Rickards’ Latest Book Predicts Financial Lockdown for Looming Crisis

In my opinion, The Road to Ruin is a book that everyone should read, no matter their interests.  James Rickards is at his best as he foretells how the world’s elites will deal with the impending financial crisis, which he believes will hit us by 2018.

ICE NINE

The premise of Road to Ruin is to reveal a plan set out by the world’s elites to freeze the financial system in the face of crisis. No longer will the governments of the world turn to quantitative easing (QE), but will “ICE NINE,” as Rickards puts it, everyone’s financial assets, essentially locking down the world’s financial system. This will mean shutting down the stock exchanges, freezing bank accounts and controlling anything and everything financial in people’s lives.

The effects of QE weren’t  felt by the average Joe, because most of the QE was filtered into America’s too big to fail companies, and mainly banks. A financial system lock down, however, will, without a doubt, be felt by everyone. Fortunes will be frozen in their trading accounts, unable to buy or sell. Bank accounts will be frozen, leaving us with a bare minimum in the way of available cash to buy food, if we are willing to line up and wait our turn at the ATM.

You may be thinking it will never happen, but unfortunately, as Rickards points out, this plan has already been executed, albeit on a smaller scale, in Cyprus in 2012.

Cyprus is the best example of this new way of dealing with a financial crisis, as the European Union was concerned about the contagion of the Cypriot crisis and, therefore, shut down their financial system. The residents of Cyprus had their bank accounts frozen, left to rely on a daily stipend that was plagued by massive lineups. Basically, most had to get by with whatever cash or tradable items they had in their possession.

Those with over $100,000 Euros on deposit with Laiki Bank and Bank of Cyprus were given a haircut of 10% on their deposits . This haircut is referred to as a ‘bail-in,’ and it was used to help re-capitalize the failed banks, reducing the cost to the rest of the European Union.

Economic Theory

Rickards’ points out, on numerous occasions, that the Federal Reserve and other central banks around the world are using wrong and outdated models to forecast the future of the world’s economy. Rickards states,

“General equilibrium models also suffer from fallacy of composition. Elites assume local equilibria can be aggregated into a larger equilibrium called the economy. This is like inferring the totality of human nature from a strand of DNA without ever meeting a human.” ~The Road to Ruin pg.210

Equilibrium systems do not have memory, and as Rickards points out, this is a major sticking point when using it for financial market modelling. To further explain his position, he uses a comparison of an economist using equilibrium theory and Ricardian principles (referring to David Ricardo’s, The Principles of Political Economy and Taxation) to examine markets, and the physicists of today using Newton’s theories to explain the universe when Einstein’s Theory of Relativity would do a much better job.

Interestingly, physics is a fantastic way to examine how complex subjects are examined. Newton’s theories came first and work well for the world that we live in, day to day, while Einstein’s Relativity works best on a grand scale, mainly space. Finally, Quantum Mechanics is best used to explain the quantum world, which wasn’t even considered during Newton’s days.

Parlaying this analogy to economics, I much prefer Rickards’ breakdown of financial tools, Complexity Theory, Behavioural Psychology, and Bayesian Statistics, as he uses a different method to look at each aspect of the financial markets, just as physicists do with their theories of nature.

The Cycles of Life and Financial Markets

Whether it is Kondratieff wave theory or William Strauss and Neil Howe’s (authors of The Fourth Turning) analysis of the cycles of generations, we are in a crisis period of world history, or ‘winter,’ so to speak. Winter periods are characteristic with major historical turning points; decisions made by the people in crisis will dictate how the next major generational cycle will take form. Fear will either drive us to a prosperous spring or lead us down a very dark path.

Rickards adds to this sentiment and points out,

“They wait for an exogenous shock, a natural disaster or financial crisis, then use fear created by shock to advance their vision. New policy is presented to mitigate the fear.” ~The Road to Ruin – pg.89

“Fear is contagious, like a virus” ~The Road to Ruin pg 295

In my mind, it’s clear that both the Canadian and American voting public have been affected by the turmoil of the last 8 years. As leaders, both Justin Trudeau and Donald Trump are better known for everything but a political background, which certainly speaks to the public’s desire for something ‘different’ in a political leader. The question that remains to be answered is whether the public have chosen wisely or emotion has once again skewed judgement.

Fascism

The Road to Ruin goes much further than I thought it would into the realm of government control over markets and people’s everyday lives. While most believe what we see today to be a further  push toward socialism, Rickards states,

“Facism is not in our future, it is here now.” ~The Road to Ruin pg.256

Those who follow the ‘alternative media’ have been exposed to this line of thinking for more than a decade, with 9/11 truly being one of the most polarizing events this world has ever seen, on a number of levels.

What is fascism? Rickards summarizes Jonah Goldberg’s 2008 book, Liberal Fascism, when he says,

“fascist regimes may be quite unalike. Some are murderous such as those of Hitler and Stalin. Some are doctorial such as those of Mussolini and Franco. Some operate within democratic frameworks such as those of Wilson and FDR. What unites them is a shared view that the state is the exclusive mediator of human activity…action through state power” ~ The Road to Ruin pg.257

Over the last decade, whistle blowing on the activities of governments and elites has hit the mainstream, with Julian Assange and Edward Snowden becoming household names.  My question is whether the claims by these people were really heard. With the picture that Rickards paints, I would tend to say that they have not been, or rather, the claims were heard but not fully understood.

