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The World Gone Crazy and Your Gold Stocks
By: Kenneth Gerbino, Kenneth J. Gerbino & Company
-- Posted Sunday, 21 September 2008 | Digg This Article | Source: GoldSeek.com
http://news.goldseek.com/KennethGerbino/1222023600.php
Gold going up almost $90 on September 17th is not to be taken lightly. This is extremely unusual and bullish. The global financial system led by the United States investment banks, insurance companies and commercial banks are now in a precarious and dangerous situation with asset values and balance sheets suspect.
The bottom line is that the precious metal mining stocks with economic resources in the ground will rebound dramatically led by the larger producers.
Financial institutions with various types of commercial paper, interest rate certificates, and packaged loan or debt portfolios insured by derivatives or some other contractual form of IOU’s are now impossible to value or analyze. Here are the facts and my conclusions as where we are headed.
Financial Companies and Stock Markets
Looking at the AIG and Lehman Brothers balance sheets, it appears that the Feds and the TV guys could be off target by $450 billion. I took the short and long term investment assets that supposedly are loaded with toxic paper and simply decreased the value by a conservative 20%. Comparing these new asset values to the liabilities shows a $458 billion shortfall.
The above points to a possible $162 billion shortfall for Lehman and a $296 billion shortfall for AIG. This means that possibly in the next few weeks or months some other creditors (banks, insurance companies, investment banks) will have to write off hundreds of billions of assets they are carrying on their books (assets owed to them by Lehman or AIG). Bottom line: there is probably more bad news coming and the $85 billion from the Fed for the AIG bailout may be just the beginning of a flood of new money needed.
Reports state that AIG had also provided $400 billion of debt insurance to banks all over the world. How can AIG possibly honor even a small per cent of this commitment if some of these debts default? If some of this debt goes bad then these banks will be stuck with zero protection on the toxic loans they foolishly made. Will the Fed or foreign central banks with a deal with the Fed honor all this paper?
Reserve Fund, the nations oldest money market fund wrote off $785 million of Lehman paper as their Board declared these assets “worthless”
Citicorp in 1991 with just a 5-7% decrease in real estate values was almost technically bankrupt because of over-leverage. With real estate today down 15-30% depending on what area of the country you live in, it is hard to imagine that we will not see similar financial stress with more financial institutions.
Russia closed their stock and bond markets a few days ago for 24 hours due to a panic. Their stock market is down 54% in 60 days. The Hong Kong stock market is down to 19,327 from 32,000 last November. China’s Shanghai “A” Stock Market is down from 6,200 to 2,179 in the past 11 months. The Japanese Nikkei is at 11,920 from 17,300 last October. These are Friday,19 September closing prices.
Globally stocks were getting battered and central banks have been adding massive amounts of bail out money over the last three months (I lost track when it went over $400 billion) including $200 billion in “liquidity” in just the last two days. This is highly inflationary medium to long term but will cause stocks and gold to move higher in unison until inflation is rampant, then interest rates will rise dramatically and stocks will head down and gold will soar. Remember an OK economy and an OK stock market are not always bad for gold or gold stocks. In 1980 when gold roared to $850 the Dow Jones was up 13.7%. All this money being injected into the economy will be a “fix” and in the short term should make gold and the stock market more buoyant.
The Bad News Regarding the Government Solutions
1. The money supply (MZM – zero maturity or immediately available money) in the U.S. has already increased by $1 trillion in the past 14 months yet most commentators are fixated on M1 which is an obsolete measurement of money supply because money is swept from these M1 accounts every night into interest bearing money markets (not counted as M1). Therefore the so called monetary base is useless as an indication of the nation’s money supply. Because of this huge confusion people are worried about a “deflation” because M1 is going sideways. On the contrary, we are being flooded with money and because of the stress on Wall Street much more is coming and this will be very inflationary.
2. The bailout of the financial institutions Fannie, Freddie, AIG and the consolidation of investment banks like Merrill and probably Morgan Stanley into commercial banks will create institutions that cannot fail. Hence the entire professional hierarchy of these new giants will certainly lean towards investments and more financial gimmicks (some to be created in the future) as speculative as possible to make more year end bonuses. Top management who can now also make huge bonuses could care less as Uncle Sam will be there to bail them out. This is certainly a moral hazard concept that will cause taxpayers huge pain in the future.
3. China and India have both doubled their money supplies in just the last 5 years! I am expecting 10-15% annual inflation rates in both these countries for the next 3-4 years. This will have a dramatic positive effect on gold demand and prices and will dwarf the U.S. and European demand for gold.
4. The Inflation vs. Deflation debate is a debate between Knowledge and Stupidity. History and Fantasy. Understanding and Confusion. When a stock portfolio goes from $2 million to $1 million this is in fact a “deflated” value but this does not cause a deflation in the economy. Even with $10 trillion of stock market losses it has little effect on the general price level of goods and services in an economy. The crash of 1987 saw $15 trillion of stock and bond losses in the U.S. An historic loss of asset values at the time. Yet inflation in 1988 and 1989 averaged 3.2% and 4.3% respectively. There was no deflation. The same concept is true for real estate. Real Estate losses in 1990-91 were in the trillions and the inflation rates in 1990, 91, 92 averaged 4% annually. There was no deflation. There never is with paper money.
5. Do not confuse financial assets, real assets and money ….they are very different animals. The deflation fears are promoted by the banking establishment economists as an excuse to print more money. In a paper money system deflation is basically impossible. Yes, “deflated” prices of assets can take place but that is a market mechanism of asset prices and asset values and nothing to do with a deflation in the economy.
6. The great deflation and Depression in the U.S. in the 1930’s was caused by three factors. Treasury Secretary Mellon who was clueless on the theories and practices of money and credit thought that because the stock market was going up in the late twenties that the money supply would explode and we would have “inflation” so he instigated a horrendous margin increase to curb stock prices and liquidations then followed and got out of hand. He also raised taxes! On top of that the Federal Reserve actually drained money out of the banking system. This caused a panic and a true deflation. It was the work of government intervention. When Credit Anstalt (major Austrian bank) went under in May of 1931, it brought down many British and U.S. banks and started the banking crises of the 1930’s.
7. There will be no deflation. If your adviser or broker or newsletter writer ever mentions this word…send him this article and wise him/her up. Inflation is here to stay as prices have not gone down in this country in any year for the last 60 years despite the calls of the deflationists. During this time, despite market crashes, horrible recessions, and numerous real estate busts we have had no deflations. Paper money is inflationary and we are going to be flooded with more of it before the bailout of the global financial system is completed.
8. Nancy Pelosi (Speaker of the House) and Barney Frank (Chairman of the Banking Committee) want to have Congress handle the current financial crises. This is almost as bad as it gets. There is only a handful of men in Washington that understand honest monetary policy. Friend Congressman Ron Paul is one of the few. The Congressional solution will be to flood the country with even more money and this will take the heat off the Fed and Treasury for debasing the currency. They will socialize Wall Street and under the guise of protecting people give the bankers carte blanche to speculate, take huge bonuses and never have to worry about losses as the Fed will bail them out. The real hidden price of all this is the destruction of the middle and lower income earners standard of living. There is no free lunch.
9. Merrill Lynch every year does a very extensive and well known Global Survey of Money Managers. The results just announced are so off the wall that it made me add another $1,000 an ounce to my gold price projection. 7 out of 10 managers expect lower inflation in the next 12 months. This means that the so called best and brightest managing trillions of dollars have bought into the Great Lie.
10. The Great Lie: For almost 75 years the Fed and the Treasury have promoted the following concept. Inflation is caused by a strong economy. This, of course, is a smokescreen for the truth that all inflations are caused by an increase in money supply. But with this stable datum that a strong economy causes inflation, the powers that be always had something else to blame for inflation. Money managers therefore thinking that if a strong economy causes inflation then a slow economy or a recession will cause less inflation. Therefore they reason “why own gold or the gold stocks”. These were some of the guys selling the gold shares the last 3-4 months. They are so wrong.
11. Ironically there are plenty of institutional money managers and investors that buy gold because they think a massive deflation will take place and money will disappear, therefore making gold a good hedge as a substitute currency. On the other hand inflation minded investors buy gold to protect themselves from higher prices. Gold is actually benefitting from the Great Lie. Unfortunately, the man in the street is not as inflation from more paper money ruins his take home pay purchasing power.
The Gold Mining Stocks
The last six months have seen total devastation of the junior and developmental precious metal mining stocks as well as huge share losses for the majors. This was caused by a series of events that added up to what can only be described as a once in lifetime phenomena when one considers gold at $800 and silver above $10. The events are listed below.
Thousands of new mining companies came into existence from 2003 to 2008 taking investment dollars for these uneconomic and speculative ventures from the normal pool of gold bug or money manager investors.
A gold ETF is formed and billions of dollars that normally would be invested in gold mining companies was diverted to bullion.
Gold goes above the old high of $850 and new investors, momentum players and hedge funds pile in with even more money, many with margin leverage and buy anything in sight.
Insiders and promoters of speculative companies issue thousands of press releases with bullish news that is mostly pie in the sky and sell their shares into these press releases - shares that they paid pennies for.
Jim Dines turns the whole world onto the uranium stocks which go ballistic and many gold bugs sell gold shares and buy uranium stocks. Dines call on uranium was clairvoyant and he came in at the exact bottom. Nevertheless money is diverted from the gold and silver mining shares.
Mining promoters jump on the uranium bandwagon and create approximately 300 new uranium companies that siphon off even more gold bug and gold managers assets.
Gold and uranium prices have a normal pullback and people who came in at the top start seeing erosion in their portfolios and start to sell.
Commodity prices go up dramatically and also have a natural pullback and pundits now are crying “deflation” totally ignoring the fact that prices are still up over 100% and more for almost every commodity in the world over the last three years.
Many investors and hedge funds pile into the gold stocks and gold during the October 2007 – March 2008 high range. Prices start turning down in sympathy with gold and the momentum players with huge leverage and funds start dumping.
Gold corrects from above $1,000 to $800 and then below and the “deflationists” convince the Street that because of all the real estate sub prime problems and mortgage problems that deflation is coming as well as a recession and gold will have to go down even further. Some pundits talk about $500 gold. More selling by investors.
The summer rolls around and the Canadians are fishing, hiking and camping and no where to be found. The Europeans are on vacation and closed down for the summer. There are no bids for junior stocks. A 5,000 share sell order for a $2.00 mining stock knocks the price down 20 cents and wipes out millions of dollars of market value. Selling begets more selling.
Stock markets globally are going down and people are liquidating blue chips as well as major gold stocks.
Insiders of the junior mining companies in Canada are trying to sell some stock to pay for their kids tuitions and they are now part of the problem. Note, that inspections of junior mining companies income statements show these entrepreneurs usually take very modest salaries and justifiably sell stock to make ends meet. The “moose pasture promoters” do this with malicious intent and rip off investors.
Insiders are now seeing their stocks collapse and the market makers in Canada and London have literally headed for the hills. Insiders decide to let the market take the stocks down to wherever they are going and will enjoy reissuing options to themselves and management at much lower prices and wait for the next upturn to cash in.
Real assets-in-the-ground juniors and quality development companies are trashed with the thousands of “moose pasture” stocks that deserved to be zero in the first place.
Investors who are gold bugs and visit all the usual gold sites are disgusted and now in fear. Their spouses are shocked at how bad these investments appear. Tough times on the homefront.
Stock markets are in turmoil, the dollar is being debased by massive money supply infusions, trade deficits, budget deficits, etc. and yet gold and the gold stocks continue to go down. The impossible is happening.
The gold stocks are so oversold that some of the sophisticated medium to short term technical indicators are the most oversold in history. My favorite NYSE gold stock that produces gold for zero cost (that’s $0.00) because of copper credits is selling at 6 times next years cash flow. It is below $10. I expect it to reach $40 if gold just stays at $900. Unbelievable.
It seems like it is all over for the gold bugs…..almost.
Wednesday, September 17, 2008 arrives and gold soars $90 in normal and aftermarket trading in New York. The bell has rung. The great bull market to end all bull markets in gold has resumed.
What is Next
Current gold buyers are most likely split between investors that believe a horrible deflation is coming and money will be wiped out so gold should be a good substitute and other investors correctly understand that trillions of new dollars and foreign currencies are going to flood world economies to bail out the institutions and this will be very inflationary.
Both sides will have great conviction and this $90 move underlines those thoughts. Therefore, with the financial turmoil of this week gold and the quality mining stocks should move much higher with or without the stock market.
Moose pasture stocks will not recover….ever. Sell them, take your tax losses and buy companies with real resources and reserves.
The recent bail outs announced this week have turned Wall Street into Sweden. The large financial stocks are now backed by and socialized by Uncle Sam. This will create even more problems in the future. A list of the negatives on this is very long and would include such negatives as bureaucrats deciding on investment allocations, political favors used by politicians to get funding for pork barrel projects in their districts and red tape to choke a horse.
Socialism is a failure, but capitalism with a paper money system and a central bank manipulating interest rates, foreign exchange values and creating money and credit out of thin air is just as bad. Gold will now go much higher because of all this but it is a sad commentary on the banking elite and government fools that are responsible for our present condition.
