Doing nothing while collecting royalties has to be one of the best ― and easiest ― ways to get rich. For instance, David Sengstack does nothing and collects royalty paychecks of $2 million per year... just because his dad was smart enough to buy the commercial rights to a song you've sung a hundred times, "Happy Birthday to You."
Michael Jackson does nothing and collects royalties every time a Beatles song plays on the radio (he bought the rights years ago). But Paul McCartney ― now a billionaire ― does nothing and collects even more on the 3,000 song rights from other artists that he owns.
Paul Newman made plenty acting. But licensing his name piles up even more donations for his favorite charities ― over $200 million so far ― from royalties on the Newman's Own food line.
Even boxer George Foreman does better doing nothing than he did fighting in the ring, thanks to the $137 million royalty checks he gets for lending his name to a grill.
No wonder the world's richest investor calls collecting royalties the best business in the world. It's literally one of the easiest ways to do nothing and "make money while you sleep."
What might shock you is that there actually IS a way for anybody to tap into a pool of growing royalties... wealth that piles up by itself... that, ultimately, could be worth more than the entire Beatles catalog, all the commercial rights to "Happy Birthday," and the total value of the top 25 most expensive works of art in the world... combined.
And you can set it up in less than five minutes.
I call it the "Chaffee Royalty" program, after a former schoolteacher and wealthy American millionaire, Jerome B. Chaffee. Just like people who make a living collecting royalty checks, you don't need to do anything once you've tapped into the program.
You just sit back and watch the money pile up.
8 Americans Who Just Cashed in on "Chaffee Royalties"
Even though I'm almost positive you've never heard of "Chaffee Royalties," some of America's wealthiest families have ― though by another name. In fact, it's a secret that's made more than a few Americans exceedingly rich.
Robert Friedland made millions of dollars when his "Chaffee Royalty" holdings jumped in value from $4 to $167 in just two years
George Hearst borrowed the $3,000 he used to buy his way into "Chaffee Royalties" in Nevada. Within months, his stake had grown to $91,000 ― money he used to buy even more royalty rights, which ultimately launched his empire
Jim Fair, a former Illinois farmer, got so rich with his "Chaffee Royalties" he was able to hand his daughter a $1 million check as a wedding present
William O'Brien earned enough from his "Chaffee Royalties" to make him one of the 100 richest Americans of all time
Former California carpenter John Mackay scraped together $500 to buy his first share in a "Chaffee Royalty" program. He made enough to build a mansion surrounded by 70 acres of land and formal gardens for his son
E.J. "Lucky" Baldwin parked his last $800 in "Chaffee Royalties" while living in Virginia City, Nev. By the time he was through, he'd piled up royalty wealth worth over $5 million
James Flood, who came to the U.S. with next to nothing, got so rich on "Chaffee Royalties" he was able to build a beautiful sandstone home on top of San Francisco's famous Nob Hill. It's still there today
Then there's Stanley Dempsey. A lawyer who quit law and put his money into "Chaffee Royalty" contracts now makes his living collecting on 23 different streams of royalty income. Forbes even featured Dempsey and called his fortune "virtual gold," since he barely has to do or run anything to keep the money rolling in.
But there's no reason you can't collect anytime you like.
In fact, now that these "Chaffee Royalty" programs trade directly on the stock exchange, you can get in anytime you like. And with the right timing, you can get in at a very good price. And then start seeing gains from "Chaffee Royalties" immediately.
This is the situation we're in right now.
Which is why I'm writing you today.
See, in 2002, one of the most impressive "Chaffee Royalty" opportunities of all time closed its doors to new funds, just after delivering a 50-to-1 payoff for its earliest "members."
Today, that opportunity is back.
And for reasons I'll share, the timing now is better than ever.
What's more, today, there's more than one way to lock into "Chaffee Royalties." And one of those options, according to research that took me nine months to pull together, could pay out even better than what was once the most profitable "Chaffee Royalty" opportunity of all time.
We'll get to those details.
But first, let's start at the beginning...
The "Chaffee Royalty Program" That Changed America
Jerome B. Chaffee didn't make enough as a schoolteacher. So he took a job as a sales clerk in a dry goods store. Then he took that money and started a dry goods store of his own.
When that wasn't enough, he packed his bags and went to Colorado in 1860.
See, Colorado then ― as right now ― was mineral rich. And even though Chaffee knew next to nothing about mining, he saw the possibilities. And started snapping up the "royalty rights" on as many gold and silver claims as he could afford.
Every time one started to pay off, he bought more. Until he had a business making between $300,000�500,000 per year ― or as much as $17.3 million today.
Suddenly the ex-schoolteacher was very rich. And powerful.
Chaffee took up politics, pushing for laws that would lock in the same kinds of opportunities for everybody. He even went to Washington and became a senator ― and a friend of the president, Ulysses S. Grant.
Chaffee's own daughter even married the president's son, Ulysses S. Grant Jr.!
In 1872, Grant expanded on protecting the resource rights that Chaffee championed by signing the General Mining Act, a law that still safeguards mineral rights today... has already created countless American millionaires... and helped blow open the gateway to the American West.
"Chaffee Royalties" let you tap into rich mineral rights more easily than so many others did years ago. You don't need a lot to get started. In fact, you do practically nothing. Even as the rich resource wealth piles up.
I've done all the legwork already. It's written up in my newest research report, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep.
You cannot buy this report anywhere. However, at the end of this letter, I can show you how to download your own copy very easily. Inside, you'll find details on why now is easily the best time in history to make money tapping into "Chaffee Royalties."
I then go ahead and name for you my top five favorite ways to get started, including the No. 1 "Chaffee Royalty" opportunity available today.
And getting in right now won't cost you more than about $6 per share.
Almost Nothing to Get Started. . .Provided You Act on This Quickly
The better known these "Chaffee Royalty" opportunities become, the faster the entry price goes up. That's just the way they work. Simply because new capital lets them add even more rich royalty streams, increasing the value of the program for shareholders.
For instance, in my report, I tell you about one royalty-collecting group that let in new "members" for just $3 per share as recently as June 2005. But as royalty assets grew, so did the cost of entry ― up to $19 per share today.
That's a 530% return if you got in early. I see it going still higher, but the longer you wait, the more of these gains you'll miss out on in the future.
Then there's another one of these unique "Chaffee Royalty" opportunities I name in the report that first hit the open market at just $1.10. As of this writing, it's already asking new "members" for $32 per share. That's a solid 2,809% return so far ― turning every $5,000 into well over $140,000.
While I see still more ahead, this, too, is far from the best gain I expect you to have the opportunity to make. In fact, one of the most famous "Chaffee Royalty" plays of all time ― which I'll tell you about in detail in just a second ― soared from just a few dollars per share to more than $180 per share before it was through.
Anyone with the luck to get in early had the chance to make as much as $50 for every $1 invested ― or $250,000 for every $5,000. And then, in 2002, this particular "Chaffee Royalty" miracle closed its doors to new investors.
