DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSBy NICK GIAMBRUNO

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

Editor’s note: In this special feature, available only to Crisis Investing subscribers, Doug Casey and Nick Giambruno answer your Crisis Investing questions.

You’ll learn Doug’s favorite investment today… what could cause the bond bubble to pop… how Nick and Doug are investing their own money right now… and

much more. If you have a question you’d like to ask Doug and Nick, you can submit it here. Please keep in mind we cannot give any personalized investment advice.

[QUESTION] WHAT INVESTMENTS COULD DO WELL DURING THE NEXT FINANCIAL CRISIS IN THE U.S.?

Doug Casey: Maybe it’s best to do this by process of elimination.

You don’t want to touch bonds, which are at the top of a super bubble. In today’s insane and artificial environment of negative interest rates, bonds are deadly. In fact, they’re a triple threat to your capital. You have the interest rate risk, the risk of default and the fact that they’re denominated in depreciating paper currencies.

Stocks are in a bubble, too. Earnings are going to collapse in the coming crisis. The time to buy stocks is late in a crisis—not before one hits.

And real estate is also in bubble territory in many major cities, like Los Angeles, New York, Vancouver, San Francisco and Miami. One big problem is that it’s very taxable, and those taxes are going up, since most governments are bankrupt. Real estate also floats on a sea of debt. And with interest rates at all-time lows, it’s about as good as it’s going to get.

So, where are you going to put your money? By process of elimination, I come to gold.

Nick Giambruno: I agree. A substantial portion of my personal asset allocation is tied to gold and silver.

Gold is real money. It’s held its value for centuries because it’s durable, transportable, easily divisible, has intrinsic value and is consistent. Gold’s value is recognized anywhere in the world. There’s always a market for precious metals like gold and silver. There is no single government or country that has total control over the gold market. Bottom line, gold is inherently an international form of money.

Many Americans don’t have a clue about precious metals. They would prefer a chocolate bar to a silver bar, as this video shows. This is one thing that tells me we are nowhere near a bubble in precious metals.

Nick GiambrunoDoug Casey

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

Owning gold is critically important. It protects your savings from the destructive measures of bankrupt governments.

When a government has its back against the wall, it’s going to choose the easy option… print massive amounts of money. We’ve seen this repeated in so many countries throughout history, and the U.S. is no different.

When Doug and I were in Zimbabwe recently, we had the pleasure of meeting “the man who made everybody trillionaires,” Dr. Gideon Gono. He’s the former governor of the central bank. He’s infamous for his direct role in the hyperinflation of 2008.

He told us he knew printing money would cause hyperinflation. He, and everyone else, knew perfectly well what they were doing. But they did it anyway. They claimed they needed to placate the army and the masses.

It’s not just Zimbabwe. It could happen in any country in financial trouble. It’s the nature of any government with control of a fiat currency.

Like Doug, I believe the U.S. is entering the trailing edge of the massive financial hurricane that began in 2008. And I expect it will be much more severe than what we saw in 2008. The inevitable response to the next crisis will be massive money printing. It’s all the Fed can do. They’re a one-trick pony. That’s why I think gold will give us explosive returns during the coming crisis.

We recently sold Integra Gold (ICG.V) for a 103% return in the Crisis Investing portfolio. This doesn’t mean I think the price of gold has peaked. Far from it. It was simply a prudent move to take our big profit and lock in a win.

I still think there is huge upside potential for Gold Fields (GFI), the other gold stock in our portfolio. We’re constantly on the lookout for other gold companies, too.

The gold-mining industry is in one of its worst downturns in decades. Gold prices dropped over 40% from their 2011 peak at one point. This has put enormous pressure on mining companies. Most are in survival mode. They’re trying to cut costs to stay profitable.

But I think Gold Fields will do far more than just survive. When gold breaks out of its almost five-year bear market (I think it already has), the company will hand huge profits to its shareholders.

I think it could easily double from current prices and realistically be a five-bagger. Stay long.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

[QUESTION] WHAT COULD CAUSE THE BOND BUBBLE TO POP?

Doug Casey: There’s too much debt in the world. It’s like a house of cards a hundred stories high.

What’s going to bring that hundred-story-high house of cards down? It could be a light breeze or it could be a bent card. It will probably be a black swan, something that nobody’s looking at.

Nick Giambruno: I think the biggest potential black swan of 2016 is the collapse of the petrodollar arrangement with Saudi Arabia, which is already on life support. The petrodollar dollar system is a main reason the U.S. dollar is the world’s reserve currency.

In short, after Nixon severed the dollar’s last ties to gold, the U.S. government made a series of agreements with Saudi Arabia. These agreements created the petrodollar system.

