“The Greatest Economic Conspiracy in History”

By Travis Johnson, Stock Gumshoe, October 30, 2008

“After 98 years of secrecy, the greatest economic conspiracy in history is finally unfolding.”

“Learn how you could turn $5,000 into $100,000 (or more) by 2009 with this safe and simple
profit/protection plan…”

That’s how this latest ad opens, with the threat that the 98-year-old “Jeckyl Island Project” economic conspiracy will ruin your retirement — though to be fair, the ad has actually been around for many months. It’s still circulating, and the ideas it espouses might be more promising today then they were when the ad was first written, but it ain’t brand new. The ad is for the Taipan newsletter, and it comes to us from Justice Little, editorial director of same.

The lead-in is a familiar one — a government conspiracy, engineered by the titans of industry, is stealing your money, and your only savior is the investment strategy sold by Taipan:

“Almost a century ago, America’s financial titans drew up a plan to ensure that their power and wealth could never be challenged by ordinary investors.

“Since then, that plan has been quietly and consistently making the rich richer… that is, until word of it recently began to leak out.

“Now more and more people are beginning to realize its devastating effects.

“In fact, CNNMoney.com just called the plan ‘horrible news for your retirement portfolio.'”

I’ll spare you the rest of the conspiracy theory, but yes, this is another ad that takes our current economic problems back to the founding of the Federal Reserve back in the early part of the last century. And yes, the Fed does trace its founding back to a secret meeting on Jeckyl Island, Georgia that was attended by the country’s dominant bankers and robber barons. I included only the first quote from a business news site, that CNNMoney one — they are all generally about inflation, which I think we can all agree that high inflation is a bad thing for many investors (though you can also certainly argue that inflation that is too low is much worse, as is deflation — extremes are bad in either direction, but many people argue that the economy needs a certain level of inflation, often cited as around 1-3%, to function well).

The argument is that the titans of industry backed the creation of the Fed in order to ensure that more money would be created, which would enable them to get rich from all of that new money even as it caused serious inflation problems for the rest of the country. It’s basically an argument that the mint’s printing press is going to cost us all as the Fed ramps up the money supply and creates inflation. I can only assume that the only reason they didn’t put the blame on Nixon for fully eradicating the gold standard is so they didn’t come across as wild-eyed gold bugs, but it’s more or less the same argument: A currency untied to gold or hard assets leads to massive inflation.

To be fair, this was probably written well before the current severe deflation crisis, but it is true that many people are still worried about serious inflation in the future — the guess is that the huge increase in money and credit created by the Fed and the government bailout plans will bring inflation as soon as the markets recover to the point that anyone is wiling to spend money.

I don’t personally agree that the gold standard makes any sense for a modern economy, but I know lots of folks do think gold is for some reason more “real” than paper money, probably including some of you. And there are a huge number of people who believe that the Fed’s founding was a crime, and that it is part of a massive governmental conspiracy. I won’t get into that, I’m no expert and my economic views are much more mainstream.

But anyway, the point is that Justice Little has some investing ideas that you should consider, as tools to use in protecting your retirement from the “greatest economic conspiracy in history.”

Here are a couple of them:

“Fed Beater Play # 1: Attack the Precious Metals Bull Market With This Safe and Profitable Fund

“Your first Fed Beater is unlike any investment you’ll find in the world.

“It’s a specialized holding company whose assets consist of 98% gold and silver bullion.

“And, in my opinion, it’s one of the best precious metal bets you’ll find anywhere without actually owning the commodities themselves.

“This company has been specializing in gold and silver investments for 25 years and I truly believe that, for the investor looking for the utmost in safety and profits, this is a great way to go.

“Think about it — investing in precious metals can be an expensive thing.

“Just recently, the popular gold ETF, StreetTracks Gold Trust, was trading for an eye-popping $90 a share.

“And silver ETF, iShares Silver Trust, was priced at an insane $176 a share!

“Well, as I write this, you can purchase shares of this precious metals fund for only $12!

“Talk about getting the most bang for your buck.

