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Tuesday
Jan122010

Agnico-Eagle Mines Limited Options Trade Closed

Gold Chart 13th Jan 2010.JPG

As we can see from the above chart gold prices fell out of bed today rather dramatically dropping around $30.00/oz to trade at $1129.60/oz, which in turn scuttled our options play on Agnico-Eagle.

At one time they were up 81.46% and on reflection maybe we should have taken those profits as they appeared almost instantly.

However the price deteriorated quickly and so we decided to average down by purchasing more of the same Call Options at an average price of $0.90 just before the close on Friday thus reducing our average price to $1.28, writing at the time that it is a real gamble when trying to predict the price movement of a stock over such a very short time frame. Again these options started well enough to trade as high as $1.80 before falling back so we then reduced our exposure and commented as follows:

Team,
Sold around 50% today at about a $1.00 as the market faded. There were opportunities to sell earlier at higher prices but we decided to wait. Lets see what tomorrow brings.


Tomorrow arrived and gold falls taking our options down with it so today we sold the remainder of our contracts for around $0.20 per contract, registering an overall loss on this trade of approximately 50% of the cash put into it.

In hindsight the opportunities were there to register a profit but we held out for a bigger profit and missed out on those opportunities. The lessons we must learn from this is to take some profits when they are presented to us and also to use 'stops' to protect our position once a reasonable gain has been achieved.

As we write gold appears to be stabilizing at $1125/oz lets hope that it can hold at this point and then resume its trek north.

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Sunday
Jan102010

The US Dollar Opens the week down 0.66%

USD Chart 11 Jan 2010.JPG

As the Australian, New Zealand and Asian markets get into full swing the US Dollar slides to register a loss of 0.66% causing gold to move inversely against it and improve by around $17.00/oz, to $1154.70, with silver joining in the fun with a gain of $0.30 to $18.78.

Its 4.00am in the UK so there is a while to go before they commence trading and a lot can happen between now and then. However if these gains can be maintained it will be interesting to say the least to watch the reaction on the NYSE. If gold is still motoring north then expect a wet blanket to be thrown over the precious metals sector in an attempt to dampen the enthusiasm for this tiny sector.

It should be a good day for the stocks if Australia is anything to go by as miners such as Newcrest Mining Limited (NCM.AU) has gained 2.32% to trade at $37.04, so fingers crossed once again.

All the best.

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Friday
Jan082010

High River Gold article update (by John Helmer)

HRG Logo 31 July 2009.JPG

In the mail bag this morning is this update sent to us by Chris Charlwood

To High River Gold Shareholders,
 
Please see the article below. It will be interesting to see at what share price Severstal considers it too high to try and buy out the minority. If we are getting close, then perhaps they will give up trying and either help the stock appreciate to its full value OR merge its other gold assets into HRG at a reasonable ratio of, let's say, 60/40 in HRG's favor. This would allow them to retain 70% ownership of  the combined entity and all of our motives could be aligned for a change. Thereafter, Severstal can grow the combined business or sell it at a premium - benefitting all of us shareholders. However, if Severstal continues to want us out, they will need to offer fair value - much higher than where we are trading at. Any way you look at this story, there is still a large gap between the current HRG share price and the opinions offered in this article regarding the value that HRG contributes.
 
Mining world's most widely read source of news

http://www.minesite.com/nc/minews/singlenews/article/what-is-high-river-gold-really-worth-discussion-and-disagreement-rages/1.html

January 08, 2010

What Is High River Gold Really Worth? Discussion, And Disagreement, Rages Across The Continents
 
By John Helmer in Moscow
 
The share price of Canadian-listed, Russian-owned gold miner High River Gold (HRG:CN) has shot up by 65 per cent since December 4, and this week hit 89 Canadian cents – its highest level since August of 2008. There has been no news to speak of, but there was a meeting, a month ago, with Prime Minister Vladimir Putin. Does he have the Midas touch?
The Prime Ministry isn’t saying how much time metals and mining oligarch Alexei Mordashov, who runs Russian conglomerate Severstal and through it controls HRG, spent with Putin when they met in the latter’s office on December 4. But Mordashov has incurred such debts, and lost so much money, since the two of them last met intimately in May of 2006, that there must have been plenty to talk about. “Good. Let’s talk in more detail”, said Putin, the instant before the public transcript was cut off.
 
According to the generally accepted understanding that Russian oligarchs have of the terms under which they hold their resource concessions from the state, they must ask permission before making new transactions that put at risk the cashflow generated by their concession agreements. They are also obliged to plead for forgiveness, when their concessions lose big money, or cause unpopular scandal (e.g., mass layoffs, budget shortfalls, mine fatalities). In both cases, they must pay for the privilege of walking out of the room and back to their counting-houses.
 
