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Investing with the Best – Doug Casey & Marin Katusa Interview Oct 2013

Visit Casey Research here: CaseyResearch.com

 

Transcript:

FutureMoneyTrends.com: Thank you for joining us at FutureMoneyTrends.com. I'm here at the Casey Summit with Doug Casey and Marin Katusa of Casey Research. Thank you for joining me gentlemen. I want to talk about making money today, of course that's why everybody shows up to your summit. Doug, what's one of your favorite investment stories, from your personal investments?
 
Doug Casey: I don't know, look.... I hate private equity, which is to say buying private companies with no prospect of going public, but recently I sold out of an online university that I got into ten years ago, and that was a 13 to 1 hit. So, I'll put money in anything if it looks right at the time, and I love resource stocks because they're so volatile and there's a whole argument that can be built for investing in natural resources, but I'll do anything if it looks like a good deal and it's a right time in the market. So, one thing that I've done is buy a lot of international real estate. And that's treated me well because I bought things that I liked. It's not because I thought I could sell it to a greater fool, it's because I actually like it and I liked the price. So I think it's important in the markets, what I'm trying to say in a roundabout way is to be — keep a broad view, and look at everything. Because if you've got 200 countries, there's always a couple at the bottom of a bear market, and there's always a couple that are right at the top of a bull market, and different asset classes, stocks and bonds and currencies. So you have a wide selection of things and you can just pick the very best ones. For instance, Nick Geobrano and I just went to Cyprus, where the stock market is down 98% since its peak in 2007. Now this is very unusual that a national stock market has dropped not 90%, not 95%, but 98%. And this has got to get your attention. There are stocks in Cyprus right now that are selling at ten percent of book value. So you have to investigate these things, so that's my approach.
 
FutureMoneyTrends.com: Marin, what is your favorite story right now, or favorite stories that have you excited.
 
Marin Katusa: I always try, and it doesn't always work, but I try to invest in what I try to call the A teams, the best management teams that I can find. And right now a few of my favorite stories are where the management owns over 20% of the companies themselves. Because if they have as much risk in the game as I do, I'm willing to take that bet. And they have to have this excess before, also, and they can write checks. And I want to invest in guys that can only come back if I finance them. I want guys who can do it without. That's one of my little rules of thumb. I really like backing the NexTen members, such as Amir, such as Nolan, such as Morgan Polack. These kind of guys that I can know that have a great future. And it keeps the explorer leagues, like Keith Hill, or Jim Roark, or Bob Quartermain. And finding these guys, and the beauty is in this bear market you can find the best teams at a discount. Why would I waste my time with the B players.
 
FutureMoneyTrends.com: Right. On the NexTen list, it's such an interesting list for me as a young guy, because it seems like this is something that you can invest in these people and it can be really your only investments for the rest of your life are these people. Have all of them had some type of major setback? Because I have found in my own personal experience that major setbacks make people better.
 
Marin Katusa: Builds character, definitely. Let's take Amir with UEC. He had the stock up to 7 dollars at the peak of the uranium bubble, and I've known Amir back, he sat behind me in organic chemistry class, so I've known Amir for a long time, and he was the best pitcher. He's a great promoter, I call him the next Robert Freedman. When he pitched Doug and I, I said we're in a bubble here for uranium, I want to see you develop your assets, and then in November 2008, his stock went from seven dollars to 18 cents. And we wrote it up in our newsletter as a buy under 25 cents. Okay? Within two years it ran back to seven dollars. Now, what are these setbacks? Well sheesh, there's a global crisis, he's had Fukushima to deal with, and he took an exploration asset to production. One in 3000 projects ever goes into production. Very few guys have ever been involved in something that has been speculative, to exploration, to development and actually build production. So yes, there's a perfect example of a guy who's had a setback, but he doesn't give up, and he puts more money into the deal. Those are the types of guys you want to back.
 
FutureMoneyTrends.com: Doug, what are some things out there that excite you right now? Any investments out there that are kind of like a "screaming buy?"
 
Doug Casey: Well, right now, I think we're in an investment twilight zone. I don't see an awful lot of bargains anywhere, but I'll give you a couple of ideas. I think that we're, as we speak now, at the peak and headed down on the bond bubble, and the bond bubble I think is bigger than the tech bubble was in 2001, it's bigger than the real estate bubble in 2007. So, it's tough to do because this timing question, but if you can be short bonds over the years to come, you're going to make a lot of money, that's number one. As interest rates go up, this has got interesting consequences for the real estate market, for the stock market, but let's not talk about that. Second thing I'd look at are the junior resource stocks have just been devastated over the last 18 months, and I suspect there's a bubble that's going to be ignited in them, so the potential exists for getting not just double or triple, but even 5 to 1 or 10 to 1 on your money. The most volatile sector of the market that there is, so I look at them to go long.
 
FutureMoneyTrends.com: Does it require a booming economy for these resource stocks to go up?
 
