From Conversations With Casey:

Remember that the Fed’s pumping up of the money supply ignited a huge bubble in tech stocks, and then an even more massive global bubble in real estate – which is over for a long time, incidentally – but they’re still creating tons of dollars. That will inevitably ignite other asset bubbles. Where? I can’t say for certain, but I say the odds are extremely high that as gold goes up, for all the reasons we spoke about last week and more, that a lot of this funny money is going to be directed into [junior exploration] gold stocks, which are not just a micro-cap area of the market but a nanocap area of the market.

I’ve said it before, and I’ll say it again: when the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.

Gold stocks, as a class, are going to be explosive. Now, you’ve got to remember that most of them are junk. Most will never, ever find an economical deposit. But it’s hopes and dreams that drive them, not reality, and even without merit, they can still go ten, twenty, or thirty times your entry price. And the companies that actually have the goods can go much higher than that.

At the moment, gold stock prices are not as cheap, in either relative or absolute terms, as they were at the turn of the century, nor last fall. But given that the Mania Phase is still ahead, they are good speculations right now – especially the ones that have actually discovered gold deposits that look economical.

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