My Golden Journey Back in Time

To better understand the powerful economic forces that can determine the fate of silver, gold and our money in the months ahead, I sometimes travel back in time to explore landmark events in my own family’s past.

Join on my one such journey and I think you will gain a deeper understanding of the opportunites — and dangers — you face today.

Our First Stop
The Year: 1931
The Place: New York

Drown out any loud voices or distracting thoughts around you. Then focus your mind on the sights and sounds of downtown Manhattan in early 1931.

The streets are still busy with motorcar traffic as commuters and delivery boys on bicycles weave in and out with bravado.

But nearby, on Broad Street, the stocks traded on the New York Stock Exchange have suffered their worst bear market in U.S. history.

Millions of formerly middle- and even high-class citizens are now paupers. Thousands of stocks, thought to be the fountain of fortunes, are now considered high risk.

Today, though, we’re here to visit one of the few independent research firms on Wall Street, the International Economic Research Bureau.

That’s where my father, Irving Weiss, works as a freelance junior analyst, while holding down another job at a nearby brokerage firm.

He’s been on Wall Street since he was 16, when he worked in Western Union’s “Unpack Department,” sorting through cables from overseas. Now, he’s 23, writing research reports on silver, gold and mining shares.

His publisher, William Baxter, wants him to find out what’s going on with the yellow metal. Baxter is especially interested in senior mining companies like Homestake and Dome Mining. But he also wants to know about some of the juniors.

In response, Dad enlists the help of his older brother, Al. And together, they contact some of the gold experts of the day.

They call Bernard Baruch, the adviser to several presidents and an investor who’s famous for having made a fortune during the crash.

They call Tom Bragg and Ben Smith, floor traders specializing in gold stocks.

And they talk about gold.

All of them are accumulating gold coins and gold shares. But they are among the very few. Most investors have little interest, and very few people are buying the gold pieces.

For over a hundred years, the price of gold has been steady near the $20 level. So people don’t even view it as an investment. Even mainstream shares are considered a wild gamble. Gold and mining shares are shunned like the plague.

But Baxter, Irving Weiss and the gold bugs of the day don’t care what other people think. They just walk up to the bank tellers and ask for $20 gold pieces. The tellers then give them as many as they want, no questions asked.

When it comes to the mining shares, they invest in bigger amounts. They believe the shares are grossly undervalued because they’re consistently snubbed by most of Wall Street.

Indeed, gold shares have a very bad reputation. Earlier in the century, shady characters roamed the countryside peddling the shares in mining ventures which went belly up. So by the 1930s, investors have learned to give mining companies a wide berth.

But Irving Weiss and his associates figure they can’t go wrong if they concentrate on the biggest companies like Homestake, plus a couple of large Canadian companies.

Soon, they have very respectable paper profits, and some of the men are itching to get out. With the 1929 stock market crash still fresh in their memories, you can’t blame them for being nervous.

Dad calls a meeting at Baxter’s office.

Bernard Baruch is there, and so are Ben Smith and Tom Bragg. One of them alludes to the possibility of “some big selling which could hit at almost any time.” Their urgent question: “Who’s going to do the selling and how much?”

Dad suggests they get the facts with a survey. He and his brother get a hold of the stockholder lists of some of the big mining companies, and they have a phone staff call about 400 people at random, asking a simple series of questions:

“When did you buy your gold shares?”

“How much do you own?”

“What do you plan to do with them?”

Later, in his report summarizing the results, Dad writes:

“We never got past the second question! About half the stockholders in mining companies didn’t even know they owned the shares. The rest said they had the shares stashed away — in their attic or in a vault somewhere. None of the people had plans to sell the shares.”

So he calls another meeting and tells his associates: “If there’s going to be any big selling, the only source of that selling would have to be from someone right here in this room.” They all breathe a sigh of relief. They hold on to their mining shares and double their profits.

But it’s just the beginning.

Homestake, which bottomed at $65 per share after the crash, surges to $130 and change in 1931. From there, it doubles again to more than $350 a share by 1933.

By the time it peaks in 1936, it reaches $540 a share — an astronomical gain of more than $470 per share, or a 7-fold increase.

In the meantime, the dividends also double, redouble and double again — reaching $56 per share in 1935. The dividends earned in one year alone almost pay back the entire purchase price of the stock.

And Homestake is not an isolated example. Dome, another large gold producer, does even better. You could have bought Dome for as little as $6 a share after the crash. But in the next 7 years, it pays $16.60 in dividends. The dividends alone are equal to more than two and half times the cost of the stock.

Meanwhile, the price of Dome rises to $61 a share. Anyone investing $10,000 in Dome walks away with more than $100,000 — while nearly every other investment remains depressed.

Tom Bragg reaps the biggest benefit. He’s the largest holder of Newmont Mining. Then he leaves Wall Street to become a major executive in the company and stays with gold for the big rise in subsequent years. The others also make huge profits.