As you'll see, it's back again. And already piling up new royalty stream income for the new wave of shareholders. You can easily move on this right now. But before you do, let me show you a way I believe you can do even better than by revisiting any of these already time-tested "Chaffee Royalty" moves.
Again, it's all in my new report, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep.
So why haven't you heard of "Chaffee Royalties" before?
Because most mainstream headlines don't look deep enough into the deals to discover them. At least, not until the early opportunities are long gone.
As an ex-commercial banker who used to handle $400 million contracts for breakfast, looking deep behind the scenes... for Special Situations like this... is my specialty.
That's what first got me looking into "Chaffee Royalties" as a unique new way for investors to get very rich. It's also what has me convinced, along with some very smart and very rich investors, that this may be one of the best undiscovered ways to "make money while you sleep" available today.
But there's something else...
Because today, with the massive global credit crisis... soaring energy costs... and the systematic destruction of your dollar-denominated savings... this is also the best market ever to start looking at these "Chaffee Royalty" programs as a way to build wealth.
Why? I lay it all out for you in my new report, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep, which can act as a valuable "primer" on exactly how to tap into this new wave of royalty-backed riches.
Here's a glimpse of what you'll find...
Big Mining Gains Without the Usual Big Risks
All the value in "Chaffee Royalties" is backed by real resource wealth.
Oil. Gas. Gold and silver. Copper. Nickel. Diamonds.
But the beauty of these royalty streams isn't just the hard asset value that's behind them.
Instead, it's the fact that... as you watch the wealth pile up... you do it with none of the major risks that most mineral and hard asset investors face.
How so?
That's the unique opportunity with "Chaffee Royalties."
They're designed to deliver all the upside of the world's rich mineral wealth. But without passing on any of the major exploration, management or environmental costs of mining or drilling to the end shareholders.
Imagine, for instance, if you could own a "piece" of Apple's iPod sales... without paying a nickel toward the operating costs, research or advertising.
Imagine if you could collect Google's ad sales... or Exxon Mobil's oil revenue... without forking over for employee salaries, building and maintaining headquarters, or any of those other costs that typically nickel-and-dime shareholders out of gains.
"Chaffee Royalties" let you do that, backed by pure gains on some of the most valuable mineral and other raw resource deposits in the world.
No Better Time Than NOW to Take Advantage of "Chaffee Royalties"
Right now, resource companies are lining up to swap some of their gross profits for these royalty programs. Why would they do that?
It's simple.
See, right now, the global credit crunch is just one of the forces destroying the U.S. dollar. And that, plus unstoppable Asian demand, has sent the value of gold... silver... copper... nickel... zinc... lead... and just about every other mineral asset you can name... soaring.
That's great for anyone who produces or sells those resources.
Trouble is, as energy prices go up, so do the operating and production costs for the miners. So if they want to expand to capitalize on the resource boom, they need money.
Usually, that money comes from the banks. But the banks don 't want to make any new loans today. And the resource companies themselves ― like Barrick Gold and Newmont Mining ― just don't have the cash flow to take up the slack.
So they turn to the royalty companies instead, trading big loans for future profits on the huge piles of resources they're drawing out of the ground.
As long as the minerals keep coming up... and the market keeps begging for more... these royalty companies and their program "members" get rich, without ever owning an inch of dirt or worrying about running the actual mining business.
It's that simple. And right now may be the best time in history to be a part of the "Chaffee Royalty" trend. Even the Financial Post recently reported:
"Today, the last thing many investors want is operating control. Mining companies are fighting staggering capital cost increases due to soaring demand for labor and equipment, as well as fuel and power. The beauty of the royalty model is that it gives investors all the exposure on the revenue side and none on the cost side."
The Financial Post went on to say, "[Chaffee Royalties] are the low-risk way to play the mining game" and the "ideal way to get lower-risk exposure" to gold, energy and other resource wealth.
No work. No major worries. No management.
Just royalty riches.
Here's a great example...
Up to 50 Times Your Money. . .Without Getting Your Hands Dirty
The Goldstrike mine ― in northeastern Nevada ― is one of the best producing and most profitable gold mines in the world.
Millions of dollars are spent pulling out and processing as much as 35,000 tons of rock per day. Year after year. More than 1,600 employees work the site.
That's nearly the same size as the whole population of nearby Carlin, Nev.
Anyone who owned a piece of Goldstrike made a fortune.
Pierre Lassonde was one of them. But Pierre never actually owned the mine. He never actually hired a mining team, either. Or spent every day on the mining site.
Instead, he had a better plan.
See, at the time, Pierre was one of the top gold analysts in Canada, with more than 25 years of mining experience. And, though he knew early about the potential at the Goldstrike site, what he also knew was that he could get rich without having to do the work.
Because he'd worked out a way to let someone else do it for him while he collected the "Chaffee Royalties" we've just talked about. And he did. To the tune of many millions of dollars.
Not just for himself.
But for the shareholders who helped "back" Pierre on the deal...
The Laziest, Low-Risk Road to Mining Riches
You might still remember Pierre's company. It was called Franco-Nevada, and at the start, it was pretty tiny. Some mining companies have as many as 30,000 or more employees worldwide.
Pierre's company started with just two ― himself and a partner.
And his plan was not to own an actual piece of the rich Goldstrike property ― but to dedicate Franco-Nevada's assets to buying only the "Chaffee Royalty" rights to Goldstrike instead.
And when Goldstrike hit big on gold, the royalty money started pouring into Franco-Nevada. And all Pierre and his team had to do was rake it in.
In those early days, you could have picked up Franco-Nevada shares for just a few dollars... and then watched them soar to well over $180.
By the time Franco-Nevada got snapped up in 2002, it had ballooned from a tiny $2.3 million firm... to a company worth the $2.9 billion shelled out by Newmont Mining... which saw the writing on the wall and bought up Franco-Nevada's whole portfolio of royalty deals in one grab.
With the buyout, your chance to get in on the original Franco-Nevada pool of "Chaffee Royalties" ended. Pierre Lassonde took over as Newmont's new president. Until recently, he even chaired the World Gold Council.
But Pierre never forgot what a low-maintenance income bonanza he had with Franco-Nevada. And just recently, at the tail end of 2007, he tried to quietly bring Franco-Nevada back onto the public market. News still traveled fast, and Franco's IPO hauled in a record $1.2 billion.
Here's the beauty of this new arrangement.
Franco-Nevada held onto a pile of royalty contracts, even while under Newmont's shadow. And now, with its IPO money, it's perfectly positioned to snap up even more.
This is just one reason why "Chaffee Royalties" could very well be the safest way, right now, for you to play this ongoing global scramble for commodities. And by the way, the new Franco-Nevada could also be one of the better ways for you to play this opportunity, too.
However, I'm convinced I've found one that's even better.
Right now, it's still very small. Just as Franco-Nevada was at the beginning. And you can still get in at that early, easy entry stage.
Because it's so small, I can't possibly name it here. That wouldn't be fair to the small group of individuals who pay to follow my research on these specialized, lesser-known opportunities.
