Eight Takeaways from Cambridge House Investment Conference

I am not typically fond of conferences, but the Cambridge House Phoenix Resource Investment Conference and Silver Summit was packed with the industry’s top analysts, thinkers and newsletter writers. It also showcased several promising junior miners and was well-attended by gold bugs from across the spectrum. Speakers included Peter Grandich, Jason Hommel, Bill Murphy, Thom Calandra, Ted Butler, Greg McCoach, Jay Taylor, Roger Wiegand, David Morgan and Al Korelin.

Here are some of my key takeaways from the conference:

1. Most of the speakers were expecting the general market to rally and gold to correct in the short-term. This is expected to last anywhere from a few weeks to two months, with an expectation that the market downtrend will accelerate around the April-May timeframe, due to a second round of foreclosures, credit card and auto loan issues and CDS risk, which is estimated at $500-$750 TRILLION. Gold stocks could be dragged down during this time frame as investors move to cash and throw out the proverbial baby with the bath water. Stay clear of REITs as real estate has much further to fall.
2. The dollar rally could continue throughout 2009, but precious metals have decoupled and can rally along with the dollar. Deflation will quickly turn into hyperinflation without much warning and this is expected to occur sometime in early 2010.
3. The Obama stimulus package will only exasperate the problem as it is utilizing the same tactics that got us into this mess in an attempt to solve it. It will not work and while it may delay the pain, it will only make the end result more severe. The U.S. government and Fed are incapable of pulling us out of this mess. Either Citigroup (C) or Bank of America (BAC) will be nationalized before the end of the year. Stay clear of financial stocks.
4. The economic crisis is global with European banks in even worse condition than U.S. banks. The current recession will turn into a depression with the potential to be much worse than The Great Depression of 1929.
5. Silver will outperform gold significantly during the next upleg, as the gold/silver ratio is far too high and above historic norms. There is less investment-grade silver above ground than gold. With such a small silver market, the Barclay’s ETF continuing to increase their holdings at such a fast pace and signs of shortages in several forms of silver, we could see the price go ballistic if only a small fraction of investment dollars enter the silver market.
6. Get out of debt as soon as possible and make sure to hold 10-30% of your wealth in physical gold and silver bullion. Store it in a safe that is cemented/bolted into the ground and hidden. Do not trust ETFs, certificates or bank safety deposit boxes.
7. The bond market is the next big bubble to pop and investors can profit from this by owning UltraShort 20+ Year Treasury ProShares (TBT).
8. To prepare for the upcoming depression: Get a food storage, have a safe haven place to go in case of trouble, be able to protect yourself and family, learn to garden and build closer local communities, help to educate and prepare others and of course, own physical gold and silver.

I have been writing about many of these very ideas for some time now, but there were also plenty of new concepts and angles presented over the weekend. Unfortunately, the outlook is not very bright for the U.S. or global economy and it looks like we are headed for very difficult times. My goal is to understand the scope, potential and proximity of these events and then determine the best ways to protect capital and profit going forward. I am by no means a doom and gloomer, but I believe it is prudent to hope for the best and prepare for the worst.

I met with the presidents of several junior mining companies and discussed their plans, properties, financing situation, production forecasts and expectations in the near term. I also met many of the speakers, analysts and newsletter writers and had discussions about recent developments with junior miners and the companies they believed had the most upside potential going forward. We discussed companies that have just made huge discoveries and others that are about to move into production for the first time. I am in the process of researching these companies and will summarize my findings and make recommendations to premium subscribers in the March 1st edition of our newsletter, Road Less Traveled.

Comments

[mr freddo:]

I agree with the author that we are headed into difficult times and should be prepared with food storage. Last week I went out and shopped for long shelf life foods and also bought seeds which are now sprouting. I also loaded up on wine and vodka. My thought is to be able to live in my house for at least a month without having to venture outside.

I am concerned about the counter party risks of GLD and SLV and have added TBT and GDX recently.

Thanks for the conference update.

