The Rude Awakening
Wall Street, New York
Thursday, May 18, 2006 ------------------------- - A Wall Street of worry – where to next for everyone's
favorite shiny yellow metal,
- Too far too fast? The race for $3000 off to a shaky
start,
- More red arrows in the markets and an offer not for
the bashful...
------------------------- You are receiving this email as a part of your FREE
Subscription to The Daily Reckoning. Should you wish to
unsubscribe please follow the instructions at the bottom of
this email. --- Resource Investment Alert --- The emerging bull market in precious metals, and in the
precious metals stocks, is just beginning to gather speed,
with 100%, 300%, even 2,000% profits ahead for early
investors. But the really big profits require being selective in your
chosen stocks, avoiding the "paper tigers" and focusing on
those with excellent management teams, working on big
targets in highly prospective geology. For over 20 years,
Doug Casey's International Speculator has been providing
investors with clear, unbiased recommendations on the
world's best resource stocks. To learn more about this
uniquely valuable service, click the link below. www.caseyresearch.com/crpmkt/crpSolo.php?id=30&ppref=RAK031ED0506A
-------------------------
Gold Over $700: Too Much, Too Fast?
By Doug Casey Recently there was much ado about an ambitious Harvard
student (a redundancy) who got caught with someone else's
prose on her hands. So that I don't suffer the same embarrassment, I will
forewarn you that parts of what you are about to read were
swiped wholesale... albeit from myself, from a recent
interview sent out as a special report to subscribers of
our International Speculator newsletter. While the reasons for this outrage definitely include sloth
and a lack of time, they also include the fact that the
interview is fresh and still very much relevant to the
questions at hand. Namely, "Are we really in the precious
metals bull market of a lifetime?" and... "With gold
blasting over $700, have things moved too far, too fast?" To answer the first, I would start by pointing out (as I
did to our subscribers) that bull markets and bear markets
follow one another as surely as a person in- and exhales.
And, as with breathing, the longer you hold your breath,
the more urgent and powerful the subsequent intake.
Commodities in general, but precious metals in particular,
went through a deep bear market that lasted an entire
generation. Gold fell from over $800 in 1980 to $256 in
2001; silver from $50 to $4. These are fantastically deep
and prolonged bear markets. But they were even worse than
they seemed because the dollar was losing about two-thirds
of its value at the same time. For Americans to keep track
of value, over time, with dollars is as idiotic as for an
Argentine to try to do that with pesos. The financial crisis of the late 1970s drove the metals to
those highs. We're now looking at another crisis, one that
will dwarf the turmoil of the 1970s and likely bring on a
depression worse than the 1930s. With so much trouble just
ahead, there's good reason to believe that the metals will
exceed their old highs—which, in today's dollars, means
gold over $2,000. Let me reiterate what I've said for
years: This time, gold isn't just going through the roof.
It's going to the moon. And there are other reasons. Because the bear market was so
long and deep, there's been relatively little exploration
for new deposits of not just precious metals but of all
metals—copper, nickel, moly, zinc, you-name-it. Meanwhile
consumption has risen steadily all over the world, but
especially in China, and now India. Entirely apart from that, most areas of the world have been
pretty well explored. As with oil, the easy-to-find, rich,
near-surface deposits have been cherry picked. What's left
are mostly low-grade or deep deposits in hard-to-access
locations. And even after you've found a deposit,
permitting is expensive and slow. In a nutshell, the world has been living out of inventory
for a long time. But, as far as the precious metals are concerned, these
factors will be greatly compounded by the brewing monetary
crisis. It will be of historic proportions. Has gold moved too far, too fast? There are basically two views. The bears argue, quite
correctly, that commodity run-ups are always self
correcting: consumption drops just as production increases
and prices retreat. They also point out, correctly, that
the longest bear market ever is actually in commodity
prices, which have been dropping, in real terms, since the
beginning of recorded history. The bulls, including myself,
argue that, while these things are true, both fundamental
and monetary factors militate for perhaps a decade of
higher prices until the fundamental trend reasserts itself.
In other words, I think we're in a period that's going to
run against the norm. Stocks, in bear markets, tend to fall
twice as fast as they previously rose. Commodities, in bull
markets, rise twice as fast as they previously fell. We're
in one of those times. I, like everyone else, would be much
more comfortable in conventional, prosperous times. But I
like to be a realist and make the trend, whatever it is, my
friend. When the bubble arrives — and I'm very confident it will —
it will be easy to tell. The magazine cover stories, the
cocktail party buzz, the talk of legislation in Washington
to "do something" about high prices, the reports from
brokerage firms — there will be lots of indicators. Of
course, few people will pay attention to them in the right
way — they'll think they're accurate descriptions of
reality, not indicators of a mania. It was the same with
the Internet stocks a few years ago. Generally there are three stages to a bull market. The
first is stealth, when prices go up but nobody cares or
even notices. With commodities, that happened from about
2000 to 2003. Next is the "Wall of Worry" stage. People see
that prices are rising, but expect them to fall back to the
bear market levels they'd gotten used to. People come up
with all kinds of reasons why they're overpriced. They are
confused by the new reality, and many "old hands" and
commodity producers take the opportunity to sell, since
they haven't seen good prices for years. This is the stage
of the market we're now in. Finally, there is the mania
stage, when broad masses of the public get involved. It's
where the big profits—but also the big risks—are. Personally, I'm more comfortable buying when everyone says
you're an idiot for doing so, or at least when they're
skeptical. When we're all hearing about what a great
investment gold is, I'll be looking for other
opportunities. But my guess is that we won't really be
there for another year. And when it arrives, the mania
should last for some time, as it did most recently with the
Internet stocks. While I was expecting to see a big surge—and went on record
with that expectation on March 22 when gold was trading at
$550—there's little doubt that gold and silver may be
getting ahead of themselves for the short term. A market
trend, even an unstoppable one—which is how I view the
current metals bull market—is still going to periodically
correct. Get used to it. That is especially true if you're an investor in the mining
shares, which is absolutely, without question, the right
way to play this market. Buy on dips (historically, we see
buying opportunities in the summer months) and don't be
chased out of the market by volatility. When this thing does finally come to an end, the better-
managed gold and silver stocks will be trading for many
multiples of what they trade for today. This trend is your friend... get comfortable with it. [Joel's Note: Doug Casey, chairman of Casey Research, is an
internationally acclaimed resource stock speculator and
author of the book "Crisis Investing," which broke records
by spending 26 weeks as #1 on the New York Times Best-
Seller list. Each month his International Speculator
newsletter provides unbiased, carefully researched
recommendations on early-stage gold, silver and other
natural resource stocks with the potential to provide a
100% or better return over the coming 12-month period. To
learn more about intelligent investing in resource stocks
and about the International Speculator, click here: www.caseyresearch.com/crpmkt/crpSolo.php?id=30&ppref=RAK031ED0506A --- Special --- Warning: This Is Not for the Timid or Profit Shy!
Starting with just $400, a pizza delivery boy created a
$200 million fortune. He then taught his secrets to 14
lucky average Joes and Janes. Just five years later, the
Wall Street Journal reported they had racked up $150
million in profits!
Now you can benefit from the same kind of secrets - for
your chance to make the same extreme gains. It's so simple,
you will barely lift a finger doing it. If you have the
courage and fortitude for this kind of trading, you can get
in on this virtually effortless opportunity.
http://www.isecureonline.com/Reports/RTA/ERTAG509 ------------------------- 
------------------------- | 