There is, however, a way I can share this with you.
Which I'd like to tell you about right now...
The Next Franco-Nevada
In my new report, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep, I give you everything I've found ― after nine months of deep research ― on the best of the "Chaffee Royalty" opportunities open to you right now.
But the one I recommend first to my readers and friends is one I can't resist telling you a little more about right now.
If you've ever flown across the Atlantic, there's a good chance you've seen it.
Or at least, you've see the "crown jewel" assets that make this still undiscovered "Chaffee Royalty" opportunity so rich. It's called Voisey's Bay. And it's one of the most valuable piles of ice and rock ever discovered.
From a plane window, it looks like a map made of elephant skin. Nothing but frozen rivers and gnarled earth, stretched out as far as you can see.
But underneath, you'll find as much as $50 billion worth of mineral wealth. Discovered in 1993, it's already making fortunes. Not on gold or silver, but on some of the world's richest deposits of copper, cobalt and ― mostly ― nickel.
And it's the nickel that should to continue to make many more people very rich. Including anybody who holds a "Chaffee Royalty" deal on those same vast nickel deposits.
Let me just show you why...
You need nickel to make steel. And China churned through 7.5 million tons of stainless steel last year. It'll produce 9 million tons before the end of this year
Over 65% of world nickel demand goes into the making of high-grade stainless steel
Even in a slowdown, China needs to build railroads to transport energy and cities to house their exploding population. For both, China desperately needs stainless steel
China alone uses up six times more nickel now than it did in 2000
In the last five years, Chinese nickel demand surged from 50,000 tons of nickel per year... to over 200,000 tons. No other country consumes as much.
Global nickel demand could surge another 10% before 2009
As with all metals, nickel prices fluctuate. But top metals analyst still see nickel prices spiking as high as $20 before the end of 2008.
You can see how this shapes up.
And buried deep in Voisey's Bay, you'll find one of the world's largest and highest-grade nickel deposits ― and easily the richest Canadian mineral discovery of the last 40 years.
There's easily enough nickel here to make this one deposit a cash cow mine for the next 20�25 years. If you want to own just the direct mining shares, you can look to a Brazilian company ― Companhia Vale do Rio Doce (CVRD) ― which owns and works the property.
But before you do, let me show you an even easier way...
Getting Paid for Just Breathing
Because CVRD does all its own exploration at Voisey's Bay, it pays for it. And so do its shareholders. They pay for the digging. They pay to process the tons of rock. They pay to get all the copper, cobalt and nickel ready for sale on the open market.
Sure, they make money. But they spend money, too. A TON of it.
So far, more than $1 billion just on developing CVRD's properties in this one area. That's nothing to sneeze at, even if the price of nickel is soaring. But I can show you how to tap the "Chaffee Royalties" tied to those same minerals so you can take profits without the costs of running a mine...
Without the major cost concerns.
Without even worrying whether or not the price of nickel will go up.
You see, right now, there's another company in Voisey's Bay doing what Franco-Nevada did so early in its own legendary march toward blockbuster 50-fold gains.
This company, like Franco, traded some early investment capital for the unique "Chaffee Royalties" rights connected with Voisey's Bay nickel. And now it's offering a piece of those royalties to you, as a potential shareholder.
This is a very rare opportunity.
It's not so difficult today to find other companies offering "Chaffee Royalties." But it's not as easy to find one in as early a stage as this one. With a share prices that's still this low... and nearly 100 royalty contracts either already producing or about to produce potential gains for new shareholders.
Remember, one of the "Chaffee Royalty" companies I told you about jumped from $3 per share to $19 very quickly... another soared from $1.10 to $32... and Franco-Nevada itself went from under $4 to more than $180 per share before it closed its doors to new "members."
This next future blockbuster royalty opportunity is already on the move.
On this Voisey's Bay deal alone, it should collect royalties between $16�20 million. And yes, that's if nickel prices today don't budge another inch.
What happens if nickel surges again to the record levels it hit last May?
If that happens, count on another $24 million in royalties going straight to this little company's bottom line. That might not sound like much for a big, well-known company. But for a company like this ― still undiscovered and valued at only just over $400 million on the stock market ― this is enormous. And just based on that, I already calculate that this could be an easy way to triple every dollar invested over the next two years.
But it doesn't stop there.
Because, you see, this little "Chaffee Royalty" outfit ― like the early Franco-Nevada ― has a lot more going for it that just the sweetheart royalty deal on Voisey's Bay nickel.
As I said, it carries nearly 100 royalty deals ― any one of which could start producing as well or better ― and all of which give you even more opportunities to pile up royalty wealth on five different continents... and in 10 different countries... in 18 different commodities.
Gold Gains With Much Less Risk, Too
On top of the Voisey's Bay "lock" this company has on Canadian nickel... it's also taking in piles of royalty cash for itself and its shareholders on some of Canada's richest gold deposits.
Not to mention even more gold royalties on one of the most productive gold mines in Chile... another huge "Chaffee Royalty" stream on more than 1 million estimated ounces of Nevada gold... and even more gold royalties on a large mine in Australia.
I haven't even mentioned the royalty streams on platinum properties... uranium properties... and even more copper and cobalt properties... just to name a few. Some pay huge royalties now, and some promise huge potential royalties as they steadily come online.
This company provides more than just access to some of the best gold, silver and diamonds... uranium, coal and oil... natural gas... nickel, copper, cobalt and zinc... in the world. It also gives you the diversity and balance that you just can't get from most straight mining shares.
Without sacrificing the rare opportunity for triple and quadruple gains.
And just as good as the royalties this company already takes in is the promise of future royalties on deals it's already made. Take this company's royalty rights on a hugely profitable gold mine in Chile.
Mining giant Barrick does all the work to get the metal out of the ground. And that mine alone should churn out as much as 775,000 ounces of gold per year... at a cost as low as $130 per ounce. In fact, this Chilean mine should be Barrick's third largest operation by 2010.
Owning Barrick directly isn't a bad move. It's one of the best mining stocks in the industry. But it's not cheap. And Barrick, as I said, faces some rising costs and shrinking cash flow.
This little company, however, owns the "Chaffee Royalties" on the same gold mine. It paid only $11.4 million, very early on. And I expect it to make that back many times over during the life of the mine.
Barrick and its shareholders love the deal, because it means they get money to expand exploration and production. This royalty company and its "program members" love it because it's yet another stream of resource royalty income.
As long as Barrick keeps bringing gold out of the ground, this little company rakes it in. And so do you, if you hold this company's still affordable shares.
Plus, while this company already makes very good money on its five best royalty deals... let's not forget what you get out of its huge portfolio of nearly 100 other royalty deals.
Right now, another 11 of these new royalty arrangements are scheduled to come online over the next several months. That's more royalty income without the major mining costs. And more value in this little royalty company's shares.
I told you before that the Voisey's Bay income alone was enough reason for this little royalty company to give you an easy triple on every dollar invested. But with these extra royalty agreements, including the 11 new ones that should come online over the next few months... this isn't just an easy triple... it could, conservatively, be a "ten-bagger" best stock.
