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Thursday
Aug042011

Endeavour Silver Corp: One for your Core Holdings

EXK Chart 04 August 2011.JPG

We initially bought Endeavour Silver Corporation (EXK) for $3.97 many moons ago and have maintained a core position ever since with our average purchase price standing at around $4.00. Today Endeavour closed at $10.61 so we are more than pleased with the progress this stock has made.

A quick look at the chart and we can see that this silver producer is up ten fold in a few short years and in our opinion is now set to go further as mine development and new discoveries continue to be reported.

As we see it this company forms one of the foundation stones of our core position and we intend to add to that position in the near future.


We'll now take a look at the latest results starting with this comment from Bradford Cooke, Chairman and CEO:

"Endeavour posted healthy financial and operating results in the Second Quarter, 2011 and continued to grow its cash position and working capital thanks to a robust and rising gross profit margin. As a result of rising silver and gold production and substantially higher precious metal prices, our sales revenues, operating cash-flow, and adjusted earnings were all up sharply compared to Q2, 2010."

"Endeavour is well on track to meet its 2011 guidance for silver production (3.7 million oz) and cash costs (< $5.70 per oz), with our better than expected First Quarter results being partially offset by a slower Second Quarter. Cash costs of production did jump in Q2, 2011 as industry-wide cost pressures caught up to us during the quarter. While costs such as labour, power and consumables will likely continue their slow rise, we expect our cash costs of production to start falling again once the economies of scale from our new mine and plant expansion at Guanajuato take effect."

Cash costs are currently running at $6.98 per oz silver produced leaving lots of room to generate profits going forward.



Highlights of Second Quarter, 2011 (Compared to Q2, 2010)

Adjusted Earnings (non-IFRS measure) escalated to $10.6 million ($0.12 per share) compared to a $1.4 million loss (see IFRS comment below)

Net Earnings (IFRS measure) increased to $17.0 million ($0.20 per share) compared to a $3.2 million loss

Operating Cash-Flow jumped 553% to $21.3 million

Mine Operating Cash-Flow rose 151% to $23.6 million

Revenues climbed 85% to $36.4 million

Silver production up 3% to 850,476 oz

Gold production up 8% to 4,831 oz

Silver equivalent production up 4% to 1.04 million oz (40:1 silver: gold ratio, no base metals)

Realized silver price up 102% to $37.65 per oz sold, realized gold price up 26% to $1523 per oz sold

Cash cost up 6% to $6.98 per oz silver produced (net of gold credits)

Gross profit margin up 241% to $30.67 per oz silver

Working capital up 31% to $133.6 million, with cash and short term investments of $108.9 million


Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico, the Guanacevi Mines in Durango State and the Guanajuato Mines in Guanajuato State. The outlook for the Third Quarter, 2011 is as follows:


In Q3, 2011, Endeavour anticipates its financial performance will continue to improve, reflecting still rising silver and gold prices, a modest increase in precious metal production once the new expanded mill and flotation circuits at the Guanajuato plant are commissioned during the quarter, and falling cash costs related to the new economies of scale at Guanajuato. However, industry-wide cost pressures such as rising labour, power, fuel and consumables costs will likely continue to partially offset the Company's progress towards cost reductions at its two mining operations.

Similar to 2010, the first two quarters of silver production in 2011 were relatively flat as forecast, with the operations team focused on the mine development and plant expansion capital programs. Silver production is expected to start rising again late in the third quarter, once the mine and plant expansion at Guanajuato is completed. 

To read this news release in full, which contains a lot more in the way of detail please click here.

Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico, the Guanacevi Mines in Durango State and the Guanajuato Mines in Guanajuato State.

Finally, we were in touch with Hugh Clarke, Vice-President Corporate Communications, who summarized their position as follows:

Look for increased production starting in the latter half of Q3 as we bring the new circuit online at our operations in Guanajuato. Cost pressures are evident throughout the industry and this is not going to abate any time soon. We plan to combat this through higher production, higher recovery rates and increased efficiencies.

We are actively drilling and we expect to have a steady flow of drilling results over the coming weeks and months. As well, we will be announcing new acquisitions of exploration properties in the near future.

As usual, the company is in excellent financial condition.....rising profits, $133 million in working capital (mostly cash and short term investments) and no debt with only 85 million shares issued.

Hugh Clarke.JPG
Hugh Clarke


Endeavour Silver Corporation is traded in Canada, USA and Europe on the following three stock exchanges:

(TSX: EDR)
(NYSE-AMEX: EXK)
(DB-Frankfurt: EJD)

So they have plenty of exposure to the investment market.


Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are all showing a healthy profit, all aboard!



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG
Tuesday
Aug022011

US Yield Curve Flattening To Prompt Fed Easing and $1800 Gold

Gold prices made yet more all time highs in the last trading session, propelled by what we think was a short squeeze. Many traders were probably betting that gold prices would decline once the US debt ceiling was resolved; however this was not the case. In this article we will outline one longer term factor that we think will drive gold prices past $1800 in the next six months; the flattening of the US Yield curve. We believe the flattening of this curve is a symptom of economic weakness and coupled with rising unemployment will be the catalyst for the Fed to embark on another round of monetary easing which will send gold prices past $1800. In fact, $1800 is a conservative target.

Weaker economic data from the US has caused the yield curve for US Treasuries to flatten significantly in recent months. However when the July manufacturing ISM came in at 50.9, well below the predictions of around 55.5, the curve flattened to a level not seen since August 2010. It was in August 2010 that the Fed first hinted at QE2 and therefore the fact that the curve has got back to this level puts pressure on the Fed to embark on another round of monetary easing. Whether this will be through QE3 or some other mechanism we do not know, however we are confident that further easing of US monetary policy is very bullish for gold prices.

For those readers who may be unfamiliar with how the yield curve works, we will provide a brief explanation. Bonds of different maturities have different yields. By plotting these yields against their maturities we can build a yield curve. The yield curve becomes steeper if longer term interest rates increase relative to shorter term interest rates. The yield curve becomes flatter if longer term interest rates decrease relative to shorter term interest rates. One way to measure the steepness of the yield curve is to look at the difference between the yields at two different points on the curve. For example one may look at the difference between the yields on 2 year Treasuries compared to the yield on 5 year Treasuries. Such a comparison will often be referred to as “2s5s” and is measured in basis points (bps) by subtracting the shorter term yield from the longer term yield. So if one says “2s5s are trading at +225” this means that the yield on 5 year bonds is 2.25% higher than the yield on 2 year bonds. If 2s5s go from +225 to +275 then the yield curve has steepened between those two maturities. If 2s5s go from +225 to +175 then the yield curve has flattened between those two maturities.

