From Stansberry Research:
Many investors think cash is one of the best "safe havens" in the world...
But in reality, it's one of the worst.
That's because modern currencies are "fiat"... They aren't backed by anything.
A fiat currency's value depends entirely upon the government, which effectively controls the amount of money in circulation. If governments spend recklessly, take on too much debt, or otherwise compromise the faith in a currency, then the perceived value declines.
The result is higher prices for goods and services. Of course, this is known as inflation.
In extreme situations, the currency swiftly becomes worthless. That happened in Venezuela recently. Rapid inflation – or hyperinflation in Venezuela's case – is a telltale sign of a currency crisis. And government incompetence is often the root cause.
But whether it occurs quickly or slowly, inflation is unavoidable...
Even the U.S. dollar – the world's reserve currency and the most stable fiat currency around – has lost 93% of its purchasing power over the past century. That means the same food and clothing bought for $10 in 1918 would cost you about $170 to purchase today.
The point is, currencies – even the U.S. dollar – don't hold their value well over the long term. Therefore, putting cash under your mattress and leaving it there for a long time isn't a good idea. But one asset will hold – and possibly increase – its value over the long term...
You see, gold has proven itself as a reliable store of value over thousands of years.
It's an economic constant... Unlike fiat currencies, like the U.S. dollar, governments can't control the amount of gold in circulation. They can't print more gold out of thin air.
Gold won't become worthless like a fiat currency. It has no chance of going to zero like the stock of a bankrupted company. And since it won't default, it's even safer than owning debt.
Take the last economic crisis as an example... From October 2007 to March 2009, the S&P 500 Index lost more than 50%. Meanwhile, gold gained more than 25% in that span...
It's clear that gold is one of the best safe havens for your money in times of crisis. But you can often do much better than just holding physical gold. You could invest in gold miners...
Gold-miner stocks effectively give investors leveraged exposure to gold. These stocks often move up two or three times more than the price of gold when times are good. And if you invest in the right gold miner, you'll outperform gold by an even wider margin than that.
Today, Barrick Gold (NYSE: GOLD) is the second-largest gold miner in the world. The company began as an oil and gas company, before pivoting to the gold space in 1983.
Most important, the company has built the best management team in the business...
Its operations are spearheaded by CEO Mark Bristow, who ran Randgold Resources before Barrick purchased the company in a deal that closed in early January. Under Bristow's leadership, Randgold was one of the best-run mining businesses in the world...
Randgold had a conservative capital structure. The company had virtually zero debt.
It also never reported a quarterly loss in its history. That's astounding since mining is such a difficult, capital-intensive business. And now, Bristow has brought his expertise to Barrick.
In addition, Barrick owns some of the highest-quality gold mines in the world...
In the mining world, "tier one" assets are the best. These mines produce at least 500,000 ounces of gold, have a mine life of more than 10 years, and have low cash costs per ounce.
After adding Randgold's assets, Barrick now owns five of the top 10 tier-one gold mines in the world. Even better, Barrick has two more mines that could become tier-one assets.
The company's two largest mines – Cortez and Goldstrike – are both based in Nevada...
The state is home to one of the world's largest gold-producing areas. The Cortez and Goldstrike mines combined to produce more than 2 million ounces of gold in 2018. And each mine contains more than 8 million ounces of proven and probable gold reserves.
To make the most out of its Nevada assets, Barrick recently formed a historic joint venture ("JV") with rival Newmont Mining (NEM) – the largest gold miner in the world. The JV will combine the companies' nearby operations in the state, including Cortez and Goldstrike.
Together, Barrick and Newmont produced more than 4 million ounces of gold from their Nevada assets last year. And they have 48 million ounces of gold reserves in the state.
This partnership should benefit both Barrick and Newmont for many years to come... Over the next 20 years, the companies expect the JV to help them save more than $5 billion.
The best part is, Barrick's excellent management team will operate the combined complex. The company will hold a 61.5% ownership stake in the JV, while Newmont will own the rest.
Right now, most investors aren't worried about putting their money to work in stocks...
But the good times won't last forever. We're in the final innings of this bull market. And as the next storm approaches, gold will once again prove itself as a reliable store of wealth.
Given gold's safe-haven status and the next bear market that will inevitably come, we believe the metal's price will rise from here. And as that happens, you can expect gold miners to do even better... We're confident that Barrick will thrive in the years ahead.
Sometimes investing is simple.