“Think and Grow Rich”

“The way of success is the way of continuous pursuit of knowledge.”

— Napoleon Hill

YOU may remember Napoleon Hill’s famous advice to “think and grow rich” as a collage of self-help platitudes from the 1930s — “A

quitter never wins and a winner never quits.” That sort of thing.

But don’t despise it. Hill reported that Think and Grow Rich reflected 20 years of study of individuals who had achieved considerable wealth. Without consciously imitating Hill, I undertook my own informal effort to learn from the investment masters, of whom I was lucky to know several. Foremost among them was the “legendary investor” Baron Nils Otto von Taube, a great-grandson of Czar Alexander II, known to his friends simply as Nils.

I was lucky to have Nils as a partner in Strategic Investment in its early years. He instructed me in the techniques and principles of investment. While tutoring me, he also kept his day job. He advised Lord Rothschild and ran a number of Rothschild portfolios. Nils also ran two mutual funds for Kitcat & Aitken, where he famously generated an annual return of more than 15% continuously for 37 years.

Thanks to Nils, a pound invested in 1969 became about £110 by 2006.

Nils regarded professional investments as “being paid to do the crossword.” Nils thought like T.S. Eliot, who advised that: “Bad poets borrow, great poets steal.” I continue to follow Nils’ advice, and later in this issue, Charles Del Valle has quite a heist to share with you — an investment idea for profiting from the renewed bull market in gold … that he has plagiarized from of one of the divine geniuses in investment today.

Meanwhile, I have a lot of clues to help you decipher the “crossword puzzle” you face in making sense of the world today. These contrarian excursions into the footnotes highlight the profound truth reinforced by a thought-provoking weekend in Washington last month, where I attended a University of Oxford Alumni Weekend function.

Exciting stuff. The discussions not only evoked Napoleon Hill’s best-selling advice, they recalled a broader take on the theme — super-successful investor Warren Buffett’s contention that he owed much of his wealth to having spent 80% of his career reading and thinking. I suspect that Buffett is right to conclude that thinking per se can do more to make you successful than explicitly trying to make money.

www.sovereignsociety.com May 2016

Inside This Issue

Strategic Investment James Dale Davidson’s

4 | Past and Future of Medicine

9 | Ride a Billionaire’s Gold Bet

10 | Portfolio Review

7 | The Big Mystery

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Technology More Than TradeMy friend Donald Trump and many voters may

not like it, but if you want to raise the incomes of unskilled workers, you would need to put the cleverest inventors the world has ever seen to work for approximately half a century to create a new technological imperative that raises the return from low-skilled participation in mass production. I don’t see it happening, but perhaps you can divine an opening that I overlook.

Otherwise, the almost complete collapse of the incomes of the bottom 60% to 70% of the population seems inevitable. Building a wall on the Mexican border may employ a few thousand construction workers for a year or two, but it will do little to change the reality that unskilled labor is being rapidly devalued.

Remember, historians estimate that it took 500,000 workers to build the Great Wall of China by hand over a period of centuries. With today’s technology, a Mexican Wall would be completed more quickly, and with fewer workers. Apart from those who might be overpaid for government work, few others would benefit.

Why do I dispute the importance of a Mexican wall to restoring blue-collar income? Because the decline in incomes is being driven more by technology than trade deals. Note the fate of some 58,429 deadweight tonnage bulk freighters, formerly owned by Goldenport, one of the last surviving shipping companies on the London Stock Exchange.

The now delisted company sold six of its remaining eight vessels for the bargain price of $1.00. The vessels sold for less than a grande black coffee at Starbucks — hinting that there is not enough trade to keep average daily hire rates for freighters above operating expenses.

Technological change explains the plunging incomes of blue-collar workers who tend to rail at trade deals. Consider that in 29 of the 50 U.S. states, truck and delivery driving is the most common type of job. But how long can this last? Not long. And not because there will be an invasion by Mexican, much less Chinese truck drivers. The real risk to these blue-collar jobs is not cheaper human labor, but technological progress.

The Self-Driving 18-Wheel TruckThe self-driving vehicle is no longer science fiction.

In October, German automaker Daimler began experimentally operating a self-driving truck under real traffic conditions for the first time on the A8 motorway in southern Germany.

The truck is outfitted with smart systems including radars, cameras and active speed regulators, and works without a human driver. Daimler’s truck and bus division has been granted the first autonomous truck license for its Freightliner Inspiration self-driving 18-wheeler by Nevada, joining a number of other corporations already testing self-driving vehicles on Nevada’s roads.

