Benjamin Franklin was born in Boston on Jan. 17, 1706.
He was one of the great Father's of our country. He wrote A penny saved is a penny earned. The idea here is to protect your wealth in an era of inflation and resource scarcity.
Early in his life, Benjamin Franklin spent a bitter period of time as an indentured servant. He became well acquainted with scarcity and privation in a colonial economy at the frontier of the British Empire. After gaining his freedom, Franklin went on to become a printer, editor and merchant. (At one point, Franklin had a government contract to print the paper currency of Pennsylvania.) Franklin was also a natural scientist, scholar, writer and inventor -- coming up with an array of things ranging from the lightning rod to the glass harmonica. It was Ben Franklin who came up with many social innovations that we take for granted, such as America’s first lending library and the first volunteer fire department.
And Franklin was a politician, diplomat, philosopher, ambassador and Founding Father of the United States of America. It was Franklin who famously summed up the form of U.S. federal government -- if not its ultimate fate -- as he walked out of the proceedings of the Constitutional Convention of 1787. When asked what sort of government had been established, Franklin replied, “A republic, if you can keep it.” More than two centuries after his death, Franklin is among the most revered and respected figures in American history.
Indeed, Franklin is among the best-known Americans throughout the world. Certainly, Franklin’s intellect and accomplishments are the foundation of his fame. But one aspect of Franklin’s worldwide fame comes from the fact that his image is printed on the U.S. $100 bill. Thus, Ben Franklin is ubiquitous in international trade and commerce.

This monetary aspect of Franklin’s fame is worth bearing in mind. Because it now takes about one of those Franklin $100 bills to purchase one barrel of oil.

And it takes nine of those Franklin $100 bills to purchase an ounce of gold.

Just a year ago, a Ben Franklin $100 bill would buy nearly two barrels of oil, not one. And it took just a bit more than six Ben Franklins to buy that gold coin illustrated above. While we are thinking about it, how much food can you buy this year at the grocery store for the amount indicated on one Ben Franklin? Less than you could last year, right?
What a difference a year makes. Things are changing fast in the world of money. That is, the value of your U.S. currency is declining, while the costs for the things you buy are rising. In a fundamental and philosophical way, it gets back to Ben Franklin’s comment about living in “a republic, if you can keep it.” If your currency is declining in value and the things you want in life are becoming more and more expensive, what can you really do? What does the future hold? At the end of the day, can we maintain that republic?
Gold and Energy
I think it is fair to say that Ben Franklin knew how to adapt to changing times. And you have to have that ability, as well. So let’s discuss a couple of defensive investments in a time of rising prices and declining value of the currency.
Most recently, I recomended NovaGold Resources Inc. (NG: AMEX). NovaGold recently won an important court case in the Ninth Circuit Court of Appeals, (which is why it was knocked down so hard before) upholding its mining permits for a new project near Nome, Alaska. NovaGold is still running final tests on its Nome processing mill, but the company is already mining and stockpiling ore. So NovaGold will be processing and selling gold within a couple of months. Plus, NovaGold is making steady progress on another project at Donlin Creek, Alaska. Donlin Creek is one of the largest undeveloped gold deposits in the world, with nearly 33 million ounces of gold resources measured, indicated and inferred. My view is that in the long term, NovaGold is one of the greatest gold mining stocks you can own. Don’t chase the stock, but build a position.
Action to take: Accumulate shares in NovaGold Resources Inc. (NG: AMEX) up to $11.50 per share. Expect this stock to appreciate significantly in 2008.

Kinross Gold Corp. (KGC: NYSE) Kinross is just now ramping up production from new mine facilities. It will be selling increased gold output into a higher-priced gold market. The profits will flow straight to the bottom line. And this is reflected in the higher stock price. Do you have a position in Kinross? It is not too late. Kinross is selling at over $21 per share, The price-to-earnings ratio is high, but not relative to other well-run gold miners. Kinross is growing its earnings rapidly, so I am raising the “buy” price up to $22 per share.
Action to take: Accumulate Kinross Gold Corp. (KGC: NYSE) up to $22 per share. Use any pullback in the gold price to accumulate shares of this great gold miner.
Now let’s think about the world of energy. You surely know that oil prices have been rising, with oil crossing the $100-per-barrel mark and then retreating. Natural gas has also had a slow, but steady climb in recent weeks, although the vaporous energy source has not climbed in price as dramatically as the rising price for oil.

Chesapeake Energy Corp. (CHK: NYSE) , which is rapidly increasing its output from the Barnett Shale play. Chesapeake has given us a return of almost 40% in just over two years since we added it to the portfolio. Keep in mind that this was during a time of, essentially, stable natural gas prices. So Chesapeake does engage in some element of hedging, but the company must be doing something “right” to be rising in value while its product is selling at a level price. What is that?
First, Chesapeake may be one of the best-run energy companies you can own. The past couple of years were good to Chesapeake, with a phenomenally successful drilling and production program within the heart of the U.S. And the future appears even brighter for this Oklahoma City-based company. Using between 38-40 drilling rigs that it either owns outright or operates under contract, Chesapeake expects to complete -- on average -- a gas well in the Barnett Shale play about every 15 hours through at least 2010 !
Aubrey McClendon, Cheasapeake’s CEO, recently stated that the company plans to continue acquiring leaseholds in Tarrant, Johnson and Dallas counties in Texas. So Chesapeake will be drilling its additional acreage in due course. In 2007, Chesapeake’s gross production from the Barnett Shale was 600 million cubic feet of gas equivalent (400 million cubic feet per day net), compared with 2006 gross production of 250 million cubic feet per day. According to CEO McClendon, “We now will focus on achieving our 2008 gross production exit rate target of 900-1,000 million cubic feet per day.” This is an output increase of over 60%.
Thus, Chesapeake will be increasing gas output, in all likelihood in an environment of rising energy and natural gas prices. Chesapeake stock is currently selling at about $37.00 per share, with a price-to-earnings ratio of about 12. My expectation in 2008 is for Chesapeake to increase gas output and sell it at higher prices. So I am raising the “buy” price for Chesapeake to $38 per share. I believe that this stock could rise to $50 and more during 2008, for a 25% gain.
Action to take: Accumulate Chesapeake Energy Corp. (CHK: NYSE) up to $38 per share. Use any pullback in the price of natural gas to accumulate shares of this great energy company.