Welcome to Gold Goats ‘n Guns. While the title may sound cheeky, I assure you my reasons behind it are serious. Gold Goats ‘n Guns is more than an investment newsletter. It is an ethos around self-sufficiency, free markets and becoming your own wealth generator so you can live a life free of hypocrisy and full of the things you value most.

The issue you are reading is the culmination of four years of planning and preparation. In my former newsletters,

Gold Stock Advisor and the Resolute Wealth Letter, I refined a portfolio strategy that balanced growth with income, risk with reward, in the most contentious and difficult markets to invest in: commodities and gold.

In Gold Goats ‘n Guns, we’ll study everything from geopolitics to emerging technologies. From yield curves to currency arbitrage. But we’ll do it all in clear language with a modicum of wit, even if it takes us a whiskey or two to get there. Thank you for taking this journey with me.

IndexFrom Humble Beginnings p. 2The 3 G’s of the Gold, Goats ’N Guns Portfolio p. 3The Starting Points p. 6Just Say No…to Google p. 10Select Sands p. 11Portfolio Table and Allocation Recommendations P. 14

— Tom

Welcome to the Premier Issue of Gold, Goats ’n Guns Tom Luongo Editor • Publisher

Tom Luongo is a former research chemist and part-time goat farmer. He’s always been a writer. A former Editor of Resolute Wealth for Newsmax Media, Tom still contributes there to Financial Intelligence Report.

The publisher of the Gold Goats ‘n Guns Blog his work is published at Investing.com, Russia Insider and Halsey News. A marketplace contributor at Seeking Alpha, he offers a subscription-based service called Stocks, Shocks & Rocks.

An advanced student of Traditional Tae Kwan Do and an adherent to Austrian economics he applies those lessons to geopolitics, gold and central bank policy. He lives on his hobby farm in North Florida with his wife, daughter, 5 dogs, 13 goats, 40 ducks and a cat.

Quote of the month: “I distrust all organizations larger than a two handed game of poker.”

— Butler Schaffer

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Financial Newsletter - Premier Issue • September 2017

I remember the day my wife, Camille, and I began building our house like it was yesterday. We’d closed on the property a few weeks before. And having submitted plans to the engineer, we knew what came next.

So, after work one night we hopped in our 1993 Toyota pickup truck and threw a pair of shovels, a wheelbarrow, and a hundred-foot tape into the bed and drove the twenty-three miles to the field.

After rough staking the corners with sticks we picked up out of the woods, we began, by hand, to dig out what would become the foundation for our house.

Twenty-four feet square. One wheelbarrow full at a time.

We had time. This was late January, we planned for the build to start in early March. March 3rd, to be exact.

So, over the next couple of weeks we went out in the evenings and dug out the foundation. We both knew we needed to be in better shape to do this and this was simply getting a head start.

But it was more than that. It was an important moment when Camille and I committed to the biggest project we’d ever conceived of, no less attempted. And with each shovel full, we knew we were that much closer to pulling off what even we thought was nearly impossible.

Once March 3rd came around, the work began in proper. Camille’s parents came down from Ohio. Camille, myself and our friend Larry took two weeks off from work and we got started.

I paid another perpetually under-employed friend for those two weeks and the weekends after.

Larry was working for sweat equity in the five acres he was planning to buy from us and I did my best to keep everyone mostly on the same page. Camille’s a perfectionist while I’m the very definition of Pareto – the 80/20 rule, use your time wisely to get the most important parts done and leave the finishing bits for later.

We could have made life-changing money on You Tube with our reality show, “This Freaking House” had we thought to film it.

We were new to this entrepreneurial thing. Hindsight and all that.

People ask me all the time, “How do you build a house?”

And I always reply, “One board at a time.”

Building the Foundation

This is my third financial newsletter. I told a different version of this story when I took over Gold Stock Adviser for Newsmax.

Then I was trying to convince people to give me a chance to stay on board; that I have a plan and the skills to execute it. Today, I’m here to tell you that I know that how to build something from scratch.

To take an idea, give it form and turn it into something tangible, something worth owning.

Gold Goats ‘n Guns is important to me. It is an idea built over the four years of steering my previous newsletters, first Gold Stock Advisor and then Resolute Wealth towards the issue you are reading today.

It’s more than a portfolio strategy or a set of stock picks. Gold Goats ‘n Guns is an ethos born of self-sufficiency, hard work and the need to be your own central bank in a time of social, political and financial upheaval that comes around once in a lifetime.

I’ve felt this storm has been coming my entire life, and we couldn’t avoid it. I couldn’t put my finger on it. I remember being so traumatized by the West Side Highway falling down in New York City I grew up with a fear of bridges. The infrastructure of the current order was breaking then, it was only a matter of time before it would fail completely.

Camille and I built a house to assist our family ride out that failure as best as we could. The money saved versus buying someone else’s idea of a house has paid us back ten-fold over the past fourteen years.

It has insulated us from unemployment, inflation, deflation and family drama. Those cost savings and skills garnered through building our house were the cornerstone to our strategy.

Our low mortgage payment means Camille would work from home, being a mom, building gardens, raising chickens and finishing up various building projects.

Our daughter was born in our house. Camille was seven months pregnant as she tiled her bathroom in the addition while I worked out of town. We survived my two-year transition from research

chemist to financial writer, living on an intern’s salary and her working the Garden Dept. at Lowe’s.

When I got the invite from Newsmax it was the light at the end of a very long tunnel.

The New House

All things, however, end. And like building my house, my time with Newsmax gave me a far wider skill set than I had when I started there. Then I understood gold, or at least I thought I did. Today, I see markets more holistically and have tailored my thinking about what a newsletter like this should accomplish for its readers.

We are living in historic times. These years will be talked about the same way we talk about the Great Depression, WWII and the Civil War. The election of Donald Trump on the heels of the historic vote for Brexit kicked off events that will now have to play themselves out.

When it’s over the world will look radically different. The upheaval will begin in Europe and travel across the pond to the U.S. While that happens, the BRICS nations, led by China and Russia will lay the foundation for their ascendency to the top of the financial and political global order.