Naturally, I expect there to be fierce pushback from teamsters. There will be calls for regulation to ban self-driving trucks as a safety hazard. There may even be acts of violent sabotage. Nonetheless, it is only a matter of time until the proof of concept is established.

Autonomous vehicles will prove to be safer than trucks piloted by human drivers. Their performance will not be impaired by inebriation, fatigue or drug addiction. Self-driving trucks will not be steered into accidents by operators distracted by threats of divorce or other intractable family crises that plague human truck drivers.

James Dale Davidson has spent over 30 years as a

specialist “crisis investor,” which has taught him that

it’s always the hardworking, the savers, the taxpayers

who suffer the most. James has been warning investors

about the dangers of a financial collapse for over 20

years. He’s also spent most of his adult life taking on

an overreaching government. In 1974, he founded the

National Taxpayers Union, which for 35 years has been

protecting your right and that of every American to keep

what they’ve earned.

ABOUT JAMES DALE DAVIDSON

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Daimler director Wolfgang Bernhard foresees driverless trucks being more rapidly adopted than autonomous autos. Truck operators will have a big financial incentive to adopt technology that will bring a lot of savings in fuel and wages. (The projected fuel savings come from more precise management of acceleration and braking in traffic). “It makes the most sense to them,” Bernard said at a Las Vegas introduction of Daimler’s self-driving truck. ‘These guys have to make money.”

The standard Mercedes-Benz Actros, fitted with the intelligent “Highway Pilot” system, operated safely on the Autobahn. And I expect similar success in Nevada. Of course, during the tests, there will be a driver in the cab, but he won’t be steering the vehicle.

Probably, long-haul interstate trucking jobs will be among the first to go. Those who have studied it, expect long-haul interstate autonomous trucking to be delayed for about five years. It will probably take that long to adjust laws in states along the major thoroughfares to permit driverless trucks.

I would expect the jobs of delivery drivers to be more secure than those of drivers taking cargo from point-to-point. Delivery drivers who must constantly get out of their vehicles to take packages to the door could not be replaced by a single technology.

Doctors and Lawyers, Too?As Wolf Richter recently detailed, the structural

displacement of low-skilled labor due to automation is also displacing high-skilled professionals:

Even professional jobs such as lawyers are being taken over by bots. Not their rare courtroom appearances, or their roles in negotiations with other humans, but their daily grunt work, which is much of what lawyers do, such as preparing reams of documents. And then there’s discovery: It’s already no longer a human job in many law firms. Bots are sifting through millions of emails and memos and documents in a fraction of the time that an army of humans pulling all-nighters used to spend on it. These bots are much cheaper, don’t need pizza after midnight, and work much more accurately.

And doctors. IBM is positioning its Dr. Watson for that. It doesn’t need to be perfect. It only needs to be better than humans. And that’s pretty easy to do, given human limitations. Human doctors can only learn through their own efforts and experiences. But doctor bots can instantly learn from the entire body of research out there, from anything and everything in the entire medical database, and from all the other doctor bots. While not all human doctors will go away, the need for them will be less.

And the highly paid coders of the current tech bubble? Other coders are designing bots that replace those coders who haven’t been replaced already by bots. And the cashiers at the grocery store, now being replaced by self-checkout machines? Or bank tellers, the remaining few? And the millions of jobs up and down the scale?

The replacement of human labor by digital

Strategic InvestmentTo contact us with a question or comment, please call: 1-888-898-2227 or email us at strategicinvestment@sovereignsociety.com

Published by Delray Publishing

Editor: James Dale Davidson

Managing Editor: Charles Del Valle

Editorial Director: JL Yastine

Legal Notice: Nothing herein should be considered personalized investment advice. Although our employees may answer general

customer service questions, they are not licensed under securities laws to address your particular investment situation. Also you should not base investment decisions solely on this document. Delray Publishing expressly forbids its writers from having financial interests in securities they recommend to readers. Delray Publishing, its affiliated entities, employees and agents must wait 24 hours after an initial trade recommendation published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation. Also, please note that due to our commercial relationship with EverBank, we may receive

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4May 2016 www.sovereignsociety.com

information in the production process, exemplified by the transition to driverless vehicles, is a relatively straightforward extrapolation from technological developments with which you are familiar. For example, it is more or less a certainty that if you have a cellphone, you carry a GPS unit with you during most of your waking hours.

The Past and Future of MedicineMy old Pembroke College contemporary, Professor

Matthew Freeman, head of the Dunn School of Pathology at the University of Oxford, is the herald of a new “hidden revolution” in molecular biology. Freeman believes we are “on the brink of understanding the inner working of the cell, the fundamental unit of life.”

