{"id":70541,"date":"2015-04-02T12:27:31","date_gmt":"2015-04-02T16:27:31","guid":{"rendered":"http:\/\/countingpips.com\/?p=70541"},"modified":"2015-04-02T12:27:31","modified_gmt":"2015-04-02T16:27:31","slug":"doug-casey-signs-of-a-resource-sector-bottom","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/04\/doug-casey-signs-of-a-resource-sector-bottom\/","title":{"rendered":"Doug Casey: Signs of a Resource Sector Bottom"},"content":{"rendered":"<div id=\"inves-2165939120\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">April 2, 2015<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h4>By Doug Casey<\/h4>\n<p>Interviewed by Louis James, Editor,\u00a0<em>International Speculator<\/em><iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?editorial=doug-casey-signs-of-a-resource-sector-bottom\" width=\"1\" height=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p><strong>L:<\/strong>\u00a0Well, Doug, we\u2019ve seen another quarter of high volatility and significant world events. What strikes you as most important at present?<\/p>\n<p><strong>Doug:\u00a0<\/strong>Everything is still held together with chewing gum and baling wire, for which I\u2019m grateful, considering what\u2019s coming. It\u2019s very clear to me that the global economy is in very much the same space as it was in 2007\u2014in other words, on the edge of a precipice.<\/p>\n<p>[\u2026]<\/p>\n<p><strong>L:\u00a0<\/strong>On the global economy, my question is this: If Obama and Yellen have saved the US and Merkel and Draghi are saving the EU, why are commodities selling off so dramatically? Iron, copper, oil\u2014just about everything is selling off. How can an economy be recovering if it\u2019s not using raw materials?<\/p>\n<p><strong>Doug:\u00a0<\/strong>That\u2019s another reason why I believe that the Greater Depression started in late 2007. During a depression, people are forced to consume less, and you see that reflected in the price of commodities\u2014at least in real terms. This can be obscured in current price terms, depending on the debasement of the currency in question.<\/p><div id=\"inves-2474536123\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>But it\u2019s important to remember that commodities are only a good bet when they\u2019re cycling upward, and that only lasts for a time. The longest trend of all is the downward trend of real commodities prices, as the march of technology makes them and the cost of life itself cheaper over time. Real commodity prices have been going down for at least 2,000 years, but probably 4,000 or 5,000 years\u2014at least since the invention of agriculture. And I think they will continue falling, despite the fact that most large, high-grade, close-to-surface mineral deposits have been discovered.<\/p>\n<p><strong>L:<\/strong>\u00a0Hubbert was right about \u201cpeak oil\u201d in terms of West Texas Intermediate, but oil is still getting cheaper because of the fracking revolution.<\/p>\n<p><strong>Doug:\u00a0<\/strong>Exactly. Because we\u2019ve made so much money on commodities and because we believe in gold and silver as money, people think of us as commodity bulls. But actually, in the big picture, I\u2019m a commodity bear, and always have been. Nanotech will transform city dumps into high-grade ore bodies. The asteroids will be mined at low cost. Ocean water will be processed economically. It\u2019s simply a matter of technology and energy. The future could be\u2014should be\u2014better than we can even imagine.<\/p>\n<p><strong>L:<\/strong>\u00a0I understand that\u2014but I have to step in here and remind readers that gold is not a commodity\u2014or at least not a regular commodity, since it\u2019s also the most successful and enduring form of money ever devised.<\/p>\n<p><strong>Doug:\u00a0<\/strong>Yes. No matter how many times we tell readers that no one can time the market, they still want to know what I think of the timing of the gold market.<\/p>\n<p>So let me tell you that even I have been feeling a bit abused and unloved by the market over the last couple years. If I\u2019m feeling that way, I\u2019m sure the average person in the sector is feeling it in spades\u2014and that\u2019s actually a strong sign of a bottom.<\/p>\n<p>It\u2019s not as if we\u2019re buying at $35 in 1971 or $250 in 2001\u2014both times when gold was clearly a one-way street. But at $1,200, it\u2019s very reasonable considering how explosive the world situation is.<\/p>\n<p><strong>L:<\/strong>\u00a0That\u2019s why we call it contrarian investing.