There will be innumerable twists and turns along the way. Here at Gold Goats ‘n Guns we will discuss the strategic blunders of presidents and parliaments, the tactical maneuvers of central bankers and CEOs. But mostly, we will look ahead to what’s next and how best to build wealth while minimizing risk.

Gold Goats ‘n Guns is a metaphor for how you navigate all those things and distill them down to big ideas, big themes and simple, clear actions.

It is my job to explain to you what’s happening and chart you a course through it without overwhelming you.

Not only will you have this monthly newsletter but also the public and private blogs and regularly-scheduled live chats to provide both answers and give you the tools to ask better questions, so you can live a life free from hypocrisy and full of the things you value most.

That is my pledge to you.

FROM HUMBLE BEGINNINGS

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THE 3 G’S OF THE GOLD, GOATS ’N GUNS PORTFOLIO Each “G” represents a different part of your investment strategy and each one performs a different task.

GOLD This is your savings. The pool of accumulated wealth that forms the basis from which you take on risk and build larger-scale endeavors.

As an Austrian Economist, I believe very strongly in first building a ‘pool of real savings’ that can then be leveraged once immediate security needs have been met. One doesn’t invest with all of your capital all the time.

Your Pool of Real Savings in the real world is your savings account, your physical precious metals holdings and, now in the 21st century, your cryptocurrency holdings. I will explain the last part when I give you my recommendation for one later in the issue.

My savings, along with the low operational costs of my home, were vital in dealing with the myriad of challenges we face every day. Having savings makes you brave. It keeps you from being exposed to debt.

Once you have enough savings to satisfy your future risks, then and only then, should you invest capital in projects that bring a real return. Whether we are conscious of it or not, we make these decisions every day, multiple times a day.

“Cash makes you brave. Having a portfolio that generates a lot of it keeps your fear at bay…”

Like it or not, every action you take has economic consequences. Every action comes with the opportunity cost of not doing every other thing you could have done with that time. And time circumscribes our lives.

In the investment world, your savings are those instruments that throw off high-yield and/or provide a streaming income from gold-related investments. There aren’t a lot of good stocks in this category. These investments, regardless of the fluctuating value of the share price, pay you for your time.

They may rise and fall in price, but as long as the dividend they pay is safe then we will stay invested in them. We are interested in them for the yield and the options the cash from that yield gives us. Cash makes you brave. Having a portfolio that generates a lot of it keeps your fear at bay while the world goes to hell around you.

In the Gold portion of the portfolio we will focus on this high-yield strategy. It will encompass everything from Master Limited Partnerships to companies with a ‘royalty’ business model to bond funds. The goal here is income and generating free cash flow for the portfolio. This gives us the option to reinvest the earnings in them or redeploy the cash and take on more risk in other parts of the portfolio.

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GOATS “Goats are a metaphor for industry and industry involves risk.”

In the Robinson Crusoe economy – the one where you are alone in the wilderness -- after you’ve saved up enough food to get you through winter, built yourself a shelter and tamed some land, you can then invest time in larger pursuits like animal husbandry.

You have a pool of real savings – food, shelter, productive land.

Animal husbandry involves risk. The important difference between savings and investing is the acceptance of risk. There’s the personal risk of investing time into a project that doesn’t yield a positive return.

No animal is better suited for such a life than the goat. Having raised goats for seven years now I can tell you that they are incredible creatures to turn time into physical capital – meat, milk and/or fiber/leather. It’s why, even today in certain parts of the world, a man measures with wealth in goats.

But, keeping goats on a particular parcel of land involves risks, health risks that have a steep learning curve. So, in going from novice to experienced goat farmer isn’t an easy path. And you may never get good at it. That learning curve is your risk.

Believe me, I’ve made so many mistakes

keeping dairy goats that I apologize to my older does regularly for them. Thankfully, they’ve survived well enough to not hold those mistakes against me.

And in our portfolio goats are a metaphor for the operational risk of producing companies.

There is another aspect to investment risk that needs to be clarified for this

discussion and that’s counter-party risk. Get used to this term, I will use it a lot.

Counter-party risk is where you enter into a contract with another person to fulfill his end of the bargain. Buying a stock buys not only a claim against the company’s assets but also the efficacy of the leadership to manage those assets and provide you with a return.

An options contract has counter-party risk because there is the possibility the person who sold you the call or put (the counter-party) doesn’t have the shares or the money at the time you exercise your rights.

And then what?

So, industry involves not only the risk that your knowledge is insufficient but also counter-party risk that may be beyond anyone’s control.

The “Goats” portfolio will have stocks that produce things. Its focus will be on the commodity space because that is my personal area of expertise. I’m not a savant, but I retain the right to stray from this initial idea over time if that’s where changing conditions apply.

(Portfolio con’t.)

GUNS “Protect what you have.”

Nothing is worth accumulating if someone can walk in and just take it from you. This is the primary fallacy of Socialism; it destroys the desire to accumulate wealth through the investment of savings.

In the real world, protection comes in many forms, insurance against death, illness, car crashes and theft. The gun is, of course, the metaphor for this active defense of your stuff. There is no one thing more powerful than a gun to dissuade one human from abrogating the rights of another.

So, where “Gold” represents a mix of savings and income and “Goats” represent your industry and investing in big ideas, “Guns” represent your ability to defend your “Gold” and your “Goats.”

On the hobby farm, you can’t run goats or poultry of any kind without active protection. And that mean guardian dogs. Guardian dogs are your guns. They are the cost you incur to keep your stock and your home safe.

There are good forms of protection and bad. Guardian dogs (like the one pictured) are simply the best tool for the job. Strong, brave, smart and nurturing everything becomes part of their pack – you, your kids, the goats, the chickens, the neighbors’ kids…. – and everyone else is a threat to be monitored.

I could write an entire issue explaining to you how these seemingly lazy, goofy dogs are on constant watch; making sure our investments of time, energy and physical capital are safe so the livestock can live stress-free lives and produce at their peak.

Again, there’s a metaphor there. Unstressed goats are happy goats. Happy goats don’t get sick. Healthy goats produce more.

In the “Guns” portfolio we will put our defensive positions. Our hedges against losses in other asset classes and laying off risks from currencies. These can be currency long or short positions; bets for or against a specific type of bond or economic sector, like commodities or real estate.

