It’s another Legacy Research “Hall of Fame” trade…
I’m talking about a 400%-plus gain on the gold bull market we’ve been shouting from the rooftops about.
I’ll get to the details in a moment. First, if you’re new to the conversation, a bit of background.
Gold is our favorite precious metal at Legacy.
We typically view it as “disaster insurance” for your portfolio. It’s something you want to own when the world goes to hell in a handbasket.
And we recommend you own physical gold – as coins or bars, ideally – as bedrock wealth in your portfolio.
Gold, as we’ve been showing you, is also a great way to protect yourself from the monetary madness that’s underway.
It boggles the mind to think about it. But at the height of the coronavirus meltdown in March, the Fed (America’s central bank) was creating $1 million a second and using it to buy financial assets.
That’s about $90 billion a day… or more than the Fed was creating at the height of the 2008 financial panic.
And it’s gotten some of colleague Tom Dyson’s readers thinking.
If you don’t know him already, Tom cofounded Palm Beach Research Group along with Mark Ford.
And as I showed you yesterday, he believes gold is going to trounce stocks over the coming years.
He writes about it every day over at our Postcards From the Fringe e-letter… along with reports on his travels with his family.
Here are some questions readers had for Tom about central banks… and how they relate to inflation…
Reader question: What do you think about this quote by Henry Ford? “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Is this just a nice quote, or did Henry Ford understand how the central banking system works in transporting money from the many to the few? And would you be able to describe how this works?
Tom’s answer: As long as we are comfortable and safe, and our credit cards work, no one cares about the workings of the system. The problem is, I think people assume it’s stable and safe. What they don’t realize is the system has become very unbalanced… and nature abhors an imbalance. It desperately wants to reset itself. And the feds desperately want to keep it going. Something’s going to break. And when it does, gold will soar.
Reader question: I read your Postcards daily and look forward to each one. Reading the latest one, this question came to mind: They’ve been devaluing the dollar for at least 50 years.
What’s different about now? Is it that the rate of devaluation greatly exceeds the interest rates on Treasurys?
Tom’s answer: The difference is, now there’s an economic imperative to create inflation. Without inflation, the whole system collapses into a great depression. But free-market forces want to deflate the debt bubble. And those forces are more powerful than they’ve ever been.
As Tom has been showing his readers, gold has been falling relative to stocks for years. Now that trend is about to reverse… and our fraying money system will finally come apart.
To protect your wealth, we recommend you start off with physical gold. But gold stocks can add extra oomph to your portfolio… especially if you know your way around the options market.
Without getting too technical, it’s where investors place “side bets” on the movement on stocks.
And that’s exactly what Crisis Investing editor Nick Giambruno did last August.
He added January 2021 call options on gold royalty company Franco-Nevada (FNV) to the model portfolio.
And that’s played out beautifully…
He just recommended selling those call options – bullish side bets that FNV shares will rise – for a maximum gain of 406%.
He still has plenty of open gold positions in the model portfolio to play what he believes will be the biggest gold bull market in history.
And judging from the feedback that’s been flooding in, Nick’s readers are making money. Here are just some of the emails we’ve gotten…
Nice call. Started buying around 6.5. Average sale price 9.0.
$44k profit.
– Howard A.
Last August you suggested small investors limit their positions to $800 or so; that bought one call. Payday today… $3,000 and 375% gain. Thanks. What’s next?
– Robert P.
I don’t have exact figures on my FNV calls, as I was selling on the way up, but I know my gains were at least 200%, probably more. Great call. Thanks!
– Kenneth P.
I followed your advice to use calls to leverage my exposure to FNV. I have not done a lot of options trading, so I purchased just two contracts. Those two contracts produced a $5,100 gain, while 20 shares of actual stock only produced a $1,000 gain.
While owning shares was a “winner,” it is clear the power of options to really leverage buying power and accelerate gains is awesome. I put less capital at risk and have sold the shares for a big win. I can’t wait to deploy the funds to another options trade. Thank you!
– Richard N.
Finally for this week, a question on another precious metal – palladium – for Nick…
Reader question: What do you see for palladium as a hedge against the current money-printing wave?
– Ravi P.
Nick’s answer: If you’re concerned about the reckless money-printing taking place around the world, then the best inflation hedge is gold.
Gold is primarily a monetary metal, not an industrial metal. The opposite is true of platinum and palladium. They are primarily industrial metals. They’re most used in automotive catalytic converters.
Industrial metals can work as inflation hedges, too. But they, of course, have the extra risks their specific industries are associated with.
If the demand in those industries decreases, so does the demand for the industrial metals. With the global economy on the precipice of the biggest collapse since the Great Depression, I wouldn’t want to be taking on any added risks when looking for an inflation hedge.
So if you’re concerned about inflation (and you should be), go with gold. All the other options are suboptimal when it comes to an inflation hedge.
Have you built a position in gold to protect your wealth from inflation? Have you shared in the gains from Nick’s recommendations?
Write and let us know at feedback@legacyresearch.com.
Regards,
Chris Lowe
May 8, 2020
Dublin, Ireland
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