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« Silver stops triggered bringing a buying opportunity a little closer | Main | Silver Wheaton Corporation sold off hard »

Where is the Global Economy Headed? The Experts Weigh In

To be forewarned is to be forearmed.

I'm writing today after spending the last three days in Boca Raton, Florida, attending The Next Few Years: A Casey Research Summit. If you're not already familiar, the purpose of this summit was to bring together many of the world's top economic and investing minds to share with us where they believe we're headed in the months and years ahead.

The cast of speakers was impressive, to say the least. They brought a variety of view points, an almost overwhelming amount of data and analysis, and a perspective on what the current world means for investors that would be hard to build on. Yet, with all this variety of thought and perspective, one central theme seemed to emerge. 

If you're able to see the annihilation of your currency coming down the pike, and you take the right steps to protect your wealth, you can come out on the other side largely unscathed. Given the right investment strategy, you may even be able to grow your wealth significantly during this time.

While I knew this on some level coming into this event – I’ve been reading Casey Research’s work for just a few months now, and this was the first of their events I’ve attended – I was given pause by Casey CEO Olivier Garret's welcoming remarks.

"While no one can predict the future with complete certainty,” he said, “it should give you comfort to know that the faculty for this summit have in common that they correctly anticipated the trends now dominating the global landscape."

When you bring together 35 experts who each correctly predicted what's happened in recent years – while the mainstream media and those who followed it were thrust clueless into "the worst economic crisis since the Great Depression" – you have to think that if these 35 experts are in agreement about what lies ahead... it's worth listening. Even if what they're saying has painful implications.

So what's the consensus? What will The Next Few Years bring? Well, hold on to your hat.
The Worst Is Yet to Come

I'd like to share an important point Casey Research's Chief Economist Bud Conrad made to me as the summit was wrapping up.

Bud said that when Casey Research editors are among the most optimistic in the group, you have to wonder how serious the situation is getting.

After all, the Casey Research team is known for predicting well in advance the liquidity crisis that would play out in 2007 through 2009 and the continuing economic troubles that have resulted. They'd laid out the path of the previous crisis far prior to most folks ever hearing the word "subprime." They've long been talking about the decline of the dollar and even “the Greater Depression.”

Yet Bud said this conference was perhaps the first he's aware of in which the guest experts were more pessimistic about our situation than Casey's resident experts.

I'll explain...

As the summit was wrapping up, a number of panelists were brought on stage to answer attendees' questions. One question in particular was, "On a scale of 1 to 10 – with 1 being, it all gets better from here, and 10 being the unthinkable – how bad do you think it can get?"

A number of attendees gave their votes and thoughts. And it was clear – the consensus was that our current situation of enormous sovereign debt and the associated race to debase the globe’s currencies would get worse. Not to mention civil unrest in the Middle East and North Africa, and even Wisconsin. Or the fact that oil production seems to have peaked and is declining, even before production being taken offline due to the current conflicts.

The most optimistic of the experts on stage suggested we'd experience about a 5 – not too good, but also not too bad.

But what took attendees aback was when folks like professional economist, truth-digger and founder of Shadow Government Statistics John Williams predicted that we were approaching the top of the scale rapidly, and that the lid was about ready to blow on a pressure cooker of economic manipulation and deteriorating fundamentals.

The outlook was similarly negative from James G. Rickards, direct participant in many of the most significant financial events of the past 30 years, as well as the current senior managing director for market intelligence at Omnis.

And perhaps the most frightening picture was painted by John Robb, expert on guerilla warfare tactics and the new "open source" warfare – who not only concurred with the dire outlook but who also was quick to explain that should worse come to worst, we could actually see severe degradation of civilization as we know it.

And this was just what came after nearly three days of hard data, detailed explanation and vigorous debate revealed these scenarios as reasonable assessments of the situation.

The Fall of Fiat?

So what is it that's pushing us to the edge of disaster? To echo the sentiment with which Bud Conrad started his presentation Saturday morning, I wish I had a better story for you today.

For one, we're well on our way to a sovereign debt crisis. From the summit's first presenter to the last, there was nearly complete agreement that our current debt and deficit spending situation is flat-out unsustainable. And while some speakers believe hard-line austerity may be a way out of this without default or massive inflation, this is not a solution that will get any politician reelected, and thus it simply will not happen.

So deficits will continue and debts will grow. But as was suggested by Johns Hopkins University Professor of Applied Economic Steve H. Hanke, among others, our low interest rates cannot continue forever. And as our current, historically low interest rates move to a more normal level, our debt load becomes crippling.