(Daisy, a Maremma Sheepdog, is so protective she wouldn’t let my daughter play rough with our other dog. He’s off camera sulking.)

(If I do my job right) In the other portfolios we will buy and likely hold those stocks for years, but in the “Guns” section will be more proactive. This group will attempt to capture gains from short to medium term trends (three months to a year) and lock them in.

And those gains can be reinvested back into the other sections of the portfolio to grow the positions. They protect our core investments and help us to maximize our gains. If I thought “Gold Goats ‘n Guardian Dogs” was a winning title, I would have used it.

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I don’t know about you, but I save all of my change. Aside from combing through it for pre-1964 silver dimes and quarters on the rare occasion I’ll find one, doing this is a good form of savings. Because we run a cash-based side business, I generate a lot of change, easily more than $100 a year, if not more.

I could blow that money on a nice dinner (well, average dinner today) for the three of us. Or, I could consider it ‘found money’ and put it to work in something that I wouldn’t normally invest in.

Imagine if every December you took all your change and made one small bet on a high-risk stock? This is a stock where you can pick shares up for $0.10 each. Each dime you find is potentially a share in the next big gold mine in Nevada or a biotech firm that finds a novel cancer cure.

If, over the course of a decade, just one of those stocks pan out and becomes a going concern, you’ve likely tripled your entire stake. Or more.

At 7% your money takes just over ten years to double. It’s the “Rule of 72” – divide the yield on an investment by 72 and that’s the number of years it will take to double your money.

At 14% it takes five years.

Penny resource stocks represent great opportunities to offer great returns over both the medium (nine to eighteen months) and the long-term (greater than three years).

Make no mistake, this is the high-risk portion of the portfolio. This is where I will introduce to you resource stocks in the early stages of their development. These stocks have the highest-risk, but also the highest potential reward.

The reason I call this group, “Found Money” is because I don’t want you diverting funds that would go to the core Gold Goats ‘n Guns Portfolio to these stocks. They may take ten years to pay off, if ever.

So, the right course of action is to invest non-essential funds. Only put in them the money you take to a poker game. The first rule of gambling is you never put money you can’t afford to lose on the table. The same thing goes for junior resource stocks.

This is where you can slough off some of your dividends and take small bets. In effect, you’re playing with House Money. And that’s exactly the kind of money you want to use at the beginning.

(Portfolio con’t.)

FOUND MONEY

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Now that I’ve laid out the portfolio strategy and the mindset behind Gold, Goats ‘n Guns, it’s time to start filling the portfolio with stocks.

I’m not going to overwhelm you with a full portfolio. No, this process will take time. One or two stocks per issue for you to chew over along with updates as to what has happened and what’s likely to happen next.

For this issue, however, I feel it’s important to make choices for each category.

The Gold Pick

This will not be a strictly gold-oriented group of stocks. The Gold industry is a miserable place to look for yield. In all the market, there is only one high yield gold-centric issue out there, the GAMCO Global Gold and Natural Resources Trust (NYSE:GGN).

This is a stock I’ve recommended in the past and will continue to do so here at Gold Goats ‘n Guns. GGN is a high yield closed-end fund that produces income from writing covered calls against its portfolio of mining and energy-related assets.

A covered call is an options contract. A call is a bullish options contract; the right to buy 100 shares of a stock before a certain date (December 15th, for example) for a certain price ($10). For that right the buyer of the call pays a premium to you, the holder of the stock, say $0.50 per share.

If the stock rises above $10.50, $10 strike price plus the $0.50 premium already paid, then the buyer of the contract ‘calls’ the shares away from you. You get $10.50 per share.

If the stock doesn’t reach $10.50 by December 15th, you get to keep the $0.50 per share and the stock.

Long term holders of stocks in bear markets write covered calls to generate income while the stock price languishes.

This is what GGN does. It writes covered calls and generates income through dividends against its portfolio of both Gold and Oil & Gas stocks. It’s not a foolproof business model, because the share price of the fund rises and falls with the underlying value of the stocks in its portfolio and may not generate enough income to cover the distribution.

In really bad markets like the one we just went through over the past three years, the distribution will fall as well.

This will result in the closed end fund having to report your dividend as ‘Return of Capital.’ This is one of the dangers with closed-end funds like GGN. By reporting your dividend as ‘Return of Capital’ the fund is lowering your

cost basis on the investment. So, if you bought at $9 per share and the fund delivers you $0.60 per year in dividends, if you sold you would do so from a cost basis of $8.40 ($9.00 minus the $0.60 in distributions).

GGN has been killed in recent years as we have suffered through the worst commodity bear market in history.

Now that we’ve seen the worst of the commodity bear market the fund is paying a stable $0.05 per share per month against a share price around $5.50. And the use of ‘Return of Capital’ is receding in the monthly distribution reports.

In 2017, more than half of GGN’s dividend distributions have been from “Short-Term Capital Gains” and “Income.” And in July we saw the first month in over three years where the fund reported all its distribution covered by income.

This is a sign that the value of the fund has likely reached its nadir and can now safely collect dividends, bond coupons and income from covered calls. This is now a real return for you without having to reconcile “Return of Capital” when you decide to sell.

Therefore, I’m putting us in this fund now. The fund returned to positive annual returns in 2016 and that has continued into 2017.

I feel there may be one large downdraft in Gold and commodities later this year (more on this later in the issue) or early next year. It will be a brief collapse followed by a tremendously powerful bull market, especially in Gold and Silver. This fund will not only rise in price (explosively) but also in its monthly dividend distribution.

The Goats

For the initial stake in Goats portion of the Gold Goats ‘n Guns portfolio I’m recommending the Russian state oil company Gazprom (NYSE:OGPZY).

Gazprom carries all kinds of risks today. It lies at the intersection of so many geopolitical dogfights it’s hard to keep them all straight. But it also is the one company uniquely placed to benefit from the changes to the geopolitical order I see coming on the horizon.

Moreover, I am, by nature, a contrarian. I absolutely want to be buying a stock that no one else wants because the risks are too high. It takes guts to go where everyone else is running screaming from. I get enormous push back from commenters on my articles at Seeking Alpha on this.

