

It’s true that the Uruguayan government controls the marijuana industry tightly and set that $28/oz price. But the cost to produce marijuana there averages just $14/oz. So $28/oz is a reasonable guess as to where the price of marijuana would settle if the market were allowed to clear.

Going forward, profit margins won’t be nearly as fat as they were in the past.

2) The Government Will Be Heavily Involved

At least one guy will unquestionably make a killing from marijuana’s legalization. His initials are “U. S.,” and he wears a star-spangled hat.

We’re just two months into legalization, and taxes are already hefty. In Colorado, marijuana is subject to a 2.9% sales tax, plus a 10% tax on retail marijuana sales, plus a 15% excise tax based on the average wholesale price. Washington is no better—it plans to exact a 25% excise tax, plus an 8.75% sales tax.

All told, taxes in these early-adopting states will be in the neighborhood of 30%. And that’s before the feds get their cut (more on that momentarily). Further, taxes are the one exception to the rule, “What goes up must come down.” Someday, tokers might look back longingly at that 30%. After all, the average tax on a pack of cigarettes in the US is 42%.

Last, the marijuana industry isn’t going to be the Wild West. Colorado is working to control pretty much every aspect of the market, as evidenced by its 144-page marijuana Rule Book. You can be sure that other states will follow suit.

3) It’s Still Illegal

Though marijuana is now legal in two states, it’s still illegal under federal law. The Obama administration has said it won’t enforce marijuana prohibition in states that legalize it, as long as those states keep it under control. The federal government maintains the same position on medical marijuana, which, somewhat surprisingly, is also still illegal under federal law.

The feds are moving in the right direction, albeit slowly. Two weeks ago, the Treasury Department issued new rules that open the door for banks to do business with legal and licensed marijuana dispensaries.

Of course, once the feds do get on board, they’ll want a piece of the action. So be ready for even higher taxes.

4) Unsavory First Movers

It’s an unfortunate fact that, because the industry was just decriminalized recently, those best positioned to jump quickly into the marijuana business are those who were already in the marijuana business. In other words: people who were classified as criminals just two months ago.

Not that they were necessarily doing anything wrong by growing and distributing marijuana before it was legal. I’m sure plenty of growers and sellers are good people trying to earn a buck, just like those who grow and sell any other crop.

But as with any emerging industry, the first movers will be those who already possess an intimate knowledge of said industry. And in the case of marijuana, that means people who were running illegal businesses. So if you invest in their companies, you’re entrusting your capital to someone who’s willing to break the law.

As an investor, that should give you pause. Tread carefully, and dial your skepticism up to maximum.

5) Weak Candidates

The investment options in this infant industry are, understandably, limited. We’re a ways off from being able to buy a bushel of hemp on the futures exchange. If you want to invest, you’ll have to go with one of a handful of public companies. And unfortunately, none of them looks compelling.

The six companies in the chart below are the purest plays in the marijuana space. Their performance in 2014 is the stuff of legends—the worst performer gained 243% in the last three months:

But dig into their businesses and you’ll soon find that their value comes from their scientific-sounding names, and not from actually making money.

First, the companies are tiny and only trade on the illiquid over-the-counter markets. Before the share price run-up, only one, CannaVEST, had a market cap above $60 million.

What’s worse, most of them don’t have any revenue. And the ones that do generate revenue spend much more than they earn. Not that this is surprising—hardly any business could become profitable in just two months, so we won’t hold that against them. The problem is their valuations: CannaVEST is worth a staggering $1.8 billion today, and most of the others are all in the hundred-million range.

Let’s put it this way: if an entrepreneur walked into the Shark Tank seeking a $1.8 billion valuation for a company that doesn’t make money, Mark Cuban would laugh him out of the room. Speculative money already took these stocks to the moon. By buying one now, your only hope of profiting is for a greater fool to come along and buy it from you at a higher price.

As I see it, because of sky-high valuations, the risks in this blossoming industry far outweigh the potential reward, at least for a retail investor. I’m sure there are some fantastic private deals out there, and if you’re willing to press the flesh and meet some marijuan-trepreneurs yourself, you could make money.

But for non-full-time investors, you’ll want to watch this trend unfold from the sidelines, waiting for either (1) the speculative bubble to pop, so you can pick up some shares for fractions of a penny; or (2) a leader to emerge and demonstrate it can turn a profit.

Here’s a tip, though: If you’re looking for an investment with potentially spectacular gains, I would like to point you to another drug, this one perfectly legal once it’s FDA-approved. What I’m talking about is an impressive biotech startup my colleague Alex Daley, Casey’s chief technology investment strategist, has dug up.

The company is well on its way to launching a breakthrough Alzheimer’s treatment—which, if successful, is sure to be a game-changer for the medical industry. Clinical trial results are due out in early March, and should they be positive, the stock could easily double on the news… so right now is a great time to get in. Find out more about the company and its revolutionary product in this report.

The article Should You Invest in the Marijuana Boom? was originally published at caseyresearch.com.

Doug Casey: “There’s going to be a bubble in gold stocks”

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Posted on 27th February 2014 by Administrator in Economy |Politics |Social Issues

Doug Casey: “There’s going to be a bubble in gold stocks”

By Doug Casey

The following video is an excerpt from “Upturn Millionaires—How to Play the Turning Tides in the Precious Metals Market.” In it, natural-resource legends Doug Casey and Rick Rule discuss the deeply undervalued junior mining sector and the rare opportunity for spectacular returns it offers investors right now.

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Discover for yourself how to make life-changing gains in the new bull run in junior mining stocks. They still trade at deep discounts, but not for much longer. To learn more, watch the full “Upturn Millionaires” video here.

Doug Casey: “There Is a Rogue Elephant in Your House”

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Posted on 21st February 2014 by Administrator in Economy |Politics |Social Issues

by Doug Casey

One time when I was in Burma (now Myanmar), I spent a couple of days riding around the forest by elephant back. Elephants are a fine thing to have in the forest but, believe it or not, you have one living in your house with you. And you should do something about it now, before your house is wrecked and you and your family get stomped in the process.

Any amount of financial success won’t mean much if you get stepped on by the elephant in the room. The damage you routinely suffer from the elephant—not to mention the lingering threat that he’ll go completely berserk someday—dwarfs the importance of the best investment decision you’ll ever make. So, I’m going to invite your attention to a problem of overriding importance: How can you protect yourself and your wealth from the elephant?

The elephant in the room is, of course, the government.

The elephant is your permanent roommate, and it has a permanently big appetite. In the name of “income tax,” it regularly eats 40% or so of everything you earn. You may not like it, but by now you’ve probably learned to live with it.

After you’ve lived out your income-tax paying years, the elephant will attend your funeral—not to console the mourners or to recount your good deeds, but to collect estate tax. In the name of the “estate tax,” the government will take up to 40% of what you leave for the next generation and perhaps more of what you leave for your grandchildren.

It’s not the kind of roommate you’d advertise for. In fact, if you add things up, government probably is the most expensive disaster you’ll ever suffer. Almost every year, you lose more to it in taxes than you lose on your worst investments. And unless you’re a champion crime victim, you’ll lose less to a lifetime’s worth of burglars, bandits, muggers, and con men than your estate will lose to the tax collector… if you don’t do something about it.

Most successful people respond to the elephant by trying harder—working harder, working smarter, and earning enough to live well on what the elephant doesn’t eat. They’re like the farmer who plants enough to have a good harvest even after the bugs have taken their share. This is a workable solution, up to a point. But it won’t work at all if the elephant decides to take everything.