For more articles on stocks, the economy and gold visit our website at http://www.kengerbino.com
SGCP - Sierra Gold Corp. - http://www.sierragoldcorp.com - This is a very solid junior gold mining company in Sierra Leone. Currently trading at .006 with 222 Mil outstanding.
They have just turned the corner from exploration to production. At this time, they have many projects going on simultaneously, and are going to take full advantage of the mining season. They do relatively inexpensive river dredging in historically known gold areas.
They are also into diamonds, but gold is the primary focus.
I have been assured by the company recently that they will not be diluting to fund additional equipment purchases. This is not a pump and dump in any way.
Recently they have increased transparency, added a new web site with updated financial info and current projects.
The CEO Doug has been traveling to Sierra Leone for 5 years now earning the trust of the locals and Paramount Chiefs. He employs and feeds hundreds of the locals with separate farming activities and animal projects.
I expect this to really make some nice moves over the next few months. If you have any questions, the board is http://investorshub.advfn.com/boards/board.aspx?board_id=6600
Please take a look, you might like what you see :)
For you Technical guys, heres a chart:
Government Debt Rescue a Boon for Gold!
by Sean Brodrick 09-24-08
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2318
Treasury Secretary Paulson and Congress are hammering out details of the government's rescue plan for financial institutions, and we don't know what final impact it will have on the debt crisis. But I can tell you one thing — it's going to drive gold prices higher.
In this plan, the government is squirting out hundreds of billions of dollars through a fire hose. That is inherently inflationary and should pump up the price of gold.
And then there's the whole question as to whether this mega-bailout is going to work or not. Martin told you his doubts on Monday. I have my doubts, too. After all, here's just a partial laundry list of all the schemes the government has hatched in recent months to "save" the market ...
The Bear Stearns takeover by JP Morgan, which was midwifed by the federal government (cost to taxpayers: $29 billion)
Special Fed liquidity programs including the Term Lending Facility and Term Auction Facility ($200 billion)
The Economic Stimulus package ($168 billion)
The Federal Housing Administration's scheme to refinance failing mortgages into new, reduced-principal loans with a federal guarantee ($300 billion)
The bailout for Fannie & Freddie (up to $200 billion)
The bailout for AIG ($85 billion)
Last week's decision to block short-selling of financial stocks
The insurance program for money market funds (potentially $50 billion from the Great Depression era Exchange Stabilization Fund)
Direct Treasury purchases of mortgage-backed securities ($10 billion)
Another $300 billion injected into global credit markets on Friday
Add in the $700 billion proposed for the current bank bailout plan, $87 billion in repayments to JP Morgan Chase for providing financing to underpin trades with bankrupt investment bank Lehman Brothers, etc., etc., and I tally up over $1.8 TRILLION ... so far.
A flood of dollars into the system lowers the value of dollars. It's simple supply and demand. Since commodities are priced in dollars, as the greenback goes lower, they usually go higher. And gold is an obvious play for a falling dollar.
Flooding the financial system with billions of dollars will only deflate the value of the greenback — and boost the price of gold.
Some of these programs and ad-hoc spending sprees were more successful than others, but any short-term rallies they caused in the stock market didn't last for long.
Oh, and there's more to come. We still haven't gotten to the billions of dollars in special loans proposed for GM and Ford, as well as the next new economic stimulus package which may be tied in with the bank bailout — a second economic stimulus that Treasury Secretary Paulson ruled out as recently as May.
If you think I'm being hard on Secretary Paulson, remember that he was in charge at Goldman Sachs when that company (among others) went crazy for bad debt that is now impossible to value properly. He's been in office a year and a half, and now — SUDDENLY! URGENTLY! — he needs us to approve his new bailout plan without time for deep discussion or changes ... to give his friends on Wall Street a check for $700 billion without a second thought.
I mean, just to focus on the cost of the current bailout plan: $700 billion in new U.S. debt is an additional $5,072 added to the debt burden of every U.S taxpayer. Plus it's ...
Roughly what the U.S. has spent so far in direct costs on the entire Iraq war.
As much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services.
Three and a half times what the S&L crisis cost taxpayers ($126 billion back then, $200 billion in today's dollars).
All this and it still might not fix the problem?! That means the U.S. government might have to spend even more money ... a lot more! Can you see why I think gold is looking so good?
And what if Paulson's plan doesn't work? He and other Wall Street types have been dropping hints that we averted disaster at the last minute. Maybe they're bluffing, but maybe they're not. What could happen to the U.S. dollar in a full-blown bank solvency crisis? Could it do a lot worse than it is now? Probably!
Just take a look at a recent chart of the U.S. Dollar Index and you'll see that it has broken its short-term uptrend. If this crisis gets worse ... if the Treasury opens up the floodgates on the money supply ... if the bailout plan fails ... all bets are off.
And that's when you want to own gold.
A Steep Correction Lays a Base For The Next Leg Higher
We saw gold prices crushed in recent months. And this came despite bullish fundamentals. I'm talking about facts like ...
Global gold mine production continues to go down ... and should decrease by 2% in 2007-2008.
So far, in 2008, we have seen the least gold sales by the central banks since 1985. That means less gold supply coming on the market.
The price of mining gold is going up ... from approximately $395 per ounce in 2007 to $458 in the second quarter of 2008, according to the World Gold Council. This puts a base under the price of gold, because if gold gets too cheap, mines close down and new projects aren't pursued.
One of the biggest drivers of gold now is gold ETFs. In fact, the world's biggest gold ETF, the SPDR Gold Trust (GLD), holds more gold than many countries. Its gold hoard rose by 24.5 metric tonnes on September 19th, and it now holds 679.60 metric tonnes.
It's not alone. For the week ending Friday, all of the gold ETFs sponsored by the World Gold Council showed a collective increase of 65.41 tonnes to their gold holdings, totaling 834.54 tonnes worth $23.3 billion.
And sure enough, as you can see from this chart, the more that ETFs stock up on gold, the higher the price of gold goes.
I'm thinking that the smart money is betting on a big rise in gold. This pullback in gold has created a base for its next leg higher. Don't get left behind.
What You Can Do
This is one of those times when you might want to have some physical gold and silver on hand. I'm not saying a lot ... but I keep some just in case, and it lets me sleep at night.
And the GLD is a great way to buy gold without having to store it. If you don't have some in your portfolio, consider adding some now. Gold should be part of a well-balanced portfolio anyway. And the troubles for banks, brokers and the market in general probably aren't over ... not by a long shot. After all, as Shakespeare said: "When troubles come, they come not single spies, but in battalions."
When troubles come, make sure you have some precious metals handy and in your portfolio.
Yours for trading profits,
Sean
An Open Letter to the U.S. Congress Regarding the Current Financial Crisis
John P. Hussman, Ph.D.
September 22, 2008
http://www.hussmanfunds.com/wmc/wmc080922.htm
In 2006, the president of the Federal Reserve Bank of St. Louis noted “Everyone knows that a policy of bailouts will increase their number.” This week, Congress is being asked to hastily consider a monstrous bailout plan on a scale nearly equivalent to the existing balance sheet of the Federal Reserve.
As an economist and investment manager, I am concerned that the plan advocated by Treasury is essentially a plan to bail out the bondholders of financial institutions that made bad lending decisions, with little help to homeowners that are actually in financial distress. It is difficult to believe that the U.S. government is contemplating taking on the bad assets of these institutions at probable taxpayer loss and effectively immunizing the bondholders (and shareholders) of these companies.
While it is certainly in the public interest to avoid the dislocations that would result from a disorderly failure of highly interconnected financial institutions, there are better ways for public funds to accomplish this, other than by protecting corporate bondholders while homeowners remain in distress.
Consider a simplified balance sheet of a typical investment bank:
Good assets: $95
Assets gone bad: $5
TOTAL ASSETS: $100
Liabilities to customers/counterparties: $80
Debt to bondholders of company: $17
Shareholder equity: $3
TOTAL LIABILITIES AND EQUITY: $100
Now, as these bad assets get written off, shareholder equity is also reduced. What has happened in recent months is that this equity has become insufficient, so that the company technically becomes insolvent provided that the bondholders have to be paid off:
Good assets: $95
Assets gone bad (written off): $0
TOTAL ASSETS: $95
Liabilities to customers/counterparties: $80
Debt to bondholders of company: $17
Shareholder equity: ($2)
TOTAL LIABILITIES AND EQUITY: $95
These institutions are not failing because 95% of the assets have gone bad. They are failing because 5% of the assets have gone bad and they over-stretched their capital. At the heart of the problem is “gross leverage” – the ratio of total assets taken on by the company to its shareholder equity. The sequence of failures we've observed in recent months, starting with Bear Stearns, has followed almost exactly in order of their gross leverage multiples. After Bear Stearns, Fannie Mae, and Freddie Mac went into crisis, Lehman and Merrill Lynch followed. Morgan Stanley, and Hank Paulson's former employer, Goldman Sachs, remain the most leveraged companies on Wall Street, with gross leverage multiples above 20.
Look at the insolvent balance sheet again. The appropriate solution is not for the government to replace the bad assets with public money, but rather for the government to execute a receivership of the failed institution and immediately conduct a “whole bank” sale – selling the bank's assets and liabilities as a package, but ex the debt to bondholders, which preserves the ongoing business without loss to customers and counterparties, wipes out shareholder equity, and gives bondholders partial (perhaps even nearly complete) recovery with the proceeds.
The key is to recognize that for nearly all of the institutions currently at risk of failure, there exists a cushion of bondholder capital sufficient to absorb all probable losses, without any need for the public to bear the cost.
For example, consider Morgan Stanley's balance sheet as of 8/31/08. Total assets were $988.8 billion, with shareholder equity (including junior subordinated debt) of $42.1 billion, for a gross leverage ratio of 23.5. However, the company also has approximately $200 billion in long-term debt to its bondholders, primarily consisting of senior debt with an average maturity of about 6 years. Why on earth would Congress put the U.S. public behind these bondholders?
The stockholders and bondholders of the company itself should be the first to bear losses, not the public. That is the essence of what a free and fair market, and a responsible government would enforce. The investors in the companies that produced the losses should be accountable for them, and the customers and counterparties should be protected.
The case of Fannie Mae and Freddie Mac was special in that government had already provided an implicit guarantee to their bondholders, so that bailout couldn't have been done otherwise without harming the good faith and credit of the government, but it's absurd to tell Wall Street “send us your poor and your tired assets, and we will tend to them.” The gains in financial stocks we have observed in the past two days reflects money that those firms expect to be taken out of the public pocket.
A further difficulty with the Treasury plan is that it does little to actually reliquify banks that are at risk. To the contrary, the process of reverse-auctioning bad mortgage debt will provide for "price discovery" about what these assets are actually worth, most likely forcing other institutions to write down assets that are still held on the books at unrealistically high values. As a result, we may observe an increase, rather than a decrease, in the number of financial institutions having insufficient capital.
Replacing the bad assets on the balance sheet with cash, at the market value of those bad assets, may improve the quality of the balance sheet, but does nothing to increase the capital on that balance sheet or the ability of financial institutions to lend. If the objective is to prevent these institutions from bankruptcy or liquidation, or to increase their ongoing lending capacity, then the government requires a method to provide more capital. It is essential that such efforts to "reliquify" the financial system do not place the public behind the bondholders in the event that the institution fails anyway. This might be accomplished by lending to these institutions as a hybrid form of subordinated and senior debt, and altering regulatory capital requirements to allow such debt to be included as capital. In the event of bankruptcy, the government's claims would be placed behind customers and counterparties, but before the company's bondholders. In any event, rather than making small changes around the edges of Treasury's vague and costly proposal, Congress should focus its attention on approaches that will provide capital to viable institutions and expedite the assumption and "whole bank" sale of failing ones.
Among the obstacles to the efficient management of this crisis has been the growth in recent years of the credit default swap (CDS) market. These swaps are essentially insurance policies that pay the holder in the event that an institution's bonds fail. The large CDS market makes it more likely that the failure of one institution will infect another. In many cases the notional value covered by such swaps exceeds the value of the debt of the underlying companies, suggesting that the CDS market is being used for speculation in the same way that one might attempt to purchase life insurance on an unrelated individual. Both credit default swaps and short sales should be allowed for bona-fide hedging purposes when an investor has a related asset that is at risk. However, it is appropriate for regulators to curtail the speculative use of credit default swaps and short sales relating to financial institutions.
With regard to assisting homeowners, purchasing the bad mortgage securities from financial institutions will do nothing to help those homeowners because it does nothing to alter the cash flows expected of them. Congress will be a far better steward of public funds by offering distressed homeowners what amounts to a refinancing, coupled with a partial surrender of future appreciation.
In practice, the homeowner would default on the existing mortgage, but the government would purchase the foreclosed property at an amount near existing foreclosure recovery rates (presently about 50% of mortgage face value). The government would then sell that home back to the owner with a zero-equity mortgage, allowing individuals to keep their homes. Importantly, there would be an additional, marketable lien placed on the property itself in the form of what might be called a “Property Appreciation Receipt” (PAR), which would be provided to the original mortgage lender. Though it would accrue no interest, it would provide a claim to the original lender on any appreciation in the value of the home up to the difference between the foreclosure proceeds and the original mortgage amount. Note that the PAR would only become relevant at the point that the government was fully repaid.