Severstal and the Prime Ministry are not giving details of their conversation. Mordashov’s spokesman was evasive. In the pictorial record of the meeting, if Putin’s face and body language indicate he was far from happy with Mordashov, that’s only a guess. Ten days later, Severstal tipped Bloomberg off that Mordashov is thinking of spinning all his gold mining assets out of the group, and giving it an independent share listing outside Russia. Such a transaction might create marketable equity value as high as C$4.3  billion depending on how market analysts judge the value of the group’s principal mining unit, High River Gold (ticker HRG:CN), which is already listed in Toronto.  If Mordashov asked Putin to give him the Sukhoi Log deposit, whose mining licence is currently retained by the state, then the spinoff would more than triple its gold reserves, and be worth much more. If, on the other hand,  Mordashov asked Putin’s permission to sell the lot to a Chinese mining company, then the valuation and the transaction price might go even higher. 

The formula Bloomberg uses when it is given Russian company placements, and wishes to avoid informing readers of the provenance, is: “two people familiar with the situation.” Accordingly, on December 16, Bloomberg reported: “Severstal may hold an initial public offering late next year or in early 2011, said the people, who declined to be identified because the deliberations are private. Severstal created a separate company, OOO Severstal Gold, in October to manage assets including a controlling stake in Toronto-based High River Gold Mines Ltd., one of the people said. The location for a potential IPO hasn’t been chosen, the people said”. A Bloomberg source says his agency knows who its sources are, but doesn’t want to tell its readers.
But the December Bloomberg report wasn’t news, because a Severstal executive had already said it publicly on October 22. At an investment conference in Moscow that day, the chief financial officer of the Severstal group, Alexei Kulichenko, said the company might divest its gold business in the first half of 2010. This was then reported by Alfa Bank to investors, with the comment that “the divestment will occur earlier than we anticipated. Previously, the management planned the divestment for 2011. We understand that the company still has to do a lot of preparation work for the divestment by consolidating financials and auditing and publishing reserves, etc.” A day after Kulichenko’s remark, Severstal issued a formal denial of its intention to sell its gold business.

The important difference between what Kulichenko had said in October and what Bloomberg’s “two people familiar with the situation” said two months later, was the timing. Until Mordashov went to Putin on December 4, he didn’t dare admit publicly what he was saying privately. Sources close to HRG and to Severstal Gold in Moscow say that the company has three end-game options. One is for him to secure enough shareholder votes to sell the entire kit and caboodle to a Chinese gold mining concern, although HRG denies such a deal is in the offing. The mooted arrangers are Troika’s joint-venture partner and shareholder, Standard Bank of South Africa, and its joint-venture partner and shareholder, Industrial and Commercial Bank of China (ICBC). If so, HRG has completed the first step – a deal between Mordashov and Troika for the latter to buy 150,000,000 HRG shares at a price of C$0.38 per share, for a total of C$57 million.

That deal was announced on October 27, when the share price was 38 cents. At its high this week of 89 cents, the market capitalization is C$711 million. Troika has been able to book C$76.5 million, or 134 per cent in gain over the 10 week interval. Minority Canadian shareholders have complained to the Toronto Stock Exchange that the Troika transaction was undervalued to Troika’s benefit. The shareholders also requested stock exchange action to rule that the deal wasn’t arm’s length, that Troika was a concert party with Mordashov the controlling shareholder, and that its new shareholding should not be allowed to vote in favour of further deals Mordashov might have in mind but has yet to disclose to the market.
Igor Klimanov, the new chief executive of HRG, insisted: “Troika is a non-related party, and everyone who says otherwise is a liar.” On the option of a sale of Severstal’s gold assets to a Chinese buyer, he said: “As to Chinese stuff I have no idea what you are talking about.”
 
With the completion of the Troika transaction, there are approximately 798.9 million shares outstanding. Severstal will own approx. 400.7 million (50.16 per cent). Troika’s 150 million will amount to 18.8 per cent, while unaffiliated minority shareholders will hold 248.2 million shares (31.1 per cent).
 
The Ontario Securities Commission (OSC), which regulates the Toronto exchange, has told HRG minorities that it cannot rule on whether to nullify Troika’s votes on a new transaction proposed by Mordashov until the proposal is actually tabled. “The application of Multilateral Instrument (MI) 61-101 Protection of Minority Security Holders in Special Transactions to any future going private transaction of HRG,” the OSC has written, “cannot be determined until the time of the proposed transaction. To view MI 61-101 on the OSC website at www.osc.gov.on.ca, from the homepage”.
 