Professor Freeman’s hidden revolution is taking place at the microscopic level, driven by an astonishing 400,000-fold increase in the power of microscopes over the past three and a half centuries. The signal date in this timeline was January 1, 1653, when Robert Hooke, under commission to King Charles II, discovered the cell with a compound microscope with 50 times the resolution of the human eye.

Today, the new scanning transmission electron holography microscope (STEHM) allows researchers to see with a resolution of 20 million times human sight. Science now has the ability to see material as small as a single atom — a million times smaller than a human hair. The deepest secrets of life, literally hidden by invisibility since the dawn of time, are now open for inspection.

What does this mean? Among other things, it implies a new paradigm in medicine that will be orders of magnitude more effective in treating disease and extending human health span than conventional sick care. The hidden revolution has already played out in a series of Nobel Prize-winning breakthroughs over the past half century:

1962: Professor Sir John Gurdon clones living tadpoles from stem cells of an adult frog. Gurdon later wins the 2012 Nobel Prize for

Medicine for his work showing that mature cells can be “reprogrammed to become pluripotent,” which can give rise to all of the cell types that make up the body.

1985: Elizabeth Blackburn and Carol Greider discover a specific telomere-enhancing enzyme, telomerase. They win the 2009 Nobel Prize in medicine for discovering how chromosomes are protected by telomeres and the enzyme telomerase.

2007: Shinya Yamanaka’s lab in Kyoto, Japan, successfully reprograms human adult stem cells to function like pluripotent embryonic stem cells. Yamanaka shares the 2012 Nobel Prize with Professor Sir John Gurdon.

These groundbreaking findings, authenticated by the Nobel Committee, open the way for a new paradigm in medicine based on molecular biology. Of particular interest, is the role of telomeres in governing the process of aging. At the tips of every chromosome in the human body is a biological “clock” called the telomere. When a cell divides, its telomeres get shorter as a normal part of cell division. As a cell’s telomeres get shorter, the cell functions less effectively. Eventually, the telomere becomes critically short, cell division stops and the cell eventually atrophies and dies.

Telomere shortening is a primary cause of many age-related diseases, including heart disease, arthritis and COPD, while telomere shortening in the cells of our immune system progressively limits the body’s ability to fight infectious diseases, as well as cancer.

The 2009 Nobel Prize for Medicine was awarded to scientists who, in the mid-1980s, did research that later led to understanding of the role of telomeres. Since the awarding of this Nobel Prize, public interest in telomerase-based antiaging therapies has soared.

Further fueling the excitement over telomerase research was a January 2011 article in the journal Nature describing a study demonstrating that activating telomerase in mice actually reversed their aging — the clearest proof of concept yet that aging can be reversed through telomerase induction.

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Along with dramatic progress with stem cell therapies, enhanced understanding of the role of telomere deficiency in aging opens the way to a new category of treatments with molecular medicine that attack the underlying cause of disease and debility.

Curing more or less all disease and multiplying human health span fivefold is no longer a magician’s fantasy.

The miracles of molecular medicine have achieved some truly astonishing successes. I have seen time-lapse photos of the amputated fingers of a 24-year-old man growing back after induced pluripotent stem cell injections.

Equally, patients with Type 1 diabetes have been cured with stem cell treatments of the pancreas. In the not-too-distant future, as stem cell treatment protocols evolve, it will be possible to treat virtually any disease or affliction, from heart failure to saggy jowls, with telomerase-enhanced stem cell therapy.

The hidden revolution antiquates the whole system of allopathic medicine, predominate in the West today, which largely treats symptoms rather than the underlying causes of disease. The traditional systems of medicine that evolved before the discovery of the cell, such as Chinese medicine, Ayurveda in India and even traditional European medicine practices, were based on trial and error with natural herbs and other remedies informed by centuries of observation.

These practices were also vitalistic rather than scientific, in that medical theories held that health depended on a “life force” rather than some molecular mechanism. For the Chinese, this was “chi.” In Ayurvedic medicine, the life force was “prana.” And traditional European medicine incorporated the ancient Greek humoral theory, which attributed disease to an imbalance of four humors and four bodily conditions that corresponded to four elements.

The shift in Western medicine away from vitalism toward the scientific treating of symptoms in the early 19th century gave rise to the emergence of the pharmaceutical industry, as well as FDA-style regulation to limit entry into the new drug field.