For example, consider a homeowner with a $300,000 mortgage balance on a home now worth less than the mortgage balance itself. The government would buy the foreclosed property at say, $200,000 and mortgage it to the existing homeowner. The original lender would receive $200,000, plus a Property Appreciation Receipt (PAR), giving it a claim on $100,000 of any future appreciation of the property. If the homeowner was to sell the property later for, say, $250,000, the owner of the PAR would receive $50,000, and there would be a remaining lien on future appreciation of that same property, which would be assumed by the new buyer. If the next buyer sold the home for $250,000, no funds would be due to the PAR holder, but if it was sold for $275,000, another $25,000 would be payable. At any point the home was to sell for more than $300,000, the PAR would be fully repaid and there would be no further claim.
Some provision would have to be made for the appreciation of an unsold home, but that detail could be accomplished through some form of equity extraction refinancing. To account for time value, the claim on future appreciation could be increased at a small rate of interest. Though the credit impact of a mortgage default would likely be sufficient to dissuade solvent homeowners from making inappropriate use of the program, the government could impose additional costs or eligibility requirements to avoid such risks.
In summary, the Treasury proposal to address current financial difficulties places corporate bondholders ahead of the public, rewards irresponsible risk-taking, and sets a precedent for future bailouts. Moreover, we know from a long history of economic experience across countries that a major expansion of government liabilities is invariably followed by multi-year periods of extremely high inflation, particularly when it is not matched by a similar expansion of economic production. Such inflation would initially be modest because of the current weakness in the economy, but could pose unusual challenges to the United States in the coming years.
Congress can benefit the American public by maintaining a focus on responsibly assisting homeowners in distress rather than defending the stockholders and bondholders of overleveraged financial companies. It is essential to recognize that the failure of these companies need not result in “financial meltdown” provided that the “good bank” representing the vast majority of assets and liabilities is cut away, protecting customers and counterparties, so that the losses are properly borne out of the capital base of the companies that incurred them.
Again, everyone knows that a policy of bailouts will increase their number. By choosing who bears the losses for irresponsible decisions at these companies, Congress will also choose the scope of the bailouts that follow.
Sincerely,
John P. Hussman, Ph.D.
President, Hussman Investment Trust
No Bailout May Be Big Enough to Bring a Quick End to This Bear Market
by Sharon A. Daniels 09-22-08
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2302
To Congress: Please Do Not Spread the Panic
by Martin D. Weiss, Ph.D. 09-22-08
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2298
Warning: Nasty Surprises Coming Next Week
by Martin D. Weiss, Ph.D.
09-21-08
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2294
An Analysis of Secular Bear Markets and Secular Bull Markets since 1900
http://www.amateur-investor.net/Secular_Bear_Markets_vs_Secular%20Bull_Markets.htm
THE COMING BULL MARKET IN GOLD STOCKS
by Frank Barbera, CMT
April 14, 2005
http://www.financialsense.com/editorials/barbera/2005/0414.html
NOTE: Frank includes great historical perspective for a gold bull market.
The costs and unintended consequences of all these bailouts
by Mike Larson 09-12-08
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2222
Back on August 1, I asked the question: "When is enough, enough?" I wrote:
It seems like every week we get another borrower bailout initiative.
Or another multi-billion dollar package of legislation.
Or another whiz-bang Federal Reserve program that keeps U.S. banks and brokers on the dole for a few more months.
Or more recently, a blatantly transparent attempt by the Securities and Exchange Commission to squeeze short-sellers and drive stock prices higher ... but only for a select group of 19 financial companies.
And things have only gotten dicier since then! The number of companies and executives lining up at the Fed's doorstep ... or the Treasury's ... or Congress' ... looking for bailouts gets longer every day.
The U.S. auto industry, for example, is panhandling in D.C. for $50 billion or more in federally subsidized loans to revamp their factories and product lines to produce more fuel-efficient cars.
Several banks are essentially living off the Fed, with borrowing at the discount window surging to an average of $19 billion per day in the week ended September 3. That's the highest in U.S. history and a huge increase from $1.1 billion a year ago.
And of course, we just saw Treasury bailout Fannie Mae and Freddie Mac.
Bailouts of the week. The cost: Nobody knows!
According to the terms of the deal:
The government will place the two Government Sponsored Enterprises into conservatorship, essentially taking them over.
Common and preferred share dividends will be eliminated, and the government will buy a new class of preferred shares. This has left the original shares with little value.
The senior and subordinated debt securities of Fannie and Freddie will be backed.
The Treasury is going to open another secured, short-term funding facility that will be accessible to Fannie, Freddie, and the 12 Federal Home Loan Banks that support various private banking activities.
The Treasury has also announced plans to buy mortgage backed securities in the open market. This is an attempt to manipulate the market in such a way as to drive down consumer mortgage rates.
But what's the cost of these bailouts? Nobody knows!
Now here's the thing: With each bailout, we the American taxpayers are told, this is in the best interest of the country. And with each bailout, we're told these bailouts are necessary to save the financial system.
Fed Chairman Bernanke paints a gloomy picture for financials.
Heck, if you think we've been bearish about the prospects for the financials, get a load of what Fed Chairman Bernanke had to say a few weeks ago about what would have happened if the Fed had let Bear Stearns collapse ...
"Although not an extraordinarily large company by many metrics, Bear Stearns was deeply involved in a number of critical markets, including (as I have noted) markets for short-term secured funding as well as those for over-the-counter (OTC) derivatives. One of our concerns was that the infrastructures of those markets and the risk- and liquidity-management practices of market participants would not be adequate to deal in an orderly way with the collapse of a major counterparty.
"With financial conditions already quite fragile, the sudden, unanticipated failure of Bear Stearns would have led to a sharp unwinding of positions in those markets that could have severely shaken the confidence of market participants. The company's failure could also have cast doubt on the financial conditions of some of Bear Stearns's many counterparties or of companies with similar businesses and funding practices, impairing the ability of those firms to meet their funding needs or to carry out normal transactions.
"As more firms lost access to funding, the vicious circle of forced selling, increased volatility, and higher haircuts and margin calls that was already well advanced at the time would likely have intensified. The broader economy could hardly have remained immune from such severe financial disruptions."
I happen to agree with him. But how come the shareholders of Bear ended up getting $10 out of the deal? How come the bondholders didn't get a big haircut?
More importantly, we have no idea what the Bear bailout will ultimately cost. The same goes for the Fannie Mae and Freddie Mac bailout. There literally is no precise, accurate estimate of the cost to taxpayers now or in the future.
3 important bailout questions people aren't asking
There are three more important questions people should be asking too:
If these firms truly are "Too Big to Fail," how in the heck did the government let them get that way?
Where the heck were the regulators when these chowderheads were piling up so much counterparty risk on derivatives and complex securities, that their failures would force the government's hand?
Why were they allowed to make tens of billions of dollars financing crummy subprime mortgages ... loan huge amounts of money against overpriced commercial real estate ... take on gigantic risk financing stupid leverage buyouts ... during the boom times, then come crying to the Fed and Treasury when things head south?
It's enough to make your head spin.
I have another problem with all of these bailouts, too: If you keep weak institutions alive on the dole (by allowing them to keep swapping crummy assets to the Fed for Treasuries ... allowing them to keep rolling over short-term loans at the Fed to ensure liquidity, if not solvency ... and so on), you just make it harder for the stronger institutions to do business.
What do I mean? Go to Bankrate.com when you have a minute and look up rates on Certificates of Deposit. Or look at the ads in your local newspaper. Who is offering the highest rates? Generally speaking, it's the banks that are in the most trouble.
Bankrate showed a 1-year CD from Washington Mutual paying an Annual Percentage Yield of 5% yesterday. Washington Mutual is loaded down with bad mortgage debt. Stock market investors are so concerned, in fact, that they have driven WM shares down 86% year-to-date to around $2! Its main bank subsidiary has a "D+" Financial Strength Rating from TheStreet.com — fairly low on the A to F scale.
Next in line is Corus Bank of Chicago, offering a 4.6% APY. This institution was a huge lender to condominium developers and converters. It has significant exposure to the markets that experienced the biggest real estate bubbles — Florida, California, Las Vegas, and so on. Corus merits a "D" rating from TheStreet.com.
Troubled banks like these are paying so much for consumer deposits because other avenues of fundraising have been shut down. The problem is, as they offer higher and higher yields, it siphons deposits from other institutions that pay less. That forces even healthy banks to pay more for money, pressuring THEIR profitability.
In other words, it's bad enough that propping up weak institutions sends a bad message to the market — namely, that you can take huge risks during the good times and keep all that profit, then get bailed out during the bad. It also carries other unintended consequences.
Speaking of unintended consequences, the Fannie Mae and Freddie Mac bailout allows Treasury to directly intervene in the Mortgage Backed Securities market. It can buy up however many MBS it wants, whenever it wants, with the goal of driving down mortgage rates. Trading in the MBS market determines how much you and I pay for mortgages; when MBS yields go down, so do the mortgage rates we pay.
That part of the Fannie and Freddie bailout program incited a big rally in MBS. Thirty-year fixed rates have dropped about a half a percentage point as a result. Sounds good, right?
But here's the thing: I have never, ever seen such direct manipulation of a freely traded market by the government. You literally have the government saying: "Private investors have it 'wrong.' They don't know how MBS should be priced. We do. And we're going to manipulate this market as we see fit."
What kind of precedent is this setting? What does it say about our supposedly "free" markets — you know, the ones we keep being told are the envy of the world? And not to sound all "tin foil hat" here, but what if one day Secretary Paulson woke up and said, "You know what? Stocks are too cheap. Let's buy some S&P futures!" Is that really the direction we want to be headed in?
Where we go from here
I said a long time ago that my fear was we'd end up in a Japan-like situation — facing a long, drawn out period of economic weakness. I got some pushback there. People argued that we were different ... that America dealt with its economic problems quickly ... that we wouldn't just prop up so-called "zombie" companies for quarters or years on end, and instead let them fail. That, in turn, would let the stronger companies survive and thrive.
But look at what has happened in the past year and ask yourself: "Is that really true anymore?"
I think a case can be made that we're sacrificing the long-term principles (free markets, unfettered capitalism) that make America great just to avoid short-term pain. I also think you can make an argument that all these moves by the Fed, the Treasury, and Congress could be prolonging the crisis, rather than solving it.
So I really hope the politicians in Washington ... the big-wigs on Wall Street ... and the policymakers at the Fed and in Congress do some soul searching here. I really hope they start thinking more about the long term. And frankly, I really hope they just start letting some weaker companies fail, so that the rest of America can get back to business.
Until next time,
Mike
Battered gold may have finally hit bottom
After falling below $750, metal could rebound to $900 an ounce, analysts say
By Moming Zhou, MarketWatch
http://tinyurl.com/3vpoc2
Last update: 3:21 p.m. EDT Sept. 11, 2008
NEW YORK (MarketWatch) -- Gold futures, suffering from the longest losing streak in eight years, dropped below $750 an ounce Thursday for the first time in nearly a year -- and analysts say the price of the precious metal may have finally bottomed.
"Gold prices might already be trading at oversold levels," wrote Tobias Merath, head of commodity research at Credit Suisse, in a note released Thursday. "Fundamentals still speak in favor of a recovery to $900 or slightly higher in the next few months."
Gold for December delivery fell $17, or 2.2%, to close at $745.50 an ounce on the Comex division of the New York Mercantile Exchange Thursday, the first time the metal closed below $750 since last October. After market closed, it moved higher in electronic trading. See Metals Stocks.
Gold hasn't recorded a single upward session this month and it has fallen more than $90 in the nine trading days since Aug. 28. In the previous month, the precious metal lost $89.20, the biggest monthly loss since at least 1984. The precious metal is now more than $250 lower than its record high above $1,000 hit in March.
"An important low is at hand and while some base building will be needed, we'll be above $800 again" before the end of the year, said Peter Grandich, editor of the Grandich Letter.
Investor demand for physical gold is still strong, said Jeffrey Christian, managing direct of commodities consultancy CPM Group. Demand in markets such as Mumbai and Dubai have held up well.
"Investors in physical metal appear to be taking the drop in prices as an opportunity to buy more metal at lower prices," he said.
On the gold ETF side, there has been only marginal liquidation of gold ETF holdings -- about 1 million ounces over the past five weeks, according to Christian's calculations.
In comparison, open interest on the Comex, or total futures contract outstanding, has dropped 63,684 contracts in the same period, or about 6.4 million ounces, according to data from the Commodities Futures Trading Commission.
Dollar pushes down commodities
Gold is moving broadly in line with other commodities and broadly in an inverse pattern with the dollar, Christian said.
Gold isn't the only commodity that has suffered losses as the dollar rallied. Crude has dropped almost $50 from its record high and closed near the $100-a-barrel psychological level Thursday. Corn was trading at the lowest in more than one month.