“And this is a great time to get in too. Given the recent (and temporary) dip in precious metal prices, you’re looking at a nice little discount on a stock that’s been heading up in price all year. ”

OK, so I have to say this first: it’s ridiculous to say that the iShares Silver Trust (SLV) or the Gold Trust (GLD) are more expensive just because they have higher share prices — unless you’re an options trader, the actual dollar price of a stock should mean almost nothing. Is SLV less expensive now because they split the shares 10:1 a few months ago (after this ad came out)? No. It is cheaper, since Silver has fallen 40% or so since this letter was first created, but individual investors should generally not care what the share price is in raw dollar terms — you’re still putting your money almost directly into silver that’s held in storage for the fund, whether you buy 10 shares for $9 each or 1 share for $90 each makes absolutely no difference.

You’ll hear that stocks that are under $10 a share are potentially more explosive, and you’ll also still see a lot of investors feel compelled to buy in “round lots” of 100 shares, but neither thought is particularly useful for most people — and they’re certainly pointless when it comes to a company that primarily invests in hard assets. The fundamentals and prospects of a company matter much more than its share price, and there is absolutely nothing wrong with buying in “odd lots” of whatever number of shares you like, with the exception that if you want to use options trading strategies those are almost always priced against 100-share blocks of stock. The percentage of your portfolio that you dedicate to each investment is very important, the specific number of shares is not.

But there was a point before I started ranting, no? Yes, this stock being teased is actually …

Central Fund of Canada (CEF)

I’ve seen positive comments about this fund from several readers over the last few months. They essentially are a precursor to the exchange traded funds GLD and SLV, this is an investment company that simply owns gold and silver bullion for the benefit of investors, so you get some asset management expertise from them as they decide how much gold and silver to buy, and when, but they say they always hold at least 90% of their value in physical bullion.

So you can think of this as a closed end fund, essentially — they don’t appear to use any leverage, so you’re just buying a fund that owns precious metals and manages those holdings. Currently they have about 60% gold, 36% silver, and 4% cash, though they don’t actively manage or try to predict prices, and they consider these to be long term holdings, so a few months ago that would have been closer to a 50/50 split between silver and gold, since silver has fallen much harder and faster this year.

The only real downside to this, assuming that you’re interested in owning gold and silver, is that the shares are currently trading at a pretty significant premium to net asset value — according to the fund’s website, the NAV yesterday was $8.15, and the price right now is well over $9. The fund has traded at a premium for quite some time, but the current premium of well over 10% is historically very high.

This is clearly less of a premium than you’d have to pay to buy physical gold coins at the moment, but you can buy similar proportions of tradeable gold and silver using the ETFs GLD and SLV for almost no premium to the bullion price, though they can certainly fluctuate by a few percent around NAV. You also pay a .43% management fee for CEF, which is definitely not a crazy amount for a closed end fund, but is real money for a fund that doesn’t trade much.

So … yet another reasonable way to get exposure to gold and silver with a fairly steady and no-nonsense fund, albeit at a surprisingly large premium.

We’ll look at another of the ideas for investing in gold, since everyone seems excited about that these days … here’s the tease:

“… the fastest-growing, low-cost, “senior” gold producer, with 17 world-class operations and development projects throughout North and South America.

“Put it up against the other big gold players and there’s no comparison ….

“And keep in mind when looking at those figures that this company is also projecting a 14% increase in production for 2008.

“In the next 5 years they’ll be constructing three new mines at a cost of $4 billion.

“However they’ll be funding these projects completely in-house, which means they’ll accumulate no debt whatsoever from them.

“With these new mines coming on-line, their five-year outlook calls for another 50% increase in gold production!

“There’s just no slowing them down, and there hasn’t been for a few years now.

“After a change in CEO back in 1999, this company has catapulted itself from a $100 million firm up to the multi-billion dollar corporation it is today.

“And they’ve been able to continuously ramp up their production while keeping costs low.

“That’s enabled them to pay a healthy dividend to their shareholders since 2003.”

This one looks like it has to be Goldcorp (GG)

Some of the clues are not exactly perfect matches — they have paid a dividend for actually longer than five years, but the dividend has been steady at the same per-share amount since 2003 so perhaps that’s the point (the dividend was actually cut in 2003, and it remains pretty insignificant at about a 1% yield … below what I would call “healthy”).

But their CEO did come on in 1999, though he was actually CEO of Glamis at that point, which later merged into what is now Goldcorp. They do have 17 mine sites, mostly in North America (especially Mexico), and the growth figures are accurate — 14% was the projected production growth for this year, and the five year projections of 50% growth are what the company is claiming.

