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SURVIVING
FEDCOIN
How to Survive (and Profit) From
Americas Coming Currency Change
SURVIVING FEDCOIN

TABLE OF CONTENTS

Chapter 1 | Introduction............................................................................. 4
Chapter 2 | The Danger of Digital Cash..................................................... 16
Chapter 3 | Surviving Crisis: A 4-Part Solution.......................................... 22

FEDCOIN SURVIVAL PLAN, PART 1: LIQUIDATE


Chapter 4 | Raise Cash...................................................................... 25
Chapter 5 | The Four Most Dangerous Sectors to Invest in Today........ 32

FEDCOIN SURVIVAL PLAN, PART 2: CREATE


Chapter 6 | The Essence of Becoming Wealthy................................... 39
Chapter 7 | The Crash-Proof Portfolio................................................. 46

FEDCOIN SURVIVAL PLAN, PART 3: CONSOLIDATE


Chapter 8 | The Critical Steps to Survive Any Crisis............................ 54
Chapter 9 | Gold................................................................................ 57
Chapter 10 | Silver............................................................................. 70
Chapter 11 | The Best Place to Store Your Cash, Gold, and Silver........ 74
Chapter 12 | An Alternative Asset to Hold........................................... 81
Chapter 13 | StockpilingThe Basics............................................... 83

FEDCOIN SURVIVAL PLAN, PART 4: SPECULATE


Chapter 14 | How to Be a Rational Speculator.................................... 92
Chapter 15 | Gold Stocks................................................................... 94
Chapter 16 | The Top 3 Precious Metals Stocks to Buy.....................102

Chapter 17 | Conclusion.........................................................................105
Appendix I.............................................................................................110
Appendix II.............................................................................................118
CHAPTER 1 | INTRODUCTION

CHAPTER 1

Introduction
So many things in life are inevitable.

But are they imminent?

What youre about to read in this book is a dangerous scenario we


believe is on the horizon. And while we may not be able to predict if
this scenario will happen in a month, two months, or two years We
are absolutely convinced it will happen.

Whats going on?

The world, as Im sure youve noticed, has taken a bizarre turn for the
worse.

After years of zero or near-zero-percent interest rates, 19 different


countries now have negative interest rates.

In short, this means you have to pay the bank to hold your money.

This is completely insane.

You see, after years of money printing (or what the economists call
quantitative easing) central banks around the world are running out
of options.

They believe that, in order to keep the economy humming along, they
must interfere.

By pushing rates to 0%and now below zerothey figure people


wont want to keep their money in a bank and, instead, will go out
and spend it on things like cars, houses, and so on.

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CHAPTER 1 | INTRODUCTION

So, they reason, pushing interest rates below zero is a way to


stimulate the economy.

Unfortunately, as Doug Casey says, these are contrary goals.

The root of a sound economy is SAVING.

The more someone saves, the more capital he or she has to put to
productive usesto invest in a business, to support research, and so
on.

Punishing savers is not a wise approach.

But, sadly, this is now the world we live in. The new reality.

Can things get any worse?

Unfortunately, yes they can.

A lot worse.

Introducing Fedcoin
So what do you do when youve printed trillions of dollars set rates
to zero and the economy is still in rough shape?

Well, if youre a central banker, theres only one answer that makes
sense.

And that is Fedcoin.

But before we get into the specifics of what exactly Fedcoin is, lets set
the stage a bit more

We mentioned negative interest rates. Well, currently, there is over


$13 trillion in debt around the world trading at negative rates.

These rates havent hit the United Statesyet

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CHAPTER 1 | INTRODUCTION

You see, theres one major hurdle that goes along with imposing
negative interest rates.

And thats the risk of a bank run.

Why would people keep money in a bank if theyre going to get


penalized for it?

This is a real problem.

In Japan, for example, when the central bank set the rates to -0.1%,
safes sold out in certain stores in Tokyo.

I am a bit worried about what will happen next, one Japanese man
told The Wall Street Journal.

People withdrawing money in droves is a banks worst nightmare.

We believe thats why the U.S. Federal Reserve Bank hasnt


introduced these upside-down rates yet. Because they dont want to
start a bank run.

But that doesnt mean theyre not thinking about it

In fact, Stanley Fischer, the Vice Chair of the Federal Reserve, said
in early 2016 that negative rates (in other parts of the world) were
working more than I expected. And Fed Chair Janet Yellen said the
Federal Reserve was looking at them.

So the Fed has a conundrum:

Theyd like to be able to impose negative interest rates to stimulate


the economy but, unfortunately, doing so might cause a country-
wide bank run.

Thats where Fedcoin comes in

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CHAPTER 1 | INTRODUCTION

An Added Policy Tool


What if you could implement negative interest rates and prevent bank
runs in one fell swoop?

Well, thanks to new technology, the Federal Reserve is now in a


position to do this.

You see, back in 2009, a new alternative digital-only currency


surfaced. It was called Bitcoin.

The idea behind Bitcoin was to have a new type of money that was
safe, had a limited supply (to prevent massive inflation), and was
outside government control.

The currency flourished

From a price of less than $0.01, it rose to over $1,000 per Bitcoin
back in 2013 and now trades for around $500$600.

So what does Bitcoin have to do with the Federal Reserve?

Simply this:

The technology behind Bitcoinsomething called the blockchain


can be used to create other digital currencies.

That means the Fed could issue its own type of Bitcoinhence the
name Fedcoin.

If this sounds far-fetched, consider this

Back in 2014, Franois R. Velde, senior economist at the Chicago


Fed, said the blockchain was an elegant solution to the problem of
creating a digital currency.

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CHAPTER 1 | INTRODUCTION

And David Andolfatto, vice president at the St. Louis Fed, actually
proposed Fedcoin (mentioning that exact name) in 2015. Hes
spoken publicly about this multiple times, and says Fedcoin could give
the central bank an added (policy) tool.

Just imagine the benefits of having a digital-only currency

How can you have a bank run if you cant withdraw physical money?

Thats exactly the point.

You cant!

With a digital-only currency, you

Cant have bank runs

Can easily implement negative interest rates if you want to


(how will people withdraw their cash?)

And you make it easier for the government to tax people at


will.

Thats why we believe its an absolute lock well have some kind of
Fedcoin-like currency in America very soon

Consider:

Over 40 million Americans are on food stamps. Our Social Security


program is practically bankrupt. And everybody knows about our out-
of-control debt problem.

In fact, David Walker, former comptroller general of the United


States from 19982008, says taxes need to DOUBLE, otherwise the
country will go bankrupt.

America is in dire straits.

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CHAPTER 1 | INTRODUCTION

Right now, the government loses an estimated $450$500 billion


each year in lost tax revenue because of the underground, or cash,
economy.

So you can see where this is heading

By getting rid of cash and introducing a cashless currency, the


government could dramatically increase its tax revenue.

This idea of a cashless economy is gaining more and more traction.

Earlier this year, former Secretary of the Treasury Larry Summers


said it was time to kill the $100 bill.

And several countries around the world have already started


outlawing higher-denomination bills (for example, the European
Union will soon ban their 500 banknotes).

We believe its the right of every American to purchase what they


choose in total privacy.

Not everybody who uses cash is a criminal.

But limiting cash is only part of the equation.

Some of the features we could see with a new monetary system like
Fedcoin are incredibly Orwellian in nature

Perfectly Trackable
Imagine a world where everything you buy (or cant buy) is controlled
by a single card

A world where any government bureaucrat can instantly look at your


entire history of purchases on a single record.

Thanks to blockchain technology, thats exactly whats at stake with


Fedcoin.

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CHAPTER 1 | INTRODUCTION

If this sounds crazy, just take a look at some of the government


controls were currently subject to

With FATCA (the Foreign Account Tax Compliance Act),


Americans now need to report all their non-U.S. financial
accounts to the Financial Crimes Enforcement Network
(FinCEN).

Banks must now send a currency transaction report to


FinCEN for any withdrawal that exceeds $10,000.

Even if you withdraw less than $10,000, if the bank thinks


youre doing so to avoid reporting, you could be found guilty
of structuring.

Civil forfeitures: Today, even if you are not even charged with
any wrongdoing, law enforcement officials can legally seize
your assets (in 2014 alone, federal agents seized more than $5
billionan amount greater than what was lost in every single
burglary in America that year).

And thats to say nothing of other regulations like FBAR, PFIC,


know your customer rules along with things like cigarette and
soda taxes for anything the state deems dangerous to your health.

I mean, just think about this:

Theres already a Federal law that says food stamp recipients cant use
their benefits to buy liquor, cigarettes, or any non-food items.

Now, were not in favor of the welfare program. But the point is, with
Fedcoin you could control everything very easily since, unlike cash, its
a programmable currency. (Fedcoin would likely be administered as
a type of debit card or perhaps as an app on your smartphone but
behind it all it would run like a big computer program.)

What would this look like?

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CHAPTER 1 | INTRODUCTION

Well, imagine if 17-year-old Johnny Junior tries to buy liquor. His


purchase would automatically be denied. No need to look at a drivers
license.

Or if Fred Foodstamp tries to go to the strip club using his


government-issued EBT cardsorry, no dice.

What if, all of a sudden, the president decides a certain type of gun
shouldnt be purchased by certain people or maybe all guns?

Well, again, once you get rid of cash and use a perfectly trackable
digital currency, it becomes very easy.

No costly gun registry needed.

Remember: the government already controls what types of things you


can and cant buythink drugs, medication, and online gambling

They control where you can buy thingsfor decades Americans


couldnt travel to Cuba

And they also control when you can buy thingsjust think of the
legal drinking age.

Now, I dont think anyone wants to see a 10-year-old drinking


booze and were not here to make a political statement

But we do believe that for liberty-loving Americansand those who


want to safeguard their savingscertain steps need to be taken in
anticipation for what seems like a mere eventuality a type of digital-
only currency.

Thats why we wrote this book.

To help make sure you are able to protect everything youve worked
hard for to be able to purchase the things you want in privacy and
also to come out ahead.

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CHAPTER 1 | INTRODUCTION

And, even if Fedcoin turns out to be years away, or if by some miracle


we never see it By following these steps, youll be no worse for wear.
In fact, youll be in a much better position to face any oncoming crisis,
like another stock market crash, than 99% of Americans out there.

What Youll Learn Inside This Book


In the next chapter, youll learn about some of the real dangers of
digital money. As youll see, not even the Federal Reserve is safe from
digital theft.

Then, in the rest of the book, well go over the 4-step plan Doug
Casey originally created* to prepare for and prosper from crisis.

Chapters 4 and 5 cover the liquidation part of the plan, including the
main sectors most at risk from an investment standpoint right now.

Chapters 6 and 7, the create chapters, talk about how to set yourself
up as an empire builder with a set of crash-proof companies.

Chapters 813 cover consolidation. This is perhaps the single most


important section in this book as it lays out several defensive steps to
take today to prepare for Fedcoin.

And then, chapters 1416 go on the offensive with speculation. They


discuss how to best profit from a drastic potential currency change
like Fedcoin.

Remember, while we may not know exactly when a currency change


like Fedcoin will take place, we know that it could happen very soon

Most fiat currencies like the U.S. dollar last only 3040 years. We
are now at 45 years

*For more reading on this 4-part plan, pick up a copy of Doug Caseys bestselling book, Strategic Investing.
Even though this book was published several years ago, the principles in it are timeless.

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CHAPTER 1 | INTRODUCTION

Interest rates are already at zero and the Fed has no more tools left
at their disposal

We also know the central bank has already been in talks with key
leaders in the blockchain community. Janet Yellen held a private
meeting in Washington, D.C. back in June 2016 with three key
blockchain executives, as well as with members of the World Bank
and the International Monetary Fund.

So there may be little time left.

The best time to buy insurance is before you need it. We encourage you
to prepare yourself today while theres still time left to do something
about it.

What is Blockchain?
Blockchain is not a currency, and its not money. Its a technology
thats going to change the way people buy and sell things.

Its more secure, cheaper, and far more reliable than any system of
payment that exists todayincluding cash, checks, and credit cards.

Soon, youll use blockchain to buy a TV, a car, or a stereo. Youll


also use it to buy things like stocks, bonds, and real estate.

Blockchain is an open ledger. It keeps track of transactions, just


like an old-fashioned ledger on a store clerks counter.

But the store clerks ledger is only for him to see. Youll need a
warrant to see it, even if youre a paying customer. If you do get a
warrant, he might change it before you see it.

An open ledger is different. Its visible to everyone involved in a


transaction. Buyers, sellers, regulators, and anyone granted access
can see the ledger.

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CHAPTER 1 | INTRODUCTION

Plus, everyone involved in the transaction has their own copy


of the ledger on their computer, and all copies must agree. This
prevents stealing or fraud.

Heres an example: When you buy a pair of shoes using


blockchain, both you and the seller broadcast the transaction
over the Internet. Everyone updates their copy of the ledger for
your transaction. Then, everyone compares ledgers. When theres
disagreement about the content, the most common ledger is
accepted as the truth.

Then the transaction becomes permanent. The record in the


ledger cant be changed unless all people in the transaction agree
to it.

We call this decentralization because it takes the power out


of the hands of a single institution like a bank. And it puts the
power in the hands of the people doing the transaction.

With blockchain, no central authority or group can manage or


manipulate a transaction. And no one can steal things that are
secured by blockchain. Not thieves, hackers, or even the U.S.
government.

This incredible security is what makes blockchain so amazing.

In 2013, the U.S. government tried to seize over 600,000 Bitcoins


worth over $100 million. The Department of Justice claimed the
owner of these Bitcoins was breaking the law.

However, because Bitcoins are built on blockchain technology,


the Bitcoins were worthless to the U.S. government. Only
the owner could sell or spend them. If he didnt agree to the
transaction, they could not be sold or spent. Period.

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CHAPTER 1 | INTRODUCTION

This is what makes blockchain one of the greatest technological


advances in recent memory.

Heres the catch, though

If the government and Federal Reserve decide to implement


something like Fedcoin, theyll be able to modify the
blockchain to suit their needs

Theyll be able to see every transaction impose extra taxation


through negative interest rates and do just about anything they
please.

Thats because, unlike current blockchain applications, a central


bank Bitcoin likely wouldnt be placed on a distributed network.

In fact, Russia is currently planning a central bank-issued digital


currency of its own. As one report noted, In stark contrast to
Bitcoin, the plan for the Russian cryptocurrency explicitly says
that it will have a central issuer in control over the currencys
supply.

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

CHAPTER 2

The Danger of Digital Cash


Billions of dollars are transferred electronically every day.

We bank online, shop on our computers, and pay for lunch with credit
and debit cards. Even the stock exchanges are now 100% electronic.

In todays world of digital money and quick-swipe payments, its very


common to view physical money as a relic like fax machines or CD
players.

In fact, according to a 2016 Gallup poll, 62% of Americans said they


believed cash would cease to exist within their lifetime.

However, digital money is also very, very dangerous. And if you


have a significant amount of money in digital form (like at a bank or
a brokerage), you and your family are in grave danger.

Banks, brokerages, credit cards, and the payment systems used by


billion-dollar corporations all rely on electronic systems. And they are
all at risk of catastrophic failure.

To understand exactly how fragile the financial system is, consider the
damage a major incident, like a successful cyberattack, could cause.

If terrorists, rogue governments, or even the U.S. government attacked


or sabotaged the financial system, it could instantly shut down your
ability to buy food, clothes, medicine, or other necessities.

Just imagine

What if all the accounts at a major bank like Wells Fargo were suddenly
erased? What if businesses couldnt process digital payments? What if
your bank told you all records of your life savings had disappeared?

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

If your life savings were suddenly gone, how would you buy food,
water, medicine, and gasoline?

We know these claims and questions may sound outlandish.

But think about it

If you have $100,000 in the bank, what do you really have?

These days, its certainly not a claim to hard assets like gold or silver.

And its certainly not real cash in a bank.

Many local banks dont even have that much cash on the premises!

Just try asking your bank for $25,000 in cash. The teller will say, We
cant give you that much money. And hes obligated to file a report on
any amount over $10,000.

If you have your life savings in a bank, or a brokerage account, what


you have are electronic entries that hackers can easily and quickly
delete.

Chilling, isnt it?

All the money youve earned the hard work, the sweat, the
sacrifice the nest egg youve built to provide for your family

Gone.

In an instant.

Thats exactly what could happen during a large-scale financial attack.

Think were crazy? Cyberterrorism experts deal with hundreds of


cyberattacks every single day. Most of the time, these attacks are
stopped. But some get through.

Just consider

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

***In 2013, a gang of mostly Russian hackers stole up to $1 billion


from bank accounts.

The hackers secretly infiltrated computers at over 100 banks. Once


they had control of the computers, they ordered bank ATMs to
distribute cash at a set time where an associate would pick up the
cash. One bank lost $7.3 million.

By stealing relatively small amounts per transaction, the hackers kept


the scheme going for nearly two years. The names of the hacked banks
are still secret.

***In 2015, we learned hackers infiltrated some of the largest and


most sophisticated financial firms in America. The media called it the
Largest Cyber Breach Ever.

The victims included big names like J.P. Morgan, E-Trade, and
Scottrade. Americans trust these companies to safeguard hundreds
of billions of dollars in assets. Yet hackers were able to breach their
security and steal personal data on over 100 million customers. The
hackers also manipulated stock prices.

The hackers have used the stolen data to set up false bank accounts,
credit card accounts, and gambling accounts at online casinos.

These giant, successful cyberattacks have targeted and damaged


the worlds most powerful institutions. And they demonstrate that
financial terrorism isnt just something to worry about in the future.

Its something that is happening right now.

In fact, even the U.S. Federal Reserve is not immune from these hacks.

According to Reuters, the Fed detected more than 50 cyber breaches


between 2011 and 2015. On February 4, 2016, hackers stole $81
million from a Bangladesh Bank account at the New York Fed.

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

Thats another reason we believe something like Fedcoin could


happen in the future: It would be very easy to sell the idea to the
public as a way to secure our nations monetary system.

Why a Major Financial Attack Is Virtually


Guaranteed to Occur
Doug Casey wrote the book Crisis Investing in 1979. It spent 34
weeks on The New York Times Best Sellers list.

