Seabridge: My Best Trade Ever Is an Even Better Deal Today

By Dr. Steve Sjuggerud Tuesday, February 22, 2011
In mid-2005, I recommended shares of Seabridge Gold (SA) to a few thousand subscribers. We sold a couple years later, up 995%.

Today, it’s a better deal than when I originally recommended it…

Seabridge is one of the world’s largest undeveloped gold deposits, with $90 billion worth of gold in the ground in Canada.

When we bought it in 2005, it offered fantastic upside potential: If the price of gold went up, Seabridge would soar. But our downside risk was limited: Seabridge’s stock was so cheap compared to the amount of gold it owned, it could hardly go lower.

That’s the way I want to invest.

You want to buy Seabridge when you’re getting a LOT of gold for a low price. After we made nearly 10 times our money on Seabridge, I never thought I’d get a chance like that again… But Seabridge is a better deal today than it was back then.

Since 2005, shares of Seabridge have climbed from $2.64 when I originally recommended it to over $30 today. So how can it be a value today when it’s up so much?

Three reasons:

1) The price of gold has soared, increasing Seabridge’s value.
2) Seabridge’s shares have done nothing since mid-2007.
3) Seabridge has massively increased its gold resources.

The chart below from my January 2010 issue of True Wealth tells the story… It compares the market value of Seabridge shares to the value of its gold resources in the ground.

Back in 2005, Seabridge didn’t have a lot of gold value in the ground compared to today. But it didn’t have a big stock market value, either. So it was cheap. You can see what I mean in the bottom left of the chart.

By mid-2007, Seabridge was expensive relative to the gold it had. And we sold. But since then, the price of gold has doubled. The dollar value of Seabridge’s gold in the ground has soared. But the stock is similar to the price we sold it at in 2007, at around $30 a share.

Even though Seabridge is cheap, it has a lot more going for it today than it did back in 2005… With the price of gold so high, it’s “economic” to pull the gold out of the ground. And in recent years, Seabridge has done the drilling necessary to reclassify much of those gold “resources” into gold “reserves.” This dramatically increases Seabridge’s buyout value.

Seabridge’s flagship asset Kerr-Sulphurets-Mitchell (or KSM) likely has around 35 million ounces of gold reserves. In March 2010, gold giant Barrick Gold bought into a project like Seabridge for $82 per ounce of gold reserves.

Valuing KSM at $82 per ounce, that’s a buyout price of $2.87 billion… over twice Seabridge’s current market value (around $1.3 billion).

If gold keeps going up as it has, the ultimate buyout price could go much higher. And I’m not counting Seabridge’s other assets, either. The bullish case is as high as $200 a share.

On the downside, if gold falls dramatically, Seabridge will get hurt. But as the chart above shows, Seabridge is so cheap, shares should have a floor to their price. The other downside risk is that the universe of potential buyers is small. But this is a motherlode asset, in a safe jurisdiction (Canada), so it will happen someday.

The price of gold has doubled since 2007. And Seabridge has dramatically increased its own value. Yet the stock price of Seabridge has been stuck around $30. (I told my paid subscribers to buy shares of Seabridge Gold under $29. That advice still stands… Don’t chase it.)

Readers once rode Seabridge for a 995% gain. It’s a much better deal today than it was back then. It will be a mine some day. It will be bought out some day… And shareholders will make triple-digit returns from current prices.

Good investing,

Steve

THE XLF BATTLE IS OVER. THE BULLS WON.

The breakout is official: It’s a bull market in financial stocks.

For over a year, we’ve monitored the long “bulls vs. bears” struggle in the big financial investment fund (XLF). It’s been one of the most important battles in the entire stock market… or it was, anyway.

With large weightings in giants like JPMorgan, Wells Fargo, American Express, and Bank of America, XLF rises and falls with America’s ability to earn money, service debts, launch new businesses, and generally just “get along.” For 18 months, this fund was locked in a huge sideways trading pattern. Several weeks ago, we noted how this fund was “one small step” from taking out its April 2010 closing high of $17.05.

On Friday, February 11, that step happened. XLF built on its bullish series of “higher highs and higher lows” to close at $17.08… Then inched higher to close at $17.16 last Wednesday.