Special Drawing Rights

How will the elites resolve the financial crisis once they freeze the system? Well, Rickards believes that they will institute more fiat currency, Special Drawing Rights (SDR). SDRs are controlled by the world’s central bank, the International Monetary Fund (IMF) and are backed by the world’s largest currencies; the American dollar, the Euro, the Japanese Yen, the British Sterling, and finally, its most recent member, the Chinese Yuang.

The Chinese have gained access to this privileged currency group with their massive accumulation of gold, over the last decade. China is the number 1 producer of gold in the world and the number one consumer, engulfing each ounce that it produces within its borders.

Rickards pointedly states:

“The elite agenda is to hoard gold and substitute special drawing rights as the currency of world trade and finance” ~The Road to Ruin – pg.59

If you want to know more about SDRs, I highly suggest reading Rickards’ previous books, Currency Wars and The Death of Money. These books take a much more in-depth look at the subject and are good reads.

Rickards’ Financial Toolkit

Rickards is one of the most trusted financial minds in the world and his rolodex is proof of how far his reach really is.  The Road to Ruin is laced with commentary from the conversations he has had with some of the heaviest hitters in the American Financial world. Along with this commentary, Rickards reveals the financial toolkit that he uses to examine the state of the world’s financial system, which includes:

• Behaviour Psychology – The key to understanding behaviour psychology, according to Rickards, is to realize that human behaviour in financial markets is irrational and inefficient. For those interested in the topic of the irrational behaviour of humans, check out Dan Ariely’s Predictably Irrational; it’s a great read and a little scary if you apply what he says to your own life!
• Complexity Theory – Rickards explains Complexity theory using 4 main attributes: diversity, connectedness, interaction and adaption. A system which has these attributes is complex and, therefore, is much harder to predict or forecast than the equilibrium systems that most economists of today use to model capital markets.
• Casual Inference or Bayesian Statistics – Bayesian probability says that certain events are path dependent, or simply, they have memory. In a random process such as the tossing of a coin, the preceding coin toss does not affect what is going to happen with the next coin toss. In a complex system, such as the stock market, events occurring over the course of time have an effect on the buying and selling that occurs, making the possible outcome more or less likely.

In closing, The Road to Ruin covers a lot of important information that people need to be either reminded of or alerted to. The bottom line is that we live in a world in transition, where crisis and turmoil is more common than stability. I believe Rickards’ message is to be cognizant of the outcomes of a flawed financial system, the motivations behind the elites who control the governing bodies of the world, and finally, to prepare yourself and your family for the freezing of your financial assets.

“Society does not get endlessly richer and more sophisticated. Periodically things collapse. It is not the end of the world. It is the end of an age.” ~The Road to Ruin pg.297

Check out James Rickards’ new book, The Road to Ruin. You won’t be disappointed!

In Rickards’ conclusion to the book, he gives the reader a portfolio for weathering the impending storm. Now, I think it only fair to Rickards that you purchase the book to find out what’s in that portfolio. I will, however, review a few financial products that I believe will help those who want to prepare for the financial future that Rickards is predicting, over the course of the next month or so. Stay tuned!

If you enjoyed this article and don’t want to miss another financial product review or investment idea, become a Junior Stock Review VIP now, for FREE!

Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

My introduction to the junior resource market and my outlook on the world were heavily influenced by Doug Casey. Without a doubt, I wouldn’t be where I am today were it not for the impression he made. I’ve read virtually every book Casey has written, so I was intrigued, to say the least, when I heard he would be releasing a fictional story about speculation.

It’s funny how things seem to pop into your life at just the right moment, because in the case of Speculator, the philosophical narrative really resonated with me. In part, I’m sure it has something to do with the types of projects I’m currently working on, but also because it’s written in true Casey style.

Speculator Review

Doug Casey and John Hunt’s collaboratively written, Speculator, is the answer to those looking for an education in junior mining stock speculation – with a twist. What makes this book especially interesting is that it offers a reprieve from the sometimes boring confines of non-fiction writing with some fantastic story telling.

Speculator tells the story of Charles Knight, a young speculator, and his adventures in the fictional West African nation of Gondwana. Knight is drawn to Gondwana to investigate a junior gold company, B-F  Explorations, in which he holds a large speculative position.

What Knight finds during his time in Gondwana, however, will change his life forever; by following his instincts, he uncovers a fraud that will put his life and the people he cares about in jeopardy. His plan to expose this fraud navigates the ironic and idiotic nature of our governing bodies, and how doing the so to speak ‘right thing,’ really doesn’t do any good for anyone.

Questioning Social Norms

Knight’s adventure intertwines with a few different plot narratives, which discuss some very important social concepts that are so often overlooked or considered too ‘politically incorrect’ to broach. In my opinion, this is where Casey and Hunt are at their best, providing commentary that anyone not completely sold on social norms will find particularly thought-provoking.

This paragraph stood out for me as both a lesson in speculation and in life:

“Most people, navigating the waters of life, seemed sonar directed, setting their course based on what the rest of the school of fish was doing. These sonar-directed types spent their days pinging their surrounding, turning-often suddenly and without understanding why-when everyone else turned. Perhaps if they turned fast enough the ones on the edges would get eaten, instead of them. It was safer, but the crowd, necessarily, always got average results. And occasionally the entire mass got swallowed whole.” ~ Casey, Hunt. Speculator, 91 (PDF Version)

Knight encounters a number of challenges that test his moxie, as he must decide how far he’s willing to go to ensure B-F’s fraud is uncovered and his profits maximized. The adventure concludes fantastically, fraught with death, love and taxes (so to speak).

