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Ask The Expert

Ask The Expert- Doug Casey- June 2018

Headshot of Doug Casey

June 15, 2018

Doug Casey is a trader, philosopher and best-selling author. His company, Casey Research is a leading independent investment research firm and his newsletter, “The Casey Report” is one of the most widely-read in finance. He describes himself as an anarcho-capitalist influenced by the works of novelist Ayn Rand. His thoughts can also be found on his website Internationalman.com.

We are thrilled to have him answer seven of your burning questions, including:

  • What is the outlook for the US$ and price of gold?
  • Will the “greater depression” affect precious metals?
  • What is the best investment choice among physical metals, US$ and cryptocurrency?


Get the answers to these questions, plus Doug‘s opinion on the gold price miners and global economy


Listen to Ask The Expert on SoundCloud:


Announcer: You're listening to "Ask the Expert" on Sprott Money News.

Craig: Well, greetings once again from Sprotty Money News on sprottmoney.com. This is your "Ask the Expert" segment for June of 2018. I'm your host Craig Hemke and joining us this month is Doug Casey. He is best known as a trader, a philosopher, a best-selling author as well. His company Casey Research is a leading independent investment research firm and his news letter "The Casey Report" is one of the most widely read in the industry. Also publishes a great website that you can find at internationalman...it's all one word, internationalman.com. And one last thing, he will also be a featured speaker at the upcoming Sprott Natural Resources symposium next month, July 17th through 20th in Vancouver. So all of that combined makes Doug a great guest. Dough, thank you so much for spending some time with us this month.

My pleasure, Craig, absolutely.

Craig: And just as a reminder to everybody before we get started, these questions are always provided by Sprott Money customers. It's one of the benefits of being a Sprott Money customer. We find out about a month in advance who the guest is and the Sprott Money customers submit the questions for the guest. Again, that's not the only benefit of being a Sprott Money customer. You also find some of the best precious metals deals in the industry by visiting Sprottmoney.com or calling 888-861-0775 at any time. There's always some great deals at Sprottmoney.com. Doug, thank you so much, again, for joining us. If you're ready, I think I might just hit you with question number one.

Doug: Let's hit it.

Craig: All right. As we record this, it is Wednesday the 13th and we are about 45 minutes away from the conclusion of the June FOMC and some kind of announcement from the Fed is what they're doing with Fed funds rate. That's going to have a pretty dramatic impact on the dollar I would suppose, you know, really all markets. So the first question deals with the dollar and this person just wanted to know what is your near-term outlook for the U.S dollar, and I guess on a big picture basis, do you see the gold price as an inverse to the level of confidence in the dollar?

Doug: Oh, it's definitely an inverse indicator of the dollar, but the fact is that I don't pay a lot of attention to very short term. Now, I trade commodities in my personal account, things like wheat and cattle and cotton, that type of thing. But even though I do that, I try not to focus on the short term because the chances are excellent. You're just going to whipsaw yourself. Either the market will do it or your own psychology will do it for you. So don't pay much attention to short-term predictions of what's going to happen or what even the Fed is saying or supposed to be doing because they don't know what they're doing to start with, and a lot of what they say quite frankly is misdirection at best.

The long-term fate of the dollar is it's in competition with the Chinese Yuan. And the Yuan is actually on its way on long term to replace the dollar. They're going to come up, I'm pretty confident, with a gold-backed Yuan to help along their One Road One Belt scheme where they're investing many trillions of dollars to tie together 60 or 70 countries in Asia and Europe. Combine that with a trillion dollar current government deficit and it'll be 2 trillion or 3 trillion per year. As the economy goes downhill, I'm very bearish about the long term future of the dollar. What it's going to tomorrow morning or next week I have no opinion.

Craig: Well, actually, Doug, I think that's going to lead us right into question number two because this by extension deals with the dollar as well. It says you have said in the past that the U.S is in a greater depression. That was the quote I think. That's a term maybe you might have coined yourself. How did you conclude that? And that's obviously a part of the, you know...that would affect the dollar too. And what would that mean for the precious metals?

