These Bad News Bears Are Bullish on Gloom and Doom—and Best-Sellers
Douglas Casey: Buy blackballed stocks
Few prophets of America's economic future are as spectacularly grim as Douglas Casey, the 34-year-old Washington, D.C. bachelor whose Crisis Investing (published by Stratford Press) was a No. 1 best-seller nine weeks and has sold close to a half-million hardback copies since it was published two years ago. By 1983, he warns, the U.S. will enter a depression that "will make the crash of 1929 look like a technical error." Mounting inflation will lead to bank failures, the collapse of Social Security and pension funds, a return to bartering, urban riots and possibly even nuclear holocaust and germ warfare among industrial nations.
Now for the good news. Amid the gloom-and-doom, Casey argues, lurk opportunities that can make smart investors rich. He urges speculators to buy into companies that have fallen out of public favor—utilities committed to nuclear power or chemical companies accused of illegal dumping. "You can't run with the thundering herd," explains the cigar-smoking maverick. "The herd always ends up in the slaughterhouse."
Casey cautions investors to unload their pricey U.S. real estate and recommends buying cut-rate hideaways in the cozy Bahamas or even property in Zimbabwe once that African nation's civil conflict ends. Collectibles like stamps, rare coins and even custom-made knives are hedges against a currency collapse and perfect assets for bartering. "In uncertain times, you don't want to be burdened with un-transportable possessions," he notes. Gold bullion, now selling for about $500 an ounce, will jump to $2,000 during the next two years and should be banked in Swiss accounts "because in this country gold is a natural candidate for nationalization and confiscation." Likewise, savings should be transferred to neutral foreign nations like Switzerland and Austria. If this sounds unpatriotic, well, "I didn't make the rules," Casey says. "I'm just playing the game."
Of course, wealth has never been a problem for Casey, who was born the son of Eugene B. Casey, a multimillionaire Maryland landowner and developer and onetime crony of Franklin D. Roosevelt. Casey graduated from Georgetown University in 1968 and started work as an insurance consultant and financial adviser. "Everything I have I made on my own," he observes. In 1978 he wrote a little-read book on international finance. Crisis Investing was also a flop until author-publisher Robert (Winning through Intimidation) Ringer snapped up the marketing rights, redesigned the cover and papered the country with newspaper ads announcing how "A few will not only survive, but prosper" during the coming Armageddon.
With sales now expected to hit more than $5 million, Casey is working on a follow-up volume, selling his consulting services to well-heeled investors and publishing a monthly newsletter, Investing in Crisis, for subscribers who can afford its $145-per-year price. A regular on the talk-show circuit, he has tried drag racing and skydiving (65 jumps) and he still scuba dives and studies karate. "The martial arts offer self-discipline," says the brown belt, "which also happens to be what investing is all about." The problem is that Casey's reputation precedes him: "I've been looking for a good game of poker for months."
Jerome Smith: Hoard like Hetty Green
"A carpenter should buy enough hammers and saws to last him the next 10 years," says Jerome Smith, 53, author of the forbiddingly titled The Coming Currency Collapse (Books in Focus). Hoarding durable goods not subject to obsolescence is only prudent, argues Smith, who figures that bedroom bureaus can become private banks if properly stuffed with "socks, underwear, belts, anything that doesn't go out of style." Of course, he warns, "Don't stock up on suits and dresses—they do change."
That may sound like a last-trench financial strategy, but Smith, a 45-year veteran of corporate life with General Motors, General Dynamics and International Harvester, asserts that his outlook is actually positive. "A currency collapse is only harmful to people to the extent that they have their assets in currency," he reasons. "If they get their investment capital out of dollar-denominated assets and into tangibles, it's really not going to bother them all that much."
To that end, the University of Kansas-trained economist advises speculators to buy goods that "you can see, feel, touch or use." Among these, says Smith, are gold, silver, platinum, diamonds and commodities like soybeans. Smith himself has invested in silver and even counsels kids to sink half their allowances into rolls of pennies. "In a year or two the value of the copper in the coin will exceed one cent," he predicts. For bigger spenders, he favors buying long-term treasury bonds, then liquidating them in the months ahead to buy gold and silver as interest rates decline—as Smith predicts will happen. Would-be investors in real estate, meanwhile, should try to have as big a mortgage and as low an interest rate as possible. "Owe paper money to have inflation working for you," explains Smith. "And don't overborrow. That's gambling."
Smith's own real estate holdings include a "modest frame house" in Costa Rica that he shares with his Canadian-born third wife, Barbara, 32, who helped him write Currency Collapse in a breathless two weeks. A three-time grandfather (he has six children from his first marriage), he is a vegetarian and self-described "work freak" who spends much of his time on his monthly newsletter, World Market Perspective, which has 30,000 subscribers, and on the Economic Research Counselors Center he opened in Vancouver 14 years ago. Although Smith dropped out of law school and developed much of his economic theory on his own, he still extols the benefits of education. Says he: "One of the best investments a person can make is in himself. It's one form of capital that cannot be taxed."
Harry Browne: Play it safe in Zurich
When he first suggested that wary investors protect themselves by buying gold, silver and foreign currencies, "People thought I was crazy," recalls Harry Browne. But that was in 1970, and his first book, How You Can Profit from the Coming Devaluation, became a best-seller. Now, 11 years and five books later, the 47-year-old Browne is literally a gnome of Zurich, a West Coast expatriate who followed his own advice, made a bundle in precious metals and moved to Switzerland in 1977.
His message hasn't changed. In Inflation-Proofing Your Investments (William Morrow), the self-trained economist sees unemployment, business failures and banking problems ahead for the U.S. A deflationary collapse brought on by the current credit crunch is just as menacing as double-digit inflation, he maintains. "If we get through this year without that kind of collapse, then we are probably safe for another three or four years while inflation builds again," he notes. "But then comes the next credit crunch, and that is when you have to be cautious."
Browne says speculators should expect to be surprised, should diversify their investments and should never ignore the risks that accompany opportunity. "It is most important now not to simply rely on two or three key investments, as I recommended in the 1970s," he says, advocating a mix of gold (15 to 45 percent of a speculator's assets), long-term treasury bonds and volatile growth stocks. "When in doubt, play it safe," he urges. "In any investment, if there is a risk you cannot tolerate, then ignore that investment."
The son of a radio announcer, Browne was raised in L.A., dropped out of junior college after two weeks, worked briefly in advertising, then as a newspaper writer, before finally spinning off his first best-seller. Nowadays he is constantly checking the stock market prices around the globe. An avid reader (mystery, history and economics), he also composes classical music on his seven-foot Steinway. Although his own financial status is now secure, the lanky (6'4") author hopes to hear bookstore cash registers singing once again. His next project? A book called Why People Hate Opera.