By Porter Stansberry in the S&A Digest:

"Who's gonna get screwed?" Rick Rule posed this question to the audience in St. Michaels... only his language wasn't so tame. He was discussing the sorry state of the U.S. economy. The U.S. has on-balance-sheet liabilities of roughly $12 trillion. We have off-balance-sheet liabilities of closer to $60 trillion. Our states are running huge budget deficits. Pensions are severely underfunded – Rick's example was San Diego, whose pension contribution shortfall is $1.2 billion.

Then, you've got the overstretched individual. And we're trying to solve this problem of debt with more debt. Between the entitled individuals, the U.S. bondholders, and the producers, someone will get screwed. Rick actually says all of them will. And the theme of the End of America will be "strong and enduring." Now, you need to know how to protect yourself.

Rick is an expert in natural resources. In particular, Rick's expertise is in small-cap natural resource firms. Rick says Pareto's Law is one of the most important rules in small-cap resource investing. According to Pareto's Law, or the "80/20" rule, 80% of the effects come from 20% of the causes. In the small-cap natural resource world, 80% of the success comes from 20% of the people. If you apply the 80/20 rule to the existing 20%, you get 4% or 5% of the population responsible for 65% of the utility. Rick urged everyone to identify that 4% or 5% – the most successful folks in the natural resource world – and follow them.

Guys like Lukas Lundin, Ross Beaty, Robert Friedland have made investors a fortune with their mining projects. Everything they touch gushes cash. You have a much higher probability of winning when you're betting on guys like this. The key is to back them only in ventures they have experience with (i.e. mining versus exploration).

From a macro perspective, Rick says the major theme with energy is emerging demand. A lot of people around the world want to live the way we do in the U.S... and we use a lot of energy. The average Chinese person only uses 4% of the energy we do per capita. South Koreans use 17% of the energy we use. According to Rick, if China's demand went to half that of South Korea, it would consume every drop of petroleum produced in the world. While energy demand is increasing per capita, reserves are decreasing. While Rick's presentation had a small light at the end of the tunnel, the next presenter extinguished it...

"Things are going to be so bad, they're going to be even worse than I think." These words came from none other than the great Doug Casey. Doug followed Rick's bearish presentation with an even more bearish one. Doug says everything is expensive. He doesn't want to buy real estate or stocks. He wants gold, and recently bought a bunch. But he's not happy about it because gold has increased by four or five times in the past 10 years. Other than gold, Doug doesn't want to hold commodities. He doesn't want to hold U.S. dollars.

Doug says the only "lock cinch" trade is shorting bonds. He says it's a triple threat on your capital. Bonds prices fall when interest rates rise, and interest rates are going "to the moon." Bonds are also a bet on the creditworthiness of the issuers. And from the government on down, their credit worthiness is in doubt. Finally, bonds are denominated in currencies. And every currency in the world will eventually reach its intrinsic value... zero.

On the long side, Doug says he's putting his money with Rick Rule and Marin Katusa, an energy analyst who works for Casey Research. Doug thinks a super bubble is coming in junior mining stocks. And when they soar, they don't double. They increase by 50 or 100 times.

Crux Note: To discover some of the world's best junior mining and energy stocks, consider a risk-free trial subscription to one of Casey Research's flagship services. To learn more about Casey's International Speculator, click here. To learn more about Casey's Energy Report, click here.

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