Future Money Trends: Greetings and thank you for joining us at FutureMoneyTrends.com. I’m here with Marin Katusa. He is a chief strategist with Casey Research and for a young guy he is actually a legendary investor as well, with a lot of ten baggers under his belt. Marin, thank you for joining us.
Marin Katusa: My pleasure Dan.
Future Money Trends: As a Canadian, as our neighbor to the North and world traveler, what does everybody else think of the U.S. Economy as far as our government’s fiscal state?
Marin Katusa: Well, you know I’ve been to a lot of countries, as you stated over 100 countries that I’ve traveled to. And it’s already started, the change has already started. Russia is trading oil with China, not in petro-dollars but in different currencies. China and Iran are trading oil for gold, oil for food, oil for debt, oil for infrastructure. Same thing is going on in Africa. So the world has already had enough with America’s fiscal policy. Now when I went to Iraq, Kuwait, and Dubai, I met with the ministers of energy there… the big question there is, in my opinion, what will happen to the petro-dollar? And that is the final straw that will break America’s back. Because it is a petro-dollar that is financing the debt, and the American way of life. If the petro-dollar disappears, and if Putin succeeds in ending the petro-dollar. Remember, it’s Saudi Arabia where Nixon set up the whole petro dollar. If the petro-dollar ends, the American way of life will be something that will be destroyed. The inflation will be over 100% because Americans are getting their lifestyle subsidized by the rest of the world. This is a very complicated issue, and when I gave a talk about it in London, I actually had announced on your show; I signed a book deal to get in to all the specifics of the petro-dollar, and what’s going on with the world. And that is a very complicated issue, but to be summed up quickly, the world has already started trading commodities and oil, not in the petro-dollar. And if the petro-dollar finally does die, the American way of life is gone. You want to invest in gold, and that’s why you really want to invest in tangible assets, because the bank system will crash. And I’m not trying to be a doom and gloom guy, this is just factual. You want to invest in silver, and gold, and companies that produce what the rest of the world wants, which is gold and silver.
Future Money Trends: Let’s talk about the mining shares, because the mining shares are also roaring in 2014. What are your overall thoughts on the market right now? Because I remember last time we talked you were still saying, “hey, it’s still kind of a bearish mood out there, and this might take a long time.” But it appears, for the good juniors I mean, these things are snapping back hard.
Marin Katusa: Yeah, that’s exactly what the last time we spoke before Christmas was about: “look, don’t get caught up in the general sector when the gold price does correct. You want to invest in management teams that can make these projects work in bear markets.” And when we spoke about which companies we were buying back then, today we’re sitting at about a double, in just less than two months. Are we selling these type of companies? No, because we believe that these management teams are just the beginning of a multi-year cycle. So you have to know which companies to invest in, the right management teams, I can’t emphasize enough to your viewers how important the people factor is. That is the most important, I don’t care if you’re Warren Buffet or Rick Rule, or Doug Casey, they all look at the same thing – the people running the deal.
Future Money Trends: Well you, Rick Rule, and Doug have a big interest in Brazil Resources (TSXV: BRI & OTCQX: BRIZF) and we’ve talked about it before. It’s a company I cover, and I also own myself, full disclosure. And it has seen, year to date up like 85%, I think it’s almost 20% just Friday. This thing has seen big moves. So is this thing like the last two years of work, where Amir Adnani has just advanced and acquired projects, and moved this company forward? Is this where we’re starting to see the fruits of our labor?
Marin Katusa: I think we’re in the very early stages. Rick, Doug, and I have put a lot of money, and I mean a lot; we’ve put millions of dollars into this deal because not only do we believe in the management team, but the management team themselves own over 25% of this stock. And that’s hard dollars, they’ve invested millions of dollars into it. But more importantly, it’s run by a fantastic management team. So that test is passed. Plus you know that Amir is going to go out there and grow his company by acquiring broken companies in this market. And that’s why I’m so excited about BRI. Here’s the guy who’s done this before with UEC. He goes out there in a bear market and uses his network, because his investors believe in him, and acquire proven assets. And I’m willing to say by the end of this year he’ll increase his proven ground gold reserve by another 25%, and I’m expecting Amir to have over 5 Million ounces proven. And now remember, there’s less than 100 projects in the world that have over 4 Million ounces. Amir’s in the top 100 already and nobody knows about this story. This is the early days.
Future Money Trends: Well, it does seem like the secret is getting out because it has seen a huge increase in volume in 2014. Like I said, the price is up 85%, what else is out there? Let’s just stick with Brazil. Is there anything out there that has you really excited, but people aren’t talking about?
