Casey Research is out with a new Casey Report teaser ad about gold, and it’s strikingly similar to one that they ran back in November of 2016 (that’s about a year and a half ago, for those who are calendar-challenged).
Which is no big surprise — once a newsletter publisher finds a theme and a hook that work to get investors’ attention, they stick with it. Sometimes they even keep running the same ad every couple months for years with nary an edit (I’m looking at you, Motley Fool), but more likely they just come back to a very similar theme in future pitches.
And that seems to be the case here — “circle this date on your calendar” because that’s the day this mysterious event (that only we know about and understand!) is going to send the price of gold soaring.
Back in late 2016, it was the new adjustment to Shariah law that had Casey’s knickers twisted up — he thought that would be the cause of gold soaring to $5,000 starting on December 31.
And now, it’s March 31… with a couple catalysts around that date, mostly related to the expectation that the large Indian and Chinese gold markets will begin to demand more gold.
“… there’s another urgent gold catalyst that you’re NOT hearing from the financial media.
“One that almost certainly will drive gold to $5,000 and beyond.
“And I know precisely when this will happen.
“In short, a new law going into effect by the end of 2016 could send shockwaves through the gold market.
“I’m talking about…
“A ‘gold law’ that impacts 1.6 billion people… 32 major central banks…
“And 112 billionaires…
“A legal ruling that could send them all into a gold buying frenzy… the likes of which we’ve never seen before.”
That was following gold’s move from about $1,000 an ounce to $1,350 in 2016, which was certainly a lively year for gold stocks. Fast forward a bit, though, and we see that despite that “almost certain” move to $5,000 and beyond that was promoted, gold actually spent more time below $1,300 than above it over the past year and a half or so. Today it’s around $1,325, so if you found that Sharia law presentation compelling and think it’s just a matter of time, well, you haven’t missed anything yet.
And, P.S., it’s really hard to predict catalysts that will move whole segments of the market.
So yes, E.B. Tucker says that “My Firm Has Accurately Predicted EVERY Major Gold Move in the Last Half-Century” — and, to be fair, that could be true… it’s just that they’ve also predicted at least this one gold move that didn’t happen, too.
I can’t pass on just a little snarkiness here: If you predict a major move in gold every few months, as seems to be the case for many of the newsletter pundits, odds are pretty good that you’re going to catch most of the actual big moves in the gold price and be “right” about those moves. Economists predict lots of recessions that don’t happen, gold bugs predict bull markets that don’t happen. C’est la vie.
The ad indicates that Doug Casey predicted big moves upward in gold in 1970, 1999, and 2009 and bought it and urged his readers to do so as well, right before major moves in the gold price — though I have no idea how many other times Casey recommended or “pounded the table” on gold over the past 50 years.
But now the catalyst that’s proposed (or promised, it might seem) is that India and China will be sucking up even more physical gold… largely thanks to their gold exchanges that will require actual gold backing for all trading.
That gets rid of the major complaint of gold bugs about the Comex gold futures trading (which really sets the global gold price and represents a large amount of what people think of as “gold” trading) — that Comex doesn’t have nearly enough gold on deposit to back up those futures contracts, so that “paper gold” isn’t nearly as valuable as physical gold in the event of catastrophe… and, if you believe the conspiracy talk, is regularly manipulated by JP Morgan and the other major banks who participate in the gold futures market because they want to keep prices under control (silver, too, but we’re talking about gold today).
So now, in 2018, the promise is eerily similar to that 2016 pitch…
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“March 31, 2018: New Legal Ruling Will Send Gold Higher Than Bitcoin…..
“You see, there’s an overlooked catalyst that’s poised to ignite the gold market, sending the ancient metal soaring past the price of bitcoin.
“And I know precisely when this will happen.
“By March 31, a new law will go into effect that sends shockwaves through the gold market.
“I’m talking about a new gold law that impacts…
“1.3 Billion People
“$1.1 TRILLION in Wealth
“And 82 Billionaires
“A legal ruling that could send them all into a gold buying frenzy… the likes of which we’ve never seen before.
“And you have just days to make a move, or miss out on the gold buying opportunity of a lifetime.”
And the $5,000 prediction isn’t enough any more, apparently, they have to up their game…
“… you’ll want to use another obscure gold trade unknown to most of the investing public.
“A trade that could return 27 TIMES more than simply holding bullion.
“That means if I’m right and gold soars to $10,000, most gold investors will see 8 times their money.
“Don’t get me wrong. That’s pretty solid. Especially in just a few months’ time.
“But if you use this type of gold trade, which historically has shown astronomical returns, you could instead make 200 times your money (or more).”
And they use a quote from Doug Casey that I’ve seen several times about this “secret” gold investment…
“According to Doug…
‘[This Gold Play] is About to Create a Whole New Class of Millionaires’
“But if you don’t want to miss out on the gold profit opportunity of the decade, you must take action now…
“Before this ‘gold law’ goes into effect…
“Before 1.3 billion people begin a gold buying frenzy…
“And before a TRILLION-DOLLAR tidal wave of cash disrupts the gold market.
“All of which is set to happen beginning March 31.”
So what is that big catalyst in India? Tucker says it’s a new physical metals exchange…
“India’s gold obsession actually hurts the economy.
“That’s because gold has zero productive value. It creates no jobs or consumer demand. It contributes nothing to economy.
“Yet most Indians refuse to trade their precious metals for cash, especially with a constant inflation.
“So the Indian government came up with a solution.
“A way to bring all of India’s gold wealth out of hiding—without taxes or confiscation—allowing Indians to generate capital for their gold, without actually losing possession.
“A gold price exchange, one that allows investors to buy and sell gold investments.
“And it’s backed by REAL physical gold bullion!
