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Louis James
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Louis James' background in physics, economics, and technical writing prepared him well for his role as senior editor of the International Speculator and Casey Investment Alert. Like Doug Casey, Louis constantly travels the world, visiting highly prospective geological targets, grilling... More
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  • No Such Thing As A Sure Thing—But Sometimes It's Close

    In the investment world, there's no such thing as a sure thing, and if anyone tells you they have such an investment, you should run the other way. Fast. But sometimes, the odds are so clearly stacked in one direction that it comes pretty close.

    How can one be so sure? Due diligence, of course; the devil is in the details-and so is the profit.

    It's impossible to illustrate this without tooting my own horn a bit, so please bear with me on that. The point of the story is critical to investments in all sectors and should help you with your own.

    My sector-my specialty-is mining. I've been kicking rocks around the world for more than a decade now, learning geology and engineering and metallurgy from world-class experts in their fields. But the point is to make money, not just to figure out nature's geological puzzles, so I've also immersed myself in the world of legendary investors, learning all I can from their successes and failures.

    The result is that I now have an encyclopedia of mineral exploration and exploitation projects in my head, as well as experience with thousands of companies in the field-and the outcomes of their efforts. This enables me to very quickly sort the wheat from the chaff.

    I'm sure it won't surprise you if I say it's mostly chaff out there (I'm being polite), so the due-diligence "trick" is to disqualify an investment idea as quickly as possible. That way, you spend precious time digging deep into only the best opportunities and risk precious funds only on the very best of the best. I can knock out more than half of the pitches that come my way in 60 seconds or less, and I can knock another four out of five opportunities within five minutes. The real contenders can take hours or even days to thoroughly vet, depending on how responsive management is (or how clever they are about hiding potentially fatal flaws).

    Now we get to the part where the rubber really hits the road. When an investment opportunity looks great on paper and it has survived my best efforts to disqualify it, my MO is to go see the project in question. Due diligence in person-literally kicking the rocks in my case, on surface or underground-looking for that rarest of rare beasts: a metals deposit with clear evidence of the capacity to become a profitable mine.

    Usually the result of all this due diligence is a level of comfort; the opportunity has survived all my efforts to drop it, has a clear value proposition for investors, and looks like a reasonable speculation.

    It does happen sometimes-very rarely-that I come away from a due-diligence investigation thinking, "Wow! I can't believe the market has overlooked this great story."

    I can't honestly quantify it for you (I intend to keep track going forward), but I can tell you that when an opportunity impresses me this way, it almost always turns out to be a spectacular winner. It's never a sure thing, but the odds are great, and the returns… well, they're measured in three-digit percentages, or sometimes even four.

    A case in point would be a trip I took to see a high-grade gold project in Canada last year. I can't name the company in fairness to my paying subscribers, but it's a well-known story that fell from grace because the mine builder the company hired to take the project to production adopted much stricter criteria, slashing the "official" grade of the deposit. For technical reasons, this was the right thing to do, but the market hated the drop from ridiculously high grade to merely high grade.

    So the stock was selling cheap, but the question was: will the new mine plan deliver and send the share price back up again?

    On paper, it looked like the company was deliberately pursuing an "under-promise and over-deliver" policy, but when it comes to the reality of blasting a bunch of rock to rubble and shoveling it through a delicate chemical plant, there's really no way to know without inspecting the operation in person.

    Again, my usual hope is to fail to find any fatal flaws, leaving me with a reasonable speculation on a positive outcome that can "move the dial." This time, just about everything I saw exceeded my expectations:

    • No expense was spared on new, state-of-the art vital equipment, but not a penny was wasted on cosmetic foolishness or management perks.
    • Underground drilling right in the guts of the deposit was finding more gold than the company resource model predicted, not less.
    • Great pains were taken to ensure worker safety (even at its best, actual mining is still dangerous).
    • The project had major production cost advantages due to being located right in the heart of a prolific high-grade mining camp with plenty of water, power, and trained personnel available, as well as strong government and community support.
    • Nothing was sloppy; everything looked to be executed to the highest standards. The technical people all exhibited high levels of knowledge and competence.
    • Key point: the project looked far more advanced than the company's timetable for starting production implied it should be.

    That last point really impressed me. I came away convinced that the company would start producing gold sooner than anyone who hadn't been there would expect. That made this opportunity one of my top picks for 2015. And now the news is just out that I was right; the company has started processing ore earlier than forecast.

    As I write, the stock is up 45.6% from its 2014 low, which was hit last November, but due to the volatility in the gold market, it's still relatively cheap, making it a great speculation on my other forecast: that the mine will be profitable at current gold prices, can still make money at substantially lower gold prices, and will perform phenomenally well at higher gold prices. That's all to be determined, but I'm very bullish.

    The takeaway here is that it all comes down to due diligence. There are no sure things in the investment world, but serious due diligence can show objectively undervalued opportunities poised to deliver in spades.

    Granted, this is my specialty, but I've met individual investors in the field as often as I have other professional analysts, if not more so. It may not be easy, and parts of it may be boring, but it is something anyone can learn to do, and it's the key to stacking the investment odds in your favor.