Marin Katusa: Well sure. Not only am I excited about the geology; remember, I told your viewers before that one of the founders of Yamana believed that they had a major potential deposit in Brazil Resources. He wanted to spend his own money to farm in to, and explore, one of BRI’s projects. A little secret that nobody knows is the potential, because of one of the companies they took over. You know serendipity has a way of working itself out. BRI now has 88,000 acres in the Athabasca basin, right by Patterson Lake, and has a joint venture with Areva. It’s a 25% Areva, 75% BRI on 88,000 acres around the Maybelle deposit, which is analogous to what Patterson Lake has. But it’s twice the grade of Patterson Lake, same depth, and nobody knows about this because it’s hidden in this company that was focusing on gold that Amir took over. So this may have so many lottery tickets bouncing around, and that’s not including the other things I expect Amir and his team to pull off in the coming 18-24 months. So it’s just a fantastic story.
Future Money Trends: Marin, with seeing a lot of the miners rally, and something like BRI where it’s literally a double since January first, when do you sell these stocks? Do you sell them when you see a move like this, or do you wait for the story to play out?
Marin Katusa: What we do is, because these juniors are so high-risk, when you finally find a management team that hits all the criteria that we have at the Casey eight P’s, the people, the project, the politics, all the different pieces, you don’t sell for a double. Because A, the liquidity is an issue. For example, the KCR Fund, which is Doug Casey and Rick Rule, the KCR Fund is a reporting issuer. So if we own over 10% of stock you can see what we’re doing with our stock because we report it to the public, so that everybody in the public can see that. We are going long on this, we have a five year time frame because we expect, within 5 years, for Amir to take this to over $5. And for your viewers, those guys who bought at $0.55 when we last talked, and now it’s at $0.90 change, you have to ask yourself what is your time frame? And if you have a better investor, and looking at what we have right now with BRI is a fantastic story. Management is buying stock and they put more money in to the financing. If you see management and insiders start selling, then you want to start taking money off the table. Or if the story has changed, then you want to start taking money off the table. But in this example, management has put more money in to the story, the story is even better, so this is where you go long and run with the jock. And that’s what we are doing.
Future Money Trends: For the mining companies, they’ve been rallying in spite of the DOW Jones actually having a correction. Not a lot of us are familiar with the mining cycles and the mining stocks. But everybody is familiar with 2008, where everything fell across the board. Is this typically not the case? Was 2008 that one-off year? Could the DOW Jones fall, and mining stocks continue to rise?
Marin Katusa: In November of 2008, I’ll give you a great example. In my newsletter, I put a strong buy on UEC. It was trading less than $0.25, actually $0.18-$0.19 within that week. And I said this is a strong time to buy it. And in our portfolio, because I just bought it after the close it was around $0.25 that day. Within 24 months, and again this is a great example of the junior resource sector, it went to over $7 within 24 months! So what I’m trying to explain to everybody is, with that you’re making over 25 times your money. Not 25%, 25 times your money. And those are the type of gains that you look for in the junior resource sector because it is so risky. So even now that it’s pulled back and UEC’s hovering around that $1.70, two and a quarter range, you still are up ten times your money. So what I’m trying to say is, yes. Like Doug Casey says, if you invest in the right management team and they can survive these bear markets, which we’ve just had, a ten-bagger, which Doug Casey clearly gave examples in the Upturn Millionaire, which is free on our Casey Research website, ten-baggers are the norm. And then when Doug Casey said that, Rick Rule confirmed it, and said, “if these companies can survive for two years in a bear market, a triple is the reward.” That’s coming from Doug Casey and Rick Rule. So what I’m trying to get at is, yeah we’re up about 85% in a few months. That’s not why we invest in the junior resource sector, we’re looking for the ten-baggers.
Future Money Trends: Marin, what about the overall economy? Does that concern you at all? What is your biggest risk when you’re investing in these things, besides them just not ever achieving their objectives? Are you worried at all about the U.S. Dollar, or the global economy? Because I know Casey also covers that.
Marin Katusa: Yes, so when you’re investing in the junior resource sector, you have to have your eyes on a lot of different variables. And why understanding of what’s going on in the global economy is important, is sometimes the junior resource stocks have investors that are called hedge funds. And I coined the phrase, back about four years ago, called the Trigger Effect. And when you have a fund who wants to get out of a junior you have to be very careful because one fund can take down the stock 50%, and that’s a buying opportunity if you understand why they’re selling. Did they get a cash call? Did they get redemption? Did they blow up somewhere else, and they’re just trying to get cash to pay out their investors? So it’s critical to understanding the new dimensions of investing in the junior resource sector. Not only do you have to through the 8 P’s, but you have to understand who the other players are. And maybe it should be a 9th P, for Casey Researchers. Who are the other players investing in the stock? And that’s something very important to understand. If you go to the BRI website, they talk about all of the big shareholders. You have Tocqueville, Sprott, Sun Valley, KCR, and then you can do your due diligence and find out, ”Ok, what type of funds are these? Are they strong funds? Are they hedge funds? Are they long? Are they short?” And that’s another factor that I caution your investors, when they start investing in the junior space, to ask themselves, “who are the players investing in this? What outside black swans can affect the share price, that has nothing to do with the management or the quality of the project?” So that’s a new dimension that is occurring right now in the junior sector.
