christian dehaemer’s bubble & bust...

C H R I S T I A N D E H A E M E R ’ S

Bubble & Bust Report

April 2017



April 2017 Issue

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Fool's Gold and Fantasy Heists: Gold on the Verge of a 15-Year Breakout!

A few days ago, some crack addict broke into a museum and stole the world’s largest gold coin worth $4.5 million by weight.

According to the Berlin police, these criminal masterminds broke into the Bode Museum using a found ladder to enter a window from the elevated railway tracks. The thieves grabbed the “Big Maple Leaf” coin, put it in a wheelbarrow, and bounced it across the river via a train truss.

The coin is 1.2 inches thick and 20.9 inches in diameter and weighs 220 pounds. I can imagine the scene.

The problem you have after such a theft is what to do with your ill-gotten loot. The melting temperature of gold is 1,943 degrees Fahrenheit, so it can't be melted in an oven or on a stove.

What you need is a propane torch. They also sell electric furnaces for use at home along with crucibles and molds in which to form the bars. There is even a microwave gold melting kit, which wouldn't work for a coin this size. Of course, I'm sure the Europol are already looking through online orders of such things.

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The statute of limitations on stolen art in Germany is 30 years. One could imagine sitting on the gold for a number of years, before melting it down and selling it off in chunks to pawn shops or mail-in gold buyers.

As an aside, it is interesting that the “we buy gold” guys in the strip malls have shut down. Nor are there any commercials on late night TV. That's a good contrarian sign for us buyers. Another positive factor for gold bugs is the falling dollar.

Death of the Dollar

According to Reuters:

The dollar slid to a four-month low against a basket of currencies on Monday as investors weighed the prospects of a U.S. fiscal spending boost under President Donald Trump after his failure to push through a key healthcare reform bill. The euro EUR=EBS reached $1.0874, its highest since Dec. 8. Sterling, the worst performer among the G10 group of major currencies against the dollar this year, hit an 8-week high of $1.2598 GBP=D4.

You can see it yourself in the dollar index chart:

This is a five-year chart, so you can see how overvalued the dollar is compared to where it was in the past. The dollar hit a 14-year high in January. It could easily drop 20% from here and still be at normal levels.

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The market has gone up 3,000 points since the November 8th election with the idea that Donald Trump will ease restrictions on business, cut taxes, and ramp up spending on roads and bridges.

This idea took a hit when they couldn't repeal Obamacare. The failure of a new health care package comes on top of a failed attempt to halt immigration from seven Muslim countries as well as a blow back from the deep state on intelligence.

The market is coming to realize that draining the swamp is a lot more difficult than it appears. Tax cuts and infrastructure spending seem unlikely at this point.

Not only that, but other countries are actively trying to bring down the dollar.

Countries like Brazil, Russia, India, China, and South Africa have been taking steps to cut the dollar out of international trade. China in particular wants the RMB to be a leading currency and has joined forces with Moscow to make it happen.

On March 16, the Central Bank of Russia opened its first overseas office in Beijing. The local news called this “a small step forward in forging a Beijing-Moscow alliance to bypass the U.S. dollar in the global monetary system.”

The biggest beneficiary of this move to shrink the dollar will be gold and other hard assets.

As you can see by this 10-year chart, the price of gold is in a massive pennant formation.

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With the dollar falling and the Trump rally running out of steam, it is likely that the price of gold will break out to the upside. We are sitting on gains like 140% in Aura Silver, 83% in Goldcorp, and 142% in Bitcoin.

That said, it would be wise to wait for a conformation of the breakout before going all in. That could come as soon as this week.

Keep reading. Our friend Luke Burgess has an insightful take on another precious metal. And later I'll give you the Q1 update of our current positions. Our portfolio is sitting pretty with a solid gain for the start of 2017.

All the best,

Christian DeHaemer Bubble and Bust Report

Forget Gold and Silver for Now; Buy Platinum

Gold and silver prices are heating up. And over the long term, both metals are very well positioned to continue rising. But with so much action in gold and silver right now, I want to hit the pause button on buying either metal and look at platinum. And that's because there's a bit of a hierarchy when it comes to precious metal price increases. Here's what I mean...

During any economic conditions that would spur precious metal prices, the first metal to respond positively is gold. Gold is the world's best monetary asset, and the yellow metal is always the first to increase in prices during times of uncertainty. The price of silver tends to follow next.

After gold prices increase in economic uncertainty, traders go for the next best thing: silver. Like gold, silver has become a very popular safe haven instrument. And over the past few weeks, we've seen this in action.