But, the comments reveal more about the people than it does about Gazprom. They have no good reasons for not buying a stock trading well below book value, a price-to-sales of 0.2, and a P/E below 3.

On top of that Gazprom paid a 7% yield in July. The ADR is trading below $4.00 per share and in terms of oil & gas majors it is, by far, the cheapest. This is not because it carries great operational risk, but because it carries political risk.

In the U.S. right now, Russophobia is reaching an all-time high thanks to a very dangerous path taken by the Democratic party, the media and the coalition of intelligence, military and political agencies known as the Deep State.

Investors fear Gazprom because it is the target of the latest round of sanctions put on by the U.S. congress. But, for the record, that effect has now been fully priced in. The on-again/off-again sentiment surrounding the Nordstream-2 pipeline has pummeled the stock below RUB120 on the Russian MICEX exchange.

And yes, in the immediate term, the risks to Gazprom’s long-term plans are high. Investors are worried that its European financiers like Engie, Royal Dutch Shell (NYSE:RDS.A) and OMV will be forced to pull out of their agreements with Gazprom to fund the construction of the pipeline.

That the costs to complete it will rise in that instance are likely. With the Russian economy back on its feet after a two-year recession brought on by the collapse in oil prices and subsequent attack on the ruble, the timing of the sanctions bill was important.

It had to be done now for several reasons beyond the headlines:

• Nordstream construction is underway. But subcontractors for pipes, fittings and laying them underwater can be sanctioned now.

• Turkstream is also under construction and the same issues are now in play.

• Russia’s economy must be brought low in time to incite unrest against Vladimir Putin ahead of next year’s elections. Derailing the recovery is an important cog in this strategy.

• It pressures the European Union to decide if its ready to pursue an independent foreign policy from the U.S.

The last point is the most important. The long-term effect of the sanctions bill is to alienate the U.S. from its allies and its significant trading partners. Trump’s feud with the Globalists fuels his animosity towards people like German Chancellor Angela Merkel. This sanctions bill, however, is a huge strategic and tactical mistake on the part of Congress.

The EU needs Russia as much as it needs the U.K. and the U.S. But, it doesn’t need U.S. LNG at three times the cost of Russian piped gas.

THE STARTING POINTS The initial positions in the “3G” Portfolio

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Congress, and to a lesser extent Trump, trying to push that choice on them is a mistake that will push Germany towards Russia.

Poland may be happy to buy at those prices to defy Germany but that is a minor issue and one that should be welcomed by Trump. Germany is backing Nordstream 2 because it needs the gas. Nordstream 2 will allow Russia to bypass Ukraine and move gas to Europe without having to deal with the hostile, U.S.-backed government in Kiev.

Poland, right now, gets its gas from Russia through Ukraine. After 2019 it will have to get it from Germany via Nordstream 2. Poland and the Baltics don’t want to do this now that the EU is forcing its hand on refugee quotas and its internal judiciary issues. Merkel is threatening Poland with expulsion from the EU.

And Poland does not want the threat of Germany blackmailing them by withholding gas to ‘align their foreign policy objectives.’

So, Trump is happy to step in and sell Poland LNG to offset this threat from Germany. Poland was offered a stake in Nordstream 2 and declined, instead doing the U.S.’s bidding to back the coup in Kiev.

These are the political issues tearing these long-standing relationships apart. Russia stands accused of meddling in everyone’s affairs and the CIA-backed media tells us that it’s all part of Putin’s evil plan for world domination.

The problem with that worldview is that it is projection. It’s what the U.S. Deep State is trying to do: rule the world through energy diplomacy and economic warfare. Russia’s policies have been to simply protect its borders from continued aggression.

Our leadership projects its motivations onto Putin, fearing further integration of the EU and Russian economies through energy and technology sharing. It ramps up its opposition to it by passing laws through our legislature that are 1) unconstitutional and 2) against long-standing international law.

The net effect will be the fracturing of the relationship between the EU and the U.S. coming at a time when the EU is as politically weak as it could possibly be. There is no good strategic outcome from these sanctions.

They will be remembered historically as the beginning of a global trade war that will rival the Smoot-Hawley Tariff Act of 1930 which turned a recession into the Great Depression as global trade collapsed.

The bottom line is this: Nordstream 2 will get built, so will Turkstream. In 2020, the $400 billion gas deal with China signed in 2014 will begin moving gas for the next 30 years and these problems will be far behind. Russia and China will be transacting all of this trade in yuan and rubles. Gazprom and other Russian oil majors are already doing this.

The questions surrounding Nordstream 2 and Turkstream is at what cost to Gazprom and the Russian state treasury will they be completed. That is what is keeping the stock down.

The Russian state treasury has the money to complete the pipeline without question.

Russia’s retaliation to these sanctions will be to cut even more deals with countries tired of being dictated to by a fading U.S. empire. The first of which is a $7 billion one between it, Turkey and Iran in direct defiance of the sanctions. This will be coupled with targeted measures that will inflict maximal pain like Russia’s counter-sanctions on EU dairy exports.

The early announcements have all pertained to Russia’s embracing the blockchain and the cryptocurrency space, but we’ll discuss that further in the future.

Gazprom will be seen as the savior of a European economy in tatters after capital flight guts the investment base of the EU and a reorganization of it takes place. Euro-zone countries will not buy expensive U.S. LNG simply because U.S. banks will not do business with them if they buy their gas from Gazprom.

“Buying Gazprom now is like buying Apple when Steve Jobs begged Bill Gates to save the company from extinction. It’s that cheap.” There are always ways around the sanctions.

People like John McCain who think that Russia is a “gas station masquerading as a country” forget that this is the world’s biggest exporter of military hardware with an advanced nuclear arsenal and the miniaturization technology, like chip design and fabrication, that can and will be deployed in the private sector very quickly.

Russia is not technologically backward; its handling of capital is what holds it back from greater pursuits.

The first taste of this is one of those cryptocurrency projects I just alluded to. Russian Miner Coin will utilize Russia’s spare electrical grid capacity to become a major player in the Bitcoin mining space. Their mining platform will be run on chips (ASICs) designed and fabbed in Russia. They are investing $100 million into the project.

People like McCain and the rest of Congress should fear exactly this. Unfortunately, they are more worried about their own agendas and Trump killing their personal gravy trains than the geopolitical fallout from over-stepping their bounds.