The U.S. government chose Saudi Arabia because of its vast petroleum reserves, its dominant position in OPEC and the (correct) perception that the Saudi royal family was corruptible.

In essence, the petrodollar system was an agreement that the U.S. would guarantee the survival of the House of Saud. In exchange, Saudi Arabia would:

1. Use its dominant position in OPEC to ensure that all oil transactions would happen in U.S. dollars.

2. Invest a large amount of its dollars from oil revenue in U.S. Treasury securities and use the interest payments from those securities to pay U.S. companies to modernize the infrastructure of Saudi Arabia.

3. Guarantee the price of oil within limits acceptable to the U.S. and prevent another oil embargo by other OPEC members.

Oil is the world’s most traded and most strategic commodity. Needing to use dollars for oil transactions is a very compelling reason for foreign countries to keep large U.S. dollar reserves.

For example, if Italy wants to buy oil from Kuwait, it first has to purchase U.S. dollars on the foreign exchange market to pay for the oil. This creates an artificial market for U.S. dollars that would not otherwise exist. The U.S. dollar is just a middleman in a transaction that has nothing to do with a U.S. product or service. Ultimately, it translates into increased purchasing power and a deeper, more liquid market for the U.S. dollar and U.S. Treasuries.

That’s why I think the breakdown of the petrodollar system would definitely pop the bond bubble.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

And I believe it’s already starting to happen…

Saudi Arabia’s strategic regional position in the Middle East is cratering. Iran, which is notably not part of the petrodollar system, is on the rise. U.S. military interventions are failing. And the emerging BRICS (Brazil, Russia, India, China and South Africa) countries are creating potential alternatives to U.S.-dominated economic/security arrangements. This all affects the sustainability of the petrodollar system.

Taken together, I think the situation is ripe for a black swan event to knock the petrodollar off its throne in the near future. And that will be catastrophic for the bond market.

[QUESTION] OVER THE NEXT 10 YEARS, WOULD YOU BE COMFORTABLE HAVING, IN ADDITION TO GOLD, SOME HIGH-QUALITY DIVIDEND-PAYING STOCKS IN THE CRISIS INVESTING PORTFOLIO? LIKE COCA-COLA, PROCTER & GAMBLE...

Doug Casey: Yes, but at the right price. Because people forget that, when stock markets get cheap, they can get really cheap. And the classic example I always like to share is how, in the mid-1980s, I was recommending the Belgian, Spanish and Hong Kong stock markets; in all of them, the indexes were yielding 12%–15% current dividends. They were all selling at about three times earnings, and selling for half to no more than book value. That is how cheap things can get.

Nick Giambruno: I think that buying iconic, blue-chip companies that have been around for decades at crisis-driven bargains is a great idea.

If you can spot these opportunities, you can make gigantic returns without taking big risks.

We’re often told that there’s a close relationship between risk and return. According to Wall Street, to earn big returns, you must take big risks.

But it’s not true. Buying elite businesses for pennies on the dollar is one of the least risky investments you can make.

To find the best time to buy, we watch dividends. Dividends are the most reliable simple indicator of true value. You can trust the cash payments landing in your pocket.

Reported earnings aren’t as reliable. It’s too easy for a company’s management to pump them up by choosing the right accounting formalities.

Book value is just as susceptible to manipulation. Stretching facts (or ignoring them) can push book value toward whatever management wants it to be. Plus, accounting and reporting standards vary widely across the world.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

Dividends, on the other hand, are cash in your pocket... and you can’t fake that. It’s astounding what you can get in dividends alone when a market reaches bottom, something a lot of people have forgotten.

When an elite business with a consistent dividend starts to yield more than 6%, that’s when I get interested.

[QUESTION] WHAT IS YOUR PERSONAL ASSET ALLOCATION?

Doug Casey: I’m heavily in gold, to preserve capital. I own a lot of speculative resource stocks, because they’re very cheap now; I’ll sell them when they, too, become a bubble. I’m moving into commodities—grains and cattle are both quite cheap. And a lot of rural real estate, especially outside the U.S., because political risks are at least as great as market risks today.

Nick Giambruno: I own a lot of precious metals–related assets, some dividend aristocrats, some cash and some foreign real estate.

I am particularly fond of foreign real estate. I think of it like a diversification grand slam.

Like a grand slam in baseball, owning foreign real estate is the most potent move possible in a single play. It accomplishes four goals at once…

1. Move Savings Abroad

Though it’s illiquid and has carrying costs, foreign real estate can function as a hard asset with diplomatic immunity. It’s an asset outside the immediate reach of your home government. It’s highly unlikely they can seize it.

2. Create Other Diversification Options

In most cases, owning foreign real estate in a country provides a valid justification for you to open a financial account in that foreign country (whereas you may not have been able to before).

