by Jeff Clark: If
Deflation Wins, What Will Gold StocksDo?
punching the $1,300 mark, thoughts of what a gold mania will be
like crossed my mind. If we’re right about the future of precious
metals, a gold rush of historic proportions lies ahead of us. Have
you thought about how a mania might affect you? Not like this, you
You log on
to your brokerage account for the third time that day and see your
precious metal portfolio has doubled from last week. Gold and silver
stocks have been screaming upward for weeks. Everyone around you
is panicking from runaway inflation and desperate to get their hands
on any form of gold or silver. It’s exhilarating and frightening
in the same breath. Welcome to the mania.
of 20% in gold and silver producers become common, even expected.
Valuations have been thrown out the window – this is no time
for models and charts and analysis. It’s not greed; it’s survival.
Get what you can, while you can. Investors clamor to buy any stock
with the word “gold” in its title. Fear of being left
behind is palpable.
of junior exploration companies have gone ballistic. They double
and triple in days, then double and triple again. Many have already
risen ten-fold. You have several up 10,000%. No end is in sight.
Your portfolio swells bigger every day. Your life is changing right
in front of you at warp speed.
program touts the latest hot gold or silver stock. It’s all they
can talk about. Headlines blare anything about precious metals,
no matter how trivial. Weekly news magazines and talk-radio hosts
dispense free stock picks. CNBC and Bloomberg battle
to be first with the latest news. Each tick in the price of gold
and silver flashes on screen, and interruptions offering the latest
prediction seem to happen every fifteen minutes. Breathy reporters
yell above the noise on the trade floor about insane volume, and
computers that can’t keep up. Entire programs are devoted to predicting
the next winner. You watch to see if some of your stocks are named.
You can’t help it.
The only thing
growing faster than your portfolio is the number of new “gold
experts.” It’s a bull market in bull.
You can feel
the crazed mass psychology all around you. Your co-workers know
you bought gold some time ago and pepper you with questions seemingly
every hour, interrupting your work. They ask if you heard about
the latest pick from Fox Business. They want to know where you buy
gold, who has the best price, and, by the way, how do I know if
my gold is real? They all look at you differently now. Women smile
at you in the hallway. You worry someone may follow you home.
once teased you but now hound you with questions at family get-togethers
– what stocks do you own? What’s that gold newsletter telling
you? Where can I keep my bullion? You don’t want to be the life
of the party, but they force it – it’s all anyone wants to
talk about. Your brother tells you he dumped his broker and is trading
full-time. Another relative shoves his account statement in front
of you and wants advice. You sense someone will ask for a loan.
You don’t know what to tell people. The attention is discomforting,
and you feel the urge to escape.
At first it
was exciting, then breathtaking. Now it’s scary. You’re drowning
in obscene profits but are becoming increasingly anxious about how
long it can last. Worry replaces excitement. You don’t know if you
should sell or hold on. Nobody knows what to do. But the next day,
your portfolio screams higher and you feel overwhelmed once again.
You grab the
local paper and read the town’s bullion shop had a break-in last
night. They hired a security company and have posted several guards
outside and inside the store. Premiums have skyrocketed, but lines
still form every day. The proprietor hands out tickets when locals
arrive: your number will be called when it’s your turn… the
wait will be long… please have your order ready… yesterday
we ran out of stock at 11am.
You begin to
worry about the security of your own stash of bullion – those
clever hiding spots don’t feel quite as secure as you first thought
they’d be. Is the bank safe deposit box really secure? Shouldn’t
they hire a security guard? Should I move some of it elsewhere?
Is there anywhere truly safe? You find yourself checking gun prices
And it’s all
happening because the dollar is crashing and inflation has scourged
every part of life. You curse at those who said this couldn’t happen
and mock past assurances from government. Cash is a hot potato,
and spending it before it loses more purchasing power is a daily
priority. Everyone is clamoring to get something that can’t lose
value, but mostly gold and silver.
calls and says the $100 you gave her that morning isn’t enough to
buy groceries for dinner. Prices change often on everything. She
urges you to get some bread and milk before the stores raises the
price again. You suddenly remember you’re low on gas and make plans
to leave work early to beat others to the filling station. Restaurants
and small businesses post prices on a chalkboard and update them
throughout the day. Employers scramble to work out an "inflation
adjustment" for salaries.
On your way
home, the radio broadcaster reports the government has convened
an emergency summit of all heads of state. They’re working urgently
on the problem, and all other agendas have been tabled. Outside
experts have been called in. We’re going to solve this rampant flood
of inflation for the American people, they say. In your gut you
know there’s nothing they can do.
the channel and hear about the spike in arrests of U.S. citizens
at the Canadian border. Scads of people are caught trying to sneak
bullion and stock certificates out of the country – from airports
to rail stations. Violence at borders has escalated, and stories
of bloodshed are getting common. The White House ordered heightened
security at all U.S. borders, with the media reporting it can take
days to cross. Foreign governments offer meaningless help, others
mock U.S. leaders for their shortsightedness. Their countries are
You think about
the gains in your portfolio and wince at the taxes you’ll pay when
you sell. Nothing has been indexed to inflation, so everyone has
been pushed into higher tax brackets. Citizens are furious with
government. Agencies have been swarmed with bitter taxpayers and
revolting benefit recipients. One government office was set on fire.
A riot erupted in Washington, D.C. last week and martial law was
temporarily declared. It’s too dangerous to travel anywhere.
As crazy as
things are, it’s hard not to smile. You’re in the middle of a mania.
Your life has changed permanently. You’re part of the new rich.
You can quit work, live off your investments. Your wife is ecstatic,
and you both feel as if it’s your second honeymoon. Your kids
are amazed and gaze at you with the same awe they did when they
you bought gold and silver before the mania, along with precious
metal stocks. You daydream of where you might go, what you might
buy. New options open up daily. You realize you’ll need to meet
with your accountant, maybe hire a second one to protect your sudden
wealth. You wonder what you’ll invest in next. You ponder what charities
are worthwhile. Better meet with the attorney to redraft the will.
As night settles
and your house quiets, you log on to your brokerage account one
last time. Even though you’re ready for it, your mouth drops when
you see your account balance. It is truly overwhelming. You think
of others who own gold and silver stocks and wonder if any have
sold yet. Has Doug Casey exited?
at the blinking screen, hand on the mouse, the cursor hovering on
the sell button…
We can’t promise
the gold mania will be exactly like Jeff outlines, but we’re convinced
one is coming for all things gold and silver. And to be prepared
for the coming events, you’d do well to listen to those experts
who have predicted the quagmire the financial system now finds itself
in long before it happened. An all-star cast including John Hathaway
of Tocqueville Gold Fund fame… Eric Sprott, Sprott Asset Management…
Richard Russell of the Dow Theory Letters… and many
experts will gather at Casey’s
Gold & Resource Summit from Oct. 1 to 3. But even though
the summit is sold out, you can still hear every presentation and
stock recommendation… on more than 17 hours of audio on CD.
If you order now, you’ll save $100 off the retail price. Details
Clark is editor of Casey's
Gold & Resource Report in Casey’s Daily Dispatch.