The idea of losing everything is literally unthinkable for many people. It is so far outside the range of their experience that all they can do with the idea is to reject it as not worth considering. Unfortunately, this also means rejecting all the opportunities for protection—just as many Titanic passengers shunned the early invitations to a lifeboat.

But the danger of a total wealth wipeout doesn’t go away. Some people do in fact lose everything to the elephant. In a few cases, it happens through seizures. A government agency points to an individual, calls him a bad name (drug trafficker, money launderer, polluter, racketeer, or tax evader), and takes everything the target owns. The target may not even have enough money left to hire a lawyer to help recover a portion of what he’s lost.

More commonly, it’s a lawsuit that takes everything a person has. The judge hears a story. The judge likes the story. The judge orders the defendant to give the plaintiff everything the defendant owns. Then the plaintiff wonders why a seat in the lifeboat seemed so uncongenial.

Perfect Protection

The best protection you can have from the elephant is not to own anything. What you don’t own can’t be taken from you by a tax collector, by a government agency, by a results-oriented judge, or by anyone else. You don’t want to be poor, obviously. But there’s a strategy that lets you have it both ways—the safety of not owning anything and the benefits of being wealthy. You can have it both ways by transferring your assets into an institution in another country that will return them to you (or family members) only when you want them back.

That’s the essence of an international trust. It puts just enough distance between you and your assets that the assets can’t be taken from you. But it makes those assets available to you when you want them. An international trust needs to be designed in just the right way. It mustn’t leave you with any rights that a local court or government agency might try to take away from you; and it mustn’t leave you with any powers you could be forced to use against your wishes. On the other hand, the trust must give you emphatic assurance that the trustee will never lose sight of your real objectives—otherwise you’re not going to use it.

Here’s an outline of how an international trust protects you from the elephant:

  1. You are the grantor of the trust—the person who transfers legal title to selected assets to the trustee.
  1. The trustee is a bank or trust company in a country with no income or estate taxes and a legal system that won’t tolerate a US-style litigation explosion. The trustee takes legal responsibility for the safekeeping of trust property and applying it for your purposes.
  1. You and everyone else you care to include are the beneficiaries—the persons who are eligible to receive cash distributions or other benefits from the trust. You can include family members (including descendants who haven’t been born yet), or anyone else.
  1. You are the protector of the trust. As protector, you have the legal power to monitor the trustee’s performance and the power to replace it with another institution if needed. You also have the power to name your successor as protector—so that the trust will continue to have a protector even after your lifetime.

The relationship among the participants is spelled out in a written trust agreement. Two provisions are essential to getting maximum protection. First, the trust should be irrevocable. If it isn’t, then anyone can undo your trust simply by forcing you to revoke it.

Second, the trust should be discretionary. “Discretionary” means that no one beneficiary owns a particular share of the trust. Instead, each beneficiary receives what the trustee, in its discretion, decides to give the beneficiary. With a discretionary trust, no beneficiary owns anything he can be forced to assign to a judgment creditor or tax collector. And a discretionary trust makes it impossible for any tax collector to attribute the trust’s income to a beneficiary.

These two key features—irrevocable and discretionary—are both powerful and cautionary. They are powerful in that they put up a wall around your assets that the elephant can’t knock down. The elephant can’t reach trust assets directly, because they’re held by an institution offshore, where US courts and government agencies have no jurisdiction or power to enforce a judgment. And it can’t reach them through you because you don’t have the power to get them back without the consent of the trustee. You can do or sign whatever you’re ordered to and still be confident that your wealth is protected.

But that same power is a source of caution. How can you be confident that the trustee will use the discretionary authority you’ve given it in the right way? How can you be confident that the trustee will send you a check when you need it? You get that confidence by being the protector.

The trust agreement should give you, the protector, the power to replace the trustee with another institution of your liking—in other words, you should have the power to fire the trustee.

Two other features should be included to ensure that the trustee uses its discretionary authority correctly. First, the trustee should be obligated to consider all the advice it gets from the protector. Second, the trustee should be absolved of liability for decisions it makes based on the protector’s advice. Together with the power to fire the trustee, these provisions give the protector all the influence he needs.

Using an international trust for lawsuit protection and tax savings doesn’t interfere with your freedom to make investment decisions. If you want, the trustee can open a brokerage account for your trust anywhere in the world and appoint you as the trading advisor. You continue to give the buy and sell orders. Or you can ask the trustee to hire a particular investment manager for your trust. Or you can keep complete management control by using a limited partnership. You transfer the real estate, business, or investments you want to protect to a limited partnership and then transfer the limited partnership interest to the trust. As general partner, you would still make the day-to-day investment and management decisions, but the value of the assets is protected by the trust.

The biggest, simplest benefit of an international trust is lawsuit protection. You can’t be forced to hand your assets over to the winner of a lawsuit (or to any other creditor), because you no longer own them. The trustee is the legal owner. Anyone who hopes to reach those assets must bear the expense and bad odds of legal action in another country. Provided you’ve selected the right country for your trust and assuming that you were solvent when you funded it, his prospects are extremely dim.

Plaintiffs’ lawyers know how difficult it is to break into a properly established international trust. As a result, having your assets protected by an international trust means that litigation against you never gets started or gets settled on terms that are extremely favorable for you.

Income tax savings for yourself aren’t automatic. They depend on how your trust investments are structured. This is a complex topic, but the summary is short: Merely transferring assets to an international trust won’t achieve any income tax savings in your lifetime.

For future generations, the income tax consequences of an international trust are far more dramatic. The trust will have no ties to the US tax system. It can be used to accumulate and compound investment returns free of current income tax. Future generations will face no tax on the profits until they spend them. Even then much of what they take from the trust can come to them free of income tax. An international trust allows you to pursue any type of estate plan you want (or none at all). You can do all the conventional things you’re likely to hear about if you visit an estate planner, and also do some other things that wouldn’t be possible without going international. For example, with an international trust, you can get property out of your estate and still be eligible to receive the money back for your own support if you later find that you need it. This frees you to act aggressively to reduce your taxable estate without the fear of planning your self into the poorhouse.

The biggest estate-planning advantage is finality. The wealth you leave in an international trust disconnects from the US tax system. It will never be included in the taxable estate of any future generation. For your family, estate tax comes to an end. The elephant will have to dine elsewhere.

Previously, getting the protection of an international trust demanded so much effort and expense that almost no one did it. But now an international trust is cheap and easy to use.

What has opened up the world of international trusts is Terry Coxon’s International Trust Guidebook. This guidebook takes all the mystery out of the topic. The material is laid out in such a clear and direct fashion it will quickly make you feel like a minor expert.

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Doug Casey on Gold Stocks

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Posted on 5th February 2014 by Administrator in Economy |Politics |Social Issues

Doug Casey on Gold Stocks

By Doug Casey, Chairman

The following is an excerpt from famous contrarian speculator and libertarian freethinker Doug Casey’s latest book, Right on the Money. The interview with Casey Research Chief Metals & Mining Analyst Louis James took place on September 30, 2009, when gold stocks were clearly rebounding from their post-crash lows. Doug’s thoughts are just as timely and true today as they were then, presenting a perfect picture of this most volatile and most rewarding of sectors…

Louis: Doug, we were talking about gold last week, so we should follow up with a look at gold stocks. If one of the reasons to own gold is that it’s real—it’s not paper, it’s not simultaneously someone else’s liability—why own gold stocks?

Doug: Leverage. Gold stocks are problematical as investments. That’s true of all resource stocks, especially stocks in exploration companies, as opposed to producers. If you want to make a proper investment, the way to do that is to follow the dictates of Graham and Dodd, using the method Warren Buffett has proven to be so successful over many years.