As frequently happens, the paradigm shift to molecular medicine is being blocked by anachronistic rules and laws. It is nonsense to treat your own induced pluripotent stem cells as a pharmaceutical product. The idea that you should have to pay $100 million for “drug trials” on your own genetic material, which would never be used on anyone other than you, is an absurd imposition on freedom rather than a valid regulatory protection.

Looking ahead, you can see why it is unlikely that Donald Trump or anyone else can “make America great again.” For one thing, technological imperatives are against it. The incomes of the mass of voters seem destined to continue eroding because of the growing incorporation of digital information in the production process. And further to that, you can expect the whole social premises of life to be overturned by the hidden revolution in molecular biology. The promise of dramatic life extension through stem cell rejuvenation and telomere augmentation is obviously disruptive to traditional life-cycle patterns.

If you think Social Security is broke now, you haven’t seen anything yet. Wait until you can approach the life span of Methuselah and father a son at the age of 187. At that point, annuity tables will be nonsense.

The institutional framework inherited from industrial society, already badly misaligned with the technological imperatives that will drive change for the foreseeable future, promises to be even more maladaptive.

Given the fact that government policies are at least notionally determined by popular vote, this implies a continuing crisis in governance, marked by confiscatory taxation, monetary instability and more counterproductive policies like higher minimum wage laws.

Stupidity TriumphantIf you have been giving even halfhearted notice to

America’s political contentions, you probably have your own examples of stupidity triumphant that you

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explore at dinner parties or over card games with friends. But I have several that are ripe for discussion, even if you are a connoisseur of nonsense. They raise one of the abiding puzzles of our time: Are leading politicians lying, or are they just stupid?

Take the current campaign funded by the Service Employees International Union and endorsed by Hillary Clinton and Bernie Sanders to more than double the current $7.25 federal minimum wage in the U.S. to $15 per hour. The headline purpose of this campaign is to force employers, particularly fast-food joints such as McDonald’s, to pay minimum-wage workers $30,000 a year for full-time employment.

Sounds great, right? Well, yes, if you make or sell self-service computer kiosks that will replace minimum-wage employees in many McDonald’s locations. Think of the ATMs that replaced bank tellers and the self-service checkout stands that have supplanted cashiers in supermarkets. And the self-service check-in counters at airports.

Almost 90% of McDonald’s locations are owned by independent franchisees, who typically earn $156,000 in profit on about $2.6 million in annual sales. For many locations, the increase in the minimum wage would wipe away their whole profit. What would they do?

According to former McDonald’s CEO, Ed Rensi, writing for Forbes, the contingency plan is already in place. The answer is to replace human labor with computer interfaces.

In higher-cost European countries, these kiosks are already the norm. In 2011, the company ordered more than 7,000 of them to replace entry-level employees. They’ve been tested successfully in a number of markets in the U.S., and now the company is even testing self-serve McCafé kiosks where a customer can prepare and customize their own coffee beverage.

So a likely consequence of hiking the minimum wage to $15.00 an hour will not be to raise the incomes of low-skilled people, but to put many of them out of work, as the McDonald’s example so vividly demonstrates.

“Lies, Damn Lies, and Statistics”Another area that challenges you to think as an

investor involves discerning fact from propaganda. True, a lot of propaganda swirls around the minimum-wage campaign. But the basic facts are not in dispute. The current federal minimum wage is $7.25 per hour. The big push is to raise it to $15.00 per hour. There are other areas of public policy where the facts — if honestly reported — would support conclusions that politicians are not keen for you to draw.

So they lie. They resort to wholesale data tampering. In past issues, Strategic Investment has exposed the remorseless falsification of jobs data that makes the U.S. Bureau of Labor Statistics the greatest purveyor of economic lies since the TsSU (the Soviet Central Statistics Agency) expired with the Soviet Union.

In his latest dissection of March payroll and unemployment statistics, released on April Fools’ Day, John Williams of Shadow Government Statistics blasts them as “nonsense well removed from underlying economic reality.” As Donald Trump says, they are “lies, lies, lies.” While the government, through statistical fiddle, placed the U.S. unemployment rate at 5%, the ShadowStats real unemployment rate was 22.9%.

There are so many dimensions to the thorough-going fraud that masquerades as a “vigorous recovery” that it would literally take a book to detail and expose them all. The more closely you look at the supposedly “good news” incorporated in the jobs reports, the more evident it is that the bureaucrats charged with fabricating a convincing statistical trail of fake prosperity have a daunting, and probably impossible task.

