History doesn’t necessarily repeat itself, but it often rhymes. In any emerging crisis, it’s usually those investors who insist that “this time it’s different” who get hurt the most.

So with that in mind, these are the investments we like best for this stage of the crisis...

This Investment Will Pay Off
for Years to Come

A core tenet of crisis investing is that “stuff” maintains real value while everything else goes down. What do I mean by stuff? Commodities, precious metals, and prime real estate bought on the cheap, for example... These have real value independent of the currency in which their price is denominated.

It doesn’t matter whether you denominate them in dollars, euro, rubles, renminbi, or seashells... A bushel of corn, a tank of gas, and an acre of farmland all maintain real and usable value that doesn’t depend on the currency you use to buy it. But even then, some “stuff” investments pay off better than others in crisis.

Looking back in history, one such investment has made more tycoons than any other, in both good times and bad.

Energy.

Since the Industrial Revolution, the world has run on oil. Our modern world was built on “black gold,” and those who discovered it and brought it to market struck it rich. Yet this trend is far from over. Even as the West gets “greener,” China, India, and other growing markets are consuming oil at a faster pace than ever. China’s oil consumption, for example, more than doubled between 1998 and 2009 – from 4,105 barrels per day to more than 8,300. All of this while worldwide production has been stagnant for much of the last decade.

Despite Al Gore’s arm-waving, the world is still addicted to oil – and there’s not enough to go around.

Increasing demand and constrained supply will lead to higher prices, even without inflation and political instability in oil-producing nations also pushing prices up.

In The Casey Report portfolio, we have an oil-and energy-related fund we recommend because:

• It has among the lowest expense ratio of funds with similar holdings
• It gives you exposure to high-quality oil producers with more upside than oil itself
• And it gives you critical diversification in an industry constantly under fire from environmentalists and politicians (you saw what this did to BP)

Whether you choose our recommendation or find your own, putting at least one well-selected oil investment in your portfolio is a smart way to stay ahead of the crisis.

But oil is only part of the total energy picture.

Some of the best profits in energy in the next few years are likely to come from one of today’s most overlooked forms of energy available: natural gas.

Natural gas is so overlooked because new technologies like hydraulic fracturing (“fracking”) have opened up gas deposits in the United States that were previously hard or impossible to get to. The result: a supply glut of natural gas that led to the bargain-basement prices we see today.

While the current low prices are keeping many investors away, we see a buying opportunity. Natural gas is currently discounted by 75% compared to oil when measured by heat generation. Prices are bound to go up.

In fact, natural gas is so underpriced it could go up by 300% and still be on par with today’s oil prices. This is the type of market anomaly where profits are less a matter of “how much,” but rather “when.”

This opportunity is much like uranium in October 1998, when Doug Casey was the only analyst with a contrarian enough bent to cover it. At the time, “the other yellow metal” was selling at just $9.50 per pound – a price Doug recognized was bound to go up due to a number of converging factors. Over the next nine years it took a trajectory to the moon, eventually topping out at $136 per pound in 2007. Along the way, Doug recommended a number of uranium stocks that handed readers exceptionally large gains, including International Uranium (now Denison Mines) and Paladin Resources, which both gained more than 2,000%.

One rather low-risk way to get strong upside exposure to what we see as an inevitable upshot in natural gas prices is through utility companies. They’re relatively safe plays because utility companies have strong cash flow – even during a crisis, customers will pay to keep the heat and lights on. Utilities often pay strong dividends. And there are additional opportunities to profit above and beyond price increases in natural gas itself.

Our favorite is a large, financially strong natural gas utility:

• It has a sizeable customer base spread across the mid-Atlantic and Southeast
• Even with low natural gas prices, it maintains high profit margins and a healthy dividend greater than 5%
• And it’s undergoing a promising merger to nearly double its customer base plus acquire an additional profit center that also gives it a power position in the natural gas storage industry

This company will continue to be profitable whether or not the price of natural gas goes up in the short term. In fact, they have profit strategies in place whether gas goes up, down, or sideways.