Now there is no one exact interpretation of what causes shifts in the yield curve. The curve changes with changes in inflationary expectations, default risk, equity markets, the outlook for future interest rates as well as other factors.

However in our opinion the recent run of poor US economic data has been causing the curve to flatten. A weaker economy means that interest rates will probably be held lower for longer, therefore longer term interest rates fall relative to shorter term interest rates, causing a flattening of the curve.

We view gold as a currency and since currencies are tightly linked with interest rates, we have a large focus on the US and global interest rate market. We are bringing your attention to the flattening of the curve since it has now reached a level not seen since August 2010, when the Fed first hinted that QE2 was going to be carried out. The chart below illustrates our point.


UST Curve 2s5s 5s10s Aug11


This flattening of the curve is a symptom of a weakening economy and if this continues it puts pressure on the Fed to act; particularly if unemployment begins to rise again. Further monetary easing by the Fed is massively bullish for gold prices.

This Friday we have the US non-farm payroll data and if this figure comes in below expectations, as it has done for the past couple of months, this will increase the pressure on the Fed to act. This coupled with a drop in core inflation would almost guarantee further monetary easing. Remember that unlike some central banks the Fed has a dual mandate to maintain price stability and full employment; therefore it is not enough that core inflation is within a tolerable range; the unemployment rate must come down too.

In terms of what form further easing from the Fed could take, there are a number of options. We could see another round of QE or other asset purchase programs. However since QE1 and QE2 have not provided a sustainable recovery, there is a strong possibility that the Fed will try something different this time. First we would expect to see a change in the language of the Fed statement, a change that implies that interest rates will remain lower for longer. We then could see the Fed setting a cap on longer term interest rates, such as the 2 year or 5 year rate on Treasuries. All these forms of monetary easing are massively bullish for gold prices.

However despite this August bearing significant similarities to August 2010, it is important to highlight the differences. The most important of these is that inflation is much higher. In the US core CPI increased at an annualized rate of 2.5% over the last six months. However inflation expectations are at levels consistent with the Fed’s mandate. Therefore we do not think that the threat of inflation will prevent the Fed from easing, since it is still in its target range and even if inflation moves out of its target range the Fed believes it can contain inflation easily by raising interest rates. The other half of its mandate, unemployment, is well outside its range and in the Fed’s view presents the larger threat at this point in time.

In summary this is how we view the dynamics of the US interest rate market affecting gold; The yield curve has flattened and may continue to do to, this shows economic weakness in the US. With a weak economy unemployment is unlikely to fall and will most probably rise. This will prompt the Fed to embark on additional monetary easing in an attempt to boost economic growth and combat unemployment. Monetary easing is bullish for gold, as shown by its inverse relationship with US real interest rates in the chart below. (Please also see our previous article: Decline In US Real Rates To Send Gold Past $1800 for further explanation of this relationship. We view it as the key determinant of gold prices in the medium to long term)


US 10yr TIPS vs Gold YTD Aug-11

At SK OptionTrader we use options on GLD to optimize our trading returns on gold, options that can be traded from most US brokerage accounts that allow stock options trading. Looking at our track record and only considering gold based trades, SK OptionTrader has outperformed both GLD and HUI nearly 7 times over. This was achieved not merely by taking excessive leverage, but by timing moves in the gold market and identifying options trades with strong risk-reward dynamics to benefit from them.

Our model portfolio is up 338.11% since inception, that's an annualized return of 117.00%.
We have an average return of 40.41% per trade including losses. We have closed 81 trades, 78 closed at a profit. The average trade is open for 46.27 days.


In the interest of full disclosure we do have trades open at present, the average gain of these trades is currently 54.88%, but we think there is a lot more to come. So sign up now to get on board and begin receiving our market updates, trading signals and model portfolio.


Our full trading record is available to view on our website www.skoptionstrading.com

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with Global AutoTrading and therefore auto trading is now available for SK OptionTrader signals.

Subscribe for 6 months - $499

 

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portfolio-chart-220511-resized.jpg
Tuesday
Aug022011

Five Things You Need to Know About the Economy

Five Things You Need to Know About the Economy



By David Galland, Managing Director, Casey Research

At any point during the recent negotiations in Washington over the debt, did you seriously think for even a second that the U.S. was about to default?

Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation.

Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might very well qualify them for gilded trophies at awards banquets. Instead, rather than glittering statuettes, these masters of the thespian arts settle for undeserved honorifics and the pole position at the public trough. Followed by lifelong pensions.

But to the heart of the current matter, do I think that the latest antics out of Washington will have any more lasting effect on the trajectory of the economy than what I had for breakfast this morning (raw oats with a dab of maple syrup, milk, a sprinkling of strawberries, and half of a banana, sliced)?

Absolutely not. Sorry to say, but the trajectory of the economy at this point is well established, and closely resembles that of a meteor streaking through the night sky. What’s left of the solid matter of the nation’s accumulated private wealth is fast being burned off by an unstoppable inferno of government spending, inevitably leading to an earth-shaking crash.

I make this dire prediction not out of an aberrant psychology (I hope), or in an outburst of self-promotion for Casey Research because the big-picture scenario we have so long warned of is unfolding according to script, but rather due to certain fundamental truths about our current situation.

And that brings me to the five things you need to know about the U.S. economy (much of which also applies to the other large developed nations)…

1. The U.S. remains in the grip of a debt-induced depression. While personal levels of debt have eased somewhat since the crash, most of the improvements have come at the expense of debt repudiation, and are offset by the steep decline in housing prices that have left something like 50% of mortgages underwater. Meanwhile the debt on the balance sheets of the U.S. government and the country’s largest financial institutions remain at record highs – and much of that debt is toxic.

So, what’s the one thing that the heavily indebted – individual or institution – most fears? Answer: Rising interest rates.