But even then, I STILL think saying you could make 10 times your money on this is also conservative...
How This Beats the Best Royalty Play of All Time
Wouldn't it be nice to know that without lifting a finger, you're accumulating the kind of money that could free you from work... fund your retirement... and pay for your future?
That easily could have been the case if you'd have known to move early on Franco-Nevada.
But let me just walk you through how that unfolded. Because, you see, Franco-Nevada going from zero to $40 million per year in royalty income took about 12 years. And that was ultimately enough to take its shares from $4 to over $180 per share.
Not bad, right?
Another of the "Chaffee Royalty" opportunities you'll read about in my new report, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep, took 15 years to get to its first annual $30 million in royalty income. That was enough to get it from $1.10 per share to over $32. For a gain so far of 2,809%.
While I believe that last company could go still higher, I urge you to pay attention now to this little company I've been telling you about ― which I like to call the "next Franco-Nevada" for a very good reason.
You see, this little company recently managed to jump from about $400,000 in annual royalty income... to over $13.7 million... in less than two years! That's many times faster than even some of the best "Chaffee Royalty" companies I've ever seen.
What's the key difference?
The track record of this small company for picking the best royalty deals is impeccable. What's more, it just recently picked up another 16 new royalty deals... including royalty draws on four new gold mines... four new diamond properties... two new uranium deals... and three more new nickel royalties... plus royalties on rich new deposits of zinc, lead, silver, cobalt and molybdenum.
With nearly 100 royalty streams, your chances of the "next big hit" or major discovery could be huge. And remember, you need only one to pay off ― the way Goldstrike did for Franco-Nevada ― to see even MORE upward pressure on the value of this royalty company's shares.
If just one of these nearly 100 royalty deals pays off big... I'm confident that this isn't just a triple or a ten-bagger opportunity, but quite possibly the next 50-to-1 payday for anyone who acts on this quickly.
Maybe even better.
It's like owning an option on what could become the best resource play of the century. If it doesn't pan out, you still do extremely well. And if it does, you get rich.
Just in case you think I'm overstating the evidence, the fact is that at least two of these new royalty deals already look like they could add 25% in new royalty income to this company's bottom line over the coming year.
With that amount going up over the years ahead.
Right now, this company lists on the stock market for only $408 million. Given that it has only $22 million in debt... plus over 100 royalty contracts... and an easy $40 million already looking likely, thanks to its nickel and gold royalty deals alone... you're talking an incredible deal. Other royalty companies have already sold for double that multiple.
But as I said, few of these other mineral rights royalty companies have as good a spread of different royalty streams as this one. And with every dollar that comes in, it continues to add more great royalty streams to its portfolio.
Based on that, plus everything else I've already told you, I fully believe this is the best "Chaffee Royalty" opportunity listed on the market today. Maybe even better than getting into Franco-Nevada at the start of its amazing 50-to-1 profit run.
A takeover... more soaring energy prices... soaring interest in the shares... they could all take the share price higher, very soon... closing out the best of this opportunity very quickly.
So I urge you to get my report, by accepting the special invitation at the end of this letter, as soon as you can. As I said, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep isn't free. And I won't take your money for it, either.
It's simply not for sale, anywhere or to anyone.
But there is one way to get a copy into your hands instantly. All you have to do is accept a special invitation. One that could potentially make you a fortune over the year ahead. And show you how to access a pool of investment wealth you never knew existed.
I Should Introduce Myself
My name is Chris Mayer.
Maybe you've heard of me. I'm known for the appearances I make on financial news shows like Fox Television's Bulls & Bears... Forbes on Fox... and the CNBC financial reports.
Or maybe you know me for my new book, Invest Like a Dealmaker. Or from interviews I've given to national radio talk shows or in the newspapers.
You might even know my background, which wasn't originally in financial market analysis at all. I was a commercial banker, for one of the largest and most respected banks in the U.S., overseeing a $250 million investment account and loans for $400 million companies.
It was a role I loved. I'm proud to say I was a vice president there before I turned 30. And not once during my tenure did we lose a single dime on our major corporate loans. That's a rare claim in lending.
I mention it because that background ― poring over the balance sheets of major and minor companies alike, looking for anomalies, mistakes and even hidden value ― was about the best stock picking training you can imagine.
It's why I eventually stepped away from the bank.
Because I loved the markets. And I loved picking winning stocks even more. I do that now, for over 29,220 readers, in a highly sought-after monthly stock market research letter.
But for years, I kept coming across a kind of investing opportunity that I just couldn't share in my widely read monthly letter. Stocks and other plays that were just too small... too "different"... and just that much harder to find or track for your average, mainstream reader.
The "Special Situations" Kept Secret From You All These Years
The undiscovered opportunities I kept coming across are what Wall Street calls "special situation" stocks ― fast moving, hidden opportunities that are extremely popular with insiders but just too small or too little known for the average investing mainstream.
Takeovers and buybacks... secret mergers... heavy insider buying opportunities... and "Chaffee Royalty" moves like the one I'm showing you today.
Every single one of them revealed money most investors just kept leaving on the table...
Huge opportunities.
I couldn't stand knowing how many of these kept going unnoticed.
So I did something about it. I worked with my publisher to create a brand-new kind of research service, called Mayer's Special Situations.
This is not a simple newsletter for mom and pop market watchers.
It's a much more revealing and advanced research advisory service, tailored for elite readers. How are we doing so far? The service is barely 23 months old.
And we've already clocked gains like 44% on Fundtech... 100% on Lindsay Manufacturing... 122% gains on Gorman-Rupp... 132% on T3 Energy Services... not to mention gains on shares I can't name because they're still open. But we're already up 26% on one... 36% on another... 48%... 50%... 78%... and then 84%... 93%... 129%... 137%... 153%... the list goes on.
Just on an average of all the winners and losers in my current portfolio, we're already racking up an average 33% so far. And on a cumulative basis, a stunning 758% altogether.
These are opportunities you just can't read about anywhere else. And much earlier in the moneymaking stage than you'll discover anywhere else...
You'll get the moves that go beyond regular stock investing, like the special "royalty program" plays I revealed to you today
You'll get the best stock opportunities pros would rather trade, above the humdrum, and hinging on the "behind the scenes" deals and insider moves we all know really move markets
You'll get the picks that can move your money quickly, and in a very short time, but with my own "banker's twist" ― where I'll do the qualified number crunching most brokers don't even know how to do ― to ensure that I never ask you to take an unjustified risk
You'll get advance warning on above-and-beyond moves, with far greater potential than you average, everyday stock opportunity.
Of course, the easiest way to reveal what Mayer's Special Situations can do for you is to let you try it for yourself. Which is exactly what I hope you'll do.
Here's What Others Are Already Saying
Matt M. was one of my earliest Mayer's Special Situations readers. Take a look at what he told me recently...
"Chris, your recommendations total $272,000 ― 15% of my portfolio... I like your approach and style ― and the results ― you identify opportunities that I would not be able to find by myself."