On the latest financial data available, HRG makes up about two-thirds of the gold division revenues for Severstal Resources. For Mordashov to legitimately neutralize the minorities, he needs to construct a new transaction worth at least 100 million shares, so that, combined with the Troika bloc, the Mordashov allies would have a majority of the minority ready to approve his scheme of arrangement. The second end-game option is aimed at such an outcome. It has been in discussion at Severstal Resources and with Mordashov for some time, according to a source who was involved. The idea has been to build an additional majority of the minority shareholders at HRG by acquiring a Russian gold company or asset in a swap for HRG shares. One of the candidates, which independent Russian sources say is being marketed for sale elsewhere, is GV Gold, whose controlling shareholder is Sergei Dokuchayev of the Lanta Bank group. GV Gold has already made several abortive efforts at public listings in Canada and London, falling short of its target valuation each time. In the meantime, it has been steadily lifting gold output at its principal producing deposit of Golovets Vysochaishy, near Sukhoi Log in the Irkutsk region.
 
Nine-month results reported by GV Gold indicate production in 2009 to September 30 of 87,200 ounces, compared to 99,300 ounces in the same period of 2008. Gold sales revenue this year amounted to Rb2.5 billion (C$88 million), up 19 per cent on the revenue figure of Rb2.1 billion a year ago. Current reserves for Vyoschaishy and other deposits for which GV Gold holds licences amount to 2.3 million ounces counted according to the C1 and C2 Russian classification of reserves; with an additional three million ounces in resources counted as P1, P2, and P3.
 
In comparison, HRG’s production in the first nine months of 2009 was 241,781 ounces with C$263 million in gold sale revenue. HRG’s gold reserves and resources are reported to be 6.4 millon equivalent ounces, according to the corporate presentation on the company website. On the 2008 production standings, GV Gold ranks 8th largest goldminer in Russia and. Severstal Resources, including HRG’s Russian output, ranked 5th.
 
GV Gold’s last semi-public share transaction was undertaken by BlackRock in 2007, but at a deep discount that valued the company between US$150 million and US$200 million. GV Gold denied the reported transaction price at the time, and BlackRock refused to say. BlackRock’s current stake is reported to be 20 per cent.
 
In comparing GV Gold’s and HRG’s production, you come up with a value ratio of 73.5 per cent in HRG’s favour. It is more difficult to compare the reserves of each company’s mines,   as Canada and Russia have a different reserve classification system (described in this document). However, if no system differences are taken into account, you come up with a value ratio of 55 per cent in HRG’s favor. In comparing these ratios, it may be difficult for Mordashov and Dokuchayev to reach agreement  There is also this hitch in the Toronto exchange rules: “TSX listed issuers will be required to obtain security holder approval for public company acquisitions that will result in the issuance of 25% or more of their issued and outstanding securities (on a non-diluted basis).”
 
The Canadian minorities have so far demonstrated considerable staying power against Mordashov. During last summer’s minority buy-out attempt, the institutions currently holding about 120 million shares said publicly they will not sell for less than one Canadian dollar. Retail minority shareholders with 57 million shares indicated their average sale price would be C$1.47.  If Mordashov tries a new share swap, and follows with a reorganization of HRG to the exclusion of the Canadian minorities, they threaten to sue . “The litigation lawyers have sent a warning letter to HRG stating we will be extremely vigilant to ensure that any transactions, if done, are carried out at fair value and for a proper purpose”, according to Chris Charlwood, an HRG shareholder with significant minority support
 
So the suspicion remains that Mordashov will attempt consolidate the entire HRG at a price for the resisting minorities that would be well below what they think HRG is worth. So what is HRG worth? Last month, a Canadian business newspaper combined with a Russian brokerage and valued HRG shares at C$2.48, a more than a fourfold increase on the present price which would give it a total market capitalization of  C$1.98 billion. "We believe High River Gold has now become a secure asset which carries substantial investment attractiveness", the Moscow report from the Olma brokerage was quoted as saying in the Canadian media. 
 
Charlwood circulated this valuation in November, as HRG began to move. “With the recent closing price at C$0.44,” Charlwood reported at the time, “HRG’s market cap would be approx. 2.7 times cash flow from operations (post Troika deal closing). HRG’s global peer group of mid-tier public gold companies (Randgold Resources, Northgate Minerals, Centerra Gold, Golden Star Resources, Red Back Mining, Eldorado Gold, Semafo Inc., Gammon Gold, New Gold Inc., Alamos Gold, Aurizon Mines, Jaguar Mining) is trading at an average of approx. 18.2 times Q3 Operating Cash flow on an annualized basis. If HRG were trading at this average multiple, the share price would be C$3.00 (after Troika dilution). HRG was trading at $3.40 early last year.” At this estimated share price, HRG’s market cap would become C$2.4 billion.
 
