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Tuesday
May112010

John Ing Comments on the Record Gold Price

John Ing on BNN 12 May 2010.jpg

John Ing, president and gold analyst, Maison Placements Canada, discusses gold's new record high and his outlook for bullion-related stocks on BNN, we don't get to see enough of him so this is well worth a watch.



John positively zips through the reasons for the rise in gold prices including, the EU bailout package, the debasement of currencies, the volatility in the broader markets, investor anxiety, the distrust of the Institutions including such Wall Street icons as Goldman Sachs etc.

He then covers the various vehicles available to us for investing in gold, ETFs, physical gold and gold stocks which are now starting to perform. He likes the mid caps and expects the exploration stocks to do well. We struggle with explorers due to the added risks inherent in prospecting, but each to their own.

In terms of predicting gold prices he sees $1350/oz in a month or so and $2000/oz by the end of the year, now that will buy the baby a nice hat!

Also keep an eye on Australia where the proposed new tax hike on mining companies could put a real dent in gold production down under. If any of our Aussie readers could give us their views from the ground, so to speak, they would be very much appreciated by the team here.


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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.

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.

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.

Tuesday
May112010

3 Steps to Geographically Diversifying Your Gold Stocks

By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report and author of this new FREE Special Report: ‘When Is the Right Time to Buy Gold?’

Jerry’s broker wrinkled his nose in disapproval.

“I don’t like it, Jerry,” he said in a grave tone, as if scolding a misbehaving child. “Why don’t you invest in the gold company I told you about?”

Jerry thought this might happen. His broker was traditional, conventional, and only pushed company products. And the man knew embarrassingly little about gold stocks.

“Because I want to diversify my gold stocks. There’s a lot of gold around the world. And this company is capitalizing on that.”

The broker was shaking his head. “The company I recommend is right here in North America, Jerry. There’s no need to buy one with mines halfway around the world. Besides, we don’t know what the politics are over there.”

Disappointed with the mainstream advice, Jerry left and called another broker. This one specialized in resource stocks.

Jerry explained his reasoning for wanting to buy this particular gold stock. The broker listened patiently, but was so quiet Jerry thought maybe he was cool on the idea.

“Politics in general are somewhat unpredictable there, but less so for mining,” the broker explained. “In fact, they just lowered their tax rate on mining companies. The company he’s recommending is well run, but it’s already a mature producer with a huge market cap, and has no exposure to these other parts of the world you’re looking at.”

Jerry felt comfortable with his original hunch after finishing his discussion with the new broker. He put some of his money into the stock of the younger gold producer, with assets on the other side of the globe.

A year later, Jerry ran into his old broker at a local bar. The man smirked when he spotted Jerry. He was obviously unhappy about losing Jerry’s account and apparently wanted to rub it in.

“You should’ve bought that gold stock I recommended last year,” the broker said smugly. “It’s up 43%.”

“Good for you,” Jerry replied, “But that stock I told you about is up 75%.”

The broker’s smile wilted, and confusion clouded his expression. He spoke tentatively, not sure he wanted to hear the answer. “How’d you know to look at companies there?”

“Lots of reasons,” Jerry replied. “But for starters, there’s lots of gold over there.”

Gold Around the Globe

The keyword is geographical diversification. And while no single investment variable can guarantee profits, geographical diversification does add a layer of safety and enhanced profit potential that investing solely in companies located in one country or region cannot offer.
Jerry’s broker, like many in the U.S. who don’t know much about the gold industry, are uncomfortable investing in smaller producers or in faraway regions. And yet, most of the gold is currently being dug up in Africa, South America, China, and Oceania. North America accounts for only 16.3% of total gold production.

Further, of the 15 largest gold deposits in the world, only five are in the U.S., Canada, or Mexico. Many countries where gold has been traditionally mined, such as South Africa and the U.S., are experiencing production declines, while other areas, like South America and China, are just now starting to rev up.

►First Step to Geographical Diversification: Make sure you have global exposure. If you’re only investing in companies that have deposits where you have cell phone coverage, you’re greatly limiting your profit potential. Don’t ignore a region just because it’s an unfamiliar culture or doesn’t speak your language.

“Can We Tax That?”

Don’t get me started on politicians and NGO’s [Non-Governmental Organizations] monkey-wrenching the free market’s wheels. Hey, I want mining companies to keep cyanide out of the drinking water and for local communities to see some economic benefits as much as the next guy. In point of fact, most modern mining efforts run clean operations and provide good-paying jobs to local residents. But more often than not, greed is the motivation behind the politics – governments want revenue, and mining companies can be an easy target.

