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cl001 - AGT $.50
I am saying $.50 in the next 7 trading days is a BIG annualized return for us. I am with you on the longer term $2+ with these gold prices. I sold my WGW and took the AGT gift this morning, now I am topped off.
Do you remember EuroZinc warrant overhang??? I missed the first run on EuroZinc and then the warrants were triggered, it gave me time to load up 100,000's of shares and then it took off. Either way $.50 would just be a foundation for the Apollo launch pad!!!!!!!!!!!!!!!!!!!!
Kipp
AGT Warrants
So it looks like a tug of war will develop between the warrant holders and the rest of us. On one hand a move to $.50 in 2 weeks would be a BIG gain for all of us. On the otherhand if the warrant holders flip them it will cap us around $.50 while the new issue gets digested. The bad news for everyone if it closes above $.50 is DILUTION. This will be interesting to watch!
Thanks for the info.
Kipp
cl001 - AGT - SMC
I have been out of the country for a week and a half and I'm trying to get caught up on everything this morning. Can you help me understand the details of the AGT warrents?
I also think you said that SMC was going to be out soon with new reserve numbers for Orosi?
I am going to try to get all of the posts on the VMC boards read by tonight.
Thanks for all of your hard work! You have been on fire!
Kipp
I want to add Silver to the list. My pick is FR.TO. Kipp
nsomniyak - I looked at GIX and it looks ok, just a lot riskier than some of our more sure bets. One thing I was digging for and could not find was permit information. Do you have this information so I can cut to the chase.
The big problem for GORO is the lack of the most important permit of all. No permit, no mining, no mining, no revenue, no revenue = BROKE!
Kipp
"King Midas"!
Guys - SMC - I need help selling, buying is a lot easier than selling. Right now my plan is to let the market take me out.....BUT, when SMC gets bought by another Jr., that Jr could get taken out by a mid-sized or major miner. I feel that I need to sit in this longer to see the Orosi reserve update. Gold also looks like it is going to give us a tale wind for a while. Perhaps one of the larger miners won't be able to stand watching a Jr. become a mid-sized miner with $1200+ gold.
What to do......kind of like the dog chasing the bus......now I caught the bus and it stopped.
There are worse problems to have!
Kipp
SMC - My plan is going to be to let the market take me out of SMC. I have all of my shares (250k) and I'm just going to go along for the ride. I see a "Pac-Man" game coming to the Jr Mining sector. The companies that have large workable projects at $800 gold will survive and will be taken out by the mid size and possibly the majors. Kinross and Yamana have announced that they are in the hunt.
Now we just need to find the next SMC!
Good Luck Guys!
THANKS cl001.....you ARE the man!!!! Thanks to Bobwins to for founding VMC and contributing awesome investing ideas!
Kipp
nuts - gas vs. electric
My son bought a 2000 Jeep Cherokee 4x4 SUV last week. He paid $3200 for it. It is in great shape and will run for another 9 years no problem. When comparing the cost of a new vehicle of any type, it is not hard to see that gas burning vehicles will be with us for a very long time. He will probably burn 400 gallons of gas per year. It will take gas prices back in the $5/gallon plus range to get people to opt for something other than todays choices.
Kipp
Thanks cl001! I like longer term buy and mold candidates better than day trading. I am getting close to fully invested again. I bought more WGW and SMC over the past 24 hrs. Eyeing mor FR.TO. Lots of talk of Mexican instability/political risk makes me hesitant. What do you think about investing in Mexico? The Peso is really week, this makes expenses really low for Mexican miners.
Kipp
cl001 - GORO - SMC
I know the situation with GORO and getting the final permits. Have you looked into Orosi permits? Is everything 100% secure in the permit area at Orosi?
Thanks!
Kipp
Anyone buying SMC, WGW, GORO ???? on weakness today?
New Guinea Gold Corporation: Gold Production at Sinivit Increases to 3,560 Ounces in Q4 Triple Q3 Production Levels
Wednesday January 14, 2009, 9:30 am EST
Yahoo! Buzz Print VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 14, 2009) - New Guinea Gold Corporation (TSX VENTURE:NGG - News; FRANKFURT:NG8 - News) -
Gold production at the Sinivit Mine (92% NGG) in East New Britain, Papua New Guinea for the fourth quarter 2008 was 3,560 ozs plus 633 ozs silver up from 1,170 ozs gold and 243 ozs silver in the third quarter and as against forecast production for the fourth quarter in the Management and Discussion Analysis (MD & A) of 3,500 ozs gold.
The above production represents gold produced to mid December only - no gold was produced in the second half of December due to security reasons and Christmas / New Year holiday period. Vat leaching and deposition of gold onto carbon continued throughout the whole month with gold leached, or on carbon, in the second half of December expected to report to the January production figure.
