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Well, it has finally happened.
USA Today has raised the cost of their
daily paper to one dollar. Knew the day was coming. The mining industry
continues to suffer along with the rest of the stock market. Definitely
a contrarian market now. The availability of credit is now zero and blessed
be those companies who have previously stock piled huge wads of cash. They
will have the best chance of surviving this market.
Cash is king.
The following material below comes
from Bill Bonner’s Daily Reckoning. A daily email commentary on current
events. Definitely worth subscribing to and it’s free.
The Daily Reckoning, Bill Bonner, Dan
Denning, 12-11-2008 - “More firms are going broke every day. And others
are desperately trying to stay in business by cutting payrolls. Sony, for
example, announced 16,000 job losses yesterday. We've done our part to
help the airlines...but the industry is facing $5 billion in losses for
2008. And Paulson has only $15 billion left of the $350 billion first
draw for his deflation-fighting campaign.”
How many of you out there remember
Johnny Carson?
I know a lot of the newer generation
will not know who the devil I am referring to. Almost 20 years since the show
signed off the air but seems like yesterday. And now Jay Leno is reaching his
final years as the late night host. History moves forward relentlessly
leaving all of us racing to catch up.
Gold and resource stocks are way down.
Many market caps are smaller than the company’s cash in the bank. This
is why they are called speculations. Gold remains insurance, but all else
remains speculation. This is the true definition of a contrarian investor.
You place your bet where you believe the future is heading. And who
knows for sure? Many of these resource shares were trading earlier in the
year for 5 or 10 dollars a share. Now, they are around a nickel or a
couple of pennies. This market is volatile and cyclical.
Alan Greenspan has predicted that the US will have inflation for the next 25 years. And that he believes the US dollar will
ultimately lose its position as reserve currency status. Right now the
markets are still collapsing and seething in their own blood.
Do by all means hold onto a
substantial portion of physical gold. Learn to live below your means
and of course reduce your debt as much as you can. Risk. Debt. Risk
Debt. The addition of those two have put us where we are today. If you
are going to risk, that’s ok, just get out of debt first. Let
your risk be money you can afford to lose and not borrowed money. That
is what drove the poor souls to jump off buildings in 1929. Don’t
mortgage the farm. Become a little more (actually a lot more) conservative in
your expectations and life style.
The time to buy is when everyone else
is selling. And the time to sell is when everyone else is buying. The
time to buy is always when the blood is pouring in the streets and right now
the streets are filling to over pouring.
“L. Frank Baum’s The
Wonderful Wizard of Oz has become popular as a teaching tool in economics. It
has been argued that it was written as an allegory of Populist demands for a
bimetallic monetary system in the late 19th century.” “One method
of enhancing student learning in economics courses is to introduce economic
concepts through literature…” “A well-known example
in economics has been the incorporation of L. Frank Baum’s The
Wonderful Wizard of Oz into the teaching of monetary issues.” “The
primary evidence in support of the allegorical interpretation is what appears
to be an extraordinary number of similarities between characters and events
in the book and the people and events of the 1896 presidential campaign (when
the book was written).” indiana.edu/~econed/pdffiles/summer02/bhansen.pdf
Sounds a lot like the journey we have
been on these past 20 years. The road to the beautiful emerald city of Oz.
“The Wonderful Wizard of Oz by
L. Frank Baum (Chicago, 1900) is a parable about Money Reform and the 1890s
Midwestern political movement led by William Jennings Bryan…” “From
1891-1895 Bryan served in the House of Representatives, where he advocated
the coinage of silver at a fixed ratio with gold, in order to break the
bankers' monopoly and manipulation of the gold-backed currency.”
prosperityuk.com/articles_and_reviews/articles/wizzoz.php
Wow! Manipulation of the gold market
100 years ago?
“Oz is short for ounce, the
measure for gold and silver.” “…Dorothy sets out on the
Yellow Brick Road (the gold standard) to the Emerald City (Washington), where
they meet the Wizard (the President), who appears powerful, but is ultimately
revealed as an illusion; the real Wizard being just a little man who pulls
levers behind a curtain.” “This can be interpreted in two ways:
Either, the President himself is really just a little man who pulls levers to
sustain an illusion of power, or, the real power of the President rests with
the little men behind the curtains who pull the levers and create the
illusion.” prosperityuk.com/articles_and_reviews/articles/wizzoz.php
Is this true? Are presidents only
puppets?
“…the world's small stock
of gold was controlled by wicked bankers in New York and London.” “…Emerald City is only an optical illusion. (emerald-green paper money is likewise a
delusion.)” prosperityuk.com/articles_and_reviews/articles/wizzoz.php
Is the world adapting to changing
market conditions? Many remain in denial.
“To stand outside ones history,
culture, and language and see what has happened with acciptrine
scholarly vision is among the hardest of accomplishments, and the least
valued by those who deal with the certainty of a set universe.” LE
Modesitt, Jr.
Have you noticed how our republican
form of government is being slowly eroded during this financial crisis with
the appointment of “czars?” What is the true definition of a
“czar?”
“A male monarch or
emperor” “A person having great power; an autocrat” “An
appointed official having special powers to regulate or supervise an
activity” thefreedictionary.com/czar
We now have a financial
“czar” and soon to have a car “czar?” Does this not
alarm anyone? The stage is being set for a division of power held by non
elected officials. Consider the enormous un-checked power that is being
given to this position. And answerable to neither the constitution nor
elected congressmen.