In the currencies market, the euro Thursday broke through its psychologically important level of $1.40. The dollar is also trading near its strongest level against the British pound in more than two years. See Currencies.
Historically, dollar-denominated gold prices tend to move in the opposite direction of the greenback. A stronger greenback tends to push down gold prices as it makes gold less appealing as an alternative investment.
"We are experiencing a massive hedge fund panic into the dollar, and that hurts gold," said Ned Schmidt, editor of the Value View Gold Report.
But a further sharp appreciation of the dollar is unlikely given the problems in the U.S. financial system, said Credit Suisse's Merath.
The U.S. financial industry witnessed the most dramatic change in decades when the Treasury Department announced over the weekend that the government will take over Fannie Mae and Freddie Mac, the home mortgage loan giants. Shares of the two firms plunged to below $1 after the announcement. See full story.
The government's move is bearish to gold in the short term but bullish in the long term, said Ed Bugos, editor of Gold & Options Trader, a newsletter published by Agora Financial.
"In the short term it reduces the dollar's risk premium and boosts the debt markets," said Bugos. "In the long term, it confirms the arguments gold bugs have been making about a government that creates crises through intervention then adds more regulation and intervention in the next crisis."
However, gold could still fall further in the short term, some analysts said.
"There is still a realistic chance of having gold prices try for the $640-$680 range in the not so distant future," said Jon Nadler, senior analyst at Kitco Bullion Dealers. "There remains a huge amount of damage that needs repair before confidence returns."
Moming Zhou is a MarketWatch reporter, based in San Francisco.
The World as We See It
By: Bud Conrad, Casey Research LLC
-- Posted Thursday, 4 September 2008 Source: GoldSeek.com
4 reasons why this may be the worst crisis since the 1930s – and 4 projections for what’s going to happen
http://news.goldseek.com/BudConrad/1220542620.php
Eric the Fed: Jobless rate may hit 6 percent
No upturn in sight
By Jay Fitzgerald
Thursday, September 4, 2008
Boston Herald General Economics Reporter
http://www.bostonherald.com/business/general/view.bg?articleid=1116877
Jay Fitzgerald has been a journalist and blogger for years. He's now the general economics reporter for the Boston Herald.
The nation’s economy isn’t out of the woods yet, Federal Reserve Bank of Boston president Eric Rosengren warned yesterday.
Despite unexpected economic growth in the second quarter, the U.S. economy is still hobbled by a credit crunch as severe as the one seen in the early 1990s, which could cause the jobless rate to rise above 6 percent in coming months, Rosengren said yesterday.
Recent Fed action and tax rebates helped prevent an even worse situation, Rosengren said in a speech yesterday before the Greater Manchester Chamber of Commerce in New Hampshire.
But the financial system’s woes, caused by the recent subprime-mortgage meltdown, are now spreading into other financial sectors, reducing loans to businesses and consumers, he said.
Prime, home-equity and construction loans are all feeling the credit crunch, Rosengren said.
“The tightening (of lending) already appears to be more widespread than it was during the early 1990s,” when the economy was reeling from a recession, Rosengren said.
Rosengren, who once thought the economy would emerge from the current turmoil in early fall, now believes the nation’s financial system won’t recover until the end of the year.
The nation’s jobless rate, now at 5.7 percent, could rise above 6 percent, for a net loss of two million jobs since a year ago, he said.
Rosengren’s speech came soon after the European Union announced that its 15-nation members collectively experienced a 0.2 percent contraction in their economies, indicating that global economic growth was slowing.
The U.S. economy grew by nearly 2 percent in the second quarter, surprising many economists.
But Rosengren said yesterday that probably won’t repeat itself in the second half of the year.
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How High Leverage Has Brought Down the Whole Banking Industry
Thomas Tan
Posted Jul 28, 2008
http://www.321gold.com/editorials/tan/tan072808.html
The peg precipice
Eleven years after the Asian financial meltdown, economists warn of another possible currency crisis
ECONOMICS REPORTER; hscoffield@globeandmail.com
July 23, 2008 at 6:36 AM EDT
http://www.reportonbusiness.com/servlet/story/RTGAM.20080723.wrcurrency0723/BNStory/Business/home
OTTAWA — Inflation control measures in the Middle East are almost as rampant as inflation itself these days.
Qatar just froze the price of steel and cement, and extended a diesel subsidy. Bahrain is spending more than a billion dollars a year to subsidize food and fuel. The mainly foreign construction workers in United Arab Emirates have launched strikes and riots as they watch the value of their savings erode.
Gulf countries are swimming in oil wealth but drowning in inflation - caused in large part by their own unrestrained consumer demand, and their insistence on hanging on to fixed exchange rates, analysts say.
Now, there's a growing fear among the world's opinion leaders that emerging market countries' last-ditch attempts to stifle inflation are akin to sticking a finger in the hole of a leaky dam.
Eleven years after the Asian financial crisis toppled currencies and wreaked havoc in Asia, Latin America, Russia and parts of the North American economy, analysts are again wondering whether the world is on the verge of another currency crisis - this time starting with the U.S. dollar.
The fear is that the inflation dam in emerging markets will break, prompting a quick abandonment of the U.S. dollar as a currency peg and reserve currency - an event that would be destabilizing at the best of times, but would be alarming in an era when the global economy is already dealing with soaring prices, a slowing U.S. economy and a credit crunch. "If you had a big shift in the Middle East, I think it would be a big deal because these countries are accumulating very sizable monthly excess revenues from oil sales. How they place that savings in terms of global currency markets is very important," said Jens Nordvig, senior global markets economist for Goldman Sachs.
"If they move away from the dollar, it would be a signal that they were about to invest more in non-dollar assets."
Pegged exchanged rates prevent those countries from raising interest rates to keep inflation under control. Instead, to maintain the exchange rate, they have to match U.S. monetary policy. Interest rates in the United States are highly stimulative, however, designed for an American economy struggling to avoid a recession - not a Gulf country whose coffers overflow with oil money.
So emerging market demand continues unabated, even encouraged, further exacerbating the inflation problem that governments around the world are scrambling to contain. Qatar's inflation is running at about 14 per cent. Egypt is at 19 per cent.
The average for the region just two years ago was a mere 2 per cent.
Even without a currency crisis, surging emerging market inflation is a major problem for advanced countries, since it pushes up prices for commodities worldwide at the same time as growth in advanced countries is weak - including in Canada.
To add to the difficulties, economists and currency traders wonder whether Gulf countries will soon be forced to move away from their inflexible currency pegs to the U.S. dollar and opt to peg to a basket of currencies or float freely. That would trigger a loss of confidence in the already shaky U.S. dollar and send the greenback into a downward spiral.
"The world may realize that it is no longer reasonable for the dollar to be the anchor currency," writes Sherry Cooper, chief economist at BMO Nesbitt Burns in a recent note called Next Shock: Currency Crisis?
"If several dollar-pegged currencies were revalued, we could expect to see some panic selling in the U.S. dollar, further destabilizing the global economy," she said.
Such speculation has prompted politicians in the United States and the Gulf to frequently deny this would occur.
But Mr. Nordvig doesn't think the world is on the verge of a currency crisis. If American authorities won't let Fannie Mae and Freddie Mac twist in the wind, there's no way they'd let their currency plunge either, he argues.
"Some of these institutions are so crucial to the financial market over all that they cannot be allowed to fail," he said in an interview.
Instead, the United States would intervene to prop up its currency - a move that has been much speculated about but extremely rare in the past 15 years. Since so much of the global economy's well-being depends on a stable U.S. dollar, intervention has now become a real possibility, Mr. Nordvig said.
"This intervention issue has for the first time in a decade basically become something we have to view as a distinct possibility, fairly soon," he said.
"I'm not talking about words. I'm talking about dollar buying."
The Gulf countries, too, will likely take steps to prevent massive instability, say economists at London-based Capital Economics.
"The Gulf [countries] would also want to take account of the potentially negative impact on U.S. financial markets, given their very large holdings of U.S. assets," they say in a recent note to clients.
"The [Gulf] countries will be wary of undermining market sentiment further, especially when relations with the West are already strained over the issue of record high oil prices."
Indeed, the hard currency pegs common among Gulf countries are not nearly as troublesome as the "dirty" exchange rates in Asia, economists say.
Inflation is soaring there too, but real interest rates - the level of interest rates excluding inflation - are negative.
That's because monetary authorities are too busy managing their currencies to stay roughly in line with the U.S. dollar, performing monetary policy contortions in an unsustainable effort to maintain currency stability and keep inflation at bay at the same time.
"The Chinese are between a rock and a hard place because they have all those assets in U.S. dollars, and if they revalue the yuan, or let it float up, that imposes big capital losses on them. On the other hand, if they don't, it's going to inflate out of their control anyway," eminent Canadian economist David Laidler said in a recent interview. "So they are in a mess."
Even the Bank of Canada is asking the currency crisis question, wondering aloud whether moves in China and other emerging markets to tighten reserve requirements and raise rates are enough to cool off the region and keep the global economy on an even keel.
If not, commodity prices, financial markets and the Canadian economy would all be hurt as a result, Mark Carney, the central bank's Governor recently suggested.
Is there a painless route out of the emerging market currency and inflation problem? No, says Mr. Laidler, who has been analyzing economics and currency movements since the 1960s.
"You're going to get huge instability one way or another. You're going to get it if they un-peg, or you're going to get it when the inflation finally gets loose domestically," he said.
But there's a way to manage the pain, Mr. Laidler added. Major emerging economies need to allow their currencies to appreciate more quickly than in the past, and they also need to allow more inflation to trickle down to consumers.
"The critical thing now is to recognize that people did get it wrong, and start thinking systematically about how to get out from under it."
Massive Economic Disaster Seems Possible -- Will Survivalists Get the Last Laugh?
By Scott Thill, AlterNet. Posted July 26, 2008.
http://www.alternet.org/workplace/92706/massive_economic_disaster_seems_possible_--_will_survivalists_get_the_last_laugh_/?page=entire
The Recent Hindenburg Omen
by Robert McHugh
July 04, 2008
http://www.safehaven.com/article-10678.htm
Retirement: Reality or Mirage?
Challenges in a changing world
BY TONY ALLISON
06 23 08
http://www.financialsense.com/Market/wrapup.htm
Baby Boomers, and even succeeding generations, need to be looking at their retirement years with eyes wide open. In a rapidly changing world, “hoping for the best” is not a viable strategy. For millions of unprepared Americans, retirement may prove to be more mirage than reality. The following is one of a continuing series of retirement-themed essays outlining potential risks to avoid and necessary preparation for a successful retirement.
Risks to a stress-free retirement
There are many risks lurking in the weeds to derail one’s retirement dreams. There have always been risks of course, but today’s global economy pushes the risks to a higher level. The US is no longer the world’s economic giant, dominating global commerce. Retirees in 1960 were cushioned by low inflation, generous company pensions, inexpensive health care, and the backing of a country that was a net creditor, energy self-sufficient and unchallenged in industrial and technological might. None of these “security blanket” elements exist for today’s retirees and many government promises of future benefits may prove more rhetorical than real.
Under-Saving
One of the most basic risks to retirement is just not putting enough wealth away during one’s working years. Many people have 401k’s and IRA’s, but don’t fund them every year, or carefully monitor the investment performance. With the major indexes flat (or worse) this decade, many 401k’s have shown little if any growth. In addition, many investors make the mistake of leaving most of their 401k savings in their own company stock. In these turbulent times, betting on the success of any one company is taking a big risk with your retirement savings.
Unfortunately, many other Americans have never started retirement accounts at all, and with inflation gnawing at the dollar’s purchasing power, find it difficult to put any money away for the future. In addition, those who assumed the equity in their homes would fund their retirement are seeing that dream severely tested.
Under-Preparing
This goes along with under-saving, but includes other aspects of retirement. For those close to retirement, this would include preparing a budget to get a realistic picture of expenses now and what they may look like in retirement. Without a clear understanding of both essential and discretionary expenses, it is impossible to know if one’s retirement income will be sufficient to fund the desired lifestyle. We all have caviar dreams, but none of us want to end up eating Alpo to get by.
Many pre-retirees may fail to prepare because of an “expected” inheritance. However, circumstances can change over time, and the size of that inheritance may shrink substantially. In addition, the potential for higher estate taxes in the future could devour large chunks of a substantial inheritance.
Preparation would also include looking into downsizing into a smaller house or moving to a more tax-friendly state. It is also important to have access to health and medical facilities if you plan to relocate.
Higher Taxes
The risk of higher taxes, while uncertain, is overwhelmingly likely in the decades ahead. The demographic reality of 79 million retiring Boomers will, without doubt, put a tremendous strain on the government to provide Medicare and Social Security benefits. The $60+ trillion in unfunded future liabilities will very likely lead to higher income and payroll taxes, as well as lower benefits and means-testing. In addition, our growing $9 trillion national debt will keep compounding, and our massive trade deficit, much of which is imported oil, will need to be financed (currently $2 billion per day, every day, from foreign sources). Unless the government simply prints the money and destroys the value of the dollar, then higher taxes (of all shapes and sizes) will be a reality for future retirees. The biggest danger is we may see both realities. The third option would be for government spending to be radically cut in future decades. As long as retirees can vote, don’t expect that to happen.