    This is why I always say that if one wants to make serious money investing, one has to get serious about due diligence.

    For a glimpse at the kind of in-depth research that goes into every one of my recommendations, click here to read more on the mining company mentioned above. I don't expect shares to stay where they are for long.

    Tags: gold
    Apr 22 9:30 AM | Link | Comment!
  • A Cure For Metals Investor Malaise

    Markets fluctuate. Sectors cycle. Investors love and hate these facts, but we all know that if it were not so, it would be impossible to buy low and sell high.

    The problem, of course, is that no one can time the market consistently. That makes it hard to know when low is low enough to make buying a likely one-way street and when it's high enough to make selling a stroke of genius.

    But this is a good thing: if it were easy, anyone could do it, everyone would try, and there'd be no profit in it. It is the very fact that it's hard-that it takes true contrarian guts to bet against the herd and buy low, and buck the trend and sell high-that makes extraordinary profits in rational speculation possible.

    Still, hard is hard, and many would-be speculators end up buying high, when "everyone" says a market sector will keep rising, and selling low, when "everyone" hates the sector precisely because it has become objectively undervalued.

    And therein lies the key for maintaining one's contrarian courage: price and value are not the same thing. When price is objectively less than value, it's a fair bet that wherever the bottom is (just ahead or just behind), it's close enough to count as time to buy low. When price is objectively greater than value, it's a fair bet that wherever the top is, money in the bank today is better than evaporated, unrealized profits tomorrow.

    The good news is that there's a limit to the downside-dropping to effectively zero is gut-wrenching, but that's the limit-while there is literally no limit to the upside. So, if one takes profits along the way, one can come out ahead, even without any stroke of genius at timing market tops.

    These are the facts and logic that drive resource speculators to do what they do, to the bemusement of mainstream investors. But facts and logic are rarely as persuasive as they should be, so we thought we'd share this new video from CEO.ca, which illustrates all of the above perfectly.

    This is the story of a man who turned a $20,000 speculation on junior resource stocks, some of which did drop to what he deemed to be effectively zero, into $15 million. Note that he doesn't speak of taking profits, but one look at the car he's driving shows that he did. This drives home the point of this article, because he admits that he completely failed to time the market, multiple times-and yet he came out ahead.

    Simple words, important lessons, highly recommended. This video just might be the cure for the Bottom Time Blues.

    Sometimes "investing mistakes" can turn out to be blessings in disguise. Watch these eight investment pros discuss how they invested in stocks that then plummeted up to 90%... and recovered to deliver mega-jackpots. Click here for the video.

    Tags: gold, invest
    Apr 01 2:24 PM | Link | Comment!
  • Will Gold Win Out Against The US Dollar?

    It is an essential impossibility to solve problems created by excess debt and artificial liquidity with more of the same. That's our credo here at Casey Research, and the reason why we believe the gold price will turn around and not only go higher, but much, much higher.

    While fellow investors around the world may not agree with gold-loving contrarians like us, they are buyers: gold is up in euros and almost everything else, except the dollar.

    The dollar's rise has been strong and seems all but unstoppable. But look at it in big-picture terms, as in the chart below, and ask yourself how sustainable the situation is.

    I'm skeptical of reading too much into such charts. A peak like the one in the early 1980s would certainly take the USD much higher, and for several years to come. But still, this is an aberration. It's not the new normal, but rather the new abnormal.

    More to the point, gold hasn't collapsed since the dollar began its latest surge last July. Just look at this one-year chart of gold vs. the US dollar. The dollar is up sharply (in EUR, as a proxy for everything-not-the-dollar and for comparability to the chart below), but gold is only moderately down.

    Gold has been trading almost sideways over the last year.

    That might seem like damnation by faint praise, but it's critically important. With the USD skyrocketing and commodities plummeting, gold should be dropping like-well, like a gold balloon-if the critics are right and it has no practical value at all, except to dentists and fashion accessory designers.

    But gold is money, the best store of wealth millennia of human experience have devised, and more and more people are recognizing this.

    Consider this chart of gold vs. the euro, which documents my contention that people outside the US do not see gold as a barbarous relic, but as an essential holding to safeguard their future.

    Pretty much everywhere but in the US, gold is up, not down.

    This chart supports my view that gold rebounded last November when it breached its 2013 low because international buyers saw that as an opportunity. The US has gone from primarily exporting inflation to exporting gold and inflation.

    The fact that the dollar has risen faster than gold has dropped has important, positive effects on miners operating outside the US. If costs are paid in Canadian dollars, Mexican pesos, euros, or really hard-hit currencies like the Brazilian real, then those costs have just gone way down relative to the price of gold.

    Of course, there's a good chance that there'll be more sell-offs before the gold bull resumes its charge… but they should be regarded as opportunities. Because once the gold market rises again, the best small-cap mining stocks have the potential to go vertical.

    Watch eight industry experts discuss where we are in the gold cycle, and how to prepare your portfolio for gains of up to 500% or even 1,000%, in Casey's recent online event, GOING VERTICAL. Click here for the video.

    Tags: gold
    Mar 31 1:04 PM | Link | Comment!
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