Again, like our oil-market pick, this play won’t make you rich overnight – but it has strong upside potential with little risk. And it’s a “stuff” play to protect your portfolio in the crisis, with additional profit potential based on smart business practices. In The American Debt Crisis, this is exactly the type of investment you’ll want in your portfolio to protect yourself... and collect solid profits, too.

Gold for Protection and Profit

Ben Bernanke says, “Gold is not money.” Yet for thousands of years cultures across the globe have used gold as a means of exchange and store of wealth. Not one government-backed currency has endured like gold.

Doug Casey often refers back to Aristotle’s criteria for sound money as to why gold maintains this status. In Doug’s words:

• It should be durable (which is why, say, wheat isn’t a good money – it rots)
• It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change)
• It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value)
• It should be consistent (which is one reason why land can’t be money – each piece is different)
• And it should have value in itself (which is why paper money leads to trouble)

You don’t buy gold to get rich. You buy it because it purchases the same amount of stuff now as it did 100 years ago... while the purchasing power of the dollar has fallen by 98%.

You buy gold because Bernanke and friends have proven they’ll do anything to keep interest rates low and “fight off” the debt crisis – even if it means complete debasement of the dollar.

Of course, you can profit from gold, too. And that’s why we recommend a three-pronged approach to investing in gold in this stage of The American Debt Crisis:

Invest in Gold, Part 1: Get Physical

Putting a portion of your savings in physical gold protects you from the song and dance of negative real interest rates, as the Fed devalues the dollar to help Washington manage its debt. Store your gold somewhere safe, and history has proven it should buy about as much when you take it out of storage as it did when you put it in – no matter what happens to the dollar between now and then.

For physical gold, we recommend most investors start with the most popular forms available: Eagles, Maple Leafs, and similarly mainstream bullion coins. They have established market value, and because they’re so widely known they should be easiest to sell if you ever need to do so.

Invest in Gold, Part 2: Pad Your Portfolio

In The Casey Report, we follow a select gold fund that allows you to buy gold from within your IRA and other retirement or investment accounts. This is quick and easy, so you can get invested in gold right away, to begin padding your portfolio against inflation. This type of fund shouldn’t be your only gold strategy, mind you – because there are many benefits to having the metal in hand when you need it. But it can be an important part of your gold holdings.

This investment has had a lot of upside recently – gold’s been on a ten-year winning streak that Casey readers have profited from tremendously. But that’s not the only reason to hold it in your portfolio. Think of a gold fund as an alternative place to stash your cash between investments – when you can’t stay ahead of inflation by holding cash in money market funds.

Invest in Gold, Part 3: Profit Opportunities

It’s one thing to invest in the metal itself – either directly by buying physical gold or by proxy through the gold funds. But the current gold bull market will also make a lot of people far wealthier by the time it’s done. The key is to invest in gold mining and exploration companies. Put very simply, if a company is able to produce gold at $400 per ounce which many do – and the price of gold goes from $800 to $1,600 or $2,600 per ounce, its profit goes through the roof. Share prices tend to follow in kind.

For investors who want to invest in this trend without maintaining an active portfolio of gold mining and exploration companies, there are a number of ETFs available. But even in a bull market there are downside risks, especially in smaller companies without active projects. Whether via direct investment or ETFs, you only want to invest in high-quality gold companies – and we have a favorite fund that will help you do just that.

But is it still a good time to get into gold?

We know gold is a popular investment today. Many analysts are recommending it because, well, it’s on a ten-year winning streak. When Doug was recommending it in the late 1990s, it was for the exact opposite reason – the price had simply been too low for too long.

Sure, today’s popularity makes us cautious... but no matter how we cut the deck, the big picture still points us strongly toward gold. The US continues to debase its currency, as does just about every other government on the planet. They have to, in order to pay for decades of debt and overpromising. Their only way out of years of mismanagement is to destroy the currency in which debts are denominated.

As currencies go down, the price of “stuff” goes up. And gold is the most enduring “stuff” to hold for folks who want to maintain their wealth. So even with today’s record-high prices of gold, we still see it going considerably higher as paper currencies continue their downward spiral.