We once again remind readers there are many things worth worrying about out there (government debt and government debt being the two biggest), but since money talks and you-know-what walks, we have to look at this bull move in America’s financial backbone and say, “For now, things ain’t all bad.”

A 100% Accurate Stock Market Indicator… Since 1940

By Dr. Steve Sjuggerud Tuesday, February 1, 2011
In the last 100 years, this indicator has only been wrong twice… And one of those losses was less than 1%.

Since 1940, this indicator has been infallible… Stocks have risen 22% a year when this indicator says “buy.”

We’ve been hard at work crunching numbers, developing our True Wealth Systems project. We have the world’s deepest historical data sets at our fingertips. And we’ve been testing all kinds of investing systems going back hundreds of years.

Our goal is to find what works in investing, over the long run.

Today’s indicator is incredibly simple: It’s the third year of the presidential election cycle. Stocks have gone up every third year of a presidential election cycle going back to 1940.

In the third year of an election cycle, stocks have delivered a total return of 22% a year. For the other three years together the other 75% of the time the total return on stocks has been a single-digit percentage gain annually.

Why such a huge discrepancy?

Legendary stock market analyst Jeremy Grantham calls it the “routine Year 3 stimulus.”

Barack Obama was elected in 2008. It’s now 2011… Year 3. The stock market goes up, the theory goes, in anticipation of Big Government stimulating the economy in the coming pre-election year.

We have a double tailwind this year… Grantham says the Year 3 stimulus will be “spiced up” even more by “QE2” what I call The Bernanke Asset Bubble.

I said this indicator has been infallible since 1940… but what about before then? We tested it back to 1800…

The thing is, until the Great Depression in the 1930s, government stimulus didn’t really exist as we know it today.

In 1929, the lowest tax bracket was less than 1%. And the top tax bracket was in the 20s. Astoundingly, government spending as a percentage of GDP was less than 5% a year until the Depression (NOT including defense spending… which shot up during wars). These days, government spending (including spending by state and local governments) is up over 40% of GDP.

So if Grantham is right, and the routine Year 3 stimulus rally is here, stocks could go up yet again.

Stocks have delivered a 22% total return on average, going back seven decades, during Year 3. We’re in Year 3 now. And stocks are only up about 2% so far. So there’s plenty of room to run, based on history.

This indicator is another example of our True Wealth Systems work… finding things that I wouldn’t believe are possible. So far, in every case, whenever I personally guessed against our systems, I was wrong, and our systems were right…

If this indicator from True Wealth Systems is right, it’s a high probability bet for you to own stocks in 2011.

Good investing,

Steve

FRAC IT, BABY!

As you may have noticed from our “new highs of note” yesterday, the picks and shovels of the oil industry are ripping right now.

“Oil services” is the general term used to describe firms that perform and produce all sorts of “niche” products and services for giant oil companies like ExxonMobil and Saudi Aramco. It’s a diverse bunch, ranging from companies like Bristow Group (helicopter services), to ION Geophysical (seismic field testing), to National Oilwell Varco (manufacturing oil rigs), to big blue-chip Schlumberger (almost everything).

One big trend tucked into this idea is the emerging business of horizontal drilling and fraccing. These incredible technologies have unlocked the natural gas trapped in U.S. shale fields. In just a few years, the U.S. has gone from being natural gas poor to boasting the world’s largest reserves. Now, Asia and Europe are desperate to use these technologies to achieve similar increases in their domestic reserves.

This development has sent Matt Badiali’s S&A Resource Report holding CARBO Ceramics to an incredible uptrend. As Matt told us last year, CARBO is a world leader in the vital “frac ammo” needed to access these fields. The stock is closing in on a 100% gain for his readers. The “frac boom” is here… it’s going to last for decades… and it’s good for companies like CARBO.

The Most Astounding Gold Development I’ve Ever Seen

By Chris Weber, editor, The Weber Global Opportunities Report Wednesday, January 5, 2011
Ten consecutive years.

Three words. As rare as they are few. Gold has risen in price for 10 consecutive years. Not one year since this century began has gold not gone up in value.

Compare this to any other bull market and you won’t see its equal. Take the huge Nasdaq bull of the 1990s. Or, really, the 1980s and ’90s.