Obtaining real estate in a foreign country usually gives you some sort of residency, sometimes a shortened path to citizenship, and, in the case of certain countries, like Dominica and St. Kitts and Nevis, immediate citizenship and a second passport.

Owning foreign real estate provides you with a second home, potentially a place to retire and an emergency bolt-hole that you could, in an instant, always escape to in case of trouble in your home country.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

3. Portfolio Diversification

Foreign real estate is a tangible hard asset that has diversification benefits for a traditional portfolio of stocks, bonds, precious metals, etc. It has the potential for capital appreciation as well as the ability to generate rental income in a currency other than the U.S. dollar.

4. Privacy and Tax Benefits

Owning foreign real estate is one of the very few ways that Americans can legally keep some of their wealth abroad while retaining their financial privacy. If the foreign real estate is held directly in your name (i.e., not in a trust, LLC, real estate fund, partnership, etc.), it is not reportable (although any rental income must be reported).

I’ve personally invested in Colombian real estate (read more here).

I also think Argentina is very attractive right now. With the election of a pro-market president, Mauricio Macri, there’s a good chance Argentina is also turning the corner to a brighter economic future. That, along with the incredible lifestyle, is why I’m now happily an owner at Doug’s La Estancia de Cafayate.

I consider both Colombia and Argentina to be good examples of crisis investing in action.

[QUESTION] WHAT’S THE SINGLE MOST IMPORTANT THING A RETIREE CAN DO?

Doug Casey: Well, first of all, don’t retire. Find something both productive and enjoyable you can do so you can keep yourself busy and earn some money. It’s good for your health. And it’s unwise to rely on conventional pensions or Social Security.

Nick Giambruno: It’s no secret that governments strapped for cash commonly turn to stealing retirement savings from their citizens. They are a juicy, irresistible, low-hanging fruit.

In recent years, this has happened in Poland, Portugal and Hungary, just to name a few. The truth is, it could happen in any country drowning in debt and financial troubles—the U.S. included.

Governments usually accomplish the seizure by forcibly converting retirement assets into government bonds. Governments claim it to be “helping people manage their risk.” This just isn’t the case.

Anytime any government claims that it wants to help you manage your retirement savings, I believe the best course of action is to run as far away as you possibly can.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

A few years ago, Obama announced the myRA program, which supposedly helps people save for retirement (though it offers no benefits over existing options).

In short, the program was designed to corral retirement savings into U.S. Treasuries, and therefore help the U.S. government finance itself.

I think it’s a harbinger of things to come.

What should you do?

I’d suggest reading Casey Research’s Handbook for Surviving the Coming Financial Crisis, which Doug and I put together. There’s a detailed chapter on how you can make your retirement savings a “hard target.”

[QUESTION] IS FARMLAND THE NEXT ASSET CLASS TO SHOOT UP, ALONG WITH GOLD, AND WHAT IS THE BEST WAY TO PLAY IT?

Doug Casey: Well, let me reemphasize that basically all the agricultural commodities are very cheap, and cattle are again very cheap. I think agricultural commodities are going much higher. Like the metals, they’ve been in a five-year bear market. Farmland I think will go up, too.

Nick Giambruno: I think farmland is the ultimate hard asset. Like gold, its value can’t be diluted by central bankers. Unlike gold, it produces food, the most basic of human needs.

The Black Earth region of Ukraine and Russia is one of the world’s richest, most fertile agricultural zones. For centuries, it was known as “the breadbasket of Europe.” Its soil is loaded with high concentrations of phosphorus, ammonia compounds and other nutrients.

The crisis in Ukraine has left investors afraid—unduly so—of Black Earth opportunities. This kind of pessimism is handing us an opportunity to pick up economically strategic real estate for pennies on the dollar.

Doug and I just returned from Ukraine. We discuss in detail how you can invest in these opportunities in the July 2016 issue of Crisis Investing.

[QUESTION] WHAT DO YOU THINK OF SOUTH AFRICA, FROM THE PERSPECTIVE OF INVESTING AND LIVING?

Doug Casey: South Africa is very cheap. I’d say it’s the second-cheapest country in the world populated with Europeans, after Ukraine. Everyone’s afraid of the crime situation, and that’s a consideration if you live in the wrong area. But all things considered, it’s a very underrated country with great weather year-round.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

Nick Giambruno: South Africa is Africa’s most industrialized economy. The country has delivered phenomenal crisis-investing profits in the past.

Today, South Africa is facing a new crisis.

The local currency, the rand, has been in a free fall for the past year. It’s lost over half its value against the U.S. dollar since 2012. It recently hit its lowest value ever against the U.S. dollar.