The People & Experiences that Shape Our Lives

The principles you choose to live by reflect who you are, and essentially, where your life will lead. I can hear Casey’s voice in almost every one of the characters in this book, and for me, they provide excellent thinking points, or words to live by.

There are two characters, in particular, that play a major role in shaping Knight’s character:

Uncle Maurice is really much more than an uncle, as Knight uses him as a barometer for his actions throughout the story. Maurice empowers his nephew to follow his dreams, to live life by a set of principles that help Knight overcome obstacles along the way.

There are a variety of lessons to be learned from this character, but a few that stood out for me were:

• The importance of soundness, which Knight defines as,

“Soundness means having integrity…People who are sound don’t live in contradictions. They’re…internally consistent…It’s being honest with yourself, for sure. Caring enough to seek the truth is part of it” (80-81).

• Listen to your instincts:

“Contrary to common opinion, intuition wasn’t mystical; it was scientific. Intuition was the ability to properly integrate many subtle pieces of information. To have good intuition, therefore, someone needs experience and data and a logical mind that can fuse them into coherence” (17).

• Be truthful:

“Truth never contradicts itself” (81), and, “lying to others is bad enough, but lying to myself is actually worse. I don’t have to live with other people, but I have to live with myself” (92).

Xander Winn is an experienced Dutch speculator, who imparts a great deal of wisdom throughout this adventure. Winn’s experiences combined with the fact that he shares similar principles make him the perfect supporting character for Knight, as they struggle to solve the issues that arise and to deal with the consequences of their actions.

For me, the following three themes were most prominent in the wisdom that Winn shares:

• Life lessons:

“Lesson One: to succeed, position yourself to take advantage of luck. Lesson Two: bad luck happens. So plan on bad luck, not good luck” (12).

Winn explains further:

“Luck materializes when preparation meets opportunity” (30).

• Money is important:

“Money is important. It’s not just hunks of metal, pieces of paper, or computer entries. It represents all the time you spend earning it. It represents all the good things you want to have, and do and provide for others. It really represents life itself, in concentrated form”  (25).

• Justification of your actions:

“In your life, make sure to watch how far down that slippery slope of justification you drop, okay? An emotionally laden human brain can justify a whole lot of evil” (257).

Speculator can be read on a number of different levels. It’s simultaneously a great adventure story – complete with death, love, and suspense, – a useful guide to speculation, and a philosophical commentary on some of the most important social topics of our world. Read Speculator, and no matter what you take from it, I guarantee you will be entertained.

Become a Junior Stock Review VIP and receive a FREE digital copy of Speculator. Sign up now!

Until next time,

Brian

What Type of Thinker are You?

The depth to which you research and think about an investment will most often dictate how successful you are. Howard Marks uses a great comparison of first versus second-level thinkers. He says,

“First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority).”
~Marks, The Most Important Thing Illuminated. pg.4

“Second-level thinking is deep, complex and convoluted. The second-level thinker takes a great many things into account…Second-level thinkers know that success in investing is the antithesis of simple.” ~ Marks, The Most Important Thing Illuminated, pg.4

Here is a real world investing situation with a first and second-level solution: A gold mining company publishes a news release about lower production numbers for the next quarter, unfortunately, matching the previous quarter’s low results.

• A first-level thinker reads the news release and says let’s dump the stock

• A second-level thinker reads the news release and asks, “can they fix this production issue? What is the value of the stock if they can only produce at this current rate of production?” Most people will sell the stock because of this news; I think you should buy if there’s value there!
It’s easy to see the difference between the two lines of thinking and why the second-level thinker will always beat the first-level thinker. BE A SECOND-LEVEL THINKER! In the end, the choice may be the same, the best choice may be to sell, but by getting more complex with the questions you ask, a more reliable conclusion can be made.

“Upshot is simple: to achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.”
~Marks, The Most Important Thing Illuminated, pg.7

A Lesson from One of the Best

On numerous occasions, Rick Rule of Sprott Global, has spoken about the concept of answering ‘unanswered’ questions when you’re evaluating a company’s upside potential. After researching the basics of the company and what their end goal is, you should be able to assemble a list of questions that must be answered to reach that goal. It’s a good idea to try to roughly estimate a company’s value if that goal is achieved, which will give you a sense of their upside potential.

Recently, I wrote an article about an investment idea that I’ve been contemplating, Sandspring Resources. For those of you who aren’t familiar with Sandspring, it’s a 4.1 Moz gold project in Guyana. The following is an example of a few questions the company must answer to reach their goal of constructing a producing gold mine:

• How high will the gold price go and for how long? Sandspring’s economics are highly leveraged to the gold price. A strong gold price above $1300 USD for a prolonged period of time makes it a very good value proposition. In my mind, this is the most important question of all, as I believe that, barring a major political shift in Guyana, even if management decides not to drag their feet while attempting to build the mine, tremendous share price appreciation is in the future if the gold price continues to rise.