<\/p>\n<p><strong>Doug:\u00a0<\/strong>It\u2019s pretty stark. Most of these crappy little mining stocks have no money, no management, no assets. In bull markets, they\u2019re still crappy companies, but they can raise money, drill some holes in the ground, and hope to get lucky. But now they\u2019re turning into shells, and that\u2019s another sign of a resource sector bottom.<\/p>\n<p>On the other hand, Wall Street has been rising for about seven years now, which is record territory. Several major indices have hit new records. These are signs of a market top. If the market collapses, it can take everything down with it. Mining stocks are also stocks.<\/p>\n<p><strong>L:<\/strong>\u00a0What about earnings? Don\u2019t higher Es justify higher Ps?<\/p>\n<p><strong>Doug:\u00a0<\/strong>They do, but earnings can be pumped up by things like sacrificing sustaining capital to maximize near-term profit or buying back shares instead of investing in new growth. As per your question about commodities, I don\u2019t believe the real economy is truly in recovery, and I don\u2019t believe the earnings we\u2019ve seen are sustainable; I expect them to collapse.<\/p>\n<p>That in turn could produce a general stock market crash as happened in 1929 and on into the 1930s. The odds are overwhelming that that\u2019s going to happen to the bond market, and if the bond market crashes, that\u2019s going to devastate the stock market, which will in turn bring down the real estate market.<\/p>\n<p><strong>L:<\/strong>\u00a0There you go again, Mr. Sunshine.<\/p>\n<p><strong>Doug:\u00a0<\/strong>You know I\u2019m not trying to be perverse\u2014that\u2019s just the way the world is.<\/p>\n<p><strong>L:<\/strong>\u00a0So what does that leave?<\/p>\n<p><strong>Doug:\u00a0<\/strong>Most people would say cash, but as we\u2019ve seen in the last few years, every government in the world\u2014including the US and EU\u2014is more than willing to print unbelievable amounts of money to try to paper their problems over. That\u2019s going to go into hyper-drive in the next round, trashing the value of currencies around the world as it does.<\/p>\n<p><strong>L:<\/strong>\u00a0But gold is the real cash of the world\u2014always has been.<\/p>\n<p><strong>Doug:\u00a0<\/strong>Yes. We can\u2019t stress enough that the primary reason for owning gold today isn\u2019t to speculate on its price rising, but for prudence, for wealth preservation. For speculation, that\u2019s what gold stocks are for, especially the kind you follow in the\u00a0<em><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.caseyresearch.com\/go\/uji5e-2\/PIP\" target=\"_blank\">International Speculator<\/a><\/span><\/em>.<\/p>\n<p>The good thing about all the money printing is that we can predict that it will create more bubbles. Hopefully these stocks will be among the bubbles.<\/p>\n<p>Currencies come and go, but over the centuries, gold has always held value. About 100 years ago, you could buy a good suit with an ounce of gold, and that\u2019s still true today\u2014and I expect it will still be true for the foreseeable future.<\/p>\n<p>In fact, as unlikely as it may seem to mainstream economic thinkers today, one of the more likely outcomes of the financial turmoil ahead is that some country or another is going to reinstitute the gold standard.<\/p>\n<p>We don\u2019t need a gold standard, of course, or any currencies at all, for that matter. People just need to be free to own and trade in gold. Period. Today, it can be represented by computer bits on your iPhone, of course.<\/p>\n<p>I think it will probably start with China or Russia, or possibly an Islamic country serious about its interpretation of the Koran. You know that the Prophet, peace be upon him, said in the Koran\u2014which everyone knows is the direct and incontrovertible word of Allah himself\u2014that one should only use the dirham and dinar as money. These are units of silver and gold.<\/p>\n<p><strong>L:<\/strong>\u00a0There have been attempts, but none has gotten very far.<\/p>\n<p><strong>Doug:\u00a0<\/strong>The new ISIS caliphate says it will operate according to the Koran on all matters, including money. They may make it stick, at least in the lands over which they have sway. Whatever else one might say about them, you have to admit they really are sincere fanatics. If someone says they believe something and they actually try to do what they say they believe, that\u2019s worthy of some respect, even if you don\u2019t share those beliefs. They appear to be not just talking the talk, but walking the walk, in every respect.