Unfortunately, resource stocks in general and metals exploration stocks in particular just don’t lend themselves to such methodologies. They are another class of security entirely.

Louis: “Security” may not be the right word. As I was reading the latest edition of Graham and Dodd’s classic book on securities analysis, I realized that their minimum criteria for investment wouldn’t even apply to the gold majors. The business is just too volatile. You can’t apply standard metrics.

Doug: It’s just impossible. For one thing, they cannot grow consistently, because their assets are always depleting. Nor can they predict what their rate of exploration success is going to be.

Louis: Right. As an asset, a mine is something that gets used up, as you dig it up and sell it off.

Doug: Exactly. And the underlying commodity prices can fluctuate wildly for all sorts of reasons. Mining stocks, and resource stocks in general, have to be viewed as speculations, as opposed to investments.

But that can be a good thing. For example, many of the best speculations have a political element to them. Governments are constantly creating distortions in the market, causing misallocations of capital. Whenever possible, the speculator tries to find out what these distortions are, because their consequences are predictable. They result in trends you can bet on. It’s like the government is guaranteeing your success, because you can almost always count on the government to do the wrong thing.

The classic example, not just coincidentally, concerns gold. The U.S. government suppressed its price for decades while creating huge numbers of dollars before it exploded upward in 1971. Speculators that understood some basic economics positioned themselves accordingly.

As applied to metals stocks, governments are constantly distorting the monetary situation, and gold in particular, being the market’s alternative to government money, is always affected by that. So gold stocks are really a way to short government—or go long on government stupidity, as it were.

The bad news is that governments act chaotically, spastically. The beast jerks to the tugs on its strings held by its various puppeteers. So it’s hard to predict price movements in the short term. You can only bet on the end results of chronic government monetary stupidity.

The good news is that, for that very same reason, these stocks are extremely volatile. That makes it possible, from time to time, to get not just doubles or triples but 10-baggers, 20-baggers, and even 100-to-1 shots in these mining stocks.

That kind of upside makes up for the fact that these stocks are lousy investments and that you will lose money on most of them, if you hold them long enough. Most are best described as burning matches.

Louis: One of our mantras: Volatility can be your best friend.

Doug: Yes, volatility can be your best friend, as long as your timing is reasonable. I don’t mean timing tops and bottoms—no one can do that. I mean spotting the trend and betting on it when others are not, so you can buy low to later sell high. If you chase momentum and excitement, if you run with the crowd, buying when others are buying, you’re guaranteed to lose. You have to be a contrarian. In this business, you’re either a contrarian or road kill. When everyone is talking about these stocks on TV, you know the masses are interested, and that means they’ve gone to a level at which you should be a seller and not a buyer.

That makes it more a game of playing the psychology of the market, rather than doing securities analysis.

I’m not sure how many thousands of gold mining stocks there are in the world today—I’ll guess about 3,000—but most of them are junk. If they have any gold, it’s mainly in the words written on the stock certificates. So, in addition to knowing when to buy and when to sell, your choice of individual stocks has to be intelligent too.

Remember, most mining companies are burning matches.

Louis: All they do is spend money.

Doug: Exactly. That’s because most mining companies are really exploration companies. They are looking for viable deposits, which is quite literally like looking for a needle in a haystack. Finding gold is one thing. Finding an economical deposit of gold is something else entirely.

And even if you do find an economical deposit of gold, it’s exceptionally difficult to make money mining it. Most of your capital costs are up front. The regulatory environment today is onerous in the extreme. Labor costs are far above what they used to be. It ’s a really tough business.

Louis: If someone describes a new business venture to you, saying, “Oh, it’ll be a gold mine!” Do you run away?

Doug: Almost. And it’s odd because, historically, gold mining used to be an excellent business. For example, take the Homestake Mine in Deadwood, South Dakota, which was discovered in 1876, at just about the time of Custer’s last stand, actually. When they first raised capital for that, their dividend structure was something like 100 percent of the initial share price, paid per month. That was driven by the extraordinary discovery. Even though the technology was very primitive and inefficient in those days, labor costs were low, you didn’t have to worry about environmental problems, there were no taxes on whatever you earned, you didn’t have to pay mountains of money to lawyers. Today, you probably pay your lawyers more than you pay your geologists and engineers.

So, the business has changed immensely over time. It’s perverse because with the improvements in technology, gold mining should have become more economical, not less. The farther back you go in history, the higher the grade you’d have to mine in order to make it worthwhile. If we go back to ancient history, a mineable deposit probably had to be at least an ounce of gold per ton to be viable.

Today, you can mine deposits that run as low as a hundredth of an ounce (0.3 g/t). It’s possible to go even lower, but you need very cooperative ore. And that trend toward lower grades becoming economical is going to continue.

For thousands of years, people have been looking for gold in the most obscure and bizarre places all over the world. That’s because of the 92 naturally occurring elements in the periodic table, gold was probably the first metal that man discovered and made use of. The reason for that is simple: Gold is the most inert of the metals.

Louis: Because it doesn’t react easily and form compounds, you can find the pure metal in nature.

Doug: Right. You can find it in its pure form, and it doesn’t degrade and it doesn’t rust. In fact, of all the elements, gold is not only the most inert, it’s also the most ductile and the most malleable. And, after silver, it’s the best conductor of both heat and electricity, and the most reflective. In today’s world, that makes it a high-tech metal. New uses are found for it weekly. It has many uses besides its primary one as money and its secondary use as jewelry. But it was probably also man’s first metal.

But for that same reason, all the high-grade, easy-to-find gold deposits have already been found. There’s got to be a few left to be discovered, but by and large, we’re going to larger-volume, lower-grade, “no-see-um”-type deposits at this point. Gold mining is no longer a business in which, like in the movie The Treasure of the Sierra Madre, you can get a couple of guys, some picks and mules, and go out and find the mother lode. Unfortunately. Now, it’s usually a large-scale, industrial earth-moving operation next to a chemical plant.

Louis: They operate on very slender margins, and they can be rendered unprofitable by a slight shift in government regulations or taxes. So, we want to own these companies… why?

Doug: You want them strictly as speculative vehicles that offer the potential for 10, 100, or even 1,000 times returns on your money. Getting 1,000 times on your money is  extraordinary, of course—you have to buy at the bottom and sell at the top—but people have done it. It’s happened not just once or twice, but quite a number of times that individual stocks have moved by that much.

That’s the good news. The bad news is that these things fluctuate down even more dramatically than they fluctuate up. They are burning matches that can actually go to zero. And when they go down, they usually drop at least twice as fast as they went up.

Louis: That’s true, but as bad as a total loss is, you can only lose 100 percent—but there’s no such limit to the upside. A 100 percent gain is only a double, and we do much better than that for subscribers numerous times per year.

Doug: And as shareholders in everything from Enron to AIG, to Lehman Brothers, and many more have found out, even the biggest, most solid companies can go to zero.

Louis: So, what you’re telling me is that the answer to “Why gold?” is really quite different to the answer to “Why gold stocks?” These are in completely different classes, bought for completely different reasons.

Doug: Yes. You buy gold, the metal, because you’re prudent. It’s for safety, liquidity, insurance. The gold stocks, even though they explore for or mine gold, are at the polar opposite of the investment spectrum; you buy those for extreme volatility and the chance it creates for spectacular gains. It’s rather paradoxical, actually.

(to be continued)


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(continued)

Louis: You buy gold for safety and gold stocks specifically to profit from their “un-safety.”

Doug: Exactly. They really are total opposites, even though it’s the same commodity in question. It’s odd, but then, life is often stranger than fiction.