Take the April Fools’ payroll report. An industrial recession that has become too obvious to ignore was apparently offset by a major surge in retail employment. Taken at face value, this would appear to be unequivocally good news to the naïve, unthinking investor.

But think about it. How could retail employment be enjoying a major growth spurt, capping the best first-quarter retail employment growth ever

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(supposedly with more first-quarter 2016 retail hires than retail payroll growth for all of 2014) when the financial news wires are clogged with announcements of retailer bankruptcies?

Among the highlights, Sports Authority filed for Chapter 11 bankruptcy protection in March, announcing that it was closing 140 of its 450 stores. Clothing retailer Pacific Sunwear of California, with almost 600 stores, filed for Chapter 11 bankruptcy on April 7. And April 16, Vestis Retail Group, operator of Eastern Mountain Sports, Bob’s Stores and Sport Chalet, filed for Chapter 11, and announced it will close all its stores. Obviously, the retailers filing for bankruptcy were not operating in the same plane of reality as the official, fake realm experiencing the record retail job growth described by the Bureau of Labor Statistics.

The Big MysterySomething else you need to decipher with careful

thought are the puzzles with no easy answers. Let me give you an example. When the year opened after the Fed rate increase in December, the stock market swooned in tandem with commodity prices. Talk of debt deflation, long ridiculed by the powers-that-be, was suddenly no longer so preposterous. Stock indexes traded up and down with commodity prices, particularly oil, as low oil prices threatened to radiate debt default to holders of subprime energy bonds and banks with billions in loans to the oil patch.

More recently, stock prices rallied vigorously with commodities leading the way higher. As I write, the S&P 500 is within 2% of its highs, notwithstanding the fact that the economy is probably already in recession and earnings have been in retreat since 2015.

More recently, CNBC has been pounding the drums, as in this, from April 19, 2016 — “Record high for S&P 500 on the horizon,” by Bob Pisani. What happened? Commodity prices rallied sharply, easing fears of debt deflation and relieving pressures on the banks heavily exposed to energy sector.

The widely followed Thomson Reuters/Core

Commodity CRB Index, which tracks 19 major commodities, rose to its highest levels since December on April 21. Goldman Sachs promptly cautioned that the rally was not supported by fundamentals in the physical markets.

I am not a big a fan of Goldman Sachs, but they were right about the lack of fundamental support for the commodity rally.

Strangely, some of the markets with the worst fundamentals, including oil and iron ore, have enjoyed the most vigorous rallies. Oil rallied, even as the supply imbalance hanging over the market worsened as Iran came back on the market with the end of sanctions. Why did prices rise? My tentative answer — central bank manipulation.

Remember, they have been loudly proclaiming their commitment to raising inflation. Nothing makes a hash of that like plunging commodity prices. So it would meet their objects in more ways than one to drive up commodity prices. Of course, central bankers can’t readily reverse the imbalance between supply and demand created by the malinvestments they stimulated through rampant creation of fictitious capital. But with the ability to create money out of thin air, central banks can engineer outsized bids for overvalued commodities, apart from any hint of improvement for the fundamentals of supply and demand. As John Edwards summarized in Nikkei Asian Review:

The prices of two raw materials essential to the global economy have sharply increased lately. Not long ago the spot price of iron ore saw its biggest one-day rally in history, after nearly five years of decline. That spike was soon followed by oil, which has rallied recently after a dramatic price fall over the last two years.

This change might be the first sign of an improving global outlook. There has been no significant cut in the global oil supply or in iron ore shipments that would explain the change in price direction. Markets see higher commodity prices as a good thing for global economic growth and lower commodity prices as a bad thing.

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I suspect that what you have seen is a move by the Fed and other central banks to goose market sentiment by rigging the commodity pits.

Would that shock you?

The Fed and other central banks have already done their level best to destroy price discovery in the debt markets with quantitative easing. They have shown themselves to be almost comically receptive to barmy experiments, like negative interest rates. And they have been beavering away almost openly monetizing stock indexes, amplifying income inequality, while depriving Grandmother of her retirement income with ZIRP (near-zero interest rate policies). With this in mind, do you suppose that the Fed and other central banks have any qualms about manipulating and rigging commodity pits? I don’t.

They want to increase the perception of inflation. They want to lift stock prices. And I am guessing that they have no particular objection to the “Lazarus effect” that suddenly high commodity prices have in bringing zombie oil and steel companies back from the dead.