As gold and silver mining stock investors, it is imperative we understand and monitor the politics of any region where our companies operate. And not just the federal or provincial authorities; we must be alert to local community sentiment towards mining as well. Just because federal or state regulations are supportive doesn’t prevent a local group from agitating against a development.

And laws affecting miners can change at any time, and suddenly, making the political climate tricky to judge and planning for mining companies and investors difficult. Would it be safe for me to assume, for example, that your tax planning of 10 years ago has had to be modified? The same applies with mining.

A stable political jurisdiction today can be tomorrow’s iffy hot bed of discontent. For example, the U.S. is consistently rated one of the lowest-risk countries in Resource Stocks’ yearly World Risk Survey. Yet, Washington politicians have drafted a bill that, if passed, would adversely affect mining in the U.S. While nothing is imminent, and we don’t expect it would pass in its current form, we can’t say that mining in the U.S. will never have any risk, and it is something we have to keep an eye on at all times.

On the other hand, eight of the world’s 10 highest-risk jurisdictions are in Africa, where Randgold has all of its operations. However, they mostly operate in countries where the politics are more stable, reducing their political risk to a tolerable and more predictable level.


The lesson: we cannot make assumptions about politics and mining based on geography.

So what’s the solution?

►Second Step to Geographical Diversification: Don’t be overexposed to any single government. In today’s political climate, and for the foreseeable future, there is no such thing as a 100% risk-free country. Politicians and political whims come and go, so risk will always be fluid. And we think gold mining could become an increasingly attractive target as the gold price rises and international economies struggle.


Of course, there are areas we’d simply avoid. Of the 15 largest gold deposits mentioned above, we wouldn’t consider investing in six of them solely because of the host country’s politics. We want diversification but not at the expense of unnecessary risk.

The One-Company Rule

Okay, perfect politics is a fairytale, so is there a way to minimize a downdraft in your portfolio if a government makes a negative move against one of your company’s mines, or mining in general?


There is.

►Third Step to Geographical Diversification: Own a sufficient number of companies. Having several eggs in many baskets will prevent your portfolio from suffering a Humpty Dumpty event if the government where your mining stocks are concentrated decides to follow, for example, Venezuela’s lead. Country risk can be offset with the right mix of stocks. That’s why we don’t just buy Barrick and say, “We’re diversified!”

So... is your gold stock portfolio globalized? Do you have too much exposure to any one government? And do you own enough gold stocks so that bad news with any one company doesn’t sink your portfolio?

The easiest way to diversify, of course, is to buy a mutual fund (see the table below for our top picks). But we think the mining stocks with the greatest profit potential are those newer producers with operations in regions seeing increasing production and greater exploration prospects.

“Buy low, sell high” is easier said than done. Is there a particularly good time to buy gold? Are there patterns in gold’s market fluctuations? Find out everything you need to know in our FREE Special Report How Do I Know When to Buy?Click here to read it right now.


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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.

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.

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.

Tuesday
May112010

Gold Prices at $1233.30/oz

Gold Chart 12 May 2010.jpg

As the NYSE comes to a close we can see that gold prices have put in a fantastic day gaining $30.00/oz despite yesterdays euphoric response to the European bailout package.

As the chart shows the rise started in the southern hemisphere with Sydney, Singapore, through the UK and finally with the largest gain coming after the NYMEX had closed.

The HUI was also wide awake for this one and it gained a little over 30 points with some of our stocks doing very well such as:

Kinross Gold Up 7.71%
Yamana Gold Up 6.55%
Agnico-Eagle Up 3.47%
AEM Call Options Up 42.68%

Note the leverage by the Call Option on Agnico-Eagle against the progress of Agnicos stock price, spine tingling stuff, however, there are times that you have to drink de-caf instead of a fully leaded coffee when you are trading options.

Smile if you are a gold bug.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.

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.

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
May102010

A Trillion Dollar Band Aid

Trillion Dollar Baby 11 May 2010.jpg



The snapshot above gives us the make up of this bailout which sent the clap happy crowd into party mode as the broader markets put on good gains across the planet. As far as we can ascertain all of these funds do have to be paid back at some stage, so here we are again giving the drunk another drink. After today's flash flood of a rise in stock prices it will be interesting to see just where we are in week or so from now when the euphoria subsides. In the mean time both silver and gold prices remain firm.