Louis: And it’s being a contrarian—”timing” in the sense of making a rational decision about a trend in evident motion—that helps stack the odds in your favor. It allows you to guess when market volatility will, on average, head upward, making it possible for you to buy low and sell high.

Doug: You know, I first started looking at gold stocks back in the early 1970s. In those days, South African stocks were the “blue chips” of the mining industry. As a country, South Africa mined about 60 percent of all the gold mined in the world, and costs were very low.

Gold was controlled at $35 per ounce until Nixon closed the gold window in 1971, but some of the South Africans were able to mine it for $20 an ounce or less. They were paying huge dividends.

Gold had run up from $35 to $200 in early 1974, then corrected down to $100 by 1976. It had come off 50 percent, but at the same time that gold was bottoming around $100, they had some serious riots in Soweto. So the gold stocks got a double hit: falling gold prices and fear of revolution in South Africa. That made it possible, in those days, to buy into short-lived, high-cost mining companies very cheaply; the stocks of the marginal companies were yielding current dividends of 50 to 75 percent. They were penny stocks in those days. They no longer exist; they’ve all been merged into mining finance houses long since then. Three names that I remember from those days were Leslie, Bracken, Grootvlei; I owned a lot of shares in them. If you bought Leslie for 80 cents a share, you’d expect, based on previous dividends, to get about 60 cents a share in that year.

But then gold started flying upward, the psychology regarding South Africa changed, and by 1980, the next real peak, you were getting several times what you paid for the stock, in dividends alone, per year.

Louis: Wow. I can think of some leveraged companies that might be able to deliver that sort of performance, if gold goes where we think it will. So, where do you think we are in the current trend or metals cycle? You’ve spoken of the Stealth, Wall of Worry, and Mania Phases of a bull market for metals—do you still think of our market in those terms?

Doug: That’s the big question, isn’t it? Well, the last major bottom in this sector was from 1998 to 2002. Many of these junior mining stocks—mostly traded in Canada, where about 75 percent of all the gold stocks in the world trade—were trading for less than cash in the bank. Literally. You’d get all their properties, their technology, the expertise of their management, totally for free. Or less.

Louis: I remember seeing past issues in which you said, “If I could call your broker and order these stocks for you, I would.”

Doug: Yes. But nobody wanted to hear about it at that time. Gold was low, and there was a bubble in Internet stocks. Why would anyone want to get involved in a dead-duck, nineteenth century, “choo-choo train” industry like gold mining? It had been completely discredited by the long bear market, but that made it the ideal time to buy them, of course. That was deep in the Stealth Phase.

Over the next six to eight years, these stocks took off, moving us into the Wall of Worry Phase. But the stocks didn’t fly the way they did in past bull markets. I think that’s mostly because they were so depleted of capital, they were selling lots of shares. So their market capitalizations—the aggregate value given them by the market—were increasing, but their share prices weren’t. Not as much.

Remember, these companies very rarely have any earnings, but they always need capital, and the only way they can get it is by selling new shares, which dilutes the value of the individual shares, including those held by existing shareholders.

Then last fall hit, and nobody, but nobody, wanted anything speculative. These most volatile of stocks showed their nature and plunged through the floor in the general flight to safety. That made last fall the second best time to buy mining shares this cycle, and I know you recommended some pretty aggressive buying last fall, near the bottom.

Now, many of these shares—the better ones at least—have recovered substantially, and some have even surpassed pre-crash highs. Again, the Wall of Worry Phase is characterized by large fluctuations that separate the wolves from the sheep (and the sheep from their cash).

Where does that leave us? Well, as you know, I think gold is going to go much, much higher. And that is going to direct a lot of attention toward these gold stocks. When people get gold fever, they are not just driven by greed, they’re usually driven by fear as well, so you get both of the most powerful market motivators working for you at once. It’s a rare class of securities that can benefit from fear and greed at once.

Remember that the Fed ’s pumping up of the money supply ignited a huge bubble in tech stocks, and then an even more massive global bubble in real estate—which is over for a long time, incidentally—but they’re still creating tons of dollars. That will inevitably ignite other asset bubbles. Where? I can’t say for certain, but I say the odds are extremely high that as gold goes up, for all the reasons we spoke about last week and more, that a lot of this funny money is going to be directed into these gold stocks, which are not just a microcap area of the market but a nanocap area of the market.

I’ve said it before, and I’ll say it again: When the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.

Gold stocks, as a class, are going to be explosive. Now, you’ve got to remember that most of them are junk. Most will never, ever find an economical deposit. But it’s hopes and dreams that drive them, not reality, and even without merit, they can still go 10, 20, or 30 times your entry price. And the companies that actually have the goods can go much higher than that.

At the moment, gold stock prices are not as cheap, in either relative or absolute terms, as they were at the turn of the century, nor last fall. But given that the Mania Phase is still ahead, they are good speculations right now—especially the ones that have actually discovered gold deposits that look economical.

Louis: So, if you buy good companies now, with good projects, good management, working in stable jurisdictions, with a couple years of operating cash to see them through the Wall of Worry fluctuations—if you buy these and hold for the Mania Phase, you should come out very well. But you can’t blink and get stampeded out of your positions when the market fluctuates sharply.

Doug: That’s exactly right. At the particular stage where we are right now in this market for these extraordinarily volatile securities, if you buy a quality exploration company, or a quality development company (which is to say, a company that has found something and is advancing it toward production), those shares could still go down 10, 20, 30, or even 50 percent, but ultimately there’s an excellent chance that that same stock will go up by 10, 50, or even 100 times. I hate to use such hard-to-believe numbers, but that is the way this market works.

When the coming resource bubble is ignited, there are excellent odds you’ll be laughing all the way to the bank in a few years.

I should stress that I’m not saying that this is the perfect time to buy. We’re not at a market bottom as we were in 2001, nor an interim bottom like last November, and I can’t say I know the Mania Phase is just around the corner. But I think this is a very reasonable time to be buying these stocks. And it’s absolutely a good time to start educating yourself about them. There’s just such a good chance a massive bubble is going to be ignited in this area.

Louis: These are obviously the kinds of things we research, make recommendations on, and educate about in our metals newsletters, but one thing we should stress for nonsubscribers reading this interview is that this strategy applies only to the speculative portion of your portfolio. No one should gamble with their rent money nor the money they’ve saved for college tuition, etcetera.

Doug: Right. The ideal speculator’s portfolio would be divided into 10 areas, each totally different and not correlated with each other. Each of these areas should have, in your subjective opinion, the ability to move 1,000 percent in price.

Why is that? Because most of the time, we’re wrong when we pick areas to speculate in, certainly in areas where you can’t apply Graham-Dodd-type logic. But if you’re wrong on 9 out of 10 of them, and it would be hard to do that badly, then you at least break even on the one 10-bagger (1,000 percent winner). What’s more likely is that a couple will blow up and go to zero, a couple will go down 30, 40, 50 percent, but you’ll also have a couple doubles or triples, and maybe, on one or two of them, you’ll get a 10-to-1 or better win.

So, it looks very risky (and falling in love with any single stock is very risky), but it’s actually an intelligent way to diversify your risk and stack the odds of profiting on volatility in your favor.

Note that I don’t mean that these “areas” should be 10 different stocks in the junior mining sector—that wouldn’t be diversification. As I say, ideally, I’d have 10 such areas with potential for 1,000 percent gains, but it’s usually impossible to find that many at once. If you can find only two or three, what do you do with the rest of your money? Well, at this point, I would put a lot of it into gold, in one form or another, while keeping your powder dry as you look for the next idea opportunity.