And the company actually got quite lucky early this year, too — as part of their plan to simplify their operations, they sold their large holdings in Silver Wheaton for about C$14.50/share — not bad, Silver Wheaton is now under C$5.

Most of the gold miners have been on a bit of a bumpy ride over the past year, and Goldcorp has essentially been in the middle of the pack — it does avoid some of the political risk of miners who operate in more volatile countries, it does have a good track record, and I don’t know of anything that would cause me to call them anything but a quality company.

If you’re looking for a big gold miner, perhaps GG is worth a look, along with the other biggies like Barrick, Agnico-Eagle, and their ilk. Over the past year, they have more or less traded in line with the diversified Van Eck Gold Miners ETF (GDX), though, so if you’re not interested in researching a specific gold miner you can always buy them all. The last six months have created a fairly big gap in the performance of gold miners versus the physical price of gold, as the miners (as represented by the ETF) have fallen about 50% while gold is only down 10% or so … so be careful. Many people believe that gap should narrow, but gold mining companies are operating businesses that face all kinds of complications, and many of them also produce other metals, especially copper, so it’s certainly not guaranteed that they’ll trade in line with gold over the long run.

So … are you worried that the Jeckyl Island “conspiracy” that created the Fed will sink us all? Need some gold to fight inflation, if it eventually comes back? Let us know what you think …

Related Gumshoe Articles

“Newly Issued ‘Platinum Notes’ Set to Soar 1,173% — or More — by January 27th”

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30 Comments on "“The Greatest Economic Conspiracy in History”"

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kickk
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kickk
October 30, 2008 1:29 pm
RE: Your informative ‘The Greatest Economic Conspiracy in History’ report…. The Federal Reserve has been going a little nutty on money supply growth since ’92. As a result we’ve had stock and asset booms and busts. Milton Friedman won a noble prize linking money supply to price inflation. However with the current collapse of credit, we’re experiencing a price deflation. Who knows how far it will go? Even though the Feds are buying stock in the bad banks, they still have bad assets on their books. Sooner or later, the piper must be paid. We’ll either get a deflationary depression… Read more »
Gabbi
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Gabbi
October 30, 2008 2:40 pm

I’m wondering why, even after being discovered, the Federal Reserve is still allowed to operate; is it not still a “conspiracy?”

Dusty
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Dusty
October 31, 2008 12:50 am
It is too obvious that emotions are over-riding reality. Gold was the standard for money until the supply of gold became inadequate. Too many human beings and too many channels of use of the money. There was not enough metal to make enough coinage or even to back paper money. Synthetic money or “fiat” money was the only reasonable solution. Find the background of William Jennings Bryan “Cross Of Gold.” That was a battle by the American Proletariat to do away with gold as money! The Fed was created because the US Treasury could not and can not operate with… Read more »
Joseph
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Joseph
October 31, 2008 5:19 am
The Fed is a private enterprise and should not have the resposibilities it has at present. Look at which banks and investment banks are still standing (and their controlling shareholding owners, families eg like Morgan, Wartburg etc)and which have been “sacrified”. Lehman was to heavily committed to CDS (read liabilities, future and present) that they let it go! AIG would have made the fin system collapse worldwide. The USA is actually dependent on creditors like China, Japan and Middle East wealth funds and their “buddies” (esp England and Holland and France in growing importance) in Europe. As long as “they”don’t… Read more »
Henry Chakoian
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October 31, 2008 8:29 am

With the new regime of runaway spending and hiper inflation, precious metals are a slam dunk. Other than holding the metals, Gold Corp and Silver Wheaton are screaming buys.Disclosure, I do hold both.

kickk
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kickk
October 31, 2008 10:39 am
The true standard for money should be naturally determined by the market (us), not government. Government and its minions (The Federal Reserve) are irresponsible and always resort to inflating its fiat currency when it wants to spend more than the taxpayers are willing to give it (borrowing has its limits). Inflating the currency is nothing other than a tax that diminishes the value of everyone’s currency and artificially pushes everyone into higher tax brackets. Plus it can have the effect of increasing the amplitude of the business cycle – sometimes with devastating results like today. I suspect the market, left… Read more »
vaag
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vaag
October 31, 2008 12:07 pm

Inflation up or down. Who knows? But I’m sure glad to find Greenspan getting his comeuppance over the bubbles he helped create. Maybe his $100,000 a shot speaking fee will get down to earth where it belongs; like maybe $3000 or so.