A third option for Mordashov is the spinoff - with or without Sukhoi Log’s 60 million oz on the balance sheet. Without them, Severstal Gold has been estimated by an Alfa Bank report in November to have about 14 million oz in reserves. Output this year for the group, including HRG, should come in at about 550,000 oz, according to public remarks by Kulichenko. The company has been valued by Barry Ehrlich of Alfa at about C$1.6 billion.

Severstal paid €300 million ($437 million) in October 2007 for Siberian gold assets belonging to investment company Arlan, according to Rob Edwards, metals and mining analyst for  Renaissance Capital in London. Sector sources in Moscow say this price was highly advantageous to those involved in the transaction, but unrealistically high as a benchmark for future transactions. Severstal also overpaid, the sources claim, when it spent US$325 million in 2007 and 2008 to acquire and delist London-based gold miner Celtic Resources. Using the Olma valuation for HRG alone at C$1.98 billion, and considering  HRG’s percentage contribution in production and reserves , the estimates for Severstal Gold may well fall in the range between C$3.2 billion and C$4.3 billion.

In a recent report for clients of Unicredit Securities, gold analyst George Buzhenitsa said: “we believe the structure of the transaction could resemble the [2006] spin-off of Polyus Gold, where shareholders of Norilsk Nickel received one share in a new entity for each share owned in the parent, giving current shareholders a free option. We value Severstal’s gold business at roughly USD 2.5-2.7 billion, based on our gold price forecast of USD 1,150/oz for 2010E”.
 
If Mordashov and Dokuchayev can’t agree on merging GV Gold into HRG and Severstal Gold, and if the proposed spinoff doesn’t look like achieving a high enough target valuation to suit Mordashov, there is an alternative scheme, according to Edwards of Renaissance Capital. This would involve Severstal selling the Arlan and Celtic assets to HRG at a valuation precisely equal to the number of shares required to strike the majority of the minority, and topple the holdout Canadians. But that might trigger a Canadian lawsuit, and then what would happen to the Severstal Gold IPO?


Gold Prices: To answer readers questions, we have not added to our position due to being busy in other areas, so please dont be put off by our lack of activity, if it fits your criteria then go ahaed.


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Friday
Jan082010

Agnico-Eagle Mines Limited Options Update

AEM Chart 09 Jan 2010.JPG
On the 4th November 2009 we bought a few Call Options on Agnico-Eagle Mines Limited (AEM) they were the JAN 2010 series at a strike price of $60.00, symbol AEMAL, for an average price of $5.10. We were of the opinion that Agnico was grossly undervalued at the time but the market didn't agree and these options, although they started well they soon fell out out of bed.

At one time they were up 81.46% and on reflection maybe we should have taken those profits as they appeared in quick time.

Fast forward to time now and we tracking the price at sub one dollar. So, firstly we looked at the chart again and as we can see there has been a positive crossover on the MACD and the RSI has improved but still has some room for further upward progress. Also note how AEM is back filling the gaps created by a drop in price. Now the stock price is heading north and today it closed at $59.38, so an increase of $0.70 or so will put these options into positive territory. We think that this can be achieved next week. This is not an investment it is a straight out bet for gamblers only. Anyway we bought at an average price of $0.90 just before the close today thus reducing our average price to $1.28, but we must repeat that it is a real gamble when trying to predict the price movement of a stock over such a very short time frame.

It now remains for Agnico to blow through the $60.00 level early next week, no doubt keeping us on our toes.


Any thoughts or comments on how we could do better are always welcome so please let us know.


Have a sparkling weekend.

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Thursday
Jan072010

High River Gold Up 27.14% Today

HRG Chart 08 Jan 2010.JPG

High River Gold Mines Limited (HRG) was the standout performer today despite the metals sector being a tad off colour. As we can see from the above chart HRG is coming back to life in spectacular fashion as this spike in the stock price clearly demonstrates. The technical indicators are pushing against the ceiling and are well and truly in the overbought zone.

However as regular readers know this is no ordinary gold play as this stock is still undervalued and has some way to go before it regains its former glory.

Scanning the air waves we could not find a unique news item that would justify todays move, we can only hope that the recovery continues and that we get back to where we once were.

Got a comment then please add it to this article, all opinions are welcome.