Buying Gazprom now is like buying Apple (NASDAQ:AAPL) when Steve Jobs begged Bill Gates to save the company from extinction. It’s that cheap. And the sentiment surrounding it is that bad. It took guts to make that call.

But, that’s where the similarities end. Gazprom is a reasonably well-run company

that throws off billions in cash flow every year. It’s the single most controversial stock in any discussion about Russia right now.

I would keep your bids for the stock low here. Don’t chase it above $4.10 per share now that we’re past the annual dividend payout. Catalysts are likely bearish for the next few months, so plan to accumulate slowly.

The Guns

As I said at the outset, the “Guns” portfolio will be mostly defensive, containing hedges against currency trends. While the stocks in the “Gold” and “Goats” portfolios are stocks you will own long enough to take delivery of the stock certificates, the positions here in “Guns” will be shorter-lived.

I will still apply contrarian thinking to these positions. We are in the middle of major changes in both the geopolitical and monetary order of things. Big changes are occurring not only in labor and manufacturing with the widespread adoption of robotics and automation but also in the digitization of currency.

2017 will likely be remembered as the year the cryptocurrency grew up. As the promise of both first-generation Bitcoin-like coins and second-generation token systems matured they begin paying off on their promise to revolutionize how we handle money and contracts.

And that’s just the beginning. Tokens like Ethereum and others will build systems that can and will remove the middle man from so many transactions. From managing supply chains to expediting document verification, ‘smart contract’ cryptocurrencies will make obsolete clerks and paper-pushers the world over.

Brokerage back-office services consume vast amounts of resources, verifying and validating paperwork becomes completely unnecessary if all that information is encoded, stored and distributed on the blockchain.

Camille and I took our daughter to obtain our passports for an upcoming trip to Mexico. Sitting in that office at the county courthouse I noted all of the wasted space, energy and people necessary to handle the most mundane tasks that frankly do not need human hands to process.

All of that adds cost. And an expedited passport costs $170. Something that with all the money we pay in taxes should be close to free, now costs nearly as much as the plane fare from Orlando to Guadalajara, or one-month’s electric bill.

Cryptocurrencies like Ethereum can and will reduce the cost of that process to next to nothing.

Starting Points (con’t.)

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And all that needs to be paid for is the manipulation and printing of the actual passport. No matter how inefficient, that can’t cost $110 plus another $60 to guarantee a government employee does his job in less than two months.

There is an overwhelming need to remove this loss due to paper-pushing friction from our society. And by the time the government realizes that we’ve done a complete end-run around their lame attempts to control us, it will be mostly obsolete.

There are a number of these “cryptos” on the market today that promise to build replacement platforms on the blockchain with all of its verifiable advantages – EOS, Verisateum, Gnosis, etc—but for right now, Ethereum is the one that has first-mover advantage.

Like Bitcoin was the first, but not nearly the best, brute-force mined crypto designed to be a replacement for currency, Ethereum is the first of these ‘smart contract’ coins that has the majority of the developer and investor mindshare.

First-mover advantage is a powerful thing.

And for that reason, even though there may be more explosive potential returns in these

other cryptos, Ethereum is the one we want to put into the Guns portion of the 3G Portfolio. This is a hedge against a breakdown of the government-issued, debt-based monetary system that will serve us very well over the next year.

“…Ethereum is the first of these ‘smart contract’ coins that has the majority of the developer and investor mindshare.”

Ethereum’s growth in 2017 so far has been explosive. But, it’s not done yet. I feel that we’ve only just begun to see the movement of capital into the crypto-space. Yes, there is a wild-west feeling here; a mania that feels like any idea can get $50 or $100 million thrown at it, like during the Dot.com bubble.

There is also a growing perception that the financial system is incredibly fragile and will collapse soon. The growth of Ethereum and the rest of the crypto-space is a warning not a bubble.

It’s the digital canary in the monetary coal mine that is warning us that rational people are taking large lots of capital and sequestering it outside the banking system.

Normally they do this with Gold; keeping it away from the prying hands of governments who are broke, busted and like a junkie, addicted to stealing tax money from those it supposedly serves.

But Gold is now hard to move across borders. Governments are on the hunt for it. And like most generals, governments are still fighting the last war. Gold is not the currency of choice to move wealth across borders anymore to escape currency devaluation and predatory taxation, Bitcoin is.

We’ve reached the point where taxation is predatory. Germany and France have plans to implement after the German elections tax renting your property, a la AirBnB. Sweden is moving to a cashless society, not because it’s more efficient for people, but for the government to collect taxes.

When that happens, people move to assets that cannot be taxed as easily.

India is the latest experiment, doing away with most of its circulating currency.

It is reeling from both new taxes and demonetizing cash.

Starting Points (con’t.)

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India’s war on cash will drive cryptocurrency growth Figure 1: Source - zerohedge.com

Here are the basic steps to buying Ethereum:

•Buy an encrypted hardware wallet device like a Trezor (www.trezor.io) or a Ledger Wallet (www.ledgerwallet.com) and follow the setup instructions. They are available on Amazon.

•While waiting for your hardware wallet to arrive begin getting an account set up on an exchange like Coinbase (www.coinbase.com).

•Linking your bank account or using your credit card can be tricky. I had a horrible time getting things set up because of account security issues.

•Don’t get frustrated.

•Once you can make a buy, make a small one ($50 or so). And use that initial small purchase to learn how to manipulate your Trezor or Ledger wallet. Follow the instructions for Ethereum at the manufacturer’s website. It isn’t hard, but the jargon is.

•Once you learn the jargon and fully understand the steps you’ll realize it’s no more complicated than doing an ACH transfer from your bank software to your brokerage.

•Once you are comfortable moving cash around in ‘crypto-space’ then make larger purchases based on your budget.

Businesses here in the U.S. have to pay their ‘quarterlies’ and their annual taxes. They are enough of a hassle for small businesses from a liquidity perspective, especially if you book receivables before getting paid for the work.

In India, now after the new tax law, businesses must file three tax returns every month along with the annual. This raises the number of returns (and potential for fines for doing it wrong) from six to thirty-seven.