The first tranche of the CAD$3 million Convertible Note Issue closed in late December 2008 at CAD$2,438,000 (net to NGG of CAD$2,186,995 after all costs). The remainder of the CAD$3 million offering is expected to close in late January 2009. These funds will be used in part to strengthen NGG's balance sheet and to provide funds to increase processing capacity and thus gold production to 8,500 ozs per quarter by third quarter 2009.
Forecast production for 2009 remains as stated in the September quarter MD & A - 4,500 ozs in quarter one, 2009; 7,000 ozs in quarter two, 2009; 8,500 ozs in quarter three, 2009; and 8,500 ozs in quarter four, 2009. These figures remain achievable provided the process upgrade can be completed as scheduled by end of first quarter 2009.
Cash at the end of December was approximately AUD$4.2 million after repayment in December of AUD $0.6 million (approximately) to the Bank of South Pacific.
In view of the Company's strengthened cash position, and expected gradual increase in gold production, drilling will commence/recommence at several projects over the next few months including NGG's 100% Weioko Project (Sehulea Property), 100% Imwauna Project (Normanby Property), Pacific Kanon's Mt Penck (NGG 60%) and Allemata (NGG 50%) Projects. NGG and Pacific Kanon own and operate 6 diamond core drill rigs and one RC/diamond combined drill rig. NGG's associate company, Coppermoly Ltd owns and operates a further 2 diamond core drill rigs.
Investors are cautioned that the development of Sinivit is proceeding in the absence of a full feasibility study. These evaluations are preliminary in nature and are based entirely on indicated mineral resources, which have not been categorized as mineral reserves. There is no assurance that the operating and financial projections in the preliminary assessment will be realized. Mineral resources that are not reserves do not have demonstrated economic viability. Measured and indicated mineral resources are that part of a mineral resource of which quantity and grade can be estimated with a level of confidence sufficient to allow the application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit.
Full details of the Sinivit Project are described in an Independent N1 43-101 report dated January 2006 which is available at www.newguineagold.ca.
For further information on this release or on other NGG projects contact Forbes West toll free at 888 655 5532, email forbes@sherbournegroup.ca or Judith O'Quinn at 604 662 3598, email ngg@telus.net or access our website - www.newguineagold.ca.
ON BEHALF OF THE BOARD
R.D. McNeil, CHAIRMAN & CEO
The statements made in this News Release may contain certain forward-looking statements. Actual events or results may differ from the Company's expectations. Certain risk factors may also affect the actual results achieved by the Company.
The TSX Venture Exchange has not reviewed and does not accept the responsibility of the adequacy of this release.
GoldenKnight - Crosshair
I do not follow uranium. Can you tell us in a few words what we should look for in Crosshair?
Thanks,
Kipp
Short U.S. Treasuries Long Gold/Platinum would be a better play.
Does anyone follow platinum stocks. I know a lot of the platinum comes from South Africa and I refuse to invest in any African stocks.
Thanks,
Kipp
TXCO busting out with great volume. I think the $40 level in oil should hold. A dead cat bounce in oil should get it into the mid $60's.
Kipp
cl001 - What is your latest feeling on SMC?
nsom, Jr Canadian miners have been totally destroyed. I think the survivors will be up 5x, 10x, 20x. If gold hits $1200+ look out.
GBG, GSS, SMC, NG, are a few.
Kipp
SMC survival guaranteed through June. Now all we need is for gold to break out into the $1000+ range in the first half and we could have a multi bagger on our hands. That would be a refreshing change!
What do you all think?
Kipp
Central Sun Corporate Update
12/24/2008 9:47:27 AM - Market Wire
TORONTO, ONTARIO, Dec 24, 2008 (Marketwire via COMTEX News Network) --
Central Sun Mining Inc. (TSX:CSM)(NYSE ALTERNEXT US:SMC) ("Central Sun" or "CSM") is pleased to provide the following update. The term of its US$8.0 million loan has been extended to March 9, 2009 with an option to extend to June 8, 2009. In consideration for such extensions, CSM has agreed to pay a cash fee and to issue 1,000,000 CSM common shares. In addition, CSM has agreed to amend 300,000 currently outstanding common share purchase warrants held by the lender to change the exercise price of CDN$1.99 per share to CDN$0.14 per share. The warrants will be amended effective on the 10th business day following the date hereof. Extending the loan to June 8, 2009 would require an additional cash fee and the issuance of an additional 1,000,000 CSM common shares. The lender is an arm's-length party of CSM.
Last Day For Canadian Tax Loss Selling.
Housing Bubble Video had me in TEARS!
FR.TO News
http://biz.yahoo.com/iw/081223/0462534.html
This newly updated report with a cut-off date of September 30, 2008, has resulted in a significant increase in overall Resources at La Encantada. Total Proven & Probable Reserves have increased by 183%, while Total Measured and Indicated Resources declined by 17% due to upgrading some of those Resources to Reserves and Total Inferred Resources increased by 51%.