Note, however, that the miraculous oil rally, in the face of an 86.6 million barrel inventory build-up over the past six months, is mainly confined to the front end of the market. Nearby months have rallied sharply by $18 a barrel, while the out months, most useful for hedging, have only rallied one-third that much, by just $6 a barrel. The result is a much flatter price curve, perhaps the consequence of fundamental limitations on the ability of central banks to rig commodity prices.

And Then What?One of my Oxford tutors used to ask one pertinent

question you need to ask yourself constantly as an investor: And then what?

If you think about it, there is problem with

a long-term policy of printing money to buy commodities. When central banks support stock prices, they may end up like the Bank of Japan, the Swiss National Bank, the Czech National Bank and the Bank of Israel with significant stock holdings. Stocks and bonds pose no storage challenges, as they are held in digital form. But if central bankers were to continue intervening in commodity markets, they would come face-to-face with a big storage problem. What do they do with millions of barrels of oil and tons and tons of iron ore? Warehouse them in a vault?

Central banks can temporarily intervene in oversold futures markets with the intention of stimulating a rally and then taking profits by selling their contracts before notice day. But without a fundamental rebalancing of supply and demand, they would find themselves in the awkward position of having to dump the surplus commodities back into the market or spend billions to develop warehouse capacity.

What this tells me is that whatever tonic emergency intervention by central banks can bring to the commodity market is likely to be no more than temporary in nature. In the long run, the collapse is likely to be even more devastating. And that, to me, argues for gold.

The ultimate advantage of gold is that it is a monetary asset that frees you from dependence on counterparty risk and the manipulations of central banks. When we reach the breaking point, the endgame for this bankrupt system, you’ll want to own physical gold (some in hand; and a lot in a vault in Switzerland).

Look out below,

James Dale Davidson

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By Charles Del Valle

PRECIOUS metals have had a tremendous rally over the last few months. This is partly what led

me to recommend a silver play just last month. Since that recommendation hit your inbox, silver has done nothing but go straight up.

It seems the time is ripe for precious metals to move higher once again. The Fed — heck, central banks around the world — are trying to create inflation through debt monetization and

negative interest rates. And there’s this little fact that financial instability leads investors to pour money into precious metals — the ultimate safe haven.

This is great for us as we have plenty of exposure to these shiny metals. In the past, I’ve told you to purchase coins, gold bullion and now silver.

So today, I’m going to ask that you take a look at a promising gold miner: Pershing Gold Corporation (Nasdaq: PGLC).

Pershing is a strong company for a variety of reasons:

• Pershing is sitting on an impressive gold resource in Nevada, which does not have any foreign geopolitical risk.

• It’s run by a top-notch management team, with impressive experience building gold assets.

• Pershing is debt-free and just added cash to its coffers with an equity that should give it runway and capital to continue to amplify its gold resources.

• It’s consolidated 25,000 acres in Nevada with its own state-of-the-art, permitted and constructed gold-processing facility.

Before I go on, I have to admit that this is a

company we invested in before. But that was right at the tail end of the sell-off in gold. Our position ended up hitting its stop-loss and we had to be prudent and get out of the stock.

But today, the timing looks perfect for a jump into Pershing. The shares bottomed at the beginning of January. The big catalyst? The company was able to sell stock to the market. This surprised investors, because up to this time, they were used to seeing commodity companies suffer from a lack of funding. With prices heading down, it’s hard to convince any investor to give you more cash.

But Pershing made it happen. That signaled to observers that this company was sitting on something promising, and that it was somehow different from many of the gold miners out there.

Since that bounce, Pershing has managed to register higher lows nearly every week and looks poised to break above its 200-day moving average. Our expectation is that Pershing will eventually climb past its February highs on a long march to $10 a share.

When I originally started looking at this company, I couldn’t help but ask James Dale Davidson what his thoughts were. After all, he has invested and made money off many different mining and resource companies. I figured he’d have some insight.

Boy, did he! In a letter, he told me:

Pershing Gold is almost unique among small-cap gold companies in that insiders have been heavy buyers, not sellers. For example, director Barry Honig, famous for his success building winning companies, recently shelled out $1.5 million in open market purchases of PGLC, to bring his total investment to more than $30 million.

Honig has made his gold bet on Pershing, and his ownership stands at over 25% of the company.

Ride a Billionaire’s Gold Bet to Stupendous Gains

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I am betting the billionaire’s big commitment to Pershing Gold will prove to be another savvy move from his celebrated playbook, because as you’ll see, PGLC has some pretty impressive investable traits:

PGLC is due to release its Preliminary Economic Assessment (PEA) on the Relief Canyon project, proving the viability of putting the project into production. Now is a great time to invest ahead of this potential catalyst when the PEA is publicly released for the first time.