“…a government "car
czar" will [be] given the task of handing out the taxpayers'
cash…” foxnews.com/politics, 12-10-2008
And no commentator, analyst or even
conservative talk show host is discussing the ramifications of this newly
created government position with absolute power and authority over an entire
industry? Well, who cares what is happening, right? Time to party. And that
is what Americans do best.
“Wall St financiers party like
there's no tomorrow – literally” “The hedge fund dealers
partied at a New York nightclub like there was no tomorrow -- which for some
was probably true.” “Swilling martinis and vodkas, they filled Manhattan's white, tent-themed Nikki Beach to bursting. Waiters, trays of tapas held high
in the air, became stranded, wedged into crowds swaying to music under pink
lights.” “Yet with hedge funds in freefall, this was more funeral
wake than celebration.” “Job losses across Wall Street are
forecast by New York state accountants to hit 48,000 by the end of next
year.” “…as clients run for the exits, growing numbers of
hedge funds have imposed emergency blocks on the ability to withdraw
money.” breitbart.com/article.php?, 12-5-2008
What’s new as jobs continue to
disappear and money is hoarded and credit disappears? As you can read bellow
this “recession” continues to grow and build up steam. Like a
boulder rolling down hill and growing in size.
“As bad as you think it is,
it’s worse,” said Diane Garnick, who helps oversee about $500
billion as an investment strategist at Invesco Ltd. in New York. “The
chances of the economy turning around in the first half of 2009 are declining
rapidly because unemployed people can’t spur economic growth.” “There’s
a concern out there that this isn’t a recession, it’s the Great
Depression II, or the Great Recession I,” said Kenneth Schapiro,
president of Condor Capital Management, which oversees $500 million in Martinsville , New Jersey.” “Businesses are battening down the
hatches,” Stuart Hoffman, chief economist at PNC Financial Services
Group Inc. in Pittsburgh, said in Bloomberg Television interview.” “Job
losses are going to continue to accelerate.”
bloomberg.com/apps/news?pid, 12-4-2008
The following text below is from an
analyst very much worth listening to. Ken Gerbino knows the gold market and
his speculations and longer term assessments are generally tight on the money.
Kenneth J.Gerbino, 11-11-2008 -
“…the gold mining stocks have been beaten up badly for various
reasons that are now basically played out. Concurrently, dollar strength has
been based on two overriding circumstances and these are about finished as
well. This means a very positive environment is about to affect the gold and
silver mining stocks.” “These three reasons and the fact
the dollar needed some sort of rest from the continuing multi-year down trend
were why the dollar has been so strong while the Feds have been debasing it
beyond belief in the last few months. As the dollar became in demand for the
above reasons, gold which is denominated in dollars came down. The reasons
above have most likely played out. This means the dollar should resume it
weakness because when the trillions of new dollars that are being created
start circulating in the economy, inflation will return to the U.S. with a
vengeance.” “If you own gold and silver and legitimate gold
and silver mining companies, the above means you are in the right sector. You
do not have to make things anymore complicated than that as your investment
thesis.” “Commercial banks do not trust each others paper.
That is why the credit and commercial paper market is currently effectively
frozen. This is a crucial concept for gold. Commercial bankers and central
bankers have the same ethos, many times come from the same schools, study the
same bad economic text books, know and adhere to the same misguided economic
concepts. They think alike.” “…bankers know the dollar is
going to be debased dramatically in the future and gold cannot be
debased.” “The greatest mistake one can make is to think a
deflation is coming because houses and stock prices have collapsed. We are
entering one of the greatest inflationary periods in our
history.” kitco.com/ind/Gerbino/nov112008.html
What we just read above is really very
powerful stuff from an astute financial guru. Let’s repeat what I
believe Ken Gerbino’s most powerful statement from the above text.
“If you own…legitimate
[quality] gold and silver mining companies, the above means you are in the
right sector. You do not have to make things anymore complicated than that as
your investment thesis.” Kenneth J.Gerbino, 11-11-2008
Inflation is coming. Lots of it.
The Daily Reckoning, Bill Bonner, Dan
Denning, “…the quantity of money is increasing, but its velocity
is not. That's because the new money isn't getting into the hands of people
who are just itching to spend it. But it will soon enough. And when it does,
look for bond yields to rise and the great inflation to begin.” “We
think the Money Migration is the long-term transfer of the world's wealth
from the debt-based consumption economies of the West to the world's savers
and producers, roughly in the "East."
Again, I say…inflation is
coming. A lot of inflation. And inflation is the best scenario
for gold and silver mining stocks. But again, do not risk the milk
money. Speculate only with money you can afford to lose. Hang in
there with the gold stocks. Gold is still going to be around even when
all this present economic mess settles down in ten or so years. Gold
mining stocks just may be at the bottom of a life time. Opportunity is always about buying low. And the lower the better.
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We’ve just completed an article
recommending 4 gold stocks whose price has been driven to the basement. These
are quality mining companies with the gold in the ground. And their
market cap is less than the cash in the bank? These are the type of companies
to buy that have the potential to make a lot of money. Find out who
these 4 stocks are?
On Friday the bailout plan for the big
3 automakers began to fall apart.
All blame, of course, was shifted to
the unions for making too much money. There aren’t too many decent
paying middle class jobs left out there. There are very soon going to be a
lot less. A lot less. Maybe as a country we should start making a real
attempt to make manufacturing competitive in the United States. Probably too
late now any way.
The choice tomorrow is minimum wage or
higher than average wage. There will be very, very few middle class jobs
available to the majority. Actually, soon, there will not even be a
middle class. Just the haves
and have nots. No in between.
David Vaughn
Editor,
Gold Letter, Inc.
www.goldletterdv.com
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