Is it any wonder that I no longer feel the “I” in BRICS stands for “India” but “Iran?” Prime Minister Narendra Modi will destroy the Indian economy with laws like this and forcing centralization of government on an unruly and poor India.

While Modi may be popular now, wait until there is a global contraction and his tax-grubbing gets between Indians and their ability to eat. These things never work out well.

As these grand plans of misguided reformers like Modi go awry, expect people to rotate away from them. Tax collection will drop as more Indians embrace alternate payment systems. Just because he outlawed the physical Rupee doesn’t mean Indians will stop engaging in commerce. It means he will simply drive it underground.

Even Communist Vietnam has acceded to the reality of Bitcoin. They are putting forth plans to ‘legitimize’ it as a legal currency. This is a country notorious for using every currency out there except the government-issued one, because it’s worthless.

For that reason alone, I’m more bullish (relatively speaking) on Vietnam than I am on India. I wouldn’t buy either.

That’s a taste of the world we are entering here in late 2017, and for you to hedge some of your risks into Ethereum is simply prudent protection against what looks to be a dark period of human history.

The hardware wallet is the key to your privacy and security. Think of it just like a physical wallet you keep cash in. The difference is, however, if it gets stolen or lost

it can be recovered. But, the Ethereum resides on your Trezor, not in your Coinbase account. And that’s important to protect you from cyber-crime.

So, in no way should you leave significant amounts of cryptos on an exchange unless,

like playing poker in Vegas, you are willing to lose it all. Keep your money off the internet.

The problem is with your public encryption keys. If these get stolen then your money can be taken from you without recourse. The hardware wallets I mention in step #1 above lock your keys behind hardware

encryption that cannot be accessed. Your money and your keys reside on the Trezor or Ledger Wallet and your money is as secure as you are careful with your cash.

Thieves are everywhere.

As far as amounts, I recommend everyone keep three to six months of cash on hand/in checking for day-to-day household operations – food, housing, internet, car expenses to get to work, etc.

You should also have at least one year’s basic living

expenses (not including non-essential debt) in physical gold and silver as emergency savings (and if unneeded an inheritance). Substitute up to 25% of that number into cryptocurrencies.

Do so slowly over the rest of this year. We’ve had a wild ride in these assets this year, buying in multiple tranches protects you from volatility. And after each transaction clears, move your money immediately to your hardware wallet and unplug it from your computer.

The first rule of network security: Not being connected to one is the most secure position.

Start with Ethereum.

Starting Points (con’t.)

There is no way to sugarcoat it, getting started with cryptocurrency isn’t easy.

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Bitcoin Note: At this time Bitcoin is too expensive to be considered a hedge against dollar uncertainty. Issues still surround the improvement of its transaction network that could yet again force a fork like the recent creation of Bitcoin Cash.

Other ‘alt-coins’ like Litecoin and Dash are alternatives to soak up profit-taking without going back to fiats like the dollar.

Ethereum

Humans need boundaries. Any parent knows this. Aside from keeping their child alive, a parent’s most important job is the creation of boundaries on their child’s behavior in order for them to build the basic emotional responses needed to connect with other people.

One firm ‘No’ is more important to a child’s emotional development than a thousand well-earned praises. Absent that negative feedback the child never learns how their behavior affects other people. They exist in a bubble.

They never gain the emotional maturity necessary to properly deal with new ideas.

In our political sphere, we’ve reached a very dangerous moment in time. Echo chambers proliferate like mosquitos after a storm. Technology giants like Google have such dominance over the way information reaches us that they can, in effect, define reality for many.

Worse, those that run these companies feel they have a duty and a right to control that reality for all of us. It’s the hallmark of Progressivism. They are the original social engineers. They believe they have the data, the brains and the morality to make a better human.

U.S. media, academia and government bred an entire generation of infantile adults who completed the Progressives’ long march through the institutions and were never properly challenged in their neo-Marxist worldview.

Two generations of kids inculcated in political and economic theories actively promoted to push an ideology with the eventual removal of any opposition.

Ideas that flourish in a monoculture petri dish have no controls. They grow without limits until they consume everything in their path. There is only reinforcement and amplification of those ideas until anyone who speaks out against them is a heretic.

And that’s what happened when James Damore published his ‘diversity’ memo at Google. Like children never taught no, his introduction of ideas into the hive-mind at Google was like a virus that had to be removed before anyone could process it.

They reacted like any two-year-old would when told, “NO.” They screeched and screamed. This memo was ‘wrongthink’ and as such demanded to be stricken from the cult’s consciousness.

From the outside, we snicker at Scientology. Well, at least I do.

It is a cult. Tom Cruise makes great action movies but we all know he’s a lunatic.

Google is also a cult and its leadership are lunatics. Infantile lunatics.

L’Affair Damore proved this and it woke a large number of people up to the reality of that, and how dangerous it is. Cultural Marxism has been allowed to thrive to the point where any discussion of facts that don’t comport with the cult’s ideological goals are excised.

Not opinions. Facts.

If that doesn’t frighten you, then you aren’t paying attention.

It’s one thing to run your company internally this way. It’s quite another to run a country that way. Worse, when

the company and the government get together to decide what is acceptable then we have the kind of nightmare that would make even Orwell shudder.

Companies like Google, Twitter, Facebook and even Patreon are

hiding behind vaguely-worded Terms of Service that allow them to control information in ways Goebbels himself would have given body parts to have.

They are now deciding who can and who cannot make a living pursuing their bliss using their platforms. Now, I’m all for freedom of association but when I paid for the bandwidth that your business runs on top of you have to abide by the same constitutional restraints that I do.

If Google wants to control access to YouTube, great. They can do so on the fiber they’ve laid. If not then, first amendment and interstate commerce protections apply.

It doesn’t matter anyway. We’ve reached Peak Google. Their ad models are faltering. People are building new systems. The blockchain will make YouTube the next

MySpace and Android sucks.

It is only in the absence of nuance and argument that cults like Google thrive.

YouTube is becoming a wasteland of mindless diversion and monoculture. The hypocrisy of its enforcement is blatant.

Its relevance was built in no small part by people’s need to find information

outside of the 3x5 card of acceptable political thought available on the

networks.

