The global race to zero...

This market's down 90% and one of its best investors is getting excited...

Editor's note: The notoriously cyclical mining business has been enduring a classic bust… But Sprott Global Resources Investments Chairman Rick Rule – one of the greatest resource investors we know – explains why now may be the time to start getting optimistic on the sector.

 I think we're coming into the point in time in the market where the big holes in the ground that eat up capital – aka mines – begin to give [capital] back, which is lovely. The nature of the resource business is that it's extraordinarily cyclical, and it either rewards you extravagantly or punishes you mercilessly. We've been through three years of merciless punishment… and having endured the pain, now we get to enjoy the gain.

 And what's particularly attractive to me is the sort of perversely negative sentiment associated with the mining business today. I was recently in Australia... And I spoke at four different investment conferences. I am delighted to say that out of probably 80 speakers at the four conferences, I was the only optimistic voice.

I was so different from [other speakers at] the podium that I was actually interviewed – in a very fair fashion, I might say – by the newspaper The Australian, which is the equivalent of their New York Times and Wall Street Journal rolled into one. And the uniqueness of my views and the importance of resources in the Australian sector was such that actually an American analyst discussing junior resource financing made the front page of The Australian.

People were truly aghast at the fact that, in the first instance, somebody cared, and secondly, that the somebody who cared was positive toward the sector rather than negative toward the sector. People were saying to me, "Rick, the sector's fallen by 90%. Why would you be attracted?" And I said, "Well, because the sector's fallen 90%. That's why I'm attracted."

– Rick Rule

Editor's note: Today's Digest Premium is taken from Rick's recent interview with Porter on a recent episode (No. 108) of Porter's weekly Stansberry Radio Podcast. To listen to the full interview, click here.

This market's down 90% and one of its best investors is getting excited...

The notoriously cyclical mining business has been enduring a classic bust… But in today's Digest Premium, Rick Rule – one of the greatest resource investors we know – says now may be the time to start getting optimistic on the sector...

To continue reading, scroll down or click here.

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As of 11/08/2013

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

This market's down 90% and one of its best investors is getting excited...

The notoriously cyclical mining business has been enduring a classic bust… But in today's Digest Premium, Rick Rule – one of the greatest resource investors we know – says now may be the time to start getting optimistic on the sector...

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

The global race to zero... Everybody is cutting rates, even Peru... A $1.1 million Rolex... Ray Dalio questions the Fed's ability to stimulate... Record sales for silver coins... But are we running out of the metal?... A satisfied reader...

 The global race to zero continues...

Central bankers around the world are still battling to see who can cut interest rates the lowest, who can print the most money, and who can weaken his currency the most.

A weak currency benefits a country in several ways. It increases exports (as goods are now cheaper for foreigners). It makes the country more attractive to foreign investment. And multinational companies with foreign revenue also make more money after repatriating foreign profits and converting them into the home currency.

 On November 7, the European Central Bank (ECB) cut its benchmark rate by a quarter of a point to a record low 0.25%. ECB head Mario Draghi said the rate cut was done to boost inflation, and the euro's strength "didn't play any role" in the move. Inflation in the 17 European nations that use the euro has remained below the 2% target for the past nine months.

The same day, the Czech National Bank announced it would sell koruna "for as long as needed" to boost growth, according to Governor Miroslav Singer. This is the first time the Czechs have intervened in the currency market in 11 years. The koruna fell 4.4% against the euro on November 7.

 New Zealand said it may delay rate increases to weaken its dollar... And Australia last week left its benchmark interest rate unchanged at a record low 2.5%. Reserve Bank of Australia Governor Glenn Stevens said the Aussie dollar remains "uncomfortably high."

 Even Peru is getting in on the game...

On November 4, Peru's central bank cut the overnight interest rate to 4% from 4.25% – its first cut in four years... Slowing exports is hurting the commodity-dependent nation.

 Of course, this is all child's play compared to the U.S. – which is still holding interest rates at record lows and purchasing $85 billion of bonds every month.

And then there's Japan... Prime Minister Shinzo Abe is administering massive quantitative easing. He made his intentions well-known from the start. Abe took the top post in Japan last December. "We have got to get the economy out of deflation, correct the strong yen, [and more]," he said at the time. "That's our mission."

 Steve Sjuggerud recommended Japanese stocks in the January 2013 issue of True Wealth. At the time, he dubbed it "Abe's revenge." An unpopular Abe resigned as Prime Minister in September 2007. Following his resignation, the Nikkei (Japan's benchmark stock index) fell in half. And the yen dropped 40%. Critics viewed his policy of maintaining higher interest rates as hampering Japan's economy.

Having won election a second time, Abe vowed to not repeat his past mistakes this time around.

 When Abe took office in December, Japanese equities were cheap... And having watched Federal Reserve Chairman Ben Bernanke work his inflationary magic on asset prices here... we knew what unhinged quantitative easing would do to Japanese stocks.