2. Interest rates can’t stay low. Despite the debt, interest rates remain near historic lows – which is to say, well below the norm. At some point they have to at least revert to the mean, which would push the 10-year treasury rate north of 5% from current rates below 3%. But in reality, the levels of monetary inflation, the nature of the debt, and mind-numbing scale of the government’s other financial obligations – in total upwards of $70 trillion – all but guarantee that interest rates must go much higher than 5%. That in turn torpedoes the half-sunk real estate market and risks kicking off a debt death spiral as higher interest payments suck the financial juice out of the economy and causes debtors to demand even higher rates. Say hello to Doug Casey’s Great Depression.

The last time the U.S. economy found itself in such dire straits was back in the 1970s, when the problem was raging price inflation. Back then, though, the debt levels were considerably lower than they are now. Then, Fed Chairman Paul Volcker had the latitude to raise rates and by so doing helped to choke out inflation. By contrast, today the Fed is virtually helpless. Rates certainly can’t be pushed lower by any appreciable amount, and the Fed sure as hell doesn’t want them to go up. While the Fed has been a primary factor in controlling interest rates up to this point in the crisis, in the near future the direction of interest rates – particularly long-term rates – will increasingly be determined by skittish market participants. Specifically, the sovereign and institutional buyers whom the U.S. Treasury so desperately needs to keep showing up at their auctions.

To use a metaphor, the situation today is akin to a bunch of gunfighters facing off in a dusty street, hands poised over their six-shooters, eyes nervously shifting this way and that – to the eurozone, to the housing markets, to the situation in Japan, to the U.S. government spending, to the crumbling balance sheets of the banks, to the Fed. Everyone is anxiously watching, waiting for someone else to start making the first move. The standoff can’t last – and when the lead starts flying, there will be few places to hide.

3. There is no non-disruptive way to resolve the debt. I can’t stress this point enough. Simply, there is no magic wand that can be waved in order to make the debt go away. In order for this crisis to end, someone’s ox has to be gored, and gored badly.

Yet, because we live in a democracy, where any politician wanting to be re-elected has to cater to their constituency – and politicians make their careers by being re-elected – it is considered business as usual for the denizens of Washington to hand out bread and put on circuses. It is this situation that has brought us to this place in the first place.

But it is the flip side of that equation that provides a clear signal as to where things are headed. Namely that politicians will jump through every possible hoop in order to avoid making politically unpopular decisions – even if they know that failing to act will have serious and lasting negative consequences for the nation. The trick is to make sure that those consequences only become acute during the next guy’s watch.

The key point is that there is no easy fix, and there is no politically convenient time to take the draconian measures needed to rebalance the budget and get the nation’s finances in order. To actually take the measures needed to curb the deficits, let alone reduce the debt, would be political suicide.

So despite a lot of talk blowing out of Washington, if you have to make a bet, bet on the crisis continuing and getting worse. Greece provides a reasonable look at how things are likely to unwind. And the problems in Greece – problems which will increasingly include social unrest – are far from over. As I write, lenders are starting to pressure Italian bond yields up, clearly indicating the eurozone’s problems are only going to worsen, as will those of the US as we move toward systematic breakdown.

4. The monetary system is irretrievably broken and will be replaced. For a recent edition of The Casey Report I interviewed monetary scholar Edwin Vieira, who pointed out that every 30 to 40 years the reigning monetary system fails and has to be retooled. The last time around for the U.S. was in 1971, when Nixon cancelled the convertibility of dollars into gold. Remarkably, the world bought into the unbacked dollar as its reserve currency, but only because that was the path of least resistance. But here we are 40 years later, and it is clear to anyone paying attention that the monetary system is irretrievably broken and will fail.

What will replace it is still unclear, but I suspect that when the stuff really hits the fan and inflation rages the government will try the approach taken by the Germans to end their hyperinflation back in the 1920s, coming up with the equivalent of the Rentenmark – a dollar that is loosely linked to some basket of commodities and financial instruments. It won’t be convertible, because it would be impossible for bank tellers to exchange your dollar for a cup of oil, and a coupon off of a bond, and a chip of gold, or whatever makes up the basket – but it might restore some semblance of confidence in the currency. That’s one option. Another is that some government decides to make its currency convertible into precious metals; but that will only happen when all other less fiscally restraining systems have been floated and failed. Simply, at this point we can’t know what will replace the current monetary system, or when. All we can know is that the status quo cannot and so will not survive this crisis.

Between now and the point in time where the Fed throws in the towel on today’s fiat monetary system, you would have to be naïve in the extreme not to expect volatility, uncertainty, and wholesale financial dislocations.

5. The government is not your friend. Another simple truth is that the politicians, being just average humans, will always look after themselves first. They are well aware how difficult it is becoming to kick the can down the road and are only growing more desperate.

And as the economy worsens and cries from the masses grow for the government to do “something,” the politicians will grow more desperate still.

As should now be clear to anyone, today’s political apparatuses are not operating based on any core principles – other than getting members of the government re-elected, that is. Thus the government of the U.S. and all the highly indebted Western nations are free to do almost anything in the name of the “public good.” Exchange controls? Higher taxes on the productive elements of society? Deliberate debasing of the currency? Outright confiscations for regulatory infractions? All of that – and literally anything else that helps mollify the masses and continue the charade – is likely.

Ironically, the worse the situation gets – and today’s GDP data again confirm the weakness in the economy – the greater the demands will be from the public for the government to do more, even though the government was mostly responsible for bringing us to this place. And so the government’s reach into your private affairs, and especially your finances, will only grow.

As this coincides with the rapid deployment of new monitoring technologies and procedures that allow the U.S. government in particular to cast its Sauron-like eye into every nook of the globe, the free flow of capital and legal avoidance of whatever new taxation schemes are passed will become increasingly challenging.

Summing up…

Unless and until the deficits and the debt are tangibly dealt with, expect things only to worsen and prepare accordingly. As there will never be a good time to deal with the debt, the situation will continue to deteriorate until there is a systematic breakdown.
Inflation remains the only politically viable way to continue the charade. Pretty much anything tangible will help offset the coming inflation, though the monetary metals of gold and silver will likely do better than most.