Here's one from subscriber Eric L...
"Hey Chris, your Libbey recommendation alone just paid for my Acapulco vacation ― thanks! Your reports are very professional without being stuffy... You're one of my main go-to guys... keep up the great work, and thanks again!
And this is what Special Situations reader Michael K. wrote in to report...
"I'm enjoying this new service, and I love the way you think about investments. My highest compliment is that I look forward to your updates and recommendations. I appreciate your thorough and thoughtful analysis and independent thinking and research. And the bottom line is you are making me money..."
You can guess I love getting letters like these. And I have piles of them. The gains, the rare and undiscovered alternatives to typical stock investing opportunities, the handpicked moves and careful research... I'm happy to finally have the chance to share this with people who can appreciate how rich these "special situations" opportunities can be.
I'm not looking to brag.
I just want to make it clear that you'll find something here that you're not going to find elsewhere. One popular financial writer even wrote, on his financial blog Market Metaphysics...
"Chris Mayer is the best financial journalist you've never heard of... Mayer's elegant prose will make you wonder why you don't find this caliber of writing in the mainstream financial press. Mayer's essays are sharp intellectual discoveries... all this and solid investment ideas, too."
Again, I'm proud of the kudos. But I'm even more proud of the results. And I'm going to urge you, in just a second, to give me a chance to do the same for you... starting immediately with the new research report I've told you about, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep...
The Single Best Way for You to Get Rich on Royalties Right Now
Right now, there are several companies listed on the stock market that use the "Chaffee Royalty" model to enhance shareholder wealth.
That's why I've spent the better part of the last year doing careful research to find only the best ones for you to consider adding to your portfolio.
And I've written each of them up in detail in the new report we've talked about, Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep. Inside, you'll find my full and targeted analysis on...
One of the easiest and purest plays on the coming surge in silver prices. With this company's already solid "Chaffee Royalty" streams of income, you could tap into six of the world's top silver deposits, including a stream of expense-free royalty income on the largest silver deposit ever discovered. If you like silver as an investment play, this could be the single best way to play it.
With one move, this next "Chaffee Royalty" play could give you a claim on royalty deals for nearly 50 mining properties in mineral-rich Nevada... plus a piece in wholly owned and productive mines with several million ounces of proven gold already in the ground
Like the other pure "Chaffee Royalty" companies, this next player owns no mines. Or mining equipment. In fact it has only 15 employees. But that hasn't stopped it from tapping into royalties from several of the world's best gold mines... on the future sale of over 50 million ounces of gold and more than 1 billion (with a "B") ounces of silver
The new Franco-Nevada is a lot like the old Franco-Nevada ― jammed with choice royalty deals. After raising over $1.2 billion with a record-breaking IPO at the end of 2007, the new Franco bought back 190 royalties on metals and mineral companies... plus another 100 royalties on oil and gas producers. Is it still a good buy? I reveal the answer inside my report
My favorite "Chaffee Royalty" company by far, I save for last. With nearly 100 mineral royalty rights and a brilliant track record of picking deals with as many as 25�30 years of production, this is easily the best way for you to combine big money-multiplying gains with higher safety than you could possibly get just owning mining shares outright.
I urge you to take a look.
And keep in mind, on each of these deals, the royalties are coming in on minerals already discovered, but there's also potential for more discoveries down the line. By already owning a piece of the royalty rights, you'd also be locking in on those future income streams too.
When the mines' owners invest more money to expand the mines, you'd also automatically own a piece of that expansion. Without investing another dime.
What if there's another breakthrough mineral discovery on one of the mineral properties? The royalty rights shareholders own a piece of that too. Along with the bump it could give to the royalty company's shares.
It's like owning an option on the resource boom, with which you get all the future upside gains at a much cheaper entry price. And without any of the major downside headaches.
As long as those mines are producing, the royalties roll in year after year. And with the companies I've found and featured in the report, you've got access to "long haul" deals that have as many as 25�30 years of production left in the related mines.
So those royalties have plenty of time to pile up pretty high. In other words, you could start benefiting from the royalties immediately. And then keep on collecting for many, many years to come. All while even more royalty rights get added to your share of the overall portfolio.
Why would you want to pass that up?
You'd have a tough time finding a better deal ― with full and growing access to the "mineral rush" upside, almost as far as the eye can see, but with very little to none of the conventional mining or exploration company risks ― and that's just the beginning of what I'm ready to share...
Five More "Special Situations" Moneymakers You Don't Want to Miss
Right now, my Mayer's Special Situations readers and I are looking at five more rare "special situations" I don't want you to miss...
Unless you know mining, you've never heard of molybdenum. But it's known as the "energy metal." And it's key to all things energy. This little company produces it better than anybody, with a share price that's an easy double within the year. Even if "moly" prices don't budge.
The world's energy fields are getting old. And this one stock gives you a better way to play this than anybody. Right now, it's still deeply undervalued. But that won't last for long. In our first 11 days with this company, we were up over 6% ― so it's already on the move
T. Boone Pickens, the 79-year-old billionaire, must love this next stock as much as we do ― he just bought $76 million worth. And I see it soaring much higher, on the back of a surprise supply-demand super-crunch in this one ignored raw resource
This tiny little $2 copper stock is super cheap with huge potential. It's another easy double within the year. Plus, it pays a 5% dividend ― how can you beat that?
Drug companies come and go, but with the boomers marching into the golden years... it's a sure bet someone somewhere is writing a medical prescription. The more they write, the better for this last company. It's a spinoff story with solid 300% gain potential ahead.
You'll find out the names of these rare "special situation" moves in your free report Five Stunning "Special Situation" Plays You Can't Afford to Miss. You can download that the minute you accept my invitation to become a subscriber to Mayer's Special Situations.
Here's how it works...
How to Gain Full Access to My Elite "Special Situations" List
I'm sure you understand this "special situation" research isn't free.
These plays are more difficult to find and track than top stocks. And you can share them only with a smaller group of readers. That way, the share price won't get influenced.
So the first thing I insist on is that we keep new enrollment at a maximum of 2,000 slots. Not one more. If you come in after that, I'm afraid you're out of luck until we can open enrollment again. No exceptions.
Second, I need to ask a reasonable price, given the potential of the plays I reveal and the level of sophistication I'm hoping to attract in my readers.
What's a fair price for gaining access to these highly valuable, undiscovered "special situation" deals? Before I answer that, let me tell you about just one more little-known opportunity you should add to your portfolio right now...
Grab Your Share of a 500 Billion Barrel Oil Payout Underneath North Dakota
This is just one more thing I can't resist telling you about.
My readers and I have tracked it recently, and it's one of the most exciting investment stories taking shape in North America today. In short, it starts with incredible new research related to the "Bakken Trend."
This is an absolutely huge stretch of American acreage that could hold as many as 250 billion barrels of oil ― possibly even as many as 500 billion.
And smack in the middle of this suddenly valuable stretch of land is an astounding undiscovered play that was going for less than $2 per share when I first wrote about it for my Special Situations subscribers.