Besides, gold’s recent run has not generated anywhere near the mania you see at the end of most bubbles. Around 2005, everybody and their brother was flipping houses on the weekend to get in on the record-high prices. We know what came of that. Until you can’t open Newsweek or turn on Good Morning America without hearing about how everyone must buy gold now – and until you see pawn shops with signs that say “We Sell Gold” instead of “We Buy Gold” we’re not in a mania... And gold still has room to run.

And as long as The American Debt Crisis endures, this three-pronged approach to investing in gold should be a critical part of your saving and investing strategy... both for the protection it provides against bad monetary policies, and for the profit potential it gives you thanks to gold’s ongoing historic bull market. Once you subscribe to The Casey Report, you’ll get instant access to our portfolio and the gold recommendations it includes.

The Only Way to Make Money in Bonds for the Next Few Years

As I mentioned above, some of the biggest players in the US Treasury bond market have been selling for months – some even building substantial short positions in treasuries.

Yes, it’s still the largest, most liquid investment market in the world... and still holds sway in the establishment as the “safe haven” investment.

But here’s the thing – what Bill Gross from PIMCO and others like him realized months ago...

Even if the US government doesn’t overtly default on these debt obligations, they’re still playing a dirty game of “soft” default. As long as their printing presses keep inflating away the value of the dollar faster than you can make money with the interest rates offered on treasuries...

Bonds are the safest way to lose 1%, 2%, 3% or more of your purchasing power every year.

These negative real interest rates can wreak havoc on your retirement plans. Let’s say, for example, you retire today at 65 and buy 20-year bonds, hoping to maintain purchasing power until you’re 85. Losing 3% of your purchasing power every year doesn’t seem like that much until you calculate it out over the life of the bond – and realize that by the time the bond hits maturity it can only buy you 56% of what it could have bought you the day you purchased the bond.

This simply can’t go on for long.

Interest rates are at 50-year lows. Using the last crisis as an excuse, Washington has been able to force the cost of its new debt down to simply unsustainable levels:

Yes, the Fed has used quantitative easing (QE) to act as a “buyer of last resort” to ensure that even at these low rates the Treasuries are scooped up every time they’re offered. But this stimulus just drives real and expected price inflation. Which means all the other buyers in the market will want higher interest on their investments – especially as Washington struggles to keep up in the debt crisis. And even though the Fed has been able to control short-term rates with QE, long-term rates are far less controllable and could rise quickly.

If you’re buying bonds at today’s low rates, this is bad for you, because as rates go up, the value of your bonds go down. So you lose two ways – first, from negative real interest rates; and second, from the depreciating value of your investment as market conditions change.

Short-term upticks may look good, but historically speaking today’s bond market is headed for a major swing in the other direction.

Which leads to “the only way to make money in bonds in the next few years.”

Put simply: You don’t want to bet on bonds, you want to bet against them. But shorting bonds can become expensive, because unlike shorting stocks you are required to make the interest payments on the bond for as long as you hold the short position.

We’ve uncovered a couple of unique investment vehicles that allow you to short bonds while avoiding interest rate payments... and take advantage of the large upside we see in the coming months and years as interest rates swing back upwards toward a more historically “normal” level (with the added benefit that if interest rates take off due to inflation like they did in the 1970s, you’ll be looking at even bigger gains).

Here’s the expected performance of our two favorite picks as interest rates rise:

We’ve already seen it throughout Europe: When a sovereign debt crisis hits, there’s little the borrower can do to control interest rates. Lenders simply want more for their money. Before The American Debt Crisis is over, we expect to see much higher rates. And this is simply one way to shield yourself and profit.

Become a Global Investor
Without Leaving the US

If you want to protect yourself and your money from the coming crisis, you need to “get one foot over the border.” For some, that includes offshore trusts and other similar investment vehicles. For others, that includes purchasing property overseas, such as at Doug Casey’s La Estancia de Cafayate in Salta, Argentina. And it can even mean getting citizenship in multiple countries.