La Encantada Silver Mine is located in northern Mexico, in the northern part of the physiographic province of the Sierra Madre Oriental in the NW portion of the State of Coahuila. It is located in the municipality of Ocampo, at about 120km to the N60 degrees W from the city of Muzquiz, and 120km to the N7 degrees W from the city of Ocampo, Coahuila. The La Encantada consists of the mine, mill and plant facilities, housing, recreation centre, church, hospital, restaurant, store and associated structures including an airstrip.
For the period between November 1, 2007 and September 30, 2008 the Company completed an exploration program consisting of; Underground Development including, access ramps, drifts, crosscuts, raises and drill sites totalling 6,144 meters. Underground Drilling consisted of 29 holes totalling 6,660 meters. In addition, a 50km line Geophysics Program confirmed previously defined anomalies for future exploration at La Encantada.
During the recently completed exploration program a new mineralized zone was discovered at the 1790 mine level. This zone has been named the Buenos Aires zone and has been defined 15 drill holes resulting in about 850,000 tonnes of Resources at an average grade of 339 g/tonne Ag and 0.6% Pb, containing approximately 13.4 million ounces of silver equivalent which has been included in the Indicated and Inferred category. Drilling and development is presently ongoing in this area.
Construction of the new cyanidation plant with a capacity of 3,500 tonnes per day continues and is progressing well. The plant will process the ore and dump rock that is currently processed through the flotation plant in conjunction with reclaimed tailings. The plant is scheduled to commence operation in April 2009. Once completed, the new plant will produce 4,000,000 ounces of silver in the form of Dore on an annualized basis.
The following summary tables were taken from the
Yikes! AGT will struggle with that selling. What is the latest on NG financing?
Kipp
Link to where I watch the USD index
I like this link because it automatically updates every few minutes.
http://quotes.ino.com/chart/?s=NYBOT_DX&v=w&w=60&t=c&a=0
Kipp
Bobwins
SMC, GBG, GSS
GORO is interesting but needs the final permits as I recall. Any word on permits of late?
I still like FR.TO, MFN for silver. GPR.TO on watch.
We need these metal prices to get up and get on to new highs.
What does your list look like?
Kipp
Plan for the next 2.5 trading days
I think buying beaten down (obliterated) Jr. gold stocks may pay off as we exit 2008. There are only 2.5 trading days for Canadian traders to book tax loses due to the tax law requiring sales to be "settled". On Friday, a bunch of stocks were taken out of the indexes causing more dumping. I think the gold price may also dip as the dollar bounces a bit.
What do fellow VMC'ers think?
Kipp
GBG and GSS rug pull.
What do we make of the last minute dumps of GSS and GBG. The trades went off at very large volumes. Hedge fund dumping? I can't make sense of the action.
Anyone have any explanation?
Kipp
Matt - I think it is quite possible it can get cheaper. Not sure about how "much" cheaper if they are making money. I own some "much" higher, and got more in the $2's to average down. A buyout offer can't be discounted either.
OT - Where did you catch the Tuna, Rooster, and Dorado I have seen in your posts? I am a habitual fisherman. I commercial fished in Kodiak, AK for 8 years and keep a sport fishing boat there. My son works on a dock at a Canadian resort in Western Ontario. We leave for a 10 day Cabo trip the day after X-mas. Cheap diesel and jet fuel are a good thing and I will be taking full advantage. I just wonder how long it will last?
Happy Holidays and Good Luck!
Kipp
cl001 - Here comes another pull back in gold and silver. This could help us accumulate some of your favorite Jr's. Are these your feelings on some of your favorites:
SMC - Strong buy today.
AGT - Accumulate on tax loss selling and a major holder being forced to liquidate.
NG - Will you buy the pull back?
What other stocks do you like on this pull back?
And what are your thoughts on silver? What do you think about First Majestic? Is Aurcana off of your list?
I appreciate your input and hard work on the metal and energy stocks. You are a great contributor here and it is appreciated!
Thanks!
Kipp
cl001 - POE may get their wish for oil in the 20's! They may be able to make some great aquisitions for next to nothing in the months to come. There are not many little oil companies that will survive oil in the 20's if it lasts very long. At some point, oil we blast off again.
Kipp
"Fail to bail" auto makers just announced.
50 BILLION DOLLAR PONZI SCHEME
Are you kiddin me????????
This could really trash the market, bust more hedge funds, trigger credit default swaps. I wonder what they invested the $17,000,000,000 in.
Not good.
Kipp
Madoff arrested in alleged Ponzi scheme
Ex-Nasdaq chairman, investor charged with securities fraud, FBI says
By Alistair Barr & Ronald D. Orol, MarketWatch
Last update: 8:48 p.m. EST Dec. 11, 2008Comments: 117SAN FRANCISCO (MarketWatch) -- Bernard Madoff, former Nasdaq Stock Market chairman and founder of Bernard L. Madoff Investment Securities LLC, was arrested and charged with securities fraud Thursday in what federal prosecutors called a Ponzi scheme that could involve losses of more than $50 billion.