Since that book came out, Doug has appeared on CNN, Time, NBC
News, Forbes, Regis Philbin, and Charlie Rose. Phil Donahue even
devoted an entire show to his work.

Because of Dougs reputationmany people say he wrote the Bible


of surviving financial crisespeople constantly want to talk to him
about spotting looming financial disasters and how to survive them.
You could say Doug has spent over 40 years specializing in this area.

Doug says that expecting a major financial terrorist attack is a no-


brainer one of the biggest threats he can imagine.

Its not a matter of will it happen. Its a matter of when it will happen.

And, like any crisis situation, it will be too late to do anything about it
after it hits.

The Government and the Banks Are Lying They


Cant Protect You
What were saying about the safety of our financial system is
controversial.

The government and the banks dont want anyone to broadcast the
facts were sharing with you. They dont want you to question the
system, because the system is unstable. It rests largely on confidence.
And confidence can disappear overnight.

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

After all, the government NEEDS you to have confidence in our


monetary system.

If you and your fellow citizens dont have confidence in the safety of
money, all hell would break loose.

You see, our money isnt backed by gold like it was in the past. Our
monetary system is built on confidence and confidence alone.

If lots of people questioned the safety of the system and pulled their
money out, it could trigger a nationwide run on the banks, a stock
market collapse, and a currency crisis.

It could literally lead to rioting in the streets.

In fact, former congressman Paul Kanjorski told CSPAN that, back


in September 2008, we came within three hours of a total system
collapse.

No politician or banker wants this to happen on his watch.

The highest political positionsand trillions of dollars in wealthare


at stake in this game.

Between the government and the banks, there is a giant, entrenched


power structure that DOES NOT want you to have the information
were sharing or to take any of the actions we recommend.

They want you to think everything is completely safe.

They want you to wear blinders. They dont want you asking
uncomfortable questions.

Thats why we fully expect these institutions and their lapdogs in


the mainstream press to attack this message. They might even try to
outlaw the steps and techniques were recommending. Thats why its
important you take action as soon as you can.

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CHAPTER 2 | THE DANGER OF DIGITAL CASH

Note: For information on some of the steps you can take to protect
your digital presence, please refer to the Appendix.

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CHAPTER 3 | SURVIVING CRISIS: A 4-PART SOLUTION

CHAPTER 3

Surviving Crisis: A 4-Part Solution


You wake up to a blank alarm clock.

The alarm clock is plugged in but it looks like the power is out.

Its sunny outside. So it wasnt a storm. Must be a line down somewhere.

You go to the sink to brush your teeth and theres no water.

No water no power somethings not right.

You go outside and see your neighbors congregating in the street.


They dont have water or power either. One of them has a generator
but quickly realizes hell run out of diesel if he keeps it on all day.

There hasnt been a hurricane, earthquake, terrorist attack, or flood. In


fact, its a peaceful morning in Middle America.

But last week, the Federal Reserve flipped the switch on its new
digital currency, Fedcoin.

For years, the U.S. struggled with paper currency. Counterfeiters


printed tons of cash terrorists purchased firearms and drug lords
rose to kingpin statusall thanks to paper money.

The Feds move to Fedcoin was supposed to solve all of these


problems. It would also give the government total control.

But the transition hit a snag.

Part of the switch was Congressional Bill 1683, which outlawed


paper currency for payment of any government fee or tax bill. All
government payments were now meant to be made with Fedcoin.

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CHAPTER 3 | SURVIVING CRISIS: A 4-PART SOLUTION

The local government also could only accept Fedcoin now for all
payments.

This was a critical step in cementing the digital currency as the


primary payment tool in the U.S.

But your local governmentalong with several others in the


countryfailed to synchronize their system with the new Fedcoin
payment mechanism. It couldnt take any payments, buy fuel for its
fleet of trucks, or pay its power bill. It also missed payroll on Friday
and nobody showed up for work this week.

Youve got access to email and a web connection with your phone, so
you can see theres an emerging crisis.

But once your battery dies, youll be completely on your own.

The situation described above hasnt happened yet. But others just like
it have.

In fact, almost every time traditional payment systems change, there


are snags, glitches, delays, and frustration. And if terrorists attack and
the whole digital financial system comes crashing down, things will be
much, much worse.

But theres a way to protect yourself. To prepare for any crisis, Doug
has created a four-part formula. Its something he swears by. It has
helped him protect his wealth in times of chaos And its also helped
him make millions in times of financial crisis.

Dougs formula is simple: Liquidate, Create, Consolidate, and Speculate.

In the following sections, well walk you through each of these steps
in detail. You can read these in order or skip ahead to the chapter of
your choice. If youre looking for the most important things you can
do to protect yourself against a currency change like Fedcoin, make
sure you skip ahead to the Consolidate section.

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CHAPTER 3 | SURVIVING CRISIS:SURVIVING FEDCOIN
A 4-PART SOLUTION

Fedcoin Survival Plan, Part 1:


Liquidate

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CHAPTER 4 | RAISE CASH

CHAPTER 4

Raise Cash
As we saw in the last chapter, the transition from our current money
system to a digital currency like Fedcoin might not be a smooth one.

Major glitches trip up even the smallest companies when they merely
change software providers. A change to the payment system of the
entire U.S. economy would be several times more dangerous. Add to
that the most dangerous fact of all it would be administered by the
government.

In fact, back in 2013, shelves at two Louisiana Walmart stores were


cleared out in two hours after a small glitch happened with food
stamp cards!

Can you imagine what would happen if Fedcoin is implemented?

Chances are very high a crisis would ensue. In fact, even if Fedcoin
doesnt happen for some time, chances are very high well see some
kind of crisis in the near term.

Doug, for example, believes we will soon be exiting the eye of the
hurricane we entered in 2007, and that well soon see its trailing edge.

Its going to be much more severe, different, and longer lasting than
what we saw in 2008 and 2009, says Doug.

In order to prepare for crisis, there are simple, concrete steps you can
take right now.

The first step is to liquidate and raise cash.

There are two important reasons you want to do this:

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CHAPTER 4 | RAISE CASH

One is because as we saw a change to a digital-only currency


like Fedcoin could be very Orwellian in nature. We dont know what
may or may not be outlawed, but youll want cash on hand to purchase
items which may no longer be available in the future.

The second reason is because crisis breeds opportunity. By raising cash


now, youll have the resources available later on to take advantage of
profitable situations as they arrive.

So, where can you liquidate?

Well, many people hold a significant part of their wealth in the stock
market. In a minute, well discuss the key sectors most at risk where
you might want to trim down. But, first, lets take a broader view on
liquidation.

You see, theres a good chance you have too much stuff at home.

Take an inventory of all your assets. Old clothes, furniture, tools, cars,
bikes, electronics, and even properties. Chances are you have hoarded
too many things over the years.

If youre like most people in the U.S., your garage looks like a storage
unit. Your basement is unlivable. And you have a storage unit which is
costing you money.

Excess stuff limits your options. Eliminate anything that is not


essential to get by in daily life.

Start selling now. More than likely you have at least $1,000$5,000
worth of stuff sitting around unused.

Call your neighbor. Call your friends. Organize a yard sale. Put stuff
on Craigslist or eBay.

Whatever you cant sell, give to your favorite charity. Items given to
charity might qualify for tax deductions (see your accountant).

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CHAPTER 4 | RAISE CASH

Just liquidate now while there is a market for all of these things.

When the crisis hits, everything will be worth much less. Everyone
will be trying to sell their stuff to put food on the table.

People will be desperate for cash. And their standard of living will be
lower. This desperation will create huge opportunities.

Youll be able to buy many assets cheaper. And youll be ahead of the
game.

While youre liquidating your excess resources, cut back on your


expenses. Doug says, Not spending money is actually twice as important
as either earning it or saving.

People have been living above and beyond their means. Its one big
reason the world is $60 trillion more in debt now than before the
global financial crisis.

Cut back now while you can. Because it will be too late when the
depression hits.

Youll feel 100% better after liquidating excess stuff and cutting
expenses. And youll be in a much better position to take advantage of
opportunities that the crisis will bring.

After you liquidate all the stuff you can, think about liquidating
some of the stocks you own. But which stocks should you sell? In
a moment, well tell you the four stock market sectors most likely
to lose huge amounts of investor money as times get tough. If you
own stocks in these sectors, youll want to plan on selling as soon as
possible.

Before we get to that, lets cover why the cash youll be generating
will be extremely importantand could help make you wealthyas a
crisis unfolds

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CHAPTER 4 | RAISE CASH

Why Cash Is King


Imagine walking into your local shopping mall. You enter through the
same door as always. Something, though, is different this time. The
mall is virtually empty. The stores are open but nobody is shopping.

You see a huge red sign. Its sitting directly in front of the store where
you normally buy suits. It says, Today Only Save 90%.

It sounds too good to be true.

The sales clerk tells you, with a noticeable degree of urgency, theres
one catch Cash only. The credit card machine does not work and
the store needs cash quickly.

If you walked into this situation, youd realize pretty quickly its a great
opportunity. These suits normally cost $1,000 each. But today, theyre
$100. For a fraction of the regular price, you could have enough suits
to last a decade.

Most people today walk around without any cash on hand. If they
encountered a situation like this theyd be a spectator watching the
lucky ones with cash scoop up the deals.

People dont feel like they need cash. Its risky a robber could steal
your wallet and your cash. Debit and credit cards offer some degree of
security. If stolen, one phone call cancels and replaces them.

But having cash gives you options. In a tight situation, cash is more
powerful than plastic.

The average investor has the same attitude towards cash in a


brokerage account. Most investors hold less than 5% cash in their
brokerage accounts. Thats a mistake.

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CHAPTER 4 | RAISE CASH

Consumer Reports says: Active investors should keep 3% to 5% of their


portfolio in cash. Thats enough cash to take a decent-sized position
or add to an existing one when you find a security on sale.

But 3% to 5% is not enough cash to take advantage of a once-in-a-


generation opportunity. Im not talking about buying stock when the
market falls 1% in a week. Im talking about buying when everyone
else goes running for the exit door, screaming and selling at any price.

This type of market panic comes along about once a decade. Its
usually caused, at least partially, by government manipulation.

Take low interest rates, for example. During the last economic
downturn, the Fed lowered interest rates to effectively 0%. It was an
unprecedented move

Borrowing money at 0% means money is free. Free money doesnt


need to earn much to generate a profit.

The Feds radical 0% money scheme warped our economy.

As the central bank-owned Bank for International Settlements has


stated, The probability and severity of another financial crisis is
increased by the prolongation of ultra-low or negative rates The
question is not whether this will happen again, but when.

The day of reckoning will come. When it does, markets will get a
wakeup call. If you have cash on hand, you can take advantage of
prices you wont see again for years.

This happens all the time.

Just take a look at the following chart. It depicts the price of Silver
Wheaton Corp (SLW), a company we recommended buying in the
July 2016 issue of The Casey Report.

Back in the 2008 panic, it sold for as low as $2.57.

29
CHAPTER 4 | RAISE CASH

If you had cash on hand and bought SLW shares when everyone else
panicked you made over 1,700% over the next 30 months.

In short, a market panic creates opportunity.

And the next panic is right ahead of us. So now is the time to raise
cash.

As we write in late 2016, the stock market is near all-time highs. But
the economy has slowed to a pace usually seen just before a recession.

Former Fed Chairman Alan Greenspan used to monitor the


likelihood of recession using ISM data.

ISM is the Institute for Supply Management. Each month, it phones


300 purchasing managers at U.S.-based manufacturing companies. It
asks them a series of questions to gauge the health of their companys
business.

It takes the answers to those questions and compiles them in an index.


That index was Greenspans favorite recession indicator. When it sank
below 50, it meant the economy was in recession.

30
CHAPTER 4 | RAISE CASH

Typically, it flirts with 50, recovers, then tumbles into recession. That
happened in 2015. In 2016, the ISM started falling again after a brief
recovery.

Get Ready to Go Shopping


You cant shop without cash. Thats why right now is the time to get
cash ready. When the market falls to a new low, its too late to sell stock.

You dont have to sell everything.

In fact, you shouldnt.

Some companies, like Starbucks Corp. (SBUX), will suffer in a


downturn but fully recover their value. Why? Because Starbucks sells
simple products to the masses of society. Therefore, theyre very robust
and likely to survive any downturn.

You dont want to sell companies like this to raise cash.

Instead, you want to sell stocks that are the most sensitive to changing
economics. Companies like the ones we describe in the next chapter.

31
CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

CHAPTER 5

The Four Most Dangerous


Sectors to Invest in Today
Here are the sectors most likely to face trouble in the near term. If you
own some of these companies in your portfolio, consider liquidating
them:

1. Companies that sell want not need luxuries to the lower and
middle class.

Most people buy products they dont needlike jewelrythrough


credit financing.

Spending now and paying later is easy. It allows customers to buy


more jewelry than they can afford.

This is also why these products should rarely be an investment. And


why businesses that sell these products are in trouble.

Take, for example, Signet Jewelers Ltd. (SIG). Signet is the parent
company of popular jewelry stores like Zales, Kay, and Jared. It sells
jewelry to the masses. And most of the purchases are financed using
credit.

During a recession, credit is more difficult to get. Borrowers lose their


jobs, burn through savings, and have to choose which bills to pay.
The list of priorities usually goes: rent, car payment, power, and cable.
Jewelry loans might come in dead last. Naturally, lenders get nervous.
This is bad news for companies like Signet who depend on consumer
access to credit.

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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

As you can see in the chart below, Signets stock has had a
tremendous run. If we enter an economic downturn and consumers
lose easy access to credit, the companys business will suffer. Its stock
could fall in half.

Companies with customers who depend on credit see booming sales


during times of easy credit. But when the easy money slows down,
so do sales. So, take a close look at the companies in your portfolio.
Do any of them depend heavily on consumer credit? If so, youll want to
consider reducing your position.

Stocks that depend on easy credit make great potential sell candidates
when youre raising cash. When the good times get started again, you
can usually buy them back at a fraction of their current price.

2. Car Retailers

The car business is another sector that suffers in a downturn. Most


consumers borrow money to buy cars. Even worse, record numbers of
cars are now being leased instead of purchased.

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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

When the easy credit slows down, people will drive their old cars
longer. They will fix these cars instead of trading them in for a new
car. This is bad for car dealers. They have tremendous expenses
maintaining dealerships, salespeople, and expensive service centers.

CarMax Inc. (KMX) is one of the countrys largest used car retailers.
The company buys cars from consumers, reconditions them, and puts
them on the lot for sale.

During boom times, its a great business. But when trouble shows up
on the horizon, it means dark days ahead for all car dealers. During a
downturn, most customers have less options. They also often have less
income.

Further, used car retailers like CarMax hold used car inventory as
their primary asset. As the massive boom trend of leasing cars slows
down and begins to unwind, the used car market will be flooded. The
value of used cars will fall. Meanwhile, customers in the market for
those cars will have less borrowing power in a recession. Its a double
whammy for used car retailers. And its likely to happen at just the
wrong time.

New car dealers suffer a similar fate. Its common for car
manufacturers to fill dealer lots with new cars on credit. Dealers
typically have several months of low-cost financing from
manufacturers, allowing them to display and sell cars before actually
paying for them.

But when sales slow, this amounts to a huge liability for dealers. Doug
and E.B. Tucker visited a Chevrolet dealer recently that offered 84
months of 0% financing. Seven years of free time to pay for a car is
about as easy as it gets.

Car sales hit a record in 2015. But if the easy credit slows down, sales
will suffer.

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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

AutoNation Inc. (AN) and Penske Automotive Group Inc. (PAG) are two
other good sell candidates. These companies are well managed but even
the best managers cant survive when sales dry up. Stay out of these stocks
at a time like this.

3. Homebuilders

Homebuilder stocks are another great sell candidate. Companies like KB


Home (KBH) sell homes to customers that normally borrow most of the
purchase price through a mortgage. KB Home depends on credit. When
easy credit stops and recession starts, the companys sales slow dramatically.

To make things worse, a homebuilders largest asset is its land held for
development. This means large tracts of land purchased and prepped for
homesites.

These companies often invest tens of millions in roads, water, sewers, and
basic utilities preparing new neighborhoods for construction. If the economy
slows midway through this process, it can be stuck with expensive lots.

After close to six years of economic recovery, homebuilder stocks have been
flying high. Things cant get much better. Thats why they make a great
candidate for raising cash.

Another homebuilder to stay away from at a time like this is William Lyon
Homes (WLH). The California-based company may survive a decline in
home sales but its stock may not.

These companies have big financial commitments and often heavy debt
loads. If sales slow, their stocks often fall in a hurry.

4. Airlines

Warren Buffett said it best: Investors have poured their money into airlines
and airline manufacturers for 100 years with terrible results. Its been a
death trap for investors.

35
CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

The airline business looks great at the end of an economic boom.


Finally, planes are full, ticket sales are high, cargo holds are full, and
competition is fierce.

Thats also when airlines expand fleets, buy back stock, buy
competitors, and increase dividends.

This is a mistake.

When the economy slows down again, airlines desperately need cash.
But because they spent it all during the good times, theyre often
broke (or close to it).

Because of this, airlines have spent the last 100 years in a boom, bust,
binge, and purge cycle. Just like Warren Buffett said, theyre a death
trap for investors.

Thats why right now is a great time to sell airline stocks. Business cant
get much better. And it can get a lot worse.

When a downturn comes, airline stocks fall dramatically some go


bankrupt. Even the survivors have to issue more stock, borrow money,
and endure tremendous pain.

If youre holding airline stocks and looking to raise cash, follow


Dougs advice and hit the bid before its too late.

To sum up, when a downturn comes (either caused by Fedcoin


or something else) the stock market will suffer. Stocks of quality
companies will trade at much lower prices than today.

Overwhelming optimism will turn to despair.

Thats exactly the time to buy stock in quality companies companies


with long-term business models. But youll need cash to do it. Before
the downturn hits is the time to raise cash. Once stocks fall, its too late
to sell. Even the best companies will trade at once-in-a-decade lows.

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CHAPTER 5 | THE FOUR MOST DANGEROUS SECTORS TO INVEST IN TODAY

As you pick through your current stock holdings looking for things to
sell, focus on the businesses that struggle the most in recession. The
ones that only make sense during boom times should be your first to
hit the auction block. Remember, sell now while prices are high and
before its too late.