Doug Casey: No, not necessarily. It's helpful because you want high commodity prices, but that's a very interesting thing right now. Even with gold at $1300, which seemed like an insuperable number a few years ago, here it is at $1300 and almost none of these mining companies are able to make any money at 1300 dollar gold. This is quite interesting actually. So, I like the junior mining stocks right now, even though we can't call them an investment, because they're strictly a speculation. Speculation on the gold price, speculation on whether they can be permanent, speculation on whether they can build the mine for reasonable costs. It's a very risky area, but if you call it right, the potential rewards are gigantic. And I've long been a believer that: Why should I risk 100% of my capital for a potential 10% return when in some areas of the market I can risk 10% of my capital for a potential 100% return? That's just the way I've always oriented psychologically towards the markets. So, well, other things that are kind of interesting, I think that if American bonds are a good short, Japanese bonds are an even better short, compounded by the fact that they're in Japanese Yen, which they're creating even more aggressively than the U.S. government is creating U.S. dollars. So these are three ideas that I feel pretty good about.
 
FutureMoneyTrends.com: Marin, at the Casey Summit you guys have some companies. Any conference you go to there are always a bunch of companies. But yours are unique — did you guys invite these?
 
Marin Katusa: Yes, invite only. So last time three of us sat down about a year ago and my favorite panel of the shows that we do, is the last panel of every conference, we do our best picks. The two that I came up with last year who were in the room last year, one doubled and the other is up 400%. So, people are talking about we're in a bear market in the resource sector, and I think we are, but you can still make big gains in this. And what I'm trying to emphasize to people is the most important element of investing in the junior resource sector is picking the right people. The commodity, whether oil is 150 dollars or 50 dollars is irrelevant if an oil explorer finds a massive oil deposit, because that is a value to a bigger company who is going to buy it. Whether gold goes to 2000 dollars or 800 dollars is irrelevant if you find a major economic gold deposit. Now yes, you're going to attract a lot of attention if it's 2000 dollar gold and there's going to be more speculation, there's going to be more froth in the markets, but if you follow the right people, the economy or the commodity price doesn't really matter. You can still get the major returns if you're finding world class assets.
 
FutureMoneyTrends.com: Is everyone here that's on the NexTen list?
 
Marin Katusa: No, not everyone here. At this conference we have Nolan Watson and Amir Adnani at the show who are on the list.
 
FutureMoneyTrends.com: Alright. And in the room, I guess tomorrow you'll do your top picks? Or Doug you'll do your top picks? Or, who will do them?
 
Doug Casey: I don't do picks, Marin is... Look, I've been doing this for forty years, and I've got to tell you that Marin is the best disciplined and most knowledgeable stock picker in this field. Ever.
 
FutureMoneyTrends.com: That's an amazing —
 
Doug Casey: But it's true! I'm not just blowing smoke, it's a fact. So I don't do stock picks anymore, I'm more interested in doing other things. So I leave that to Marin because he's very very good, and I kid you not.
 
FutureMoneyTrends.com: In closing, for fun, this is actually one of the top ten questions from our members before I came here. Did you guys have a mentor in your youth? And if so, how did you meet them? Doug let's start with you.
 
Doug Casey: Well, I wish I had. I could have saved myself a lot of time and a lot of money. So I had to figure all this stuff out by myself. What are you going to do, it's luck of the draw.
 
FutureMoneyTrends.com: Who do you listen to or read?
 
Doug Casey: Well look, there are some guys who are in this business who I consider to be something, have a genius for. Richard Russell is a guy, he's a WWII veteran, but always been one of the best intuitive judges of the markets that I can think of, so I'm going to put a plug in for Dick there. Who else? Well I've got a lot of friends in the business, and some of them are very good, but Marin is quite correct. You've got to bet with the people, because good people make for good business, and bad business make for bad business. So it's a question of making the correct judgment of the character of the people you're dealing with, not just their technical competence, but also their basic character. And since I am in this business and have to associate with people, I'd much rather associate with these people than clever people who can't be trusted. So that's an endorsement for all the people on our NexTen list and our explorers list. They qualify both technically and character wise as far as I'm concerned.
 
FutureMoneyTrends.com: Marin, did you have a mentor in your youth? Though you're still young, how old are you?
 
Marin Katusa: 35.
 
FutureMoneyTrends.com: So who are your mentors, I guess I should ask that.
 
Marin Katusa: I've been lucky, I've been very fortunate. From earlier on, my dad was a workaholic, and I developed a hard discipline for work from my dad. Met Doug very early on and Doug's been a great mentor for me, always made time, taught me the ropes. And more importantly, introduced, Doug gave me the keys to the empire, and through that become very close friends with Rick, and that's how Rick became a partner in our funds. He offered to buy out our funds and I said look, I'm not a gun for hire, and we ended up creating a partnership and Rick became a great mentor. And another one I've learned a lot on the development from is Jim O'Rourke. Not only is he in the Canadian hall of fame for mining, he's got the order of BC, and together we developed and I've been on the board of a company called Copper Mountain, which today is the third largest copper producer in the country, and seven years ago we stood at a Casey conference and said to everybody: “We're going to put this mine into production.” Remember the numbers, 1 in 3000 projects ever goes into production, and Jim Roark did it. So the three main guys in the mining business have been Doug Casey, Rick Rule, and Jim Roark.
 
FutureMoneyTrends.com: Gentlemen, thank you so much for sharing your thoughts on wealth building and investing and speculating, I appreciate your time.
 
Doug Casey: We'll see you here next year.
 
FutureMoneyTrends.com: Every year!

 

 

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