 Are You Tired of Going It Alone?
Doug Casey's Outlook for 2006
By Doug Casey
Chairman, Casey Research, LLC.
The
International Speculator
January 13. 2006
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DOUG CASEY'S OUTLOOK FOR
2006
What will 2006 be like? Let
me set the mood with my favorite Einstein joke.
Einstein dies and goes to heaven.
Since heaven, for obvious reasons, is a centrally planned economy,
St. Peter sheepishly informs him that they have a temporary housing
shortage. He'll have to bunk with three other guys for a while.
Of course his new roomies are
thrilled. The first one comes up to him and says: "Mr. Einstein,
it's an honor to meet you. But I'd like to get to know you better.
I have an IQ of 130". So Einstein says: "Great. After
lunch, let's bounce around some ideas on astrophysics I've been
working on."
Then the second one comes up
to him, and says: "Mr. Einstein, it's an honor. I'd also
like to get to know you. I have an IQ of 100." So Einstein
says: "Fine. Let me put my grip away, and we'll have a game
of chess."
Then the third one walks up,
and says: "Hi, Mr. Einstein. I'd also like to get to know
you. But I'm afraid I'm not as smart as those other guys; I've
only got an IQ of 70." Einstein says: "So where do
you think interest rates are going?"
SOME GENERALITIES...
On the one hand, discussions
of the economy and the markets should be for amusement purposes
only. Since it's impossible to know what the finances, motives,
constraints, and desires of six billion people might be, it's
impossible to know what they're going to do, or when. On the
other hand, there is such a thing as human nature. Actions do
have consequences. The madness of crowds exists. And both history
and markets exhibit definite trends over time. Like many things
in life, looking at the markets can lead you to paradox.
When establishment economists
prognosticate, their guesses are typically gussied up with convoluted
theories and complex mathematical formulae. Their predictions
are overwhelmingly bullish, partly because they're really just
extrapolations of the prevailing trend, and partly because that's
the politically savvy view to hold. This is not to accuse most
economists of being idiots, even though I think most of their
theories and formulae are idiotic. On the contrary, it's highly
intelligent to be bullish -- because throughout history things
have always gotten better (albeit punctuated with setbacks, ranging
in length and depth from the recent recession to the Dark Ages).
Clearly, the longest trend in existence is the ascent of man,
and it's likely to continue. Indeed, despite my cynicism on the
world as it is, I think the ascent will likely accelerate.
So, all this having been said,
what do I think? As you know, I think the U.S. is riding for
a serious fall; that opinion has historically constrained my
ability to capitalize on domestic stock, bond, and property bull
markets. At the same time, I like to play to the strong suits
in any game. That has led me to the opinion that over time, some
foreign countries will do better than the U.S. And that it's
only common sense, considering the fate of the dollar, to keep
a close eye on commodities in general and precious metals in
particular.
It's just a question of timing.
In brief, the U.S. stock, bond, and property markets had a fantastic
run from roughly 1980 to roughly 2000, with most of the gains
made towards the end, as confidence built. Precious metals (notwithstanding
some spectacular bear market rallies) did the opposite. I, and
hopefully most subscribers, used those years to build large positions
in metals and mining stocks. I don't expect to liquidate these
things wholesale for at least a few years. And at vastly higher
prices.
A FEW PARTICULARS...
Oh, I almost forgot. What about
2006? I rather expect to see gold well over $700, silver closing
in on $20, oil at where it now is (but likely closer to $100).
The stock market resuming the downtrend it started in 2000, interrupted
since October 2003. Interest rates will be heading up decisively.
And the U.S. property market is headed down decisively -- along
with the dollar. All of which should result in a quintuple whammy
on Americans' standard of living, which will likely be compounded
by a turnaround in the balance of trade (fewer free goodies from
abroad in exchange for paper money) and higher domestic inflation
(as some of the trillions of dollars Americans have shipped abroad
come home, to be redeemed for real goods). I'm not necessarily
expecting the Greater Depression to be announced on CNN this
year, but I'll be surprised if the average American doesn't become
more concerned about his standard of living and financial future.
AND SOME PROBLEMATIC QUESTIONS...
The big X factor, as always,
remains the government. Frankly, I never expect anything good
from government. And here I refer to the institution itself.
How can you, considering that its main products are wars, pogroms,
prosecutions, persecutions, taxation, regulation, inflation,
and assorted idiocy. These aren't just accidental characteristics;
the actual essence of government is coercion, and coercion is
not a good thing. Worse, the people drawn to "service"
of the State aren't the "best and brightest", as their
propagandists put out, but the worst and dullest; they're people
who believe in organized coercion. Who else could even consider
working for such an organization? That's why "throwing the
bums out" is a pointless exercise in self-delusion.
America's long slide towards
authoritarianism has greatly accelerated since our version of
the Reichstag fire on 9/11, and I see no prospect of it even
slowing, much less reversing. It makes me nostalgic for the days
of Reagan; even if the reality was two steps backward for one
step forward, he at least seemed good-hearted. The Baby Bush,
on the other hand, appears to be stupid, ignorant, stubborn,
and mean-spirited. I don't know whether or not to credit the
reports that he's hitting the bottle again and flies into fits
of rage when his will is challenged. Is it possible Bush is also
psychologically imbalanced? That is certainly possible, given
his stated views on torture. But, looking to the bright side,
at least he's not Dick Cheney, who appears to be a genuinely
degraded being.
What's likely to happen with
the wars they've started? My guess is that they'll grow and spread.
Maybe the catalyst will be another big event in the otherwise
phony War on Terror. Maybe it will be some type of airstrike
on Iran, because of their nuclear program. Certainly, the numbers
of Iraqis and Afghans who join the guerrilla resistance movements
will grow. It's foolish to think they like foreign troops running
around their countries any more than we'd like an Islamic army
in the U.S., however well intentioned. Will the U.S. pull out?
That's the best case, of course, although it would result in
some type of civil war in both countries. The U.S. will eventually
leave, of course, but I don't expect that to happen until it
literally can no longer afford to stay.
The generational theory of
history I outlined in the International Speculator seems
to be developing fairly accurately, and truly titanic war would
seem to be in the cards in the decade to come. Maybe with the
Islamic world, more likely with the Chinese. Perhaps with some
government, or group, that seems most unlikely right now. Who
would have guessed, in 1941, that we'd be fighting the Koreans
in 1951? And who would have guessed, in 1955, that we'd be fighting
the Vietnamese in 1965? The current dust-up with Iraq was certainly
off the radar screen back when Saddam was our ally. Fortunately,
those were, and are, among the smallest and most backward countries
in the world, even though the wars were quite unpleasant. In
the next one, it might turn out we get into a tangle with somebody
our own size.
I guess my bottom line prediction
is that you should rig for stormy weather. But you'll be well
able to afford it with the profits you'll make in selected gold
and gold stocks in 2006. Which should be an excellent year for
us, even if not the world at large.
Get in Before it's Too Late!
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-Doug Casey
The International Speculator
321gold Inc
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