“By March 31, this Indian government will announce this new exchange, unleashing a new flood of gold into the market for the first time ever.”
The other two catalysts of note are the Chinese gold exchange, which is also requiring physical backing, and which is part of China’s effort to dominate the gold market — including their requirement that all gold mined in China be sold to the government and kept in China…
And the oft-cited (including back in 2016) catalyst that “peak gold” has arrived, because we’re no longer finding as many huge discoveries… and because exploration dollars dried up with the lack of financing in 2008 and with the collapse in gold prices a few years later, so the pipeline of new mines is not being refilled. Which is generally true, most analysts estimate that world gold supply has declined over the past two years and will continue to decline, though not all agree on whether the decline will be dramatic or precipitous.
Production, of course, is heavily influenced by price — if the price of gold surges to $2,000, there will be a heckuva lot more gold produced over the next few years as mines work more aggressively to expand or maximize production, and if it falls to $1,000 and stays there, production will drop sharply because a bunch of mines will shut down because they can’t be profitable at those prices.
So perhaps those things will be catalysts for the price of gold, though the March 31 date is not particularly “magical” and is probably in there more because newsletter ads need an imminent deadline in order to get your attention — India is trying to start up a network of spot gold exchanges, and it’s possible that they could be rolling the first one out as soon as April, but I wouldn’t bet the house on India’s bureaucracy moving rapidly… or on it having an immediate impact (and the conventional press is being much more cautious, as noted by the Bloomberg headline back in September that “India May Have a Spot Gold Exchange in 12 to 18 Months”).
It takes time to build a marketplace and build trust and get people to use it, and India is even working to some degree with the World Gold Council, which makes the gold bugs so very happy… so India remains a big part of the global gold consumption market, but I’d be wary about betting on the impact that will bring to the gold price on any given date.
But anyway, do we learn anything about what specifically Casey is touting?
Not really. The ad simply cites that there’s this “27X” opportunity if you buy gold in the right way, and that’s clearly a reference to buying speculative gold mining and exploration stocks — mostly “junior gold” stocks, but he doesn’t reference or hint at any specific ideas.
The only individual stock that Tucker and Casey hinted at back in the Fall of 2016, in the previous iteration of this pitch, was Northern Dynasty Minerals (NAK), which was certainly one of the more interesting stories at the time thanks to Donald Trump’s election win and their progress in the courts against the EPA (I speculated on it at the time, too, though am no longer invested in Northern Dynasty), but this time there are no hints dropped at all.
We do know about at least one stock that E.B. Tucker likes, so perhaps we can think of that as a starting point… that’s Metalla Royalty & Streaming (MTA.V in Toronto, MTAFF OTC in the US), a startup gold/silver royalty and streaming company that was effectively launched last year from the shell of what had been Excalibur Resources. E.B. Tucker is on the board of that company, and Casey holds shares along with some other newsletter-connected folks (like Adrian Day in Canada).
This is a little guy, but it’s not completely irrationally priced — and they do have a couple royalty deals that are actually producing cash right now, which is good to see in a very small company… though we should note that silver is the major driver of Metalla’s cash flow, not gold, and we’re now getting to the point that the royalty business is attracting a lot of capital and seems like it might be getting to be a “crowded trade” after the relative success that the big royalty companies have shown. It’s harder to build a royalty company now because it’s hard to buy meaningful deals without either taking risk or paying too much.
Part of the justification that Metalla makes for its own expectations about share price appreciation is that Metalla trades at a substantially lower multiple to cash flow than other early-stage cash-flowing royalty companies, of which there are very few — but they call out Maverix Metals (MMX.V, MACIF) as one comparable that is priced at a much higher cash flow multiple than Metalla, and that’s true. Maverix is in my Real Money Portfolio, and Metalla, at least on the surface, appeals to me for much the same reason Maverix did when I bought a few shares back in June.
Metalla should have substantial cash flow this year, mostly from the Endeavor Silver stream that they bought from Coeur in their large company-launching transaction last summer — so there should be roughly $4 million in net revenue coming just from that deal if silver stays near current prices, and they have other projects that are just about to start up… but the largest risk seems to be that Endeavor has only another year or so left on its mine plan after 2018, which is why they could buy this cash-flowing royalty (in a package of other royalties) for only $13 million last summer (mostly in shares, no less).
So the risk with that headline asset is that the royalty could dry up unless they expand the reserves and set a new plan for more mining. They probably will, and Endeavor’s owner CBH Resources has been exploring the surrounding area to boost reserves so they can continue to exploit the infrastructure resources in place at Endeavor… but that’s not a promise or a guarantee.
If it does work out well, Metalla is promising to distribute a lot of their cash flow — they pay a monthly dividend that’s currently small but measurable, paying about a 2% yield right now, but they say the goal is to pay out half of their operating cash flow, so it could grow substantially if these early royalties they’ve acquired work out (it could even reach 4-5% this year, if Endeavor meets expectations and they don’t blow a lot of cash on other costs) … though, on the flip side, that dividend policy also means they will not be able to grow revenue per share as quickly, since over time that dividend policy means they won’t have as much cash to reinvest in new streaming deals. You can see Metalla’s investor presentation here if you’d like to start looking into this one.
So… that’s perhaps worthy of some time to investigate, though I doubt it’s actually being recommended by the Casey Report (not sure whether Tucker is allowed to recommend stocks he owns, or where he sits on the board, and this one might also be too small for a large newsletter to cover).
What else might be a “27X your money” speculation from Doug Casey and E.B. Tucker? Do you think India’s nascent gold exchanges will change gold pricing this year? I’ll leave it to you to throw your suggestions and opinions on the pile… have a directional argument to make, or an appealing junior gold stock you see? Let us know with a comment below.