Doug: Yes, the term "The greater depression" is in fact one that I've coined and you have to look at that from a historical point of view. Western civilization itself peaked in 1914 before the first world-war. The U.S peaked somewhat later, let's say in the early 1950s when almost all the aircraft, all the vehicles, all the manufacturing in the world were American. Three quarters of the world's stock market capitalization was in the U.S. The US government owned almost all the world's gold. So that was our peak. And since 1971 we've been going downhill noticeably in terms of the standards of living of the average guy, even though the standard of living of the average guy has been buttressed by improvements in science and technology.

The greater depression...look, I think we entered upon that in 2007, and things...the analogy I use is that of a hurricane. We entered it in 2007. We went to the leading edge of this hurricane in '07, '08, '09, part of '10. And the governments of the world, not just the U.S, have created trillions of new currency that have been like pouring oil on the waters. When are we going to exit the hurricane? I thought we would've exited...gone into the trailing edge of the hurricane several years ago. I've been wrong so far. I thought that we would've had high levels of retail inflation, noticeable levels...high levels of retail inflation. It hasn't happened yet. All that money that's gone into the markets so far giving us a stock market bubble and a bond market hyper bubble, a super bubble. What's going to happen? The government's idiotically trying to go to digital money. A total disaster from the point of view of the individual and the viewpoint of personal freedom. If they succeed with their digital money they'll be able to track everything you do, everything you own, every place you go. And they're trying to get rid of cash in the meantime. This all plays into my Greater Depression scenario, although I think the long-term future is going to be not only infinitely better than we can even imagine. I think we're going to go through some really messy time over the next five or six years. That's my story and I'm sticking to it.

Craig: I hear you and I think a lot of folks listening to us probably feel that way too. You mentioned the long term though being better. And so I think question number three is perfectly timed for that and this is all part of the fun in getting questions from Sprott Money customers because you never know exactly what they're going to ask and here's something that's a little off the beaten path. It says that years ago this person has seen you speak and you were very bullish on the future of nanotechnology and so the question is can you provide an update on the state of nanotech and do you have any nanotech-related investment ideas?

: I don't have any nanotech-related investment ideas but let me say this. I'm going to say the same thing now that I said when I first wrote about nanotech in 1993 in my book "Crisis Investing for the Rest of the '90s". Nanotech is one of those things that is going to change not just investment markets but the entire nature of life itself radically, un-recognizably. It's the biggest thing that's ever happened in human history. That's not only nanotech. There are a number of technologies that are advancing at the rate of Moore's law. The question about a long-term historical point of view you could say that civilization itself has been advancing at the rate of Moore's law ever since homo sapiens came onto the Earth 200,000 or so years ago, and the rate of change has been increasing. So when we look at computer technology, artificial intelligence, robotics, genetic engineering, nanotechnology, what's happening is that the speed of development of these things is accelerating radically.

It's like a used stadium that at the bottom of the stadium there might be a drop of water, and at first that drop of water doubles every week. It's not noticeable. Then after a while it starts doubling after every day, then it doubles again after every hour and it still doesn't make any difference because it's only one, two, four, eight drops of water, but at some point the curve...there's a knee in the curve and it goes hyperbolic and we're at about that stage right now. This is something that Ray Kurzweil has written about. He calls it the singularity. And it seems with the way things have been accelerating, not just since Moore's law was crystallized in the 1960s, but going back since the dawn of mankind itself that within 20 years that stadium that I referred to, it's going to go from just a sheen of water that you'll see on the field to doubling, doubling and doubling again very, very quickly and it goes from half full to overfilling the stadium in a matter of seconds, and that's actually where we are right now in all of those areas not just nanotech.

So it's a big picture but this is why I'm so optimistic for the long term future. All you have to do quite frankly is survive another 20 years and magic could happen, including living for as long as you'd like. So that's a real brief nutshell answer to that cosmic question.