Madoff, 70, of New York, was charged with one count of securities fraud, according to a statement from the Acting U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation.
The Securities and Exchange Commission filed a complaint in federal court in Manhattan seeking an asset freeze and the appointment of a receiver for the firm run by Madoff.
"We are alleging a massive fraud, both in terms of scope and duration," said SEC Enforcement Bureau director Linda Thomsen in a statement. "We are moving quickly and decisively to stop the fraud and protect remaining assets for investors, and we are working closely with the criminal authorities to hold Mr. Madoff accountable."
Madoff did not enter a plea or make any comment during a court hearing Thursday evening, according to The Wall Street Journal. He was expected to be released after agreeing to post a $10 million bond secured by his Manhattan apartment.
A preliminary hearing was scheduled for Jan. 12.
"Bernard Madoff is a longstanding leader in the financial services industry with an unblemished record," Dan Horwitz, a lawyer for Madoff, told the Journal. "He is a person of integrity. He intends to fight to get through this unfortunate event."
Madoff's firm is known as securities broker dealer, but he also runs a separate investment advisory business which had more than $17 billion in assets under management, federal authorities said, citing two unidentified employees and a Securities and Exchange Commission filing.
Madoff counted several large hedge fund investment firms as clients, along with some European banks, so if his firm has lost more than $50 billion, the impact could be widespread.
On Wednesday, Madoff told two senior employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme," federal prosecutors said in their statement.
According to a criminal complaint filed on Thursday and cited by the Journal, Madoff "deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars."
Madoff also said his business was insolvent, and that it had been for years, estimating losses to be at least $50 billion, prosecutors alleged, again citing the two unidentified employees.
According to the complaint, Madoff told one of his senior employees that clients were seeking about $7 billion in redemptions and that "he was struggling to obtain the liquidity necessary to meet those obligations." The employees believed the firm had about $17 billion under management.
Earlier this week, Madoff also allegedly told an employee that he wanted to pay bonuses to employees this month-- earlier than usual. Later, two employees who met with Madoff at his apartment were told that the business was a giant Ponzi scheme, which they took to mean that Madoff "for years been paying returns to investors out of principal received from other, different investors." Madoff allegedly told those employees that the firm was insolvent, according to the complaint.
Eric Sprott says it all!
It’s the end of the world as we know it.
It’s the end of the world as we know it.
It’s the end of the world as we know it and I feel fine.
- R.E.M.
It may not be the end of the world, but it likely is the end of the world as we knew it.
However, unlike the members of the band R.E.M., there’s nothing to feel fine about.
Especially for those who make their living in the financial sector. At the risk of sounding like
doomsayers, we don’t believe the heady days of disproportionate wealth creation through
finance, for the sake of finance, are ever coming back. The prevailing hope that things will
eventually return to normal on Wall Street, Bay Street, London, and the other financial
centers of the world is, we believe, nothing but wishful thinking. Those days are over, never
to return in the form that we knew them.
For what is ‘normal’? Were the decades of the 1990’s and 2000’s, which witnessed
unprecedented prosperity in the financial sector, normal? Logic dictates that the answer is
no. As we’ve been opining for a number of years, there was “too much finance”. 1 So much
so that the “financial system was a farce”. 2 The financial sector became far too large in
relation to the real economy. The compensation of those who worked in the financial sector
became increasingly disproportionate, and abhorrently so, relative to the wages being
earned in the real economy making real things. Too many financial instruments were being
derived on other financial instruments, becoming too far removed from anything that even
remotely resembled real assets or real economic activity. These were abnormal times, and
were therefore unsustainable times. The heyday of finance was nothing more than a
pyramid scheme, only viable until it was unable to reel in the last sucker. The world has
finally come to the realization that pushing paper to other paper pushers for the sake of
paper pushing doesn’t, in fact, constitute real value-added economic activity. The myth of
the financial system as an unbridled source of wealth has been exposed.
The pyramid has crumbled and the world is now a different place. The solutions that worked
in the past aren’t working this time. In the past, financial crises were ‘solved’ by throwing
money at the financial system. Although more money by far has been thrown at this crisis
than at any other in history, it just doesn’t seem to make an iota of difference. Not for the
financial system (except to delay the ultimate day of reckoning), and certainly not for the
economy.