And ideally, I’d look at every market in every country in the world. People who look only in the United States, or only in stocks, or only in real estate—they just don’t get to see enough balls to swing at.

Louis: Okay, got it. Thank you very much.

In 2009, at the time of this interview, Doug said it was not the perfect time to buy because “we’re not at a market bottom.” That, however, has changed dramatically. In the last two years, gold mining stocks have gotten slaughtered, and even the best companies with proven, high-grade gold deposits are now trading 50-75% below their actual value.

The time where contrarian investors can literally make a fortune may be close: Right now, Doug and many other seasoned resource investors are seeing unmistakable signs of an imminent turnaround in the gold market.

Find out how to play the turning tides of the precious metals market by watching “Upturn Millionaires,” a free online video event hosted by Casey Research—featuring Doug Casey, Porter Stansberry, Rick Rule, John Mauldin, Frank Giustra, Ross Beaty, Louis James, and Marin Katusa. Click here to save your seat.

A Turning Point in Junior Gold Stocks?

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Posted on 31st January 2014 by Administrator in Economy |Politics |Social Issues

A Turning Point in Junior Gold Stocks?

By Doug Hornig, Senior Editor

It’s not exactly news that gold mining stocks have been in a slump for more than two years. Many investors who owned them have thrown in the towel by now, or are holding simply because a paper loss isn’t a realized loss until you sell.

For contrarian speculators like Doug Casey and Rick Rule, though, it’s the best of all scenarios. “Buy when blood is in the streets,” investor Nathan Rothschild allegedly said. And buy they do, with both hands—because, they assert, there are definitive signs that things may be turning around.

So what’s the deal with junior mining stocks, and who should invest in them? I’ll give you several good reasons not to touch them with a 10-foot pole… and one why you maybe should.

First, you need to understand that junior gold miners are not buy-and-forget stocks. They are the most volatile securities in the world—”burning matches,” as Doug calls them. To speculate in those stocks requires nerves of steel.

Let’s take a look at the performance of the juniors since 2011. The ETF that tracks a basket of such stocks—Market Vectors Junior Gold Miners (GDXJ)—took a savage beating. In early April of 2011, a share would have cost you $170. Today, you can pick one up for about $36… that’s a decline of nearly 80%.

There are something like 3,000 small mining companies in the world today, and the vast majority of them are worthless, sitting on a few hundred acres of moose pasture and a pipe dream.

It’s a very tough business. Small-cap exploration companies (the “juniors”) are working year round looking for viable deposits. The question is not just if the gold is there, but if it can be extracted economically—and the probability is low. Even the ones that manage to find the goods and build a mine aren’t in the clear yet: before they can pour the first bar, there are regulatory hurdles, rising costs of labor and machinery, and often vehement opposition from natives to deal with.

As the performance of junior mining stocks is closely correlated to that of gold, when the physical metal goes into a tailspin, gold mining shares follow suit. Only they tend to drop off faster and more deeply than physical gold.

Then why invest in them at all?

Because, as Casey Chief Metals & Mining Strategist Louis James likes to say, the downside is limited—all you can lose is 100% of your investment. The upside, on the other hand, is infinite.

In the rebound periods after downturns such as the one we’re in, literal fortunes can be made; gains of 400-1,000% (and sometimes more) are not a rarity. It’s a speculator’s dream.

When speculating in junior miners, timing is crucial. Bear runs in the gold sector can last a long time—some of them will go on until the last faint-hearted investor has been flushed away and there’s no one left to sell.

At that point they come roaring back. It happened in the late ’70s, it happened several times in the ’80s when gold itself pretty much went to sleep, and again in 2002 after a four-year retreat.

The most recent rally of 2009-’10 was breathtaking: Louis’ International Speculator stocks, which had gotten hammered with the rest of the market, handed subscribers average gains of 401.8%—a level of return Joe the Investor never gets to see in his lifetime.

So where are we now in the cycle?

The present downturn, as noted, kicked off in the spring of 2011, and despite several mini-rallies, the overall trend has been down. Recently, though, the natural resource experts here at Casey Research and elsewhere have seen clear signs of an imminent turnaround.

For one thing, the price of gold itself has stabilized. After hitting its peak of $1,921.50 in September of 2011, it fell back below $1,190 twice last December. Since then, it hasn’t tested those lows again and is trading about 6.5% higher today.

The demand for physical gold, especially from China, has been insatiable. The Austrian mint had to hire more employees and add a third eight-hour shift to the day in an attempt to keep up in its production of Philharmonic coins. “The market is very busy,” a mint spokesperson said. “We can’t meet the demand, even if we work overtime.” Sales jumped 36% in 2013, compared to the year before.

Finally, the junior mining stocks have perked up again. In fact, for the first month of 2014, they turned in the best performance of any asset, as you can see here:

(Source: Zero Hedge)

The writing’s on the wall, say the pros, that the downturn won’t last much longer—and when the junior miners start taking off again, there’s no telling how high they could go.

To present the evidence and to discuss how to play the turning tides in the precious metals market, Casey Research is hosting a timely online video event titled Upturn Millionaires next Wednesday, February 5, at 2:00 p.m. Eastern.

 

register here for free

 

Born Libertarian: Doug Casey on Ron Paul and the Price of Freedom

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Posted on 14th October 2013 by Administrator in Economy |Politics |Social Issues

,

Born Libertarian: Doug Casey on Ron Paul and the Price of Freedom

By The Gold Report

The Gold Report: Doug, we are at your conference in Tucson, Arizona, the day after former Congressman and presidential candidate Dr. Ron Paul gave the keynote speech to a sold-out crowd. How did you two first meet?

Doug Casey: It was about 30 years ago. Ron used to attend my Eris Society—named after the Greek goddess of discord—meetings in Aspen, Colorado. Everyone from Sonny Barger of the Hells Angels motorcycle club to Burt Rutan, inventor of SpaceShipOne, would meet to discuss ideas.

TGR: In those 30 years, have Ron Paul’s ideas changed much?

DC: Ron believes he was born a libertarian. He’s right. I believe in Pareto’s law—the 80-20 rule. I prefer to think that 80% of humans are basically decent, which is to say that they were born libertarian oriented. But it takes a while to crystallize what that means. Ron and I, and many others, have moved beyond gut libertarianism to a structured, intellectual libertarianism.

Some people see the same things we see through a totally different lens, however. Those people tend to be the other 20%, or perhaps 20% of that 20%, or even 20% of that 20% of that 20%. They range from being wishy-washy on ethical subjects to being sociopaths or even outright criminals. These people are at the opposite end of the spectrum from us in every way.

TGR: One of the things Ron Paul mentioned last night is that a true libertarian advocates for the freedom of everyone to do what he or she wants as long as it’s not hurting someone else. This includes people who don’t agree with your views.

DC: Exactly. As opposed to busybodies who want to tell everybody else what to do. They think they know best and are perfectly willing to put a gun to your head to make sure that you do what they think is right.

TGR: We are meeting in the midst of a government shutdown. Ron Paul called it a paid holiday for federal workers. Are we doomed to an endless cycle of these manmade crises?

DC: I would like nothing better than to see the shutdown go on forever, but unfortunately the government is only shutting down things that inconvenience people, like monuments and national parks—things that should not be owned by the government to start with. I wish they would shut down all their praetorian agencies, like the FBI, the CIA, and the NSA. Shut down the IRS. I am much more concerned about Silk Road being shut down than I am the US government being shut down.

TGR: Do you think regular people care whether government is shut down or not?

DC: Over half of Americans are living off the state, receiving more from the state than they’re putting into it, which makes them receivers of stolen property. They see the government as a cornucopia and therefore a good thing so they want it to be open and sending them checks.