Very interesting stuff, Doug. All right, let's turn back to the precious metals and to the precious metal miners for a second. The fourth question has to do with the...I guess we call it a gold rush down in western Australia in the Pilbara region. This person wanted to know what you think of those theories behind the Pilbara gold rush and are there any companies based down there that you might recommend.

Doug: Well, Clinton Hennigs Noval [SP] of course is the go-to company if you're interested in that. That's basically his deal. I don't know how to assess it. Maybe it's the next Witwatersrand or maybe it's just a couple of bed nuggets that have been found. I don't know. I don't know if anybody knows for sure. What I do know is this. Is that Noval has a market cap of over a billion dollars. I got involved in it about a year ago in a private placement I did at...I don't know what it was, was a dollar. After it quadrupled I sold it and the warrants. You know, I don't like wildcat plays that have market caps of over a billion dollars in a bad market. So what's going to happen? If they do find the next Witwatersrand maybe that stock goes from 1 billion to 5 billion. Well, that's a nice hit. But there's lots of other ways to play this that are lower risk and higher potential at this point so that's my answer. I don't know and right now I don't care.

Fair enough. All right, let's move on. I got a couple of questions in a row that have to do with the gold market. GATA and other organizations have provided years of coverage detailing government involvement in gold price suppression. You've said in the past that you don't believe in gold price suppression, this person just was wondering why you think that.

Look, these GATA people are...they're nice folks. They're sincere folks. They believe in gold. I'm all for them. They're very nice. But they really wear tinfoil hats when they start talking about this stuff. Of course governments want a low gold price because that would indicate that there's no inflation, that there's nothing to worry about economically or financially, but are they suppressing the price of gold? They wanted a lower gold price but they're not doing anything about it. Look, gold is going from $35 an ounce to $1300 an ounce since 1971. Is that successful gold price suppression? They couldn't even suppress the price of gold at $35 an ounce and that was in the time where there was a lot less gold out there when the governments owned most of it and when the governments were much, much economically and financially stronger than they are now. They couldn't suppress it at $35 then. How can they do it now when there's twice as much gold in the world than this very week and so forth? It's impossible.

Entirely apart from that, the fact of the matter is that the people that run these governments really believe their own propaganda. They think that gold is basically just a dead asset. It's worthless. It's irrelevant. It's ancient history. They're not trying to suppress it. They don't care. In addition to the fact that they can't suppress it for the reasons that I just gave you. In addition to that, why would they wanna suppress it if they could? Because the Russians and the Chinese have been buying huge amounts of gold for years. Should the U.S be suppressing the price of gold so that the Russians and Chinese get a bargain in buying it? The whole thing about gold price suppression is actually quite ridiculous and quite laughable.

Tell you what, I think that's a good segue to question six actually, Doug, as kind of the followup in a sense in that this person phrased it as the Fulfulla [SP] blog contends this, but I think a lot of other websites, my website, others websites contend that the entire price model is flawed. The way that it's not really physical that's exchanged to determine the price, it's all these derivatives and forwards and futures and everything else, and if that price model is flawed, which I'd let you decide whether it is or not, that gold mining itself where they're selling their product at that price is kind of a failed business model. Anyway, with that as a question what do you think?

Well, I only discovered the existence of the Fulfulla blog earlier today. Look everybody's got an opinion. Most opinions are worth nothing, probably including my own. And this kind of relates back to that question about GATA and gold price suppression. Look, the futures markets are for price discovery, and I wouldn't worry about a bald head guy with a white [inaudible 00:16:40] stroking trying to manipulate all the world's markets. Nobody can do it, so forget about that stuff. I don't buy it.