It's already shooting up ― I see a triple on these shares not too far into the future. And even higher ― as much as $10 ― not much longer after that.
I would love nothing more than to name it for you, right here.
But that wouldn't be the least bit fair to my paying readers. So I'll tell you what I'm going to do. If I hear from you immediately, I'll include a copy of this new Bakken Trend report, America's Secret 500 Billion Barrel Bonanza (and How It Could Make You up to Five Times Your Money), in your welcome package for Mayer's Special Situations.
The door to this incredible opportunity just swung open again in 2008. There's no telling how long it will last. That's why you must collect your share of "Chaffee Royalties" before they're gone for good.
So let's sum this up.
When you sign on for an elite, fully guaranteed subscription to Mayer's Special Situations, you immediately get...
The breaking story about the incredible new energy investment discovery right here in America, in the new report I just told you about, America's Secret 500 Billion Barrel Bonanza (and How It Could Make You up to Five Times Your Money)
You also get my exclusive new research on the "do nothing" wealth you can pile up in America's "Chaffee Royalty" opportunities, in your copy of Big Mining Money Without the Big Risks: How to Build Resource Royalty Wealth While You Sleep
A bonus special report to get you up-to-date immediately on the very best of what the rest of my members are reading about right now, called Five Stunning "Special Situation" Plays You Can't Afford to Miss
My members-only stock analysis, which I'll send directly and privately to my Mayer's Special Situations readers, once every month, with coverage of our newest exclusive on an undiscovered "special situation" stock or other alternative market play
Plus, between every full analysis report, we'll stay in steady contact each week so I can make sure you're on target with everything new that's happening in the portfolio, from what to hold to when to take gains, and more
And finally, only members will have password-protected access to the Special Situations private Web site, where you can find full backup of all alerts and updates, plus the latest news on the portfolio and downloadable copies of all your reports... so you'll never be left wondering what to do on these underreported, fast-moving and lucrative plays
Here's one more bonus: Everyone who signs on will get free access to my publisher's brand-new Agora Financial Executive Series. The Executive Series consists of two daily e-letters and provides you with an insider's view of our editorial room. First, every morning, you'll receive the Rude Awakening delivered straight to your e-mail box. Each "Rude" article enlightens you with focused, articulate essays -- each of which delves deep into some of the core investments that Agora Financial is researching. Next, you'll also receive the 5 Min. Forecast every weekday at noon. The 5 Min. Forecast aims to cut through the incredible glut of "news" by providing you with a quick-and-dirty roundup of the day's most essential ideas and not-so-common knowledge -- in five minutes or less. Normally, this would be an $195 value. But because you're willing to take me up on this trial invitation, this bonus gift is yours free.
So with all of that, what is it worth? To you, it could be worth thousands... tens of thousands... hundreds of thousands. It all depends on how ready you are to jump on these often-missed "special situation" opportunities.
I've seen other services offering half this much and less... charging as much as $2,000... $2,500... even $5,000. Yet even with the coming price hike for new members, I won't ask you to pay anything even close to that.
You'll get the full year of all of my best "Special Situation" research and updates for the reasonable introductory price of only $995.
It couldn't be more plain.
One more thing...
Because of the nature of the hot stocks we'll cover... and the "special situations" that make them so valuable... I simply can't expand our Mayer's Special Situations membership circle any wider.
What's more, I must insist that when you join as a subscriber, everything you discover inside the circle stays in the circle. You must promise that you won't share our list of "special situation" plays with anybody.
If that's not something you can do, this service might not be for you. Because these unique plays are intended for your eyes only. No exceptions there, either.
Of course, I'm ready to make my own promises, too...
The performance of silver has outshone even gold: silver was up almost 31% in 2005, compared to gold's gain of almost 18%. Now some investors are asking: "Was that it?" And if we aren't near the top for silver stocks, then how high will it go? To answer those questions, Doug Casey looks at what's driving the market today…
WHAT'S NEXT FOR SILVER STOCKS?
There are important differences between silver and gold. The demand for gold is almost entirely a demand for holding the stuff for financial purposes (protection and profit) and for uses, such as jewelry. Very little gold is actually consumed. In this respect, gold is the polar opposite of a base metal, such as iron, that people buy exclusively for purposes that use it up. Silver stocks has a foot in both worlds; some is bought for uses that will consume it; other ounces are held for financial protection or profit.
Most of the gold ever mined (including the metal in Baal, Cleopatra's necklace and what Alexander looted from the ancient cities of West Asia) remains above ground in various easy-to-melt forms. The reasons for gold's physical persistence are chemical - it is nearly inert, so it doesn't corrode - and economic; because of its great value, very little gets lost or discarded as waste. Annual mine production is small compared to the existing stockpiles - on the same order as the small amount of gold that is lost or consumed each year. So, the size of the existing stockpile doesn't change much. Fluctuations in the price of gold come almost exclusively from fluctuations in the demand to hold the stuff.
Ounces of silver, on the other hand, come and go - not as quickly as tons of iron, but as inevitably. Silver, unlike gold, is chemically active. When silver is used, much of it gets used up - consumed beyond practical recovery. And because silver stocks is so much less rare than gold, less effort goes into salvaging and protecting it. Annual mine production and consumption are large compared to existing stockpiles, so fluctuations in price come from changes in both those factors and also from changes in the demand to hold silver for financial purposes.
The uses for silver in modern industry are growing. It is the best conductor of both heat and electricity, the most reflective, and (after gold) the second-most ductile and malleable element. It is used in photography and for many electrical applications, particularly in conductors, switches, contacts and fuses. Silver alloys are used in batteries as cathodes. As a bactericide, silver is used in water purification and air-handling systems - we recently came across an ad for a silver-lined washing machine that claims to need no detergent to produce clean laundry.
The uses for silver are so numerous that, despite the dwindling role in photography, you can expect demand to remain strong as long as industrial economies remain strong. And they have been so for some time now - with China and India leading the charge.
But since the Hunt brothers' ill-fated attempt to corner the silver market back in 1980, there has been little investment demand for silver from the public in developed countries. This has clearly and unequivocally changed, as evidenced by the new silver exchange-traded fund (ETF) from Barclays.
Most silver mines are really lead-zinc-silver mines or copper-silver mines or gold-silver mines, from which silver stocks is a byproduct. In fact, 70% to 80% of all silver comes as a byproduct of copper, lead and zinc mining. Because the byproduct element is so large in the supply of new silver, production doesn't respond much to price. This puts the few mines that do produce primarily silver in an extremely risky position. Over the last two decades, with silver being dug out by copper, lead and zinc miners regardless of how low the price went, most pure silver mines consistently lost money, and none were especially profitable. For more than 20 years preceding 2003, no pure silver mining company generated free cash.
However, there are many known silver deposits and proven reserves poised for production as soon as silver crosses whatever price line makes them economically viable. Furthermore, low silver prices don't necessarily halt exploration; it's the prices of copper, lead and zinc that drive exploration.
