I recently sat down and spoke with our resident precious metals expert,
Dr. Russell McDougal. “Rusty," as we call him, manages our
Resource Windfall Speculator advisory service, and has had
absolutely incredible success in his field. Over the past 17 years Rusty
has studied the precious metals market and has been rewarded handsomely
for it. His personal track record has included numerous 1,000%+ winners,
and he is showing the members of his advisory service similar success.
Out of his last 29 recommendations, 25 of them have been closed for a
gain, or are currently showing an open gain. Eight of them show gains
over 80%. You can learn more about the service
here.
I hope you enjoy the interview. And let us
know your thoughts or if you have any questions. Email us at
feedback@investorsdailyedge.com.
Respectfully,
Bob Irish
Investment Director
Investor’s Daily Edge
Back in 2007, you predicted that 2008
would be the “year of the bailout.” You were absolutely correct. Does
that play into your “apocalypse” scenario?
Absolutely. The elitist banks and other
connected institutions that received the vast majority of the public
funding remain in trouble. The main issue that was never resolved is the
unfathomable amount of failing derivatives still floating about, hidden
from public scrutiny. I’ve seen credible estimates that this global
“shadow” financial garbage can be as high as one quadrillion dollars!
Banks are still marking these “assets” to
fantasy. They remain in deep trouble and have not lost their prime
position at the pig trough. It is, however, definitely getting more and
more difficult to implement bailouts because the public has been
severely abused and folks are finally waking up.
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In your excellent newsletter,
Resource Windfall Speculator, you have mentioned many times that
you feel the government is truly “bankrupt.” Please explain why to our
readers who may not be subscribers to your newsletter.
The U.S. has long run Ponzi schemes with its
budgetary processes. Social Security withholding funds, for example,
have been diverted for decades to the general spending account instead
of being put in a true “trust.” In an end game activity, the Federal
Reserve is now printing money to buy a large portion of the debt issued
by the Treasury. Debt is completely beyond any semblance of control.
Servicing it is now impossible.
My major declared theme for 2010 is DEFAULT.
That’s inevitable when any entity runs up debts and obligations beyond
any possibility of ever being honored. What is now visible in Greece and
other southern European Union countries will spread in the coming months
and years. We are no better off than Greece except we control Earth’s
primary printing press and the rating agencies, for now.
Nations, states, corporations, and individuals
will eventually choke on their excessive debt. You simply cannot fix the
problem of excessive debt by issuing more debt. Hello.
The debts will be cleared one way or another.
They can be repudiated through default or hyper-inflation. There will be
no moving forward until a clearing is allowed. Our central planners
learned nothing from Russia’s debt default in the late 90’s.
You are probably best known to our
readers as a “gold bug.” That’s a term intended to ridicule those who
follow gold, but it’s one that you have taken as a badge of courage. So
take us back to the beginning. When did you originally get involved with
gold, and why?
My initial objective, in 1993, was to make a
few bucks via gold stocks. That subsequently turned into a multi-decade
study of the deeper intricacies of the precious metal markets.
It turns out that investigating the gold
market is the premier tool for understanding how the world works. The
economics taught at most universities, Keynesianism, is unsound,
socialistic, and rapidly failing. Seeing the world through gold, and the
freedom and honest money it represents, has clearly revealed to me all
the massive frauds now crumbling around us.
Warren Buffett long ago stated that fortunes
can be made by specializing in a market niche and learning more about
that market than 90% of other investors. I have taken that advice and
put it to use in the resource sector.
So how has the gold market changed
since you got involved?
I naively believed the gold market to be an
honest one when I first entered it. It became blatantly obvious by the
late 1990s that the truth was entirely different. The patriotic work of
GATA (www.gata.org) and others has pointed out (to those who care to
take the time to seriously investigate it) that a free gold market and
abusive fiat currencies are mutually exclusive.
The precious metals are turned to
internationally when economic and monetary events are fragile. Bash gold
and silver via the crooked markets in London and New York, and the
monetary system backed by misguided faith and misplaced confidence
continues unabated.
History clearly shows that no un-backed
currency (fiat) has ever lasted. Don’t expect a re-write.
Wait a minute, Rusty. You’re making
some big claims here. I know you can’t go into all the details now. But
can you let us know how bashing gold is rescuing the dollar?
Gold is the canary in the coal mine that
alerts citizens that all is not well in dollar land. A rising gold price
is a signal that inflation is coming, thanks to excessive dollar or
other currency printing. You cap the price of gold pretending to push a
“strong dollar” and the games go on without alarms being sounded.
U.S. history is replete with campaigns
directed against gold. Many of these examples have recently come to
light.
And what about Ft. Knox? What is
really going on behind those fortified doors?
Ft. Knox is a waste of American soldiers
because they are no longer guarding what the entire world believes is
our national treasure. Ft. Knox (as well as every other U.S. gold
depository) hasn’t been adequately audited since the Eisenhower
administration.