This is an excerpt from a missive sent to us this morning from Peter Schiff:

A Time for Gold


The frightening financial gyrations unleashed by the unrest in Greece, and compounded by the mysterious kinks of electronic stock markets, have quickly reintroduced naked fear into the hearts of investors. Not surprisingly, while these concerns throw into question the safety of just about every asset class, gold and silver are beckoning once again as a means to help protect purchasing power.


We are now in the early stages of what I believe will be a global sovereign debt crisis.  With Greece, Portugal and Spain, we are seeing the results in what might be considered the “subprime” nations struggling with overly burdensome debt payments.  However, just like in the mortgage crisis, many “prime” nations, like the United States and Great Britain suffer from the same disease.  It is just that for these countries it will take a bit longer before the symptoms materialize. 

The bottom line is that many nations, including the United States, have simply borrowed more than their citizens can realistically repay. For many such countries, default may be the only way out.  The only question is how to do it.  Will governments simply refuse to pay, or will they pretend to pay by printing money?  I believe either option would be very bullish for gold and silver.  If nations default, gold and silver prices should rise, if they inflate, they should soar.



This is an excerpt from the Guardian:

Bill Gross, founder of Pimco, the world's largest bond investor with $1 trillion (£675bn) under management, recently told the Guardian he wasn't paid "to feel sorry" for countries. He also sent Britain's borrowing costs higher after saying gilts – UK government bonds – were lying on a bed of nitroglycerine.

Hedge funds have been widely blamed by European politicians for creating instability in the sovereign debt markets and their activities may have worsened the crisis by betting on a potential default of the troubled countries. This measure of market sentiment may have contributed to raising borrowing costs even further.


We draw your attention to the use of the word nitroglycerine or nitroglycerin, a thick explosive oil used in making dynamite!


The battle lines have been drawn with with yet another bailout package thought to be the solution. These props will buy some time but as we have said many times in the past liquidity will not solve the problem of insolvency. None of these sovereign states can magic wealth out of thin air and so gold and silver will go to higher and higher ground.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.

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.

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.

Trillion dollars.jpg
Sunday
May092010

A missive from Jim Sinclair 10 May 2010

Jim Sinclair.jpg
Jim Sinclair


The following is an excerpt from a missive that we received from Jim Sinclair this morning, who is the host of a web site called Jim Sinclair's MineSet. He sums up the situation much better than we can so its well worth the time spent on reading what he has to say. The above link will take to his site and his updates via email are free so you have nothing to lose by signing up for them.

Here we go:

A nuclear solution to Europe's debt problems is simply another way of saying "Quantitative Easing to Infinity."
 
All national debt will be bailed out. All states of the USA will be bailed out.
 
Paper currencies are headed to dust.
 
Regardless of the first knee jerk market reaction, gold is going to $1650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.
 
Credit default swaps are herein called the "Wolfpack." About that they are totally correct.

Now that they have challenged the "Wolfpack," whatever additional funds might be required will have to be provided or the "Wolfpack" will slaughter the EU.

EU Preps Euro Fund to Fight 'Wolfpack,' Debt Crisis

By James G. Neuger and Meera Louis
 
May 9 (Bloomberg) -- European Union finance ministers pledged to stop a sovereign-debt crisis from shattering confidence in the euro as they held an emergency summit to hammer out a lending mechanism that may be worth around $645 billion.
 
Jolted into action by last week's slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed on the backstop yesterday and told ministers to get it ready before Asian markets open. The European facility may be worth around 500 billion euros, said an official familiar with the talks.
 
"We are going to defend the euro," Spanish Economy Minister Elena Salgado told reporters as she arrived to chair today's Brussels meeting. "We think we have a duty for more stability for our currency. We will do whatever is necessary."
 
Europe's failure to contain Greece's fiscal crisis triggered a 4.3 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.'s collapse. It prompted the U.S. and Asia to urge broader steps to prevent a debt crisis from pitching the world back into a recession.
 
President Barack Obama spoke by phone with German Chancellor Angela Merkelfor the second time in three days, adding to the international pressure Europe has faced since a hurriedly arranged conference call of Group of Seven finance chiefs on May 7. Obama today emphasized "the importance of the members of the European Union taking resolute steps to build confidence in the markets," White House spokesman Bill Burton told reporters in Hampton, Virginia.



So, more new words to learn, such as 'Wolfpack' just when we thought they were second world war submarines! These statements to defend the euro remind us of the time the UK decided to defend the pound shortly after it entered the now defunct 'EMU'. The chancellor announced just how much he had in the war chest and Soros and company promptly torpedoed the good ship GB Pound. It looks to us that we are in for a re-run of this episode with euro taking the place of the pound for now.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.




