• Will they finance the project and, if so, how? There are a few different ways that they can finance the project, each with positives and negatives for the shareholders. They will only try to finance this project with a strong gold price and, therefore, this shouldn’t be an issue.

• How large of an impact will the drill results at Sona Hill have on the company’s economics? They are drilling 8000 metres over the course of the next year, good results could mean that the gold price may not need to be above $1300 USD for it to be of good value.

• Will the mine be permitted for construction? This is always a huge question when it comes to mines. It is one thing to drill and find mineralization, it’s another thing all together to permit a mine. Fortunately for Sandspring, a neighbouring mine, Guyana Goldfield’s Aurora Project, has been permitted and is producing.

• Are the people involved able to take this project successfully to production? They have done it in the energy sector in North America, can they parlay that to Guyana?

By answering these questions, you create more questions. The process is never over, you need to determine where your exit is and follow through when you do or don’t reach that goal.

As Rick Rule puts it, “it is easy to confuse a bull market with brains.” I can totally attest to this, because coming out of the crash in 2008, everything I bought went up. As the bear market bore its ugly head in 2012, I wasn’t ready for it and neither was my portfolio.

I can’t stress how important it is to buy at the bottom of the market’s cycle. True value lays where the majority of the investing population believe it’s not. A great example is the first six months of this year, when the precious metals market came back with a boom. For the last four years, the junior miners have been beaten down, dropping over 90% in nominal terms, and yet, the talking heads of the mainstream media and a good portion of your average investors believed there was no return from this hole.

With the money flowing into the resource sector the last few months, you almost can’t make a mistake – all boats are rising. This is very characteristic of a bull market in the junior resource sector. However, the more confident the general population becomes, the less comfortable you should be.

Until next time,

Brian

Risk, we manage it in every part of our lives, but it’s most prevalent in our investments. The best in the business make it their goal to minimize it, while still maximizing profits.
In the junior resource sector, risk is managed by understanding a number of different aspects about a company, including: Who are the people, Where is the property, What does the balance sheet look like, and How much of the stock is owned by the company insiders?
Answering these questions will allow you to mitigate risk and maximize profits. The better the questions you ask, the better the results, I have no doubt!

“The art of investment has one characteristic that is not generally appreciated. A creditable, if unspectacular, result can be achieved by the lay investor with a minimum of effort and capability; but to improve this easily attainable standard requires much application and more than a trace of wisdom.”
~Ben Graham – The Intelligent Investor

Mr. Graham sums it up in this timeless quotation that applies to pretty much everything in life; mediocre results can be achieved by anyone, it’s only those who strive to outperform and act differently than the crowd that can achieve spectacular results. Managing risk is a big part of success in the financial world and, therefore, it’s very important to not only understand your risk tolerance, but also how to judge the amount of risk that exists in the investment you intend to buy.

Disclaimer: The following is not an investment recommendation, it is an investment idea. I do own shares in some of the companies mentioned in this article. Please perform your own due diligence to decide whether any of the companies mentioned fit your personal investment criteria.

Portfolio Distribution

During that first period in my investing career, I didn’t pay much attention to the risk associated with the portfolio I had assembled. I knew speculating in junior resource companies was risky, but I didn’t consider the level of risk that was involved with the types of companies I owned.

What do I mean? Well, in my view, there are a few different types of companies within the sector. Here are a few examples, plus some of the risks associated with each type of company:

Explorers (highest risk)

These companies are drilling for discoveries on properties that hopefully have the goods. In most cases, some mineralization has been found, but it currently doesn’t amount to much more than a hope or a dream.

Risks Associated with Explorers: They are cash burners with nothing but the cash in the coffers and the potential of their property to prop their stock price up.

Examples:
Colorado Resources
West Red Lake Gold Mines

Early Discovery (medium to high risk)

These companies have hit mineralization, but are looking to expand their discovery. These companies have not performed a Pre-Feasibility Study, Feasibility Study or Preliminary Economic Assessment.

Risks Associated with Early Discoveries: Consider if there’s further mineralization, whether that mineralization is economical, politics (unfortunately, always a risk), and how much money they need to further outline the resource.

Examples:
Auryn Resources
Gold Standard Ventures
Balmoral Resources

Outlined Resource (medium risk)

These companies have found a resource. The value of the resource is directly linked to the Feasibility Study (or Pre-Feasibility) or Preliminary Economic Assessment.

Risks associated with outlined resources typically relate to the commodity price, politics (permitting and taxes), and financing.

Examples:
Dalradian Resources
Orezone Gold Corp.
Lydian International
Goldquest

Prospect Generators (medium risk)

These companies are explorers (high risk), however, they use other people’s money to drill their properties, making it less risky than a typical explorer, but there’s still the risk of not finding any mineralization.

Risks associated with prospect generators are typically similar to explorers, however, they are less of a risk because they have access to other people’s money. ‘Other people’s money’ typically refers to senior producers, who will pay certain companies to perform exploration work for them.

Examples:
Lara Exploration
Mirasol Resources

Producing (medium to low risk)

These companies have a resource that they are harvesting. They can be further broken down into segments based on the amount of ounces they produce, with the low multi 100Ks ounces being mid-tier producers and those in the millions of ounces being considered senior producers.

Risks associated with producers are political and production related failures.