Health Care Costs
The explosive rise in health care costs does not seem likely to ebb as the aging Boomer generation floods into the health care system in future decades. This is one of the most difficult categories to predict for most retirees. It is safe to say most will not have budgeted enough for future health care costs, including long-term care. The shrinking dollar carries much of the blame.
Inflation
This may be the biggest risk of all and one that affects all the other categories. Inflation acts as an invisible tax and can destroy the dreams and lifestyle of any retiree that is not adequately prepared for it. Earlier generations were fortunate not to be subjected to high rates of inflation for prolonged periods. Current retirees may not be so fortunate. The combination of massive federal, state and personal debt, fewer productive workers, and (since 1971), a purely fiat currency leads one to believe that inflation will be a painful reality for future retirees. It is imperative that strategies for future inflation be part of the retirement planning process.
Longevity
This will be a huge societal issue for the Boomers and those generations to follow. Current advances in medicine, health-care, and improved lifestyle habits are already leading to huge leaps in longevity. The Baby Boomers will, as usual, take longevity to new levels, with hundreds of thousands (or more) expected to live to 100 and beyond. This new reality means retirees must seriously consider living nearly as long in retirement as working, and how to make the money last. Going back to work at 94 is not an appealing proposition.
In 1900, 1 in 25 Americans was over 65 years old. The vast majority was self-supporting or supported by their family. By 2040 it is estimated that one out of every 4 to 5 Americans will be over 65. This vast majority will be supported by the government to some degree. According to the Concord Coalition, by the mid 2020’s America will be as old as Florida is today. Imagine seeing more people pushing walkers than baby strollers.
Debt
Debt, in moderation, can be beneficial during one’s working years. However, dragging a large debt load into retirement is a major concern. It is true that future debt payments will be made with inflated dollars, but debt also compounds and can wreak havoc on a fixed income. Clearly it would be best to pay down one’s debt load as much as possible while still working. The government can simply print more money to pay its debts. The retiree should not try this at home. It is entirely plausible that many Boomers will delay long-planned retirement due to the albatross of high personal debt.
Role of Bonds
Fixed income has been the traditional investment of choice for retirees. While bonds still have a role to play in a retirement portfolio, it should be a lesser role if you believe that significant inflation will be a reality during the retirement years. Moreover, in a study published in the October 2007 issue of the Journal of Financial Planning, two college professors, John Spitzer and Sandeep Singh, argue that retirees should spend their bonds first, gradually lowering the fixed income allocation. Their contention is the greater the exposure to equities, the less likely a retiree will exhaust his savings.
Most retirees would be uncomfortable without any fixed income. One strategy suggested by Professor Spitzer would be to retain 20-30% of one’s portfolio in short term bonds to use during times when the stock market is weak. When the stock market is strong, equities could be sold and more bonds could be purchased. This of course is a direct challenge to the “target-date” funds that automatically lower the equity allocation as one approaches retirement. It is impossible to predict the perfect allocation years from now, but my concern is that retirees will invest just like their parents or grandparents did in 1960.
Role of Stocks
Equities obviously can play a significant role in funding a successful retirement. The key of course is diversifying among many companies, and buying successful companies with established track records for growing earnings and paying dividends. The role of dividends will become ever more significant in future decades as retiring Boomers seek income and inflation protection. Owning a company that pays a dividend that grows and compounds every year is one of the few ways to protect one’s purchasing power in retirement. There will likely be hundreds of new mutual funds catering to this niche in the future. Many of these funds will hold companies from Asia, Europe and around the globe. The hunt for growth and dividends will be a global phenomenon.
Role of Diversification
If possible, retirees should be diversified among their assets, including stocks, bonds and real estate. They should also seek some currency diversification as well. If all one’s assets were denominated in US dollars and the dollar continually loses value, then purchasing power is lost. Examples of diversification out of the dollar could be investing in tangible assets, and foreign stocks, bonds or real estate.
Role of Flexibility
It is important to stay flexible and involved in one’s retirement planning, even years into retirement. The traditional “ratios” may not apply in 10 or 15 years from now. Planning to live on 75% of your working income may not cut it if inflation hits 10% for an extended period of time. Even 5% inflation can be devastating to quality of life unless you plan for inflation and hedge against it. Even if you haven’t planned for it, there are ways to mitigate the inflation if you are flexible enough to take action. But just staying put in fixed income bond funds as your standard of living implodes is not a recipe for a happy retirement.
The world is a very different place than it was in 1960, or even 1990. This doesn’t mean one can’t enjoy a long and fulfilling retirement in the 21st century. However, for most of us it does mean more diligence, preparation and discipline is going to be required. Every journey begins with the first step. If you are not already on the journey, it would be wise to start walking now.
Today’s Markets
Stocks stalled Monday, ending mostly lower after rising oil prices and ongoing worries about the financial sector gave investors little reason to buy a day ahead of a Federal Reserve meeting.
The Dow Jones Industrial Average was down .33 to close at 11842.36. The S&P 500 Index was also flat, closing up .07 at 1,318.00. The Nasdaq however was lower, ending at 2,385.74, down 20.35.
Disappointment that Saudi Arabia is not boosting production by more than 200,000 barrels a day sent oil prices higher, fanning concerns about inflation. Light, sweet crude rose $1.38 to settle at $136.74 per barrel on the New York Mercantile Exchange.
Gold tumbled nearly 3 percent in volatile trade on Monday, ending just above $880 an ounce as a sudden rise in the dollar against the euro prompted panic selling by funds in exchange for cash.
Wishing you a good evening,
Tony Allison
Registered Representative
Copyright © 2008 All rights reserved.
The Gold Market and World Economy
Kenneth J. Gerbino
Posted Jun 19, 2008
http://www.321gold.com/editorials/gerbino/gerbino061908.html
Precious Metal Stock Review
Posted Monday, 26 May 2008
http://news.goldseek.com/GoldSeek/1211814060.php
DISCUSSING THE GOLD TO OIL RATIO
http://tinyurl.com/4x8kv9
Tyhee intersects broad zones of gold mineralization, including 21.5 m grading 10.39 gpt gold and 78.8 m grading 1.94 gpt gold at Clan Lake, Yellowknife, NWT, Canada
Tuesday May 13, 8:30 am ET
TSX Venture: TDC
VANCOUVER, May 13 /CNW/ - Tyhee Development Corp. (TSX Venture, TDC) (the "Company") today announced preliminary results from the initial seven drillholes on its wholly-owned Clan Lake Property. Drilling tested a 100 metre long portion of a gold bearing zone. Another 12 drillholes have assays pending.
"We are very pleased to have confirmed a gold-bearing zone over such a broad area that remains open on strike." said Dr. D.R. Webb, President & CEO of Tyhee. "Significant intersections include CL100, which returned 78.8 metres (m) grading 1.94 grams per tonne (gpt) gold including 33.0 metres grading 4.29 gpt gold. CL103 intersected 21.5 metres grading 10.39 gpt gold, and CL104 intersected 11.9 metres grading 15.58 gpt gold and 32.7 metres grading 1.15 gpt gold further down hole."
[continued in following link]
http://biz.yahoo.com/cnw/080513/tyhee_gold_clan_lake.html?.v=1
The Great Depression of the 2010s
Economics is not rocket science. Neither is power
Darryl Robert Schoon
May 6, 2008
http://www.321gold.com/editorials/schoon/schoon050608.html
When in doubt….Fundamentals
by Andy Sutton, My2CentsOnline.com |
April 25, 2008
http://www.financialsense.com/fsu/editorials/sutton/2008/0425.html
Holding Gold is the best investment these days
By P S Ziad
23 April 2008 @ 10:28 am
http://tinyurl.com/5ufnkj
Gold is playing a decisive role in the present economic scenario as inflation and recession have eaten the vital parts of every country's economy.
It is because of that the most investors prefer to invest their money in gold. Most traders think that this is the good time to squeeze maximum benefit from the collapsing economy. So they prefer to hold on to their dear possessions.
Recently, Indian Finance Minister P Chidambaram had said that the inflationary expectation is worse than inflation. Inflationary expectation occurs when people think the prices will rise in which case they will have to pay more and buy more.
Meanwhile globally its impact has screwed further. Gold also plays a main role in this segment. Gold's role as a hedge against inflation is unparalleled, although for much of the late 1980s and during the 1990s, following the Plaza Agreement that ushered in monetary policy, this philosophy was challenged in the west on the basis that it wasn't working.
What was being overlooked, of course, was that in Europe and North America at that point inflation had been brought under control and gold was not, at that time, needed as an inflation hedge. In other countries where inflation was running much higher (or out of control Turkey was a particular case in point), it was doing its job perfectly well.
With the markets now increasingly concerned about inflationary trends, gold has posted its credentials once more, quite separately from its role as a mitigator of financial and political risk.
While inflation is nowhere near the levels of the early 1980s (in the first quarter of 1980, inflation in the United States was 14 percent), inflationary expectations combined with an unprepossessing growth outlook have reinforced gold's defensive qualities. In the United States, in China in particular and also in Japan real interest rates are negative and, therefore, holding gold does not incur an opportunity cost.
Given the fears swirling around the financial sector at the moment, the fact that physical gold, held either in person or in an allocated account , carries no counterparty risk and counterparty risk is as we all know, is at the forefront right now.
Federal Reserve cuts key interest rate by quarter-point
April 30, 2008
http://tinyurl.com/6pn4vn
WASHINGTON - The Federal Reserve has cut a key interest rate by a quarter-point, a smaller move than the aggressive easing it undertook earlier this year.
The Fed action, announced Wednesday after a two-day regular meeting, pushed the federal funds rate down to 2 percent, its lowest level since late 2004. It marked the seventh consecutive rate cut by the central bank since it began easing credit conditions last September to combat the growing threat of a recession brought on by a deep housing slump and credit crisis.
The rate cut will mean lower borrowing costs throughout the economy as banks reduce their prime lending rate, the benchmark for millions of consumer and business loans.
The Fed move was in line with expectations. Wall Street believes this could well wrap up the Fed's rate cuts unless the economy threatens to fall into a worse slump than currently expected.
The Fed said it stood ready to "act as needed to promote sustainable economic growth and stability." That phrase was seen as a signal that the Fed is as worried about weak growth as it is about the risk of higher inflation.
The Fed devoted portions of its statement to both the threats of weakness and the threats that inflation could pose, likely reflecting the debate inside the central bank.
There were two dissents from the move, with both Richard Fisher, president of the Dallas regional Fed bank, and Charles Plosser, head of the Philadelphia Fed, arguing that the central bank should make no change in rates.
The central bank is walking a tightrope, trying to jump-start economic growth while also confronting the risk that if it overdoes the credit easing it could make inflation worse down the road.
Many economists believe the country has fallen into a recession. However, the government reported Wednesday that the overall economy, as measured by the gross domestic product, managed to eke out a 0.6 percent growth rate in the January-March quarter, barely in positive territory.
On the overall economy, Fed Chairman Ben Bernanke and his colleagues said in their statement explaining the decision that "economic activity remains weak" with subdued spending by businesses and households.
"Financial markets remain under considerable stress and tight credit conditions and deepening housing contractions are likely to weigh on economic growth over the next few quarters," the Fed officials said.
While saying the central bank expected inflation to moderate in coming months, the Fed statement said that "uncertainty about the inflation outlook remains high," adding that it would be necessary to "continue to monitor inflation developments carefully."
The quarter-point move followed a string of more aggressive rate cuts ranging from a half-point to three-fourths-point in the first three months of this year as the central bank was battling to stabilize financial markets roiled by multibillion-dollar losses caused by rising mortgage defaults.
That turmoil claimed its biggest victim on March 16 when Bear Stearns came to the brink of bankruptcy and the Fed stepped forward with a $30 billion line of credit to facilitate a sale of the nation's fifth largest investment bank to JP Morgan Chase.
However, credit markets, while not back to normal, have stabilized and many analysts believe the worst may be over — although they caution that this forecast could prove too optimistic if the housing slump deepens further, causing even more mortgage defaults than now expected.
Before the Fed made its first rate cut in September, the funds rate had stood at 5.25 percent.
While many economists believe the country is in a recession, the expectation is that it will be a short one ending this summer. If that turns out to be correct, the Fed may hold rates steady for the rest of this year with the next move being a rate increase sometime next year when the economy is on sounder footing.
The Fed's Dilemma
Wednesday April 30, 6:00 am ET
http://tinyurl.com/53jnjb
Much has been said about what the Federal Reserve will do today, but only one thing is certain: No one will be happy about it.
Federal Reserve policymakers are widely expected to end their two-day meeting with another quarter-point cut in interest. And investors will probably be satisfied with that.
It is the accompanying statement that is sure to disappoint.
"This is a case where words are going to speak louder than action," David Rosenberg, the Merrill Lynch economist, said.
The Fed is likely to signal that it is done with cutting rates for now—an expectation that gained widespread currency after Greg Ip of the Wall Street Journal reported last week that policymakers were shifting to such a view.