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Wednesday
Jan062010

The Biggest Financial Deception of the Decade

Bernard Madoff.JPG



By Jeff Clark, Editor, Casey’s Gold & Resource Report

Enron? Bear Stearns? Bernie Madoff? They’re all big stories about big losses and have hurt a lot of employees and investors. But none come close to getting my vote for the decade’s most dastardly deception...

First came Enron, with $65.5 billion in assets, going belly-up and becoming the largest bankruptcy in U.S. history at that time. Chairman Kenneth Lay said that Enron's decision to file bankruptcy would “stabilize the company,” but over the next five years the company was completely liquidated. The stock went from a high of $84.63 in December 2000 to a whopping 26¢ one year later.

And what had we been told by the media? Fortune magazine dubbed Enron “America's Most Innovative Company” for six consecutive years. A well-intentioned friend wanted to give me a gift subscription to the magazine for Christmas; I choked on my cocktail and luckily he assumed my drink was too strong. In the end, you can thank Enron for bringing us the Sarbanes-Oxley Act of 2002, a ghastly financial reporting regulation for which compliance is grossly expensive, and – stop the presses! – hasn’t prevented similar repeats.

Next came WorldCom filing for bankruptcy in 2002, their assets of $103.9 billion dwarfing Enron’s. “We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity,” assured CEO John Sidgmore. Was his eggnog spiked? Today, WorldCom stock certificates have been spotted as doilies under pancake house coffee mugs signifying it’s decaf.

Tyco, Adelphia, Peregrine Systems… it’s a crowded field around this time. But their stories of fraud and greed and mismanagement get boring after awhile. Just watch the closing credits from the movie Fun with Dick and Jane and you’ll see what I mean.

Bear Stearns set us all up for the Big Meltdown of 2008. It was B.S. (no, I mean Bear Stearns) that pioneered the asset-backed securities markets, and we all know how that turned out. Later we learned that as losses mounted in 2006 and 2007, the company was actually adding to its exposure of mortgage-backed assets, gearing itself up to 35:1. With net equity of $11.1 billion supporting $395 billion in assets, B.S. carried more leverage than a streetwalker’s push-up bra.

And during it all, Bear Stearns was recognized as the “Most Admired” securities firm in a survey by Fortune magazine (there’s that Lower Manhattan tabloid darling again). Frequent sightings of company executives on country club fairways assured the public that all was well. And CEO Alan Schwartz told us there was “no liquidity crisis for the firm” and insisted he “had the numbers to back it up.” His company was sold four days later to JPMorgan Chase at $10 per share, a 92% loss from its $133.20 high. Perhaps his numbers were prepared by ex-Arthur Andersen employees.

Lehman Brothers, the 158-year-old investment bank, was next and still today holds the title as the largest bankruptcy in U.S. history. L.B. succumbed to 2007’s Word of the Year, “subprime,” and its $600 billion in assets all went poof! In just the first half of 2008, before the meltdown, Lehman’s stock slid 73%.

And what did CEO Dick Fuld tell us in April of that year? “I will hurt the shorts, and that is my goal.” He must have been referring to the attire of his tennis club buddies, because the ones who actually got hurt were numerous other banks, money market funds, institutions, hedge funds, REITs, brokers, private and public trusts, foundations, government agencies, foreign governments, employees, and investors.

Moving on to the largest U.S. government bailout recipient by far, AIG’s troubles spawned my favorite placard of the decade: seen outside their Manhattan offices stood a sign that simply read, “Jump!” Maybe its creator heard what I did from AIG’s financial products head Joseph Cassano: “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of these [credit default swap] transactions.”

He must have substituted his prescription eyewear with those giant New Year’s Eve glasses, because the government sunk $180 billion into the company and it still had to be split up and the assets sold to the highest bidder. I’m sure that his non-flippant comment had nothing to do with him making CNN’s “Ten Most Wanted Culprits” list in 2008.

GM, with $91 billion in assets, filed for bankruptcy in the summer of 2009 and is now largely owned by the U.S. and Canadian governments (i.e., taxpayers). The $19.4 billion in federal help wasn't enough to keep the nation's largest automaker out of bankruptcy. But don’t despair: the government is pouring another $30 billion into GM to fund “reorganization operations.”

GM shares? Bye-bye. For 83 years GM had been a member of the prestigious 30 Dow Industrial stocks. It managed to survive the Great Depression but not this decade’s Greater Depression. Yet chairman Ed Whitacre had insisted, “I remain more convinced than ever that our company is on the right path and that we will continue to be a leader in offering the worldwide buying public the highest quality, highest value cars and trucks.” I wonder what he thinks now that the stock is named “Motors Liquidation,” trades only on the pink sheets, and sells for about 50¢?