Examples:
Endeavour Mining (mid-tier)
Guyana Goldfields (mid-tier)
Gold Corp (Senior)
Barrick Gold (Senior)

Streamers (low risk)

These companies generally fund juniors with an outlined resource. The deal works for both parties, as the funding company is able to buy a certain portion of the produced commodity at a fraction of the spot price, typically for the life of the mine and any future discoveries on the property. The junior benefits by acquiring funding without diluting shareholders and depending on perspective, receives a better deal on the financing cost of the project.

Risks associated with streamers are political and production related failures, however, streamers typically have multiple streams and therefore dilute the risk associated with any one given jurisdiction or mine facility.

Examples:
Silver Wheaton
Franco Nevada
Royal Gold
Sandstorm Gold

When designing your portfolio, it’s wise to choose the types of companies that fit your risk profile, whatever that may be. Keeping in mind that the value of the companies in any of the given categories may make investing in them less risky than if all of the companies are trading at what you could call “fair market value.” Also, company type is only one part of the risk analysis.

“The bigger the discount, the bigger the margin of safety. Too small of a discount and the limited margin of safety provides no real protection at all.”
~Marks, The Most Important Thing Illuminated, pg.25

Assembling a Portfolio

Breaking the types of companies down into groups, you’re now better equipped to decide what’s going to make up your portfolio. I would highly suggest picking at least ten companies and splitting your money between them. Which percentages in each? Now, that’s another detail you will have to decide. During this last bear cycle, I believed the best value for my risk profile laid with the Early Discoveries and Outlined Resources. Therefore, these two groups made up 85% of my portfolio positions. In today’s market, August 2016, I would say that most of the value is in the explorers, which are, in most cases, sub-40 million dollar MCAP companies. But, the risk associated with that value may be too high for most people’s blood, because it truly is boom or bust with this group of juniors.

Putting it Together

My examples have been entirely precious metals based, because it’s been my focus for the last four years. To be a true value investor in the resource sector, however, you must branch out into whatever resource presents itself as the best value, which is typically whatever everyone else thinks you shouldn’t be in. Right now, in August 2016, that could be oil or uranium..?
I have only made one gold stock purchase in the last nine months and, right now, I sit contemplating where to put the profits from the stock that I sold. Does it go back into the precious metal sector for the next leg up in the bull market? Does it go into uranium (I’m very intrigued)? Or, does it go into oil (I actually bought my first oil stock in over four years, two weeks ago)? Not sure yet, but I want to manage my risk effectively and that, to me, means buying value, not what’s hot.

If you want to hit your first 10 bagger, it won’t be from buying the hottest stock going, it will be by doing the opposite of what most think to be true. For example, accumulating gold junior stocks in 2014 and 2015!

Unitl next time,

Brian

It Could Happen to You

Today, in 2016, we live in a world of constant flux. The greater recession, that began in 2008, continues to plague the world economy, forcing governments to participate in unprecedented ‘Quantitative Easing (QE)’ to stabilize their economies and weaken their currency. The stability bought with QE has come at an enormous price, as the amount of debt accumulated to keep their markets from imploding is reaching crazy levels. The debt overhang will have to be dealt with at some point, and when it does, the government could seek out your savings to pay for it.

Sounds crazy? Well, it isn’t Ask residents and bank account holders in Cyprus circa March 2013. Their bank deposits became the cash used to bail-out their “too big to fail” banks and government. Bank accounts were frozen and 10% removed as a levy or ‘bail-in’ tax to the Cypriot government, which was severely impacted by the struggles of Greece’s economy, the downgrading of their bond credit rating, and finally, exposure to an over-leveraged housing sector.

Living and investing all within one country leaves you susceptible to the whims of that one country’s governing body. Changes in capital gains taxes, dividend taxes, income tax or the dreaded ‘bail-in’ tax are all possibilities when living and banking/investing in one country. Diversifying yourself and your assets internationally can reduce this risk and put you in a position to prosper, or at a minimum, lose the least amount possible. As the late Richard Russell used to say, “in the future to come, it isn’t who makes the most, but loses the least.”

Advantages of International Diversification

Diversification of your assets into multiple jurisdictions has a number of advantages, including:

• Reduce the Risk of Financial Chaos – these days, most economies are tied together, but the fact is, if you live in the United States, Canada, Germany, England, China and/or Japan (most countries in the G20), you are more susceptible to the turmoil. Picking a jurisdiction outside of these core countries can have a profound effect on minimizing the loss in your portfolio.

• Currency Diversification – The ability to hold your savings in another currency (provided it isn’t worse than the currency you primarily hold) will give you another added layer of protection against your own country’s currency devaluation. Examples: Norwegian Krone or Hong Kong Dollar.

• Access to Foreign Stock Exchanges and Better Interest Rates – Access to foreign stock exchanges opens up a whole new world of possibilities for speculation and investment. Example – The Australian Stock Exchange (ASX) in particular is home to some very good junior resource companies that do not have listings on the TSX or TSXv. Interest rates abroad are far greater than at home (for most, anyway); India in particular offers savings account rates upwards 9% right now – tough for western world banks to compete with that!

• Reduce the Risk of Capital Controls and/or Asset Seizures – The Cyprus example described above is the best modern example of asset seizure. As far as capital controls are concerned, I will make a prediction that G20 nations begin to force their citizens to purchase government debt as a form of retirement savings, instead of investing in the stock markets…just a thought, not yet reality.

