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John Pugsley: Look at the Big Picture
Source: Zig Lambo of The Gold Report  03/23/2011

John Pugsley, author of the highly successful newsletter, The Stealth Investor, is struggling with some sudden health issues. But in this exclusive interview with The Gold Report, he shared his insight on how the global economic situation, including the catastrophe in Japan, is affecting the prospects for precious metals-related investments.

Editor's Note: Shortly after this interview was recorded, Mr. Pugsley suffered a major heart attack. Our thoughts are with him and his family as we share his insights. New subscriptions to The Stealth Investor have been temporarily suspended.

The Gold Report: Good morning, John. Please start by commenting on how the tragedy in Japan and conflicts in the Middle East might affect precious metals and mining stocks in the near future.

John Pugsley: We are in a particularly exciting period for speculating in the natural resource area and specifically the mining stocks. What's going on right now in the world is we've gotten totally into paper money. Governments have had a big backlash from all the money that was printed over the last 20 years in all of the major countries of the world. When the 2008 economic bubble swept across the globe, governments tried to solve it by printing more paper money. Every time they get into a problem, they think they can bail out their past credit excesses by creating more credit. This is absolutely going to lead to inflation. Whether we want to call it hyperinflation or not, it's going to come and it's going to come with a vengeance. That's the opportunity for all of us because this pile of government debt is building in all the banks and pensions funds around the world.

TGR: So how does the situation in Japan fit into this picture?

JP: It is absolutely insane to think that rebuilding after the devastating earthquake and tsunami in Japan could act as stimulus for GDP growth. That would be like saying that building bombs and blowing things up during a war stimulates the economy. That doesn't create a better world for anybody. If wiping out entire cities really does create a rising GDP and standard of living, why not just go ahead and do that periodically and have a wonderful economy. That's just insane. Instead, they're going to print enormous quantities of paper yen, which will result in passing the loss on to lower-income individuals just as the federal deficits in the United States are passing losses down to the lower classes.

When prices rise, the retired and those on limited incomes will be the victims. I feel sorry for them. But, by the same token, those of us who have some assets can take advantage of this by positioning ourselves outside of the paper-money bubble by investing in natural resource commodities like gold and silver. The real assets are the things we use everyday—copper, steel, zinc, lead and aluminum. These natural resources are the opposite end of money—they are what the price level is priced against. The opportunities are going to be enormous in the next five years. That's why every time we see a dip in any of these areas, we're going in and buying. If they fall more, we buy more. So, we're positioning ourselves.

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