Monday, May 28, 2007

Power is shifting from USA to Emerging World and so should be your capital. CS

Step out of your Google search box and look at the big picture. What world is facing today: China stock market bust and strong commodity market boom after that. The truth is that flood of liquidity created by FED and Other central banks is eroding value of all currencies, all this unrestricted credit supply is chasing restricted in its nature Real Goods, creating bubbles in all asset classes from basic metals to modern art. Magic 444 number is very close now in Dow Jones China index, it could be too esoteric for financial analyses, but to put it simple - it is the same meaning for Chinese as 666 for Christians. This bubble in Chinese market is unsustainable and created by a problem of trying to keep Jinn in the box. Capped by artificially low rate of exchange of YUAN, local currency is chasing still relatively very small stock market. Suppressed low wages and uneconomic (when all real expenses accounted including environmental and health) production costs fueled by "bad" loans from State sector can not be sustained for needed healthy rate of growth. Chinese Dragon has grown up and need to be on a healthy diet of financially responsible consumption by growing middle class and rising savings reinvested into economy. What is necessary for this positive outcome? Transparent capital market, recapitalised banking sector with recycled "bad loans" for state owned enterprises. Now Bubble mentality is taking over: mutual funds and black boxes are chasing last 20-30-40 % of the upside fearing to miss the opportunity, Woos and Guys are taking their savings and putting them "to work" their magic to riches in Parabolic last leg of bull market before correction. Whole world is getting crazy with intoxication of "free" money. But trouble is already here: USA is facing stagflation - stagnating of economy growth in real terms with increasing inflation in all basic goods: energy, food and commodities. For all those goods advertised on Google you need not clicks, but bricks to produce them and now you have to compete for them with Woos and Guys. China is already preparing for necessary painfully coming back to reality. Stock market bubble need to be deflated the sooner the better. Once liquidity will dry out market will plunge 30-50% to its still solid bull uptrend line. A lot of reckless people will be hurt as usual. Shock waves will hit all asset classes. Picture will be painted as USD will fly again as "safe heaven" when all emerging markets will take a hit. Outcome could be disastrous or very positive for China, Emerging markets and world in total. In my positive scenario China need to sterilise excess liquidity by increasing real rates and reserve requirements for banks. Currency control must be relaxed so that excess capital can go overseas and secure real assets for future growth. Part of Currency reserves must be used for recapitalising banking sector with cleaning out all bad nonperforming loans, reserve diversification from "reserve currency of choice" US Dollar must be speed up by way of deployment of Investment agency and increasing share of other currencies, gold and strategic reserves of oil and basic materials. Is it my dreams or I am just reading you out loud recent headlines coming from China. I know my limits - it is headlines, Bubble will be popped out in nearest future, a lot of "wealth" will evaporate, those who survive will come back to safety of bank deposits with rising Yuan and higher deposit rate. Shock will keep people in China out of market for a while like it was in Russia after 1998. After panic SAFE investment agency and banks will step into the market at around 200 level and buy out back what they have sold to "foreigners". Increasing minimal wage will help to stimulate internal consumption growth which will become solid base for healthy economic growth in range of 5-7% per year for decade to come. No magic here but very disturbing for US consumer truth is that even if wages in China will be doubled, nobody still will be able to compete with China . US economy will continue effectively import inflation with rising prices on all basic goods produced in China. This is the phenomenon of disbalances in the world. If within next 5 months Dow will lose 50% depression in USA will be for years, China's market after 50% loss will be back in the end of 2008. Can you imaging in USA doubling of wages, energy consumption or copper consumption per capita? But it will be reality in China within next 3-5 years, which will lead to unproportional rise in consumption of basic goods and big ticket items because now biggest part of income is spent on first necessities like food and housing. What is the limited part in my vivid imagination? Real assets, gold and silver as ultimate store of value and hedge against falling USD and political disturbances, commodities which are close to peak in production and still perceived as very risky class of assets. Turn on TV and you will hear about oil at 40 dollars, talk to insiders and they are still calculating copper price at 1.o dollar per pound. Nobody could believe that this commodity bull is for real and not for couple of years. I prey and hope that shifting of power from USA in its late stage of empire as dominant force to multi polar sustained political environment will not be disturbed by war and effective reduction of demand from growing population. In all other cases careful investment in resources, particularly in junior companies will pay out handsomely. Look for trustworthy management, stable political situation and economical resources in the ground. Even if all assets initially will be hit by sell off you will be very lucky if you will have opportunity to add to your positions gold at 50USD, silver at 1.0USD and copper at 8 cents in the ground. Do not bet your house, use margin or time against yourself in option trades. But if you have capital, deploy it carefully and be ready to buy more on any pull backs. Be twice as carefull in this market: small cap stocks are easily manipulated, but volatility will be your friend with proper risk assessment, homework and discipline. Common sense secrets of trade could help you on initial steps. Go for small companies which are close to production and in the process of economic assessment of already discovered reserves. You will have double leverage of rising prices and increasing asset base of the company. I will mention few companies for your further study. Silver Wheaton (SLW) has very interesting model of effective silver bank with high leverage to silver price. This is a big cap silver company and is well on the radar screen of investment crowd. Such stocks will benefit on initial capital inflow. Tanzanian Royalty Exploration Company (TRE) is highly leveraged to price of gold and managed by legendary Jim Sinclair who is not reading the gold story, but making it. Sterling mining (SRLM.ob) will start production in December 2007. Avino Silver and Gold mines owns former producing mine and is close to production and has value of only production assets close to recent market cap. Mines Management (MGN) was able to buy out huge deposit in mining friendly Montana at boot sale price tag and now is actively moving its into production. And of cause my story will not be even close to give you the real feeling of bull market for years to come without mentioning Lundin mining (LMC) and Lundin family itself which is behind many successful projects. Recent takeover of Tenke mining is creating one of the most promising intermediate copper/zinc producers and be ready for M&A fever around such companies which will drive commodity market to new highs after consolidation phase will be finished.