If youre struggling with which stocks to let go of, think back to


the most recent boom. Which stocks surged higher and faster than
anyone predicted? The most loved, story stocks of the boom attract
fickle investors that dont want to miss out on the good times.
Sometimes these late entrants even borrow against their shares to buy
more. As a last resort, this can be a good starting point for deciding
what to sell.

Selling stock before a downturn is difficult but its too late to raise
cash once the downturn comes. Imagine how hard it would have
been to sell stocks in 2007 or early 2008. If you told people you were
selling, theyd say you were going to miss out on all the good times.
But selling and holding some cash gave you enough money to buy
several times the stock you could have just a year before.

So that ends Part 1 of the plan. You want to liquidate things you dont
need and stocks that could soon fall fast.

Remember, cash is hard to hold until you really need it.

37
SURVIVING FEDCOIN

Fedcoin Survival Plan, Part 2:


Create

38
CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

CHAPTER 6

The Essence of Becoming Wealthy


Once the liquidation phase is complete, the next thing to look at is
creating money.

Remember, if a drastic currency change hits America, it will not only


signal crisis, but it will also spell opportunity. So you want to have as
much cash as possible on hand.

The essence of becoming wealthy is to produce more than you


consume and save the difference.

One of the best ways to do this is to work for yourself.

As Doug says, There is cause and there is effect. You dont want to be
the effect of somebody elses cause. You want to be the cause for everything
in your life. That implies working for yourself. At least turn your present
employer into a partner or an associate.

Becoming an entrepreneur isnt as hard as you may think.

For example, think about how hard it is to find good service or a good
contractor. People and businesses are desperately looking for high-
quality and consistent contractors.

Contact your network. Go through the yellow pages. Call them all
and offer your skills to help them improve their businesses. Go to
Upwork.com or Freelancer.com and set up a profile offering your
skills.

The internet has made entrepreneurship more attainable today than


ever before. According to Forbes, by 2020, 50% of the U.S. workforce
will be freelancers in some capacity.

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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

Figure out the skills you can offer. Give consumers what they need.
And watch your bank account increase.

And dont limit yourself to your hometown

If the opportunities are greater in the next state over, go there. For the
adventurous, Doug believes the best place to make a fortune from a
small asset base today is Africa.

As an educated westerner, you have the ability to meet more


important people than you would in the States. If you have a good
enough reason, you can be in the office of the president within a week.

Many countries are ripe with corruption and incompetence. So they


are in dire need of all kinds of goods and services. Theyre also full of
untapped resources and talent. Which gives a huge advantage to a
foreign entrepreneur.

Heres an idea from Doug For your next vacation, book a trip to
Cameroon, Togo, Gabon, Zimbabwe, or Angola. Go through the Yellow
Pages in the capital and meet everybody who is anybody. The chances are
good youll come up with several deals in the first week alone. If you cant
find the time, send your kid whos just out of school and idiotically thinks he
may want to misallocate time and money getting an MBA. This idea alone
should be worth a million dollars.

Building a highly successful business from scratch is the surest way


to a huge fortune. Thats how Bill Gates came to be worth more
than $90 billion. He founded Microsoft, the worlds most successful
software company.

But what if entrepreneurship is not your cup of tea?

Then buying ownership stakes in existing private or public businesses can


also be extremely lucrative. Consider, for example, the story of someone
who bought an ownership stake in Johnson & Johnson in 1990.

40
CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

At the time, J&J was an established blue-chip leader in consumer


products and pharmaceuticals. It was one of the best businesses in
America. In April 1990, someone who bought an ownership stake in
J&J began earning the companys annual dividend payment of $0.15
per share. This translated into a 2% yield on the investors capital.

Over the next 25 years, J&J grew from $11 billion in sales to $74
billion in sales. It also increased its dividend payment every single
year. The dividend increased through recessions, bear markets, and
terrorist attacks.

By 2015, the J&J owner watched the value of his stake grow by
1,321%. He was earning an annual yield of 42% on his original
investment. And he made all this money by owning one of the worlds
best businesses.

So make sure you own stakes in world-class businesses. They maintain


their value regardless of what happens in the economy. Here at Casey
Research, we want to build our own mini empire by holding onto a
slew of world-class businesses.

Were talking about businesses like Archer-Daniels-Midland Co.


(ADM).

You might think of ADM as a farming company. But its not. The
company is a diversified agriculture product and chemical company. It
buys crops from farmers and uses those crops as raw material to make
other products.

ADM produces everything from the cornmeal used in tortillas, to


sweeteners used in everyday foods, to ethanol thats blended into
gasoline.

Owning shares of an agribusiness giant like ADM means you share


in the profits produced by all the corn syrup, processed wheat, and soy
that make up the key ingredients of ultra-cheap modern food.

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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

This kind of food sells even better during hard economic times. Even
when the economy is bad, people need to eat. Thats why businesses
that help mass-produce inexpensive food are nearly recession-proof.
Theyre the kind of companies we want to own for a long time as
empire assets.

But the key to creating wealth with empire assets is to buy these
businesses at great prices.

Dont Buy Overvalued Stocks


You can lose money by investing in a great business if you pay a bad
price. And you can make money by investing in a bad business if you
pay a great price.

Consider what happened during and after the 1999 and 2000 stock
market peak.

Back then, the stock prices of good companies with solid future
prospectslike Wal-Mart and Microsoftwere wildly expensive.
Stock prices often reached 50, 60, or even 90 times earnings. People
who purchased shares back then paid bad prices. They had speculative
fever. They didnt focus on getting good value for their investment
dollars.

Because many stocks with good business models were so overvalued,


their share prices crashed and went nowhere for many years.

Keep in mind, the underlying businesses were still very sound. Those
businesses were still growing. But the stock prices got so out of whack
that investors who overpaid suffered horribly. It took a long time for
the stocks to work off their extremely overvalued state.

For example, in 1999, Wal-Mart traded at more than 50 times


earnings. It spent more than a decade working off that overvaluation.

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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

Folks who bought Wal-Mart stock back in 1999 didnt make


any money for more than a decade. The company did fine but
shareholders who bought the stock at stupid prices suffered for a long
time.

If you can buy a great business at 5 to 10 times earnings, its a good


deal. But if you pay 30 or 50 times earnings for it, youre bound to be
disappointed.

We have to state it again: if you overpay, you can make a horrible


investment in a great company.

View your stock, bond, real estate, and commodity purchases just
like you would view buying a house, car, phone, or even groceries.
Dont be a sucker and overpay. Make sure you get good value for your
investment dollar. Hunt for bargains. Those bargains typically come
during periods of crisis.

Consider Warren Buffett. Many consider Buffett the most successful


investor of the past century.

Buffett entered the financial crisis in 2008 with billions of dollars of


cash in hand. He tossed lifelines to a handful of blue-chip companies
desperate for cash in 2008 and 2009. Through a series of sweetheart
loans and investments, Buffett invested close to $25 billion from 2008
to 2011. By 2013, he had received $10 billion in income from those
investments.

Buffetts secret was having plenty of cash in a time of crisis. You see,
eventually, the economy always rebounds. And folks who bought great
assets cheap make a fortune.

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CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

For example, right after the 2008 crisis, you could have bought stock
in Starbucks and made more than 1,900% on your money. Or you
could have bought shares of Apple in late 2008 and made as much as
966%.

In the coming crisis, many stock prices will likely be cut in half. And
there will be great opportunities to make money. When a stock price
falls by half, you can buy twice as many shares for the same amount of
money.

Thats why you want to stalk great businesses now, while we wait
for the full-blown crisis to hit. By creating a shopping list of world-
class, empire-building companies, youre positioning yourself to buy
large chunks of shares at cant lose prices.

Here are a few empire-building companies that fit the bill.

Archer-Daniels-Midland (ADM) is an agribusiness giant that


processes a huge portion of all the corn, grain, and beans that make
cheap American foods. ADM makes money by feeding the masses.
Thats because companies that cater to the average American instead
of the picky few make more moneymore consistentlyover the
long term.

ADM is able to make money in any environment, making it an ideal


empire stock.

Discount retailer Dollar General (DG) is a perfect example of an


empire stock. Like ADM, it has a strong market position that isnt
easy to replace.

DG sells basic goods to the masses. Its a one-stop shop for basic life
essentials like baby formula, bread, soap, and paper towels. When the
great financial unwind hits, DG will be left standing.

44
CHAPTER 6 | THE ESSENCE OF BECOMING WEALTHY

Energizer Holdings (ENR) is another empire stock. Energizer,


as you probably know, sells batteries. Those batteries still go in
flashlights. They also make smoke alarms, remote controls and lots of
other devices work.

Thats the enviable value of owning a durable brand that produces a


premium product. It stands the test of time. With the stock market at
all-time highs, Energizer is a true value stock.

Remember, you can make a killing in the stock market by just buying
things when everyone else is running scared, selling anything they
can sell. It is possible to build significant wealth by making only a few
smart buying and selling decisions. Instead of actively trading, spend
that time studying quality businesses like the ones we profile in the
monthly issues of The Casey Report. Build a shopping list, or a wish
list, of companies youd like to own at much lower prices. Those low
prices show up about once a decade make sure youre ready to take
advantage of them.

Since were on the topic of creating wealth, heres a unique idea from
Doug Casey on the subject

45
CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

CHAPTER 7

The Crash-Proof Portfolio


By Doug Casey

Its impossible to be sure, at any given moment, whether any market is


going up or down. No matter how overpriced a market may be, there
are always bulls with good-sounding arguments about why it could
go twice as high. No matter how cheap a market may be, there are
always convincing bearish arguments for it to go lower.

After all, for every buyer, theres a seller (and vice versa). The same is
true for the economy, where a case can be made for both good times
and bad times at almost any juncture.

How can you hedge yourself against being on the wrong side of the
market? By using hedge strategies which are surprisingly little-
known, though theyre almost always lower risk and have higher
potential than pure long or short positions.

A hedge is a position where you buy X dollars worth of one stock or


commodity and simultaneously short sell an equal dollar amount of
a different stock or commodity. Since youre both long and short
the market, you dont really care which way it goes. By choosing your
positions intelligently, you can be right on both sides of your trade,
regardless of overall market conditions.

As fashions change, the first tend to become last and the last to
become first. This was recognized in biblical times, and its equally
certain in the investment markets. Regardless of the overall direction
of the market, relatively overpriced stocks tend to decline and
underpriced securities tend to rise. Indeed, both movements often
happen at once.

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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

By being both long one investment and simultaneously short another,


you can escape the need to second-guess the direction of the overall
market and still profit in either a bull or bear market. The keys to
profitable hedging are patience and consistency: patience because
it doesnt make sense to be in any market all the time; consistency
because your plan wont work if you dont follow it.

Most of the time, its a 50/50 bet whether something is going up


or down, and you need better than 50/50 odds to make money. The
idea is to be in a given investment only when the odds of it going up
appear to be 90% or better and to be short when the odds of it going
down are equally strong. It is fortunate that odds that strong usually
identify investments that are getting ready to move 10 for one or
more as well.

Suppose, for instance, you like the prospects of Stock X. Youre sure
the underlying company will do well. But youre afraid of the market
as a whole, which could take Stock X down despite the company
prospering. How do you solve the dilemma of whether to buy or to
wait?

A hedge might be the answer. Find another company in the same


industry, Stock Z, which you feel has terrible prospects and perhaps
will lose business because of Company Xs success and whose stock
looks to be overpriced. Then, buy Stock X and short an equal dollar
amount of Stock Z.

If your assessment is correct, it will not make any difference how the
market in general, or the industry in particular, does. Youll make
money as long as X does better than Zwhether they both go up or
they both go down. And, if their prices move in opposite directions,
you can make money on both and double your profits, even while
youve reduced your risk.

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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

Value is relative, not absolute. In other words, you want a position not
only because of what it is, but because of what price it is. For instance,
in October 2017, gold is a good buy at $1,240 and the S&P 500 at
2,500 is not; so I suggest owning gold and short selling U.S. stocks.
Several years from now, if gold is at $4,000 and/or the S&P 500 is at
1,000, Ill almost certainly be inclined to say the exact opposite: buy
the S&P 500 Index and sell gold.

Its never a question of how many dollars you can get for something
you want to sell. The real question is how many shares, or contracts,
or acres, you can exchange it for. It might, for instance, be hard to say
whether corn is cheap or dear at, say, $4 a bushel unless you know
what to compare it with. But we know that wheat usually sells for
about twice the price of corn and soybeans for about triplebecause
of factors like production costs and protein content. If soybeans sell
for $6 while corn is at $4, you can be pretty sure corn is dear, at least
relative to beans. By selling corn and buying beans, youre likely to
make money.

The idea is to pick out very cheap stocks or commodities to buy, and
very dear ones to sell simultaneously, with the intention of protecting
yourself from general market moves. Buy and sell respectively equal
dollar amounts of each and wait for the inevitable without caring
whether the market in general booms or busts.

An Example
In 1991, I recommended such a hedge in the thrift industry. It
provides an ideal illustration of the principle.

Continental Federal, a savings and loan bank based close to


Washington, D.C., was selling for $5less than a fourth of its $22
book value, and about a fifth of its previous high of $27. An analysis
of its balance sheet showed it could even then have been liquidated
for $15.

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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

It exceeded all regulatory capital requirements by at least two to one.


All but a few of its loans were in the relatively low-risk residential
market, and it had already charged off most of its bad loans.

Although management had been competent in making good loans,


their overhead expenses were very high at 320 basis points of their
$1.1 billion of assets (i.e., about $35 million or 3.2% of assets).
Typically, for a public company, management was treating themselves
quite well at shareholders expense. Why? They owned only 100,000
of the 2.9 million shares outstanding. Overhead should be no more
than 250 basis points (2.5% of assets), and a difference of 70 points on
$1.1 billion is about $8 million per year. If management were forced
to tighten their belts by only that much, the stock could easily sell for
at least $12 per share.

A group of shareholders, including myself, joined together to make it


happen. Still, because of my misgivings about the economy at large, I
did not want to be long Continental Federal without being short an
equal dollar amount of something likely to join the choir invisible.
GlenFed, the third-largest thrift in the United States, with most of its
assets in California, seemed like a good choice in that category.

GlenFed had about $16.5 billion in assets and $950 million in stated
capital, which was satisfactory on the surface. But about 80% of its
capital was debt, on which the interest clock continued to run. At
the same time, almost any portfolio losses could quickly wipe out
shareholders equity since non-performing assets were already over
$700 million, and in Californias depressed real estate market, it was
clear they could easily suffer large losses. In addition, GlenFed owned
numerous hotels, shopping centers, and business parks through a
subsidiary, the very worst things to be in at the time. It was all for sale,
but there were no bidders because it seemed likely that the Resolution
Trust was going to wind up with GlenFeds properties and potential
buyers could get them more cheaply later.

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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

The hedge worked out well. GlenFed crashed 80%, from $5 to $1, while
Continental rose to $22, where it was bought out by Crestar Bank. I
wound up making more money using a hedge than I would have simply
being right about Continentaland I took much less risk, to boot.

Building a Market-Neutral Portfolio


As longtime readers know, I think were just now exiting the eye of
the giant financial hurricane that we entered in 2007, and were going
in to its trailing edge. Its going to be much more severe, different, and
longer lasting than what we saw in 2008 and 2009. For reasons Ive
explained elsewhere, were headed for an economic disaster that in
many ways will dwarf the Great Depression of 19291946.

Given this bearish outlook, most U.S. stocks are likely to be money-
losers in the coming years. Although most financial advisers would
gasp at the notion, its a perfectly reasonable strategy to avoid owning
U.S. stocks today.

Instead of owning U.S. stocks, conservative investors who dont want


to spend much time managing their portfolios can keep a 50/50
allocation of cash and gold. This is a conservative allocation that
will hold up well during tough times. It might not make you a lot of
money in the coming years (although it could if gold soars), but it
certainly wont make you lose much either.

However, if youd like to own U.S. stocks, consider hedging your


holdings using the strategy Ive described. I dont mean hedging just
a few of your stocks by pairing them with short positions. I mean
hedging your entire portfolio of stocks.

Heres how. Take a look at your present holdings. Identify those


positions in the most inflated industries and those unlikely to survive
a financial collapse. Sell off the most overpriced half of these, then
take that cash and use it to short issues that are wildly expensive or
buried in debt or run by people of bad character.

50
CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

By taking these steps, youll make your stock portfolio market


neutral. A portfolio is market neutral when it doesnt have a bias
toward higher or lower prices. Its a portfolio with an equal amount of
long positions (that profit when prices rise) and short positions (that
profit when prices fall).

If you have $30,000 invested in positions that profit when prices rise
and $30,000 invested in positions that profit when prices fall, you
have a market-neutral portfolio.

With a market-neutral portfolio, you dont have to rely on the market


going up to profit. And if you select your longs and shorts well, youll
make money even when stocks crash. If your portfolio is market
neutral, you need not worry if the broad stock market rises or falls. To
make money, you only need the assets you buy to perform better than
the assets you sell short.

Lets go over an example

Say you buy $10,000 worth of Lockheed Martin (LMT)a bet on


more foreign wars and adventuresand sell short $10,000 worth of
Bank of America (BAC)a bet on financial chaos If Lockheed
Martin climbs 10% and Bank of America falls 10%, you make $2,000.
(Thats 10%, or $1,000, on each $10,000 position.)

If Lockheed Martin climbs 10% and Bank of America also climbs


5%, you make $500. (Thats a $1,000 gain on Lockheed Martin and a
$500 loss on the Bank of America short position.)

And if Lockheed Martin drops 10% but Bank of America also drops
15%, you also make $500. (Thats a $1,000 loss on Lockheed Martin
and a $1,500 gain on Bank of America.)

The only way you lose on this market-neutral position trade (often called
a pairs trade) is if Bank of America outperforms Lockheed Martin.

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CHAPTER 7 | THE CRASH-PROOF PORTFOLIO

Although I think most industries will struggle in the bad times ahead,
a handful of industries could actually do quite well. Whatever you
choose to do, the most important thing to keep in mind is this:

Youre very unlikely to do well with a conventional long only


portfolio in the coming years. Again, conservative investors can keep
a 50/50 allocation of cash and gold. This is a defensive strategy that
should protect you from losing much money.