Sunday
May092010

Fronteer Developments Group: 09 May 2010 Update

FRG Chart 09 May 2010.jpg

On 1st May 2010 we decided to dispose of our position in Fronteer Developments Group (FRG) for an average price of $6.20 per share, taking the cash to sidelines. At the time we were of the opinion that the stock price was running a little ahead of itself and the divergence between the stock price and the 200dma looked a little too stretched for us and that a breather could soon follow.

As we can see from the above chart there appears to be a double top forming at the same time as the stock was getting ahead of itself. So our disposal of stock at $6.20 looks to be a reasonable call as the stock price has retreated a little to close on Friday at $5.36, despite rising gold prices. The stock price may stabilize at this point as it is perched on the its 50dma, however, it could go all the way and take tea with its 200dma. For now we will monitor FRG's progress and see just where it settles before re-evaluating it as a possible acquisition.

We do like this stock very much and hopefully we will be able to re-purchase it at a slightly cheaper price in the not too distant future.

Have a truly sparkling day.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.




















Friday
May072010

Gold Prices Forecasts for 2010 as per The London Bullion Market Association

The London Bullion Market Association Logo.jpg


LBMA Logo

Team,

If you haven't already seen this table you might want to pit your wits against the some of the best in the industry in terms of forecasting gold prices for the year of 2010. The first chart tabulates the people and which organisation they represent and the second chart shows their predictions for the year, the high, the low and the average price for gold.

List of Forecasters for gold prices 07 May 2010.jpg


To go to The London Bullion Market Association please click here and to go to the table please follow this link.

Forecasts for gold prices 07 May 2010.jpg

Have a truly sparkling weekend.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.




















Thursday
May062010

Gold Prices Rock Up

Gold Chart  07 May 2010.jpg


Every picture tells a story and for gold bugs the above chart is a pretty nice one.

Gold prices jumped $30.00 bursting through the $1200/oz level as the broader markets hit the wall with the DOW dropping 997 points before recovering to close 347 points down.

Silver prices gained 13 points to trade at $17.63/oz and the gold bugs index, the HUI put on 7 points. It looks as though the stocks have been caught by the surprise as gold prices rocked up and left the stocks waiting at the station, tomorrow may see them playing catch up should gold prices hold at these levels. Oil also dropped around 3%.

The reasons vary for the fall in the DOW from a glitch in the system, programmed selling, etc, however, we tend to lean towards the fear factor emanating out of the financial mess that is now eurozone. Can the Greeks meet the austerity measures being imposed on them? In a word NO! And this situation is spreading like a virus, which in posh circles is now called contagion. One thing that it has brought home to us is that the European administrators are incapable of acting with speed and have dithered with this dilemma. They are now victims of their own inability to act and are no longer in the driving seat, in that they are reactive instead of being proactive and putting some of these problems to bed. The worst of this sovereign debt fiasco is not behind us, it is still to come so hold on to your hard hats and your hard assets.


The break up of the European Union is not far away.

Meanwhile back at the ranch our recently held competition has been won. On the 23rd February 2010 we posed this question: Will gold prices reach $1000/oz or $1200/oz first?

This competition was loosely based on the challenge made by Peter Grandich when we wrote:

We are conducting a poll on where gold will go next, to $1000/oz or to $1200/oz.

As you are probably aware Peter Grandich has recently doubled his bet with this release:

Posted by Peter Grandich at 8:25 PM on Sunday, February 21st, 2010
Hello Perma Bears!!!  I’m doubling my wager to $100,000 and its good for the next 72 hours.
I hope they can learn of my offer before they head for the hills.
 
Go Gold!


Well, our readership voted 75% in favour of gold prices reaching $1200/oz first and so they are the victors, which is pleasing to us as it shows that our readership is well and truly switched on to just what is going on, well done to you, the team.

Stay on your toes as things are really warming up and opportunities will arrive thick and fast so we must be wide awake and ready to move once they have been identified.

As for today, well have a truly sparkling time.





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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.













Wednesday
May052010

Doug Casey on the Russian Bear


(Interviewed by Louis James, Conversation with Casey)

L: Doug, I'm in Belarus this week, a pit stop to help some of my students with their various business ideas. I'm struggling with my Russian, but getting along. And that has me thinking about Russia's role on the global economic stage. I know this is something you've given some thought to… What do you think? Is Putin out to take over the world? What do investors need to keep in mind?