YouTube was the way outsiders like Ron Paul, Bernie Sanders and Donald Trump stormed the Ivory

Towers and created strong counter-arguments to the failed Straussian claptrap that passed for political debate.

Cultures were bridged, secrets exposed, perspectives presented and communities grew.

Google should be proud of that. But they aren’t. They see the proliferation of the ‘wrong’ ideas as something to defend against. Not to engage in honest and open debate with. Debate that may find them being told “NO” by everyone.

Editorial

JUST SAY NO…TO GOOGLE Don’t be evil.

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“We’ve reached Peak Google. Their ad models are faltering. People are building new systems. The blockchain will make YouTube the next MySpace…”

(The original version of this article was published to my subscribers at my Premium Service, Stocks, Shocks & Rocks, back in late June. I’ve updated it here with new commentary incorporating the Q2 2017 results.)

SELECT SANDS EARNINGS DISAPPOINTMENT UNCOVERS OPPORTUNITY

For those of you who came here from Resolute Wealth you are very familiar with Select Sands Corp. (OTCBB:SLSDF). I have been recommending this company to you since I first met former CEO Rasool Mohammed in New Orleans in 2013.

Select Sands is a unique opportunity in the frac sand space. You’ve all heard of ‘fracking.’ But, do you know what actually goes on. In short, the driller pushes, under very high pressure, a slurry of water and frac sand, into sedimentary rocks where oil and gas are trapped.

This slurry blasts apart the rocks releasing the oil and gas. The well is pressurized by the fracking process and the released gas and liquids rise to the surface for collection.

What’s important here is that not just any old sand will do. Well, it will, in a pinch. But, the best sand that has the right combination of size, sphericity and crush-resistance radically improves the efficiency of the initial fracking.

The difference in cost between crap sand (brown sand) and “Tier 1” frac sand is more than made up for in the returns on the well over time.

Select Sands has both one of the biggest deposits of the highest grade frac sand and the location to deliver that sand at a price that can undercut its competition. The company’s main property is Sandtown, just outside of Haynesville, AR. It just bought another nearby property called Bell Farms.

This is a stock I put my subscribers in four years ago when the firm has just acquired Sandtown. This is the kind of stock I recommend for our Found Money list.

If you bought it then you are sitting on sincere profits as the stock hit a peak above C$2.00 earlier this year after my initial recommendation at C$0.30. It has since fallen back to support near C$0.60 after the latest earnings report and I’m sure many of you are worried whether this is the signal that something is wrong with the firm.

I can tell you that from where I sit and what I see, there is nothing wrong with the company that good news can’t fix. It is completely normal for a stock like Select Sands to get way ahead of itself with the kind of news the firm put out earlier this year. Mix that with a disappointing first earnings report and this is the result.

From the acquisition of the rail loading facility to the early exploration results at the Bell Farm property, momentum will always spike interest on an illiquid stock like this one. The Bell Farm NI 43-101 report puts the initial resource slightly larger than the currently-producing Sandtown one. In effect, the value of the company doubled with that report.

The key to Select Sands’ story is not just the size of the resources, it is the grade. Everything in mining comes down to grade. In Gold (GLD), high grade equals higher margins and lower all-in-sustaining-costs. In frac sand, grade is defined by the type of silica in the deposit.

At Sandtown, the deposit is a high crush-resistance, high sphericity and small grain size sand that is in the highest demand in the fracking industry. All of the major E&P companies are noting a shortage of the 40/70 mesh sand in the Permian basin. This is part of the reason why recent headlines have average Permian production per well topping out.

They’re having to use lower-quality sand. In fact, the shortage has been so acute that these guys have been using common dirt, or ‘brown sand.’

The amount of sand going down the well heads is increasing along with the rig counts here in the U.S. The reason is the changes to fracking techniques which liberates more oil over a shorter period of time at more consistent rates.

And rig counts will continue to rise as long as oil prices stay above $35 per barrel because many of the properties being drilled now were bought during the recent bust at stink-bid prices. That strips a major ‘financial cost’ layer off the break-even price per barrel which plagued companies during the boom.

This is why the Saudis are scared to death for their market share. They can’t compete with U.S. ‘wild-catters’ and Russia, who can pump profitably down to $20 per barrel.

There is a strong subtext in their aggression against Qatar that speaks to this as well, since Qatar has been making moves to gain new friends outside of OPEC and the GCC to expand its gas exports. And if that means making deals with Russia by buying a stake in Rosneft (RNFTF) or normalizing relations Iran they can and will.

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Select Sands, con’t.

So, the story for Select Sands is still the same, but now we have a bull market in fracking just getting off the ground in the U.S. Frac sand demand is set to double in the next two years and there simply isn’t close to enough Tier I sand in the market.

Now, that said, let’s drill into the earnings report. Q1 was a big deal for the company. They reported their first operating revenue while also deploying a lot of new capex and exploration spending and acquiring the Bell Farms property.

So, the pro forma loss is a big one, since Bell Farms was a mostly stock transaction. And that is part of the reason why the price has fallen like it has. Select Sands issued a lot of stock in the past 12 months as warrants were exercised and the high stock price was used to smartly acquire new assets.

And that’s the key to reading this earnings statement. Operationally, the firm lost $429 thousand dollars, with less than half of the quarter shipping production levels of product. Early Q2 guidance projected between a 40% and 60% improvement in sales

To make this point for us, Select Sands broke out March’s operations to highlight that the firm was operationally profitable in March, shipping 66.2% of the total frac sand shipped in the quarter.

The company is transitioning quickly into a producer and operations have a ton of room for improvement. The CEO Zig Vitols is a rail logistics specialist, running a $1 billion

division at Martin-Marietta. So, if this firm is going to become a major frac sand supplier, it will be his experience in moving product by rail that will get it there.

It is still building out its fleet of railcars and owns a rail terminal close to the Sandtown mine. Remember, that Bell Farms is only a few miles from Sandtown and the rest of Select Sands’ wet and dry processing facilities.

Logistically, this is as tight a full-blown mining operation as I’ve encountered. Remember, also, that we’re not talking about a difficult operation here. A sand mine is pretty much dump trucks and back-hoes. It’s about as cheap as mining gets.