The situation is fairly hopeless at this point, and it’s likely to get a lot worse before it gets better. Trends in motion, in whatever direction, tend to stay in motion until they hit a crisis, at which point they transform into something else. This trend is not only in motion, but it’s accelerating in the wrong direction.

TGR: Ron Paul said that the charade on the American people is that the two parties are different, that actually it’s not that we need a third party, but we need a second party. Your presentation compared the end of the Roman Empire to the state of the US today. Is the current political system doing a better or worse job of protecting freedom and liberty in the US compared to ancient Rome?

DC: The founders consciously modeled the US after Rome, everything from the way government buildings look to having an assembly and a senate. We are similar right down to the Latin mottos. When you model yourself after something, you eventually tend to resemble it. That partly explains why we are on the slippery slope of constant wars, less freedom, more power for the executive, destruction of the currency, and barbarians at the gate. Another part is the natural tendency of all empires to reach their level of incompetence and then decline. It’s to be expected. Entropy dictates all things wind down and degrade.

As I pointed out in my speech, America has gone through periods of what paleontologists call “punctuated disequilibrium.” Things evolve gently in one direction and then experience massive change very quickly. I’m afraid that the US might be approaching a phase similar to the one the Romans experienced before Diocletian made himself emperor. He completely changed the character of Rome; he believed that in order to save Rome, he had to destroy it.

As we go deeper into this crisis—of which we’re just currently in the early stages—there’s every chance that the American people are going to look for a savior, a strong man, probably a military person because Americans love and trust their military for some reason. I see the military as not much more than a heavily armed version of the post office, but I suspect that we’ll find someone who is the equivalent of Diocletian, who will change the whole nature of society radically in the wrong direction.

TGR: Do you believe in changing from within the system, or just getting out from under the system? Would you ever run for public office?

DC: I think the situation is beyond retrieval at this point. People generally get the government they deserve. At this point, Americans are much more interested in freebies than they are in personal freedom. They are like scared little rabbits. They’re much more interested in safety than they are in personal liberty. I think they’re going to get what they deserve good and hard over the years to come. I would much rather watch what goes on in the US on my widescreen TV in the lap of luxury in another country than be in the epicenter of things here. The system is beyond the point where it can be reformed.

And, no, I have zero desire to run for office. Plus, anyone who runs for office disqualifies himself for being in a position of power by the very fact that he wants to be in that position. My friend Harry Browne always used to say that when he ran for president on the Libertarian ticket, the first thing he’d do if he were elected would be to quit—at least after rescinding all outstanding Executive Orders and recalling all the troops. Anyway, even if Ron Paul had been elected president and if he tried to make the necessary changes, the public would have rioted, Congress would have impeached him, and the heads of the CIA, FBI, and the military would have sat him down and subtly intimated that they have the power, and he shouldn’t do anything they don’t want done—or undone.

I don’t think a change can be made at this point. I’m just interested in seeing what happens when we really get involved in a really big crisis, which I think is going to happen in the next couple of years, as we go back into the trailing edge of the economic hurricane that started in 2007.

TGR: One of the things that has come up as part of the shutdown debate is health care. Do you have health insurance? And, how would you control healthcare costs?

DC: First of all, I don’t call it health insurance because it doesn’t insure your health. That’s something that you’re personally responsible for, not some third party. I call it medical insurance. Just as I call the FDA the “Federal Death Authority,” because it probably kills more people every year than the Department of Defense does in a typical decade by slowing down the approval and hugely raising the cost of new drugs and technologies.

Getting to back to your question, no, I don’t have medical insurance. If anything goes wrong with my body, I’ll treat it as I would if something goes wrong with my car. I’ll find the best doctor elsewhere in the world where medical costs can be 20% of what they are in this country. I’ll pay for it in cash. I don’t want to have to fight with an insurance company, or the government, about what’s covered or not.

The whole idea of everybody having medical insurance is a corruption that arose during World War II when companies used insurance to attract workers. Then we had Medicare and then Medicaid. These are the reasons costs have escalated. In a free-market society, medical costs should have collapsed and gone down in the same way as the cost of computers has collapsed and gone down even as they’ve gotten vastly better. People think they need the government in medicine, but it’s been totally counterproductive. It’s done the opposite of what was intended.

TGR: One of the things Ron Paul mentioned is that his speeches on college campuses, including UC Berkeley, have been some of the most well received. Do you have hope for the next generation?

DC: Yes, there is reason for hope over the longer term. Generally, older people in this country have voted all these “benefits” for themselves, and they don’t want to have their rice bowls broken. The younger people are being turned into indentured servants to pay for these benefits. Young people are figuring this out.

Another worrisome thing is that a lot of young people have indentured themselves by taking on huge amounts of college debt; $1.2 trillion is the current number. They can’t even discharge it through bankruptcy, although many are unable to pay it. More and more are deciding that doing four years in a college to experience indoctrination from wrongheaded professors is a complete misallocation of both their time and their money.

If I had to do it again, I definitely would not go to college. I recommend others skip college, unless they need to learn a specific technical set of skills, such as doctoring or lawyering or engineering or a science where you need lab work. Most kids today, however, are going off to college for things like gender studies, political science, and English. These are things you should learn on your own, on your own time, at no cost. Meanwhile, avoid the indoctrination of the creatures who hang out in university faculty rooms who teach because they are incapable of doing anything else.

TGR: Ron Paul intimated that we’re in a middle of a revolution. You said that the solution to our problems would be less command and control and more entrepreneurs. Are the small business owners the real revolutionaries?

DC: They could and should be, but it is becoming increasingly difficult to start a business because of the regulatory and tax environment in the US. Smart people are leaving in droves. There just aren’t enough left to change things. I’m afraid we’re just going to have to let things take their course.

The main function that Ron Paul has served is educating people, which is necessary and laudable. But the odds of him succeeding in changing things are close to zero.

TGR: You talked about the role of education, and Ron Paul mentioned the power of the Internet to circulate new ideas based on the theory that ideas have consequences. Your ideas are having an impact thanks to the power of the Internet. Does that bode well for the future?

DC: It does. The Internet is the best thing that’s happened since Gutenberg invented movable type and the printing press; it’s a marvelous thing. That’s exactly why the government wants to regulate the Internet. It sees it as a huge danger.

TGR: Does suppressing ideas ever work? Is it working in China?

DC: Actually, in many ways China is freer than the US, but that’s not one of them.

If you are a businessman and you keep your nose out of politics, it actually is freer. You’ll have less taxes, less regulation in China than you would in the US. But instead of emulating the free part of China, the US government is trying to copy the Internet restrictions because it sees the Internet as a danger to the existing order. And they’re right.

TGR: But didn’t the governments of Middle Eastern countries find out that ideas have a life of their own, and they find a way to spread despite attempts to shut them down?

DC: They do, so let’s hope for the best.

TGR: Finally, Ron Paul said that things are worse than the government will admit, and the idea of economic growth this year is a dream. He said we need to be serious, but not despondent. Make financial plans, but have fun doing it. Do you agree, and are you having fun yet?

DC: I am having fun. I’m doing this not because I need the money, but because it’s amusing and it’s good karma to sow dissention in the ranks of the enemy.

TGR: Thank you for sharing your thoughts.

DC: Thank you.

This interview highlights why Doug Casey has long been a highly sought speaker: he speaks his mind clearly, and has interesting ideas worth sharing. So it’s no wonder that Casey Research Summits follow suit… and are sold out every year. Following Doug’s lead, the company has a proven record of bringing together interesting and successful individuals, from investing to economics to technology and politics.