I put the odds at 90% that the Ft. Knox gold
has been lent, swapped, sold, or stolen over the decades, largely to
hold down the international price of gold.
The three largest gold institutions in the
world are the LBMA in London, COMEX in New York, and U.S. depositories
like Ft. Knox. The daily volume in the London gold market is three times
the volume of the international oil market! Try to convince a
knowledgeable gold player that gold is an unimportant “de-monetized”
asset.
Unfortunately, all three of these gold
institutions are laced with fraud along the lines of Bear Stearns,
Lehman Brothers, AIG, Fannie/Freddie, and Enron. See a pattern? Do you
believe for one second that these blokes are trustworthy when it comes
to our claimed 8,000 tons of gold?
None of these markets have the physical gold
they claim. The evidence of a massive fraud is slowly but surely coming
to light. It’s all under the radar right now. And I can understand why.
It’s gonna make the Madoff scandal look like a trivial blip. There will
be hell to pay in terms of rocketing gold prices and destroyed
reputations when the truth is discovered.
You have said a few times in
Investor’s Daily Edge that you see gold, currently at around $1,100
an ounce, going as high as $3,000 to $5,000 an ounce. Even our own Steve
McDonald said recently that he owns gold for the first time in his 25
years of following the markets. What makes you think gold will go that
high?
Gold would presently need to be close to
$2,400 per ounce on an inflation-adjusted basis just to equal its 1980
high. The reason it isn’t that high now is because of blatant
manipulation by the Fed, the Treasury complex, and their minions.
Manipulations always fail. It is folly to even
attempt to suppress a commodity directly against its underlying
fundamentals on a long-term basis. You should take a contrary position
every time.
Gold and silver have averaged close to 16%
annual gains over the last 9 years for good reasons. Those reasons have
just taken a dose of steroids.
The U.S. dollar and the debt structure it now
represents are the world’s largest bubbles. Gold will appreciate
massively as the dollar gets displaced as the global reserve currency
and the U.S. defaults on its debts in the biggest default the world has
ever experienced.
You are perhaps most famous here at
Investor’s Daily Edge for your personal track record. This has included
numerous gains in excess of 1,000%. What does it feel like when one of
your holdings explodes up the charts?
It is exhilarating, for sure. You must always
check the greed factor, however, to make sure you aren’t staying in a
position too long. It’s rude not to take profits and say “thank you.”
Small cap exploration companies are likely one
of the most speculative markets in the world. There is great volatility
there, and it can be taken advantage of for superior profits.
My two boys have their own stock portfolios,
and it has been especially gratifying for me to see them excel in this
market. My oldest is 29, and he just had two of his stocks bought out in
the last few weeks. One of them, Canplats Resources, went from his
initial buy near $.20 Canadian to $3.80 or so.
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Many readers may not know that you
aren’t just sitting at a desk going over charts when you recommend
companies to your readers. You actually go out and visit the mining and
exploration sites. What has been your most memorable trip so far?
Going back to my home state of Arizona to see
Riverside Resource’s Sugarloaf Peak gold project last fall was
especially fun. Small town Arizona still has such novelties as signs in
restaurants stating that guns must be checked upon entry. It’s a
beautiful state, and I don’t go back often enough.
I do like this
project and Riverside in general for its vast potential.
You have written quite extensively
recently about another niche market you follow closely, Rare Earth
Elements. Why are you so excited about these hard to pronounce minerals?
In my resource advisory service, we look for
long-term bull markets and we position ourselves accordingly. Right now,
our primary positions are in gold, silver, oil, uranium, Rare Earth
Elements, food, and select situations. We want the wind at our back as
much as possible.
Rare Earth Elements are exotic materials with
hard-to-pronounce names like Neodymium – used in high-efficiency
magnets. They’re critical to modern technology, especially the growth
industry known as “green” technology. They go into wind mills, nuclear
plants, hard drives, fiber optics and batteries for hybrid cars, plus
much more stuff. The U.S. used to hold a strategic reserve of Rare Earth
Elements but they were squandered in the 1990s. See another pattern?
China now dominates global supply to the tune of at least 95% of
production.
China is increasingly putting restrictions on
their export of the Rare Earths. They want and need them for themselves.
The U.S. is way behind and desperately needs to catch up – because these
metals have key military, as well as industrial, applications.
North American companies are fast-tracking
deposits for production in the coming years. The companies with the most
viable projects stand to make fortunes for shareholders. Hundreds of
companies claim to be targeting Rare Earth Elements, but most will never
get past the label of Rare Earth in the stock name. We are taking early
positions in the premier Rare Earth companies.
Thanks for taking the time to chat
with me, Rusty. We will meet up again soon.
Thanks, Bob, it is always a pleasure.
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