The Nasdaq closed at 151 the last day of 1979. It soared to close 1999 at 4,069. That’s 2,595%. But during those two tremendous decades, there were down years: 1981, 1984, 1987, 1990, 1994. That was the last down year, until 2000, when it all fell apart. But during that huge time, the most consecutive years of profits the Nasdaq average could muster was just five (1995 thru 1999). But long before the end of 1999, the bubble was apparent. Everyone and his pet seemed to be talking about how much money they had made in the Nasdaq.

Mid-1982 to October 2007 saw a quarter-century of gains in the Dow Jones Industrial Average unlike any other. From 780 to 14,165, bottom to top, is a rise of 1,716%. So transformative was this move that people still think in terms of it: that stocks are the only thing you should really be in, that they cannot lose. That’s what a 25-year bull market will do.

But during that magical quarter century, the most consecutive years of rises in the Dow amounted to nine: all the years from 1991 through 1999.

Until what happened recently, that was the greatest record I could find. And I’ve tried. I’ve gone back to 1800, to the one stock exchange that would be the most powerful over the next two centuries: the London Stock Exchange. It has managed to string together only eight consecutive years of gains.

Now, there may be a rather obscure market that broke the Dow Jones’ nine-year record during the 1990s. But I haven’t found it.

That is, not until the end of 2010. This past year marks 10 years of consecutive rises for gold.

From a low of $255 to a high of $1,421, that is a rise of 457%. Not the huge thousands of percent we saw in the Dow and Nasdaq… not yet. But for sheer consistency, I have never seen another market do what gold has just done…

Year Gold’s Rise 2001 1.97% 2002 24.80% 2003 19.50% 2004 5.35% 2005 18.36% 2006 22.95% 2007 31.35% 2008 5.14% 2009 24.30% 2010 29.80%
Just writing out those years brings back memories of where I was, and how I spent those years and what the world was like. In 2001, when I first bought gold, it was something that you kept very much to yourself. You thought, yet you said nothing. It was easier that way.

Today, I still say very little, but what I say is very different. Instead of doing the stupid thing and telling a few people to buy, this past year I mostly just asked people, with a wondering look, what they thought about gold. Is the price rise something you understand? Well, most people, if they even think about it, still don’t really understand it. If they own anything at all, it is a few shares of Newmont.

No, as great as the last 10 years have been, we still have much left to see. Sure, I’d be crazy to say that we’ll never have a down year. We’ve already beaten the odds. Each passing year is a tremendous statistical obstacle for yet another consecutive annual win. And yet, if (when) gold finally has a losing year, I think we’ll see choruses of “Ha! I knew it was phony! Stocks are really the place to be!”

Knowing full well that a person would have to be crazy to try to forecast anything over one year, here goes: For gold and silver, everything tells me that they will continue strong. However, I’m waiting to be proven wrong. You don’t ever see a major market go up 10 consecutive years. For gold to increase again next year would make it 11.

At some point, you throw up your hands.

For gold, we clearly are in uncharted territory. No one knows what is going to happen in the short term. But I believe that 10 straight years of gain and still keeping somewhat under the radar screen means that there is much more to come. It also means that, slowly but surely, gold is making its way back into the monetary system of the world. And silver is not far behind. This will be the story of the next decade.

Regards,

Chris Weber

FINANCIALS ARE STILL PLAYING THE BREAKOUT GAME

The bulls are working to end the long sideways saga of XLF.

A few times last year, we checked in with the action in XLF, the big financial stock fund. With large weightings in giants like JPMorgan, Goldman Sachs, Wells Fargo, American Express, and Bank of America, this fund rises and falls with America’s ability to earn money, invest money, service debts, launch new businesses, and generally just “get along.”

In 2009, XLF enjoyed a big rebound off its credit-panic lows. But in August that year, the uptrend stalled out and turned into a long period of sideways trading action. It’s still drifting sideways… though in the past few months, the bulls have managed to push XLF past $16 per share. It’s now in the upper reaches of this big sideways pattern.

XLF’s holdings are the backbone of our banking and credit system… so its share price is a good clue to what’s really happening in the economy, no matter what politicians or CNBC commentators are blathering about. Money talks and you-know-what walks. You can listen in with XLF. Right now, it’s starting to say “higher prices for me.”

An Unusual Way to Turn $1,000 into $1 Million in Four Years

By Matt Badiali, editor, S&A Resource Report Thursday, October 28, 2010

Can you turn $1,000 into $1 million in just a few years?