Topping off our list is the infamous Bernie Made-off (er, Madoff), who scammed $65 billion over 20 years from unsuspecting institutions and wealthy investors. But don’t be too upset, because the number is probably half that amount. Hey, the alleged size of the losses comes from his own ledger book, and should we really trust his balance sheet? Dubbed the largest Ponzi scheme ever, I beg to disagree, as you’re about to see...

By now you are probably wondering... what’s bigger than all these? He’s covered the major frauds and scams of the past decade – what could possibly be left?

To quote my favorite sleuth, Hercule Poirot, “When all the facts are laid before me, the solution becomes inevitable.”

Here are a few clues…

Federal Reserve Chairman Ben Bernanke said on July 16, 2008, that Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.” Then-Secretary Treasurer Henry Paulson declared on August 10, 2008, “We have no plans to insert money into either of those two institutions.”

►Both Fannie and Freddie were nationalized 28 days later, on September 8, 2008.

Ben Bernanke claimed on February 28, 2008, “Among the largest banks, the capital ratios remain good and I don’t expect any serious problems of that sort among the large, internationally active banks...” Henry Paulson added on July 20, 2008, that “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

►Since the recession started in December, 2008, 144 banks have failed.
Paulson informed us on April 20, 2007, that “All the signs I look at show the housing market is at or near the bottom.”

►The number of foreclosures skyrocketed shortly thereafter and will now any day surpass those during the Great Depression.

Ben Bernanke announced on June 20, 2007, that “[The sub prime fallout] will not affect the economy overall.”

►Less than one year later, the stock market crashed, losing 53% of its value, and is still down 25% despite one of the biggest bounces in history.

Those in charge of our country’s finances not only failed to see the crises developing and then bungled the handling of the recovery, they’ve deliberately misled us about what they’re doing to our currency. In spite of emphatic promises, flowery speeches, pat-on-the-back assurances, and continual reassurances, here’s what they’ve actually done to the dollar:
Since September 1, 2008, the monetary base has ballooned from $908 billion to $2.0 trillion. The current monetary base is now equal to bailing out General Motors 23 times.

Bailout funds in 2008 and 2009 total $8.1 trillion. That’s almost 78 WorldComs. It’s over 123 Enrons.

U.S. debt has risen sharply, from $6.2 trillion in 2002 to $12.1 trillion today. That’s over $39,000 per citizen.

David Walker, the comptroller general of the Government Accountability Office from 1998-2008, warned that the U.S. is on the hook for $60 trillion in unfunded liabilities. Independent analysts peg the figure at near twice that. Whatever the number, it is incomprehensibly large. The only way we will meet these liabilities is to print the money and inflate them away.

We’re bailing out corporations that should fail, making financial promises we can’t keep, and adding layers of debt we can’t possibly repay. And the real killer is, if we don’t have the cash, we just print it. It is, by any reasonable account, the “blunder that will plunder” the next several generations. It is changing America permanently, and the problems will persist long after you and I are laid to rest.

Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.

This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.

Yet, what is the guardian of our economy and money telling us now?

“Will the Federal Reserve's actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).

This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.

Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.

Any level-headed individual has to conclude that there will be a steady – and likely accelerating – decline in the dollar’s purchasing power. It’s inevitable.

The great masses don’t quite understand it yet, but they will. There will be no escape from the cold, hard slap in the face citizens will receive when a high level of inflation arrives. And when it does, it will make a mockery of any opposing viewpoint.

So the question before you is simple: Will you be a prepared survivor for what lies ahead, despite what our government leaders tell us, or will you be a complacent victim of the biggest financial deception of the decade?

For me, there’s only one solution. Don’t kid yourself into thinking a man-made asset will protect your purchasing power. This is the time to be overweight gold and silver. I advise letting them serve their purpose for you.

Learn the best ways to buy and hold gold and silver, and the stocks that will help you outpace the inflation that’s right around the corner. Give Casey’s Gold and Resource Report a risk-free try and learn how to escape with your assets intact. For $39 a year, it’s a no-brainer. Click here for more.


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Monday
Jan042010

The Federal Reserve Sued by GATA

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The Gold Anti-Trust Action Committee Inc. today (Dec. 30th, 2009) brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank's records of its surreptitious market intervention to suppress the monetary metal's price.

The suit was filed in U.S. District Court for the District of Columbia.