In other words, for U.S. dollar–based investors, South Africa is one of the cheapest markets in the world right now.

Since 2011, the collapses in the price of gold and the rand have crushed South African gold miners. The stocks of some quality companies are down more than 80% from their recent peaks.

However, it now appears gold has bottomed.

That means now is the time to take advantage of South Africa’s currency woes and pick up an elite mining company at an extraordinary price.

South African gold-mining companies have delivered triple-digit and quadruple-digit returns in the past. In the coming gold bull market, I think some will offer a 10-to-1 upside or even better, just as they have in previous bull markets.

There is one such South African gold-mining company, Gold Fields Limited (GFI), that trades on the New York Stock Exchange. You can trade it just like a U.S. stock. You can buy it with just a couple of mouse clicks with any ordinary brokerage account. We covered it in great detail in a recent issue.

[QUESTION] WHAT WHAT ARE YOUR THOUGHTS RIGHT NOW ON URANIUM AND RARE EARTH METALS?

Doug Casey: I’m very bullish on uranium, because there’s still much more being consumed than is being produced. The world’s operating out of inventories. The Chinese and the Indians are building scores of new reactors, as are other countries. Even the U.S. is again building new nuclear plants, after a nearly 40-year hiatus. In fact, nuclear energy is the safest, cheapest and cleanest form of mass power generation. I like uranium because, with regulatory delays, it takes years to get approval for a new mine—and at current prices, most new production is uneconomic. Prices are off about 75% from the previous peak, and are headed up.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

As far as the rare earths are concerned, there’s really no way that you can invest in them, except through shares of a specialized mining company, of which there are very few. So, forget about them; they’re not investable. It’s kind of an academic question.

Nick Giambruno: I agree. When I look at uranium, I see a good crisis investment.

Uranium is hated. The sentiment in the industry is terrible, a lingering effect of the Fukushima disaster. But nuclear power isn’t going anywhere.

Prices have collapsed to 10-year lows.

I think there are bargains in the industry. Uranium will likely be a theme for an upcoming issue of Crisis Investing. Stay tuned.

[QUESTION] IN YOUR OPINION, WHAT IS THE SINGLE MOST IMPORTANT FACTOR IN ACHIEVING SUCCESS, NOT JUST IN BUSINESS, BUT IN LIFE?

Nick Giambruno: Doug addressed this very question in an article titled “The Single Wisest Thing You Can Do With Your Money.” And I’m not exaggerating when I say it’s one of the most important articles you’ll ever read.

Uranium prices per pound$140

$120

$100

$80

$60

$40

$20

Source: NYMEX

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing

[QUESTION] IF YOU HAD TO ESTABLISH LA ESTANCIA DE CAFAYATE IN A EUROPEAN COUNTRY, WHICH COUNTRY WOULD IT BE?

Doug Casey: That’s a very good question. Forget about France, forget about Germany. I think I’d go to Portugal because of the weather, because of the low costs and because I don’t think it’s getting a lot of migration. But, that said, Europe isn’t high on my list of candidates. It’s got too many problems and—more important—the trend is still in the wrong direction.

Nick Giambruno: I would add Argentina feels more European than Europe itself in many ways. Unlike its other South American neighbors, it’s primarily an immigrant country where most people trace their roots to Italy, Spain and other European countries.

Combine this with the extremely low cost of living and it feels like living in Italy for a fraction of the price. In my extensive travels around the world, I haven’t seen a country that has such a high quality of life at such a low cost. For more on La Estancia de Cafayate, click here.

FORTUNE FAVORS THE BOLD

It takes intestinal fortitude to look past the obvious danger of a crisis market and act on the opportunity. But that’s the formula for winning big.

Investing in crisis markets can be scary. At times, you might feel like you’re running into a burning building. But if you can control your emotions and buy when others are selling, you can make a fortune. After all, that’s how Doug Casey, Warren Buffett, Jim Rogers and John Templeton got rich.

Crisis Investing will bring you a perspective you won’t find anywhere else—certainly not in the mainstream financial media. It looks past the headlines to report on the world’s richest investment opportunities.

Detecting fear and the bargains it creates is our specialty. Each month, you’ll hear about the crisis-borne opportunities we’ve found lying in the rubble of economic collapse, civil unrest, revolution, war and geopolitical turmoil.

Call us storm chasers. But unlike the pursuers of F5 tornadoes, we’re not in it for the adrenaline. We’re in it for the profit.

That’s why we look for trouble. History shows the greatest opportunities for wealth creation have happened during times of crisis.

Thanks for joining us on what we believe will be a profitable adventure.

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DOUG AND NICK ANSWER YOUR CRISIS INVESTING QUESTIONSCrisis Investing