I was 13 years old when India was in crisis. He had borrowed too much money in dollars and was desperate to pay it back.
India urgently needed dollars. So the government came up with a plan to get it from people like my father who made money in petrodollars.
The Middle East was booming and thousands of Indians had followed my father’s example and found work in Dubai and similar places. They were benefiting from the rapidly growing economy there.
Dubai’s currency is easily exchanged for dollars, and India was desperate to entice my father and others like him to lend those dollars to the government.
To do this, India offered my father a once-in-a-lifetime deal: lend your dollars to India and get 18% annual interest tax-free for 30 years. To sweeten the deal, the government arranged it so you could get your money back in dollars after a couple of years if you wanted, or keep earning 18% tax-free for 30 years.
Eighteen percent is an astonishingly high rate of return. You’d be lucky to get that from risky stocks or assets. It’s unthinkable to get that by simply putting your money in a government-guaranteed bank account.
It was a once-in-a-lifetime opportunity to earn a risk-free return, similar to that of stocks.
And even though I was only 13 at the time, I learned something absolutely critical about investing from what my dad did when he got this offer…
My dad correctly guessed that even though India was in crisis, there was almost zero chance the government would rip him off. In other words, this crisis was his opportunity.
My father bet it all. He put every UAE dirham he had into this offer. It was a complete home run for him. And although my father died in 2000, my mother collected interest from this business until a few years ago.
And this is what I got from my father’s bet: when the odds are in your favor, you have to make the bet. You have to take the initiative and go for it.
The shining star of the market
Earlier this year, I told readers that gold mining companies were a screaming buy. That’s because the stocks of these companies had just gone through an unbelievable six-month panic sale.
I showed that it really was a panic, because gold mining companies were MAKING money during this time. In other words, nothing was happening in the companies to cause this panic. It was pure emotion at work, fueled solely by irrational selling by investors.
At these prices, gold prices didn’t need to go up to make money. All you need is for the sale to stop. And then the natural demand of smart-money investors, sensing these panics to make big bucks fast, would drive prices higher. That’s the scenario I came up with.
And that is exactly what has happened. Since that article, gold stocks are up 56% in just over four months, while the S&P 500 Index is up just 10% in the same time frame.
The rally is not over
If you bought gold miners and have experienced these phenomenal earnings… congratulations! Give yourself a pat on the back or maybe treat yourself. You have done well.
Now, if you bought and made money, I want you to know that I think there is still more profit to be made. That may sound crazy. However, I can tell you after 25 years of investing that when stocks make big moves like this, it is a sign of more gains to come.
This is because behind these gains for gold mining companies is a huge demand from all kinds of investors who are just discovering the opportunity here. These shares are still held by Big Money, the same group that spent two years getting rid of them, causing their downfall.
Additionally, gold and silver prices are up 30% and 50%, respectively, so far in 2016. That means gold/silver mining companies will show increased sales and earnings growth. in 2016 and 2017 due to the jump in gold and silver prices.
Ultimately, falling stocks in gold mining companies prompted management to implement massive layoffs and cost cuts. These are still being put through today. As a result, profit margins are increasing. Even bigger gains are coming… and big investors will want to get back in on it.
That is why I have no hesitation in saying that it is not too late for those of you who have missed out on these first easy wins to enter. Even though gold mining stocks are up over 50% in four months, there are still plenty of gains to be made in this trade.
You can be sure that crooked market makers and shoddy hedge funds will manufacture volatility for you to sell your gold mining stocks, so expect more volatility as this trade makes you rich.