Financial and political analysts highlight growing national debt and instability of dollar
NEW ORLEANS, La. — From Wednesday through Saturday, 700 investment enthusiasts and 300 speakers and exhibitors attended the 36th New Orleans Investment Conference. The Hilton Riverside event included a wide range of wealth management and natural resource prospecting firms – fitting with its “gold bug” reputation – and prominent political commentators. Even the San Antonio Tea Party showed up for the mix of ideology and finance.
According to Brien Lundin, chief executive of the event and Jefferson Financial Inc., there was “not a unified message.” However, almost all of the 35 headline speakers touched on what Lundin described as the “large debt load” of the United States and the economic implications, particularly for the long-term viability of the United States dollar and the role of precious metals.
Economic and financial analysts, such as Peter Schiff of Euro Pacific Capital, shared perspectives on how to avoid what they see as a likely devaluation of the US dollar. Politicians and commentators, including Newt Gingrich and Charles Krauthammer, gave their projections for either spending austerity measures or tax increases and what reforms may be realistic at the federal level.
Origins and development of the event
The conference has occurred in New Orleans every year since 1974, when President Gerald Ford repealed the prohibition on gold coins, bullion, or ownership certificates. At that time, Lundin describes, the founder “[James] Blanchard was advocating for the return of the right of private gold ownership… It used to be illegal to own gold… So he held this conference for the first time in the spring of 1974 to educate investors how to invest in gold.”
The original title was “The National Committee for Monetary Reform,” given the presence of high inflation in the 1970s. However, with gold “in the doldrums” during the 1980s, organizers broadened to conference to include all asset classes and changed its name to the “New Orleans Investment Conference.” (Click here or below for a five minute interview with Brien Lundin.)[audio:http://bit.ly/cQE2A1]
However, Mark Skousen, an author and regular speaker, says “it’s always been a gold bug conference,” and interest in precious metals remains prominent. Nova Gold Resources Inc., based in Vancouver, Canada, holds a 50 percent stake in one of the world’s largest undeveloped gold deposits and typified this presence. They sought “shareholder outreach,” says the company’s director of communications and investor relations, Rhylin Bailie.
“It’s a great opportunity to reach a large group of people – to reach the retail shareholders that don’t usually have the opportunity to actually come and talk to management in person.”
With this year’s entrance fee starting at $595 and rising to $995, the conference attracts attendees and exhibitors who are there to do business. Nathan Tewalt, CEO of Colombian Mines Corporation and an exhibitor, appreciates that the attendees are “pre-screened, qualified investors,” given the “pretty good barrier to entry, in terms of the cost.” In the case of Nova Gold, this provides fertile ground as they seek to finance a $4 billion project in the next two to three years.
Economic challenges and opportunities
The many economic commentators gave varied views and touched on a wide variety of issues, but Peter Schiff (pictured below) perhaps best distilled the many perspectives.
“We had an economy where people were spending money they really didn’t have. They were spending money that under normal circumstances they wouldn’t spend… Has the government learnt anything? Unfortunately, No… We’re doing the exact same thing. As if we didn’t do enough damage to the economy when [interest rates] were at 1 percent. Now they’re at zero!” His inference was that this loose money was distorting spending patterns and creating market bubbles, and he sees far worse to come in terms of a government bond bubble.
Dennis Gartman of the Gartman Letter, was one notable exception to this line of thinking. He believes that the Federal Reserve had little choice but to expand the money supply during the beginning of the latest recession, even if it seemed reckless at the time.
Schiff, like many others, also alluded to the building inflationary pressure created by the federal deficits and what he sees as the risky footing of treasury bills. His concern is that as short term holders turn over they will not wish to double down, and there will not be the new investors to replace them. At that point either the federal government will have to pay higher interest rates or inflate the debt away. He predicts the latter, with losses to those who hold treasury bills and the dollar as an asset.
Frank Trotter, president of Everbank Direct, made the joke, “budget surpluses… a term you may not have heard of.” His firm specializes in holding foreign currencies, and he divided countries up based on debt load and current deficits. Surprisingly, some countries, such as Norway, Canada, and Brazil are relatively low on both accounts. He suggested investors will find returns there and that investors ought to get out of the currencies of debt burdened nations such as Japan and the United States.
Although in Argentina during this year’s event, Doug Casey has been a long-time speaker and debater at the conference, as chairman of Casey Research. He shared with the Pelican Institute the perspective he would have conveyed.
“Almost everything in the investment world is overpriced; there are no bargains out there. That said, I can suggest two excellent speculations: short long-term bonds and long junior mining stocks. Both will profit from the trillions in currency units being created by world governments. Other than that, accumulate precious metals for security.”
Many of the analysts repeated Casey’s preference for precious metals, as the most secure form of asset in precarious times. However, even with gold many attendees and presenters were concerned by its vulnerability to confiscation and theft. Chris Powell, founder of the Gold Anti-Trust Committee, believes physical possession is the best option. However, even that is not 100 percent secure.
“When you find a planet where gold is safe, let me know and I’ll join you there.”
At times the political viability of the United States, or lack thereof, was of more prominence than any specific investment or economic insight. As Skousen puts it, “the government is screwing us, but we can get back at them by making money – by becoming wealthier. But who wants to be a millionaire on the Titanic? So there’s still a political element; there’s always been a political element here.” (Click here or below for a four minute interview with Mark Skousen.)[audio:http://bit.ly/bQVBqv]
Newt Gingrich (on the right) and Charles Krauthammer (second from right) participated in a panel session and spoke individually, accepting questions from attendees. Each acknowledged the seriousness of the situation, and both called for restrained spending, particularly on albatrosses such as Social Security. If restraints are not enacted soon and Obama is re-elected, Krauthammer has no doubt that a value added tax will go into effect in the next presidential term. Both were, however, upbeat regarding creative and relatively painless options for savings. One being tort reform that would reduce what they consider to be exorbitant legal insurance costs imposed on medical professionals and then passed onto consumers.
While Lundin said the organizers’ don’t usually have any local politicians and the “focus is more national and global than anything,” others, including Skousen, were willing to give state level implications. Skousen suggests an exemption from sales tax on gold and silver.
“That could really stimulate local business… I also think the fact that seven states have no income taxes is very attractive.”
Robert Ringer (second from left, next to former congressman Dick Armey), an independent author and commentator, spoke on the theme of his recently revised book, Restoring the American Dream. Such is his lack of confidence in the federal government that he advocates greater defiance from the states.
“State politicians have to be like Jan Brewer [Arizona’s governor]. I see the federal government as the enemy of state’s rights. And state politicians should not feel beholden to the federal government. They should feel beholden to the people who voted them into office, and their job is to fight against federal tyranny and pay attention to what’s good for the people of Louisiana.”
Casey goes even further than Ringer, and believes “tough times are now both inevitable and imminent. It’s really beyond the stage where effective reform is possible. The best you can hope for is a controlled demolition, rather than a chaotic collapse.”
The fiscally conscious attendees attracted the attention of the San Antonio Tea Party, and the group’s president, Kenneth Bennight, manned their stall.
“We’re hoping to make contacts with people who can be supporters… I think we have a mutual interest. We all want to try to turn this country around and create a climate where we can rebuild prosperity… The people here by-and-large understand how wealth is created… You can only vote yourself other people’s money for so long.”