Although Nils Taube died in 2009, I vividly remember the last conversation we had in which he outlined his long-term conviction that the rational investor today had to take a big stake in gold. He sometimes was a bit ahead of his time. Just as frequently, he was vindicated.

In 1987, he was prematurely bearish on the stock market before the crash. But at the end of the day, he made £75 million from his short position. I expect his conviction that gold was going much higher to be vindicated as well.

So the news is all good. And fundamentally, the company is strong. The company has barely any debt and is sitting on $8 million. The hope is that the upcoming PEA shows some exciting news for the Relief Canyon project. This will allow the company to raise more cash in order to get this mine operational.

The company anticipates it has at least 739,000 ounces of gold in this mine. At today’s gold price, that’s a value of $955,527,000. Keep in mind that Pershing’s market cap is only $100 million … yet it holds more than nine times as much gold value in the

dirt it owns. That’s a tremendous value you should take advantage of. So here’s what I want you to do:

Buy Pershing Gold (Nasdaq: PGLC) up to $4.10 a share.

We’re going to keep a tight 15% stop-loss on this stock since we’ve already been in it once before.

Market Update and Portfolio Review

Is the market slump over? It started to look that way in February and March, but in April, the market essentially traded flat.

You see, investors put an outsized importance on things like a new all-time high. For the market to go higher, investors have to feel pretty good about the future. They will ask themselves questions like: Are earnings so good that a new high is justified? Is the economy chugging along at a decent clip?

Unfortunately, the answer to both of these questions is a resounding “no.”

Earnings have been in a recession since last year. And the economy is barely moving at all, according to the latest GDP report. It showed first-quarter GDP moved up by a paltry 0.5%.

Complicating matters is the price of oil. The most recent rally was originally driven by a rumor that Saudi Arabia would freeze oil production. Problem is, Saudi Arabia never agreed to a freeze. Once the news came out, oil prices started to fall again. Will this drop be like the one we experienced in late 2015 and early 2016? It probably won’t be quite as sharp. I don’t see oil prices, for example, falling below $10 a barrel. But we could fall below February lows.

And if oil prices keep falling, expect prices of other commodities — and eventually most of the market — to follow.

So there you have three good reasons why the market would struggle to hit a new high, and why a downward path is more likely. Here are several more worth considering:

Charles Del Valle is a self-taught, 12-year veteran of the

financial world. In the past five years, he fine-tuned his

market skills even more, mentoring under investment

experts in options and technical analysis, value and

income analysis, and sentiment analysis. Charles is also

an avid car and technology enthusiast and a firm believer

that the government has its hands far too deep into the

financial markets, and that a smaller and less-intrusive

government is what we deserve.

ABOUT CHARLES DEL VALLE

11www.sovereignsociety.com May 2016

• A recent Fed Survey found that credit quality in oil regions (places like North Dakota) is starting to deteriorate. This means loans made to people and businesses located in the oil patch are starting to become delinquent more often. Not shocking when you consider that oil companies are drastically paring back new wells.

• The ISM Manufacturing Index decreased to 50.8 in April. While anything above 50 indicates expansion, the fact that it’s so close to that threshold tells you that manufacturing output in this country isn’t necessarily robust. To the extent that there is manufacturing, it’s because of new cars. But even that’s not enough to consistently keep the ISM over 50. We’ll see how it shakes out in the months ahead.

• The Chicago Purchasing Manager Index declined in April, led by a drop in new orders and a big fall in backlogs. According to Chief Economist of MNI Indicators, Philip Uglow, “Against a backdrop of softer domestic demand and the slowdown abroad, panelists are now more worried about the impact a rate hike might have on business than they were at the same time last year.”

• Kansas City Regional Manufacturing Activity mostly declined in April. The region was slammed by lower oil prices and a stronger dollar. And while the dollar has weakened (and oil prices have climbed), I wouldn’t expect any miracle bounces in any upcoming reports.

• The Chicago Fed announced that economic growth in the region was below average in March. From the report, “The Chicago Fed National Activity Index (CFNAI) edged down to –0.44 in March from –0.38 in February. Three of the four broad categories of indicators that make up the index decreased from February, and all four categories made nonpositive contributions to the index in March.”

• With interest rates slowly creeping higher, it looks like mortgage applications are starting to decrease. In the latest weekly survey, applications fell 4.1% from a week earlier. Real estate is one of the few things propping up our economy. If we see a big slowdown in the real estate sector, expect negative GDP for some time to come.