Feb 24 03:18 AM

[Hedged In:]

Thank you for this useful and well written summary, Jason. Perhaps the most interesting points (for those of us who are not gold bugs) are that even the gold bugs:
(1) expect a short term correction in gold,
(2) think that another leg down in the equities markets in April or May could drag down gold stocks, and
(3) believe that silver has more medium term upside than gold.

The gold bugs' advice to "prepare for the upcoming depression" by buying food and "protection for your family" (aka a gun) and hoarding physical gold in an underground safe in your house reminds me of the panic before Y2K. (Enough said.)

On the bullishness on silver: What are your thoughts on the comments on the gold-silver ratio in this article? seekingalpha.com/artic...

Thanks again.

Feb 24 03:43 AM

[Conan the B...:]

The Next shoe to drop will not be related to The Banking Sector. At least if the Rumors of a $60 Billion loss at AIG are to be believed...supposedly they will announce this on Monday.

If So, all other Bankruptcies including that of Lehman will pale by the magnitude of AIG's demise.

Feb 24 04:54 AM

[Roger Knights:]

Typo: "exasperate the problem"--Make that "exacerbate."

Feb 24 05:58 AM

[svosavvy:]

neo classic drivel. Maybe I should get long campbells soup. We are paying the price for applying tax breaks instead of the tax brakes during our rampant expansion these last few years.

Feb 24 08:10 AM

[odessa88:]

as y2k was aproaching I remember reading all the same drivel.

Feb 24 08:30 AM

[veryold:]

you mean exacerbate.

Feb 24 11:05 AM

[Jason Hamlin:]

Thanks for the comments and correction on exacerbate.

In response to the article on the gold/silver ratio, I agree with the author. Silver tends to lag and has been punished to some extent by declining industrial demand. However, the relatively tiny size of the silver market, affordability and fact that it will serve as a better currency than gold (if/when fiat currencies collapse), give it the potential to significantly outperform gold when the mania begins. I also agree that oil prices will trend higher once the market stabilizes or the decline slows.

Lastly, comparing our current economic crisis to the Y2K scare is laughable and shortsighted. We are already witnessing people losing 50% or more of their wealth, unemployment skyrocketing, states issuing IOUs because they are bankrupt, grocery stores closing, ammunition shortages and price spikes, bailouts on the scope never before imagined and talk of nationalization of the largest banks. These things are already occurring, not some fringe fear of what *might* occur, like the Y2K scare.

I am not saying that food shortages and civil unrest are a certainty, only that it is prudent to prepare for the worst under current circumstances. You can write off these concerns as "drivel" at your own peril.

Feb 24 02:13 PM

[svosavvy:]

Where on earth are there ammunition shortages, not in the US that's for sure. Prepared for the worst has been my m.o. since I was a kid, "be prepared" as the old motto goes. As far as tenet #8 up there having a safe haven place and knowing how to operate a firearm and garden are common skills for good times or bad. I would like it if only people who went through the great depression would talk about it, seems to me they are the only ones qualified. From what I can see the only thing we have in common with that time period is the potential for gigantic deflation (which would crush gold). Where is the dust bowl? Food is cheaper than ever and getting cheaper through deflation. More available than ever (in the U.S.). I would concede that we will probably see some social unrest. As far as safe havens go, the second you buy goods with your precious metal someone will probably get wise and rob you, what's safe about that? About the only reason I even care to post at these stories is that this sensational stuff gets the locals wound up and then the rest of us have to listen to it.

Feb 24 03:58 PM

[Rochester:]

I guess you got spanked today


On Feb 24 03:18 AM mr freddo wrote:

> I agree with the author that we are headed into difficult times and
> should be prepared with food storage. Last week I went out and shopped
> for long shelf life foods and also bought seeds which are now sprouting.
> I also loaded up on wine and vodka. My thought is to be able to live
> in my house for at least a month without having to venture outside.
>
>
> I am concerned about the counter party risks of GLD and SLV and have
> added TBT and GDX recently.
>
> Thanks for the conference update.

Feb 24 07:33 PM