“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
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 …
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.