You can if you time a bull market in uranium stocks correctly…

In September 2003, an Australian uranium company, Paladin Energy, traded for just 1¢ per share. Things were horrible for the uranium industry.

Back then, uranium sold for around $11 per pound. But it cost the industry $15 per pound to produce. That meant uranium companies lost $4 on every pound they sold. Except for expert contrarian investors, nobody wanted to own uranium stocks.

But 2003 was the very beginning of a huge bull market in uranium. By 2005, the uranium price had climbed to $20… By the end of the year, it was selling for $35 a pound. Investors went wild for uranium plays.

In January 2005, Paladin Energy was up to 47¢. That’s a 4,600% gain from 2003 levels. By the end of 2005, it hit $2 per share… a 19,900% gain in just 30 months.

The uranium bull market peaked in 2007. Paladin topped out at $10.40 per share… an incredible 100,000%-plus gain. Every $1,000 invested turned into more than $1 million.

The uranium bull died in June 2007, thanks in part to the global economic collapse. The ride down was steep. Uranium fell from $136 per pound to $40 per pound in just two years.

But there’s a new bull market getting started right now. The price just broke out to a new 52-week high. And the next Paladin is getting ready to take off. Before I get to that, let me explain what’s driving the new move in uranium prices…

The bull case for uranium the chief fuel for nuclear reactors is simple: Emerging Asian nations, particularly China and India, are Westernizing. Their populations want air conditioning, refrigerators, iPods, and YouTube. That means electricity.

To meet its growing electricity demand, China plans to build 60 new nuclear reactors within the next 10 years. China’s high-growth cousin, India, needs 40 new reactors in the next 20 years. That would increase the number of nuclear power plants in the world by 23%.

This new Asian nuclear boom is expected to be the largest period of nuclear power growth since OPEC’s oil embargo. At its peak, back in the 1980s, the nuclear industry started up a new reactor every 15 days. By 2015, we could see a new reactor coming online every five days.

Both China and India understand the implications of that growth. According to Bloomberg, both countries are stockpiling the fuel. China could purchase more than twice as much uranium as it will use this year. The proposed reactors in China alone could consume more than 30% of the uranium mined today. That’s why the country signed a 10-year, 10,000-ton deal with giant uranium miner Cameco.

But there is a real lack of new, near-term uranium production. That means supply won’t increase as much as demand… and uranium prices will rise.

In fact, it’s already begun. A small uranium firm I just recommended to my S&A Resource Report readers has climbed 50% for us in just two months. Many other uranium plays, like blue chip uranium miner Cameco (CCJ), are entering uptrends as well. But it’s still early days and the masses haven’t caught on. That’s our opportunity. It’s unlikely you’ll score an unbelievable 100,000% gain… but hundreds of percent gains are easily within reach.

We have time to sleuth out the great junior miners and buy cheap. Focus on the little things: management’s experience, burn rate (the amount of cash spent versus amount of cash in the bank), and projects.

The big money will go to experienced teams with high-grade deposits near people, roads, and other mines. That’s what the expert contrarian investors are looking for now.

Good investing,

Matt Badiali

P.S. I have a handful of the world’s best uranium stocks in the S&A Resource Report portfolio. They offer hundreds even thousands of percent upside in the coming years. You can learn about a subscription to the Resource Report and another one of my favorite ideas by clicking here.

THE STOCK MANIA OF THE MONTH

Today, we note the stock mania of the month: rare earth elements.

“Rare earth elements” is the name of an exotic group of metals, including strange-sounding members like “lanthanum” and “cerium.” These little-known metals are crucial components of electric car batteries, wind turbines, and advanced electronics (the kind in your iPod or cell phone). In a strange twist of geology and geopolitics, China holds a virtual monopoly on these metals… producing around 95% of the world’s supply.

China is making big news right now by reducing rare earth exports in order to conserve its supply and squeeze other countries… which is causing a global scramble to build non-China reserves. It’s also causing a mania in the handful of publicly traded rare earth plays…

Leading this mini-mania is Molycorp (MCP). MCP controls the largest developed rare earth deposit in North America. The company went public at $14 per share just a few months ago… and has ridden a hype wave to a 150% gain. Other rare earth names have made similar crazy moves during this time.