There is a lot of cash floating around. As equities are representative of a tangible (i.e., a share in an operating company), selective equities – especially those that provide essential services – will probably do okay, even if only keeping up with the inflation. Those of precious metals companies should do much better than that, but again, being selective is key because a lot of these companies actively pursue policies that are not advantageous to shareholders, most importantly steadily diluting existing shareholders by regularly issuing large swaths of new shares. While we expect volatility, and probably even sharp sell-offs, these should be considered as potential opportunities to fill in your portfolio with high quality resource companies.

Diversification across two or more political jurisdictions also makes a lot of sense to me. There is no place you can invest which doesn’t entail taking some risk at this point, but that fact only adds weight to the argument for spreading your assets around.

Finally, it’s important to remember that, as far as we know, you only live once. In some ways the transition we are going to live through is going to be pretty exciting. Perilous, certainly, but exciting as well. If you take the right steps, you should come out much better than most.
But if you overly obsess about this stuff – or the latest disingenuous move by the politicians – it will drive you crazy. Thus, it’s better to take the steps necessary to get in sync with the fundamental factors driving today’s troubled economy and then get on with your life.
 
[Recent moves by the D.C. politicians and Fed “experts” are just the latest steps in a time-honored government tradition: bleeding your wealth. Read this free report to learn more, as well as how to protect yourself.]



Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are all showing a healthy profit, all aboard!


For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with Global AutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.








Monday
Aug012011

House Passes US Debt Deal

Voice of America 02 August 2011.JPG


The U.S. House of Representatives has approved a compromise deal to raise the country's debt limit and cutting spending, one day before the government is due to start defaulting on its debt, according to Voice of America.

In a vote Monday night, 269 House members approved the deal and 161 opposed it.

The bill allows the United States to keep borrowing money to pay its bills while cutting about $1 trillion in spending over the next 10 years.

It had just lukewarm support overall. Some conservatives say it does not cut enough spending, and liberals complain the cuts are too deep and that the bill does not raise taxes on the rich.

But nearly all lawmakers say the package is better than the United States defaulting on its debt. The U.S. Senate plans to vote on the bill Tuesday, and both party leaders say they expect it to pass. It then will go to President Barack Obama for his signature.

The package is a compromise between Democrats, Republicans and the White House. It comes after months of political bickering and stalemate that pushed Washington to the edge of default on its massive debt.

Along with cutting spending, Mr. Obama says the deal sets up a bipartisan panel in Congress to consider up to $1.5 trillion in further cuts. He says everything will be on the table, including tax increases and cuts to social welfare programs like Medicare. If the panel fails to reach agreement, then the deal requires automatic spending cuts.

The president called the proposal a compromise that lets the country avoid default, while making a serious down payment on deficit reduction. He said default would have a “devastating effect” on the U.S. economy.

The White House says the agreement would avoid the need for another vote on raising the debt limit until 2013, providing greater “certainty” about the fragile economy. It also would delay the issue until after the next U.S. presidential and congressional elections.


Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are progressing well.



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




Monday
Aug012011

President Obama’s debt deal more fizz than bang

Pres Obama 01 August 2011.JPG

President Barack Obama announced on Sunday that an agreement between Democrat and Republican leaders had been reached which would reduce the U.S. deficit and postpone default, at least for now. The President said that the agreement would cut about $1 trillion over 10 years and therefore would not have an immediate effect on the fragile U.S.economy. There is also another $1.2 trillion to be cut if a joint committee cannot find at least that amount in budget savings.

We need to point out that this deal still has to be passed by both the House and the Senate. Coming hard on the heels of this announcement stock futures rose and U.S. Treasuries futures slipped lower as both gold and silver also lost ground.

Two of the rating agencies, Standard & Poor's and Moody's indicated earlier that deficit-cuts in the order of $4 trillion would be enough for the U.S. to avoid losing its prized AAA rating.

As we see it the opinion of these agencies leaves a lot to be desired as they have managed not to warn against a number of train crash type outcomes for some of the organizations that they had also rated as AAA, immediately before their demise. If you are of the opinion that U.S. Treasuries are worthy of the AAA status, then your opinion is totally opposed to ours as we think they are already junk along with the Dead Cat Dollar.

As we write the Hang Seng is up 1.56% and the Nikkie is up 1.84%, so we can see that this announcement has brought some relief to the markets, not exactly euphoric excitement, more of a gentle sigh that says we have some movement on the debt problem that had dominated the headlines for weeks.

Alas there is nothing in this announcement that indicates any real political will to get the debt monster under control, one trillion dollars over ten years is fiddling while Rome burns. Our stance therefore remains unchanged and if anything it hardens our resolve to stay on track. As you are aware we do not own any equities other than in the metals space and we will keep it that way. Our holdings include both physical gold and silver, gold and silver producers , with the lions of our cash being allocated to options trades where the underlying commodity is gold or silver and the leverage turbo charges our investment account.

Hold onto to your precious metals and accumulate on the dips. Try to be in position before the end of August as the fall period is shaping up to deliver a sparkling outcome.




Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are progressing well.



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




Saturday
Jul302011

The Buzz Around Gold is Growing Louder





By Jeff Clark, Casey Research BIG GOLD

I outlined last week the increasingly bullish consensus among analysts about gold stocks. The same pattern exists with gold itself; growing numbers of analysts have either joined the movement or have upped their bullish outlook.

The following comments and developments have all been reported just this month. It presents quite a convincing case when one strings them together like this. Keep in mind that this is what these analysts and managers are telling their clients.

SICA Wealth Management’s Jeffrey Sica: “Right now, I think gold looks better than ever.” He sees a “painfully high probability” of troubling events occurring in the months ahead. “There has been a general loss of confidence in the ability of central banks and governments to manage the economy. That will continue to give gold and other precious metals a boost.”

Empire Economics chief economist Clifford Bennett expects gold to come close to $2,000 an ounce this year and $2,200 an ounce within 18 months. “There is risk in the second half of the year of a bit of a ‘panic spike,’ if you like, as everyone thinks there isn’t enough to go around and starts to hoard. That’s when you’ll really see gold take off towards $2,000 an ounce.”