Future Money Trends: That’s interesting. So you’re not only concerned with the people who manage it, but the people who own the shares?
Marin Katusa: Of course. You have to be, without a doubt. That is also an opportunity. That could be a great opportunity to buy more stocks; and we saw that in BRI. I was telling you in the last call we had, I told you that there’s a lot of funds who are tax-loss selling and have to sell. Well that’s a fantastic opportunity to buy. Because the company was actually much stronger than it was a year before. And great, the stock’s $0.90, but it’s trading at less than 25% of its PV10 value. This stock should be $3 if it was a fair value market.
Future Money Trends: Are you starting to see the big money. Are they starting to come in? I remember Rick Rule, a few months ago, was saying they were starting to circle the wagons, but they weren’t in yet. Are they starting to come in?
Marin Katusa: Well one of the reasons we did the Upturn Millionaire at Casey Research is yes, the money now is showing up. For example, Rick went and got Korean money, and then also Chinese Money. That’s a billion and a half dollars that is coming in to this sector. K.K.R, a major fund, has now put up a billion and a half dollars to set up shop in Calgary for the junior resource sector. You see a lot of funds now, starting to say, “hey, we are getting back in to the junior resource sector because it is so cheap.” There is a sector rotation going on right now, and you want to get in before the big funds. Secondly, you see take-overs happening now. In the last month we’ve seen Goldcorp take over Osisko. We’ve seen HudBay make a hostile for Augusta. And these are all very big deals. Augusta was over $500,000,000 deal. Osisko was a multi-billion dollar deal. So what I’m getting at is, it’s gotten to the point where the guys who know the sector are saying, “that’s it, this is so cheap we’re starting to take over companies.”
Future Money Trends: Let me ask you one last question. When it comes to the precious metals, what’s your overall outlook for 2014? Most of the mining companies are pretty much at cost to what they produce. Do you think this is a big turn around year from what you’ve seen so far?
Marin Katusa: I like to play the contrarian angle, so a lot of people say I’m Mr. Negative on Howe Street. And I look at $1,200 gold is the metric I use for all of my assessment values. Gold at $1,320 right now is fantastic, and it makes the market look better. I do expect a turn around, which means higher gold prices. But for me that is irrelevant because when I do my metrics for oil, I use $60 oil and I used $1200 gold. That’s just the way I do my numbers because I come from a mathematical background. And then the rest… If you’ve got $1,400 to $,1500 gold, wow these things are going to be on fire!
Future Money Trends: Marin, in your circles, with the change from Bernanke to Yellen, what are your thoughts and what are you hearing from people? Are they optimistic that Yellen is going to print more than Bernanke, or how do they expect her to react to the economy?
Marin Katusa: Well, a lot of people are asking me exactly that question. They’re saying, “well Marin, you’re buddies with Rick Rule, Frank Giustra, Doug Casey, John Mauldin, Ross Beaty and all these guys.” So I said, “I’ll tell you what, let’s put together a webinar,” and we called it the Upturn Millionaire. And we had Frank Giustra, Ross Beaty, all these guys, give their take on forty years in the business each. These guys have made billions of dollars for themselves and investors. And we asked exactly that question to everyone, so it’s an excellent question you brought up. So we asked everyone, and the answer across the board from John Mauldin to Rick Rule, to all the guys was: “Yellen is going to continue where Bernanke left off, with the troubles. And the reality is, this is going to make a stronger bull market for gold and silver, and it’s going to be even a better market for the junior resource sector.” And all of them called the bottom in the market. And two weeks ago we aired it live. It sure looks like they were right, and this is looking fantastic.
Future Money Trends: Marin Katusa of Casey Research. Thank you so much for your time, sir. If somebody wants to get a hold of you, or reach out, or subscribe to your newsletter, where do they go?
Marin Katusa: Just go to our Casey Research website. That’s CaseyResearch.com, and I would highly recommend your viewers to start with the free material. We have this Upturn Millionaire, which is a must watch video that I’m very proud of. Within that group of guys I’d say they’ve made north of $10 billion for their investors and themselves. And to listen and watch from guys like that is just priceless.
Future Money Trends: It is good information. Thank you so much Marin. You have a good day.
Marin Katusa: My pleasure, thank you Dan.