So the Fed must remain in the market as the buyer of last resort on Treasuries, to ensure that even if they're not the actual buyer, their bid keeps bond yields within what they see as an acceptable range. And because this means more QE under one name or another – through the rollover of the existing balance sheet of the Fed, or political pressure applied to banks and friendly nations – the effect is eventual rampant inflation (in other words, continued and even accelerated destruction of the purchasing power of the fiat dollar, and the takedown of dollar-based savings with it).

John Williams' estimate has recently evolved from years to a matter of months before this inflation will accelerate dramatically.

But it won't be a straight line from here, many speakers believed.

In the near term, there's largely an agreement on increased volatility. For example, Greg Weldon, Editor of Metal Monitor, suggests we may see bond yields fall and the dollar rise short-term as the Fed brings QE2 to its expected conclusion, as it has announced. This, he suggested, could be seen by many as a vote of confidence from the Fed regarding the economy.

The only problem is, just about the only thing that appears to provide support to the stock market right now is QE, and so if equities begin to fall in the absence of QE, consumer confidence drops off. And that, in turn, leads to lower earnings and GDP. Which the Fed can't have, and so the printing presses start again.

The result: continued monetary inflation, followed by price inflation.

David Galland repeated his well-received assertion that the Fed, in the absence of severe spending cuts from Washington, is finding itself wedged firmly between a rock and a hard place. Even if in the near term the dollar shows some strength, a reentry into the markets by the Fed is likely to push the dollar to new lows... And at that point, the waterfall decline of the dollar as prudent investors seek tangible value will not only be imminent, but will be happening around us.

Doug Casey, in his usual tell-it-like-he-sees-it style, called the destruction of the dollar what it is – corruption – and suggested that this corruption is not confined to the U.S. In fact, we could be facing a world-changing shift that occurs in line with the destruction of multiple dominant fiat currencies... And while the end result may be a dramatic improvement, what happens between here and there could be very painful.

Just as an example, Porter Stansberry and Chris Whalen both called for a shakeout in the banking sector – so needless to say, if you're looking at record earnings and considering buying bank stocks, you may want to hold off.
The Good News

I apologize for sounding so dire. Truly, I do. But the experts who are certainly more qualified than I to make these bold assertions – and who have a track record to back up this qualification – are in complete agreement that things are going to get worse before they get better at the macro-economic level.
But is the news all bad?
Not at all. In fact, for those prepared, the crisis that continues to unfold, largely unnoticed by the mainstream media once again, harbors tremendous opportunity. As everything I've laid out above occurs, the massive wealth transfer to those who hold tangible assets will continue. This has been largely behind the rise in precious metals and commodities in recent months and years, including gold's 10-year winning streak.

And this transfer is likely to accelerate, by most estimates. The possible prices for gold and silver bandied about are frankly too high to be believable coming from me. But as a currency depreciates, of course, the numbers become worthless. Gold maintains its purchasing power – it is the dollar whose value changes, downward, and rapidly when the world wakes up to its continued and accelerated weakness.

Michael Maloney, author of the "Rich Dad" Guide to Investing in Gold and Silver, suggested to attendees (presenting swaths of data to back his claim up) that silver will do even better than gold relative to the dollar, even after its recent historic run-up.

Further, legendary speculator Rick Rule, along with Casey Chief Energy Investment Strategist Marin Katusa and Chief Metals Investment Strategist Louis James, presented some of their current favorite picks in the junior resource sector – a sector where the best few companies are set to outperform significantly on the rise of commodity prices and strong demand.

Also, Casey Research invited representatives of some of their top company picks from this sector to present their latest projects and news. There are opportunities in gold, silver, oil, gas, geothermal, and even today's "black sheep" uranium that may present enormous profit opportunities over the next few years.

Plus Alex Daley, senior technology editor, presented his favorite investable tech trends... Doug Casey, among others, expressed the opinion that if anything ensures we get to the end of the coming crisis and create a better life for ourselves on the other side, it will be tech. And the technologies Alex shared are just the types of investments that should continue to grow in value both independent of and alongside inflation, and that are likely to be in demand even in the severest of scenarios.

And of course, you don't learn how to avoid serious inflation – or the overreaching arm of a desperate and broke government – without learning how to take your assets offshore.Olivier Garret, Terry Coxon and Jeff Schneider shared the best legal ways – including alternative IRA trustee models and offshore trusts – for ensuring your wealth will be protected through whatever storm may come our way.

There was far more information presented at the summit than I could possibly cover in one short article – from how we got here, to where we actually are now and where we may be going, all the way through to the specific investment implications. But the takeaway was clear and precise.
The global economy is still suffering from the massive accumulation of debt that has been building for the past few decades – the same debt responsible for the 2008 crash, which has yet to be addressed in any meaningful way.