Doug: Well, the first thing to keep in mind is that any time you're talking about a large group of people, I think it's about 150 million in Russia's case, it's hard to generalize. Russia makes headlines, being one of the BRIC countries (Brazil, Russia, India, China), which are "emerging" economies seen as a sort of wave of the future. But I have to say that Russia doesn't really belong in this group. We may lose some Russian readers by my saying this, but while Russia has a lot of resources and should have a bright future, I don't think it will.

L: Whoa, I didn't see that one coming. Why?

Doug: There are many reasons, and it's hard to tease out which one is the most important driver, but taking it all together, including Russia's history and resulting culture, I just don't see that Russia has The Right Stuff. That culture, which is transmitted explicitly, verbally, and more subtly, attitudinally, is one shaped by centuries of state oppression. It has strong streaks of isolationism, collectivism, and brutal authority. Russia's long history is full of sadness, fear, and violence. It's been relatively calm for the last few years, but that's a drop in the ocean of Russian tears.

L: Hm. They suffered under the Tsars, threw them out, only to get a greater tyranny in the form of a totalitarian socialist regime, which actively suppressed the kind of individual creative virtues that make for success on the global economic stage. I guess I could see that as a cultural handicap…

Doug: Think of it this way – if you keep mowing down the tallest poppies in a field of poppies, pretty soon you don't get many tall poppies. It's a not a survival trait to stand out in a field like that. It would be politically incorrect to suggest that various cultures have encouraged and suppressed different character traits to such a degree that there are now subtle genetic differences between people of different cultures – but I think it's possible.

It's like Darwin's finches in the Galapagos. And breeds like the poodle, dachshund, and shar-pei – which are all pretty different – that evolved in historic times. Vive la difference. Thousands of years hence, when mankind has spread throughout the galaxy, we'll undoubtedly evolve into different species. Just as there were numerous different hominids on the planet until homo sapiens sapiens decisively started taking over perhaps 40,000 years ago.

L: Well, I could imagine decades of brutal selection under the Soviets resulting in a greater incidence of timidity and acquiescence among Muscovites, and a greater tendency towards independent, rebellious thinking among the survivors in Siberia and other places the Soviets sent troublemakers they didn't kill outright.

Doug: I don't think there are any statistics on this sort of thing, but that's my general impression. I first went to Russia in 1976, which was right at the peak of the Cold War. At the time, the whole place had the feel of an armed military camp. I've been back three or four times since then, and there have been great improvements, at least in the big cities.

But once you get out of Moscow and St. Petersburg, it's really still pretty backward. Shiny new buildings in the capital don't alter the fact that most of the people across the country live in towns and villages that are aging, run-down, depressing, and poor. It seems like most of the smart, upwardly mobile Russians have emigrated long ago. Or at least moved to Moscow.

To make things worse, there's a big problem in that culture with alcohol abuse, especially among the men.

L: I've seen that in my travels in Eastern Europe, but you're such a bon vivant, it's a bit surprising to hear you pointing to this as an important variable.

Doug: You've seen me drink, but you've never seen me drunk.

L: That's true.

Doug: I'm far from a prude, but many of these people don't just drink too much, they drink way too much. I'm not talking about having a great party; I'm talking about alcoholism, which is a real fault. And chronic, widespread alcoholism is a serious social problem.

L: Sure enough.

Doug: And that's not all. The population seems to have fallen into a terminal decline curve. It takes about 2.2 children per female to maintain a stable population, and in Russia, the birth ratio is down to something like 1.2 - 1.4. This is not just a decline; the population is actually collapsing. That's true of most of Europe, Japan, and other relatively advanced countries as well, so it's not just a Russian problem, but when you add this factor to Russia's other problems – like a high death rate – the future looks considerably less bright.

L: That fits, I guess… I just hadn't thought of it. I'm told that in Belarus, I would be considered a "Hero Father" by the state and eligible for extra benefits because I have five children. Minsk isn't Moscow, and I find Belarusians to be quite different from Russians, especially on moral issues, but Belarus still has a very state-controlled economy – perhaps the most Soviet-style economy left in the world today.

It's hard to create new businesses here and most young people simply don't see many opportunities. So they put off having children… If that's the culture in Russia too, I can definitely see the problem.

Doug: I don't know how much the population collapse relates to perceived lack of opportunity, the alcoholism, a remnant culture of fear from the Soviet era, or any number of other variables, but it's a very serious problem.

L: And this isn't a problem for which one can look to history for solutions. Effective, widespread birth control is a recent innovation. And in the agrarian economies we've known for most of history, having a lot of children was a good thing; they helped on the farm.