• A Real Insurance Policy! – Who knows what the future holds, but having some cash in an off-shore bank account or trading account gives you options, and really, that’s all we can ever ask for.

My Thoughts on Internationalizing

I truly believe we are headed for higher taxes, on all fronts, as the government debts continue their steady climb upwards. I started my journey in internationalizing myself and my family in 2011, and haven’t looked back. I sleep very well at night knowing that I don’t have all of my political eggs in one basket. I will be reviewing some services and products that you can use to internationalize yourself, too. The first on this list will be…

Peter Schiff’s Euro Pacific Bank

I recently came across an internationalizing product that’s worthy of a further look; Peter Schiff’s Euro Pacific Bank (EPB),which is located in St. Vincent and the Grenadines. Whether you have a few thousand dollars or a few hundred thousand, Euro Pacific Bank is a great way to get started internationalizing yourself. If you are American, however, you may want to skip this review. Euro Pacific Bank does not accept clients located in the United States.
I’ll share my review of the Euro Pacific Bank here, very soon. Stay tuned!

Got a junior resource sector product or experience that you would like to share? Please let me know and I’ll share it here, at Junior Stock Review. You can get in touch with me through the contact form, located on the homepage or the bottom of this post, or you can email me at juniorstockreview@gmail.com

Until next time,

Brian

Canadian Mining Speculation

By T.H. Mitchell

Have you ever thought that the junior resource market might be manipulated? T.H. Mitchell says it is, and that you need to speculate in the market like the professionals if you want to be successful. Originally written in 1957, Canadian Mining Speculation is a book about the factors at play in the marketing of junior mining sector companies. While the book is old and some concepts are no longer relevant, Mitchell has some great words of wisdom for the reader. If you can find a copy, I recommend this one.

Mitchell argues that the junior market is dominated by professionals, and when ignorant of this fact, the average investor is destined to lose money. He defines professionals as those who consistently make profits within the sector (professionals, he claims, comprise 10% of the total buying/selling market), not necessarily those whose actual profession is somehow related to the stock market.

Professional Methods

Mitchell outlines 4 methods that professionals use to make profits, which I’ve outlined below. The fifth, propaganda, is used in conjunction with each of the first three methods as a way to sell the shares that the group has used to raise the price:

• Mark-Up Method – The professional group controls all of the floating share supply. Members within the group trade with each other, raising the price incrementally over a period of time. Once there is a significant enough margin for the group, promotion can be used to bring the general public into the stock.

• Fast-Rise Method – With this method, a rise in price is guaranteed, as the group buys up all of the available stock at market prices. The professionals will typically use this method if the stock is near a bottom and they have a significant enough cash position to buy all of the market orders. Once they have established a major position in the stock, they can begin promoting to the average investor, who will come in near the end to buy at the highest price!

• Slow-Rise Method – Much like the ‘Mark-Up Method,’ the group buys the stock – but only at reasonable prices. The result is a steady rise in price that’s then used to slowly bring in the public.

• Special Recommendation Method – This method can show up in a variety of ways, but is best characterized by the group paying for promotion from influential people, publications or websites. The marketing typically deals with ‘special situations’ and evokes an emotional response in the average investor, where they can’t help but buy into the hype.

“The speculator must take the attitude that all price movements are manipulations by the professional operators. This is not true, but to be on the safe side the speculator must operate as if it were…All news releases are promotion, all price changes are manipulations and all important discoveries are basically unimportant…pessimistic thinking…opposite of the optimistic public – can they expect to be a successful speculator over the long pull”
(Mitchell, Canadian Mining Speculation, 87).

“Sentiment makes prices, and professionals make sentiment; thus, professional operators make the prices” (Mitchell, Canadian Mining Speculation, 90).

“Anyone who intends on engaging in a speculative investment in the junior mining sector had better resign themselves to playing the game as the professionals do, for to run counter is to invite disaster” (Mitchell, Canadian Mining Speculation, 104).

Market Manipulation..?

The prospect of market manipulation is scary; it really makes you question whether you can make money if it’s rigged. Whether or not you agree with Mitchell about the manipulation, however, I tend to agree that if you take a somewhat defensive (pessimistic) posture, you’re less susceptible to the sector’s inherent pitfalls.

I’m not sure about the first 3 methods that Mitchell outlines, but I know the fourth is definitely used. Promotion is great when you’re on the right side of it, but it can evoke frustration or even jealousy when you’ve missed out on an opportunity. I think that chasing the promotional stories instead of searching for the quality companies is a dangerous road to travel. Stick to the basics of junior resource stock investing and ignore the hype – until it works in your favour and then you can enjoy it!

Worthy of a Place on Your Bookshelf

Canadian Mining Speculation may change the way you look at the junior market, or if nothing else, it will make you question your current beliefs in the system. Regardless of what side of the manipulation argument you stand on, I think Mitchell gives the reader a lot of sensible advice for successful speculation, which is ultimately what everyone wants. This is one to add to your list of must-reads.

Have a book review you’d like to share with the rest of the Junior Stock Review community? Get in touch with me via the contact form or you can reach me at juniorstockreview@gmail.com.

Until next time,

Brian

*Disclaimer: The opinions expressed in this post are based on my experiences and should not be taken as financial/investing advice.

Like investing in junior companies, brokers and the people who write newsletters will play a large role in the value you take away, or in other words, how successful you are in the markets. Go for the best in the business, it’s well worth the money, but it isn’t as easy as picking a product with a great reputation, you’ve got to pick the product that’s best for you.