Like all manias, this one will end badly… with ridiculous valuations, awesome marketing hype, and massive share declines. If you’re in this move, don’t forget your stop losses…

Bill Gross’ $8.1 Billion Bet

By Dr. Steve Sjuggerud Wednesday, September 22, 2010
“Bill Gross’s PIMCO made an $8.1 billion wager,” Bloomberg news reported last week.

Bill’s bet is simple: He’s betting inflation will return to the U.S. in the next 10 years. And he’s willing to risk billions on the idea.

Bill Gross is known as the Bond King. He’s probably the most famous and successful bond-fund manager in history. He manages the PIMCO Total Return Fund the world’s biggest bond fund, with a quarter-trillion dollars in assets. It makes sense to pay attention to Bill’s bets…

Bill is betting on inflation. Actually, more specifically, Bill is betting that DEFLATION won’t happen.

Today, I’ll show you why Bill’s bet is a smart one. And I’ll show how to make your own bet on this idea. But first, let me explain what exactly Bill is up to…

The mechanics of Bill’s bet are a bit complicated. In short, he took the other side of a bet on deflation.

Bill received $70.5 million now… If deflation occurs over the next 10 years (if the consumer price index is lower in 2020 than it is today), Bill is on the hook for up to $8.1 billion. If deflation does NOT occur, he simply gets to keep the upfront $70.5 million.

“We think the possibility that the U.S. goes 10 years with stagnant or falling prices is remote,” a PIMCO portfolio manager told Bloomberg news.

Fears of deflation have increased dramatically this year. We’ve seen a huge shift in the mindset of the U.S. consumer. We’ve gone from a “conspicuous consumption nation” to a nation of savers. Deflation is simply defined as “falling prices” and the U.S. consumer has surely seen that… Exhibit “A” is the price of their home.

But Bill has an ace in the hole for PIMCO’s anti-deflation bet… Ben Bernanke.

Bernanke is the chairman of the U.S. Federal Reserve. He is a student of the Great Depression. And he is determined to prevent the destructive deflation we saw in the 1930s from happening again today.

In a now-infamous 2002 speech, he said:

…The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost… Under a paper-money system, a determined government can always generate higher spending and hence positive inflation…

…Prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

Bill Gross has made a career out of taking calculated risks. A bet on inflation, when Ben Bernanke is at the helm of the Fed, seems like a smart one. While the fears of deflation are high, the chances of sustained deflation are slim in a paper-money society.

If the Fed does “crank up the printing press,” the simple investment you want to hold is gold. The Fed can print dollars, but it can’t print gold.

Gold is particularly attractive today… Since the Fed has cut interest rates essentially to zero, gold is more attractive than money in the bank… You earn zero percent on your cash in the bank, and earn zero percent on your gold. You don’t give up any “opportunity cost” you don’t give up any interest on your cash by holding gold today.

If you believe Bernanke is telling the truth and the U.S. government will print money as needed to prevent deflation you should hold at least some of your savings in gold instead of paper money. You’ll be on the same side of the bet as the Bond King.

Good investing,

Steve

ANOTHER “CHINA PLAY” IS SOARING

More on the “China confounds the skeptics” story…

As I mentioned in yesterday’s column, plenty of investors believe China’s economy and real estate market is a bubble ready to burst. They think the Chinese government has directed huge amounts of money into wasteful real estate and infrastructure projects.

But as we highlighted yesterday, the market is warming back up to high-profile China stocks like New Oriental Education… and sending them to new 52-week highs. Add Home Inns and Hotels (HMIN) to this list…

HMIN is one of the largest hotel operators in China. Its market cap is nearly $4 billion. HMIN is a play on China’s growing wealth and propensity to travel… so it booms and busts according to investor sentiment toward the country.

As you can see from today’s chart, you can mark HMIN in “boom mode.” After briefly struggling early this year, the stock has gained 40% and sits near its all-time high. The “China story” is still intact.

We Just Got a Buy Signal from My Favorite Oil Indicator

By Jeff Clark, editor, Advanced Income Saturday, June 12, 2010

It’s time to lean over and pick up the cash… again.

The last time this happened, I gave my Advanced Income readers three trades. We earned 25%, 27%, and 30% in just one week.

It was March 16, 2009. Stocks were suffering from a vicious selloff. Every sector was getting hammered. And the oil stocks were especially weak.