Most people’s first reaction is, “But that’s for people who have a lot more money than me!” And that’s understandable – although it may be much easier and more affordable than you might expect.

Yet with just a few thousand dollars to invest you can start to get one foot over the border financially – to insulate yourself from the US market’s volatility in the crisis. And you can do it from within your IRA and other retirement or investment accounts.

How? Simple. You can get quick global diversification by buying one of hundreds of funds traded openly on the New York Stock Exchange. These funds typically follow an index of companies in one or more countries, and often have a specific focus such as industry or company size.

For example, a single investment in the BKF ETF gives you exposure across the BRIC countries – Brazil, Russia, India, and China – with investments in a number of large companies in each country, representing a number of different sectors. Or with SCJ you can invest just in Japanese small-cap stocks.

Of course, without thorough research into the countries, economies, political situations, and companies in question, this can be tricky. After all, most of the world’s economy is tied in directly to the US economy. In The American Debt Crisis, much of the world will suffer.

That’s why we prefer resource-rich countries, insulated to some degree from the US economy, that also have low political risk.

For example, our first global diversification recommendation:

• Outperformed the S&P 500 by many multiples since the 2008 crash, showing it moves independent of the US markets
• Has tight monetary policy, a growing economy, and a strong pro-business climate
• And is rich in resources – the “stuff” investments that perform well in crisis

And our second:

• Has high labor immigration, enabling fast economic growth without fueling price and wage pressures (an anomaly among similar mature economies)
• Gives you exposure to a country that runs budget surpluses instead of deficits
• And is also resource rich, with a heavy concentration in energy

This type of “one foot over the border” investment is easy to make, and is a no-brainer for investors looking to pad their portfolio against the impact The American Debt Crisis will have on US investment markets.

The Anti-Bernanke Savings Strategy

Keeping your savings in US dollars is a losing proposition. Ben Bernanke and the folks at the Fed are more interested in “saving” the American economy with ongoing stimulus than saving the dollar. This means traditional savings vehicles are toast when it comes to keeping you ahead of inflation.

But what options do savers in the US have?

Most people simply aren’t aware that there’s a US-based bank named EverBank that allows you to diversify your savings into foreign currencies, starting with accounts as small as $2,500. Depending on your preference and account size, you can open a deposit account, CD, or basket CD in well over a dozen different currencies. Some even pay much higher interest rates than accounts in US dollars.

One important consideration when saving in foreign currencies:

These foreign currency savings vehicles are subject to normal fluctuations in exchange rates. That’s exactly what makes them so attractive if you pick the right currencies. If you’re saving in a currency that gains against the dollar, when you convert your savings back you get more dollars. Of course it works the other way around, too. Yet it’s worth noting that in heavy inflation the difference between suffering and staying financially comfortable can simply be moving some of your assets into another currency.

As I recommend this savings strategy, I also need to share that it’s our firm belief that all fiat currencies are eventually headed to zero. Some, however, are headed there much more quickly than others.

So how do you pick which currencies to save in? We tend to look to resource economies, of course. But that’s not enough. On a monthly basis we closely monitor central bank policy decisions out of a number of countries. Based on the strength of the economy overall and on their government’s commitment to maintaining a strong currency, we choose our favorites.

In The Casey Report we’re following two currencies we like best right now. Every month we keep readers posted on developments related to these currencies... and will also provide updates in the monthly issue should our recommended currencies change.

A brief note: Many people I speak with initially balk at putting their savings in foreign currencies. In 1913, before World War I, many Germans felt the same way. At that point, the German mark, the French franc, and the Italian lira were all worth about the same. Then the famed Weimar Republic hyperinflation happened. By the end of 1923 the exchange was one franc or lira per one trillion marks. The few Germans whose savings maintained value through that period were those who put at least some of their savings in currencies other than the mark.

Most people don’t think we could ever see inflation in America anything like that of Weimar Germany. Yet this illustrates exactly why a savings vehicle like those offered through EverBank is so important to consider – especially when Bernanke and the Fed have shown such a willingness to prop up every market downturn with more inflationary monetary policies.