Not losing money is a worthy goal. In a bear market, the guy who
wins is the guy who loses the least. Hes the guy who has cash at the
bottom. Hes the guy who buys assets from desperate sellers. Hes also
the guy who ends up owning the best assets.

But if youre an experienced investor with time to spend managing


your portfolio, you could do very well with a market-neutral portfolio.

52
SURVIVING FEDCOIN

Fedcoin Survival Plan, Part 3:


Consolidate

53
CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS

CHAPTER 8

The Critical Steps


to Survive Any Crisis
This is probably the single most important part in this book. And, for
this reason, it is also the longest.

Youre about to learn the most critical steps we recommend you take
today to survive a currency change like Fedcoin. But not just Fedcoin,
any crisis.

Part 3 of this plan, Consolidate, is all about taking stock of your


assets. Looking at what youre doing now and what you need to do to
be prepared for the upcoming crisis.

In this section, well share how much cash and gold (plus another
alternative currency) you should have on hand to ensure your wealth.
Well also reveal how to make sure you have the basic necessities your
family needs to survive.

Lets get started

Holding Cash
While a government-implemented digital currency like Fedcoin could
render the current U.S. dollar irrelevant, its still important to keep
some cash around for your crisis fund.

Most people already have an emergency fund. Emergency funds cover


basic expenses if, for example, you lose your job have an accident
or need to take extended personal time away from work.

Usually, an amount equal to three to six months of living expenses is


adequate. You can keep the emergency fund at a bank or brokerage.

54
CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS

But a crisis fund needs to be held in physical cash. Since banks and
brokerage firms can be inaccessible for weeks, they cant offer ready
access to the funds you need.

Now, while no one knows for sure how a currency change like
Fedcoin would take place, it seems unlikely the government would
outlaw ALL cash. Our best bet is that $5, $10, and $20 bills will
remain in circulationeven if tattered and harder to come by.
Its more likely that the $100 bill slowly fades away with no new
scheduled printings (thats what happened with higher-denomination
U.S. bills like the $500 and $1,000 banknotes).

Keeping $10,000 in cash makes sense to us. Most of this can be in


$100s to save space. The final $1,000 should be $50s, $20s, and $10s
in case you need correct change. The picture below shows just how
little space $10,000 takes up.

Thats a $10,000 wad of cash next to ten 1 ounce gold coinsmore on


gold coins in a moment

55
CHAPTER 8 | THE CRITICAL STEPS TO SURVIVE ANY CRISIS

You can store the cash in a safe, in a public storage container, or bury
it in a waterproof container in your backyard. Later in this section,
well discuss in greater detail the best places to store your cash.

So why is holding cash so important?

Well, if a crisis lingers, many items could sell out fast at local stores.
And anyone with basic necessities will begin selling them at huge
premiums.

Having cash makes sure your family has access to everything you
need.

Also, depending on how dire things get, some people in your


neighborhood might need cash so badly theyll be willing to sell
highly valued items like art, electronics, or collectables for any price
youll pay. This happened in the German hyperinflation in the last
century. It can easily happen again.

So thats the first part of the Consolidation step: make sure you have
enough cash on hand.

56
CHAPTER 9 | GOLD

CHAPTER 9

Gold
If a currency change like Fedcoin takes place, youll want to preserve
the purchasing power of your money with gold.

You see, unlike stocks, bonds, and paper currencies, gold holds its
long-term value. Its held its value during countless crises. And people
around the world have used it as money for thousands of years.

In other words, gold is wealth insurance against becoming poor in a


financial wipeout.

You can put a 1 ounce gold U.S. Eagle in your pocket, fly halfway
around the world, and sell it in local currency. It has universal value.

Owning gold is also one of the only ways to prevent the government
from having total control over your financial life.

Today, nearly every transaction is tracked by the government. Every


time you withdraw money, deposit money, trade a stock, cash a check,
or make a wire transfer, the government knows. And, as we saw
earlier, the amount of control the government exerts could increase
sharply if Fedcoin is implementedyour Fedcoin payment card could
prevent you from buying things the government doesnt want you to buy.

Thats one reason cash and gold are important: Because they allow for
financial privacy.

Gold lies outside the control of central banks like the Fed. That makes
it harder for the Fed to confiscate or tax your wealth during a crisis.
(More on this later.)

57
CHAPTER 9 | GOLD

Buying Gold
Now, there are many ways to invest in goldyou can buy gold
bars, coins, paper gold ETFs, as well as foreign and domestic
storage programs, to name a few. Each of them has advantages and
disadvantages.

But the best form of gold ownership, in our opinion, is physical


bullion. This means buying bars or coins.

Gold Bars

Only bars that carry the hallmark of a well-recognized fabricator are


worthy of your money. Fabricator names youre likely to encounter
when you buy from a reputable dealer are listed below. Bars fabricated
by these respected refiners are the safest to buy:

PAMP

Johnson Matthey

Engelhard

Credit Suisse

Heraeus

You can buy gold bars in a variety of Size


different sizes. The amount of gold you
400 ounce
want to buy will determine which size is
right for you. 100 ounce
1 kilogram
Generally, the smaller the bar, the greater
the premium youll pay over the spot price 10 ounce

of gold. 5 ounce
100 gram
1 ounce

58
CHAPTER 9 | GOLD

Premium refers to the amount a dealer charges over the actual value
of the gold youre buying. For example, a plain 1 ounce gold bar might
have a premium of $20. That is the dealers profit. If the price of gold
is $1,350 per ounce, then the bar would cost $1,370.

The same dealer might sell you a 10 ounce bar for $5 per ounce over
the price of gold. That means the dealer would make $50.

One thing to keep in mind with gold bars is fraud

You see, large gold bars can be fake. The larger the bar, the more
incentive a crook has to create a counterfeit copy. Counterfeit gold
bars are not common, but there have been documented cases of
fraudulent gold bars being sold to unsuspecting buyers.

10 ounce gold bars are a common size to begin thinking about the
possibility of counterfeits. Kilogram bars (35.3 ounce) also carry risk,
as does anything larger.

Buying from reputable dealers eliminates much of this risk. Buying a


gold bar with a refinery certificate, like from Swiss company PAMP,
also lowers the odds of fakes.

Taking these precautions can eliminate most of the pitfalls unlucky


gold bar buyers fall into.

Bullion Coins
A bullion coin is a coin valued primarily for the gold it contains.
These coins are often called common, and differ from higher-priced,
rare collectable coins, which well discuss later.

Like bars, bullion coins also come in various weights, but the most
popular coins contain 1 ounce of pure gold. (Most also contain a small
dose of copper for the sake of durability.) The coins normally trade at
a modest premium to the value of their bullion content. Premiums on
smaller coins are usually larger.

59
CHAPTER 9 | GOLD

Gold coins allow you to store tremendous wealth in a small space. The
gold in the picture a few pages back is worth over $13,000. It weighs
only 10 ounces andstacked on top of each otherthe coins barely
breach 1 in height.

We recommend buying government-minted coins. They make gold


easy to recognize and safe to trade. But not all government coins are
good to own. If youre just starting out, stick with these four common
coins:

South African Krugerrand, 1 ounce

Canadian Maple Leaf, 1 ounce

American Eagle, 1 ounce

Austrian Philharmonic, 1 ounce

60
CHAPTER 9 | GOLD

Coin dealers usually pay sellers the current price of gold for these
coins. Buyers can typically get them from a dealer for $50$100 per
ounce over the current price of gold.

Each of the coins listed above are immediately recognizable almost


anywhere in the world. Pull a 1 ounce South African Krugerrand out
of your pocket in any major city and you can turn it into local cash in
minutes. Youll also get that days gold price with little negotiating. If
you try the same transaction with a less common coin, like a Chinese
Gold Panda, it might take the dealer time to verify its size and weight.
Worse yet, he might try to lowball you since his customers arent
familiar with the coin.

These coins are also generally not worth faking. Con men prefer to
fake higher-value gold products like collectible coins and gold bars
instead.

But even among like-minded people, there is some debate about the
best gold coins to hold.

Doug Casey, for example, says:

Im coming to the conclusion youre better off with smaller coins, say oz.,
which are the size of regular pocket change. Recently, in two countries in
South America, and one in Africa, when the X-ray machine saw about
10 1 oz. silver coins in my carry-on, they investigated. It was no problem
because they were silver. But the agents were looking for golda word
to the wise. And further anecdotal evidence that the gates are closing on
multiple fronts.

For E.B. Tucker, the common 1 ounce denominations work best. He


doesnt envision a long period of time where hell use gold to transact
business.

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CHAPTER 9 | GOLD

1 ounce gold coins might come in handy as a bartering tool during a


crisis. If they dont, theyll serve as a form of wealth storage in the new
modern age of digital wealth.

The good news is, buying any size gold coin serves the same purpose.
However, it is important to stick with common coins.

You can buy gold coins and bars online through dealers or with a local
dealer. But either way, its important to find a reputable dealer

The things to watch for with all dealers are total costs (including
product, shipping, and insurance) and availability; if a dealer claims it
will take several weeks to locate the product, contact someone else.

Its also not uncommon to find salespeople who push non-bullion


products, such as proof sets or rare coins. These products have
higher markups and generally should be avoided, since its easy to
overpay, and they almost certainly wont return the extra premium
you paid. This tactic is especially true with the dealers that advertise
on TV (they have to pay for those expensive ads somehow). So shop
elsewhere if you get a hard sell.

Reputable dealers include Apmex, Gainesville Coins, and Border Gold.

For Casey Research subscribers, weve set up a special page with


discounts at one of the best gold dealers in the country. You can
learn how to access the page from this special report here: www.
caseyresearch.com/cheap-gold.

(Note: We do not make a commission on any gold coins you buy from
this website.)

The Most Dangerous Gold in the World


As world economic turmoil continues, many people have come to the
conclusion that gold should be an essential part of their portfolio.

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CHAPTER 9 | GOLD

Sadly, however, many people who are adding gold to their portfolio
right now will face a rude awakening once the crisis hits.

Enter the gold ETF.

A gold exchange-traded fund (ETF) is a financial product designed


to track the price of gold. Some people call gold ETFs paper gold.

Gold ETFs trade on major exchanges, just like stocks. A share in a


gold ETF represents a fixed amount of gold. For example, one share
of SPDR Gold Trust (GLD), the most popular gold ETF, represents
roughly one-tenth of an ounce of gold.

The big advantage of gold ETFs is convenience. If you have a


standard brokerage account, you can buy and sell gold ETFs the
same way you buy and sell stocks. This allows you to buy and sell gold
without leaving your house. You can also trade gold ETFs. Its easy
to buy and sell them in the same day. You can sell them short. You can
even buy and sell options on gold ETFs.

But gold ETFs also have a huge disadvantage As Doug Casey


has said, Gold is the only financial asset thats not simultaneously
someone elses liability.

What sets gold apart from other financial assets is that gold is
valuable in itself. Its value doesnt depend on someone else keeping up
their end of a bargain.

Consider this A stock is only valuable if management executes its


business plan well.

A bond is only valuable if the borrower pays you interest and keeps its
promise to pay back the principal.

U.S. dollars only hold their value if the U.S. government doesnt print
too much money.

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CHAPTER 9 | GOLD

Physical gold is different. It doesnt need someone to keep a promise


to be valuable.

But gold ETFs do not have this advantage.

When you buy a gold ETF, you technically own the underlying gold.
But thats not the same as owning physical gold. The gold you own
through a gold ETF isnt under your control. You have to rely on the
ETFs custodian company to store it and keep it safe. You have to
trust that the gold is really there.

Worst of all you cant get your gold.

The largest gold ETF, SPDR Gold Shares (GLD), does not allow
physical delivery of gold. So you have to take the custodians word for
it when he says its yours.

During ordinary times, the gold likely is there. But one of the reasons
we own physical gold is to protect against an extraordinary event: a
monetary crisis.

Many gold ETFs are run by large financial institutions. Theres a


very good chance some of these institutions could blow up when a
monetary crisis hits. This could result in a nightmare scenario where
the ownership of your gold is called into question at the time you
need the gold most.

Please remember this. Its extremely important:

A gold ETF will not protect you during a monetary crisis. A gold
ETF is not a substitute for owning physical gold. Gold ETFs will not
protect you in a time of crisis like physical gold will. And again, even
during non-crisis times, you cannot access the gold you own through
a gold ETF.

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CHAPTER 9 | GOLD

The #1 Worst Coin 99% of Investors Should


Never Buy
If youre just starting out, we recommend avoiding collectable coins,
also known as numismatics.

A numismatic, or rare coin, is simply a coin that is no longer


produced. It can be tens, hundreds, or even thousands of years old.
Most modern rare coins date from the mid-17th century. This is when
coin makers stopped hand-striking coins and started striking them by
machine. Most coins from this era are made of gold or silver.

These coins are often encased in plastic by a ratings agency. The rating
agency assesses the condition and authenticity of each coin, then seals
it in a plastic case. A watermarked seal on the plastic case displays the
companys ratings.

Pricing for these coins boils down to three things: rarity, condition,
and demand.

Think of it like two Mickey Mantle rookie baseball cards One thats
been stored in a bank vault protected by a plastic case since the 1950s
is more valuable than one thats been stuffed behind the credit cards
in your wallet.

Heres the real trouble with numismatic rated coins: you must pay
significantly more for them than regular coins. Youre getting the
same amount of gold, but numismatics cost more because of their
collectible value.

For example, a 1908 St. Gaudens 1 ounce gold coin rated MS 63 (a


good, but not great, rating) currently sells for $400 over the current
price of gold.

65
CHAPTER 9 | GOLD

Now, with common gold coins, the price moves dollar for dollar with
the price of gold. So if the price of gold falls 20%, common gold coins
get 20% cheaper. On the other hand, for the same 20% in the price of
gold, the price of a collectible coin might fall 25%30%. So if you pay
extra for a collectible coin, its likely to lose value faster than a regular
coin during a period of falling gold prices like in 2011 to 2015.

If you decide to buy collectable gold coins, be sure you know what
youre getting into. Paying a fair price isnt the only concern with
collectables. Fraud is much more common in the rare and collectible
coin market. The collectible coin market is much more complex than
the market for common gold coins. This complexity can give thieves
and con men cover to fleece unsuspecting buyers.

Rare or collectible coins can turn out to be fake. Or, if the gold is real,
sometimes the rarity rating is not. Thats why we recommend buying
common, recognized, government-minted coins like the ones we
mentioned earlier. Buying these common coins nearly eliminates the
risks weve described here.

Given that our main reason for owning gold is to keep our money
safe, it doesnt make sense to speculate with collectables unless youre a
seasoned purchaser. And, in a crisis, youll want commonly recognized
coins.

The Single Best Place to Buy Untraceable Gold


If youre buying gold right now the government could be tracking
you.

If you buy gold using a credit card, bank draft, or wire transfer, youve
created a permanent electronic record of your transaction that the
government can access.

Worse yet gold dealers must now keep detailed records, addresses,
and other information on buyers.

66
CHAPTER 9 | GOLD

As always, this government requirement is for your safety

As we told you earlier, when the crisis comes, gold will hold its
value unlike digital currencies like Fedcoin.

Thats why theres a good chance the government will try to take gold
from you or prevent you from buying it altogether.

Back in 1933, President Roosevelt outlawed owning most forms of


gold. He claimed that people hoarding gold were making the Great
Depression worse. The penalty for not turning your gold in to the
government was a $10,000 fine and 10 years in jail.

Of course, Roosevelt gave his closest supporters notice before issuing


the ban. They had time to move their gold to another country. Most
folks werent that lucky.

This time around, the confiscation will be digital.

Many people own gold through a fund like Sprott Physical Gold
Trust (PHYS) or Central Fund of Canada (CEF). The former will
give you physical gold in exchange for your shares, once a month, if
you own enough shares. The latter wont give you the physical gold.

Worst of all, most gold ETF owners buy gold through SPDR Gold
Shares (GLD). As we mentioned earlier, this ETF does not allow you
to access your gold.

Because this ETF gold is owned through a brokerage account, it will


be easy for the government to confiscate, restrict, or control.

What about physical gold?

If you bought gold from a dealer and paid with a wire transfer, the
banking regulators have plenty of documentation. Theyll likely let you
keep the gold. But they could make it illegal to trade. And they could
control what you do with your gold with a punitive tax.

67
CHAPTER 9 | GOLD

Something like a 90% tax on the value of every coin you sell isnt out
of the question. (Hard to believe? During World War II, income tax
reached a high of 94% for certain individuals and lets not forget
how AIG employees faced a 90% tax on their bonuses following the
recent financial crisis.)

So, how can you go about (legally) buying gold in a way the
government cant track?

By buying at a locally owned jewelry store. These stores get a few


common gold coins in every week. If you know what youre looking
for, its a great way to buy gold with cash.

Youll likely pay a little bit extra buying gold coins with cash at the
jewelry store. But if youre worried about the government knowing
every detail about all the gold you own, consider buying at least a bit
of gold with cash at your local jewelry store. However, the window of
opportunity is closing quickly. In fact, this sign was recently posted at
a local store:

It says, CASH transactions are limited to $6,000 within a 48 hour


period.

68
CHAPTER 9 | GOLD

$6,000 seems like an arbitrary number. And 48 hours seems even


more contrived. This is a sign of the times. Governments are cracking
down on cash. They want to know every detail of your financial life.
They want to know what you buy and what you sell.

Paper cash is hard to track. So, little by little, governments are getting
rid of it. The $6,000 limit will soon be $1,000. The local jewelry shop
is the last place you can buy gold without the government tracking
you. Take advantage of it while you still can.

69
CHAPTER 10 | SILVER

CHAPTER 10

Silver
Just like gold, silver will help preserve your wealth in times of crisis.
In fact, in our opinion, it is the #1 alternative currency to own for
everyday purchases during a crisis.

You see, silver is safer to carry around. Flashing a gold coin during
a monetary crisis is like wearing a Rolex while walking around the
projects at night. Someone might think, There must be more where
that came from and follow you home.