<\/p>\n<p><strong>L:<\/strong>\u00a0Just the same, Doug, I wouldn\u2019t go pay my respects in person, if I were you.<\/p>\n<p><strong>Doug:\u00a0<\/strong>No question. They are clearly\u2026 unpleasant people. I\u2019m certain I\u2019d end up in one of those orange jumpsuits if I did go back to Syria or Iraq, and I doubt they\u2019d consider my opinion over whether to behead me or burn me alive in a cage. But that\u2019s got nothing to do with the fact that they appear to be trying to act consistently with their principles, and it\u2019s intellectually dishonest to dismiss that.<\/p>\n<p><strong>L:<\/strong>\u00a0Well, I\u2019d hate to see gold branded as \u201cthe preferred money of theocratic fanatics,\u201d but I do understand your intellectual point. Your remarks about evidence of a bottom are encouraging. I\u2019ve heard it said by veteran investors with more experience than I have that the kind of bumping along the bottom we\u2019ve been suffering through is actually a classic sign of a bottom in a long cycle. Do you agree?<\/p>\n<p><strong>Doug:\u00a0<\/strong>Yes, I do. I still think that intraday low of around $1,140 last November was likely the actual bottom.<\/p>\n<p><strong>L:<\/strong>\u00a0Personally, I was very encouraged then, because gold had broken below its December 2013 low, and it seemed that every pundit and blogger in the world was saying that there was nothing to stop the fall short of $1,000, or even $700. It was widely believed that breaching the prior low was the trigger that would take it much lower\u2014but that\u2019s not what happened. Instead, the new low was a buying signal to Russians, Chinese, Indians, and others, and gold shot right back up again.<\/p>\n<p><strong>Doug:\u00a0<\/strong>Agreed. In absolute terms, gold isn\u2019t as good a value as it was in 2001, when I was telling readers that if I could call their brokers and buy gold for them, I would. On the other hand, the world is far, far less stable, so the prudence of owning precious metals is more paramount than ever.<\/p>\n<p>You\u2019ve got to own gold, because as we\u2019ve often pointed out, it\u2019s the only financial asset that is not simultaneously someone else\u2019s liability. That\u2019s particularly so when you remember that in reality, all of the major banks of the world are bankrupt. Between the fractional reserve system and the preponderance of bad loans and other factors, there isn\u2019t a one of them I\u2019d trust.<\/p>\n<p>Worse, if you have a lot of money in a bank, you may think it\u2019s an asset, but the bank thinks it\u2019s a liability, and it\u2019s subject to seizure, come the bail-ins such as we saw in Cyprus. The EU is already laying the groundwork for that.<\/p>\n<p align=\"center\">***<\/p>\n<p>For more contrarian investing tips, <span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.caseyresearch.com\/go\/uji8f-2\/PIP\" target=\"_blank\">watch this video<\/a><\/span> in which Doug, Louis, and six other industry experts discuss where we are in the gold cycle\u2026 why the best gold stocks will go vertical when the gold bull resumes\u2026 and how to prepare your portfolio for a shot at the jackpot. Or <span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.caseyresearch.com\/go\/ujitg-2\/PIP\" target=\"_blank\">click here<\/a><\/span> to get Louis\u2019 timely special report, <strong><em>The Top 7 Gold Stocks with Vertical Potential<\/em><\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Doug Casey Interviewed by Louis James, Editor,\u00a0International Speculator L:\u00a0Well, Doug, we\u2019ve seen another quarter of high volatility and significant world events. What strikes you as most important at present? Doug:\u00a0Everything is still held together with chewing gum and baling wire, for which I\u2019m grateful, considering what\u2019s coming. It\u2019s very clear to me that the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-70541","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=70541"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70541\/revisions"}],"predecessor-version":[{"id":70542,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70541\/revisions\/70542"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=70541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=70541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=70541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}