This is the opening snippet from rightsidenews.com who carried this article entitled 'GATA Sues Federal Reserve to Disclose Gold Market Intervention Records' They also refer to a letter from Kevin Walsh, a member of the board which states:

I have confirmed that information withheld from you under exemption 5 in this case is both predecisional and deliberative within the meaning of exemption 5.

Accordingly, this information was properly withheld.

'Properly Withheld' that sort of comment sticks in the throat and was aptly picked up by Al Korelin of The Korelin Economics Report when he interviewed Chris Powell, GATA Secretary/Treasurer. Click here to listen to it. Its also on Youtube.

The gold price manipulation theory has been around for some time so it should be interesting to see just how this one pans out. We don't know how long it will take to get this issue into court but GATA have asked the questions and The Federal Reserve Board need to come up with a few answers.





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Tuesday
Dec222009

Are We Missing Something?

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Nostradamus


By Olivier Garret, CEO, Casey Research

Ben Bernanke is a dubious choice to be named “Person of the Year” by Time magazine.  While Time’s Managing Editor Richard Stengel credits him with recognizing early and reacting appropriately to the ongoing financial crisis, in reality, he was wrong time and again with both his predictions and his remedies. Just remember these gems:
 
On July 1, 2005, Bernanke stated without hesitation that we were not experiencing a housing bubble: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”

November 2005, on derivatives: “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” And “the Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”

February 15, 2006: “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

February 2008: “I expect there will be some failures of smaller banks” (Bear Stearns collapsed a couple of weeks later).

But then again, I guess in regards to his nomination we are talking about achievements in 2009. That was the year Bernanke said, "Currently, we don’t think [the unemployment rate] will get to 10 percent."
 
This is the same chairman of the Federal Reserve who told us that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”  

Unfortunately, he has not just been wrong about housing, unemployment, banking, and derivatives -- his policies have directly contributed to all of the problems we now face.
 
High unemployment and the weak dollar threaten to further undermine our economy, yet his policy is to just keep borrowing. The massive debt his policies have foisted on the American taxpayer is weakening the U.S.’s position as global economic leader and hurting already tenuous relations with foreign governments. Bernanke has supported the policies of Greenspan and our current and previous administrations – the very policies that got us into this mess. He has supported the leveraging of the American economy to rescue companies long past saving and the borrowing of billions from foreign governments to line the pockets of corrupt investment bankers. 
 
I could recommend a few alternative names for runner-up, if Time’s criteria are really as dubious as they appear:

Lloyd Blankfein from Goldman Sachs for robbing taxpayers legally

Rick Wagoner of GM for taking the world’s largest car maker to bankruptcy in a quarter-century

Tim Geithner for ensuring that all of our bankers prospered during the worst financial crisis since the ‘30s

Tiger Woods for providing the nation with great dinner conversations and helping to spur tabloid sales.
 
Bernanke is insistent on using inflation to make our personal debts seem small, all the while setting the country up for a much larger disaster long term. Bernanke is borrowing from Peter to pay Paul… and robbing taxpayers to pay Peter.
 
As you may have noticed, the government will not save you from the reverberations of a declining U.S. economy. You’ll have to take matters into your own hands… and no one is better at pointing the way than the editors of The Casey Report. No matter how dire the economic trend, double- or triple-digit gains within 12 to 24 months are easy if you discover the right opportunities to profit. Find out more by clicking here.



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Friday
Dec182009

The Eye of the Storm

Eye of the storm


By Louis James, Senior Analyst/Editor, Casey’s International Speculator

At a recent Casey Research editors’ meeting, the team took on the question of whether the somewhat steady recovery since last February’s washout bottom in the broader markets had any of us thinking that the recession might be over. The gathering of minds included: Doug Casey, Managing Director David Galland, CEO Olivier Garret, Casey Chief Economist Bud Conrad, Senior Energy Analyst Marin Katusa (my counterpart on the energy side), myself heading the metals division, and several other editors.

Doug’s guru-vision remains locked on the disaster channel. The U.S. economic problems, he says, remain so profound and, if anything, have been worsened by the government’s actions, that Americans are headed for a significant lowering of their standard of living.

As this reality unfolds, it will send out shock waves that will impact much of the world: the Greater Depression.

And the next step, Doug believes, will be a change in interest rates. The Bright Boys in DC will resist doing this, but while they seem willing to let the dollar slide to ease their mounting debts, they don’t want it to crash. They may soon be forced to raise interest rates. When that happens, Wall Street usually moves in the opposite direction – which could be the end of the “Things Aren’t as Bad as We Thought” rally of 2009.

Bud Conrad – in proper, responsible chief economist-style – considered the question carefully and conceded that there do indeed seem to be many “green shoots” now, but still concluded that conditions will continue deteriorating. He sees the government deficits in the driver’s seat, the main variable to keep a watch on.