Our Dragon is Bloated and is going to cause some Trouble.

Thursday, May 24, 2007

Gold, Silver, HUI Emotion Case study

Rocket Science case study. You have a strange hobby - you are collecting plasma screens. So you are regular in your local store. You know their "normal" price. You have observed in the store that sometimes people are crazy buying the same plasmas for 40-75% mark up and thousands of them even waiting on the street and asking you to sell them if you have any. One day you will be stunned that plasmas are selling with discount at 50-75% and the same thousand people are trying to sell you some. What will be your actions in that market place? (Do not forget that you are crazy enough to have that hobby)

Three most important things in Investing: Capital, Capital, Capital. CS.

I am very blessed in many ways. Good thoughts are coming to me and sometimes I am bother to mention them. I hope you did not miss my Warning Piece. First time I really ACTED as I saw the situation: could I have been more bold in Action? No question about it, but first time I really closed the sequence: Observe, Make decision, Act. Now it is very good feeling to be able to employ capital at distressed levels of pricing in areas where nothing has changed fundamentally and they just got ahead of themselves. I remember that feeling when market has turned on a dime and you Saw it before, but was Not able to Act. You just sit in gripping panic and paralyses, unable to act. You would think: tomorrow, on uptick I will Sell - only to find yourself with minus 30% from the top. No problem here if you have studied the case and made intelligent, informed decision that this asset is in the Bull market, but if you saw the Signs, made Decision and the only problem is your Will and ability to Act - your performance will be not self confident. The main question here is not even the money, but Capital itself - your ability to Judge, Find value, Act accordingly and Follow. Technical analyses is not more esoteric than our life itself: picture of all ACTS in the market regarding this Asset. It has nothing in common with Intrinsic Value of that asset, but is the footprint of market Participants' Perceived Value. It is Emotional in nature and could be easily manipulated intentionally and "naturally" as noise of the market Participants' Excitement or Fear. Fear is more stronger emotion and usually brings down perceived value in the fearful eyes very sharply. Is everything so hopeless? Nope, so far not at all. If you will be able to Buy at least not at the Top and Sell not at the Bottom, Bull market will help all idiots to believe they are genius (I am in this category according to conventional economical and financial wisdom). I really urge you if you are reading: study at least what I wrote in CS category (Secrets of Common Sense). If you have strong and strange feeling that it is BS quit immediately and never come again, talk to your CFA and sleep well. If not: Read, Think and Challenge - it will be unbearable for nature that you will see part of something and will not understand the Whole, your education will be finished without even beginning. Remember: "You will be rich or poor not those advising you". My very expensive lessons:
1. Find the BULL, not for a day, week or month, ideally for 5-10 years. Mine is Junior Mining Now. Gold, Silver, Uranium, Metals - Things. Main drivers: End of Empire and USD - PGM as store of Ultimate Value, Rising of New Powers and Leap Frog into consumption of basic Necessities.
2. Pick up companies: first Potential Value, not 10-50% - Thousand things could go wrong - you need cushion of IHPV (Insanely High Potential Value). I was hesitating for a while when found CUU.v Copper Fox Metals, but acted firmly before stock took off from 0.5-0.6 level.
3. Leave only those with Credible Management. Like Warren Buffet put it: "I have never did any good deal with bad person". Why I have taken profit on Part of CUU.v (all initial Capital is out)? Publish Resources with 0% Cutt Off is Gross and until explained is minus in my assessment.
4. Check TA what is the Timing? (sorry Sir Warren) First asset class, then Company.
5. If it is Buy, check catalyses: what will help unleash potential value? Is it in foreseeable future?
6. Make decision - act boldly, with limits but in strong fashion. With time if you are right anomaly of misspricing will be not for long in the Market.
7. Then will start the Most Important process - Following: when is to Sell? This very important stage separates Fools and Their Money. I was a champion in this League in 2001-2002. The biggest problem is leverage, if you are not an Ace, kill it as you read this piece. Only margin call could force you into loss selling usually at the bottom of the correction. Even if you did not sell at Top, but weathered the storm the Bull market is your friend until it ENDS.
8. Profit is a profit, nobody gets bankrupt taking profits. If you feel very comfortable there could be a trouble - you could be biased in your Judgement, if the charts are screaming Sell - make assessment: Fundamentals, Management, TA. Take profit on biggest winners if TA is indicating Sell. Will you buy this company now? If not - SELL. If your capital intact new ideas will come. If you are not sure take 30% profit.
It is very simple and easy, couple of millions, few years and you will master your touch. If it is all too complicated and you do not have time to read CS and think - RUN away, do something else in your life. All I need from you now is just to be good to yourself and your own money. You can Share this piece with those who close to you. We will need a lot of thinkers with capital and positive energy. Do not forget the First Sentence.