Doug: That's right, kids were financial assets then. They were your pension plan if you had enough that some might survive to look after you, if you were lucky enough to reach old age. In an industrial, urbanized setting, they are expensive liabilities – at least from an economic point of view. And in the modern world, the state is supposed to steal money from everyone else to take care of you in your old age. So, if people feel less economic necessity and, perhaps subtly or not so subtly, that their world is not the nice place they want to have kids in, it's hardly surprising to see birth rates falling across the developed world.

L: Hm. As you say, this doesn't apply to Russia alone. I wonder why we don't hear more about this problem?

Doug: Well, since Paul Ehrlich wrote his famous book, The Population Bomb, and perhaps farther back, since Malthus' paradigm-shifting 1798 Essay on the Principle of Population, overpopulation has been the bugaboo of intellectuals around the world.

L: Radical environmentalists have taken up the cause as well; too many people making too much trash. We're going to bury the rain forests in Styrofoam cups – if we don't chop them down first to make toilet paper.

Doug: Hysteria is the ruling psychological state in today's world. But population decline is something intellectuals approve of because, I believe, they basically hate people. The chattering classes want to see, but don't particularly want to report on, terminal population decline in the developed world. That might lead to the conclusion humans aren't going to destroy the planet after all. It's the elephant in the room nobody's talking about.

And, back to Russia, the other big issue there is that it's what's left of an empire, put together by force, encompassing many very different people from very different predecessor cultures. They lost the Baltic states and southeastern Europe when the Soviet Union broke up, but whatever the odds are for Chechen independence, and so forth, there's still a lot of stress within the Russian Federation. Just a few days ago, there were those bombings in the Moscow subway, perpetrated, I understand, by widows of slain Muslim rebels. This sort of thing is likely to continue and push the country towards further disintegration, one way or another.

L: This is not how I expected this conversation to go. When I asked you, I thought we'd talk about Putin's KGB past and his probable desire to be king of the world, etc. But with all these structural issues, what you're saying is that it almost doesn't matter who's at the helm. Russia's in trouble going forward, regardless.

Doug: Another echo of Rome, perhaps. After a certain point – arguably about 180 A.D., and certainly by the 4th century – it wouldn't have mattered who the emperor was; larger trends were going to take it down.

Demographics are as important, or even more important, than any other megatrend you can point to. They are, for example, the factor that will ultimately result in the demise of Israel. One of the more shrewd things said by a leading political figure in recent history was Yasser Arafat's comment that the most potent weapon the people of Palestine had was the womb of the Palestinian woman. And he's right, because, as in most advanced cultures, the rich, urban Israelites aren't reproducing quickly, but the Palestinians are. There's really not much they can do to overcome the demographic trend; it is what it is.

The same is true for the Russians, who also have a rapidly growing Muslim population, among other rapidly growing minorities.  Demographic trends are huge factors that carry a lot of momentum; they change slowly over long periods of time and rarely respond to the feeble efforts of officialdom. The whole world is going to look very different in 100 years – even if we don't first go through something resembling World War III, which I think we will.

L: Sounds like "the dismal science" should be demographics, not economics.

Doug: Right. But no one will talk about this. It's partly because the chattering class doesn't want to admit that it was wrong about the population bomb. Just as the same people won't ever own up to the scam of global warming. But also because the places where there is explosive population growth are among the poorest populations, which goes beyond social and cultural to racial implications. And it's a total no-no to even talk about that, as people like Charles Murray and Philip Rushton have discovered.

L: But facts are facts, and the current trends indicate that the average skin color will be much darker in each succeeding generation for the foreseeable future.

Doug: That's just the way it is. During the 19th century, it seemed the whites were going to take over the world. Now non-Europeans are in the ascendant. Some people don't want to talk about it, but I don't see that as being a problem in any way. The chances are good that races on this planet will meld together. Who knows? Maybe people will speciate on different bases in the future.

L: Not being particularly white has only mattered a few times in my life, but I'm glad it never mattered at Casey Research.

Doug: You know I form my relationships based on what people's values, ethics, spirituality, etc., are. And these things have absolutely nothing to do with race.

L: Okay, so back to Russia. I visited Moscow two summers ago, and I came to two very strong impressions of the people I met. First, they were very hungry for better lives. Everyone everywhere wants a better life, but apathy and sloth are also common human traits. Russians impress me as highly motivated and intensely focused on getting ahead. That's normally a very good thing.