Franco-Nevada Chairman Pierre Lassonde said the coming mania in gold will make the 1970s run look like child’s play. “In 1980, the only players, or the dominant players, were the Americans. Today the dominant players are China and India; 58% of all the gold sold this year will be sold in these two countries. When we reach that mania phase… watch out, because it will truly make your head spin.”
Antaike analyst Shi Heqing had this to say about Chinese investors: “Record high prices won’t scare away investors… they are likely to chase the rally and continue to buy gold because paper money feels increasingly worthless and they are worried about inflation.” Shi expects China’s gold demand to rise about 20%, due in no small part to the country’s 6.4% inflation rate.

Reuters: “The case for gold in the longer term is still very strong,” said a Singapore-based trader. “Gold may appeal to new classes of investors who previously avoided the market in favor of more mainstream investments like bank deposits, bonds, and equities. Potentially there’s a whole new market for small-sized gold bars if these investors lose faith in paper.”

Newedge USA predicted gold will hit $1,800 and silver $70 by year-end due to investors seeking a haven asset and physical demand from Asia. “Gold is an excellent hedge in troubled times” said Mike Frawley. “Demand will be very strong long-term from Asia, and the economic trend in the West is improving.”

FX Concepts founder John Taylor: “Gold will climb to $1,900 by October.”

SMC Global: “Evidence of sluggish U.S. growth has shaken investor confidence. Concerns about rising inflation here have also boosted appetite for gold ETFs. Demand is high from small players.”

Minerals and Metals Trading Corp’s Ved Kumar Prakash reported “skyrocketing” demand for gold in India. He predicted that given the company’s brisk sales, gold imports would jump by more than 40% this fiscal year.

The Swiss Parliament is expected later this year to discuss the creation of a gold franc. “I want Swiss people to have the freedom to choose a completely different currency,” said Thomas Jacob, the man behind the gold franc concept. “Today’s monetary system is all backed by debt – all backed by nothing – and I want people to realize this.”

An “Iranian gold rush” is under way, according to an article by Reuters. “Usually as the price of an item increases, demand will decrease – but in the case of gold, it seems that higher prices are creating more demand,” said an unnamed Tehran gold retailer. “The reasons that people are drawn to these safe assets – gold coins and hard currency – are firstly a limited choice of investment opportunities, and secondly a fear from the weakness of the national currency,” said an economist who asked not to be named.

The Utah Legal Tender Act was signed into law by Governor Herbert last month. “Good monetary policy is an important part of a healthy and prosperous economy,” said Senator Mike Lee. He and other Republicans also introduced legislation to eliminate federal capital gains taxes on gold and silver coins. “Since the Federal Reserve Act of 1913, the dollar has lost approximately 98% of its value. This bill is an important step towards a stable and sound currency whose value is protected from the Fed’s printing press.”

CIBC World Markets’ Peter Buchanan remains bullish even if the debt ceiling talks resolve. “Even in the likely event Congress agrees to a debt ceiling rise, recent uncertainties are likely to reinforce central banks’ ongoing efforts to diversify from the dollar into gold and other assets.”
Citigroup Global Markets reported that silver may more than double to $100 an ounce if the current bull market follows similar patterns seen between 1971 and 1980. “If the final rally in the last bull market repeated, then we can expect $100 over the long term… While the high so far this year was at the same level as the peak in January 1980, we are not convinced that the long-term trend is over yet.”
Gold Forecaster analyst Julian Phillips: “This is not typical of a ‘bull’ market that will eventually fall back from whence it came. We believe gold is not in a ‘bull’ market, because it is changing its shape and nature permanently. Our reasoning is not academic posturing, but a reflection of the realities that have taken place over time and those that confront us now. Because it is perceived to be an alternative wealth-preserving asset, a counter to a failing monetary system, it is not a simple commodity moving up and down with the flows and ebbs of economic cycles; it is a valid measure of monetary values.”

American Precious Metals Advisors Managing Director Jeffrey Nichols: “A recent survey of 80 central bank reserve managers predicted that the most significant change in their official reserve holdings in the next 10 years will be their intentional build up in gold reserves. They also predicted that gold will be their best performing asset class over the next year, and sovereign debt defaults will be their principal risk.”
Gloom Boom and Doom editor Marc Faber: “I just calculated that if we take an average gold price of say around $350 in the 1980s and compare that to the average monetary base and the average U.S. government debt in the 1980s...and then if I compare this to the price of gold to today’s government debts and monetary base, gold hasn’t gone up at all. It’s actually gone against these monetary aggregates, and against debt it’s actually gone down. So I could make the case that gold is today probably very inexpensive.”

GoldMoney founder James Turk: “In reality there are very few participants currently in the gold market… when I look at the price action, it suggests to me that a lot of this big money on the sidelines wants to be in. Therefore we are seeing some aggressive bidding on any pullbacks.”

Reuters Money reports that eBay’s “gold and silver outpost” has seen gold bullion sales jump more than 60% from 2007 through 2010. More significantly, “almost half of the silver and gold buyers in the first quarter of 2011 never purchased these items on eBay before.”
Sprott Asset Management chief investment strategist John Embry: “I think it will be really exciting when silver clears $50, because then it will be in absolutely new ground. There is, without question, major physical shortages of physical silver, and demand is robust. Once silver gets rolling, it’s going to levels people cannot imagine.”

It’s hard to go one day without seeing comments like these. The chorus is growing, and as these bullish views spread further and further into the mainstream, the number of investors attracted to precious metals will swell and continue to drive prices higher.

Is this growing consensus the sign of a top? As I said about gold stocks, taking the contrarian view in response to this information would be the wrong move. Fiscal and monetary issues are getting worse, not better, and I think we’re simply seeing more investors recognize the inevitable. We’ll worry about exiting this sector when real interest rates are positive and the dollar is once again a revered currency. Until then, it’s hard to imagine a scenario that isn’t bullish for gold. Any pullback should thus be viewed as a sale price.

Is the impetus for a mania building? I don’t know if we’re on the doorstep of that phase or not, but the fundamental reasons to hold gold are as strong as they’ve ever been. Indeed, it’s getting more critical to have meaningful exposure to precious metals. Keep in mind that when the debt ceiling talks reach a resolution – whatever it may be – the fundamental problems of excessive debt and further deficits will still be unresolved.