Investors were stampeding away from the market. They were leaving a trail of crumpled value stocks in their wake. And they were willing to pay huge premiums to gain any sort of protection from further downside risk.

Profiting from selling options at that time was as easy as leaning over and picking up a pile of cash. So that’s what we did.

We took advantage of the fear in the market and a “buy signal” from one of my favorite technical indicators. We sold expensive options on three stocks in the oil sector, immediately generating high income. And we closed out the trades one week later for large gains.

Get ready for these same kinds of gains today.

Stocks are getting crushed right now. Investors are stampeding away from the market. Option premiums are enormous. And we just got a buy signal from my favorite oil-sector trading indicator.

A bullish percent index (BPI) measures the percentage of stocks in a sector trading with bullish patterns. It works best to define overbought and oversold conditions, and to indicate when a sector is vulnerable to a reversal.

For example, in the oil sector, the bullish percent index is overbought when it rallies above 80 (meaning 80% of the stocks in the sector are in a bullish formation). The sector is oversold when the BPI drops below 30 (meaning only 30% of the stocks in the sector are in a bullish formation). Take a look at the chart…

Sell signals, highlighted by the red circles, occur when the energy sector’s BPI rallies above 80 and then turns down and crosses below its eight-day exponential moving average (the “EMA” is the blue line on the chart above). Buy signals (green circles) occur when the BPI drops below 30 and then turns up and crosses over the eight-day EMA.

Now here’s a chart of the AMEX Oil Index (XOI) with circles indicating the timing of the BPI trading signals…

Not a bad track record. Selling or shorting oil stocks on the red circles and buying them on the green circles was profitable for each of the past five signals.

The oil sector BPI just flashed another buy signal. It’s time to buy some oil stocks.

I know what you’re thinking… The stock market looks horrible. Europe is on the verge of an economic collapse. Oil is spewing into the Gulf of Mexico. And everybody else is telling you to run for cover.

That’s not too different than what we were facing in March 2009. Back then, we took advantage of the situation by putting on a few trades in the oil sector. All of them generated big profits, fast.

There’s nothing like a quick market decline to turn a speculative stock into a value play. Stocks that were too expensive and too risky to recommend a couple months ago are downright cheap today. And the premiums we can get from selling covered calls are large enough to offset most, if not all, of any remaining downside risk.

Even though the market is in turmoil and it feels like the risk is high, buying beaten-down oil stocks and selling covered calls against them today is far safer than it has been for most of the past year.

These setups don’t come along every day. Take advantage of this one while you can. All you have to do is lean over and pick up the cash.

Good investing,

Jeff Clark

CHART OF THE WEEK: GOLD IS SKYROCKETING!

This week’s chart is an update on our “take the global view” stance on valuing assets.

Longtime readers know we encourage folks to look at the world’s assets through several different lenses. This exposes you to more knowledge, more perspectives, and thus, more opportunities.

One “lens” we’re fond of is the price of gold as seen by a European. In U.S. dollar terms, gold is enjoying a modest uptrend. But in the eyes (and pocketbook) of a European, the price of gold is absolutely soaring in response to the deteriorating value of his paper money.

This is the market telling him “there’s no such thing as a free lunch”… that the problem with massive nanny state socialism is, sooner or later, you run out of other people’s money. Real wealth, as represented by gold, rises in response.

Gold is skyrocketing in Europe

4.72% Interest rate on 30-year fixed-rate mortgages, according to government mortgage agency Freddie Mac… just above the record low of 4.71% set in December 2009.

The Best Investments I’ve Ever Made

By Chris Weber, editor, The Weber Global Opportunities Report Thursday, April 22, 2010

Each middle of April, I mark a sort of anniversary. It was at this time nine years ago, in 2001, when I bought what was for me a large percentage of my assets in gold and gold stocks.

At the time, I saw that gold was looking very good on the charts: its recent lows were for the first time higher than the previous lows. Then there was just a feeling I was getting that the 20 year bear market was over. At the time, the idea of buying gold or gold stocks was regarded as laughable, a relic from another generation.

At the start of 2002, I first talked about gold with my readers, recommending some gold stocks. I had to be careful even then, because writing investment newsletters as I have since 1974, I learned long ago that you can’t get too far ahead of your readers. If you suggest something that is totally off of their radar screens, they will not be happy.