Its better to carry silver coins in your pocket and keep your gold
hidden at home. Plus, an ounce of gold will be worth $2,000, $3,000,
or more during a crisis. Thats far too valuable to exchange for
everyday goods and services.

Both gold and silver are stores of value. Owning them will preserve
your wealth through even the worst monetary crisis.

Everyone should own some silver. The most common silver coins are
1 ounce American Silver Eagles and 1 ounce Canadian Silver Maple
Leafs. Like the government-minted gold coins we discussed earlier,
these silver coins are instantly recognized anywhere in the world. If
youre new to buying silver, American Eagles and Canadian Maple
Leafs are a great place to start.

Junk Silverthe Perfect Investment for Surviving


a Financial Crisis
Another great way to buy silver is through junk silver

The history of paper currencies tells us one thing They are printed
until they become worthless.

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CHAPTER 10 | SILVER

That is exactly what silver safeguards against.

And theres a specific type of silver investment thats perfect for


surviving a crisis.

Were talking about junk silver.

Junk silver is common U.S. coinagelike old quarters and dimes


that contain 90% silver.

224 years ago, the Coinage Act of 1792 established the silver dollar
as the unit of money in the U.S. All dimes, quarters, half-dollars, and
dollars contained 90% silver.

Then came along one of the worst currency debasers in American


history President Lyndon B. Johnson. He eliminated silver being
used in our nations coinage with one of the most destructive acts by
any presidentThe Coinage of Act of 1965.

This act completely debased the value of our coinage. From 1965 on,
new dimes and quarters would contain no silver. And in 1970, the
government removed the rest of the silver from the other coins like
the half dollar.

Now, coins that once contained 90% silver are known as junk.
Meanwhile, we use a paper dollar backed by nothing. Its worth less
than .06 ounces of silver as money today.

But this creates a huge opportunity for savvy investors because coin
collectors dont see a lot of value in junk silver.

This allows you to buy these types of coins at much smaller premiums
than something like Silver Eagle coins.

Junk silver is the perfect investment for protecting your wealth during
a financial crisis. It is one of the best ways you can hedge against
inflation.

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CHAPTER 10 | SILVER

For example, in 1964, a quarter was worth 25 cents. Today, its worth
almost 14 times as much.

Junk silver was used as currency for 173 years. And if the dollar
becomes worthless, it will be used as currency again.

Junk silver also has one critical advantage to gold and silver coins
its a far more practical store of value.

It will be tough to pay for milk and bread with a 1 ounce silver coin.
Right now, an ounce of silver is around $20.

The cashier may not have enough change in the register during a
crisis. The guy standing next to you in line probably wont have any
change either.

You cant count on anyone else in dire times to be as prepared as you


are.

And using gold would be out of the question. Even downright


dangerous. An ounce of gold is worth $1,350 right now. No one
should carry around that much money.

When the crisis hits, you stand a good chance of being a victim
with that kind of money in your pocket. Remember, people will be
desperate. And willing to do just about anything to put food on the
table.

The majority of your neighborhood will be unprepared. Things


could get difficult as people realize they arent prepared for whats
happening. You can avoid potential danger with junk silver on hand.
Its much safer. And much easier to pay for basic necessities in small
coins.

This is why junk silver is perfect. It comes in dimes, quarters, half-


dollars, and dollars.

72
CHAPTER 10 | SILVER

Each $1 face value of quarters contains .715 ounce of silver. With an


ounce of silver at $18.91 as we write, the value of those four quarters
making up the dollar are worth about $13.50. You can just take a roll.
Or a couple of quarters to the store or gas station.

How Do You Buy Junk Silver?


You can buy as little as $1 face value of junk silver coins, or all the way
up to $1,000 which come in large cloth bags. The bags contain dimes,
quarters, or half dollars.

It doesnt matter which denominations you buy. $1 of coins, regardless


of combination, contains .715 ounces of silver.

Many dealers sell in $1,000 increments of face value. Face value is


the value the government assigns to a coin. The face value of a junk
silver quarter, for example, is 25 cents. Its real value is around $4,
because it contains close to 1/5th of an ounce of silver.

So you could buy a bag of 10,000 dimes, 4,000 quarters, or 2,000 half-
dollars. Each one of those bags will contain about 715 ounces of silver.
A bag of $1,000 face value junk silver would cost you around $15,000
today.

Just be aware that the price of silver is volatile. The prices used in this
example could be a lot different by the time you read this.

We recommend starting with 1 ounce (non-junk) silver coins, because


they are the most recognizablemeaning you wont get questions
about their authenticity if and when you need to sell. After you own
enough 1 ounce silver coins, supplement your holdings with junk
silver.

Just like with gold coins, you can buy silver online or with a local
dealer. But either way, its important to find a reputable dealer.

73
CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

CHAPTER 11

The Best Place to Store Your


Cash, Gold, and Silver
There isnt a magic bullet for safekeeping, as each form has its own
risks. Silver and gold are subject to theft, and cash can burn up in a
house fire. The most prudent approach is to store each in more than
one location. Our colleagues at the Palm Beach Research Group have
compiled the following ways to keep your cash, gold, and silver safe:

Method No. 1 Midnight Gardening


Midnight gardening got its name from people burying their silver,
gold, and cash at night so their neighbors wouldnt see them digging.
People have been burying money and valuables for centuries. Just
make sure no one sees you. If you bury these assets in the daylight,
find another reason to diglike fixing a pipe or removing a stump.

How do you do it? With a few supplies and some easy steps.

PVC pipes are cheap, easy, and effective containers. Theyre the white
pipes used for plumbing. Buy some pipes, a couple of end caps, and
some pipe sealant. You can find them at any hardware store. If youre
unsure, ask the hardware store clerk. Hell give you exactly what you
need. But dont tell him what youre using it for.

Slide your cash, gold, or silver in the pipe, then cap and seal both ends.
When its time to remove your cash, you can easily cut off one end
with a hacksaw.

If you dont want to make your own container, you can buy one for less
than $50. Simply search the web for airtight waterproof container.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

Once youve sealed your assets, bury the container.

Its important, though, that your hiding place be within a relatively


close distance. And that you have easy access to it. It doesnt do you
any good if you need it immediately but have to drive across town to
get it.

Keep in mind, metal detectors can detect metal up to four feet


underground. If you cant (or dont want to) dig that deep, bury
random scrap metal like empty soda cans above your stash.
Prospectors who keep finding useless scrap will likely move on.

One more thingdont bury cash, gold, or silver in a flood plain.


One good flood can reveal your burial spot or carry your stash off. A
flood can dump silt on your stash or destroy the landmarks you used
to locate it. If you live near a body of water prone to flooding, dig at
higher ground.

And make sure one person you trust knows where this is. A trusted
attorney might be a good choice to safeguard this secret. If you have a
tragic accident, youll want your loved ones to know where your cash,
gold, and silver is.

This may seem old-fashioned. But its still one of the most practical
ways to keep some physical cash, gold, and silver. Itll be safe from fire.
Burglars ransacking your home will never find it.

Youre very likely to hear more about this term in the coming years,
or at least the act of pulling money out of the bank and storing it on
your property.

Method No. 2 Hidden in Plain Sight


If burying assets in the ground is not a viable solution for you, you
have plenty of other options to store your valuables at home.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

But that exposes your assets to the risks mentioned before. The first
risk is thieves.

Most burglars only spend about two minutes looking around once
theyve broken in. They go to the master bedroom first, and they look
for easy-to-grab valuables.

There are many ways to hide cash inside your home. The methods
below use clever concealment tactics to hide and protect your cash.

Vacuum Cleaner

If you have an old vacuum cleaner you dont use, you can store a large
wad of cash, silver, or gold inside the vacuum bag.

Curtain Rods

Unscrew the end cap of a large-diameter hollow metal curtain rod.


You can fit several thousand dollars worth of rolled $100 bills inside.
You can use a wire coat hanger bent into a hook to pull them out.

Flower Vase

Hide your money in an opaque flower vase. You can top it off with a
bouquet of artificial flowers.

Home/Office Printer

If you have a home or office printer, open up the front as if you are
going to change the ink. Even on small models, youll find a large
amount of unused space inside the printer.

Wall Plates

Heres a sneaky tricklook at one of the wall plates where the cable
for your TV and Internet attaches. If you unscrew this plate, youll
find a cutout in the drywall behind it.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

You can apply a strip or two of tape to an envelope full of cash, and
slide it through this hole. Use the tape to stick the envelope behind
the drywall. Screw the wall plate back in place, and youre set.

Please note: Although you can do the same with a regular electric
outlet, I dont recommend it. The exposed outlet could shock you. A
cable outlet is much better because theres no risk of electric shock.
And therell be more room to fit your hand behind the wall.

If you dont have a suitable wall plate in your home, you can buy one
for a few dollars at any hardware store. It doesnt matter if theres
actually a cable running to it. Just cut out a small piece of drywall near
the floor and install the wall plate as if it were real. No one will know
the difference.

Exposed Ductwork and Plumbing

If you have exposed ductwork or plumbing in your basement, you can


add dummy ducts or pipes. They would look exactly like the real
ones but function as hiding places for cash, gold, or silver.

If your ductwork and plumbing are not exposed, you probably have
suspended ceiling tiles (called a drop ceiling) in your basement.
Thats even easier. You can pop up a ceiling tile and lay envelopes of
cash on the adjacent tiles. (Slide the tile back into place when youre
done, of course.)

Diversion Safes

Diversion safes keep your money safe by blending in with the rest of
your normal household dcor. Even when its right in front of a thief.

Were talking about things like books, clocks, lights, and lint
rollers. Most of these are also relatively inexpensive ($20 or less is
typical). Amazon has a wide selection of diversion safes disguised as
everything from Morton Salt containers to bookshelf dictionaries.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

The tricks we just described are excellent ways to avoid losing some
of your valuables during a home invasion. Thieves are unlikely to
consider these places. However, they have a couple of drawbacks.

One, they dont protect your assets from fire. And two, if thieves
discover your money, these tricks wont stop them from making off
with it. If your house burns or a thief discovers your hiding place, you
may lose your cash, gold, or silver.

Method No. 3 Security Safes


If youre serious about extreme protection of your cash, gold, or silver,
theres nothing better than a security safe.

The one problem with safes? Nothing in your house grabs an


intruders attention more than a safe.

Furthermore, people make three big mistakes when buying safes for
their homes:

They dont conceal them.

They dont secure them.

They buy subpar, poor-quality safes (not waterproof or fire-


resistant).

You can get around these downsides easily.

Step 1 Buy a cheap, small dummy safe.

Remember, most burglars only spend about two minutes looking


around once theyve broken in. Put your dummy safe in plain sight.
Under your bedside table. On the bookshelf. Under the bed. The
burglar will find it fast and be on his way.

If youre at home and are robbed at gunpoint, burglars will ask you
where your valuables are. You can point to the dummy safe.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

Keep a small amount of money in there. About $200 or so. Some


cheap jewelry. Maybe a few important-looking papers.

In either case, the burglar thinks he has the most valuable thing in the
house and leaves.

Little does he know, you have another real safe where most of your
cash, gold, and silver is.

Step 2 Conceal your primary safe.

Having a dummy safe in plain sight should send the burglar on his
way. But in case he decides to take another quick look around, make
sure you hide and conceal your primary safe.

For example, if its in your bedroom closet, stack some boxes around
it. Put a bookshelf in front of it. Throw some blankets and pillows on
and around it.

Step 3 Secure your primary safe.

On the small chance the burglar does find your concealed safe, you
want to make sure its bolted to the floor. That way, he cant cart it off
to break into later.

Dont fool yourself into thinking you dont need to fasten your safe
because its big and heavy. A burglar can easily use a handcart or dolly
to move it.

Step 4 Buy a quality safe thats fire-resistant and waterproof.

The goal of a safe is to protect your stash from fire and burglary. It
does so with seals, insulation, steel construction, and a locking door or
lid.

At a minimum, a security safe should be:

Fire-resistant for one hour or more.

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CHAPTER 11 | THE BEST PLACE TO STORE YOUR CASH, GOLD, AND SILVER

Difficult to open with common tools.

Water-resistant, especially if you live in an area prone to


flooding.

Typical house fires burn at between 800 and 1,200 degrees


Fahrenheit. Paper burns at 451 degrees. Gold melts at 1,948 degrees.
Paper cash and documents like stock certificates are what you want to
protect from fire.

A safe with a fire-resistance rating of one hour should provide the


minimum protection. But if youre storing a lot of cash, err on the side
of caution.

Note that fire resistance depends on insulation and the right kind of
seal. A safes insulation keeps hot temperatures from burning cash.
Fire seals expand when heated to prevent fire, water, or smoke from
entering the safe.

Beware of safes marketed as fireproof. No safe on the market today


is actually fireproof. There are only degrees of fire resistance.

Underwriters Laboratories (UL) is an international certified ratings


company. It developed a system to compare home safes. It has ratings
for burglary and fire resistance.

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CHAPTER 12 | AN ALTERNATE ASSET TO HOLD

CHAPTER 12

An Alternate Asset to Hold


There might come a time when you need something more valuable
than an ounce of gold or silver. Or when a seller doesnt recognize the
value of these metals.

In this case, the most common luxury watch could come in handy as a
bargaining tool.

The Rolex Submariner has not changed in a material way in over 40


years. Its easily recognizable, self-winding, and not flashy.

We dont recommend rushing out to the local mall to buy one of these
unnecessary luxuries. In fact, at fixed MSRP retail prices of around
$9,000, theyre grossly overpriced.

But you can keep an eye out for used models in jewelry stores or gold
dealers. Oftentimes, these stores will take them on trade and stick
them in a case. If youre patient, you can find a good deal.

E.B. Tucker, for example, purchased several Rolex watches for himself
and as gifts while in Switzerland in early 2016.

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CHAPTER 12 | AN ALTERNATE ASSET TO HOLD

Rolex sets the price at which retailers can sell its products. The
company is very strict about this. It also takes into account the value
of the currency in each country.

But in 2016, the Swiss franc dropped unexpectedly in the first quarter.
Rolex does not rush out to change prices in this case. By buying
Rolexes from one of the oldest dealers in Switzerland using U.S.
dollars, E.B saved 19%.

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CHAPTER 13 | STOCKPILINGTHE BASICS

CHAPTER 13

StockpilingThe Basics
By E.B. Tucker

How long could you live without power, water, gas, or food?

Remember without electricity, your refrigerator and freezer will


keep things from spoiling for a day or two. But after that, theyre
useless.

I can survive for a minimum of two weeks. I know I can be safe,


secure, and sustained during that entire time. And just to be clear
Im not a prepper, hoarder, or a billionaire with access to a secluded
safe house.

A currency change like Fedcoin could bring about chaos. And I want
to have the basics on hand. So Ive simply prepared for the worst at
minimum expense.

Now, if you think this isnt necessary, just consider this

Back in 1999, Hurricane Fran hit my hometown of Wilson, NC. My


family went without city water for eight days. They went without
power for 10 days.

The storm was so bad, it caused the worst flood in 100 years. It
knocked down so many trees, city workers could not clear the
wreckage to get to damaged infrastructure for days.

That was only a hurricane. A switch to a completely digital currency


makes the entire financial system vulnerable to a crash.

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CHAPTER 13 | STOCKPILINGTHE BASICS

Just look at what happened to Delta Airlines in August 2016. All of


the companys computers crashed and none of its planes could take
off. Passengers were stranded in faraway airports for days. They had to
sleep in terminals. And the companys stock price crashed.

But it could get worse. Imagine a crisis where you cant access any of
your money, turn your power on, or use city water.

Id like to share with you my plan for surviving without any help from
my local municipality, access to the grocery store, online delivery, or
even a gas station. In fact, I dont need to go anywhere for as long as
14 days.

14 days is period of time long enough to survive chaotic system


changes. Delta, for example, had almost all passengers re-routed,
flights back online, and its system under control within a week of its
massive computer failure.

Step 1 Protection
In a crisis, otherwise moral people get desperate. They need to survive.
As things get worse, they will do things they normally wouldnt dream
of.

Having the ability to protect yourself in the event of a worst-case


scenario is essential.

A lot of people go overboard with protection. They create gun


collections that draw too much attention. When the time comes,
overprotection can actually become a liability. Remember, youre not
defending the Alamo youre just trying to avoid the worst-case
outcome.

If your state, city, and personal situation allow it the Glock 26


handgun could be your best option for protection.

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CHAPTER 13 | STOCKPILINGTHE BASICS

Its often called the baby Glock. But dont let that name fool you.
This 9mm semi-automatic handgun delivers deadly force under the
worst operating conditions.

Its also important to use proper ammunition in a self-defense


situation. Round-tipped target loads will pass right through an
attacker. Whereas hollow-tip self-defense rounds will knock nearly
any attacker down with one shot.

This weapon takes up very little space. Its a lot of self-defense in a


small package. If your state allows you to legally carry it on your body,
no one will even notice you have it.

Step 2 Hydration
Humans can survive a lot longer without food than without water.
Water is an essential survival tool.

In a crisis situation, where access to municipal utilities is down for


days or weeks, water will become scarce quickly.

While most people keep bottled water at home, they dont keep
enough. They still rely heavily on tap water for cooking and drinking.

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CHAPTER 13 | STOCKPILINGTHE BASICS

And most bottled water is simply treated city water packaged in


plastic, labeled, marketed, and shipped to your local store.

Ive done significant research on the health effects of drinking liquids


stored in plastic. While the water companies swear theres nothing to
fear I disagree.

For the last few years, Ive had my water delivered in glass bottles
from a natural spring in Arkansas. It sounds like a luxury only the
super-rich could afford. But its quite affordable. And in a crisis, it
could save my familys life.

For around $250 per month, I get bi-weekly deliveries of Mountain


Valley Spring Water.

Since the water comes from a natural spring, its loaded with minerals
like magnesium, calcium, and potassium. Its delicious and a great
alternative to bleached, boiled, chemically treated city water.

It comes in these five-gallon glass jugs.

The company also rents me this useful hot and cold dispenser for $1
per month.

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CHAPTER 13 | STOCKPILINGTHE BASICS

Without power, the hot and cold


feature will not work. But its not
necessary. Room temperature water
flows right through this simple device.
And room temperature water is actually
much better for your body than hot
or cold water. It does not require
temperature change and aids digestion.