Over the years, my investing approach has gone through many permutations but I’ve finally found the one that works the best for me. My aim for this post is to share some ideas for how you, too, can discover the financial products that are right for you, without wasting as much time and money as I did.

Narrowing Your Search

There are a few questions you should ask yourself to help narrow the list of options for financial products:

1. Am I going to rely on the broker or newsletter writer to choose and track my investments, or am I going to do this myself?

Brokerages and newsletter writers have a lot of people and information at their disposal, which is put to good use when they choose and track their stock picks. In many of his speeches, Rick Rule has said, “you must be willing to put in an hour per company, per week, at a minimum, to properly pick and track a company.” Most junior company portfolios consist of at least 10 stocks, which translates to 10 hours a week. Do you have that kind of time? In the beginning, I thought I could do this. I tried, but working full time and taking this on in my spare time while my young children ran around me wasn’t practical, nor was it consistently effective.

2. Is the broker or newsletter author’s outlook on investing or speculating similar to mine?

I had a bad experience with this one, and it was entirely my fault. In mid 2013, I decided to hire a broker to manage some of my investments, for a number of reasons that I will cover later on. I’d been around the resource space long enough to be familiar with a lot of the players in the resource brokerage business, and chose the firm with which I wanted to work. After completing all of the paperwork, I was set up with a broker whom I met to review how my money would be invested. After this meeting, I left feeling completely deflated; the broker had a totally different outlook on the market than I did, not only from a macro outlook, but also from a junior company perspective. He didn’t want anything to do with the juniors and I had specifically chosen that brokerage because I wanted to invest in the junior market. I bit my tongue and let him invest my money as he saw fit. The consequence was that I was never happy with the outcome. Finally, in the summer of 2014, I asked to work with someone else, and from that first phone call with the new broker, I couldn’t have been happier. Our risk outlooks were very similar; he loves the juniors and is, in my opinion, very adept at picking stocks. I should have made the change earlier!

3.What is my risk appetite? Am I okay with potentially losing it all?

Your risk appetite is something that you really need to define, because speculation in the junior market is risky business and shouldn’t be taken lightly. Mistakes will cost you.

4. How much money do you have to invest?

Many experts suggest holding a portfolio of several junior companies to combat the risk of putting all of your eggs in one basket. Considering the risk level and the odds of success, when you get a winner you really want to make it count. Give this some thought. Is buying $100 worth of a junior, hitting a 10-bagger and selling the position for $1000 really worth it? The cheaper letters typically cover the larger CAP companies, which make them a better choice for those with smaller cash positions, as you don’t necessarily need to spread your risk as much as with the juniors.

5. How much do I want to spend on the product?

This question is tied in with the size of your portfolio; if I have $5000 to invest and the newsletter I’m considering costs $1000, I’m 20% in the hole before I even start. For the top newsletters, maybe this isn’t a problem, as they give you the best chance to succeed. But, I’m still not convinced this is the best product for you to buy. I would be looking in the $100 to $200 range, supplemented with library late fees!

6. How many others are getting the same advice?

Typically, the more money that you spend on advice, the smaller the audience is for that advice. This is a huge advantage as you aren’t competing with as many speculators for the same stock, when buying or selling. A lot of companies that have multiple tiers in their products will piggy-back stock picks, meaning the highest payers get in first and then each level gets their chance accordingly. This is a situation where being on the right side of a promotion can really help.

Product Example

Casey Research is a great example for these questions as they have a line of products at different price points and risk levels. For instance, for the entry level speculator, they have Casey Resource Investor which covers large MCAP resource companies that have much lower risk levels than the juniors and the newsletter cost is only around $100.

Their mid-level newsletter is the International Speculator, which covers junior resource companies. The risk level is significantly higher and so is the cost, coming in at $2000. However, the upside potential of the returns is much higher.

Finally, they have their ALERT service, which doesn’t have a set issue schedule and is released as the editor, Louis James, finds great opportunities – all be it, very risky ones. His picks can range from micro CAP explorers to large MCAP companies. Last time I checked, the ALERT service topped out at $5000, which is definitely on the high side for newsletters, or at least the newsletters with which I’m familiar.

Things to consider: If I’m going to spend $5000 on a newsletter, I better have a large enough cash position to make it worth my while to spend that much for advice. On the other hand, you are buying the newsletter company’s best ideas and sharing them with a much smaller audience. My experience is that you usually get what you pay for. In this specific instance, I’m not saying that Casey’s letters are good or bad, they just illustrate the point I’m trying to make. There’s a lot of choice, pick what is going to work for you and know what to expect from the money that you spend.

Remember, be very selective in who you let into your circle of influence, pick the best people and products for you. You may not find the right formula without some less than ideal learning experiences along the way, and that’s fine, just persevere and figure out what works – you don’t want to miss the bull market!

If you have any experiences or formulas for successful speculation in the junior resource sector that you would like to share, please let me know, and I’ll feature it in a post. You can reach me via the contact us form or send me an email at juniorstockreview@gmail.com. Also, I can be found on CEO.ca with the handle @Leni.