“Give people what they want… Tell people what they want to hear”: that was the advice I’d always been given by other newsletter writers. And it is true, most people only hear and believe what they want to hear and believe. It has been said before, but if there is ever to be a change in anything, “the minds of men must first be fitted to it.”

Also, between the time when I first bought the gold area in April 2001 and the time I first mentioned it in February 2002, I told three people what I had done. First was my brother. He looked at me with an expression of pity and sympathy. Next was my neighbor and good friend. He looked at me like I was crazy. Finally was a friend of mine in the gold mining industry itself. He told me I was much too early, that he saw no end to the 20 year bear market anytime soon.

I relate this to say that the best investments I’ve made have been at the time when most everyone else thinks you are deranged for even talking about them.

Even today, I get letters from readers who have not bought gold, silver, or platinum. Then I get letters from people who have bought lots of metals years ago and are sitting on paper profits so large that they are nervous.

I can tell them that most of them will sell too early: That’s just the way bull markets work. The number of people who can get into a bull market near the start and hold until near the end has always been small. I’d be surprised if it is as much as 5%.

And I know that nothing I can say will stop them from selling. At least they bought and got some of the benefit from their investment. That’s more than nearly everyone else can say.

Going on from that, I still ask people I meet, when investments come up, if they own gold, silver, or platinum. Nearly no one does. The most I have gotten is “I have about 5% of my money in it, mostly in the stocks.” Since most people’s biggest asset is their house, then taking it from a total net worth basis, this becomes less than the 5% mentioned.

Truly, the precious metals are far from being in bubbles. During bubbles, everyone you meet is telling you how much they made in a certain asset. Ten years ago, the guy who cleaned my swimming pool was giving me Internet stock tips. Five years ago, when I lived in Europe, people were telling me how much they had made on Spanish property. When I would come to the U.S., everyone I knew in Florida, Arizona, and Las Vegas was telling me how much they had made.

Now they are living with the hangover from that heady time. I know one man in Palm Beach… he owns five houses either there or in Aspen, Colorado. Only one of them is rented out. He has to pay the electric bills each month, and the property taxes each year. Money is flying out, but not much is coming in. He wants out, but he doesn’t want to sell at any price below what he paid. There are a lot of people like that. When they bought, real estate was in a bubble: Everyone thought they could buy and then flip the property to someone else.

How many people today think that way about gold or the other precious metals? Precious few. In fact, I know a couple of economists from decades ago. One of them visited me recently. He’s reached a high level of fame and influence in his profession, but he doesn’t understand investments. In fact, I could have started a very successful fund based solely on doing the opposite of what he thought was a good investment over the last 15 years or so.

His question to me: “Don’t you think gold is in a bubble?” To be fair, he thought the same thing back when gold was $700.

No, gold is not in a bubble. What’s happening is what has been happening since 2001.

Governments around the world have decided the way to get ahead is to cheapen their currencies. When all of them do it, it takes more of them to buy the same amount of gold.

Just recently, gold went to record prices in terms of the euro, the pound, and the Swiss franc. If gold rises just 5% more in U.S. dollar terms, it will be in new record territory here as well.

Gold has been going up for nine years now.

Imagine what would happen if your local stock market or real estate market had a chart that looked like this. People would be piling in and talking about little else at cocktail parties.

But when was the last time you attended a gathering of people you know who rattled on about how much they were making in platinum or gold? For me, it hasn’t been since 1979.

Regards,

Chris Weber

EVEN THE HOMEBUILDERS ARE REFLATING

Our colleague Frank Curzio was right… the government’s incredible homebuilder bailout is sending stock prices higher.

Back in March, Frank told readers of the Growth Stock Wire about a huge new tax rule that would boost homebuilder earnings and share prices to new highs. Most people can’t stand the thought of owning these stocks, so a contrarian had to be interested in the idea. How’s it working out?

As today’s chart shows, it’s working out well. The big homebuilder fund XHB is trending higher… and just struck a new 52-week high. Even the fundamentals we track (like homebuilder sentiment and months of current housing supply) are improving.

The improving homebuilder conditions, plus the incredible price strength, prove that when the government wants to “reflate” a sector, chances are excellent that in the short-term, it’s going to get it done.