From the standpoint of the financial system, the need for massive bailouts (most recently
$300+ billion for Citigroup and the announcement of a new $800 billion TARP 2) continues
unabated in spite of all the ‘solutions’ that have already been adopted, such as sharp rate
cuts, aggressive unconventional monetary policy measures, central banks around the world
taking the role of buyers and guarantors of last resort, and numerous other lifelines that have
been extended to save the banking system. Furthermore, previously announced bailouts
(AIG being the prime example) seem to require a bottomless pit of government funding to
keep afloat. The price tag of the AIG bailout seems to increase with the passage of time,
initially $85 billion… now $150 billion. Nor have the ‘solutions’ made an iota of difference
from the standpoint of the economy. For over a year now, central bank rate cuts haven’t
done a thing to lower borrowing costs for individuals or corporations, let alone increase the
availability of lending. The real rates of interest for anything other than government bonds
has gone through the roof. In spite of all the financial stimulus, the global economy
continues to flounder and worsen with each passing month. It wouldn’t be a stretch to say
that of the trillions of dollars spent globally trying to prop up the financial sector, not even a
dollar has made its way into the real economy. As far as we can recall, never have such
aggressive financial measures been met with such a tepid economic response.
Everything that has been tried to date has backfired. Why? We believe it’s because all the
solutions thus far have focused on trying to save the financial system, but all the financial
system has done in return is suck more and more money into the vortex. Too many
resources are being wasted trying to prop it up, financial and political. Perhaps it’s high time
to let the financial system go and leave it to a market-determined fate. Papering over
losses, or refusing to recognize them, or having governments buy toxic assets that no one
else wants, doesn’t seem to change the fact that losses are losses. Like we said, it’s the
end of the world as we knew it. When the facts change, the solutions need to change as
well.
We posit that any real, effective solution needs to concentrate on the real economy.
Therefore, first and foremost, greater efforts need to be made to save the economy, not the
financial sector. Only the economy can turn the financial sector around and make it
prosperous, not the other way around. Finance, at its foundation, should always be, and
has historically always been, a support industry of the real economy. Therefore, ideally, it
should be peripheral to the economy and not the main component of it. It should never have
been allowed to become the monstrosity that it was over the past decade.
In this context, the G20 needs to pool their resources to support the real economy. They
need to concentrate on what works. Supporting the financial sector doesn’t work. We
believe that supporting commodity prices will. We realize that that the solution we propose
is ‘talking our own book’, but it is our book because it is what we believe in. By now it should
be clear that plunging commodity prices, thereby cutting the output of real things, is not the
ticket to global economic recovery.
To be sure, this would be an unconventional idea. One that many of our readers will
doubtless disagree with. But unconventional times require unconventional measures. Many
would argue that the crashing of commodity prices is actually a good thing for the global
economy. We beg to differ. The only thing it’s done is create an environment where
absolutely nothing works from an economic or investment point of view. Not financials. Not
commodities. Nothing. When the financial pyramid scheme started to unwind in early 2007,
at least there were segments of the real economy that were still expanding, providing
employment, profits, and investment opportunities. Nowadays nothing is working and the
world as a whole is poorer for it.
The problem with the world today, and what is making the financial crisis worse, is that it is
in a deflationary death spiral, led by the plunge in commodity prices. It’s a negative
feedback loop that is difficult to reverse once it gets started. It’s affecting everything on the
aggregate demand side of the economic equation, including all-important consumer
spending. As is well known, consumers are disinclined to spend when there is deflation.
The world is in desperate need of some inflation, and it needs it now. We’re not talking
about destructive hyperinflation, which can only occur from out of control monetary policies,
but rather the reversal of the negative vortex that commodity price deflation is causing
throughout the world. In the current environment, inflation would be good. Inflation would
make the repayment of debts and mortgages less onerous. Inflation would help turn around
plunging housing prices. Inflation would put a sail under the stock markets. Inflation would
help get new projects, which have been mothballed due to falling prices, restarted.
In this regard, infrastructure projects are a great idea from a policy standpoint, and are being
adopted the world over. They stimulate the real economy and help reverse the deflation that
the flailing financial sector is unable to do. Unfortunately, projects of this magnitude will take
a year or more before they have any real economic impact. A quicker solution is to stop the
decline in commodity prices now. It’s a short term yet, we believe, effective solution for what
ails the world today. Longer term, of course, governments should have no involvement in
commodity markets, letting free markets decide. But right now, to quell deflation, the G20
should be thinking of buying commodities, even if it means stockpiling them.
We believe this would be a far more effective, and much cheaper, solution than the trillions
of taxpayer dollars currently being squandered on the white elephant that is the financial
sector with its glut of toxic assets. We believe that going forward, the financial sector won’t
be as important as the real economy. The future, as we see it, will return to normalcy, where
real economic activity dwarfs financial activity. In the interim, there is a global economic
crisis to deal with. One of the solutions to this crisis, with a greater likelihood of working than
any that have been tried thus far, is to reverse the deflationary impact of falling commodity
prices and save the real economy today.
Eric Sprott says it all!
It’s the end of the world as we know it.
It’s the end of the world as we know it.
It’s the end of the world as we know it and I feel fine.
- R.E.M.
It may not be the end of the world, but it likely is the end of the world as we knew it.