Our Second Stop
The Year: 1936
The Place: Palm Beach

We’re at the Kennedy home, where Dad is visiting with Joe Kennedy, Baxter’s largest client and the father of JFK.

The kids are playing touch football on the front lawn, while Dad, meeting with Joe Kennedy in his study inside, is trying to convince him to buy silver.

The metal has been as low as a meager 17 cents per ounce, which is extremely cheap. But industrial demand, Dad insists, is about to take off.

“We’re about to release a special report on silver bullion with all the details,” he agues. “But before we do, we want you to take a look.” Kennedy expresses deep interest.

But later, after Dad has returned to New York, Kennedy calls, saying he’s decided against it. His advisers tell him it’s too much of a “long shot,” too far off the beaten path.

Later, Dad writes:

“Kennedy had a fortune. But with that one decision, he missed the opportunity to make still another fortune.

“I personally bought silver at around 17 cents, but I didn’t ride it up to $50. I wish I had. I got out of silver in the 1950s, having multiplied my money several times over. I thought I was smart to such a large profit. But if I had stashed away a few dozen bars in a trunk and thrown away the key, I’d have made more money than I did with all my other silver trades — large and small — put together.

“I calculate that, at 17 cents an ounce, if you invested $4,000, you could have purchased about twenty-two 1,000-ounce silver bars. Each one of them would have been worth $50,000 at the peak, or over one $1 million for the lot.

“But back then, if you told me silver would go to $50 an ounce, I would have said you were nuts. It just goes to prove, again, that no one can possibly predict ahead of time the ultimate peak — or the ultimate bottom — of any market.”

Our Third Stop:
The Time: January 2001
The Place: Palm Beach Gardens

We’re in the former headquarters of the John D. and Catherine T. McCarthur Foundation, the building we bought to house my research company along with our school for gifted children.

Silver and gold are again out of favor, and the pessimism about the metals is the greatest since the 1930s.

We’d been publishing a newsletter dedicated to the subject, The Silver and Gold Report, but the interest was so dismal, we decided to fold it into our other newsletter, Safe Money Report.

Larry Edelson, whose children attended the Weiss School on the west side of the building, has joined us at the research company. He’s a precious metals specialist and has been for over two decades.

Since the 1980s, he’s been very bearish on both metals. But now he says this is the big bottom, the time to buy.

At first I’m skeptical. Gold and silver investments have been mostly dead for so long I’m wary of analysts telling me that this bottom is “truly the real bottom.”

But Larry is persistent. It’s way too soon for silver, he says. But for gold, the time has come. Why? One reason is precisely because so many people are so down on the metal, and all the selling is now behind us.

As he speaks, I remember the stories my father told me about his gold buddies in the early 1930s and about his meeting with Joe Kennedy five years later. “Wait until you can see the whites of their eyes,” Dad told me before he passed away, echoing the words of his mentors of the 1930s. “Then buy with both hands.”

Larry and I decide to recommend some of the major mining shares. Plus we also liked a couple of juniors.

Starting shortly thereafter, the markets take off. The price of gold more than doubles. And the value of good mining shares goes up far more rapidly:

Newmont Mining, up 224% … Kinross Gold, 541% … Coeur D’Alene, 553% … GoldCorp, 747% … Bema Gold, 1,372%.

For early investors, it’s a great profit bonanza. But is it the end? Or just the beginning?

Our Last Stop:
Back to the Present

If today’s rise in silver and gold were eliciting great enthusiasm and euphoria, I might again be skeptical of a further rise. But they’re not.

Quite to the contrary, we still see rampant disregard — even disdain — for the metals.

Moreover, the lessons of history are clear: As long as powerful economic forces — scarce supplies, burgeoning demand, and investor fear of global disorder — continue … and as long as the overwhelming majority of mainstream investors remain on the sidelines … there is no end in sight to the rise.

Most important, despite any short-term rallies, the dollar is suffering a massive, long-term decline. This means that:

1. Gold and silver, which generally rise when the dollar falls, will continue higher.

2. Beyond gold and silver, there’s a very broad range of other investments that will be pushed higher by the dollar’s decline, including other natural resources, foreign currencies and foreign stocks.

The key to your success:

• Don’t be afraid to buck the crowd. Even if you’re totally alone, consider that a blessing.
• Venture off the beaten path. If that takes you to so-called “exotic investments” in faraway lands, so be it.
• And recognize, that, reality, in today’s new investment universe, there’s really no such thing as “far away.”

More so than ever before in history, foreign public companies are listed and traded on the New York Stock Exchange or the American Stock Exchange.

Plus, uou can buy exchange traded funds (ETFs) that invest exclusively in gold or silver … foreign stocks … or even foreign currencies — all with the same ease as buying a few shares of IBM or AT&T.

For more specific details, see my International ETF Trader publication.