But their traditional ethics were paved over by the Soviets, and whatever collectivist ethics they tried to instill have blown away on the wind with the Soviet empire itself, leaving most of the people with no moral compass. Many are turning to religion again, but the old Orthodox Church doesn't seem to have much impact on moral choices made by modern Russians. This is not a good thing; ambitious people with few ethical constraints on what they are willing to do to get ahead can be very dangerous.

Added together, this gives me an impression that feels like new barbarians at the gates of Rome. It's no surprise to me that people fear new Russian military expansion, Russian hackers, Russian pirates, etc.

Doug: That's a good analogy, but these barbarians are highly educated barbarians. They're using computers and mathematics, rather than clubs and swords. On the other hand, I'm not sure they are much more thoughtful than the barbarians of the Middle Ages.

Another thing about barbarians; they don't manufacture much. Production is mostly in natural resources, which is certainly the case with Russia. They do sell some high-tech spin-offs of old defense industry research and development, but that's nothing compared to the oil and gas exports, minerals, and other resources. There's a lot of truth to the joke that in places like Russia the chief import is stolen cars, and the chief export is prostitutes. Did you see anything else going on there?

L: That was pretty much it. Gazprom rules. Lukoil is coming to America (I'm sure we'll have more to say on the implications of all this in our energy newsletters). Some people see a new world order in which Russia supplies the resources, Chindia the labor and manufacturing, and the West the high-tech applications. I suspect that may be giving the West too much credit and perhaps the Chinese too little, but the Russians should prosper regardless, with all the resources they have to deliver to a hungry world, shouldn't they?

Doug: Well, there are groupings within the Russian Federation that may do well, but for all the reasons we cited above, I think the whole cobbled-together society won't last. But even among those groups, abundant natural resources may not be a blessing. When such riches fall into the laps of people who don't have a culture for putting them to productive use, the kleptocrats in charge get rich while the masses continue to suffer.

Look at Nigeria, for example, or Saudi Arabia, for that matter. Oil is the worst thing that's ever happened to Venezuela. Without a culture that respects individual rights and productivity, upholds the sanctity of contracts, honors honest effort and achievement, etc., inequality and misery just get worse. They'd be better off if all anyone had in such a society were sand and rocks. And, in fact, that's why Hong Kong and Japan, to name just two places, prospered. They had nothing, except what they created.

Actually, it was the commodities boom back in the 1970s that helped make it seem at the time that communism would triumph. There were high metals prices, high oil prices, and that was stuff they had. What little capital this accumulated was directed into their space and military programs, which made them look like a formidable power. But it didn't last, of course. Commodities cycled down and knocked the last leg out from under their stool.

L: What about the barbarian propensity for plunder? Do you see no danger of renewed Russian militarism?

Doug: No. The chances of Russia going on the march in some sort of new effort aimed at conquest are almost zero. They have enough on their plates, they're busting apart at the seams as it is.

Another thing: backward cultures don't usually understand the importance of sustaining capital, and the Russians were no exception. Most of their submarines and other military hardware turned into junk shortly after the collapse of the Soviet Union.

Putin may want to be a new tsar. That sort of thing is just natural for the kind of sociopath who rises to the top in such political environments. But I don't think it will go anywhere. For all the reasons we've been discussing, the place is on a one-way slope downhill.
This gets back to our starting point: Russia doesn't belong among the BRIC countries. It's simply not headed in the same direction.

L: Well, whether you like China or not, it's certainly true that they have a powerful, almost Yankee can-do attitude that gets things done in a third of the time it takes to do them in the West. And they certainly don't have a collapsing population there, nor in India, nor in Brazil.

Doug: Right, and the workers in those places will work two jobs, will save for the future, and so forth. None of those productive Confucian values exist in Russia. You mentioned that they are focused on getting ahead – but that's not the same thing as having a work ethic and an appreciation for the importance of accumulating capital through greater production than consumption. The Chinese will eventually take over Siberia, demographically.

L: So… In spite of the great wealth of resources Russia has waiting to be developed, you're not investing in Russia. Not even a high-stakes speculation?

Doug: No, I'm not interested in investing in Russia. Maybe at some point in the future, when the place has really melted down and the stock market gets very, very cheap, it might be worth a punt. But I don't see the country as a growth environment in which you can count on steady average growth rates. There might be occasional hit-and-run speculative opportunities, but good ones will be rare indeed. It's a place to watch, but not one to enter, financially, without great caution.

L: If that changes, I'm sure you'll let readers know in The Casey Report. What might you advise our Russian readers who have not already stopped reading our obviously hateful and slanderous conversation?