However, unlike the members of the band R.E.M., there’s nothing to feel fine about.
Especially for those who make their living in the financial sector. At the risk of sounding like
doomsayers, we don’t believe the heady days of disproportionate wealth creation through
finance, for the sake of finance, are ever coming back. The prevailing hope that things will
eventually return to normal on Wall Street, Bay Street, London, and the other financial
centers of the world is, we believe, nothing but wishful thinking. Those days are over, never
to return in the form that we knew them.
For what is ‘normal’? Were the decades of the 1990’s and 2000’s, which witnessed
unprecedented prosperity in the financial sector, normal? Logic dictates that the answer is
no. As we’ve been opining for a number of years, there was “too much finance”. 1 So much
so that the “financial system was a farce”. 2 The financial sector became far too large in
relation to the real economy. The compensation of those who worked in the financial sector
became increasingly disproportionate, and abhorrently so, relative to the wages being
earned in the real economy making real things. Too many financial instruments were being
derived on other financial instruments, becoming too far removed from anything that even
remotely resembled real assets or real economic activity. These were abnormal times, and
were therefore unsustainable times. The heyday of finance was nothing more than a
pyramid scheme, only viable until it was unable to reel in the last sucker. The world has
finally come to the realization that pushing paper to other paper pushers for the sake of
paper pushing doesn’t, in fact, constitute real value-added economic activity. The myth of
the financial system as an unbridled source of wealth has been exposed.
The pyramid has crumbled and the world is now a different place. The solutions that worked
in the past aren’t working this time. In the past, financial crises were ‘solved’ by throwing
money at the financial system. Although more money by far has been thrown at this crisis
than at any other in history, it just doesn’t seem to make an iota of difference. Not for the
financial system (except to delay the ultimate day of reckoning), and certainly not for the
economy.
From the standpoint of the financial system, the need for massive bailouts (most recently
$300+ billion for Citigroup and the announcement of a new $800 billion TARP 2) continues
unabated in spite of all the ‘solutions’ that have already been adopted, such as sharp rate
cuts, aggressive unconventional monetary policy measures, central banks around the world
taking the role of buyers and guarantors of last resort, and numerous other lifelines that have
been extended to save the banking system. Furthermore, previously announced bailouts
(AIG being the prime example) seem to require a bottomless pit of government funding to
keep afloat. The price tag of the AIG bailout seems to increase with the passage of time,
initially $85 billion… now $150 billion. Nor have the ‘solutions’ made an iota of difference
from the standpoint of the economy. For over a year now, central bank rate cuts haven’t
done a thing to lower borrowing costs for individuals or corporations, let alone increase the
availability of lending. The real rates of interest for anything other than government bonds
has gone through the roof. In spite of all the financial stimulus, the global economy
continues to flounder and worsen with each passing month. It wouldn’t be a stretch to say
that of the trillions of dollars spent globally trying to prop up the financial sector, not even a
dollar has made its way into the real economy. As far as we can recall, never have such
aggressive financial measures been met with such a tepid economic response.
Everything that has been tried to date has backfired. Why? We believe it’s because all the
solutions thus far have focused on trying to save the financial system, but all the financial
system has done in return is suck more and more money into the vortex. Too many
resources are being wasted trying to prop it up, financial and political. Perhaps it’s high time
to let the financial system go and leave it to a market-determined fate. Papering over
losses, or refusing to recognize them, or having governments buy toxic assets that no one
else wants, doesn’t seem to change the fact that losses are losses. Like we said, it’s the
end of the world as we knew it. When the facts change, the solutions need to change as
well.
We posit that any real, effective solution needs to concentrate on the real economy.
Therefore, first and foremost, greater efforts need to be made to save the economy, not the
financial sector. Only the economy can turn the financial sector around and make it
prosperous, not the other way around. Finance, at its foundation, should always be, and
has historically always been, a support industry of the real economy. Therefore, ideally, it
should be peripheral to the economy and not the main component of it. It should never have
been allowed to become the monstrosity that it was over the past decade.
In this context, the G20 needs to pool their resources to support the real economy. They
need to concentrate on what works. Supporting the financial sector doesn’t work. We
believe that supporting commodity prices will. We realize that that the solution we propose
is ‘talking our own book’, but it is our book because it is what we believe in. By now it should
be clear that plunging commodity prices, thereby cutting the output of real things, is not the
ticket to global economic recovery.
To be sure, this would be an unconventional idea. One that many of our readers will
doubtless disagree with. But unconventional times require unconventional measures. Many
would argue that the crashing of commodity prices is actually a good thing for the global
economy. We beg to differ. The only thing it’s done is create an environment where
absolutely nothing works from an economic or investment point of view. Not financials. Not
commodities. Nothing. When the financial pyramid scheme started to unwind in early 2007,
at least there were segments of the real economy that were still expanding, providing
employment, profits, and investment opportunities. Nowadays nothing is working and the
world as a whole is poorer for it.