If you cant take delivery of glass


bottled water like I do, try plastic. If
delivered water of any kind is not an
option, consider iodine purification
tablets. Theyre an inexpensive last
resort that could get you through a water emergency.

Step 3 Food
While it is possible to survive on strictly water for days on end its
unpleasant.

You might have seen preppers and hoarders on TV stockpiling boxes


of canned food in preparation for the worst-case scenario.

These people will likely never eat this food. Its expensive and it takes
up a tremendous amount of space.

I can have at least two meals a day for up to two weeks with just the
food in my pantry right now. I dont need power or city water to cook
either.

Most importantly, Ill be eating good food. Heres an example of one


meal that has essential fats and complex carbohydrates needed for
survival. It also happens to be one of my favorite dishes.

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CHAPTER 13 | STOCKPILINGTHE BASICS

Green Curry (Note: If youre a picky survivalist you


might want to grab a copy of The Storm
Gourmet cookbook. It features gourmet
meals you can cook without electricity.)

Youll notice nothing in this dish needs to


be refrigerated. Typically, restaurants serve
green curry with chicken or beef. In this
case, Ill have to enjoy it without animal
protein, which requires refrigeration.

But served over brown rice, this is


a delicious way to survive. And the
ingredients take up a small amount of
space. Heres what they look like:

Youre probably wondering how Ill boil rice or heat the curry without
using my stove. Its a valid concern since both gas and electric services
might not be on.

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CHAPTER 13 | STOCKPILINGTHE BASICS

For years, Ive volunteered to fry turkeys for a local recovery center
on Thanksgiving and Christmas. The frying equipment is incredibly
simple and takes up very little space in my storage shed.

Heres what it looks like.

The cooking stand is made of metal. It


sits on any firm surface, plugs up to a
propane tank, and lights easily. Once
roaring, this cooker will boil water
in no time. I can cook rice, curry, or
anything else that needs high heat.

The propane tank burns for about 12


straight hours before running out. It
doesnt take up much space, so storing two is easy and convenient.

Finally, I dont consider a meal complete unless it ends with a good


cup of coffee. Im also not willing to compromise just because the
power is out.

The device shown to the left, called


a Vacuum Pot, makes one of the best
cups of coffee possible without power.
Invented in Berlin in the 1830s, the
process hasnt changed much.

All you need is water, coffee, and


butane the same type used in Zippo
lighters.

You fill the bottom glass bulb with


water. Then, turn on the butane flame.
It will heat the water, creating steam
and sending it to the upper container.

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CHAPTER 13 | STOCKPILINGTHE BASICS

Once its full, add in 40 grams of ground coffee. Let that sit for
23 minutes before removing the flame. When the heat disappears,
the coffee flows through a cotton filter back down into the bottom
container, which detaches to become the serving pot.

In non-crisis times, this is a great way to entertain dinner guests. And


youll be glad you have it if the worst happens.

What else should you consider stockpiling?

If you cant be without your favorite brand of liquor for a few days,
keeping a few extra bottles could come in handy. It could make
waiting out a crisis much more pleasant. Things like having enough
soap or a flashlight would be useful too.

I keep a gallon of Dr. Bonners 18-in-1 Pure Castile liquid soap in


my home. Just one dime-sized drop dilutes into enough soap to wash
everything from me to the laundry to the dog. Its also biodegradable
and organic.

To sum up, dont worry about buying tons of canned goods or special
meals for a crisis. Just make sure you have staple meals that dont
require refrigeration.

90
SURVIVING FEDCOIN

Fedcoin Survival Plan, Part 4:


Speculate

91
CHAPTER 14 | HOW TO BE A RATIONAL SPECULATOR

CHAPTER 14

How to Be a Rational Speculator


You could consider what weve gone through so far as the defensive
parts of the Fedcoin survival plan. But there is also a way you can profit.

You can do it through rational speculation.

The word speculation gets a bad rap in the media. It sounds reckless
and downright irresponsible. Words associated with speculationlike
shortages, wars, and price manipulationdont help.

But no rational speculator causes any of this stuff.

(In fact, Doug Casey just published a new book called Speculator. Its
an enlightening story of gain, loss, and everything that happens in
between. The book is available on Amazon.)

A rational speculator is someone who understands and anticipates


price distortions in the markets. And he positions himself to take
advantage of them.

Also, and most importantly, the best speculators risk a small amount
of money for a huge potential payout. This is the opposite of what
some people dorisk a huge amount of money hoping for a small
payout if everything goes right.

This is the best time in history to be a speculator. The most successful


speculators will get rich beyond their wildest dreams. They will be the
ones who understand inflation, its causes, and how the Fed is warping
global financial markets.

Rational speculators will be the investors building the next great


wealth empires. Just like Nathan Mayer Rothschild two centuries ago.
The empire he created by taking advantage of crisis still exists today.

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CHAPTER 14 | HOW TO BE A RATIONAL SPECULATOR

Rothschild knew how to profit in times of crisis. He made a fortune


during the French Revolution era.

He did it by following his own advice to buy when blood is running


in the streets.

You can too.

The best thing is you dont have to have credentials from Wall Street
to do it either. Anybody can be a rational speculator.

Reading this book is a clear sign that you are willing and ready to
learn. Youve already inventoried your knowledge, skills, and abilities.
Now its time to put them to use

One market thats set to create a fresh pack of millionaires right now
is the gold mining and silver mining sectors.

As we told you earlier in this book, gold and silver will help protect
your wealth. Theyre insurance against becoming poor in a financial
wipeout.

If gold goes to $5,000, $10,000, or higher like we think it could,


owning gold can also make you a nice profit. But you can also make
profitspotentially much larger profitsin the mining sector that
produces gold and silver.

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CHAPTER 15 | GOLD STOCKS

CHAPTER 15

Gold Stocks
Gold stocks are shares of companies that produce gold. These
companies dig up the ore that contains the metal and sell it to refineries.

If youve ever bought a gold coin, a gold necklace, or gold earrings,


that metal came from a producers mine.

Gold stocks offer leverage to the gold price. Thats the reason to hold
them. By leverage we mean the stock of a company mining gold will
move up much higher than gold itself.

We call it slingshot profits.

Imagine a gold company. Lets call it Gold Digger Corporation

Gold Digger produces gold for $1,000 per ounce. If the gold price is
$1,200 when they sell, Gold Digger makes a $200 profit on every ounce.

The companys earnings are calculated from that $200 profit.


Assuming the company has low debt, itll earn a decent profit. And its
stock would be attractive to investors.

Now lets say the gold price rises to $1,300. Now Gold Digger has a
$300 per ounce profit ($1,300 - $1,000 = $300).

But look at what happened to their profit: it grew by 50% while the
price of gold only increased by 8.3%.

Put another way, Gold Diggers profit went up $100 per ounce, from
$200 to $300. And the company didnt do anything different.

Thats with a modest jump in the gold price. If gold rises to $1,500,
Gold Diggers profit would grow by a whopping 200%.

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CHAPTER 15 | GOLD STOCKS

Compare this to Apple. Its profit margin in its most recently reported
quarter was 23.9%. Thats impressive. But it doesnt compare to the
profits the average gold producer will see when gold starts to rise
again. This is why gold stocks often rise two to three times more than
the price of gold.

Its happened before

Below, weve listed historical returns for gold producers during four
separate cycles when gold boomed: 19791980; 19811983; mid-
1990s; and 20012006. These are not hypothetical returns. They are real.

First up, the granddaddy of all gold bull markets: 19791980

Gold more than tripled during this period. But gold stocks more than
quadrupled.

Returns of Producers from 1979-1980


Company Price on 12/29/78 Sept. 1980 Peak Return
Campbell Lake Mines $28.25 $94.75 235.4%
Dome Mines $78.25 $154.00 96.8%
Hecla Mining $5.12 $53.00 935.2%
Homestake Mining $30.00 $107.50 258.3%
Newmont Mining $21.50 $60.62 182.0%
Dickinson Mines $6.88 $27.50 299.7%
Giant Yellowknife Mines $11.13 $39.00 250.4%
AVERAGE 322.5%
Gold 214.0%

This wasnt the only time gold stocks surged From 1981 to 1983,
the gold producers in the following table returned over 85% on
average. And this happened in less than two years.

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CHAPTER 15 | GOLD STOCKS

Returns of Producers from 1981-1983


Company 1981 Price Price Peak Date of High Return
Agnico-Eagle $9.50 $21.00 Aug. 83 121.1%
Sigma $14.13 $24.50 Jan. 83 73.4%
Campbell Red Lake $16.63 $41.25 May 83 148.0%
Sullivan $3.85 $6.00 Mar. 84 55.8%
Teck Corp Class B $17.00 $21.88 June 81 28.7%
AVERAGE 85.4%
Gold 10.8%

These profits stemmed from a mere 10.8% rise in gold. In other


words, these mining stocks rose nearly eight times higher than the
value of the gold they mined.

There was another boom in the 1990s. While gold rose 8%, the
average gold producer went up more than 200% Thats 26 times
more. Thats leverage.

Returns of Producers in Mid-1990s


Company Pre-Bull Price Date Return
Market Price Peak of High
Kinross Gold $5.00 $14.62 Feb. 96 192.4%
American Barrick $28.13 $44.25 Feb. 96 57.3%
Placer Dome $26.50 $41.37 Feb. 96 56.1%
Newmont $47.26 $82.46 Feb. 96 74.5%
Manhattan $1.50 $13.00 Nov. 96 766.7%
Cambior $10.00 $22.35 June 96 123.5%
AVERAGE 211.8%
Gold 8.0%

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CHAPTER 15 | GOLD STOCKS

Another big run up in gold stocks happened in the 2000s. Gold rose
158%, but gold stocks soared over 400%.

Returns of Producers from 2001 to 2006


Company Pre-Bull Price Date Return
Market Price Peak of High
Barrick $14.48 $31.46 Jan. 06 117.27%
AngloGold Ashanti $16.18 $59.85 Jan. 06 269.90%
Newmont $16.46 $61.80 Jan. 06 275.46%
Goldcorp $3.83 $36.04 May 06 840.99%
Goldfields $3.66 $22.30 Apr. 06 509.29%
AVERAGE 402.58%
Gold 158.00%

While many things can affect a gold companys stock price, an increase
in the price of gold (even a small one) can lead to enormous profits.

Gold Stocks Are Not Heirlooms


These are explosive returns, without a doubt. However, unlike physical
gold, gold stocks are not good long-term investments.

Heres why

First, mines dont last forever.

While most producers continue to explore for gold around their


existing mines, sooner or later a mine will run out of ore. Think about it:
every day a mine operates puts it one day closer to being out of business.

Compare that to Apple. It wont run out of chips, screens, or


motherboards. Apple can keep making snazzy products as long as
people want to buy them.

Second, you cant move a mine.

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CHAPTER 15 | GOLD STOCKS

Ecuador is home to one of the richest mines found in the last decade.
The company that discovered it sold the project to an experienced
gold producer. But before this company started mining, the local
government increased taxes and royalties. Their demands were so high
that the mine never began production.

Because of the increased taxes, the producer couldnt make any money.
The mine is still sitting there today, idle. The company had no choice
but to shut down production. They couldnt move the mine to a more
favorable jurisdiction.

Companies in most other industries can move if they run into this
problem. If the local government tries to shake down a crew filming a
movie, they can pick up and film somewhere else. Actors and sets are
mobile. Gold mines are not.

Many governments have also increased mining regulations over the


past few years. Every new rule makes it more difficult to comply.
Unexpected new rules can even delay the start of a new mine.

Environmental restrictions have also increased and made many


projects more expensive to operate.

Theres another big reason gold stocks are not long-term holds: If you
want to make lots of money in this sector, you must know where we
are in the cycle

Bull, Bear, Repeat


Gold stocks move in cycles, more so than most other markets. Raging
bull market, crippling bear market, repeat.

External factorsa big discovery, government interventions or good


ol supply and demandcan impact the price along the way. But
where we are in a cycle determines how much money youll make in a
given period.

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CHAPTER 15 | GOLD STOCKS

We charted the major cycles for gold stocks from 1975, when gold
again became legal to own in the U.S., to present. Eight distinct cycles
played out during this time.

As you can see, gold stocks cycle up and down repeatedly. And the
percentage gains for those who buy at the bottom of a cycle can be
downright mouthwatering.

From 20112015, gold stocks crashed. By late 2015, blood was


running in the streets of the mining sector. But then things turned
around.

Mining stocks caught a break in early 2016. During the first half of
the year they outperformed nearly every other sector in the market.

This is an opportunity.

And it means gold stocks are entering an upcycle. The profits could
be spectacular. As the pattern shows, triple-digit gains are common
during an upturn. Of the past eight cycles, gold stocks more than
doubled during six of them. And they shot up 99.9% in a seventh.

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CHAPTER 15 | GOLD STOCKS

But dont just buy any old gold stock

What to Look For in a Gold Stock


Its important to pick the right gold stocks. They wont all perform
equally well.

Like any other industry, the stocks of stronger companies will go up


more than the weaker ones.

Some management teams run their operations better than others.


Some gold deposits have higher-grade ore than others. Some operate
in more favorable political jurisdictions. There are a number of factors
other than the gold price that impact the price of a gold stock.

So, how can you choose a solid company?

At Casey Research, we use the Eight Ps to evaluate gold stocks.


Doug Casey developed this simple and extremely effective method to
identify winning gold stocks.

In short, the 9 Ps method looks at these eight critical factors to


determine if a gold company is a worthy investment:
People
Property
Phinancing
Paper
Promotion
Politics
Push
Price
Pitfalls
Youll find a full explanation of the 9 Ps method in the appendix.

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CHAPTER 15 | GOLD STOCKS

How to Buy Gold Stocks


To buy gold stocks, youll need a brokerage account. You can use a
full-service broker, but most investors use an online broker.

We recommend Fidelity, Scottrade, Charles Schwab, and TD


Ameritrade, among others. You might also consider Interactive
Brokers. Their site is geared toward sophisticated users.

Once youre ready to buy, we strongly recommend that you buy in


tranches. In other words, stagger your purchases and buy in several
parts.

Dont rush in all at once, and dont buy after a big run-up. There are
always pullbacks.

Our basic strategy is to buy when gold is falling, not rising. We want
the best price we can get so we can make as much money as possible.

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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY

CHAPTER 16

The Top 3 Precious Metals


Stocks to Buy
Here are three of the best precious metals stocks you should consider
adding to your portfolio.

Pick #1: Franco-Nevada


Franco-Nevada (FNV) is the premier gold royalty company in
the world. Gold royalty companies do not mine gold. Instead, they
finance early-stage exploration or production projects. When a mine
they finance starts producing, the royalty company gets a cut of the
cash flow.

A royalty company does not deal with the substantial challenges most
miners face. Environmental issues worker strikes tax increases
these are not issues for a royalty company. This makes royalty
companies less risky than traditional gold mining companies.

Today, with gold prices relatively low, many mining companies need
cash. Franco-Nevada has used this to its advantage to make several
profitable deals, including its silver royalty on the Antamina mine.

Franco-Nevada also has several optionality contracts that could fuel


growth. In short, optionality is when a royalty company acquires the
entire land package surrounding a mine, rather than just the mine
itself. This gives the royalty company a chance to find more gold on
that land without having to pay another dime.

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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY

As a royalty company, Franco-Nevadas business is more stable than a


traditional gold miner. Franco-Nevadas stock held up far better to the
recent meltdown in the mining sector than almost any other. If you
dont own shares of Franco-Nevada yet, we recommend buying a first
tranche in the near term. Pick a day when gold is retreating, and youll
get a better entry point. Once you have an initial stake, look to buy
more when the market fluctuates to build your desired position.

[Please note: When it comes to gold miners, Franco-Nevada is the


bluest of blue chips. While we dont currently own it in The Casey
Report portfolio at this time, we do recommend picking up shares
today. Its a staple that we see doing well for a long time.]

Pick #2: IAMGOLD (IAG)


IAMGOLD (IAG) is one of the best mid-tier gold miners we follow.
In a gold bull market, a mid-tier company tends to move higher faster
than the largest firms, known as majors.

IAG is the best of both worlds. A premier mid-tier company has its
sights on becoming a major in the next few years.

IAMGOLD Corp. has four producing gold mines. Together they


produced 806,000 ounces of gold in 2015. The companys cost per
ounce of production at last check was between $1,000 and $1,100 per
ounce. While its cash cost of production is roughly $800 per ounce,
the higher number were using accounts for its all-in cost. We think
thats a truer measure of a mining companys profit potential.

Unlike most gold miners, IAMGOLD Corp. makes moneyand its


going to make more money in two very important ways.

First, the companys Westwood mine in Canada is on track to


quadruple production by 2019 (50,00060,000 ounces of gold this
year should become 219,000). This will push the company closer to
becoming a million-ounce producer.

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CHAPTER 16 | THE TOP 3 PRECIOUS METALS STOCKS TO BUY

Second, and perhaps more importantly, the Westwood mine


expansion has a projected all-in cost per ounce of $700$800.
That means lower production costs on a quarter of the companys
production will lower its total cost of production.

Lower production costs mean more profit for shareholders. And thats
assuming a flat gold price. Its important to remember that IAG is not
a high-flying exploration stock. Its a bona fide gold producer. If gold
stalls for a few months before rising, IAG will continue to chug along
producing a marginal profit and its share price will go nowhere.

But eventually, the gold price should soar taking shares of IAG with
it.

[Please note: We own IAG in our Casey Report portfolio. Check our
portfolio for buying specifics.]

Pick #3: First Majestic Silver (AG)


First Majestic (AG) is, in our view, the premier silver miner to own.

Silver moves much more aggressively than gold. In the past, silvers
moved up to three times as much as gold when metals rallied.

First Majestic spends just over $10 to get an ounce of silver out of the
ground. Last quarter it produced a record 3.1 million ounces. Every
dollar silver moves means several million in additional profit. By our
count, the company should produce upwards of 5 million ounces per
quarter by the end of the decade.

Silver mining stocks are the most volatile stocks we know. When
theyre down, the down never seems to end. When theyre up, they
make you feel like a genius. Were sticking with silver and with First
Majestic.