The Fed is apparently worried about creating expectations of easier credit that will fuel a fire already building in inflation. In speeches and testimony in recent months, Ben Bernanke, the Fed chairman, and other Fed officials have noted their concerns about rising energy and food costs, and they clearly see a need to tamp down that momentum given that it takes five months before a rate cut works its way through the economy.
Indeed, a small number of analysts have suggested that the Fed could even surprize the market and not cut rates at all today.
In its aggressive rate cuts earlier this year, the Fed said that the housing slump and the stability of the credit markets and their threat to economic growth outweighed concerns over inflation.
Yet that threat—illustrated by more grim housing data this week and by forecasts that banks will need to take additional write-downs and raise more capital—is still present. Many investors will see the Fed statement as abandoning a fight before victory is anywhere in sight.
At the same time, investors and analysts who have accused the Fed of being too accommodating to the markets and not paying enough attention to inflation may not be satisfied by a gradual shift toward a more hawkish stance.
As Barry Ritholtz on the Big Picture blog has noted, the growing body of evidence that inflation is anything but modest is "beginning to undermine confidence in the Federal Reserve."
To be sure, the Fed will want to indicate that it is keeping all its options open, by pointing to continued risks to growth.
A quarter-point cut would bring the Fed's benchmark, its target for the federal funds rate, to 2 percent, the lowest it has been since December 2004. In September, that benchmark was at 5.25 percent.
The crucial thing for the central bank is to persuade the markets that it is ahead of the curve.
Brian Sack, a former Fed economist now with Macroeconomic Advisers, said the surprisingly sharp rate cuts in January was intended "to convince markets that the Fed was on the job."
"Now you could be seeing the opposite," he said, according to the Wall Street Journal's Real Time Economics blog.
Big News on The Gold Stocks and Notes on The Juniors You Need to Know
Kenneth J. Gerbino
Apr 25, 2008
Here is my assessment of the current gold share market.
http://www.321gold.com/editorials/gerbino/gerbino042508.html
The High Road To Hell
By: CAPTAINHOOK
-- Posted Monday, 28 April 2008
The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, April 8th, 2008.
http://news.goldseek.com/CaptainHook/1209398466.php
Newmont Rebounds in 2008 on Higher Gold Prices, Lower Costs
By Jon A. Nones
24 Apr 2008 at 03:50 PM GMT-04:00
http://www.resourceinvestor.com/pebble.asp?relid=42206
Tax Payer Bail-out Ideas Stabilize US dollar, Trip Gold
Gary Dorsch
Editor Global Money Trends magazine
Apr 4, 2008
http://www.321gold.com/editorials/sirchartsalot/dorsch040408.html
Emgold Mining announces the appointment of Chief Financial Officer
Monday April 7, 1:00 pm ET
http://biz.yahoo.com/cnw/080407/emgold_appoints_cfo.html?.v=1
Venture Exchange: EMR OTC Bulletin Board: EGMCF U.S. 20-F Registration: 000-51411 Frankfurt Stock Exchange: EML
VANCOUVER, April 7 /CNW/ - Emgold Mining Corporation (EMR-TSX Venture) (the "Company" or "Emgold") is pleased to announce the appointment of Mr. Jonathan Fogg, C.A., to the position of Chief Financial Officer, replacing Ms. Shannon Ross, C.A., who has resigned as CFO and Corporate Secretary in order to devote more time and attention to other duties. Mr. Fogg will be responsible for the accounting, financial management and regulatory affairs of the Company. Rodrigo Romo, legal assistant to LMC Management Ltd., will assume the position of Corporate Secretary.
Mr. Fogg brings more than 10 years of post qualification experience as a Chartered Accountant to Emgold. Mr. Fogg has significant experience with public company accounting and financial reporting including exposure to SEC registrants. In addition he has consulted on initial public offerings, corporate re-organizations and business advisory assignments for a suite of both domestic and international clients. Mr. Fogg also played a key role in assisting financial institutions and other clients in implementing International Financial Reporting Standards (IFRS). In this capacity Mr. Fogg worked with members of senior management to assist them in understanding and adopting IFRS. He received his Bachelor of Administration from the University of Regina, Saskatchewan and achieved his C.A. designation in 1997. Mr. Fogg began his career in the Office of the Provincial Auditor, Province of Saskatchewan and then joined PricewaterhouseCoopers in 1997. During his time with the firm Mr. Fogg held increasingly senior positions including that of Senior Manager/Director, Assurance and Business Advisory Services.
"We are very pleased that Jonathan has chosen to join the Emgold team," said Sargent Berner Co-Executive Chairman. "Jonathan's extensive experience and expertise across a wide variety of public company accounting, financial and business advisory matters will enable him to make a significant contribution to the growth of Emgold as the Company completes the permitting process for the Idaho-Maryland Mine and achieves the award of the Conditional Mine Use Permit, which we believe will significantly enhance Emgold's shareholder value. At the same time we would like to express our appreciation to Ms. Shannon Ross for her invaluable contributions to Emgold as CFO over the last eight years. Shannon has also agreed to remain as an advisor to Emgold and we look forward to her continuing participation with management in her advisory role."
On behalf of the Board of Directors
Sargent H. Berner
Co-Executive Chairman
No regulatory authority has approved or disapproved the information
contained in this news release.
For further information
Jeff Stuart, Manager, Investor Relations, Tel: (604) 687-4622, toll free 1-888-267-1400, Email: info@emgold.com
Gold Fever: Wall Street Reporter Talks to Eastmain Resources Inc., Taranis Resources Inc., and Emgold Mining Corp.
Monday April 7, 10:49 am ET
http://biz.yahoo.com/pz/080407/139652.html
NEW YORK, April 7, 2008 (PRIME NEWSWIRE) -- Wall Street Reporter has posted exclusive video interviews with three CEOs whose companies -- Eastmain Resources Inc. (Toronto:ER.TO - News), Taranis Resources Inc. (CDNX:TRO.V - News), and Emgold Mining Corp. (CDNX:EMR.V - News) -- are actively engaged in developing known gold resources.
Investors can watch or download the interviews, along with additional content recorded in Toronto at the 2008 Prospectors & Developers Association of Canada convention, at http://www.WallStreetReporter.com.
Eastmain Resources Inc. (Toronto:ER.TO - News) is working in the exciting new gold district of Northern Quebec. ``There've been some big deposits found,'' says CEO Don Robinson. ``We own two deposits there already and we've made a discovery with Goldcorp.''
Highlights of the interview:
- An overview of the rich discovery, which grades 10 grams of gold per ton at the surface, even before the drills come in.
- The ``fire sale'' price of $16 an ounce the company paid for its eponymous resource, the Eastmain mine.
- A timetable of future milestones, including drilling on both of the company's major projects on the way to a more complete resource estimate.
Taranis Resources Inc. (CDNX:TRO.V - News) is putting four drills to work this summer on its Thor project as it moves toward 43-101 status. ``Right now there's 2 kilometers of mineralization exposed on the surface,'' says CEO John Gardiner. ``We feel it has enormous potential.''
Highlights of the interview:
- More on how TRO expects to move ``very fast'' toward development on Thor.
- The company's relationship with Royal Gold to expand a known resource in Finland.
- Mr. Gardiner's notes on the company's relatively undiluted structure, with under 15 million shares currently issued.
Emgold Mining Corp. (CDNX:EMR.V - News) is about 3/4 through the process of securing new permits to redevelop the Idaho-Maryland property, which was once California's second-biggest underground mine. ``People have concerns whether you can get a permit in California, but the state actually produces more minerals than Nevada,'' says CEO David Watkinson.
Highlights of the interview:
- Background on the project's rich history and current grades of around 0.43 ounces of gold per ton.
- Future milestones to look out for on the road to redevelopment by early 2009.
- Why Mr. Watkinson sees parallels between his company's potential and the early phases of the Goldcorp success story.
Wall Street Reporter (Est. 1843) is the premier source of investment information on global public companies in high-growth sectors. Through its magazines, special reports, website, and conferences, WSR presents unique opportunities for discovering stocks before they appear on the radar of Wall Street. Visitors to its website, http://www.wallstreetreporter.com, can listen to and view exclusive audio and video from an extensive library of CEO interviews, analyst roundtables, and conference webcast presentations, as well as subscribe to WSR's ``Smart Money Alert'' -- a weekly update of stock picks and timely market insights from top analysts and stock gurus.
About Eastmain Resources Inc.
Eastmain Resources Inc. is actively exploring for gold and base metal deposits within Eastern Canada. Eastmain owns 100% of the Eau Claire gold deposit and has significant land holdings covering key geology adjacent to the Eleonore discovery and the Eastmain gold mine.
About Taranis Resources Inc.
Taranis Resources Inc. was incorporated in December 2001. Its mission is to explore and develop precious metal exploration properties with the objective of delineating mineral resources.
About Emgold Mining Corp.
Emgold Mining Corp. is a gold exploration and emerging production company. Emgold is focused on the permitting, exploration and re-opening of the Idaho-Maryland Gold Mine, historically the second-largest underground gold mine in California.
Contact:
Wall Street Reporter Magazine
Jack Marks, CEO & Publisher
(212) 363-2600, ext. 260
http://www.WallStreetReporter.com
Eastmain Resources Inc.
Dr. Donald J. Robinson, CEO & President
(519) 940-4870
http://www.eastmain.com
Taranis Resources Inc.
John J. Gardiner, CEO & President
(303) 716-5922
http://www.taranis.us
Emgold Mining Corp.
David Watkinson, CEO & President
(604) 687-4622
http://www.emgold.com
--------------------------------------------------------------------------------
Symbol is SIM.TSX- junior producing gold in Mexico-
- they are trading on the big board and are actually producing gold so they are ahead of most juniors-
Talk about a stock basing for a long time!
It's been about 5 years and it has never really had a big move-
I am long---bought most of it under .40 cents-
Spot Gold Achieves the $1000.00 Target
By Jon Nadler
Mar 13 2008 1:30PM
www.kitco.com
http://www.kitco.com/ind/Nadler/mar132008B.html
Good Day,
The countdown to $1,000 gold finally ran out at 10:35 am New York time today as spot bullion reached a historic high of $1,000.25 bid amid the conditions that emerged overnight. The final push to the peak came on the heels of a slump in US retail sales and following a lack of reassuring words or offer of aggressive remedies for the credit black hole by the Mr. Paulson this morning. This was an achievement of a lofty objective
Gold prices were primed to finally achieve the $1K mark as early as last night, when background market conditions shifted from bad to worse overnight. Today's spike will likely become known as the "Carlyle/Drake Rally" (or cave-in, depending on your preference). The imminent doom of the Washington-based bond fund and probable demise of the hedge fund sent icy shivers through the financial markets that way overshadowed the (nanosecond-brief) cheer we witnessed following the Fed's term facility plan the other day. Mr. Paulson offered no more than lip service today by concluding his remarks with platitudes such as " We will continue to re-assess conditions, monitor progress, put forward new recommendations and take additional steps as necessary." US President Bush himself managed to say about the current predicament of the greenback only that it was not 'good tidings' (?!)
A quick scan of values recorded midday in New York revealed crude oil prices at $110-$111 per barrel, the dollar basically at parity with the Swiss franc, at 1.557 against the euro, and near 100 yen - all records, or near-records. The breach of the 72 mark on the dollar index also raised the gloom among traders, despite more back-channel chatter about intervention by one (read: Japan) or another central bank. This might also be a day where we see the Dow reversing a good part of the 400+ point rally from two days ago. It has already given up 215 of those points during today's trade. A deeper slump could once again raise the specter of margin-call related sales in other assets. The Nikkei fell by 427 points overnight.
New York spot gold was up $11.60 at last check, showing $994.70 bid per ounce and related metals still surging in concert, with strong gains of their own. Silver was up 44 cents higher at $20.59, platinum was up $37 at 2098 and palladium rose $4 to $506 per ounce. Commodities markets continued in a state of disarray, with huge sums of fund money being thrown at them, while still trying to absorb the pyramid of long positions which has already been piling skyward in previous weeks.
Keep an eye on the Dow and on gold's closing levels. Dollar-denominated commodities have all benefited from the intense fund attention. It has taken an estimated $600 billion credit debacle and six months to lift gold from $730 to $1,000. The same funds will now become increasingly conflicted on whether to push the envelope further based on potential further billions being added to the problem or whether to scale back from the sector as some corners begin to be turned. At such a juncture, we may expect volatility of a much larger order of magnitude in these markets and every single news item to matter much, much more. Keep very alert and take nothing for granted. Even on a day of such celebration. We already know how we got here. The bigger/better question is: "What next?"
There Is No Credit Crisis, No Recession And That Is Why Gold Is Going To $1500
By: Kenneth Gerbino, Kenneth J. Gerbino & Company
Posted Friday, 18 January 2008
Source: GoldSeek.com
http://news.goldseek.com/KennethGerbino/1200639840.php
Hard To Believe? - Read On Friends
The U.S. Press and just about everyone from Main Street to Wall Street have bought into yet another massive misunderstood concept. Misunderstood concepts are very dangerous to your financial health.