The problem with the world today, and what is making the financial crisis worse, is that it is
in a deflationary death spiral, led by the plunge in commodity prices. It’s a negative
feedback loop that is difficult to reverse once it gets started. It’s affecting everything on the
aggregate demand side of the economic equation, including all-important consumer
spending. As is well known, consumers are disinclined to spend when there is deflation.
The world is in desperate need of some inflation, and it needs it now. We’re not talking
about destructive hyperinflation, which can only occur from out of control monetary policies,
but rather the reversal of the negative vortex that commodity price deflation is causing
throughout the world. In the current environment, inflation would be good. Inflation would
make the repayment of debts and mortgages less onerous. Inflation would help turn around
plunging housing prices. Inflation would put a sail under the stock markets. Inflation would
help get new projects, which have been mothballed due to falling prices, restarted.
In this regard, infrastructure projects are a great idea from a policy standpoint, and are being
adopted the world over. They stimulate the real economy and help reverse the deflation that
the flailing financial sector is unable to do. Unfortunately, projects of this magnitude will take
a year or more before they have any real economic impact. A quicker solution is to stop the
decline in commodity prices now. It’s a short term yet, we believe, effective solution for what
ails the world today. Longer term, of course, governments should have no involvement in
commodity markets, letting free markets decide. But right now, to quell deflation, the G20
should be thinking of buying commodities, even if it means stockpiling them.
We believe this would be a far more effective, and much cheaper, solution than the trillions
of taxpayer dollars currently being squandered on the white elephant that is the financial
sector with its glut of toxic assets. We believe that going forward, the financial sector won’t
be as important as the real economy. The future, as we see it, will return to normalcy, where
real economic activity dwarfs financial activity. In the interim, there is a global economic
crisis to deal with. One of the solutions to this crisis, with a greater likelihood of working than
any that have been tried thus far, is to reverse the deflationary impact of falling commodity
prices and save the real economy today.
Len - They now have 3x levered ETF's !
Check this out:
http://etf.stock-encyclopedia.com/category/triple-leveraged-etfs.html
Energy Bear 3X - Triple-Leveraged ETF (ERY)
Energy Bull 3X - Triple-Leveraged ETF (ERX)
Financial Bear 3X - Triple-Leveraged ETF (FAZ)
Financial Bull 3X - Triple-Leveraged ETF (FAS)
Large Cap Bear 3X - Triple-Leveraged ETF (BGZ)
Large Cap Bull 3X - Triple-Leveraged ETF (BGU)
Small Cap Bear 3X - Triple-Leveraged ETF (TZA)
Small Cap Bull 3X - Triple-Leveraged ETF (TNA)
Just when you thought you had seen it all!
Kipp
cl001 - Do you have a list of gold and silver producers ranked by production cash cost, debt, reserves, etc.
The Canadian Dollar is really weak, the US Dollar very strong and may also help to add value when they both go the other way.
I will also look for a list and publish what I find here.
Thanks,
Kipp
Delayed energy investment disturbing
Claudia Cattaneo, Financial Post
Published: Thursday, November 13, 2008
Four months into an oil bear market that, for those associated with the energy sector, gets more challenging by the day, the International Energy Agency issued a wake-up call yesterday:
The world's energy supply crunch hasn't gone away, even though it's hard to tell from today's depressed energy prices.
Indeed, once the dust settles from the financial crisis, the Paris-based agency warned it will be even tougher to produce the energy the world needs, while dependence on Middle East supplies will keep rising.
The immediate problem is that low oil prices are discouraging badly needed investment, setting the stage for a return to high oil prices when the economy recovers.
"We see and hear about energy investments being delayed ... This is a major worry and could lead to a supply crunch and much higher oil prices than we've seen before," the IEA's chief economist, Fatih Birol, told journalists yesterday in London, where the IEA unveiled its annual world energy outlook.
While our return to higher oil prices would be good news for Canada's high-cost oil-and-gas industry, it'll be a while before anyone listens, or cares.
The market, for one, which is setting the investment agenda, is so sold on the idea the oil boom is history it may now need a supply shock to reverse course. Yesterday, traders pushed prices down even further, to US$56.16 a barrel, a 21-month low, on expectations the IEA will cut its oil demand estimate today for next year.
It's true the IEA sees enough new projects in the pipeline in the next two to three years to meet needs. But it also says seven million barrels a day of additional capacity needs to be completed by 2015, and given the time lag required to build projects, those investments would have to be launched right about now.
Instead, oil companies, particularly in Canada, are slashing budgets with a vengeance. Canada's oil-sands industry, which was expected to contribute about a third to that additional world supply by 2015, is struggling to stay afloat in the first downturn of its 10-year history.
