Crisis = Danger + Opportunity

Crisis Investing, overlooked opportunities, and the ultimate way to make money

"The time to buy is when there's blood in the streets, even if the blood is your own.”

~ Baron Rothschild

I published “Crisis Investing” in 1979. It became a New York Times bestseller for 34 weeks, and #1 for 19 weeks.

That same year, I started writing a newsletter of the same name. For its logo, I used the Chinese symbol for crisis, which is a combination of the symbol for “danger” and the symbol for “opportunity”. Most people just see danger. Opportunity may not be quite so obvious as the danger, but it’s always there.

It was a very different time back then, with 18% interest rates and no internet, but the above formula remains true today. Our world is still plagued by all sorts of crises that, despite the risks they pose, also present extraordinary opportunities.

Speculating in crisis markets remains the ultimate way to make money, which means buying when nobody else wants to buy.

Case in point: mining stocks.

Now, if you know me, you probably also know my views on mining. It’s a lousy, costly, 19th century business. Companies have to spend millions looking for prospects, and they usually fail. If they do find something, that's where the trouble really starts. It can take a decade or more just to get a mine up and running, with most of that time spent waiting on permits and red tape.

That said, mining offers many opportunities for investors to profit. And there are moments when you can make spectacular returns if you invest in the right mining stocks.

And now is a great time to do just that. That's because mining stocks are extremely cheap right now. Just take a look at this chart of the S&P/TSX Venture Composite Index.

The index tracks the Canadian TSX Venture exchange, home to numerous small and mid-cap mining stocks, and it’s down more than 83% from its 2007 highs.

I have always been a big believer in making the trend your friend... and the real money is in getting in ahead of the masses.

I believe that mining is in such a spot right now, and gold mining in particular.

And as you probably know, I'm a fan of gold. It's real money, not fiat paper masquerading as money. It stands against the notion that governments can endlessly accumulate debt, bail out banks, and print money like there's no tomorrow.

Gold is a reliable hedge against this kind of uncertainty, and lately, uncertainty seems to be the only certainty. Weak corporate earnings, economies built on debt, slowdowns in both the U.S. and China – the world's two largest economies – along with increasing political instability and wars... It’s an endless list.

The yellow metal’s ongoing rally is strong evidence of that. Just yesterday, gold surged to a record high of $2,141 per troy ounce. Unlike previous spikes triggered by major financial crises like the Lehman collapse, this surge is largely driven by general instability.

This performance is quite unusual in a high-interest-rate environment, such as this. My hunch is that it points to something seriously broken in our economy, which could become apparent as soon as this year.

The Fed has been in a tightening cycle since 2022. But you can bet that they'll quickly revert to printing money at full throttle once trouble hits.

To see what I mean, let's roll back a couple of years to the COVID-19 hysteria. The U.S. stock market was crashing, so the Fed fired up its printing press.

Between 2020 and 2021, the Fed’s broadest measure of the money supply, called M2, rose by an astonishing $6.1 trillion. That was a two-year increase of nearly 40%.

For perspective, the U.S. Gross Domestic Product (GDP) is about $23 trillion. So, it was more than one-fourth of what all 332 million people in America produce in a year.

You can see that spike in this chart.

And that was before we were on the verge of a massive global conflict, like what's unfolding right now in the Ukraine. We haven't seen a crisis this serious since the Cuban Missile Crisis in 1962.

No, it was the spread of a flu-like virus – trivial for everyone except the very old or very sick – that made the Fed discard all vestiges of sanity and ramp up money printing to unprecedented levels.

This should give you some idea of what the Fed will do when the real crisis hits.

But there’s no better safeguard against the Fed's reckless money printing and various crises, including war, than gold. Its track record speaks for itself.

For instance, the price of gold rose from $35 to $850 dollars per ounce between 1971 and 1980. That’s a gain of more than 2,300%. And that’s just for holding the metal itself… many gold miners fared much better.

Looking back, what's happening now actually reminds me a lot of that time. That's actually when I first predicted a Greater Depression.

Me on the Phil Donahue Show around the time I made my “Greater Depression” prediction.

And it was for good reason...

The 1970s and early 1980s were characterized by high inflation, soaring oil prices, geopolitical tensions, and economic uncertainty. A lot like right now. To make a long story short, things were bad. So bad, in fact, that it drove investors toward gold as a safe-haven asset en masse. And this led to gold reaching $850, or about $2,600 in today's dollars. You can see this in the chart below.

There was also a massive rise in gold prices between the global financial crisis of September 2008 and October 2011. Gold soared about 170% to $1,900 per ounce. That’s in just three years.

The other thing that should jump out at you from the graph above is that despite the recent rally to over $2,100 per ounce, we're still far from the 1980 all-time high when adjusted for inflation.

And since gold is the only financial asset that’s not simultaneously someone else’s liability, it’s absolutely headed much higher.

There’s just no way I see any of the troubles I highlighted earlier letting up. Particularly since the Fed will likely start cutting rates this year, leading to a weaker U.S. dollar.

So, when I look at the companies in the gold sector these days, I'm interested... It lines up with my strategy of seeking out promising opportunities in neglected markets. This is what allows us to buy cheap and, if we are right, sell high as the crowds rush in. Which they will.

That’s also the reason we’ve recently launched a new advisory called Crisis Investing, a nod to the book I mentioned earlier. The crisis we’re in the early stages of will have severe financial, economic, political, social, and military implications. We’re looking at the Greater Depression that will be worse, different, and longer lasting than the unpleasantness of 1929-1946, never mind those of the 1970s and 2008. So, it's fitting that the first issue focuses on a gold mining stock.

That being said, the purpose of this service goes beyond simply helping you choose mining stocks. It will cover the whole waterfront. Precious metals, energy, shipping, agriculture, foreign markets, technology, and many other sectors.

The idea is to find opportunity where most see danger. And seek safety and profits in what will be very turbulent times.

Regards,

Doug Casey