Despite the dire predictions of the faculty, I left the summit hopeful. There are simple and effective ways to protect myself from what’s to come. And, despite turbulent markets ahead, there are plenty of opportunities for profit as well – great companies in well-positioned sectors that will benefit investors like me in spite of the potential crisis looming. And, most importantly, if we find ourselves in the much agreed-upon looming next leg down anytime soon, I’ll be prepared to act and turn that crisis into an opportunity.

The Next Few Years: A Casey Research Summit sold out in just 27 days – faster than any previous Casey Research summit. If you were unable to join us, you still have a chance to listen in on all the faculty and corporate presentations plus Q&A sessions... Including the specific, actionable investment recommendations from the 35 world-class investing minds on our faculty. Click here for details.


Yesterday we reported that had closed another two trades for profits of 108.52% and 116.67% respectively, well today we closed two more profitable trades and have updated the chart and stats accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.

sk chart 04 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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Reader Comments (10)

Personally, I don't like Casey Resesarch, they recommend "no-risk" trades on gold which is going to cost them all their fame. David Morgan is much more impartial in his calls than those guys.
IMHO, if those 35 experts can't understand that no QE (and no government) will save the world from global deflation (which has started in 2008), there is nothing to listen on that meeting.
Long the dollar, short gold and stocks.
Di-flation has started


May 5, 2011 | Unregistered CommenterDi

My hobby-horse. If the silver price rockets, industrial uses will disappear. That simply has to limit the price that silver can attain.

Attention is always focused on the investors' demand vs silver supply (understandable, as this is an investors' forum), even though they are a small component of overall demand. I'd love to see a supply-demand curve for the industrial uses of silver and see how it meshes with speculative demand.

May 5, 2011 | Unregistered CommenterRogerP

This is an understandable but serious misconception (that rising prices would materially curtail industrial demand.) It would to some degree, of course, where there are substitutes and prices matters.

But many, if not most, of silver's uses require such tiny amounts that they add almost nothing to the cost of the finished product and silver would continue to be used even if the price were to increase 10 or twenty fold, partly because there's no viable substitute and partly because the cost is immaterial.

Take the computer keyboard you typed your message on Roger P. Each key has a switch with a wee bit of silver on it. Adds almost nothing to the cost of the computer, but there are hundreds of millions of keyboards with silver in them. The amount is too small to be recycled anywhere near economically, and so that silver is effectively "used up"...another reason to like the supply/demand dynamics.

My guess is that investment demand for silver will so completely outstrip industrial demand by the time the central banks of the world are done destroying their currencies that it will be a relatively minor factor.

Silver as money again. Get used to the idea.

And Di...Casey Research has done very well for their subscribers. You see, it's simple. THEY were on the right side of the metals and commodities rocket shot. YOU were on the wrong side.

How much has your advice to short the metals netted anyone?

I'm a Casey subscriber and I can tell you categorically that they have NEVER billed gold investments as "no risk." That is a complete, 100% misrepresentation. They are very attuned to risk and make no wild promises.

If you don't know what you're talking about, maybe it would be wise to keep your mouth shut, rather than libel good people.

May 9, 2011 | Unregistered Commenterfallingman

fallingman wrote:"rising prices would materially curtail industrial demand.) It would to some degree, of course, where there are substitutes and prices matters."

I support my contention that industrial demand for silver will disappear with two examples from my immediate environment.

In my field, diamond drilling, silver alloy cost has outstripped the cost of diamonds in a bit by a large margin and we are facing a wholesale change into hot pressing that will use no silver at all. The change is being driven by people with drilling rigs costing tens of thousands of dollars per hour to operate who are not prepared to tolerate continually increasing prices.

An associate of mine making dental amalgams regularly buys silver 100kg at a time. He's just one small manufacturer. Dental amalgams are still widely used in the Third World for dental restorations. These can be replaced by porcelains.

As for electronics, it's not my field of metallurgy, but there are a lot of materials that conduct electricity well and make good contacts. High silver prices might just spur accelerated development of room temperature superconductors or optoelectronics. Or people will revert back to copper.

Further afield, the photographic market for silver, once the single largest application, was decimated after the last price hike.

I disagree about recycling. I know people who were making a handy living recycling silver and gold from electronics even at $5/oz. Higher prices will entice more into recycling. Even I could be tempted if the price goes high enough. Just smash up the components, incinerate them and leach out the PMs.

The US learned to live without nickel in stainless steel during the Korean War. I'm sure US industry will learn to live without silver.

Mine is just a view from the silver user's side. Industry is a lot more resourceful than people might give it credit for.

While I disagree about the effect of price on supply and demand and on speculator demand outstripping industrial, I am not only comfortable with the idea of silver being money again, I think it's a good thing.