Will gold correct if agreements are reached on the debt talks? Probably, but I think the more appropriate question to ask is this: If these analysts are correct, do I own enough ounces?

[Jeff Clark – editor of BIG GOLD for Casey Research – puts his money where his mouth is. And his mom’s money, too: Learn how he boosted her IRA by over 90%!]




Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are progressing well.



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




Tuesday
Jul262011

Next Step: A Home Cancer Test Kit?



By Doug Hornig, Casey Extraordinary Technology

With cancer, early detection equals a greater likelihood that treatment will have a positive outcome.

Physicians have known this for a long time, and the statistics back them up. Survival rates for those afflicted with many types of cancer have risen dramatically in the past few decades. And one of the primary reasons is that we are diagnosing cancer earlier and with much greater accuracy.

Not only are people more mindful about getting regular checkups, but diagnostic techniques have improved by leaps and bounds, as well.

In the not-too-distant past, the only way to get a close-up look at what was going on inside a patient’s body was via exploratory surgery, which is not unlike using a sledgehammer to drive a threepenny nail. There’s considerable collateral damage.

X-rays, which were discovered at the turn of the last century, added an important new tool to the diagnostic arsenal, and they remain the most common first option today. And there things stood until the 1970s, when the whole field suddenly exploded.

Ultrasound machines use sound waves to map internal body structures. They’re simple and cheap, provide immediate results, and don’t involve radiation. Though they’ve been around since 1950, they weren’t perfected until 1979, when they added computing technology for image enhancement.

Computed tomography (CAT) and positive emission tomography (PET) scans were also introduced in the ’70s. Both provide detailed maps of internal body structures, with CAT scans employing X-rays and PET scans gamma rays. Nowadays, CAT and PET scans are often performed in immediate sequence in the same session, and the results can be quickly correlated to provide very detailed views of moving organs, in three dimensions and real time.

The magnetic resonance imaging (MRI) machine was first studied on humans in 1977. An MRI scanner generates a powerful magnetic field that agitates atomic nuclei into giving off photons, which have frequencies that can be translated into an image.

Finally, needle aspiration biopsies -- which came to market in 1981 -- involve the removal of a small number of cells from a suspected problem area. They are minimally invasive, generally safe, and often the procedure of choice for examining potential tumors that lie just under the skin.

All of these tools are an improvement on cutting each patient open. Although each has its drawbacks as well as its benefits, they have comprised the physician’s options for the past thirty years. What has been missing is a diagnostic that reveals the presence of cancer, no matter where it is or what stage it’s at. Something, in other words, that will provide the earliest of early detections. And, oh yes, it should also be non-invasive and risk-free.

That’s the golden key, and though it may seem like asking for too much, doctors are close to having it in their hands.
Last December, in a paper published in Nature, researchers at the Massachusetts General Hospital Cancer Center revealed the results of tests with a new cancer blood test. The test uses microchip technology to sift blood to search for circulating tumor cells (CTCs), which come from solid tumors and roam through the blood.

CTCs are hard to find because they're rare, accounting for just one in a billion among cancer patients' blood cells. Yet the test homes in on them with great accuracy. Used on 116 cancer patients, including people with lung, breast, prostate, pancreatic, and colon cancers, the test spotted CTCs in the blood samples from 99% of them. It detected CTCs even when there were only 5 CTCs in a milliliter of blood. At the same time, the test returned no false positives in blood samples from 20 healthy people.

The test requires only a couple of teaspoons of blood, and doctors initially want to put it to work providing instant feedback on whether a particular therapy is or is not working. Most exciting, though, is its potential for early diagnosis. Although researchers stress that a great deal of work remains to be done, providing cancer screenings as a routine part of one’s conventional blood workup seems like an attainable goal.

This is such a breakthrough that Johnson & Johnson immediately announced it was throwing its considerable resources behind the effort to bring the test to market. And four major cancer research centers in the U.S. have signed on to do follow-up research this year.
A home cancer test kit? No, that’s not even on the horizon as yet. But the possibility can now be imagined. And technology has repeatedly demonstrated that what can be imagined can eventually be created.

Recently, the Casey Technology team added five biotech companies with breakthrough cancer treatments to its portfolio – innovative technologies that could save millions of lives and make investors handsome returns in the process.



Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are progressing well.



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




Tuesday
Jul262011

Excerpt From SK OptionTrader on Silver Market Mentality

The following is an excerpt from an update that was sent to SK OptionTrader subscribers at the end of last week, discussing the changing mentalities in the silver market.

We present this excerpt as it may be a valuable read to those interested in the silver market and to give a sample of the type of commentary that comes with a subscription to SK OptionTrader.

We cannot provide the update in full as it contains information that is for subscribers only.

"[Regarding silver,] there was an interesting piece out from Citigroup which said that silver prices could hit $100. We do not find it interesting because of its content, but it is interesting that a major financial institution is paying attention to such a small market. The piece basically said that silver prices multiplied 5.3 times from Nov 1971 to Feb 1974, the corrected 44% before rising 13 fold to the 1980 peak. It then went on to note that silver prices multiplied 5.8 times from Nov 2001 to Mar 2008, corrected 60% and therefore could rise 13 fold again to over $100 (since the low in 2008 was roughly $8.50 and 8.5 x 13 = $110.50).

We are not sure how sound this reasoning is, although we concur with the conclusion. What we find interesting about this is that a large bank has finally set an aggressively bullish, and perhaps more realistic, target for silver prices. Usually silver is largely ignored by such institutions and those who do publish forecasts are seldom correct. For example Goldman Sachs covers gold (and they have made some decent calls to their credit) but for silver they simply multiply their gold price forecast by its historical relationship to silver. Goldman’s current 12 month forecast for gold is $1730 and their 12 month forecast for silver is $28.90. So they are saying that gold is going to increase 8% whereas silver is going to decline 28%. We will not delve into the absurdity of that hypothesis.

For a number of years there was a great deal of talk about the rumoured massive short positions of banks such as JPMorgan in the silver market. We suspect that much of this has been covered by now. We are fairly sure that no trading operation would be allowed to maintain a short position on something as it rose from $8.50 to nearly $50. In fact a great deal of silver’s parabolic rise early this year could perhaps be attributed to such short positions being squeezed.