William H
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William H
November 1, 2008 6:21 pm
What we’re NOT hearing about: The “Community Reinvestment Act” signed into law by Jimmy Carter in 1977. Copy/paste this into a Google search: “Community Reinvestment Act” +Jimmy Carter +1977. The first result gives you a quick overview in a couple of sentences, while the second is the Wikipedia entry, which traces this unmentioned cause of the Fannie/Freddie collapse. While dems say that Bush is responsible for all this, it started with Jimmy Carter. Clinton played a big part in this as well. The subprime mortgage crisis began in ’77. Bush is not responsible for this anymore than JFK was responsible… Read more »
pete k
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pete k
November 2, 2008 2:01 pm

Blaming it on the CRA is a bit simplistic. Read this article http://financialsense.com/fsu/editorials/glenn/2008/1031.html for a different view on that.

Dr. Bob
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Dr. Bob
November 2, 2008 5:56 pm

Wm. Jennings Bryant was NOT trying to do away with gold as backing for U.S. currency. He was simply trying to have silver (which was mined in the USA) get equal standing as backing for our currency, thereby helping the Western miners, and weakening the hold of Eastern “Old Money.” Do I need to tell you that he repeatedly lost the fight?

Smitty
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Smitty
November 6, 2008 11:23 pm

Buy South African Kuggands and you have something to show, its a Coin and it is 99.9% GOLD…. just takes a little time when you pay your Bar Bill. Why worry, are we not going to have the answer In Jan 09 with the New Pres and Congress?

Tom
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Tom
November 7, 2008 11:00 am
I’m very new to this game but I have bought shares in Centamin Egypt CEY.L on LSE (prospecting Gold mining company). They own all their own plant and machinery and the Egyptian process plant is due to come online Q2 and is fully funded to completion and they still have cash in the bank. The forecast is that they will have a cost price of producing gold around $300-$350 / ounce including royalty to egyptian govt. With gold at around $750/ounce currently and seemingly decent prospects of maintaining or increasing this price, this looks like a good way of buying… Read more »
Olaf Olafsson
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November 7, 2008 7:31 pm

Silver or Gold ? Warren Buffet was amassing silver some time ago and I have heard some say gold has not been so good long term investment. I see the silver miner CDE mentioned a lot as a good buy, any thougts on that one or silver in general ?

rd
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rd
November 9, 2008 9:02 am

Silver and Gold are great but they are not too nutritious. Niether can you use them to protect yourself. I believe it very possible that we will be in survival mode in the years to come.
Guns beans and bullets, tools, shoes and other necessarys will claim high trade value if the SHTF.
Physical Gold and silver in the mattres, pays no dividends.
So it takes a balance. What percentage of your investments should be where? Plan and decide.

gordy kistler
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gordy kistler
November 9, 2008 2:29 pm

balance is everything. i would recamend checking mountan house freeze dried foods. they have #10 cans that will ceep for thirty years (unopened) or two months open. you can get a years supply of veggies (1 person), for 250.00 (us) or basic entrays for just over a thousand. it is also helpfull to learn how to can food too.

Asset Protection Plan
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November 12, 2009 10:33 pm

I have no comment regarding this. I have read an article like this before. Let’s keep our heads up always. All the things that are happening in our economy right now sometime just reflect on how we live our lives. That’s just an opinion.

Gravity Switch
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October 30, 2008 1:45 pm

Thanks kickk — I too wonder how the current deflation (so much of money supply growth comes from banks lending money) will reconcile with what most expect will become inflation once all that money gets freed up and into the economy, it might be a wild ride. Who knows, it might remain balanced enough to avoid your two extremes, however, mass psychology is pretty hard to predict.

farley 5
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farley 5
October 30, 2008 2:21 pm

The banks are using the money to buy other banks – they have no intention to lend it out so we won’t see much money going into the economy.

gmcg
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gmcg
October 30, 2008 3:47 pm

I too think the Federal Reserve needs to be disbanded in its present form. However, what entity would be its replacement — the US Treasury or Federal appointees? Who do we pressure for reform — Congress? If any person or organization proposes a viable option for replacing an entrenched power elite as is the Federal Reserve, they deserve our full support. Gumshoe readers: does anyone have some suggestions??