In that issue, Steve recommended a Japanese stock fund that is hedged for a weakening yen to profit from the trend. True Wealth readers are up 39% in less than a year.

 Central bankers are striving for inflation... And if they don't achieve their desired level of inflation, they cut rates further and print more money. It's a vicious cycle. These people believe (or at least state publicly) that inflation is good for an economy.

In reality, it simply allows them to grow the monetary base and spread capital around to gain more political support.

In last Friday's Digest, Porter explained what inflation really means. I'd encourage you to read the full Digest, we'll share a small excerpt today...

 As we've discussed previously in these pages, inflation also drives up the prices of collectibles, like fine art, fine wine, and watches. The wealthy want to get out of paper money... Buying a painting by Picasso or a wine from the legendary French vintner Petrus shifts them from dollars to rare and globally recognized assets. And the ultra-wealthy are always looking to acquire more of these.

Just yesterday, a 1969 Rolex Daytona sold for a record $1.1 million at a Christie's auction in Geneva. It's the most ever paid for a Daytona at a public auction. And it's close to the record $1.16 million paid for any Rolex, which happened at another Christie's auction in May.

In total, the watch auction raised $13.2 million – four times the presale estimate.

 But what happens when the party stops? How much longer can the Federal Reserve continue easing? How much longer can such measures remain effective?

That's what Ray Dalio – the billionaire founder of Bridgewater, the world's largest hedge fund – was wondering in his daily note to clients.

 Dalio summed up the piece... "In other words, we're not worried about whether the Fed is going to hit or release the gas pedal, we're worried about whether there's much gas left in the tank and what will happen if there isn't."

 You can read more of Dalio's thoughts, which closely resemble those Porter shared in his Friday's Digest, at the financial blog Zero Hedge.

 If you're not in the market for a $1 million watch, what else can you buy today? As always, we recommend having a portion of your portfolio in gold and silver bullion. But there's no doubt word is getting around...

Sales of U.S. Silver Eagle coins are about to set a new record. As of two weeks ago, the U.S. Mint had sold 39.2 million coins so far this year. That's just shy of the 39.9 million ounces it sold in 2011... when silver peaked near $50 per ounce.

 Yet despite brisk sales, the U.S. Mint just announced its last allocation of 2013. After December 9, buyers must wait until mid-January to place orders for new coins.

 You may recall that the Mint had to suspend sales earlier this year, after running out of silver. Premiums for Silver Eagles soon reached historic levels – as much as 40% over the current (or "spot") price. That's if you could find them at all...

As legendary investor Jim Rogers said, "You can't get [them]. They sell out. Several mints have run out of coins because everybody's worried about the future of the world."

 Resource billionaire Eric Sprott takes it even further... He thinks the world is almost out of silver (and he announced this in February 2011). From the February 24, 2011 Digest:

 Our colleague Tim Mittelstaedt, Palm Beach Letter editor in chief, just finished a six-month investigation into the silver market. He says these shortages are evidence of a huge distortion in one corner of the markets – far removed from mining stocks and ordinary bullion. Tim believes this imbalance will only be resolved by much higher prices for a few silver investments. To watch the video he prepared describing his research into the phenomenon, click here.

 New 52-week highs (as of 11/8/13): Becton-Dickinson (BDX), Chubb (CB), iShares Insurance Fund (IAK), ProShares Ultra KBW Regional Banking Fund (KRU), 3M (MMM), Oneok (OKE), Steel Dynamics (STLD), and Constellation Brands (STZ).

 Some thoughtful feedback from a happy reader. Send your notes to feedback@stansberryresearch.com.

 "How I wish I had understood as a young man the principles I have learned in the past ten years or so, since I first started reading Steve, then Porter and the gang. I have realized how important and misguided economics is as currently taught, and as I absorbed from reading the business pages growing up, a practice I started in 7th grade when I invested my life savings (lawn jobs, etc.) in a mutual fund. I always knew vastly more about the subject than any of my peers – but everything I knew was sadly wrong.

"The really sad thing is that I was always quite brilliant at math. Once you (particularly Porter) showed me the numbers, the truth was blindingly obvious. Even sadder is the fact that almost all of my home schooled children were already in or through college and grad school before my education on the topic really got in gear. Only one of my nine children is still in high school now, but he is learning economics like it should be taught – which is to say, from Porter and Bill Bonner, along with some classical Austrians.

"All this to beg your indulgence in forwarding today's Digest to my 16-year-old as part of his required reading in Economics. Since he is not likely to take advantage of any proprietary investment suggestions at his age, I hoped you would not mind.

"I read a great man who once said, 'There is no teaching, only learning.' I think that while this is true, there is great value in a proper education – in fact, it might be our nation's only hope of salvation. Thanks for doing your part." – Paid-up subscriber Tim

Regards,

Sean Goldsmit
Miami Beach, Florida
November 11, 2013

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