 Casey Files:
Gold is Going to the Moon
Doug Casey
BIG
GOLD
Casey Research
Mar 27, 2008
An interview with the editors
of BIG
GOLD, Casey Research.
As part of our survey of
expectations for gold in 2008, one of our BIG GOLD editors interviewed
famous contrarian investor and Casey Research Chairman Doug Casey.
Here's his take on what's to come.
BIG GOLD: Gold has passed
its 1980 nominal high. Why do you think it's breaking out now?
Doug Casey: The fact that gold has moved above
its 1980 high is meaningful only in an academic way; today's
dollar is worth only a fraction of a 1980 dollar. From here on,
it's best to avoid thinking about anything just in terms of dollars.
What's developing now is likely to be the biggest monetary crisis
of the past 100 years, potentially the biggest since the U.S.
Civil War. This isn't a prediction, just an appraisal of the
tumultuous possibilities that are opening up. Americans are going
to have to learn to think more like Argentines: if an Argentine
tried to keep track of value in the local peso, he'd be bankrupt
in 5 years.
BIG GOLD: There are those
who agree with you about a possible crisis but believe we'll
see deflation instead of inflation, or at least deflation before
inflation.
Doug Casey: What we're facing is a monumental
monetary crisis that can take one of two forms. It can be deflationary,
where billions and billions of dollars are wiped out through
bankruptcies and defaults, and the remaining dollars become worth
more as a result. Or it can be inflationary, where the world's
central banks keep dollar assets from being wiped out by supporting
the issuance of debt - which is what they're currently doing,
by propping up failing banks and homeowners who can't pay their
mortgages. Those are your two alternatives. You can have either
one - it's really a flip of the coin as to which you get.
It's also possible you can
have both at the same time. You could have deflation in some
areas of the economy, such as real estate, which is happening
now, and inflation in other areas of the economy, where prices
are going up, as with food and oil.
I'm of the opinion that government
is so big and so powerful now, and the average person - idiotically
- relies on it so heavily, that much higher inflation is inevitable.
They're certainly going to do their very best to keep a deflationary
collapse from happening, because they all remember what it was
like in the U.S. in the 1930s. Yet not too many people think
about Germany's inflationary collapse in the 1920s. It was much
more unpleasant.
Inflation is the enemy of the
person who works, saves and invests. But it's the friend of the
speculator.
BIG GOLD: Why do you think
gold stocks have lagged while gold has taken off?
Doug Casey: Gold stocks are a play on gold. But
they're also stocks. The best environment for them is when both
gold and the general market are moving up, and lately the stock
market has been problematical. People are going to panic into
gold, because it's cash - money in the most basic form. Gold
stocks are not money; they're speculative vehicles. And despite
the strength in gold, the costs and risks of finding and building
mines have gone up just as fast in the last couple of years.
There's no necessity for them to move in lockstep with gold itself.
That said, I think gold stocks are really going to howl as gold
goes into the Mania stage.
BIG GOLD: The water in the
pot is definitely getting hotter. Where do you think gold is
going this year?
Doug Casey: Gold has been in a bull market since
2001. It's gone up, on average, about 25% per year compounded,
and there's absolutely no reason the bull market should stop
now. On the contrary, there's every reason to believe that the
gold bull market, having gone through its Stealth stage and still
being in its Wall of Worry stage, is going to hit the Mania stage.
To sell now would be to leave the big money on the table.
My best advice is, be right
and sit tight. And that means staying long until you see a golden
bull tearing apart the New York Stock Exchange on the front cover
of Newsweek magazine, at which point it will be time to sell.
BIG GOLD: What price do
you think gold will hit in 2008?
Doug Casey: Strictly gazing through a crystal
ball, I think it's going over $1,200, no problem.
BIG GOLD: What about the
long-term price for gold?
Doug Casey: Just to reach its previous high in
purchasing power, gold will have to go over $2,500 - probably
more like $3,000 after you discount the phoniness in the government's
CPI numbers. But because this crisis is much more serious than
the one in the late 1970s and early '80s and much more far-ranging,
$3,000 is actually a fairly conservative number. I'll say it
again: gold is not just going through the roof, it's going to
the moon.
BIG GOLD: What advice would
you give to readers of Big
Gold about how to invest in gold and gold stocks in the coming
environment?
Doug Casey: The first thing is, you've got to
have a lot of physical gold in the form of gold coins. Second,
make sure a large chunk of those coins is outside the political
jurisdiction where you live. If you live in the U.S., they've
got to be outside the U.S. If you live in Canada, they've got
to be outside Canada, and so forth. Third, gold stocks are definitely
going to howl, so you definitely should have a good position
in them.
As important as gold and gold
stocks are, though, I suspect we're going to see foreign exchange
controls of some type or description in the years to come. That
means if you don't have assets outside your native country, you're
going to be caught like a lobster in a trap. I think it's very
important to diversify internationally. Buying foreign real estate
is one prudent way to do so because, even though there's been
a worldwide property mania, there are still some places where
property is very cheap, leaving plenty of upside. In addition,
if you pick a locale where you'd like to live, you'll have a
comfortable place to wait things out - which is a serious plus,
because I think things in the U.S. are going to get really ugly
in the years to come. And most important, the government can't
make you repatriate foreign real estate.
BIG GOLD: What if I don't
have the ability to buy real estate outside the country I live?
I know you can have a foreign bank account and a safe deposit
box, but I have to report those, so how does that help me?
Doug Casey: You have to report a bank account,
but you don't have to report a safe deposit box.
BIG GOLD: What if I have
over $10,000 of coins in that box?
Doug Casey: It doesn't matter. It's just like
having a million dollars of foreign real estate - not reportable.
Of course they can change these arbitrary laws - probably to
make them more restrictive and invasive - at any time.
BIG GOLD: Thanks, Doug,
for the practical advice. Anything else you'd like to say to
Big Gold readers?
Doug Casey: Hold on to your hat; you're in for
the ride of your life.
BIG GOLD is a monthly advisory from Casey Research, one
of the nation's oldest and most respected organizations providing
unbiased research on natural resource investments.
BIG GOLD
is designed for conservative investors looking for an easy and
lower-risk way to participate in gold markets through producing
and near-production precious metals companies, ETFs and mutual
funds you can buy and sell through your favorite discount broker.
To learn how you can play the
gold bull market without taking excessive risk, learn more about
BIG GOLD and its unhesitant 3-month, 100% money-back guarantee
by clicking
here now.
###
Casey Archives
321gold Ltd
|