So, with silver hitting record highs and base metals doing the same (increasing the flow of silver as a byproduct), hundreds of millions more ounces of silver will be heading for the market. According to the latest projections in the CPM Group's CPM Silver Yearbook 2006, there may even be a production-consumption surplus of 48.4 million ounces of silver in 2006, the first such surplus since 1989. However, those figures don't include investment demand. The production-consumption surplus means that inventory will increase, but that still doesn't tell us where the price is headed. If financial demand (to hold silver for protection or profit) increases faster than the accumulating physical inventory, the price will keep going up. But will it?
For one thing, consumption has been eating into above-ground stocks of silver at a phenomenal rate for decades, eroding total world bullion inventories from an estimated 2.1 billion ounces in 1990 to around 400 million ounces today - a drop of 1.7 billion ounces. A large chunk of the drop, about 240 million ounces, came from government sales. But that source is almost gone, with governments holding only about 87 million ounces at the end of 2005.
For another, silver is like uranium as an industrial metal, in that it is hard to replace and it is used in such small relative quantities, that the price could double or triple without having a major impact on industrial usage. But the main reason, as mentioned above, silver stocks is being rediscovered as an investment vehicle, most notably in Barclays' new silver ETF (SLV).
The advent of Barclays' silver ETF has been a big factor in the price of silver lately, if only through the expectations of speculators. The popularity of the streetTRACKS Gold Shares ETF (GLD), which has raised $8.13 billion since it began trading in November 2004, suggests that Barclays' silver ETF will pull a lot of silver off the market. As of this writing, August 7, 2006, it has already sucked up 92.4 million ounces of silver. There goes the supposed surplus.
And as silver gets back on trend, and gets noticed by an increasing number of investors, the ETFs will make it easier for those investors to participate. That is also true for certain institutions - most of which are barred from owning physical metals - so they will, in essence, uncork a latent source of investment demand. And Barclays' silver ETF may be even more important than GLD. In Europe you have to pay a VAT (17.5% in the UK) on the purchase of silver bullion bars, as the metal is used in manufacturing. This is a blight on active trading - a market niche the new ETF accommodates free of VAT.
Throw in well-deserved concerns about the U.S. dollar and about the at-least-it's-not-the-dollar euro, and increased financial demand will almost certainly outstrip any increase in global silver production for the next couple of years. And, of course, if there's a major economic crisis, the production-consumption surplus will be utterly swamped in the mad dash to get out of paper and into precious metals - a transition the ETFs will facilitate greatly.
There is another potential source of silver - the tons of it that people hold in the form of old junk. If a high price for silver starts getting people excited, won't the masses send their broken candlesticks and seldom used spoons and trays to scrap dealers? Will that source of supply turn into a flood, as it did so dramatically during the 1980 price spike? At some price, yes - but probably not for a while.
Stable higher prices will encourage people to sell. But rising prices and the reasons for the growing financial demand will encourage people to put off selling even their unloved, broken candlesticks. Even as the incentive to melt down Grandma's tea set increases, the "silver is money" factor pushes the other way.
In 1974, silver was at $6.70, about twice today's price in constant dollars, but supply from all secondary sources was less than 170 million ounces. And in 1980, when silver reached its peak at $48.70 per ounce, secondary sources provided just 302 million ounces - a big number, but nothing like 20 billion ounces. Furthermore, the great bull market in silver stocks that ended in 1980 came after a hundred years in which the public accumulated relatively cheap silver. A lot of that was cleared out - melted down - in the early 1980s, and there hasn't been as much time to replace it. Not only that, we suspect that relatively few people have bought much made of pure silver since 1980; if you can't afford gold, why pay for solid silver when you can get something electroplated that looks just as good for a fraction of the cost?
Will silver stocks hit its previous 1980 high? It was $48.70 then, but that's $120 in today's dollars - almost 10 times the current price. Given that just below the surface, the threats to the U.S. economy are even greater today than in the late 1970s, we can easily envision silver closing in on its previous high and even going way beyond it.
P.S. When will this come to pass? No telling. But, periodic and inevitable corrections aside, it's going to happen, of that we are confident. And, more to the point of our service, when it does, the silver stocks we follow on behalf of our readers won't just go to the moon, they'll leave the solar system. To be sure you don't miss this profitable ride on the resource bull market rocket, subscribe to the International Speculator now.
Editor's Note: Doug Casey is the author of Crisis Investing, which was #1 on the New York Times Best Seller list for 26 weeks. He is also editor and publisher of the International Speculator, one of the nation's most established and highly respected publications on gold, silver and other natural resource investments.
"Inflation is a crowd phenomenon in the strictest and most concrete sense of the word. The confusion it wreaks on the population of whole countries is by no means confined to the actual period of the inflation. One may say that, apart from wars and revolutions, there is nothing in our modern civilizations which compares in importance to it," wrote Elias Canetti in "Crowds and Power." "The upheavals caused by inflations are so profound that people prefer to hush them up and conceal them."
Last night, before going to bed, we read an essay by Paul Cantor about hyperinflation in Germany in the 1920s and how it affected the writings of Thomas Mann, particularly his short story, "Disorder and Early Sorrow." Cantor deconstructs the story from the perspective of Austrian economics, showing how hyperinflation provides not merely a background, but also a means of understanding it.
This is how Mann describes one of his characters, a housewife, coping with skyrocketing prices:
"The floor is always swaying under her feet, and everything seems upside down. She speaks of what is uppermost in her mind: the eggs, they simply must be bought today. Six thousand marks a piece they are, and just so many are to be had on this one day of the week at one single shop fifteen minutes' journey away."
We find we do our best thinking when we are asleep. While we were dozing, our brain must have gone to work on the theme of the article like a Pakistani policeman on a "jihadi." We awoke in the middle of the night to find it reduced to a bloody pulp, and blabbing about one simple and horrible crime: the destruction of the American middle class.
But, the culprit is no pawn of jihad. No splinter faction or 5th columnist…no mole, no collaborator…no revolutionary cell skulking in basements. No, in the United States in the early 21st century, as in the Weimar Republic, the saboteurs are the financial chiefs ensconced in the capital itself. They are the nibs whose faces grace magazine covers, who give speeches, win honorary degrees, and chivvy consumers - can you believe it? All to avail themselves of every latest innovation from the financial industry…such as adjustable rate mortgages.
Remember that although the value of the dollar was whittled in half during his tenure at the Fed, Alan Greenspan enjoys his retirement today like a portly bishop…basking in a job done well. And, was it not the same Alan Greenspan who was knighted by Queen Elizabeth II, shortly after he won the prestigious Enron Prize?
The inflation of the mark in Germany led to disorder. It then led to sorrow. The inflation of the dollar, over the last quarter of a century, leads in the same direction…winding through bubbles, busts, ARMs and Neg Am mortgages. In the last four years alone, debt in the United States has gone up by an amount equal to 100% of the GDP. There are now an estimated $300 trillion worth of derivative contracts outstanding - in a world economy only worth $55 trillion. And, it takes five to six dollars of additional debt to create one single dollar of additional GDP. The typical ratio is usually about two dollars of debt to one dollar of GDP.