As the U.S. government persists with its spending spree, valiantly dousing the deficit fire with more debt-gasoline, it will continue destroying the dollar, and that will push ever more people into gold.

A year ago, Bud predicted that gold would top $1,150 by year-end 2009. His call was bolder than most forecasters’ – but he was right. Looking at the numbers today, Bud’s new baseline 2010 forecast is for gold to top $1,450. He sees a “possibility of further international instability or currency debasement as adding to that baseline.” In plain language, Bud’s confident that resource stocks of all sorts will, on average, benefit greatly from the demise of the U.S. dollar.

Somehow, I can’t shake the image of Bud singing Don’t Fear The Reaper with Blue Öyster Cult for back-up… but that’s really more like something Marin would do.

Speaking of Marin Katusa, he commented that there is money to be made in the current rebound environment, but speculators should be extremely cautious: “You should know you’re dancing with the devil in the pale moonlight. You need to make sure you know the dance steps: get in early and exit before you get the dip by the devil at the end of the song.” (Marin not only has made huge amounts of money for our subscribers, he sings in a rock band, so he knows what he’s talking about.)

My own thinking has evolved into seeing 2009 as being like the eye of a monstrous storm.

The sky has cleared substantially, and the sea looks amazingly calm, given what we’ve just been through. But it’s not over yet; the trailing edge of the storm always delivers the most damage, and that’s yet to come. Anyone fooled into abandoning shelter is taking a terrible risk.

This doesn't mean we should stay huddled in our huts, however – it makes more sense to go out, restock supplies, repair what damage we can, and get ready for the deluge to come. The renewed fury of the storm will sink many more ships, but it will also make vast fortunes for those who invest in the ships that survive and even thrive in the tumult.

Essential strategy: For the near term, buy only an initial “tranche” (portion of your desired position) in the most storm-proof (cash-rich) companies you can find – ideally with great discovery or development stories that will deliver exciting news regardless of market conditions – and hold a good chunk of cash in reserve for the next big buying opportunity.

Nothing goes up in a straight line, as share prices over the last month have amply demonstrated. There are some great picks that have been heading up all year that are now paused in their advances. Any more correction in precious metals could put them on sale, temporarily, offering great buying opportunities with a lot of the technical (e.g., discovery) risk removed from the plays. You’ll kick yourself if you don’t have any cash on hand to take advantage of them – and kick twice as hard if you paid too much for a large whack of something that goes on sale.

Worried about sitting on cash with the U.S. dollar in a death spiral? Remember: gold is also cash, highly liquid, and with terrific speculative upside to boot.

With gold having just corrected sharply (as I predicted it would in Casey’s International Speculator), gold is unquestionably the best investment we can recommend right now – fluctuations aside, it has nowhere to go but up for quite some time. Perhaps as long as a decade.

That, plus our essential “eye of the storm” strategy as above is what we’re recommending to all our subscribers – and indeed to all investors around the world who want to not only survive the trailing edge of the financial storm still to come, but thrive because of it.

While gold has gone up 38% since last December, junior gold stocks can provide even greater gains than the yellow metal itself. Currently, for example, Louis is following eight juniors that have all the right conditions to become takeover targets by gold majors… which would drive share prices through the roof. If you want to get in early, this is the time: with our special holiday offer, you’ll save $400 on a one-year subscription of Casey’s International Speculator – but only until midnight, December 18. Hurry up and click here to learn more.

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Wednesday
Dec162009

High River Gold Target Price of $2.48

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In the third quarter of 2009 High River Gold demonstrated improving operating and financial results: production, revenue and operating profit rose compared to the levels of the first and second quarters. Based on the Q3 numbers and upon completion of the Troika investment of C$57M, the company is debt free on a net basis, which enabled us to increase our target price by reducing the discount applied in our peer valuation from 35% to zero. The stock's upside potential remains high supporting our BUY rating - Olma Investment Company.

The above is an excerpt from a research report issued by Olma Investment Company which if you can find the time is a very interesting read, please click here to read the report in full. This could just be the buy of this festive season as the upside potential looks very attractive at this point, so you might want to give it a thought when you are next on the acquisition trail.

Our stance throughout this roller coaster ride has been to hold tight and not sell at what we considered to be bargain basement prices and we are still of that opinion. The stock price has come a long way since it bottomed for mere pennies and is making steady progress so our patience may yet be rewarded.

Once again our thanks and gratitude go to Chris Charlwood for keeping his finger on the pulse and alerting us to this report, have a great Christmas Chris.

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