Immediately following the March FOMC meeting, both gold and silver prices jumped. But if you look at what happened in the two weeks following that meeting,

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you can see that while gold prices continued to march higher, silver prices had a delayed reaction.

The next precious metal to increase after gold and silver?

You guessed it: platinum.

The charts above show a very typical movement in gold and silver price reactions. Usually, it only takes a week for silver prices to catch up. Platinum generally takes a

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little while longer to react. But it always does.

For investors, however, getting good exposure to platinum can be a bit troublesome in both options and expenses. The most direct way to get investment exposure to platinum is by owning the physical metal. The U.S. Mint and others produce .9999 fine platinum bullion investment products like the American Platinum Eagle. However, when it comes to investing in platinum, I typically recommend against owning the physical metal.

The biggest problem with physical platinum bullion is the price. All physical precious metal bullion is sold with a premium — a markup to compensate distributors and dealers for their time and effort. And while the premiums for gold and silver bullion are generally reasonable, the premium for physical platinum bullion is almost always outrageous. The premium charged for a one-ounce American Gold Eagle is about $60 right now. For a one-ounce American Platinum Eagle, the premium is nearly $100. Here are screenshots of APMEX's current asking prices.

Aside from higher premiums, finding a buyer for physical platinum can also be troublesome. You'll notice that APMEX has listed a buy price for Gold Eagles.

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That's what it will pay per coin. But there's no buy price for Platinum Eagles. That's because they don't buy platinum. Some dealers will buy platinum bullion, others won't. So aside from higher premiums, liquidity is a concern with physical platinum.

The next best thing to owning the physical metal is the ETFS Physical Platinum Shares (NYSEArca: PPLT). However, this ETF is not designed for long-term ownership. PPLT is a trading tool and should be used as such. Right now, I think PPLT is a great buy for a small, short-term gain. But for more leverage over the long term, we need to look at platinum stocks.

Unfortunately, our options in platinum stocks are quite limited — relative to the options investors have for gold and silver stocks. And that's simply because platinum is a much rarer metal. Most of world's platinum resources are located in just one country (South Africa), and it's about 20X rarer than gold. So there's not really very much of it to mine (relative to gold and silver), leaving us as investors with only a handful of platinum-producing stocks to choose from.

Among the largest publicly traded platinum producers are Anglo American Platinum (JSE: AMS) and Impala Platinum Holdings (JSE: IMP).

Both of these companies mainly trade on the South African JSE Limited. However, they also have ADRs, which are easier for Americans to buy and sell:

• Anglo American Platinum (ADR) (OTC: ANGPY)

• Impala Platinum Holdings (ADR) (OTC: IMPUY)

But my favorite platinum stock right now is Platinum Group Metals Ltd. (NYSE Mkt: PLG). Platinum Group Metals is a Vancouver-based platinum and palladium mining company with significant mineral rights in the Bushveld Igneous Complex of South Africa — home to over 70% of the world's platinum production.

The company's primary asset is the Maseve Mine, which hosts over 4 million ounces of platinum-equivalent reserves. Formal construction of the Maseve Mine began in 2011, and it was just officially commissioned last year. The company expects the mine to be cash-positive for 2017.

Platinum Group's secondary project, Waterberg, has the potential to be even bigger. The Waterberg Project, located on the Northern Limb of the Bushveld Complex, was discovered in 2011 in partnership with JOGMEC, a state company of

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the Japanese government, and is now in the feasibility stage. A pre-feasibility study was completed in October 2016, which estimates probable reserves of 12.3 million ounces of platinum-equivalent and indicated resources of nearly 25 million ounces of platinum-equivalent!

Platinum Group has already spent a lot of time and money getting these projects going. And once they really get rolling, the company is going to pay off for investors. Now is the time to own PLG. Buy this stock today.

For much more information on Platinum Group Metals, check out its website. Or check out the company's latest corporate presentation.

Until next time,

Luke Burgess Bubble and Bust Report

http://www.platinumgroupmetals.net/home/default.aspx

http://s1.q4cdn.com/169714374/files/doc_presentations/2017/feb/Platinum-Group-Metals-Ltd.-Corporate-Presentation-BMO-Long-FINAL.pdf

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Our Portfolio is Built for Protection and is Doing Well

I don't have a new recommendation this week as we wait for that giant pennant to play out. When we have a confirmed direction of trend, we will double down with some new buys.

It's time to check in on our portfolio and see how we've been doing.