But it is the bust in residential real estate that creates the most disorder and the most sorrow, because it has got the middle and lower classes caught in a steel trap from which they cannot escape.
"No Money Down Disaster," reads a headline in this week's Barron's. The author notices what we have been saying for months that adjustable rate mortgages are on the verge of ruining the marginal borrower and dragging down the entire economy, too.
For, now, says Barron's, residential real estate is threatening to revert to the mean, which may indicate a 30% drop in prices that will wipe out the equity of millions of homeowners.
Either they will end up paying more than they can afford (why did they go for "no money down" in the first place?), for something worth less than they paid for it (that is what happens in a bear market). Or, they will lose their houses. When that happens, the world they thought they understood, will give way beneath their feet.
As Dr. Cantor writes about the 1920s, "A society composed of embittered people…is soon going to face major political problems, as the rise of fascism in Germany was to show."
More on this later in the week…
First, more news from our currency expert…
And, in the meantime, more thoughts…
*** The latest from Addison and his perambulation with the good doctor:
"My thinking on these issues has never been clearer," Dr. Richebächer asserts. "You must think about cause and effect. And place the stones in a row…stone for stone…to understand consequences. Americans no longer consider consequences. They see that everything is going well today. They assume every thing will always go well.
"But what can the U.S. consumer do? Overly indebted consumers must pay back their debts somehow. There are two ways to do s through rising income or by selling assets. Therein lies the problem. The United States today has its lowest level of income growth since the Great Depression. And asset prices have either stagnated or started to fall - especially housing.
"Consumer borrowing is fine for a young couple who can reasonably expect their incomes to rise over their lifetime. But today, you have credit expansion that is completely out of control. Even since the Federal Reserve began raising rates in 2004, bank credit expansion has continued unabated."
[Addison's note: One way for the Federal Reserve to aid in bank credit expansion is through "open market operations" - purchases of securities and other assets on the market. From a low of $550 billion in 2000, when the stock market began to crash, the Federal Reserve has continued to add assets through the "open market," even while publicly claiming they are "tightening" monetary policy.
In 2004, when the rate hikes began, the Fed had already amassed $750 billion in assets. Today it has nearly $850 billion. A chart of bank credit expansion during a period of public credit tightening reveals the exact opposite. To quote the good doctor: "There has been no monetary tightening. Period."]
"What will happen next, we suspect," Dr. Richebächer continues, "is that asset prices will decline precipitously and the consumer will be left with a pile of debts. With what resources will he repay them? Ja, it is consequence that matter…not assumptions.
"Still there is not a single critical word from the economic establishment in America."
*** "A fool and his money are soon parted," goes the old saying. What has always puzzled us is how the two of them got together in the first place. The world is full of dunces and dimwits…many of them with money. But, where and how did they get it?
We are not sure of the answer to that, but we are dead certain we know how the two go their separate ways.
The other day, for instance, we were sitting down with a young friend of ours.
"Yes, I've decided to set up my own business," he said.
"Doing what?" we wanted to know.
"Managing money," he explained. "It's just much better to be on your own. You don't have all that overhead and employees to bother with. And here in Europe, there's not a lot of regulation, as long as you stick to rich clients. You know, high net worth individuals.
"I only invest in value plays. Remember, I used to try technical trading and other forms of speculation. But what I learned from you was that what really works is following a 'Warren Buffett' approach. And so far, I'm up 40% this year. And, I made a 38% gain last year. Really, I'm just in two areas now: gold stocks (I guess I learned that from you too) and Chinese stocks.
"And, I charge clients just like everyone else, a 20% performance fee…"
Thus is a hedge-fund manager born.
And thus, does a whole industry of clever folk get to work to try to take a fool's dough away from him. They offer to protect it, to manage it, to invest it, to coddle it, caress it, clip its nails and dye its hair. And when they're done, so is the dough.
Our young friend knows nothing about investing - or rather, not much. How do we know? Because we taught him everything he knows. Yet, here he is now providing financial services to hundreds of wealthy clients - one of thousands, maybe millions, of people in the world's most profitable sector.
*** The Italian Rivieria is far more dramatic - and inhospitable - than the French one.
'Riviera' technically means a location in which the mountains drop directly into the sea. On the Italian side, this is definitely true. The beaches are beds of sea-worn rocks roughly 10 meters wide. Stepping into the sea is more like diving into the deep end of a swimming pool than wading softly off a sandy beach into sun-warmed seawater. The bathers are still topless from time to time. And the atmosphere still relaxed, if not more so. But there's less space between the cliffs and the sea.
This weekend we slipped away to the Italian coastal ville San Remo. We'd heard of an enormous flea market in the center of town, which turned out to be true. But the old salt that the journey is often worth more than the destination proved itself true. On the way back, we ended up making a pit stop at a restaurant that couldn't have been built on more than 20 meters of land. High class. Civilized. And empty, but for a few well-dressed diners in the middle of a hot day.
We entered and immediately caused a commotion. Our two boys were sporting soccer shirts we'd purchased at the flea market. One wore a French national team shirt with Zidane written across the back…the other, Italy, and the name Meterazzi. (If you don't follow le football, France and Italy were in the finals of the World Cup this year. Zidane, the French national star, was thrown out of the game with 10 minutes remaining after head-butting Meterazzi, an Italian player, in the chest. The fact that our kids were wearing both shirts earned them free entrees in the restaurant. Heh.)
Above the French border town of Menton, a few kilometers later, we discovered the little village of St. Agnes, which claims to be the highest coastal village in Europe. We don't dispute the claim; it rests on top of an 800-meter mountain with cliffs on three sides. There have been people living in the area since before the Romans conquered Gaul. The ruins of a ninth-century chateau rest at the very crest of the mountain.
The high mountain village of St. Agnes is also the site of the second fort inland, of those that made up the Maginot line. A deep bunker with gun turrets and enough room to house nearly 400 men, the fort is a testament to the adage that generals always strive to fight the last war. It was opened in 1932, but closed in 1938 before the real hostilities between France and Italy began.
This area had formerly been in dispute for centuries. Not far from the village, in a hamlet known as La Turbie, lies an enormous Roman ruin known as La Trophee des Alpes. It sits high on a mountain overlooking the tiny principality of Monaco. In fact, directly below the edge of the park in which the ruins lie, you can see the palace of the Grimaldi family, and the many casinos of Monte Carlo. The Senate in Rome dedicated the Trophee des Alpes to commemorate the Emperor Augustus' dominion over the tribes of Gaul. The site also served as the starting point on a coastal highway known as the Via Julia that connected Italy with Spain and opened the whole of the western part of the Empire to trade.
Today, on both sides of the border, residents are equally fluent in French and Italian. It's as if the Trophee des Alpes and the forts of the Maginot Line never existed. "In Europe," Dr. Richebächer explains, "the people have taken over. Our politicians talk and try to do things. But nobody listens to them anymore. We know that nothing good can come of it."