Meno
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Meno
October 30, 2008 5:27 pm

Well, I just think that the Treasury should print money and we should not be borrowing it from the privately held “Federal” reserve at high interest, for starters. Yet, no one seems too bothered by this.

farley 5
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farley 5
October 31, 2008 12:25 pm
Gold and silver may be a slam dunk 4 – 5 years from now. The current situation for gold and silver is normal for a world in a global recession. The $ trillion injected into the system is not being circulated. Banks are using the money to buy other banks. Insurance companies are buying other insurance companies. Normally, if a $10.00 is lent out, the banks must have $1.00 in reserves. That $10 multiplies in the economy by a factor of 7X. Right now, we don’t have that multiplyer effect because banks are not lending. Inflation is not a problem… Read more »
destry
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destry
October 31, 2008 9:55 pm
Henry, Nothing is ever a “slam dunk”. Precious metals being no exception…. Silver for instance, is a by-product of the smelting of other metals…If commodity prices are down, so to is the smelted supply of silver. Still and all; Precious metals are no more a safe haven, nor less volitile in this type of market than any other investment, or holding….Such things,called safe haven or recession resistant, just find their feet faster. I’ve owned Silver Wheaton…And GoldCorp…. If you favor precious metals, I’d go with Central Fund of Canada (CEF)…When recently I checked, it wasn’t at much of a premium…There… Read more »
farley 5
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farley 5
October 31, 2008 3:30 pm

Also remember, as the US Dollar goes up, gold and silver will go down. We are now the safe place to put money. We get millions a day from Argentina because their country is ready to default again. Paris payoff anyone?

Meno
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Meno
October 31, 2008 5:50 pm
Interesting. I read Agora, because I was impressed by two of their books about the collapse of the dollar. Yet, I did not buy gold as yet, because no one I know knows how to do it. The stock people don’t handle gold. but, he convinced me that gold is solid, when the dollar collapses. As you say, the dollar is going strong now, ironically, as our country collapses perhaps into the biggest depression since the Depression, for reasons I don’t quite grasp. How long, I do not know. I think this recession/depression is going to be longer and worse… Read more »
farley 5
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farley 5
October 31, 2008 9:05 pm
I don’t see a depression here. Perhaps other parts of the third world that depend on the world economy to buy their commodities. I think Argentina is the next oops. How to buy gold? I suppose E-Bay would be a start. I don’t know anything about coins so I would find a smart cookie in that area. If the US Dollar collapses, there may not be many supermarkets to buy anything so your gold would be no good. There are places in this world where you could do subsistance farming. I like Equador. I think the best advice about this… Read more »
Ingrid Perez gALLARDO
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Ingrid Perez gALLARDO
November 3, 2008 10:03 am

If you are interested in buying gold bullion or gold coins look at kitco.com or davidhall.com and Bert Blumert in San Francisco.The are solid cies and expedient.Good luck.

david
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November 13, 2008 11:28 am

Gold dealers are getting 9% premiums on gold bullion and 17% on silver. Home safes and guns are selling at record amounts. all three have one thing in common, fear. People would rather have gold in their homes at a 9% premium than buy GLD because they do not believe the bankers and government will pay them back. Hopefully we can get back to reality soon. This herd mentality can get out of control and make things alot worse. As they say if people are going to panic – you should panic first.

Gravity Switch
Admin
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November 7, 2008 11:02 pm

In the long run I’d personally prefer silver because it has physical uses beyond jewelry and I think it’s more undervalued at the moment, but I’m no particular expert on precious metals. Buffett did have some very significant investments in silver starting about ten years ago, at one point he owned a massive hoard of over 100 million ounces. As of 2006 or so, Buffett confirmed that he had sold all of Berkshire’s silver holdings, and I don’t think he’s said much about it since.

Bob Gifford
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Bob Gifford
November 8, 2008 1:44 pm

You could be right, the wind-fall billions Bush
gave big oil for exploration went to buy back
their own snares, whitch in turn, make them worth
more. So, it went into their own pockets.

Gravity Switch
Admin
11
November 13, 2008 11:37 am

Well put. Bullion coins look like they are going for even greater premiums in a lot of places, especially to the least informed customers on eBay. Makes me want to sell what little of these I own.

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