The sub prime mortgage melt down and future ramifications are very real and the major financial institutions associated with all the second and third level repackaging of this toxic paper are in big trouble. But the “crisis” is a hoax. Some big institutions lost a lot of money in their investment portfolios but this is not a credit crises. If you ever got through Von Mises’ great book, The Theory of Money and Credit, this would make sense.
Follow this simple example and you will understand why there is no credit crises and why a recession is probably not going to happen anytime soon and why this is astoundingly bullish for gold and silver.
Tom buys a house. Tom has no job, no credit, no savings and lied on his loan application. He is like a few million other people in the same boat. Some bank or financial institution lent him money. The house cost $300,000 and Tom was lent the entire amount, 100% financing – no down payment. When Tom was lent the $300,000 he gave it to George who was the owner of the house. George now has $300,000 and Tom now owns a house. So far so good.
Tom defaults. His bank cannot collect. His bank is in trouble. His bank has hundreds or thousands of similar loans. The bank has a crisis on its hands. But hold on, George has the $300,000. The $300,000 has not disappeared. George has this money in his bank or he bought a boat and the guy he bought the boat from has the $300,000. The money is still in circulation. It has not gone to money heaven. The banks and the big Wall Street firms actually have a crisis, but it is an investment crisis not a national credit crisis.
RECESSION POSTPONED
The Fed, the Treasury, the European Central Bank and the British National Bank are all pumping in hundreds of billions of new money to bail out the banks not the economy. But the economy will certainly get “stimulated” by all the new money.
Since the $300,000 is still in circulation (and you can multiply this by millions of other home loan examples) and the Central banks are adding even more money and credit to the economy, what is going to be the outcome of all this? It is going to be incredibly inflationary. It is also going to assure that the economy will avoid a recession because there is now so much money sloshing around the system that it will get spent or saved or used by someone else and therefore a recession will be postponed. The way a recession could happen is that if the economy actually has finally petered out and all the mal-investment of the last cycle (real estate being first on the list) is now creating dislocations that cannot be handled. But with all the new money being pumped into the system and with continuing low interest rates this recession has surely been postponed.
The dollar will continue to go down as the Fed has decided to save the banks and flood the country with as much money as is needed to handle their crisis (the banks).
Gold is going up because this “crisis” handling means inflation is going to come back, possibly at the highest levels we have ever seen in modern times.
A SLOW ECONOMY
The home building melt down is very real. Many homes were bought by unqualified borrowers and speculators who are now in trouble. With home building crashing (this is a key sector of the economy) how will this effect the U.S. economy? It, so far, has just slowed the economy down but because there is now so much more money in circulation some other areas of the economy appear to be taking up some of the slack.
My guess is that instead of a 4% growth economy like we had because of the “housing boom”, we may have a 1.5% growth economy. With the dollar so low tourism will increase and foreigners will come in and buy our goods and services. Our real estate prices are not only going down but to someone with Euros our real estate is now at bargain prices. European yacht manufactures cannot now compete with U.S. boat builders and at the recent Fort Lauderdale Yacht Show (the largest in the world) U.S. yachts and boats were bargains if one owned Euros. Boeing Jets are also tempting to European airlines with Euros selling for a 30% discount (in Euros) from just a few years ago.
MONEY AND INVESTMENTS
If there is a credit crisis, why is MZM money supply up almost $1 trillion in the last year? Why are Aaa Corporates only at 5.3%? Why was Industrial Production up 1.5% year over year in December? Employment up 1%. These are not recession or crisis numbers. The Crisis is a smokescreen used to rationalize rescuing an investment management crisis for the banks. The big institutions are being bailed out and the guy in the street is going to pay for it.
In 1987 the U.S. stock market had its worse year since 1929 and 1974. Trillions of dollars of wealth was destroyed in stock and bond values in 1987. But we never had a recession. This was because the losses were investment losses. Money in circulation actually went up. Money, credit, and investments are three related but distinct animals.
In the present environment the banks investment portfolios are losing hundreds of billions and maybe as much as a trillion dollars eventually but the amount of money in circulation is increasing not decreasing. Therefore the so called “economy” will move on and the inflationary impact of all this new money on top of all the old money that has been shoved into the system will make inflation take off.
When Wall Street comes to it’s senses and realizes that the economy is now being flooded with money and none of the old money has disappeared and the Fed is indeed going to keep interest rates as low as possible, the U.S. stock market should not crash. The banking system will not collapse. Unfortunately what will happen is an explosion of inflation and that will be a crisis. Every lower and middle income earner in this country will pay for this bail out because their paychecks will now buy less and less in the future. Their standard of living will decrease. As usual the insidious paper money system will rob the poor and the lower and middle income earners (via inflation) and redistribute that wealth to the rich (the banks and the Wall Street firms that are being bailed out). There is no free lunch. But whenever one shows up, know that someone is paying.
The authorities have no choice but to inflate or have some major institutions go down. Eventually this will be an inflationary disaster. Gold will most likely go to $1500 within a few years. If one takes $850 gold and allows for only a 7% increase a year for 5 years – the price is $1200.
Bottom Line
The stock market already was overvalued and a 10-20% correction is expected. With all the money floating around some sectors will probably do OK. I do not like the stock market but do not feel a crash is coming. That happens when interest rates are high not low and when inflation returns forcing interest rates much higher. At that time the Fed won’t be able to stop it. Then the market will crash.
A recession is most likely postponed because of all the money injected recently. How long is difficult to predict and we will have to see how the economic statistics unfold in the coming months to evaluate.
Gold and silver are obviously the safest and best investments in a world that has the authorities with only one option. Print money. They have to bail out the banks and Wall Street and they have to pay for trillions of promises to their citizens that they cannot keep. This is global not just in the U.S.
The money supply increases in India, China, Brazil and England are now almost beyond belief averaging 19% a year. These four countries are in the top 12 GDP countries in the world, contribute almost 30% of the world’s goods and services and employ 47% of the world’s work force. The future of gold and silver as an inflation hedge is definitely going global.
The future is like the past only more expensive. For more articles on Gold, the Economy and the Stock Market visit our website: www.kengerbino.com
Ken Gerbino
The Domino Depression or Crash of 2008
Bob Moriarty
http://www.321gold.com/editorials/moriarty/moriarty012308.html
Kodiak Exploration KXL.v (KXLAF)($4.55) set to run again next month:
This stock is still under the radar screen- Big bucks (insiders-Richardsons, etc) are buying quantity of shares on the open market as they become available. IMO hold for a buyout from a Major possibly by Spring of 2008.
I have tried to share my insights since discovering KXL.v under $1. Those who have followed my suggestion have profited handsomely.
IMO There is still huge potential w/this stock -especially when more core samples come in & when spring drilling starts up again w/3 drills.
Agoracom.com has a message board on this stock.
see Credit Suisse opinion on future of Gold:
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=173d31fd-4b3b-40ef-b177-9f3cadd69e83
During turbulent market times, gold is almost always a good investment. Yes it may undergo some periods of correction, but that is almost always offset over the long term. Some are very worried about the US currency right now; and rightfully so. Under these conditions, gold is a great way to hold some of your ‘cash’. It might also be strategic to hedge some of your gold profits by selling a small amount and repurchasing on a mild downtrend. I always like to buy some natural resources with my disposable income as its always tractable in a diversified portfolio, and recently gold has been a real winner for me. Overall, I will continue to maintain natural resources in my investment portfolio as its given me a sense of satiety and balance in an otherwise unpredictable market.
Mining town grapples with latest gold rush
http://investorshub.advfn.com/boards/read_msg.asp?message_id=25318698
Ken Chan...in explaining that the correct pronounciation of
forte (a strong point) is fort,answers.com goes on to say
something to the effect of "however, if you want to be understood you are better off to MISPRONOUNCE forte as forte'.
You might want to consider dropping the $2.00 words in favor
of more commonly used vocabulary. Just a suggestion.
cheers
PS Guinness is good for you.
Agree with you totally. I'm concentrated in the investments that you just outlined.
I try to protect myself against the weakness of the dollar and currencies with precious metals and commodities. I hold natural gas, oil, and uranium stocks as a hedge again Peak Oil.
thanks for the post,
sumisu
I think the natural resource sector will continue to see growth driven by the demand in Chinese urbanization and the continued growth of their middle class. Therefore, I will continue to maintain a portion of my portfolio in gold, oil stocks and other natural resources and commodities – it’s a wise diversification in my opinion. It also a great way to offset the increased cost we pay for automobile fuels, but arguing against that is cavil in nature as everything is driven by supply and demand.
A TIDAL WAVE!
by Puru Saxena
Editor, Money Matters
November 30, 2007
http://www.financialsense.com/editorials/saxena/2007/1130.html
Look for RNGG this coming month into the new year to do very well. Heavy accumulation the last couple months, should see some substantial news very shortly.
RNGG. Properties just beside Newmont (NYSE:NEM) and other major gold producers. Should hit paydirt early December. On serious watch here.
.30 up from .09 just recently.
ADK.V - Last @ .51 on Friday - Big Volume
http://www.stockscores.com/quickreport.asp?ticker=v.adk
ValGold’s Targets of Convenience Pay Off, Drilling Ongoing at Mochila
By Doug Hadfield
October 15, 2007
When ValGold’s team of more than thirty exploration experts first hit the field in northern Venezuela a year ago, the company planned to prove up a reasonable sized resource just north of Crystallex’s Tomi Mine. Assay results from 2007, coupled with historical drill results from previous property owners, now suggest that ValGold has completed the first big step in achieving that goal.
The geology of this area is an ideal host for large gold deposits, as was evidenced by the property’s two former operators, including Gold Fields, who were the first to use systemic drilling at ValGold’s Increible 3 concession. This summer, ValGold repeated the former owners’ success, with drill results reported from the company’s “targets of convenience” just last week.
In a conversation with VP of Exploration Tom Pollock and Investor Relations Officer Jeff Stuart, the two explained the significance of expanding the known limits of Los Patos. They showed me several maps detailing the geological and geochemical aspects of what they suspect may be an initial resource in the order of 200,000 ounces of gold.
“Notice that Los Patos is on the Los Chivos shear zone in Increible 3,” Stuart pointed out that these formations are just north of Crystallex’s Tomi Mine, which ships its ore to its nearby 1,350 tonne per day mill, too. The drill holes completed by ValGold this summer are in an orderly, grid-like pattern. Distributed in a heavy line across one map, red patches indicate anomalous areas of soil geochemistry high in gold content (between 400 and 800 ppb).
“Next, look along the shear zone to the west. You’ll notice that Gold Fields only poked a few holes here and there, very short holes too, right in the center of the strongest surface geochem, no matter what the underlying geology suggested. They were just drilling a hole or two and hoping to get lucky.”
The failure of Gold Fields to find a viable resource at Los Patos is a classic gold exploration tale of late 1990’s: The price of gold plunged and the value of foresight – the project had some excellent grades – was not enough to forestall termination. It was too pricey a venture to continue. However, Gold Fields did establish much in the way of useful geological footprint of the area.
The Los Patos gold occurrence was ValGold’s first target this summer. When measured against the potential of the company’s other targets in Venezuela and Guyana, the Los Patos gold occurrence was considered an appealing target, but also one of convenience. The company chose Los Patos to start its South American drill programs because of excellent mineral potential, but also open terrain, easy access, and close proximity to a number of operating mines and mills. With drills, personnel, and infrastructure in place, Los Patos was an ideal warm-up for ValGold’s aggressive exploration program in the Guyana Shield.
The results didn’t really show a lot we didn’t already know,” Stuart said. “They did give [the stock] some volume, and the knowledge that we have a deposit that hasn’t reached its limit.”
Stuart says that most of the check assays are pending on ValGold’s Los Patos drill program, and that the company is so far pleased with the results. “A lot of people never find an economic deposit. Since it’s our first drill program here we’re really happy. The next step will be to announce an indicated resource. In the meantime, we’ve just begun drilling on one of many occurrences at the Mochilla Lineament, which is our primary target in Venezuela. Our business plan is on track and we have many loyal investors who love our story, so things are looking great.”
“Let me put it this way,” Stuart said. “We had two brokers with many years of mining investment experience in our offices this morning wanting to finance us. They looked deep into our data set and stopped us halfway through our pitch to say they wanted the next financing in its entirety. So, yes, we’re really happy.”
Los Patos is located within the Lo Increible 3 concession approximately 20 km northeast of the town of El Callao and 4.5 km northeast of Crystallex's Tomi gold mine, which in 2006 produced 41,638 ounces at a cost of $175 per ounce. It is one of several gold occurrences found along the east-west striking, 6.8 km long, Los Chivos Shear Zone, all of which is 100% owned by ValGold.
Previous drilling by Gold Fields at Los Patos penetrated a 160 metre-long mineralized zone which varies from 8m to 27m in width and which has a weighted average grade of 1.03 g/T Au.. The 19 trenches excavated in this area, each 40 metres apart, returned grades of 52 metres at 1.81 g/t Au and 32 metres at 1.16 g/t Au, for example. From 1994 to 1999, 151 diamond drills holes totaling 15,431 metres were used to test and further define targets.