Even if oil prices rebound by 2010, oil-sands operators that quickly shut down plans on the way down will want to be a lot more confident about a strong oil outlook before they ramp them back up. Just as important, they are quietly welcoming a break from labour shortages, cost over-runs and fights with governments, and won't easily give up.
Politicians will also dismiss the IEA's oil-supply concerns. The new buzzwords, certainly in the United States, are green energy, fewer fossil fuels and more greenhouse-gas regulation. They are worthy goals, but if they fail to alter the global oil demand picture, here's what the IEA predicts: unprecedented supply uncertainty, with OPEC increasing its share of world production to 51% in 2030, from 44% today.
And that's if OPEC makes the investment. The risk is that it won't, the IEA warns, since "the long-term policies of some major resource-rich countries in support of national goals may lead to slower depletion of their resources." Having barred international oil companies, they don't have the management skills or technology to do more than harvest existing assets.
So, enjoy low gasoline prices while they last. The bill will come later.
Needed: $26 trillion. Cash required to avert energy supply shock
Shaun Polczer
Calgary Herald
Thursday, November 13, 2008
CREDIT: Shaun Curry, Getty Images
International Energy Agency head Nobuo Tanaka warns of a looming oil supply crisis.
Falling oil prices will lead to future supply shocks, and in turn even higher prices, the International Energy Agency said in its global energy outlook Wednesday.
But the prospect of energy shortages in the not-too-distant future did nothing to ease the upheaval on world oil markets. OilpricescontinuedtofallinNew York, closing at $56.16 US a barrel, down$3.17 on the day. Crude prices are now down almost two-thirds from their summer peak of about $147.
That sent stock markets lower, with the Toronto Stock Exchange's main index losing 501 points to finish at 8922.57. The TSX capped energy index sector shed 17 points to fall to 212.67. The energy grouping has lost 28 points, or 12 per cent, since Monday.
However, the Paris-based IEA warned that current supply and consumptiontrendsare"patently unsustainable" and that prices couldsurgebackabove$200without major spending increases to develop new reserves.
The report suggests $26 trillion is needed to develop new energy sources, but said deteriorating economic conditions could delay needed investments that would in turn reduce energy supplies and choke a future recovery.
"Wecannotletthefinancialand economic crisis delay the policy action that is urgently needed to ensure secure energy supplies," said Nobuo Tanaka, the group's executive director.
Accelerating declines of existing oilfields are adding to the uncertainties. More than half of the world's oil currently comes from mature fields almost half a century old.
Tanaka said decline rates are actually a far more pressing issue, making it increasingly difficult to meet world demand growth of 1.6 per cent per year.
"Even if oil demand was to re-main flat . . . roughly four times the current capacity of Saudi Arabia wouldneedtobe built by 2030 just to offset the effect of oilfield decline," Tanaka added.
If the world runs out of oil, it won't be for lack of resources. The IEA estimates that 1.3 trillion barrels of proven reserves are enough to keep the planet going for 40 or more years at current consumptionrates. Remainingrecoverable conventional reserves add another three trillion barrels to the total.
"But there can be no guarantee that those resources will be exploited quickly enough," the report said.
Peter Tertzakian, ARC Financial's chief economist and bestselling author of A Thousand Barrels A Second, said consumers could be lulled into a false sense of security as gasoline prices, in particular, fall from a peak of about $1.36 a litre last summer to a little over 80 cents as of Wednesday.
"Yes, I think consumers are getting into a false sense of comfort on gasoline prices,"he said. "But it's not the only thing they have to worry about," given the state of the economy.
Tertzakian agreed current oil prices aren't enough to spur higher capital spending, especially in the oilsands, where oil prices are well below the level needed to support new projects. Meanwhile, companies such as Suncor Energy and Canadian Natural Resources have slashed billions from capital budgets.
Tertzakian said the combination of lower commodity prices and tighter credit isadoublewhammyforcompanies facing 50 per cent lower cash flows.
"The current situation is not going to facilitate the spending required to put the infrastructure in place to meet the demand increases you're likely to see in the next two or three years when the economy recovers."
Although conventional oil production has likely peaked and will remain flat, the IEA sees a growing proportion of unconventional production from sources such as Alberta's oilsands. The report estimates as much as two trillion barrels of extra heavy oil and bitumen may be technically recoverable, mostly from Canada and Venezuela.
Totalupstreamspendinghasmorethan tripled since the start of the decade, to $390 billion, but the IEA said most of that amount went to meet higher costs as opposed to increasing production.
Despite slowing economies, China and India are still expected to account for more than half of the world's incremental energy demand to 2030.Developing countries will account for 87 per cent of the increase.
Global consumption is projected to rise to 106 million barrels per day in 2030 from 85 million bpd in 2007,which is about 10 million barrels fewer than last year's projection.
The report noted that an ever increasing amount of oil production is concentrated in a handful of (mostly) OPEC countries. OPEC will account for more than half of the world's output by 2030, up from 44 per cent last year.