Bitcoin

We bought Bitcoin back on May 25, 2016 at $449.23. It is now trading at $1,037.71.

That's a 130% gain — not too shabby. I still like Bitcoin here. The Chinese, Indians, Venezuelans, and others are looking for ways to get around capital controls, and Bitcoin does the trick. The total Bitcoin market cap is $16.9 billion.

There is no telling where it could top out. I've seen estimates as high as $40,000. It's an unknown value because there has never been its like before. It would not shock me to see a $40k number in 2030, just as it isn't shocking to see Amazon at $786 or Apple worth $755 billion.

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Due to the unique nature of Bitcoin, the topside value is limitless. That said, like any currency, the only thing holding it up is faith and tradition. Therefore, we will trade Bitcoin based on the technicals. We will hold until the uptrend is broken.

Canfor Corporation (TSX: CFP)

We bought Canfor on March 13, 2017 at $17.85. It is currently trading at $18.10. Canfor is an undervalued timber company with assets in Canada, Asia, and the U.S. It is a play on the increased prices of lumber on the commodity exchange and the increased sales of new homes in North America.

Gladstone Land Corp. (NASDAQ: LAND)

We bought Gladstone on February 1, 2017 for $12.04. It is currently selling at $11.05, so we are down a bit. This is a play on a trade war with Mexico. Gladstone owns farmland that produces primarily fruit and vegetables. Any trade war with Mexico will increase the price of those products in the U.S.

Furthermore, there is no correlation between recessions and farmland. Farmland went up in price in the last market debacle in 2009. It also pays a nice 4.73% dividend.

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iShares Gold Trust (NYSE: IAU)

We bought IAU on November 11, 2016 at 11.74. It is now trading at $11.99.

IAU seeks to reflect the performance of the price of gold. This is an easy diversified way to play gold. We are long gold.

iShares MSCI Global Miners (NYSE: RING)

RING trades along with the MSCI ACWI Select Gold Miners Investable Market Index. Its biggest holdings are Barrick Gold (ABX.TO), Newmont (NEM), and Goldcorp (G.TO). In other words, it’s an easy way to buy the blue-chip gold companies. It is also a leveraged bet on the price of gold. When gold moves, these companies move more.

Physical Rhodium ETC (LSE: XRH0)

We bought Rhodium on September 1, 2016 at $60.45. It is now trading at $89.38. I love physical rhodium. Rhodium has a huge spread, but it is hitting over $1,010 on the ask. It is a “must have” metal for the production of automobiles. The last time the auto industry got in trouble, the price went from $800 to $10,000.

Given the current number of subprime auto loans in default, coupled with high number of leases dumping slightly used cars on the market, the auto companies are in trouble again.

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TASER International (NASDAQ: TASR)

We bought TASR on August 2, 2016 at $28.84. It is now trading at $23.09. TASR is known for selling self-defense weapons to police. But what they really are is a misunderstood “razor and blade” company. As you know, Warren Buffett made hundreds of millions on Gillette on the basis of its business model where it gave away the razor cheap and sold the blades.

TASER is giving away body cameras and hooking police departments on long-term video data/cloud storage deals. Its Evidence.com sector licenses have grown from 27,000 in 2015 to 132,000 in 2017. 88% of these deals are multiyear. And get this: long-term value/cost to acquire is 6.0. For every dollar it spends getting a customer, it gets back $6. And again, this number is up from 3.2 last year.

I would love to have those type of numbers. Once R&D spending drops off and police departments are locked into long-term video evidence storage deals, TASER will be a cash cow.

USG Corporation (NYSE: USG)

We bought USG based on post-hurricane flooding and the need for drywall. We bought on October 10, 2016 for $25.53, and it is now trading at $25.55. The stock is trending higher and should benefit from new construction in North America. Annual revenue is growing faster than the share price. Another earnings announcement or two should push the stock higher. Berkshire Hathaway owns 29.7% of the company.

Visa (NYSE: V)

Visa just might be the perfect stock. We bought it on December 22, 2016 and are already up 15.23%. If I were to buy one stock for my 15-year-old daughter to own until she buys a house in 10 years, it would be Visa. The trend is simple. The world is moving from cash to cashless. Governments, as well as retailers, are pushing cashless because it cuts down on tax evasion and skimming from the cash register.

Visa is in 200 countries and can make 65,000 transactions a second — it gets a cut of all of it. In 2015 Visa had 50% of U.S. market share by volume and 70% of debit cards.

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