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Fiat Currencies Always Die. Is This One Different?

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Our professors and partners have come from as far away as Australia to contribute their wisdom and guidance. Throughout the next two days we will be highlighting some of their ideas on managing risk and staying in the game as catalysts for discussion.

Approach:


-Employ fundamentally driven analysis, including close monitoring of physical metal markets, while using proprietary timing models to enter and exit trades/positions. The physical market is more important than many acknowledge or realize.
-Principal protection versus appreciation as a prime driver of my strategy and process.
-Financial market history and crowd behavior is significant in any analysis.
-I manage very different timeframes depending on market conditions.
-High cost/marginal producers versus low cost producers. We chase the biggest bang for our buck.

Key Themes:

-Paper versus physical metal - they are not the same.
-Silver is the world's most undervalued commodity.
-Fiat currencies always die. Is this one different? Precious metals are and have been money for 5,000 years.
-The optionality of metal equities
-High-cost versus low-cost producers...why?

Outlook for Financial Markets:

-A combination of inflation and deflation at the same time; Deflation of what people "want" and inflation of what they "need."
-A U.S. dollar crisis: too many dollars flooded the system this past decade. Gold and other commodities to rise, and not only in dollar terms.
-Equity markets could well stay high as more liquidity finds a home.
-Bond yields head higher as investors demand return for dollar risk.
-The re-emergence of gold as the "asset/money of last resort" as more dislocations occur in financial markets. A trickle of investors becoming a stream and so on.
-The physical metal markets start to assert their control over the pricing of the metal.
-Central banks start looking at the amount of gold in their portfolios, and not from the sell side.
-The property boom may continue for some time, but I wouldn't be counting on it. It will likely end sooner than many want and cause severe economic repercussions globally.

Thoughts on controlling risk and staying in the game:

-Liquidity is a huge issue in the precious metals markets. Can you comfortably get out of the position you have?
-75% of the money is made in 25% of the time. Size position accordingly. Pressing for return is dangerous. Timing is everything.
-Extreme market conditions occur more frequently and for longer than most anticipate. Beware of the "fat-tails."
-Metals equities are inherently risky. Expect to suffer unexpected fortune changes, both positively and negatively. Managing the negative is more important than the positive.
-What's the "worst" thing that could happen? How can you be prepared for it?

Outside Reading:

-The Power of Gold - Peter Bernstein
-The Money Miners - Trevor Sykes
-The One That Got Away - Chris Ryan
-Investment Biker - Jim Rogers
-The Bre-X Fraud - Willis and Goold
-The World of Gold - Timothy Green

If I could give one piece of advice to attendees:

The Fiat Currency system is fatally flawed. Gold and silver have been money for 5,000 years. Prudence dictates a proportion of one's wealth be stored in precious metals. I truly hope, for the sake of our kids, that we don't get anywhere near to where my analysis indicates that we may be headed.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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