But I would like to answer the second part of the question about the gold mining industry. I've been saying for years that the gold mining industry itself is a 19th century choo choo train business in an era when, you know, all the smart young guys are playing with things like we were talking about before, artificial intelligence nanotech, robotics, space exploration. And here the mining industry is still digging around in the dirt with big yellow trucks. It's the worst industry in the world, assuming you find the gold deposits [inaudible 00:17:26] economic which is hard to do for lots of reasons, your troubles only really start then. You've got a make a billion-dollar investment upfront and you're not going to even start earning your way out of it for maybe 5 or 10 years, and then when you do that's when the NGOs and the greenies and the natives and the governments all start attacking you. It's a horrible industry. So, saying that, it's an essential industry. The only way I care to get involved in it though is by trading the paper of the shares as opposed to anything very direct which only would cause brain damage.

So, having said all of that, right now as we speak, and despite the fact that it's a crappy industry, I think right now is the time to be buying the shares in these stocks because they're very very cheap and nobody cares about them. I think that will all change in a few years when gold starts running to a new, manic high.

Craig: I would think, Doug, you're probably right on. It sure seems to be the most unloved sector, that and commodities, in general. It seems at this point nobody wants to have anything to do with it.

Doug: Absolutely correct. There are a few exceptions to that. A few metals that are now considered high tech metals for batteries. Things like Lithium and Vanadium and Cobalt, but they are the exceptions. The rest of the commodities are all in the dumpster, all of them.

: Well, then I think for our final question, again, we've kind of fallen right into the right segue because the final question gives you some categories and lets you kind of allocate between them. They're pretty specific categories, so I just want to see what you think of this. The question is if you had a $100,000 to invest today or you could be a $1000, we're mainly looking at percentages I guess, how would you allocate between just these four categories: physical metal, meaning gold and silver, cash just kept in dollars, so I guess stuck in the bank, mining stocks and cryptocurrencies?

Okay, well I think you use the word invest someplace along the line of talking about how you would allocate this, and I would respond, Craig,that you can't invest in any of those things. All of those things are either savings vehicles or speculation vehicles. An investment is something where you put $1 someplace and it enables the production of more, new wealth so that the next year you can predictably and with reasonable risk have $1.10 and let it compound. That's investing, bug gold is a savings vehicle. It's the only financial asset. It's not simultaneously somebody else's liability. It's a savings vehicle. Sometimes it can be used as a speculation.

Cryptocurrencies it's still too early in the game to tell. Savings vehicle? Yeah, for people in third wold countries where they can't save their worthless local currencies or dollars easily. Yeah, savings vehicle. Mainly a speculative vehicle. Mining stocks? Pure speculative vehicle. Don't dare save with them. So how would I allocate these things since these are basically all savings and speculative vehicles? Put half of your mind in gold bullion so that you've got an asset that's not going to dry up and blow away. And at this moment as we speak I think that the cryptocurrencies are moving into a buying area again just because of the way I feel about the dollar, and I think that mining stocks are definitely a buy right now. Now, this is a prediction. Everybody can make a prediction. Everybody's got an opinion, but that's just kind off of the way I read the markets at the moment subject to change tomorrow morning unfortunately.

Well, I'll tell you it' very insightful stuff. And then what you mentioned about are you investing or you're speculating, I think that's something everybody needs to remember. Again, we've been speaking this month with Doug Casey. If you want to get more from Doug, you want to meet Doug in person, he will be at the Sprott National Resources symposium July 17th through 20th in Vancouver. This is a great warm-up for that. Doug, thank you so much for your time.

Well, my pleasure. I'll also mention if I may, Craig, that I'll be at FreedomFest in Las Vegas just before I go to Vancouver to Sprott.

Craig: I can plug that, too. I've been there. I went there a couple of years ago just as a attendee. It was terrific. It was terrific.

: It's a lot of fun.

Great speakers there.

Doug: Old Home Week for libertarians.

Craig: That's right. I agree, great fun. Well, again, Doug, thank you so much for your time, and safe travels as you go through the summer.

Okay, it's a pleasure talking to you. We can do this again some time in the future.

Craig: And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you again next month.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.