Doug: The smart ones will take their education and training and leave. Russia just doesn't have the capital to make the best use of them or provide them with the best opportunities. Most of the capital accumulation seems to flow to the oligarchs, who don't reinvest it in ways that produce more; they just spend it to consume more.

That's why there are these jokes going around about Russians, like the one about Yuri and Boris who go to London. Yuri tells Boris, "Look at this new tie I bought for £1,000." Boris replies: "You should have asked me first; I could have shown you a place where you can get the exact same tie for £2,000!"

Look, I had a friend, an American of Russian background. He decided to go back to the old world and scrambled around for years trying to get into one business or another. It's not easy. I don't want to be negative, but in general, I have to say that trying to make any serious investments in Russia is a mistake. The Russian stock and bond markets are worth watching, but you'd need to dedicate yourself to becoming an expert in them, so you can identify exceptional opportunities – it's like speculating on penny mining stocks, but even riskier.
I'm not really looking to buy in the current global economic environment, but I could be talked into buying and holding select Chinese, Indian, or Brazilian stocks much more easily. Not Russia. They're just hot potatoes, and the country is heading for trouble.
Time to get out of Dodge.

L: Okay then. Noted and logged. Thanks.

Doug: You're welcome. Till next week.

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Have a good one.

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Tuesday
May042010

Kinross Gold Corporation First Quarter Results

Kinross logo 01 March 2010.jpg


First quarter results for Kinross Gold Corporation (KGC) show Margins increase by 26%; revenue up 23%, Adjusted net earnings increase by 38%, the highlights are follows:


Highlights

•  Production(1)  in the first quarter 2010 was 544,134 gold equivalent ounces, an increase of 3% over the same period last year. Consistent with previously stated guidance, the Company remains on track to produce approximately 2.2 million attributable gold equivalent ounces in 2010.  

•  Revenue for the quarter was $657.6 million, compared with $532.7 million in the first quarter of 2009, an increase of 23%. The average realized gold price for the quarter was $1,065 per ounce sold, compared with $897 per ounce sold in Q1 2009, an increase of 19%.

•  Cost of sales per gold equivalent ounce(2) was $461 for Q1, an increase of 10% compared with Q1 2009. Cost of sales per gold ounce on a by-product basis was $417 in Q1. Cost of sales per gold equivalent ounce is expected to be approximately $460 - $490 for the full-year 2010, consistent with previously stated guidance.

•  Kinross' attributable margin per ounce sold(3) was $604 in Q1, a year-over-year increase of 26%.

•  Adjusted operating cash flow(4) in Q1 was $226.3 million, a 5% increase over Q1 2009. Adjusted operating cash flow4 per share in Q1 was $0.32 per share, consistent with the same period last year.

•  Adjusted net earnings(4) were $97.4 million, or $0.14 per share, in Q1, compared with adjusted net earnings of $70.7 million, or $0.10 per share, for the same period last year, an increase of 38%. Reported net earnings were $110.6 million, or $0.16 per share in Q1, compared with reported net earnings of $76.5 million, or $0.11 per share, for Q1 2009.

•  On April 26, 2010, Kinross announced that it had been successful in its bid to acquire control of Underworld Resources Inc. by way of a friendly acquisition. The Company now owns a total of 42,663,059 common shares of Underworld, representing approximately 81.6% of Underworld's common shares on a fully-diluted basis, and plans to acquire the balance during the third quarter.

•  Pursuant to a private placement, Kinross has subscribed for 24 million common shares of Red Back Mining Inc. representing approximately 9.4% of Red Back's issued and outstanding common shares. The subscription price is CDN $25 per common share for an aggregate purchase price of CDN $600 million.


Tye Burt, President and CEO, made the following comments in relation to first quarter 2010 results:

"Kinross had a strong first quarter, with significant year-over-year increases in revenue, margins and adjusted net earnings. We are pleased with the progress being made at our Paracatu expansion plant, as its performance to date in 2010 continues to exceed plan.

"We continue to advance our organic growth projects at existing operations while making good progress at the major development projects. At Fruta del Norte in Ecuador, we have completed an 18,000 metre drilling program ahead of schedule, while at Lobo-Marte, we are advancing our drilling program and permitting activities.


To read the article in full please click here.

Not a lot to add to this news release other than so far so good, so we will watch and see what the market makes of it.



Kinross Gold Corporation trades on the TSX under the symbol of K, and on the NYSE under the symbol of KGC.

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.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.

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