[Please note: We own IAG in our Casey Report portfolio. Check our
portfolio for buying specifics.]

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CHAPTER 17 | CONCLUSION

CHAPTER 17

Conclusion
In this book, weve taken a look at how to protect ourselves (and even
profit) from a potential currency change.

Weve laid out a 4-step plan. Given you specifics. And laid out our
case as to why we believe these are the absolute best things you can do
to prepare.

But information alone wont get you very far. Not if you dont act upon
it.

Now, I realize thaton the surfacesomething like Fedcoin (or


whatever they will end up calling it if and when its implemented)
may sound a little out there.

However, lets not forget this wouldnt be the


first time our currency has changed.

In the early, early days you had the


Continental currency. Issued in 1775 to
help fund the Revolutionary War, the notes
became so worthless they ceased to circulate
as money by 1781a mere 6 years later.

In more recent times weve had Source: Wikipedia

The creation of the Federal Reserve in 1913

Roosevelt confiscating gold back in 1933

Johnson taking silver out of U.S. coinage in 1965

And, finally, Nixon devaluing the dollar and cutting it loose


from gold back in 1971.

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CHAPTER 17 | CONCLUSION

To think more changes couldnt be upon us is to not know history.

Remember, the U.S. dollar is simply a promisean act of faith that,


by receiving, say, a $20 bill, youll then be able to use it in turn to buy
something else.

There is nothing sacred about it.

Especially not now when it isnt backed by anything of real value.

Now, in this book, we have postulated that the next currency change
will lead to something like Fedcoin, which would essentially be a
digital-only currency.

Why do we believe this?

Well, in our eyes, it seems like a very natural and logical progression
for central bankers to take. (In fact, as weve previously noted, one Fed
member has stated as much himself.)

Just think

With a digital-only currency, you dont have to worry about bank runs
anymore.

And, not only that If people had accounts directly with the Fed
then the Fed could set interest rates directly in your account even
choosing to implement negative rates (which is really a TAX) if they
so choose.

There will be nothing to stop them, since Americans wont be able to


withdraw cash anymore.

So theres nowhere left to hide.

Impossible?

Consider:

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CHAPTER 17 | CONCLUSION

19 countries around the world right now have implemented negative


interest rateswith more yet to come.

Governments and financial institutions are taking a more and more


aggressive stance towards cash. For example, the European Union is
set to ban the 500 note by 2018 Spain banned cash transactions
over 2,500 Italy and France banned cash transactions over
1,000 South Korea plans to go cashless by 2020 and Nigeria
charges a 3% fee on withdrawals over ~$1600 USD (500,000 NGN).

But the U.S. isnt safe from this trend, either.

In Louisiana, House Bill 195 restricts the use of cash to buy certain
secondhand goods. J.P. Morgan has banned cash in safe deposit
boxes for certain clients. And former Secretary of the Treasury Larry
Summers has publically stated that we should get rid of the $100 bill.

The writingit seemsis on the wall.

Now, one cannot predict with 100% accuracy how a situation like this
will unfold

Will they keep the current U.S. dollar and introduce Fedcoin as a second
alternative currency?

Will they ban the current U.S. currency outright or perhaps just stop
circulating large bills?

Or maybe theyll simply convert our current money supply onto the
blockchain in the name of national security and gradually remove all
paper currency.

One cant tell for sure.

But what we do know is this: Never in the history of the world has a
fiat, paper-only currency like the U.S. dollar survived. Most have a
lifespan of 3040 years.

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CHAPTER 17 | CONCLUSION

We are now past that.

You can sit idle and wait for the change to happen and see a drastic
devaluation of your savings as a result (not to mention the total
potential loss of financial privacy that could ensue)

Or you can take a few choice steps now to prepare.

Steps that will benefit you regardless of what the future holds.

This is what we recommend.

1. Liquidate. Most of us have too much stuff. Get rid of


what youre not using. Many people are also fully invested
in stocks. This could prove to be a death-knell if and when
the next crisis ensues. Best have plenty of cash available to
take advantage of opportunities later on. Avoid stocks from
companies that depend heavily on consumer credit like jewelry
stores, homebuilders and car businesses. Airline stocks are also
in line for a sharp decline.

2. Create. If you still need more cash, building your own


business might be the way to do it. Barring that, focus on
acquiring ownership stakes in a few great empire-builder
companies. These are recession-proof businesses that will
survive a crash. For example, people will always need food.
Also, consider a crash-proof portfolio.

3. Consolidate. This is the #1 defensive move you can make


to withstand a currency change. There are a few different
elements to consolidation. First, you want to have enough cash
on hand as a crisis fund. You also want a decent amount of
gold and silver coins (see this part of the book for specifics).
Also, youll want to have a reasonable stockpile of essentials on
hand. These steps will ensure you can maintain the value (and
privacy) of your savings and are prepared if the worst happens.

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CHAPTER 17 | CONCLUSION

4. Speculate. Go on the offensive. Every time the government


manipulates the economy, opportunities arise. The single best
speculation right now is in the gold and silver mining stock
sectors. We cover three companies youll want to add to your
portfolio.

That just about covers it.

Please remember: what we have laid out in this book are the essential
stepsthe foundationyou can take right now to safeguard your
finances from a coming currency change. But this is also just the
beginning.

In The Casey Report, well keep on top of this situation on a month-


to-month basis as this crisis unfolds. Well let you know of any new
recommendations we have or actions we think you should take.

If youre not already a member of The Casey Report, you can find
out how to subscribe at www.caseyresearch.com/products/the-
casey-report. And, if youre already a member, please keep reading
your issues each month. If were vigilant and take the proper steps,
well survive the next crisiswhether its due to a new currency or
something elseintact and in an even better financial position.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

APPENDIX I

How to Diversify Your


Digital Presence
As youve seen in this book, there are many dangers in the digital world.

While the chapter on Consolidation covered the best way to protect


yourself from the ravages of a digital-only currency like Fedcoin
here we look at other ways to diversify your digital life.

Many third parties accumulate a permanent history of your emails


and other electronic communication. If youre troubled by this, you
might want to consider moving your digital presence to a foreign
location. Not only could this provide you with peace of mind, but it
could also possibly reduce your exposure to the whims of bureaucrats.

By internationalizing your digital life, you can:

Hinder the monitoring and tracing of your communications

Reduce easy access to your documents that are stored or


accessible online

And also protect your business or personal websites from


being shut down.

Internationalization wont make it impossible for snoops to eavesdrop,


but it will make life far more difficult for them. Youll no longer be an
easy target.

Lessening the visibility of your digital life starts with the most
common stores of information on the Web:

Email

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

Online file storage (cloud storage)

Components of personal/business websites (domain name,


server, payment processor)

IP address (which can point to your physical address)

The overreach of the War on Terror lends cover for any U.S. agency
to monitor your internet activity. Draconian copyright laws mean
that your personal/business website can be seized at the drop of a hat
under the flimsiest of pretexts. Internet service providers and tech
companies in the U.S. work hand-in-glove with the U.S. government.

If some part of your digital presence at any time crosses U.S.


jurisdiction, you should assume that you have no privacy. That makes
this the easiest way to garner some digital protection: just dont
conduct any business you wouldnt want a bureaucrat to know about
online. To talk about bank accounts, taxes, expatriation, or anything
else that you think might be a red flagtake it offline. Dont surf
websites you dont want others to know about.

In other words, conduct your online life as if its an open book.

Because it is.

Its not a perfect solution, but it certainly is the simplest.

If, however, you want to conduct your online activity a little more
freely, you can take steps to keep your trail relatively opaque.

With a small amount of setup effort, you can go about your business
on the Web as usual, yet know that youre just a little harder to see
than most.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

Avoidance = Scrutiny
Note that the very act of taking these steps could raise a red
flag against you. If the government is aware which mechanisms
avoid most of their surveillance, then they likely scrutinize
the people who use those mechanisms. Wouldnt you? Thats
another argument in favor of simply assuming everything done
online is a public record.

Internationalize/Randomize Your IP Address


Everyone who is connected to the Internet has an IP address which
is easily identified and tracked. In most cases, it can literally pinpoint
your location.

There are tools available, like virtual private networks (VPNs) and
anonymized routing protocols that enable you to change your IP
address and thus mask your actual physical location. Some VPN
providers let you select the country in which it will appear you are
based. Although most VPNs are fee-based services, free options are
available, albeit with limitations.

One of the easiest and cheapest ways (its free) to browse the Web
relatively anonymously is to use Tor, if proper precautions are taken.

It comes as a free combination of tools that includes a customized


Firefox browser that will only communicate through the Tor network,
so you cannot make any mistakes in accidentally misusing the
connection.

Tor is easy to install. It comes as a single download and is as easy to


use as any popular Web browser. Just go to torproject.org.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

There are limitations to using Tor. The connection speed is slow


and will significantly limit your ability to download files and watch
streaming video.

As an alternative, we suggest you look into Cryptohippie (https://


secure.cryptohippie.com) which masks your IP address and other
information that could be used to identify you. Cryptohippie passes
all your traffic through its network first, and pledges to keep that
network offshore, secure, and free from logging that might come back
to haunt you. Its a premium VPN service and very popular among
privacy-conscious Internet users.

In addition, if youre in a country that blocks access to certain


websites, Cryptohippie or one of its fellow VPN services will get you
around this roadblock.

With your searching and general browsing covered, the next thing to
consider is the place you keep all your communications.

Internationalize Your Email


If you want email privacy, its prudent to internationalize your inbox
and use an offshore email account with a provider who has a strong
privacy stance and is based in a jurisdiction willing to back it up.

With your mail stored securely offshore, you can take some comfort
that the NSA or similar organizations arent trolling through the
storage of your provider to read your messages, looking for activity
they might not like.

However, using an email service based in most Western countries


provides little, if any, privacy protections. Though there are other
jurisdictions that have strong digital privacy lawsSwitzerland is a
notable standout. The Swiss High Court has ruled that a users IP
address is personal information and protected by the countrys strict
privacy laws.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

Using an offshore email provider in combination with strong, open


source encryption is a significant impediment to anyone who would
like to violate your privacy as long as the person youre emailing is
also using such measures.

An offshore email account isnt always free, though the fees are
generally reasonable. Below are some reputable and relatively
inexpensive options to consider.

Swissmail.org: Based in Switzerland.

Neomailbox.com: Also based in Switzerland.

Runbox.com: Based in Norway, which has strong privacy laws.


Runbox is generally considered a cheap and quality option.

E-mail.ph: Free email provider in the Philippines.

Relocating your email offshore is the biggest step you can take to
protect it. However, remember that all communications are two-
party at the least. No matter how much you do to protect your mail
in storage and in transit (all of the above providers ensure your
communication with them is secure while you read your mail), all
is lost if you communicate with people who dont take the same
precautions.

One way to force your correspondents into keeping your secrets as


secrets is to encrypt the messages you send them. In order for those
readers to view the messages, theyll have to decrypt them locally
by also installing secure message software on their machines. While
it can be a minor inconvenience to get it set up, it works on almost
every platform, will keep you more under the radar, and maybe even
encourage your contacts to do the same.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

With your email now stored safely offshore and your messages
transmitted securely even to less-privacy-minded friends and
colleagues, the only remaining area of major concern is your
documents. Just as with your email, your documents are sitting ducks
for online snoops.

Components for an Online Business


The rise of draconian anti-terrorism laws is widely reported. However,
less commonly known is the rise of equally frightening copyright
laws. Spurred by media companies with deep pockets and a dreadful
fear of technological progress, the most significant risk today lies in
the Digital Millennium Copyright Act, which provides rights and
obligations to ISPs to take down websites with a mere unproven
accusation of copyright infringement.

The threat to the host for not complying is significant; thus, action is
often taken swiftly and with little or no notice to contest it. There are
safe-harbor provisions to protect ISPs. But only those with deep pockets
and the courage of their convictions can afford to test them in court.

Thats but one of the threats to your operation. Criminal charges, even
if unproven, can result in the seizure of websites and their replacement
with an FBI or even an Immigration & Customs Enforcement
placard. A sure reputation killer, even if youre eventually acquitted.

These may seem like extreme examples, but theyre more common than
you might think. The government can be judge, jury, and executioner of
your business, even if youre just caught up in a simple mistake.

Thankfully, every aspect of your online business can be diversified


internationally to lessen the risk of government intrusion or
competitors using draconian laws to stifle you under a pile of
takedown requests. And you can even extend its reach to new
customers around the world.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

Here are the three main components of any online business that
should be internationalized if you have any concern that such risks
might derail your livelihood:

1. Payment Processors: With even a whiff of trouble, most merchant


account providers and payment processors will quickly shut off
service. If the FBI or even the IRS starts asking questions, however
innocuously, you might even find yourself shut off and not know why.
Your best bet is to have a second (or third) backup operator which you
can use to take payments if that happens.

There are numerous non-U.S. secure-payment processors that will


transact payments online. They can process credit card payments
in various currencies and transfer the funds to your bank account
overseas, or even back to the U.S. in most cases.

Processor options in Asia include China UnionPay and Alipay; in


Europe, theres PayFair. There are many more to be found online with
a little searching.

2. Domain Name: You might think the global top-level domains


(TLDs) like .com or .net are arbitrated in international courts
by the UN or otherwise outside any one countrys authority.
Unfortunately, its not the case. The U.S. has jurisdiction over those
most common TLDs. This exposes your website to the whims of
the U.S. government, which is not shy about seizing domain names.
Fortunately, its easy and cheap to internationalize your domain name.

Favorable jurisdictions for domain names include the .co domain


based in Colombia, the .me based in Montenegro, or the .bz
domain run by an entity in Belize.

While Switzerland is a great place to internationalize some aspects of


your digital presence, registering domain names is not one of them.

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APPENDIX I | HOW TO DIVERSIFY YOUR DIGITAL PRESENCE

This is because the Swiss ccTLD registrar, SWITCH, does not


allow for domain privacy. If you register a .ch domain, your contact
information becomes publicly available. Japans .jp TLD has the same
issue. However, if you can live with that, theyre still great options.

Marcaria (https://www.marcaria.com) is a company that offers a


convenient way to register multiple global domain names.

3. Hosting: When operating an online business, you must also


consider where your site will be hosted. Non-U.S. options for
website hosting include providers in Switzerland, Panama, Bermuda,
Malaysia, and Hong Kong. Providers in these countries will typically
not respond to foreign requests regarding a website without a local
court order. Combining that with domain internationalization can
keep your site online much longer, give you a chance to respond
to unfounded accusations, and possibly even let you avoid getting
accidentally swept up in some vast dragnet altogether.

Generally, hosting in a foreign jurisdiction means a slower website for


your customers in the U.S. (and for Google, which accounts for that
in search rankings). So if you do go this route, learn about the tricks
that allow you to host both in the U.S. and overseas at the same time,
so that your site keeps working even if the U.S. portion is knocked out
for any reason, from bureaucrat to tornado.

Some offshore webhosts worth checking out:

OrangeWebsite (https://www.orangewebsite.com) (Iceland)


Icy Evolution (http://www.icyevolution.com) (Mauritius)
LibertyVPS (https://libertyvps.net) (Netherlands)

To sum up, internationalization of your digital presence is often


overlooked. But just a few simple moves can help mitigate the
political risk of subjecting your personal and business life (and
possibly your livelihood), to a single, intrusive jurisdiction.

117
APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION

APPENDIX II

The Nine Ps of Resource


Stock Evaluation
By Doug Casey

Ive been asked Whats the secret of finding winning gold, silver, and
other natural resource stocks? more times than I can even begin to
count. And for over 20 years, my answer has remained pretty much
the same: the Nine Ps.

The Nine Ps is a relatively simple question-and-answer process


we use as part of our due diligence on the stocks we consider for
recommendation in our monthly newsletter: Casey International
Speculator, and, for more active traders, our premium alert service, the
Casey Investment Alert. Only a small fraction of companies successfully
make it through the Nine Ps screening and into the pages of our
publications.

As youll read, the Nine Ps process is relatively simple and, with a little
practice, you, too, can use them to screen any and all resource stocks
you are considering for your portfolio. At the very least, answering
the questions will give you a much better understanding of the true
potential of a company.

P1: PEOPLE

The first question you want answered is Who are the key players
involved with the company? As is the case with all human beings,
some are more skilled, more honest, and harder working than others.

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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION

To state the obvious, Boy Scout virtues like honesty, thrift, courage,
and diligence are always good traits for your management teams, as
are competence, knowledge, experience, and, perhaps most important,
a track record of success.

You can find this information from a variety of sources, starting


with management biographies (increasingly available on company
web sites), then doing your research by talking with the managers
themselves or their investor relations staff. Use a service like
Stockwatch.com to research the track record of the companies that
the management has been involved with previously (during their
tenure, of course) and dont hesitate to ask your broker or even
competitors what they think about the people in the deal. Despite
being a multibillion-dollar, global business, the mining and resource
industry is actually a pretty small village. If someone is a known snake
oil salesman or poseur, chances are good youll be able to ferret out
that fact with just a couple of phone calls.

In addition to trying to sort out the black hats, a key goal of this exercise
is to find out if investors have made money in their past deals. Or, if
things didnt work out too wellmining is a high-risk business, after
alldid the company at least make an honest attempt to do the right
thing for their shareholders? Remember, nothing succeeds like success.

While we are on the topic of People, it is worth noting that there


has been a noticeable gentrification of the mining business during
the 20-year-long bear market that ended in 2001. Everyone in the
business is complaining about the fact that they cant find qualified
mining engineers and exploration geologists because so many have
retired or are getting ready to. It is understandable: it would take a
fairly odd engineering school graduate to opt in to what is perceived
as a politically incorrect and faltering Choo-Choo Train industry,
rather than taking their degree down the street to a more lucrative or
modern line of business.

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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION

As someone who habitually looks for the opportunity embedded in


just about any crisis, we use the labor shortage as a useful leading
indicator by watching the career moves of the superstar mining pros.
The good ones are in such demand that they can work for pretty
much any company they want to and so, as is human nature,
gravitate to those projects which they believe will provide them with
the best personal upside. Conversely, if the good people start to jump
ship from a company, it may be a negative indicator.

In the final analysisbet on the winners.