• The ATA Trucking Index fell in March. Trucking is one of those sectors that tells you how the economy is really doing. After all, we ship products from the ports to the rest of the country. We also ship oil and a host of other things. The Trucking Index has been lagging because of the inventory overhang at retailers (requiring fewer trucks to restock) along with the decline in fracking activity.

• Retail sales dropped 0.3% in March. There was no winter storm to cause consumers to buy less, so this report shows an unwillingness from consumers to buy much of anything. And don’t think that this is driven by the falling price of gas. If you take gas out of the equation, retail sales fell 0.4%.

Not all the economic news that came out was bad, but nothing was spectacular, either.

Yet, despite the problems in our economy, the Fed wants to try and increase interest rates at least two more times this year. Indeed, at the latest Fed meeting members refused to talk about any economic risks … at all! This is their way of saying, “expect higher interest rates soon.”

If we see inflation tick higher, expect even more than two rate hikes this year. The Fed doesn’t want to feel like they’re behind the tightening curve. If they do, they may even opt to do a half percent hike sometime next year to “catch up.”

Now, let’s take a moment to talk about our open positions. We have a few closeouts to make, so let’s get that out of the way now.

We got into the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) because we expected the market collapse to continue and push the buck higher. But then the market bottomed out and went for new highs. This sunk the value of the dollar. Since we’re unsure when another sell-off might occur, or whether it would even benefit the dollar if it did, we’re going to get out of this position to prevent further losses.

Action to Take: Sell PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) at the market.

Another stock we bought because of the sell-off

12May 2016 www.sovereignsociety.com12

was the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX). But as the market went higher, we lost value. At this point, we have hit our stop-loss point.

Action to Take: iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) at the market. If you are a platinum portfolio member, sell your VIX call option at the market.

I also want to talk a little bit about Microsoft (Nasdaq: MSFT). Its latest earnings report missed expectations, mainly because revenue from its Windows operating system keeps falling. But it’s also seeing tremendous growth in its Office subscription service, hardware sales and the cloud. After reporting earnings, the company’s stock fell 10%. Still, we are up 15% on this position. And I believe the selling is a little overdone. Investors always knew that Windows revenue would fall. This isn’t a shock. So

we’ll continue our hold on the stock until we see an upward trend resume.

Action to Take: Hold Microsoft (NASDAQ: MSFT).

Thankfully, our other open positions are doing phenomenal.

We even hit a new high today on our REIT, Agree Realty Corp. (NYSE: ADC), while the rest of our portfolio is cruising higher.

Expect more gains in the months to come, no matter what the market does.

Take care,

Charles Del Valle

NOTES

Pershing Gold (PGLC) NEW Buy up to $4.10

Agree Realty Corp. (ADC) 12/2/15 $41.28 $33.46 4.7% 26.2% Buy up to $40

Altria Group Inc. (MO) 6/9/10 $63.49 $20.05 3.5% 271.4% Buy up to $62

Gold Bullion 7/30/15 $1,294.00 $1,087.50 19.0% Buy up to $1,300

iPath S&P 500 VIX Futures ETN (VXX) 3/2/16 $16.97 $22.32 -24.0% Sell at Market

Shares 20+ Year Treasury Bond Fund (TLT) 9/2/15 $129.74 $120.98 2.5% 8.9% Buy up to $133

Microsoft (MSFT) 6/30/15 $49.93 $44.15 2.7% 15.4% Hold

Pepsi (PEP) 7/30/15 $104.26 $96.63 2.7% 9.4% Hold

PowerShares DB US Dollar Index Bullish Fund (UUP) 9/2/15 $24.17 $25.04 -3.5% Sell at Market

WisdomTree Dreyfus Yuan Fund (CYB) 2/3/16 $25.01 $24.21 -3.3% Short down to $24

Date Price On Purchase Dividend Total Investment Added 5/3/2016 Price Yield Returns Advice

Strategic Investment Portfolio

The Strategic Investment Portfolio is an equally-weighted strategy and does not include dealing charges to purchase or sell securities, if any. Taxes are not included in total return calculations. “Total return” includes gains from price appreciation, dividend payments, interest payments, and stock splits. The Purchase Price is based on the first closing price after the recommendation’s release. Sources for price data: Capital IQ, and websites maintained by securities issuers. Dividend yield is calculated based on trailing 12-month distributions. Stop-losses: The Strategic Investment Portfolio maintains a 25% trailing stop-loss on every stock, ETF and bond recommendation. *25% stop-loss is waived.

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