What will be interesting is when large banks and other financial institutions start dabbling on the long side of the silver market. Such institutions are not very familiar with how the dynamics of the silver markets function, especially relative to their understanding of other financial markets. If they were familiar they would demonstrate this by giving silver more coverage and would already be long. The Citigroup piece is an indication that such institutions may be going to establish long positions in these markets in the near future, which is extremely bullish."


In the interest of full disclosure, we do have trades open at present and all of our open trades are showing significant gains.

In fact a recent trade is showing a gain of 260% in three weeks and we think it could still triple from current levels.

In the near future we are planning to open a number of new positions that we feel will be extremely profitable, so now is a perfect time to subscribe and increase the profitability of your portfolio.

We provide our subscribers with simple straight forward trading signals as well as market updates and commentary on the market situation.

Now all you have to do is click the subscribe button to see our trading recommendations that could have more than tripled your capital in three weeks, and paid for your subscription fee 12 times over in a matter of days.

Other key stats on the performance of SK OptionTrader are as follows:

Our model portfolio is up 338.11% since inception
That's an annualized return of 117.00%
We have an average return of 40.41% per trade including losses
We have closed 81 trades, 78 closed at a profit
The average trade is open for 46.27 days


Our full trading record is available to view on our website www.skoptionstrading.com

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with Global AutoTrading and therefore auto trading is now available for SK OptionTrader signals.

Subscribe for 6 months - $499

 

Subscribe for 12 months - $799

 



portfolio-chart-220511-resized.jpg
Monday
Jul252011

The eurozone crisis is on pause, not over

FT Logo.JPG





You have to give it to the European Council. They are pretty good at stitching up impressive looking deals, having lowered expectation to a bare minimum beforehand. But the effectiveness of an agreement should not be gauged by the immediate market reaction, let alone by how the agreement compares with expectations.

For it to be a positive contribution to the eurozone debt crisis, it should meet three tests. Will it put Greece on a path towards sustainable debt reduction? Will the new rules for the European financial stability facility make contagion less likely? And is the participation of private investors realistic and fair? My answer to those three questions would be, respectively: no, no, and yes.


Regarding the first question, the Institute of International Finance estimated the total reduction in the net present value of Greek debt to be 21 per cent. Nicolas Sarkozy, the French president, talked about a 24 percentage point reduction of the ratio of debt to gross domestic product. His is a more conservative estimate. In other words, the Greek debt-to-GDP ratio would not peak at 172 per cent, as one forecast suggested, but at 148 per cent. None of these numbers will come even close to a sustainable debt level. On my own calculations, Greece requires a reduction in the net present value of its debt by about 50 per cent. This agreement comes short.

With the private sector contribution now fixed, any future reduction in the value of Greek debt would have to come from an increase in the maturity of the official Greek loan. I have no doubt that a portion of the debt will ultimately need to be folded into a eurozone bond. Officially, the European Union is still pursuing a variant of plan A – that Greece will be able to repay its debts in full. Its adjustment plan for Greece remains full of unbridled optimism.

An integral part of the Greek package is a €30bn provision for privatisation receipts by 2014, which is plainly ludicrous. This and other gaps will need to be plugged. That means that the refinancing need will be higher, and the reduction in the net present value lower.

I wonder, therefore, whether it was worthwhile to risk a selective default for such a meagre debt reduction effort?

EU negotiators persuaded themselves that they were able to control the fallout from a default. But that was dependent on the default being a limited one. At the same time, the scale of the private sector participation needed it to be sufficiently large to satisfy the eurosceptics in the German, Dutch and Finnish parliaments. This was no doubt a compromise that works politically. But it comes at the expense of debt sustainability. Even before the ink on this second package is dry, a third Greek package beckons. I am just not sure what the German and the Finnish sceptics will say when they find out.

Regarding the second question: has the agreement made life any safer for Spain and Italy? The idea of providing the EFSF with more flexibility is good. The rule changes are by far the most interesting aspects of the agreement. At present, the EFSF can only grant credits. Under the new rules, it will be able to act pre-emptively. Like the International Monetary Fund, it will have a flexible credit line. It will be able to purchase bonds on secondary markets, and it will be able to recapitalise banks. It can do all of these for any eurozone country, even those that are not part of an ordinary EFSF programme.

But there is a catch. The European Council did not raise the EFSF’s lending ceiling of €440bn. It is large enough to handle its three peripheral customers, but not Spain and Italy. An enlargement would have been necessary for the new-found flexibility to have any practical use. Should Italian bonds come under pressure again, do we really believe that speculators would be scared by a stability mechanism with a fixed and transparent spending ceiling?

The EFSF also remains constricted by its own operating rules. It can only start a programme of purchases on the advice of the European Central Bank, and it requires a unanimous vote by its members.

The best news relates to the decision on private sector participation. It is good that the eurozone has come to closure in this tedious debate. The terms of the various debt exchange offers are still bank-friendly, but not nearly as cynical as some of the earlier proposals. Contrary to what the European Council said, the private sector participation will be a blueprint for bail-outs that are yet to come. Second Irish and Portuguese programmes are likely. The northern Europeans will once again demand private sector participation. Now they know how it can be done, they will want to apply the same rules in the future.

Thursday’s agreement succeeded in staving off an imminent collapse of the eurozone. That is undoubtedly its greatest achievement. But we should not fool ourselves. It will only succeed if it is followed by other agreements that fix its gaps. The new EFSF rules will only make sense if the rescue mechanisms are allowed to develop into a European debt agency. The second loan package to Greece will be fine as long as we realise that there needs to be a third.

When the Europeans return from their holidays, they will still have the euro – and they will still have the crisis.

eurocrats 25 July 2011.JPG
"Tell me that Nigel Farage is not here, is he?"




Regarding www.skoptionstrading.com. We have now placed a number of trades in the options arena and they are progressing well.



For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




Sunday
Jul242011

Silly Reasons Not To Invest In Gold

We are currently bullish on gold. We would not consider ourselves gold bugs or perma-bulls. Sometimes we think gold prices go up, sometimes down, sometimes sideways and we place trades to reflect our view at the time. The purpose of this article is not to place gold on an alter and worship it, we are simply aiming to dispel some of the mythical reasons put forward by gold perma bears as to why one should not invest in the yellow metal. Once these reasons are eliminated from one's analysis, then one can form a more accurate view on whether gold prices are going up or down. Keeping these arguments in one’s decision making process will only make for distorted analysis.