(Useful Resource: Casey International Speculator now includes the


Explorers Leaguea unique service that follows the careers of
the worlds most successful mine finders and builders. In order to
be inducted into the Explorers League, an individual must have
a minimum of three economic deposits to ones name no small
feat, considering that probably 99% of the geologists in the business
retire without a single deposit to their credit. If youre not currently a
subscriber to Casey International Speculator, there is no better way to
benefit from our own application of the Nine Ps.)

P2: PROPERTY

As you approach the topic of property, keep in mind that between


95% and 99% of all the properties controlled by mining companies
will never actually become mines. Thats because finding a mineral
deposit with the potential to host an economic resource is time
consuming and expensive. And unlocking the economic value of the
embedded minerals is even more so. The cost of building a mine and a
mill starts at a minimum of $50 million these days, and can climb to a
billion or more.

The good news is that you can make a fortune investing in companies
that, for one reason or another, will never go into the production
stage. Its all a matter of timing and knowing when to sell.

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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION

But back to the question of property. Regardless of whether or not a


company ever develops a mine, the big money flows into companies
with big mineral resourcesand it is the big money flowing into a
company that drives the price of your shares higher and provides you
with the liquidity to exit with your profits intact.

Thats the reason why the bigger and more geologically credible
the prospective deposit, the better. How can you tell an ore body
(definition: a deposit that can be economically mined) from moose
pasture (definition: a large piece of land, usually located in the middle
of absolutely nowhere that is good for nothing better than moose
grazing)?

First off, start by ignoring claims made by mining company executives


that are not derived from, at the minimum, drill results. (This advice
applies in spades if the claims are not in writing for all the world to
see.)

A favorite stunt used by some mining executives is to tell you that


they have identified a major potential resource, using grab, chip, or
trench samples. In plain English, those terms mean that geologists
working for the company: (a) literally grab some rock from the
surface of the property; (b) chip some rock from an outcropping; or
(c) cut a trench across some interesting rock on the property and
then send the more prospective samples to a laboratory for assaying.
As geologists are not paid to send in uninteresting rocks (otherwise
known as dirt) to the lab, you can rest assured that grab, chip, and
trench samples reflect the best possible rock the geologist can find.

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APPENDIX II | THE NINE Ps OF RESOURCE STOCK EVALUATION

Dont get me wrong. Finding highly mineralized rock on the surface


of a property is a good thing. Just dont mistake it for a reliable
predictor that an ore body rests beneath. Likewise, dont accept gross
value calculations that are derived by simply multiplying, say, the
price of gold by the inferred number of ounces of gold in a deposit.
Such a simplistic approach to valuation completely ignores the costs
associated with getting the minerals to market, which can be affected
by engineering problems, physical position of the ore body, metallurgy,
commodity prices, stripping ratios, cost of transporting ore (if
required), the cost of building the mine and any processing facilities,
the cost of financing, and so much more.

What to do? We may, on occasion, buy stocks that have only


the earliest-stage indication of a mineral depositif we like the
management/exploration team and know that they are fishing in the
right pond. A company with respected management, a prospective
property, and the money to embark on a good-sized drill program can
make for a very good speculation.

Typically, however, we focus on companies that have tested their


geological theories with a drill program and come up with logical
results. And we will usually get a second opinion from a consulting
geologist who will verify the companys interpretation of the data.

Next, if the story looks sufficiently interesting, myself or one of our


research team will often visit the propertyeven if its located in
Outer Mongolia or some fly-infested corner of Africa. It is one thing
to read about the geological characteristics of a property, but its
another thing altogether to examine the rock yourself, then look the
geologist in the eye and ask him to describe his theory about deposit.
Geologists are usually not very convincing storytellers.

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So, when it comes to property, make sure that you are investing in
companies that are chasing elephant-sized deposits that dont
insult your intelligence by pretending that early sampling or gross
value calculations represent anything other than wildly speculative
assumptions and for companies with significant drill results, whose
geological theory makes sense.

At the end of the day, before any decision is made on building a


mine, the company will commission a bankable feasibility studyan
exhaustive document that can cost millions of dollars to prepare. Only
once that document is completed and confirms that an economic
ore body exists can you assume that a mine may actually be built
and even then any number of factors (financing, metal prices, other
company priorities, etc.) can stand in the way of it becoming a reality.

Put another way, never forget that you are not investing in this sector
for the joy of seeing a mine builtbut for the spectacular returns
that can be made along the way to finding out whether or not a mine
could be built.

A couple of final observations on this point. (1) Look for companies


with more than one prospective large property. That way, if there is
bad news (e.g., poor drill results on one property), you have some
downside protection from the companys other properties. (2) When
a stock in your portfolio goes up by double or triple digits, dont forget
to sell enough to lock in your returns and, ideally, scrape your original
investment off the table. That way you are taking a free ride on any
further upside potential and are protected if the next bit of news is
negative.

P3: PHINANCING

When we look at financing, were essentially trying to match up the


companys next-phase objectives with its ability to finance the cost of
attaining those objectives.

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Put another way, when we consider buying a junior explorer based


upon prospective early drill results, the timing of our purchase may be
predicated on the companys ability to finance a more extensive drill
program to better define the size of the target mineralization. In this
case, you have to ask, Wheres the money for the drill program going
to come from? Do they have it in the bank? Are they going to do
another financing and, if so, what will the dilution factor be if we buy
our shares today?

Or, are they going to keep their own corporate treasury intact and
instead look for financing from a deep-pocketed senior mining
company? If so, how much of the company or the rights to future
development on the property will they have to give up?

Armed with the information of who is writing the checks, you then
have to ask yourself, How likely is the company to get the money
they need?

For this assessment, we again have to take management into


accounti.e., money follows success, and the successes the executive
team has had in the past are directly correlated to how easily they can
find financing in the future. Finding financing at a reasonable price
will also depend on the quality of the property, the stage the company
is in, the current share structure, and so on.

This is probably as good a time as any to share with you an important


concept regarding investing in this sector. Namely, that the size of your
returns will largely be a function of timing your investment before
certain ifs are answered and then having the answers be good ones.

For instance, you can pick up a quick double by investing in a


company after initial mineralization has been identified by some
of the rudimentary, early-stage exploration sampling mentioned
earlierif the mineralization is subsequently confirmed at depth
through a credible drill program.

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If a comprehensive follow-on drill program confirms your initial


results and demonstrates that your property contains a significant
deposit, its back to the bank. If the company is then able to attract a
deep-pocketed partner to fund additional drilling or even a bankable
feasibility study, your stock lights up again.

If the bankable feasibility study confirms that the property can be


economically mined, its happy times once more.

I am skipping over a lot of other events that can trigger an overnight


double or triple in your shares including the vending-in of an
attractive new property pulling a glory hole having a well-
known mining pro join the management group the company
hiring a competent public relations firm even being written up by a
renowned stock analyst. Any of those, and more, can do the trick.

The opportunity to hit numerous home runs throughout the rapidly


evolving life of a resource company is a major differentiator between
resource shares and garden-variety investments where stock gains are
based on long-range business plans and new product development
its like Mattel actually drilling for the next Barbie doll.

Back to the topic of Phinancing: the bottom line is that you need
to clearly understand where the money to move a project forward
is going to come fromand at what cost to you as a shareholder.
This is an important question because running out of money and
being unable to quickly find more at the right price is akin to a giant
TILT on a stock.

P4: PAPER

Paper and financing go hand in hand, since capital is almost always


raised in form of new shares being issued. As a result, analyzing
the structure of the company is as important as the geology of a
companys property holdings.

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Thats because some companies will too quickly dilute existing


shareholders by raising money from sweetheart financings completed
through private placements, often with full warrants. While I
personally think these are wonderfuland I have made more than a
few dollars by participating in private placements myselfthere is a
right way and a wrong way for a company to do financing.

To that end, we probably spend more time looking at the financial


structure of a company than any other aspect. How many shares
are outstanding? Who owns the shares? What percentage does
management own? (I like to see management have a clear incentive for
success.) Are any seed or private-placement shares about to come free
trading and, if so, when and in what quantity? The last question can be
very important from a timing perspective. Take a position in a stock
just before a large number of cheap shares from a private placement
come free, and you could be trying to catch a falling safe. Conversely, if
you wait a bit, then put in a cheap bid, you can buy smart.

It is always worth understanding whos got the paper, at what price,


and when the company may issue more. And dont forget to go
through the simple process of multiplying the number of shares
outstanding, fully diluted, by the current share price to come up
with the market capitalizationalways a useful indication of value.
In overheated markets, it is not unusual to see companies with little
more than early-stage drill results on land located somewhere north
of Timbuktu boasting a market cap in the hundreds of millions.

Sure, they might get lucky, but are you really willing to bet your
money on it?

P5: PROMOTION

You can have the greatest product in the world, but still go broke
if no one knows about it is an old business adage that holds true in
mining as well.

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In more instances than I can remember, Ive come across a well-


run company turning up strong results on a geologically attractive
property in a mining-friendly country and the shares of the
company are selling for pennies.

In these cases, the missing element is Promotionthe fine art


of being able to communicate your story to the broad community
of investors and analysts. I have a soft spot in my heart for these
companies, which are typically run by mining engineers and
geologistsscientifically minded individuals who sincerely believe
that if they do their work well, the market will eventually discover
them. While that occasionally happensand finding an under-
promoted company can offer us a terrific opportunitymore often
than not these companies run out of cash and are unable to raise
additional financings at least at a cost that is not usurious to
shareholders.

There are, of course, important nuances. If you can find an under-


covered company with real merit that has just hired an investor
relations staff or engaged a firm that specializes in corporate public
relations, you can make a very nice return very quickly as the company
gets the recognition it deserves.

Regardless, a company with an active investor/media awareness


program will generate trading volume, driving your shares up and,
again, giving you the opportunity to get your profits off the table
when you decide to sell. Therefore, before you invest you should ask
company executives about their specific plans to get the company
noticed.

So, promotion can be a good thing. It can, however, also be a bad


thing when a company is built solely around promotion. It is that kind
of company that proves true the old Mark Twain quip that a gold
mine is a hole in the ground with a liar standing over it.

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If you do your homework, however, it wont be long before youll be


able to tell the real cowboys from the ones that are all hat and no
cattle.

P6: POLITICS

You may wonder what politics have to do with mining, but that would
demonstrate a dangerous navet because politics touch virtually
every aspect of life, in literally every country in the world.

Politics can make or break a promising junior stock. Remember that


a lot of the gold deposits found today are located in fly-blown Third
World countries and backwater banana republics. Thats why it is so
important to research the political climate in a country where your
company wants to go miningis the government stable, are there
rebel groups or kidnap gangs operating around your mine site? Is
the country prone to nationalizing foreign interests at the first sign
of financial trouble? These are all good questions to ask company
executives.

Perhaps the biggest threat to mine development these days, however,


is ecopolitics. Try to build a mine in the remotest corner of the
remotest desert in the U.S. and be prepared to have your application
blocked by the Committee of Friends of the Box Turtle. And it is
not just the U.S. but a wide range of countriesto name just two,
Romania and the Dominican Republicwhere the permitting
process can take many, many years.

It is for that reason that you will so often see mining projects being
promoted in areas such as Mongolia or Eritreacountries that are
sufficiently desperate for money that they tend to be more tolerant
of the mine aesthetics. (In case you are wondering, almost all new
mining projects now factor in the cost of reclaiming the land once the
mineral deposit has been mined out.)

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One of the reasons why I find it so worthwhile to personally visit


a mine siteand so far Ive traveled to over 175 countries and
countingis that it gives me an upclose opportunity to assess the
mood of the locals and the greed level of politicians. Politics count.

P7: PUSH

Push is the answer to the question: Whats going to move this stock?

Often, impending or foreseeable drill results are the Push thats


going to bring us the returns we seek. Thats because we usually see
the fastest, most dramatic increases in share price at the time when
a small company makes a big discovery. And none of the years of
preparation, surface work, geophysics, etc. count for anything until
and unless drilling defines an economic tonnage of ore.

But Push can be anything: a successful transition to production, an


major increase in the price of the underlying commodity, positive
metallurgy or engineering reports, positive feasibility studies, a green
light given to construction, a merger or an acquisition, realization of
a royalty, the resolution of legal or political or regulatory difficulties
even a big promotional push can be the Push were looking for.
Generally then, Push is any important development that either adds
value to the company or removes a negative.

And if we can clearly see the Push coming, or see what look like
favorable odds of it happening, we have a basis for speculation on
rapid returns in our desired timeframe (12 months).

Whats the Push? is a question we ask ourselves about every


company we evaluateand if we cant see the Push, we turn our
attention elsewhere. Why park cash in even a great company, if it has
no Push?

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P8: PRICE

A deposit may be worthless if the market price of the embedded


minerals is X, but may become economic if the embedded
mineralization goes to 2X. At 3X, the project may be worth
hundreds of millions.

It is one of the more laborious aspects of analyzing resource


companies that, as the price of the underlying commodity rises, you
have to re-review your assessments on companies and properties
almost across the board.

For instance, a few years ago, we were following a strategically minded


copper company that used low copper prices to inexpensively buy
a huge package of proven properties. Back when copper had been
selling for 75 cents a pound, no one had wanted anything to do with
the company. As copper went over $1.00 a pound, the companys
in-situ resources became worth hundreds of millions of dollars and
everybody and their uncle wanted to own the company. Our shares
quickly doubled.

So, periodically, as resource prices rise, we do a reassessment of the


companies we have previously evaluated and found unattractive due to
the Price factor.

Also on the topic of Price, it is essential that you use rational price
expectations when calculating the potential for your investment.
Ultimately, gold might go as high as $2,000 or even $3,000 an ounce.
But if achieving those high levels will be required in order for your
company to do well, you are taking an unhealthy level of risk. So, ask
yourself: What will this company be worth at $500 per ounce? Will
it be able to justify its current market cap? If the answers are positive,
you may be on to something.

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P9: PITFALLS

While the biggest threat to mining these days usually stems from
(eco) politics, there are many other things that can go wrong in mine
development. Thats where the Pitfalls P comes in.

Pitfalls can be viewed, in a sense, as anti-Push. Where Push lists


things that can go right, Pitfalls sums up what can go wrong.
Some of these things may also be discussed under the other Ps, but
the Pitfalls make the risks involved in a specific speculation clear to
those considering it.

Its important to remember that Pitfalls are never showstoppers. If


they were, we wouldnt be recommending the stock.

Here are a few examples of the Pitfalls we look for in our due
diligence process:

Security issues. Mine operators in certain parts of the world


have to deal with crime, or even terrorism. Most companies
know how to manage these situations, others are simply not
affected, but this does happen on occasion. Understandably,
some places (e.g. parts of Africa are just more dangerous than
others. As an investor, it makes sense to know how exposed
your company is to this.

Access to land. There have been cases of mining companies


being bullied into renegotiating land agreements with
members of local agrarian communities.

Permitting problems. No two permitting processes are ever


the same, and everything needs a permit these days. Not just
production, but also drilling, and in some cases, you need a
permit simply to get your boots on the ground. Permitting
delays vary greatly in seriousness, depending on both the
nature of regulator and the company.

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Failure to receive a green light from regulators in a timely


manner can spell big trouble for a cash- strapped single-
project company. On the other hand, an actual fine can
amount to little more than a slap on the wrist for a profitable
producer with a host of projects in development under its belt.

Competition. When the resource markets are hot, it can be


hard to find good people, available drill rigs, lab time, and
many other things.

Technical issues. From metallurgical problems, to stability


of power supply, to unexpected weakness in the rock one is
tunneling through The potential technical problems are
limitless.

Financial issues. We cover this in Paper and Phinancing, but


the nuances are myriad.

This list is by no means exhaustive. Potential Pitfalls are just too


many to list in one place, so well just conclude by saying that they
are different for every company, and it is jour job to always be on the
lookout for them on your behalf.

CLOSING THOUGHTS

At Casey Research, we have always been big believers in making the


trend your friend and the real money is to be made by investing
ahead of the masses. Consequently, our approach has been to look for
solid speculations in sectors of little public interest because that allows
us to buy cheap and, if we are right, sell high as the crowds rush in.

Even a casual glance at the current state of the U.S. economythe


engine that drives much of the worldtells us that the end of a long
road is ahead. The fact is that the U.S. government cannot endlessly
take on debt, bail out every major bank and corporation, and create
money by the truckloads.

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In time, the fundamentals will prevailas we are already seeing


and tangible investments such as gold and silver will become the
investment of choice of intelligent investors looking to avoid the
negative wealth effect of a rapidly eroding dollar.

The metals rise in recent years is a clear sign that the trend is now the
friend of resource stocks. Because there is only a limited number of
quality resource investments available, as the serious money begins to
flood into them, investors who take a position now will be very well
rewarded.

If you are seriously considering investing in natural resources, dont


put it off. The leverage on these investments can turn dimes into
dollars if you exercise diligence and take the time to carefully work
through the Nine Ps.

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ABOUT THE CONTRIBUTORS

Doug Casey

Doug Casey is the founder of Casey Research. A highly respected


author, publisher, speaker, and professional investor, he literally
wrote the book on internationalization and crisis investing. His
book Crisis Investing hit #1 on the New York Times bestseller list, and
his 1978 book The International Man is the original handbook on
internationalizing your finances and your life. Doug is a sought-after
speaker who has appeared on hundreds of radio and TV shows.

E.B. Tucker

E.B. Tucker is the senior analyst for The Casey Report. Each month,
he works directly with Doug Casey in search of a clear view of whats
happening in the world and where to find the best ways to profit.
E.B.s been profiting from crisis for years. In early 2009, he realized
that the U.S. housing bust would create a generation of renters. He
raised money and bought a large portfolio of single-family rental
houses at rock-bottom prices as low as 10 cents on the dollar. E.B.
was also a founding partner and managing director of KSIR Capital
Management, an investment firm focused on gold and silver equities.
He knows the gold and silver business inside and out, having visited
mines in many countries.

About the Publisher

Founded by Doug Casey, a renowned international speculator and


bestselling author of Crisis Investing and The International Man, Casey
Research has been helping self-directed investors earn superior returns
through innovative investment research designed to take advantage
of market dislocations. Casey Research publishes a number of
subscription newsletters. Find out more at: www.CaseyResearch.com

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