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Expect
the unexpected and you’ll end up in therapy, on drugs or enlightened.
For those aware of the
impending collapse of debt-based paper money assets, the fact that the
majority still have no idea about the magnitude of the approaching danger is
unbelievable. What is also unbelievable are the
positions some of those people hold.
It is understandable that
most stock brokers, bankers, insurance and real estate agents would still
hopefully believe that the current paper-based profit machine will continue
to churn out paper profits for their benefit ad infinitum. But when reading the Silver Standard 2007 annual
report, the demarcation between those who believe and those who don’t
becomes clear.
Silver Standard Resources,
SSRI, is a well established junior mining company with properties in Canada, US, Mexico, Peru, Chile, Argentina, and Australia.
SSRI mines primarily silver and along with gold and the base metals, lead,
zinc, copper, and tin; and, most importantly, SSRI does so profitably.
WHEN
ABOVE GROUND ASSETS COLLAPSE
BELOW
GROUND ASSETS—SILVER AND GOLD—WILL RISE
It will be the monetary
metals, gold and silver, that will benefit the most from the collapse of
paper currencies and paper debt-based economies now in progress; and, Silver
Standard Resources which controls 900 million ounces of in-ground silver, the
largest in this sector, will benefit greatly when the collapse occurs.
We have been shareholders
in SSRI at various times and are once again. That is why we received a copy
of SSRI’s latest annual report, a report that
was revelatory in a most unexpected way.
The 2007 annual report
confirmed that SSRI is well positioned to take advantage of the coming collapse
of paper assets. It also confirmed the level of blindness regarding the
extent and rapidity of the seismic shift now occurring in financial markets,
a shift that has already cost SSRI tens of millions of dollars.
The 2007 report revealed
that Silver Standard Resources had invested $57,102,000 in asset-backed
commercial paper otherwise known as ass-paper or ABCP for short, paper assets
(IOUs) backed by commercial debt that is now illiquid and cannot be sold.
Perhaps the blindness of
SSRI can be attributed to its corporate domicile in Canada,
a nation that has suffered extensively from its collective trust in
asset-backed commercial paper much as Australians recently believed leveraged
investments in US shopping malls were a profitable way to ride the never
ending expansion.
That Silver Standard bought
$57,102,000 of now illiquid paper is testimony to the blindness of those who
profit from paper believing that such profits can always be taken off the
table. In this instance, they were wrong; and, they will be increasingly
wrong in other such instances in the future.
Additionally, Silver
Standard’s frozen and disintegrating $57 million investment was
unneeded news coming from a respected company in the junior mining sector, a
sector badly bruised by having been pushed aside during last year’s
meteoric rise of gold and silver.
A
SENIOR MOMENT FOR JUNIOR MINERS
The past few months for
junior mining stocks have been difficult. Always a volatile group, it was
still a rude awakening that as gold and silver rose, the junior and mid-cap
miners did not.
Now, that gold and silver
have fallen from their spring highs, some believe the reason for owning gold
and silver has abated; that the worst of the financial crisis is behind us;
and that gold and silver, the arks in a monetary storm, may no longer be
needed in the days ahead.
The truth is that the
monetary storm has not abated. It has barely begun. The credit contraction of
August 2007 was but a shot across the bow, a warning of what is on the
horizon, a historic and cataclysmic disintegration of debt that will leave
nations, businesses, and families broke and bankrupt in its wake.
INVESTING
FOR THE FUTURE
THE
NEAR FUTURE
As the week began, we were
not fully invested. We had taken some earnings off the table and were waiting
for the correction to end before reallocating assets. Gold and silver are
currently in stage III (see www.survivethecrisis.com), a stage in which gold
and silver are subject to volatile swings as paper investors move in and out
of precious metals in their search for short term gain, a process that will
end in stage IV when the search for short term gain will end in long term
loss.
For us, the 2007 annual
report of Silver Standard confirmed that SSRI and our other junior and
mid-cap miners were still well positioned to take advantage of the continuing
bull market in precious metals, a bull market that has not yet rounded the
corner to make its historic run down the home stretch, a run that will be
accompanied by the collapse of paper money and paper markets.
As the week progressed, we
began to add to our physical holdings in gold and silver and later we reentered some ETFs. And,
finally, to gain speculative leverage we bought GDX 55 Jan 2010 and Comex gold 2000 Dec 2012 calls.
It was one year
ago in May 2007 when www.survivethecrisis.com offered my book predicting a
coming global economic crisis. In that same month, in my article Subprime America infects Asia and Europe, I predicted that a crisis would
occur that summer (http://www.drschoon.com/articles%5CSubprimeAmericaInfectsAsiaandEurope.pdf) and it did. In
August the predicted crisis occurred as global credit markets suddenly
contracted and began the as yet unfinished process that will end in The Time of the Vulture.
The coming economic
cataclysm will not be an isolated event. Now that the entire world is trapped
in a world of debt created by central bankers, the collapse of that world
will affect everyone, e.g. US, Europe, Asia, South America, and Africa. No one will escape the systemic
implosion of global credit and dislocated debt now in motion.
Some will fare better than
others. Some will not. Today is the only time left to prepare for tomorrow;
because when tomorrow arrives it
will be as life changing as was Hurricane Katrina to New Orleans and the
recent tragic earthquake to the residents of Sichuan.
Both events were sudden and
unexpected. So, it will be again.
“What’s wrong,
dear?”
“Oh, Beacham, the ship’s officers have just said we hit
an iceberg.”
Beacham could not help
but notice that Lily was in an extreme state of distress. He held her in his
arms to reassure her as she was easily disturbed and this was obviously the
case.
“There, there”
he murmured, “I’m sure everything’s alright. It’s
just a bit of a fright but don’t worry. We’ll be through this in no time.”
And they were, but not how Beacham had imagined.
Note: I will be
speaking at Professor Antal E. Fekete’s
Session IV of Gold Standard University Live (GSUL) July 3-6, 2008 in Szombathely, Hungary.
If you are interested in monetary matters and gold, the opportunity to hear
Professor Fekete should not be missed. A perusal of Professor Fekete’s topics may convince you to attend (see http://www.professorfekete.com/gsul.asp). Professor
Fekete, in my opinion, is a giant in a time of small men.
Darryl
Robert Schoon
www.survivethecrisis.com
www.drschoon.com
Information
contained herein is obtained from sources believed to be reliable, but its
accuracy cannot be guaranteed. It is not intended to constitute individual
investment advice and is not designed to meet your personal financial
situation. The opinions expressed herein are those of the author and are subject to change without notice.
The information herein may become outdated and there is no obligation to
update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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