Until next time,

Brian

Rickards’ Best Yet: Get the Goods on Gold in this Short, Value-Packed Book

For those who have never read a book written by James Rickards before, you’re in for a treat. In my opinion, he’s at his best in the newly released, The New Case for Gold. Now, if you have read one of Rickards’ books before, you know that they often run over 300 pages – not something you can easily rip through in a couple of evenings after work. The New Case for Gold, however, is a value packed 170 pages with his thesis organized into 6 concise chapters, making it something you could dig into on your lunch break.

Accessible Investing Knowledge & News

There’s something to be said for the length of a book, newsletter or other investment resource, how easy it is to get through it, and if you can take what you learned and easily apply it or put it into action. That stuff matters, because at the end of the day, why spend the money on investment tools that take you 6 months to get through (if you ever finish them) and the only action they see is when you use them as coasters? Not to say that short is always better, because there are a lot of resources that are concise and still not worth the paper they’re printed on. What I’m saying is try to choose the resources that are going to best compliment your learning style, time constraints and interests. But, I’m getting sidetracked…

Gold Investing Newcomers Will Appreciate This Book

I really enjoyed this book, but having read many of Rickards’ other books, I didn’t feel I learned anything I hadn’t heard before. For anyone new to investing in gold, on the other hand, the book is a real asset because he’s assembled all of the best information concerning his thesis for gold investment in one concisely written book – I’m highlighting the brevity of this book because it’s somewhat of an anomaly for Rickards. Those who have read their share of monetary books, such as myself, may not discover anything earth shattering in The New Case for Gold, but if you’re looking for information to confirm if you’re investing correctly, this a great source.

Gold Is Money

Rickards cuts to the chase and gives the thesis for the book early in the introduction:

“Gold is money…monetary standards based on gold are possible, even desirable, and in the absence of an official gold standard, individuals should go on a personal gold standard, by buying gold, to preserve wealth.”
~Rickards, The New Case for Gold, 2

Rickards uses 6 chapters to explain his case for gold as money and why you need to make it a part of your personal investment portfolio. These chapters are titled:

Gold and the Fed – A look at US monetary policy past, present and future.

Gold is Money – A history of gold in the world monetary system and a look at what gold isn’t and why that’s a good thing.

“Understanding gold provides us with a frame of reference for understanding the future in the international monetary system” (Rickards, 56).

These ideas and facts are the reasons I first started investing in gold. They have since led me to the junior mining sector, where the ultimate leverage to the gold price exists.

Gold is Insurance – A look into the mathematical side of the world economy and the theory used to model it.

Gold is Constant – A look at the gold price and why you should change your perspective from the gold price rising and falling to the currency price rising and falling in relation to gold.

If you follow Rickards’ arguments in the previous chapters then this one won’t be difficult to wrap your head around.

“July 2015, China updated its official gold reserves…to show 1,658 tons…up from 1,054 tons in 2009” (Rickards, 92).

China’s assent into the world economic powerhouses will be predicated on its acceptance into the International Monetary Fund’s basket of currencies that back the world currency – the SDR (Special Drawing Rights). To do this, gold will play a major role in supporting the Reminibi (Yuang), thus the major push for gold consumption. China is not only the world’s largest producer (it consumes all production), but also the largest importer. Rickards believes that the Chinese gold holding is much higher:

“China’s figures are deceptively low…there are perhaps 3,000 additional tons…in an agency called the State Adminstration of Foreign Exchange” (Rickards, 92).

Gold is Resilient – A comparison of gold to the other mainstream investment vehicles of the world, mainly America’s stock exchanges, and why you are at risk for holding your wealth electronically.

This may be the least discussed topic outside of the ‘conspiracy theory’ realm of commentary, but it’s something that I believe people should take much more seriously as our lives become more and more digitized!

“As a 21st century investor, I don’t want all of my wealth in digital form…I want part of it in a tangible form, such as gold” (Rickards, 147).

How to Acquire Gold – A summary of all the ways you can invest in gold.

I think most of us are fairly familiar with many of the ways to invest in gold; purchase physical bullion, shares in ETFs such as GLD, Sprott Physical Trusts, mining stock shares and international storage banks such as Gold Money. It is, however, interesting to read the pluses and minuses that Rickards’ attributes each of the various ways to invest in gold – check them out!

Collapse. Yup, As In The Collapse Of The World Economy

Ultimately, Rickards believes the world economy is headed for collapse with a major monetary crisis forcing the world’s powers into a third major meeting to sort out a solution:

“When the next collapse comes, there will be another meeting such as those held in Genoa in 1922 and Bretton Woods in 1944” (Rickards, 43).

To weather this coming storm, Rickards encourages a conservative 10%, of investable assets, allocation in gold. With the ideas and facts laid out in this book, you must ask yourself “what are the new rules of the game and how can I survive it?”

Famously, the late Richard Russell used to say, “in times like this, it isn’t who profits the most, it is who loses the least.” If that truly is the case, we’re in for a bumpy road, one that the majority of the population is NOT ready for! Are you?

Is This The Gold Book You’ve Been Looking For?

For those who are new to the gold thesis and want to improve their knowledge of the metal, this is a great place to start because you won’t find another book that describes the case for gold so succinctly without glossing over any points that are necessary to the argument. Like I said, if you’ve been at the gold game for a while, you shouldn’t expect to unlock any new secrets while reading Rickards’ latest, but at 170 pages, this is a book you can add to your collection and return to any time you’re looking to reaffirm your stance on gold.

Until next time,

Brian