Wednesday, August 15, 2007


You all came here for investment advice. Everybody's got an opinion on where the market is going to go. So I'll give you my opinion briefly...

Stocks: Do you want to be in the stock market now? Well, I'd say no. The stock market was a bargain back in 1982 when the Dow Jones Industrial Average was less than 1,000. Today the Dow's around 14,000! Typically, at serious market bottoms, the Dow yields about 6%. – In 1932, for example. And I think what's coming up is going to be worse than what happened in the 1930s. The market yielded 13% for a while. Do you want to be in the stock market? No, I don't. I own very few common industrial stocks. And the ones that I do own are mostly private companies that I'm looking to take public. So that's a different question. You don't want stocks, so forget about stocks.

Do you want bonds? No! Bonds are a triple threat to your capital. A triple threat! The last bottom in the bond market, the real bottom was in the early '80s. Treasury bonds were yielding 15%. Bonds are a triple threat to your capital at this particular time. They have been for some years, because we're really at the edge of the waterfall.

Here's the triple threat: First, interest rates are extremely low and I think interest rates are going to be extremely high in the future. And, obviously, bond prices fluctuate inversely with interest rates.

Number two: Credit risk. The world is very very indebted today, and I don't want to be a lender when we could have a financial credit collapse. So the second thing is credit risk. The third thing is currency risk. The bonds that you're likely to buy are denominated in US dollars, and the dollar is going to reach its intrinsic value. In other words: zero.

Okay, so forget about stocks, forget about bonds. What about cash? How about T-Bills? No, because T bills are denominated in dollars, and the dollar is an "IOU nothing" issued by a corrupt and bankrupt government. It's a floating abstraction. If you hold dollars today, you're going to be as dumb as an Argentinean who held pesos ten years ago. And you're going to have the same fate. So forget about that.

Okay, real estate. How can you go wrong with real estate? Look, I've speculated in property all over the world, and it's been very, very good to me. But we're suffering a world wide real estate boom, which is just now coming to an end. So, no, I would not touch property – certainly not in the US, absolutely not in the US – with a ten foot pole. So forget about that.

I'm sorry I'm running over this without giving you adequate reasons for these opinions. But I jut wanted to cover this ground.

The other thing about property is taxes. You think you own your property? You don't own your property. Try not paying your real estate taxes for a year or two, you'll find out who really owns your property. So, no, forget about real estate, certainly in the US, and not even in Canada. I've got to say the market here is just too hot.

So where should your money be? Look, it's very simple:

Gold. That's it. I just don't know a cheaper or better \place to put your money. Honestly, of all the things in the world, and I look at everything – I'm very eclectic, looking at anything and everything. I'll buy anything if
the price is right – gold is the best bargain in the world right now. It's not just going through the roof; it's going to the moon. There's going to be a gold buying panic that's going to knock your socks off in the next few years. The gold bull market has not even gotten started...

I buy gold for safety, prudence, for insurance. I don't view it as a speculation. I view it as money – so where am I personally, what do I do with all my money? Well, not all of it, but a lot of it: I speculate in mining stocks. It's always been a specialty of mine. It's the most volatile market in the world, these little mining stocks. More volatile than the internet stocks you saw ten years ago.

And in these stocks, we're in a three stage bull market.

The "sale stage." That stage is long gone. That was from about from the late 1990s to maybe 2003, where a lot of these stocks were selling for less than the cash in the bank. They were really cheap. And here in Vancouver, every week, back in 1999, a mining company – a public vehicle that had "mining" in its name – turned itself into a high-tech or internet company. That's how bad things were back then. So from 2000 to 2003, we had a stealth bull market – when these stocks as a whole went up five- or ten- to one. That's a lot. And people didn't even know they existed, because for a whole generation, gold – and commodities in general – had done nothing but go down. So you were looked on as being an idiot, a dinosaur, if you were invested in these things.

But then, by 2003 after they had already soared, a lot of investors were discovering these stocks for the first time. Now we reach the "wall of worry" stage – the second stage of a bull market. We've been in that stage since 2003. Here is where the bulls and the bears fight, and where commodity prices sometimes fall sharply for a while, mostly because they had already gone up a lot during the preceding years.

Copper has gone from $.60 to $4 dollars; nickel from $2 to $20. So a lot of investors start predicting that prices are going down. Others say, "No, no, they're going higher because of China and India." All these arguments go back and forth, while commodities and commodity prices bounce up and down. But this "wall of worry" stage is drawing to a close.

We're going to go into the "mania stage." I think this is going to happen. As the US dollar starts really turning into toilet paper over the next few years, there's going to be a speculative bubble in these kinds of resource stocks, and people are going to pile into them. And stuff that six, seven years ago sold for 10 cents a share could go for 50 or 100 dollars a share. It's going to be that insane. So that's when I'm going to be hitting the bid, when everybody is asking me for stock touts. So, I'm telling you, right now, you're still at the end of the "wall of worry" stage. The easy money is long gone in these stocks. The safe money is long gone. The big money is still ahead, but it's going to be risky, volatile money.

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