The Summit that recently concluded was no different. With experts such as Rick Rule, James Rickards, Chris Martenson, Lacy Hunt, Catherine Austin Fitts, and many more joining keynote speaker Ron Paul, attendees at the sold-out event were treated to presentations unthinkable to those who follow the mainstream… from how to survive Obamacare to navigating shifting geopolitical trends to internationalizing one’s wealth and more.

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Doug Casey on Internationalizing

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Posted on 18th April 2013 by Administrator in Economy |Politics |Social Issues

Doug Casey on Internationalization

By Doug Casey, Chairman

Since writing The International Man in 1976, I’ve had quite a bit to say about internationalizing yourself. The book’s subtitle was Making the Most of Your Personal Freedom and Financial Opportunity Around the World; but in going over past editions of our newsletters, I find that most of what I’ve written in recent years has been about the financial aspects of expatriation. Now seems a good time to confront the rest of the subject head on – the reasons to very seriously consider leaving your home country, and to do so now, not next year.

The International Man is long out of print, of course, and only available through used bookstores and finders (including amazon.com). While I’m obviously biased, it’s actually still an excellent read, although the world is a different place and I’ve learned a few things since 1976. The book was directed to Americans, but found a fairly broad international market – becoming, among other things, the biggest-selling book in the history of Rhodesia. That, in and of itself, provides a bit of an object lesson in how things can change, I think.

When I first went to Rhodesia in 1978, war was still raging, but I was able to find an entrepreneurial local publisher, Gordon Graham. At the time, there were still about 250,000 people of European extraction among the 6-million population. And it was clear most of them were eyeing the exits and wondering where to go.

Most of the whites were native Africans, born to families that had been in the country for generations, and they felt they had just as much right to be there as the blacks. But when it comes to such things, it’s not a question of rights but of political power. Today there might be 5,000 whites still hanging on. But making what they called “the chicken run” 30 years ago was definitely the smart course. However, few of them had a “bolt hole” elsewhere. In any event, my book flew off the shelves, as people desperately scrambled for alternatives.

The problem – your problem – is that any country can turn into a 1970s Rhodesia. Or a Russia in the ’20s, Germany in the ’30s, China in the ’40s, Cuba in the ’50s, the Congo in the ’60s, Vietnam in the ’70s, Afghanistan in the ’80s, Bosnia in the ’90s. These are just examples off the top of my head. Only a fool tries to survive by acting like a vegetable, staying rooted to one place, when the political and economic climate changes for the worse. When the going gets tough, the mentally tough go elsewhere. The way your forefathers once did – at least, if you live in an immigrant-built country like the US, Canada, Australia, New Zealand, or Argentina.

I don’t know exactly when I became interested in exploring other lands. Maybe it began with reading Uncle Scrooge comics when I was a kid in the ‘50s. Uncle Scrooge (who is a fantastic character and one of the great heroes of American literature) was always taking Donald Duck and his three nephews off to an exotic clime for a high-adventure treasure hunt. Maybe it was when I wanted to be a paleontologist and read about Roy Chapman Andrews (a model for Indiana Jones) rooting for fossils in Mongolia. Or when I decided I’d like archaeology better and read about Heinrich Schliemann discovering Troy. But a couple of specific things really set the bit in my teeth.

One was when I was in Milan, looking to buy a Ferrari. The seller was a guy I remember well, Viviano Corradini, who was actually an American. I asked him why he was living in Italy. “You see this?” he said, as he veered the car way into the opposite lane and back again a couple of times, then slammed on the brakes, then accelerated – a wild little ride. “You can’t do this in the States. They’ll throw you in jail. Here, you can do anything you want!” He was right. After I bought the car we realized I didn’t have any plates, so he reached up into a closet and found some old New Jersey plates. “Here. Use these.” I did, no problem, for the next six months, all over Europe. It gave me some practical reality about not being controlled by other people’s arbitrary rules.

Another was in Switzerland, when I was hanging around for about a month with an ex-Foreign Legionnaire named Ron Schneeberger. He was planning to rob the national bank of Haiti, figuring that Papa Doc had about $50 million in negotiables sequestered there. That was a lot of money in those days. Ron reasoned, quite correctly, that if you robbed the corner liquor store, you’d get $50 and likely get killed. If you robbed an ordinary bank, you might get $5,000. But if you hit a government… who was going to pursue you?

Of course the world in general – and absolutely, positively Europe – is a bit more tightly wrapped now. And I don’t endorse the idea of reckless driving. Or of robbing national banks – at least not without the cover of being an executive with Goldman Sachs…

But the point is that, at different times, there are places that are good for doing certain things. And places where it is bad to be. Who wouldn’t have preferred to be in the USA, rather than the USSR, from 1920 to 1990? Ireland was a dismal, depressing place for decades after WW2; then in the ‘90s it blossomed. Africa was a very safe, prosperous, and enjoyable place before about 1960, when it started to degenerate into a giant hellhole.

About every country on the planet has had its good times and its bad times; that’s one reason the original Baron Rothschild sent his sons to several different ones. Some countries, like Russia, have been living at Hard Times Central since day one; others, like the US, have had good times for a long time.

A wise man, at least in my view, doesn’t allow himself to be limited by an accident of birth.

It’s most unfortunate (for them, anyway) that most people have a peasant mentality. They’re idiotically indoctrinated into thinking that their country is the best place in the world, simply because that’s where they were born. It makes sense in a way; their ancestors rarely ventured more than a day’s walk from the village where they were born. After all, there were stories of dragons and demons over the hill. Things haven’t changed much, except people have exchanged the mud hut for a McMansion. But they’ve retained that medieval serf worldview. And the CNN and BBC newscasts on their widescreens only reinforce the notion that things are dangerous outside their borders; they’re probably even more scared than their primitive ancestors. Assuming they watch anything beside sitcoms and sports.

It’s certainly possible to be happy living your whole life in the place you were born and grew up. But unless you were born a member of the lucky sperm club, it’s almost always suboptimal, and sometimes it can be disastrous. I suspect now is one of those unhappy times.

We’re of the opinion that the world at large, and the US in particular, is heading into some seriously turbulent times. The diminution of personal and financial freedom looks like a hyperbolic curve, at first with an almost unnoticeable slope, then one that gets steeper and steeper, at an accelerating rate. I think an excellent case can be made that the current crisis is an inflexion point, beyond which it goes vertical. As one of Obama’s closest counselors (and he’s a very scary guy) has said, “One can’t let a good crisis go to waste.”

A crisis (and this will be a very real one) always draws exhortations from the authorities to “unite” and “pull together” – which usually boils down to following orders and turning in those who don’t. People will want, and will get, “strong leadership.” This does not bode well for libertarians, classical liberals, and free thinkers, in general.

As the crisis deepens, it’s likely to be dangerous for someone who doesn’t agree with groupthink. Things are likely to be much mellower if you’re living somewhere they consider you a tourist, than to stay on your home turf where questions will be asked if you don’t join the hooting and panting chimpanzees that will surround you. You can absolutely plan on unwelcome social pressure in the years to come, especially as the wars expand.

Coincidental with this is going to be the near destruction of the US dollar; I just don’t see any realistic way around that eventuality at this point. The consequences of that are going to be disastrous, but it’s possible to insulate yourself from many of them. The biggest problem, and also the one most people just don’t see, is political. There is almost no way you can effectively insulate yourself if a government, and society as a whole, goes crazy.

You might argue that really tough times in the US are a long shot; the US is “different” from other countries. It’s certainly true the US has been particularly blessed for most of its existence, because it actually was different. The problem is that what made the US different from every other country – a Constitution that expressly limited the powers of the state, and an explicit acceptance of property rights and the free market – has evanesced. It’s why I refer to it as the US, which is just another country, rather than America, which was a unique and excellent concept.