The new round of diamond drill holes completed last July consisted of 35 holes for a total accumulated length of core of 9,318 meters. Twenty-eight of the boreholes targeted the main Los Patos gold zones; the remaining seven tested three satellite zones within the concession. These holes outlined up to five parallel zones of mineralization which when averaged with the intervening lower grade material gave zones up to 58.0 metres wide assaying 1.27 g/t gold, almost 100% true width. Assays included 4.75 g/t gold over 17.0 metres and 3.98 g/t gold over 36.0 metres in holes LI307-07 and LI307-11. The gold zone here remains open in all directions.
To the south of the La Increible concessions is the Mochila Layered Complex, which has the potential to host a much larger ore body. These properties are in an isolated tropical jungle area about 30 km west of the major Grand Sabana Highway that connects the towns around southeast Venezuela with Brazil. Access is best served by using either helicopter or river boats.
Tom Pollock, who is ValGold’s VP of Exploration, told me that the Mochila exploration program is going to be much more exciting than the potential economic resource the company is hoping to define at Los Patos.
“This is a big structure, with many gold occurrences that we know of – they’re almost everywhere,” he said. “Nearby is Las Cristinas, with proven and probable reserves of 17 million ounces of gold, measured and indicated of 21 million ounces of gold… it’s huge. The geology is right here.”
Pollock and Stuart agreed that little exploration work has been done in the area, which explains the dearth of existing data for Mochila. “The Chicanán concessions cover some 750 square kilometers, with gold occurrences discovered on each concession. There hasn’t been a large one found yet because it hasn’t seen the exploration – all the indicators are there, it just needs the work.”
Stuart added, “The reason no gold has been found is simple: Only 200 m have been drilled so far.”
ValGold’s drill program on Mochila started in mid-September. The company plans an initial minimum 5,000-metre drill program consisting of approximately 15 to 20 holes. Drilling will focus along the upper contact of the middle gabbro unit and along the Mochila Lineament particularly where there are gold soil anomalies and/or artisinal workings. The total length of these two linear features is in excess of 7,000 metres. The company expects the first phase of drilling to take approximately two months to complete with assays in hand by the end of the year.
“It’s a very large area with many number of strong gold soil anomalies that have never seen drilling,” Stuart noted.
Strong targets and an excellent exploration team may mean early success, but ValGold’s Mochilla program is about depth: It is best for investors to look at the Mochilla Lineament as having multiple strong targets that may take a few years to explore, drill, and define.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
Golden Reign Resources Discovers Potential New Gold Zone in Russian River Bed
By John Hurst
October 15, 2007
When Zoran Pudar returned to his Vancouver head office this week, his briefcase contained lots of good news about the ongoing exploration program on the company’s two prospective gold properties located in Far East Russia – across the Bering Strait from Alaska. The vice-president of exploration for Golden Reign Resources Ltd. (TSX-V: GRR) was returning from a field visit to the company’s properties. At the Dorozhni property, which covers 8.8 square km, gold mineralization is thought to be the source of 150,000 ounces of historically mined placer gold.
“In approximately two weeks time, I expect to receive assay results for samples collected during my visit to the properties,” he told Resourcex Investor on Thursday, “and we are still collecting some samples from the Butarni property. In total, 18 samples were sent to Alex Stewart (Assayers) Ltd., a British lab in Moscow.”
The Russian government has limited research data on the properties in the Magadan Region, under agreement to Golden Reign and more extensive information has been coming out only in recent weeks. Most of the work had been done following World War II and in the late 1980s. The property is held under a 20-year comprehensive exploration-mining licence.
“From what we know about the Dorozhni property,” Pudar said, “they were chasing some high-grade quartz veins. Typically, the gold is coarse. I had a chance to spend several days there and focused on the eastern part of the property where we have recently completed 1.5 km of trenching. We sampled some of those veins, which in 1946 had yielded over six kilos of gold (approx. 20 ounces).”
He said that high-grade gold mineralization occurs at the intersection of northwest orientated structures and the intrusive, hosting quartz veins. Of particular interest is the newly exposed mineralized sediments and breccia zone discovered in a river bed.
Pudar says that this newly discovered breccia zone appears to be 50 by 70 metres wide. “It is the type of target I was looking for. In fact, I brought home some really nice samples, just for show and tell. This new zone has really great potential, but the riverbed has to be totally exposed and properly sampled. There is rich sulphide mineralization within the zone, which is often associated with gold. This zone is considered a primary target for continued exploration.”
The first phase of exploration at the Dorozhni property was initiated this fall. Dorozhni, one of Golden Reign’s two highly-prospective gold properties at Magadan, is located at the headwaters of Dorozhni Creek. Previous exploration work focused on identifying and testing five separate gold-mineralized quartz veins at or near surface. The veins, which have been traced for 380 metres along strike, average between 0.4 to 2.4 metres in width and occasionally expand up to 17 metres wide. The distance between the veins ranges from 15 to 50 metres. Gold distribution is extremely irregular, with the highest reported grades resulting from two separate channel samples, both of which were collected from Vein No 1, of 6,322.2 g/t over 0.1 metres and 2,678.2 g/t over 0.5 metres.
Golden Reign believes that the property has potential for a low-grade bulk tonnage gold deposit. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.
The first phase of exploration was designed to map the mineralized zones and to test whether the gold mineralization is restricted solely to quartz veins and veinlets, or whether mineralization occurs in the surrounding host rocks. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.
The company has established an exploration camp, mobilized equipment and upgraded an existing access road. It has built a new two-km road to provide access to previously untested mineralized zones within the property boundaries. Comprehensive geological mapping, including reconnaissance traverses, and grab sampling have been completed. Assay results are pending and will be released as they become available.
Magadan, one of the world's richest mining areas, has about 2,000 placer gold deposits, 100 gold ore deposits and 48 silver deposits. Total probable gold reserves in the Magadan Oblast are estimated at 4,000 tons (128,000,000 ounces).
Pudar, who has been active in Russia for over 10 years, is a graduate of the University of Tuzla, Bosnia and Herzegovina in the former Yugoslavia. He worked at the Geoinstitute of Sarajevo, Bosnia, and for several Canadian public and private companies involved in mineral property exploration.
In late Summer, work also began on Golden Reign’s Butarni property, 9.3 square km situated approximately 310 km north of Magadan, the capital city of the province. It is underlain by clastic sediments, which have been intruded by a biotite granite stock with dimensions of approximately 3.0 km x 1.6 km. Five known mineralized quartz vein zones are outlined within the stock, with a length ranging from 700 metres to 1,500 metres. Major veins are between 0.1 and 1.5 metres in width, 100 to 150 metres in length and are accompanied by zones of parallel quartz veinlets. Previous grab and channel sampling returned values from 1 g/t to 334.4 g/t, with an average grade of 21.3 g/t gold from 45 selected grab samples and 29.6 g/t gold from 22 channel samples.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
Golden Reign Resources Discovers Potential New Gold Zone in Russian River Bed
By John Hurst
October 15, 2007
When Zoran Pudar returned to his Vancouver head office this week, his briefcase contained lots of good news about the ongoing exploration program on the company’s two prospective gold properties located in Far East Russia – across the Bering Strait from Alaska. The vice-president of exploration for Golden Reign Resources Ltd. (TSX-V: GRR) was returning from a field visit to the company’s properties. At the Dorozhni property, which covers 8.8 square km, gold mineralization is thought to be the source of 150,000 ounces of historically mined placer gold.
“In approximately two weeks time, I expect to receive assay results for samples collected during my visit to the properties,” he told Resourcex Investor on Thursday, “and we are still collecting some samples from the Butarni property. In total, 18 samples were sent to Alex Stewart (Assayers) Ltd., a British lab in Moscow.”
The Russian government has limited research data on the properties in the Magadan Region, under agreement to Golden Reign and more extensive information has been coming out only in recent weeks. Most of the work had been done following World War II and in the late 1980s. The property is held under a 20-year comprehensive exploration-mining licence.
“From what we know about the Dorozhni property,” Pudar said, “they were chasing some high-grade quartz veins. Typically, the gold is coarse. I had a chance to spend several days there and focused on the eastern part of the property where we have recently completed 1.5 km of trenching. We sampled some of those veins, which in 1946 had yielded over six kilos of gold (approx. 20 ounces).”
He said that high-grade gold mineralization occurs at the intersection of northwest orientated structures and the intrusive, hosting quartz veins. Of particular interest is the newly exposed mineralized sediments and breccia zone discovered in a river bed.
Pudar says that this newly discovered breccia zone appears to be 50 by 70 metres wide. “It is the type of target I was looking for. In fact, I brought home some really nice samples, just for show and tell. This new zone has really great potential, but the riverbed has to be totally exposed and properly sampled. There is rich sulphide mineralization within the zone, which is often associated with gold. This zone is considered a primary target for continued exploration.”
The first phase of exploration at the Dorozhni property was initiated this fall. Dorozhni, one of Golden Reign’s two highly-prospective gold properties at Magadan, is located at the headwaters of Dorozhni Creek. Previous exploration work focused on identifying and testing five separate gold-mineralized quartz veins at or near surface. The veins, which have been traced for 380 metres along strike, average between 0.4 to 2.4 metres in width and occasionally expand up to 17 metres wide. The distance between the veins ranges from 15 to 50 metres. Gold distribution is extremely irregular, with the highest reported grades resulting from two separate channel samples, both of which were collected from Vein No 1, of 6,322.2 g/t over 0.1 metres and 2,678.2 g/t over 0.5 metres.
Golden Reign believes that the property has potential for a low-grade bulk tonnage gold deposit. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.
The first phase of exploration was designed to map the mineralized zones and to test whether the gold mineralization is restricted solely to quartz veins and veinlets, or whether mineralization occurs in the surrounding host rocks. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.
The company has established an exploration camp, mobilized equipment and upgraded an existing access road. It has built a new two-km road to provide access to previously untested mineralized zones within the property boundaries. Comprehensive geological mapping, including reconnaissance traverses, and grab sampling have been completed. Assay results are pending and will be released as they become available.
Magadan, one of the world's richest mining areas, has about 2,000 placer gold deposits, 100 gold ore deposits and 48 silver deposits. Total probable gold reserves in the Magadan Oblast are estimated at 4,000 tons (128,000,000 ounces).
Pudar, who has been active in Russia for over 10 years, is a graduate of the University of Tuzla, Bosnia and Herzegovina in the former Yugoslavia. He worked at the Geoinstitute of Sarajevo, Bosnia, and for several Canadian public and private companies involved in mineral property exploration.
In late Summer, work also began on Golden Reign’s Butarni property, 9.3 square km situated approximately 310 km north of Magadan, the capital city of the province. It is underlain by clastic sediments, which have been intruded by a biotite granite stock with dimensions of approximately 3.0 km x 1.6 km. Five known mineralized quartz vein zones are outlined within the stock, with a length ranging from 700 metres to 1,500 metres. Major veins are between 0.1 and 1.5 metres in width, 100 to 150 metres in length and are accompanied by zones of parallel quartz veinlets. Previous grab and channel sampling returned values from 1 g/t to 334.4 g/t, with an average grade of 21.3 g/t gold from 45 selected grab samples and 29.6 g/t gold from 22 channel samples.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
This is a board for discussing various ways of investing in the Gold industry and creating a profitable portfolio of Gold Stocks. This room has been expanded to include other precious metals, particularly Silver.
Press or news releases for companies of all sizes, e.g., exploration, junior mining and large producers, are welcomed.
Articles pertaining to recent developments and trends that affect the price of gold and silver are included. For example, the dollar and other currencies reflect the value of gold. The Petrodollar is another gold measurement.
Silver and platinum are also precious metals that run in stride with gold and should or will be presented on this board.
Below are relevant links and related charts.
[chart]kitconet.com/images/quotes_7a.gif[/chart]
LINKS:
A Beginner's Guide To Investing In Gold
http://www.moneyweek.com/file/23315/a-beginners-guide-to-investing-in-gold.html
THE GOLDEN KEY
http://www.investorshub.com/boards/read_msg.asp?message_id=19976151
Bill Cara On Gold
http://www.billcara.com/gold/
GoldSeek.com
http://www.goldseek.com/
SilverSeek.com
http://www.silverseek.com/
Junior Mining Companies: Other People's Money
http://biz.yahoo.com/seekingalpha/070220/27435_id.html?.v=1
Financial Sense Online resource Page: Precious Metals
http://www.financialsense.com/metals/main.htm
Financial Sense Big Picture Archive
http://www.financialsense.com/fsn/2007.html
Financial Sense Newshour Roundtable Archive
http://www.financialsense.com/Experts/roundtable/archive.html
GoldRadio.fm & Howe Street Video
http://www.howestreet.com/
Gold Statistics and Information
http://minerals.usgs.gov/minerals/pubs/commodity/gold/
Invest.com - Gold Section
http://www.investcom.com/moneyshow/gold.htm
Invest.com - Silver Section
http://www.investcom.com/moneyshow/silver.htm
The MMI Theory - What is MMI Geochemistry
http://www.mmigeochem.com/theory.htm
Alternative Measures of Labor
http://www.bls.gov/news.release/empsit.t12.htm
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