The Real Q2 Results Select Sands just released its Q2 earnings and the results show a marked increase over their initial guidance of shipping 50% more than Q1 and even later guidance it issued in July where they said they would ship twice what they did in Q1.

In fact, they sold 163% more frac sand in Q2 at a higher average selling price than they did in Q1. (See Figure 1.)

Industrial sand and gravel sales are a negligible portion of this company’s forward revenue streams; selling off the inventory that doesn’t meet Tier I Frac Sand requirements for thinks like glass-making. Think of them like Silver credits for a Gold miner, found money – there’s that phrase again.

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Figure 1 - Select Sands Production Summary

Production By Type Q2 2017 Q1 2017 % Change

Frac Sand 52,480 19,968 163%

Industrial Sand 466 2,459 -81%

Frac and Industrial Sand 52,496 22,427 136

Other Sand and Gravel 4,146 6,801 -39%

Totals 57,092 29,228 95%

<<All quarterly amounts in metric tons>>

Select Sands, con’t.

They sold more than two-and-a-half times more sand for more than three times the money that they did in Q1. Q1’s sand sales totaled just C$978,000 per the earnings report. Other revenue in Q1 came from the exercising of share warrants in the quarter. (See Figure 2.)

So, production is rising as are prices, but the share price is falling. This is exactly where you want to be as an investor. Buying stocks that are under-valued because the market is over-invested in a bearish sector story.

Sandtown is built around producing between 50,000 and 60,000 tonnes per month. The Q2 earnings report stated that full production is possible, but it will only produce based on the sand it can ship given its rail car fleet. The company produced 19,186 tonnes per month in Q2.

It’s buying every rail car it can get its hands on.

That creates an annual EBITDA at current prices and COGS of $9.143 million. Valuing the company at six times EBITDA puts the company at $0.39 US.

So, with the stock trading near that level, Select Sands is being valued at its current operating level and full dilution. This doesn’t include assets, Bell Farms, any improvement in frac sand prices, or an improvement in the mix of products mined.

The company continues to procure rail cars for storage and logistics per their plan. They have gone from owning nine in February to more than 300 in service. Select Sands has entered the logistics game, moving from speculative bet to small-scale producer.

This stock, at full production can supply the market better than its competition at three to four times its current price. It has almost no debt and has no need to raise capital to dilute existing shareholders.

Once the market realizes that oil prices are going to stay between $35 and $55 per barrel for the foreseeable future and that current fracking operations are profitable at those prices, which they are depending on the field, frac sand prices will rise as will the suppliers. 

We’re seeing major E&P companies enter into long-term procurement agreements now in a way that we haven’t seen in years.  Select Sands has one that will take up most of their production for the next two years (1 million tonnes through 2019).  So, in effect, their production is already sold forward. 

Moreover, we are reaching the point of exhaustion of local brown sand supplying cost-conscious drillers in West Texas.  A report from last fall by Credit Suisse highlights the problem.  Once that supply is tapped, the market for Northern White sand (the trade name for Tier 1 sand) becomes more elastic and companies will have pricing leverage.  This is already starting with average prices rising in Q1.  By the fall, we’ll be seeing Northern White prices above $45 per ton and Select Sands has a huge logistics advantage being hundreds of miles closer to the major shale plays than the Wisconsin and Minnesota sands.

The market was disappointed with these results, hoping for better numbers, hence the sell-off in the last few days.  But, to me this is a gift. 

The stock has broken down below resistance and has moved back toward long-term support at C$0.50.  This is an excellent opportunity to buy Select Sands at great prices.

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Figure 2 - Select Sands Statements of Operations (in C$)

Q2 Q1

Revenue $3,083,192 $1,458,553.00

-- COGS $2,116,518.00 $1,766,126.00

-- Depreciation & Depletion $189,126.00 $121,289.00

Income from Operations $777,548.00 ($428,862.00)

General & Admin. Expenses $1,173,682.00 $2,684,280.00

Depreciation in G&A $320.00 —

Operating Loss ($396,454.00) ($3,113,142.00)

Disclaimer:

This publication is intended solely for informational purposes. It is a source of data and other information to assist your investment decisions. It is strongly recommended consulting your financial adviser or other financial professional before making any investment decisions. The information in this publication is not to be construed, under any circumstances, as an offer to sell or a solicitation to buy, sell, or trade in any commodities, securities, or other financial instruments presented. Any publicly-obtained information contained herein is assumed to be reliable, but is in no way guaranteed. It is your responsibility to do your own due diligence on the contents of Gold, Goats ‘n Guns. Past results are no indication of future performance. All investments are subject to risk, including the possibility of the complete loss of any money invested. You should consider such risks prior to making any investment decisions. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Under no circumstances should the content of this letter be construed as an express or implied promise, guarantee or implication by or from Gold, Goats ‘n Guns, or any of its employees, affiliates, or other agents that you will profit from it, or that losses can or will be limited in any manner whatsoever. Some recommended trades may involve commodities, securities, or other instruments held by our editors, writers, or employees. Investment decisions by such persons may be inconsistent with or even contradictory to the discussion or recommendations in Gold, Goats ‘n Guns per their personal circumstances. See our privacy policy at tomluongo.me.

THE GOLD, GOATS ’N GUNS PORTFOLIO PORTFOLIO TABLE AND ALLOCATION RECOMMENDATIONS

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Holding Symbol Entry Date Entry Price Recent Price Current Yield Total Return* Position

Value(1)

GAMCO Global Gold GGN 9/4/17 $5.65 $5.65 0.00% 0.00% $2,500.00

GOLD Portfolio

Holding Symbol Entry Date Entry Price Recent Price Current Yield Total Return* Position

Value(1)

Gazprom OGZPY 9/4/17 $4.03 $4.03 0.00% 0.00% $2,500.00

Holding Symbol Entry Date Entry Price Recent Price Current Yield Total Return* Position

Value(1)

Ethereum ETH 9/4/17 $275.00 $275.00 0.00% 0.00% $1,000.00

GOATS Portfolio

GUNS Portfolio

* Returns calculated based on recommended actions and assumes reinvestment of all dividends at market price.

(1) - Position Values are based on Initial Positions for GOLD and GOATS of $2,500 and for GUNS of $1,000.