We scoured the internet looking for reasons not to invest in gold and now present the reasons that we think should be eliminated from the bearish side of the debate.

The most ignorant reason we could find not to invest in gold was that apparently gold can be easily manipulated. According to this bizarre argument, “unlike paper currency that is impossible to manipulate in any way, gold can be accumulated by a group of connected buyers for the sole purpose of eliminating supply from the market.” The author then went on to cite the Nelson Bunker Hunt’s attempt to corner the market as an example.

We will concede that a driver behind silver hitting $50 in 1980 was largely due to the Hunt’s efforts to corner the market. We will also concede that central banks could dump their gold holdings on the market and this would decrease the price. However saying that paper currency is impossible to manipulate is one of the most preposterous things we have ever heard. Paper currencies are designed so that they can be manipulated by central banks. The central bank controls the supply of and interest rate earned on the currency. Gold has no interest rate, so cannot be manipulated in this way. Gold is also in limited supply and cannot be printed at will by central banks.

In the interest of putting the author’s arguments into context, they were written in March 2009 and gold prices have increased more than 50% since then.

Another amateur argument against gold is that for some 20 years (1980-2001), gold prices did nothing and anyone who had invested in gold would have lost money. Anyone who uses this argument clearly does not understand one of the fundamental features of financial markets. Markets are cyclical in nature and assets undergo both bull and bear markets. To put this as simply as we can, prices can go up or down.

To say that gold did nothing for a 20 year period and therefore is not worth investing in now (ignoring its terrific performance in the last ten years and the bull market that preceded 1980) is ridiculous. Market conditions change constantly. Sometimes they are bearish for prices, sometimes they are bullish. One must assess these conditions to form a view, not just extrapolate a trend from a handpicked segment of time.

Perhaps a more reasonable argument for not investing in gold is that it provides no income. In fact it almost always costs the investor to hold gold. This is sometimes referred to as “negative carry”. By purchasing gold the investor has forgone the interest that his/her money could have earned in the bank. They may also have to pay storage costs for physical bullion or a management fee for a gold ETF or other fund. However in today’s market environment, the interest foregone is minimal and some may even consider it negligible.

For example, instead of investing in gold one could have instead bought a risk free asset such US Government Bond. But with 2 year Treasuries yielding just 0.35%, is it really that big of a deal?

The point is that although it will cost you to own gold, this cost is dwarfed by the capital gains that one could enjoy. One does not invest in gold for a stream of income, as one might invest in stocks or bonds. Given that gold gained around 30% in 2010, chances are you shouldn’t be too concerned about forgoing the interest that money could have earned in the bank nor dividends that could have been earned in the stock market.

One of the most common anti-gold arguments put forward by those who do not understand gold is that one should not invest in gold because it has no utility. Oil can be used as fuel, corn can be eaten, steel can build bridges and buildings, but apparently all gold is really good for is looking pretty and a few dentistry applications. The major oversight here is that although gold may have some attributes that apply to commodities, it’s primarily function is as an alternative, independent, impartial currency.

The very fact that it doesn’t have many uses makes it a suitable currency substitute. Oil cannot be a currency as one day we will run out of oil. Corn cannot be a currency as we grow and consume corn so there is not a stable amount in circulation. Metals such as copper are not suitable as they are often “used up” in industries such as constructions (here we are using the phrase “used up” to indicate that copper would either be inside walls as wires so it cannot be removed and traded, or has been used in the manufacturing of a product where the cost of recovering the copper is higher that the market value).

Gold’s value comes from the same fundamentals that other currencies derive their value. It’s a function of purchasing power, global interest rates and inflation. Gold can even be thought of as a currency where the central bank that controls it has set interest rates are zero forever and fixed the money supply forever. In an uncertain world, the certainty surrounding gold makes it a strong currency.

Perhaps the most famous reason not to own gold comes from perhaps the most famous investor of our time; Warren Buffet. Buffet is an outstanding investor with a stellar reputation and we do not wish to take any credit away from his remarkable achievements. However Buffett shuns gold as an investment as he believes it has no utility. We would agree that gold has not utility in that it cannot be made into energy like oil or eaten like corn, but that is not the point. Gold is more a currency than a commodity. So how much utility do British Pounds have? Or US dollars? Or Yen? They have no more utility than gold. One cannot eat or use any of these currencies, so how are they different from gold? Would Buffet refuse to hold any currency since they have no utility? Of course not, but he would not view gold as a currency.

We will concede that other currencies pay interest, but they interest is minimal in the current environment. Gold is a store of value. Gold is a currency. Gold has no utility, which is what makes it a suitable alternative currency.

A classic argument for not buying gold would be that it has gone up significantly over the past decade. People do not want to buy when prices are high, they want to buy when prices are low. This is a reasonable argument. However following that theory, all those who subscribe to it would have been buying gold in the late nineties and over the turn of the decade, therefore they would have enjoyed significant profits to this point. But the reality often is that those who use this argument have never owned gold.

So whether you are bullish, bearish or neutral on gold prices, we would suggest that you take these reasons out of any analysis you are doing. These reasons are irrelevant and those who use them really do not have a solid understanding of the dynamics of the gold market. If you have a bearish view on gold and it does not include any of the reasons above, then that is fine. We are bullish on gold, but we could be wrong and everyone is entitled to their view. However in our opinion using these reasons as an argument not to own gold will result in distorted analysis and an invalid conclusion.

At SK Options Trading we have a strong focus on gold and we provide our subscribers with simple straight forward trading signals as well as market updates and commentary. Our signals are executed on US options based on ETFs, so are exactly the same as regular stock options.

The key stats on the performance of SK OptionTrader are as follows:

Our model portfolio is up 338.11% since inception
That's an annualized return of 117.00%
We have an average return of 40.41% per trade including losses
We have closed 81 trades, 78 closed at a profit
The average trade is open for 46.27 days


For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with Global AutoTrading and therefore auto trading is now available for SK OptionTrader signals.

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Return on SKOT Port 160711

Return on SKOT 10k