May 10, 2011 | Unregistered CommenterRogerP

Maybe there will be significant demand destruction. We'll see. In the larger scheme of things, I think it hardly matters. But, I will say, the wholesale abandonment of silver by the dying photographic market certainly didn't kill it as widely was anticipated. Silver had been left for dead.

I would be only mildly interested in silver as an industrial metal. This drama is about what is money and what isn't. The clownbuck isn't. Silver is. That's all that will matter as the clownbuck and the yen and the Euro head arm and arm to the garbage heap of history.

One last note. One would have hoped that the barbaric practice of placing "silver" amalgams, which are 50% mercury, in people's mouths would have ended long ago. No self-respecting dentist with any skill still uses them here, although the loathesome ADA still defends their use as safe. Composites work just fine.

If we can spare the innocents in the third world the misery of mercury poisoning, then, by all means, let's find another use for the silver. We can make more coins with it.

We're gonna need 'em.

May 10, 2011 | Unregistered Commenterfallingman

As this is a forum for speculators, I'll speculate on the relevance of the above diatribe against dental amalgams to investment in silver.

I contend that to defend a position, derived from received opinions, in strident terms ("barbaric", "loathsome", "spare the innocents" etc) is the stuff of commodity bubbles.

When speculators start believing their own propaganda, I think trouble is sure to follow.

I was almost convinced that there was no silver bubble. If the amalgam diatribe is an example of how a silver speculator thinks, I'm not so sure.

May 11, 2011 | Unregistered CommenterRogerP

Hey pal, I'm not a silver "speculator." I've been building a position for literally 40 years at $1.22 (I was a teenager at the time), $4.50, $7, $11 (2008) to hold for the long term...mostly as a core holding for "insurance."

I trade the silver stocks, mostly with very conservative debit spreads and have done phenomenally well. I'm considerably underweight now, because I like more of a sure thing, and I exited "too soon." So what does that do to your "theory."

Lordy, if you're making investment decisions based on these kinds kind of silly and wild assumptions, you must be a helluva trader.

But wait, that's not fair. The more I think about, I have to say you're probably right Roger. Silver must be in a bubble, because I loathe the ADA and speak my mind in strident terms. That's a brilliant bit of deduction actually. I guess the conclusion is clear then. DON'T INVEST IN IT.

We'll see how well that works out for ya in a couple of years.

May 11, 2011 | Unregistered Commenterfallingman

just interested in your take on todays general commodity sell-off. Is this just commodities establishing a new base or are we in for lower prices as QE2 is soon to expire?
My gut tells me that precious metals are getting ready for another takeoff and that they are just needing something to light the fuse.

Any thoughts would be appreciated.

May 11, 2011 | Unregistered CommenterM

@fallingman Just yanking your chain to stay on topic, otherwise I would have digressed into technical arguments about dental amalgams.

You, fallingman, are the only person I have seen on any such forum to even consider the possibilities of demand destruction. Everyone else seems to completely ignore it. I salute you for it and sincerely hope that you keep it in mind and make more money than everyone else from your investments.

Srident language, especially emotive strident language outside of politics, rings alarm bells for me. Robert H Thouless devotes the first chapter of his book "Straight and Crooked Thinking" to the use of emotive language as a cover for weak argument. Logical fallacies, such as concluding that the use of strident language means a silver bubble, are covered in chapter 4.

I carried out a successful product defence on a dental amalgam brought about by a technically lamentably bad article in an academic journal about corrosion. I read the test reports and analysed the results. I do not subscribe to anti-amalgam hysteria.

With critically important investments you have to separate the facts from the hype and decide for yourself, even if it means getting flamed on Zero Hedge.

May 12, 2011 | Unregistered CommenterRogerP

Thanks for the post Roger.

If I might just add FWIW, I've never bought the argument that the use of "strident" or course language relates in any way whatsoever to the strength of an argument. Can bluster be used to cover a weak argument? Of course. Can use of such language affect how one's communication is received? Absolutely. (I just don't care in this case. I was venting my spleen...not seeking converts.)

But when someone uses strong language to make a point, does that necessarily make the argument definition? Hardly. I would consider that a variant of the ad hominem attack. Let's phrase the assertion in logical form. "Because you use strong language (personal trait/behavior), your argument can't be sound."

Seems pretty silly when presented that way, doesn't it?

That said, in the interests of staying on topic and being as gracious as the sponsors of this site, I will pledge to be more circumspect in my responses and only vent my spleen toward the Bernanke, the Goldman Sachs, and the JP Morgue. Oh and politicians and bankers...and the media and the regulators. Fair enough?

May 12, 2011 | Unregistered Commenterfallingman

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