In any event, I suggest you at least consider the possibility of transplanting yourself, or at least start by transplanting some assets. Don’t look at it as a negative thing. The world is your oyster. Make the most of it. This is directed not only at Americans, but at everybody, everywhere. It just seems a little more urgent for Americans, as well as for Europeans, at this point.

In many ways the world seemed to turn over a new leaf in the ’80s. Not just with the election of Reagan and Thatcher, but with the appearance of many more like them, almost everywhere. Whether it’s the “hundredth monkey” hypothesis, or whether there really is such a thing as the “spirit of the century,” the majority of people tend to hold similar views at the same time. It’s strange. From about 1980-2000, all over the world, tax rates went down, regulation was relaxed, markets were freed up. The Soviet Union collapsed, apartheid in South Africa nonviolently disappeared, New Zealand fired two-thirds of its government employees, China liberalized. Even the constipated continents of Europe and South America loosened up. It looked like freedom was in the ascendant. But it couldn’t last.

Now, certainly since September 11, 2001, the tenor of the world has changed again – radically. And the negative new trend has been supercharged by the financial crisis that began to unfold in 2007. Now practically everywhere, much higher taxes, onerous new regulations, border controls, and capital controls (to prevent the make-believe crime of money laundering), among other things, are the new order. It seems as if the clock has been turned back to the 1930s, but much worse, in that governments are much more powerful. And I fear a redux of the 1940s is in store. The whole world acted pretty much the same in the ’30s and ’40s as well, you’ll recall.

One thing I think you can plan on is foreign exchange controls. A government turns to FX controls during a currency crisis, to prevent its citizens from swapping the local currency for something foreign – transactions that would further weaken the local currency. FX controls, in effect, force people to stay with a sinking ship. But they are politically popular, for a number of reasons. They allow the government to “do something” during a crisis. They appeal to the average yahoo, partly because he doesn’t travel abroad and tends to question the patriotism of those who do. Only the rich (especially the “unpatriotic” ones) have assets out of the country, and it’s now time to eat the rich.

We’re heading into a currency crisis for the record books, and I think you can plan your life around some type of FX controls. If you don’t get significant assets out of your home country now, you may soon find it costly and very difficult to do so. Already, very few foreign banks and brokerage firms will take accounts from US persons. But although there are reporting requirements, there’s currently no law against Americans having overseas accounts, and no laws against foreign banks and brokerage firms accepting American business. Many institutions find that it’s simply not worth the aggravation and worry to deal with Americans.

At a bare minimum, you should have a meaningful amount of gold in a foreign safe deposit box. In addition, you should own some foreign property, preferably in a location where you would enjoy spending some time. These things are currently not reportable, and it would be impractical for the government to get you to repatriate that capital.

The ideal scenario, of course, is to have your main residence in one country, your assets in another, your business in a third, and your citizenship in a fourth. That isn’t practical for most. But you can certainly get assets abroad. And you may want to consider acquiring a second citizenship, which can considerably expand your options. The International Man has a lot on this topic. It’s not necessary, and often not even desirable, to establish official residency in the country where you’d like to spend time, because that risks getting stuck in its tax system. It’s usually smarter just to leave every 90 days to renew your tourist visa and not spend more than six months per year in any one country. That way you’ll be treated as a valued tourist, who should be courted, rather than as a citizen, who can be milked like a cow.

Once you do acquire another passport, the next question is whether you should renounce your US citizenship, which could give you huge tax and regulatory benefits. As everyone knows, the US is one of the few countries in the world that taxes its citizens regardless of where they may live – although it must be said that other governments seem to be moving in this direction.

The problem with renouncing your US citizenship is that the US assesses what amounts to an exit tax on Americans who do so.

Since 2004, any high-net-worth individual who renounces his citizenship is automatically assumed to have done so for tax reasons. And any individual deemed to have expatriated for tax reasons is deemed to have sold all his assets at fair market value on his last day as a US citizen. And, if the expatriate spends more than 120 days per year in the US, he can be taxed on his worldwide income and potentially is subject to estate tax.

In the near future, however, even that option may not be feasible. So let’s plan ahead…

I wrote The International Man as a guide for those who were looking for a place that could offer more of what they want. I can’t rewrite the book in this short report. But it’s worth making a few observations about the world in general, then about some areas and countries in particular.

First, there may not actually be any one “best” place, simply because you’re dealing with the human animal, who’s subject to all manner of fears, hysteria, vices, and assorted aberrations. I don’t know where Shangri-La is located. Therefore, you want some degree of diversification, so you always have a “Plan B” available.

Second, there are roughly 225 distinct political entities around the world, and there are likely to be more as time goes on. There are advantages to places that are unstable, poor, repressed, and backward, just as there are disadvantages to places that are stable, rich, free, and advanced. A lot depends on who you are and what you want to do. Try to keep an open mind.

Third, I don’t think there’s any doubt that the West – meaning North America, Europe, Australia/New Zealand, and Japan – is in relative decline. Meanwhile, places like China, India, and Vietnam are on the way up.

The reasons are simple. In the developing world, a worker earns between 1/5 and 1/30 what his counterpart does in the West. But he’s just as smart, might be even better educated, is likely to work twice as hard, and has less of an attitude of entitlement. It may be true (but less and less) that the developing country has less infrastructure. But now a number of them have telecoms, roads, airports, and such that are among the world’s newest and best, while many of those in the West are falling apart. At the same time, the general level of taxes and regulation tends to be much lower in developing countries; that’s a big reason why they’re developing. Part of the better social ambiance is reflected in people being free of debt; they may not make much, but they save something like 10% to 20% of what they do make. So, instead of a mountain of debt that must be paid off, there’s a growing pool of savings to be invested.

The days of automatically having the odds tilted in your favor simply because you were born an American are coming to an end. By the end of this century, wages will be more or less normalized the world over. Americans also have had a huge advantage in speaking English, the world’s most commonly spoken language, its lingua franca, and the language of science, business, aviation, entertainment, and other fields. But that advantage is also diminishing, as almost every educated person now has English as a second language. Most Americans have only English.

Negatives? Many of these places have large bureaucracies, as a legacy from buying into various strains of socialism imported from Europe. There may not be much regulation (of the type we have in the West), but there are still plenty of forms that need to be processed and approved. In order to make things happen, bribes must be paid. I’ve discussed the ethical implications of paying bribes in the past, but suffice it to say that as developing countries become freer and wealthier, bribery and general corruption will likely diminish. At the same time, as the US becomes less free and wealthy, bribery and general corruption will greatly increase.

I think it’s incumbent upon any self-directed free man to go where he can most fully realize himself. But where that is depends on who he is. And sometimes happenstance plays a part. I’m reminded of one of my favorite scenes in Casablanca. Claude Rains, as Renault the police inspector, asks Bogart:

“Rick, how’d a guy like you ever wind up in Casablanca?”

“I came for the water.”

“But there’s no water in Casablanca – this place is a desert…”

“Yeah, I was misinformed.”

Doug Casey is chairman of Casey Research and a highly sought-after speaker on investments and the economy. At 2 p.m. EDT on Tuesday, April 30, you can hear him discuss how to legally move your assets abroad in a special web event, titled Internationalize Your Assets. Joining him will be Euro Pacific Capital Chief Global Strategist and CEO Peter Schiff; GoldSilver.com founder and owner Michael Maloney; World Money Analyst Editor Kevin Brekke; and Casey Research Managing Director David Galland.

Get the details and register here.