Saturday, May 19, 2007

Gold sales by Central banks

"The Banco de Espana's holdings of foreign currencies and gold have fallen to €13.2bn (£9.02bn), equivalent to 12 days of imports.
Over the past two months the Banco de España has sold off 80 tonnes of gold, flooding the world market with enough bullion to dampen the usual spring rally. The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate."

Sunday, May 13, 2007

China's Market is Overextended Now and needs healthy correction.

Disaster is coming, it is always here, do not go to bunker - you will miss the best part of life. CS

Save the World and the Great Country, start from yourself, turn off TV and read a book. Think and write something, invest in yourself, seek for signs and meaning, energy and trust. Look around and act, first inside and the rest will follow, just do not let it pass away, give it a Try...
"Every Empire begins with a humbug. Later it develops into mass illusion, self-congratulation, hallucination, farce, and finally disaster. Until the disaster comes, you never know quite where you are. Because for every imbecility that comes along, there are dozens of eager intellectuals ready to promote it and at least half of the population is ready to believe it. Bill Bonner and Addison Wiggin"
"Depressions or recessions are caused by basic economic changes of supply or demand or credit. What leaders say about circumstances cannot in itself help or hurt the situation, except perhaps for a few days. Harry D. Schultz"
Signs A Bull Market is Ending (based on HDS):
1. Investment sentiment is still bullish, but economic structure continues to weaken.
2. P/E ratios - market is "...driven by P/E expansion" what is it? Maybe it is just stupidity expansion?! Earnings trick in Q1 2007: cut all estimates and get amused on Bubble Vision on unexpected strong earnings. Wall Streat beloved Google EPS fell in Q1/07 over Q4/06.
3. FED is caught in between: can not CUT in order to stimulate economy because USD will fall further triggering massive exodus of IOU Holders, can not Raise - consumer is on his knees already.
4. Consumer and Investor confidence is still at its peak as it should be at the Top.
5. Gold. In times of uncertainty interest in gold and gold shares picks up. All this spring silent dumping of gold into the market by Central Banks can not break the neck of the Bull. How longer Central bankers will be allowed to commit their crime against their own citizens? It is rhetorical question, the whole system design like it. Just do not get caught in it.
6. Real Estate. Now is in apparent Bear market, killing perceived wealth and consumer's ability to spend beyond any financial reason..
8. Unanimity of Bullish forecast. Turn on Bubble Vision.
9. Sharp rise in Debt. All M&A is liquidity driven, Public/Private flip/flop.
Watch yourself and your "genius" touch: "...tide is lifting all boats, only when it is coming off you can see who is without swimming trunks" Warren Buffet.
Have a nice weekend.

Gold. What Bubble? Traffic to

Google GOOG is it Water, Energy or Youth Syrup? No, it is more important - It is WEB ADs spammer!

Silver Wheaton SLW Silver Bank Next to Wall Street

Tanzanian Royalty Exploration TRE "Nobody Loves me anymore"

Mines Management MGN Montana, Home Silver Play

Sterling Mining SRLM.ob Multy Year Reversal, Risk Lawsuit - Reward production Rocket

Avino Silver and Gold Mines ASM.v Sleeping Beauty

HUI Gold Bugs Index Main Drivers: POG, Exploration and M&A

Gold store of Ultimate Value, restricted by Nature, not your politicians' "Best Effort".

Silver When No bulls will be left rocket will be ignited

Saturday, May 12, 2007

USD: Falling Empire and Its Stock - too much debt, too big burden, not trusted and not respected any more.

VIX Blue Sky is falling

DIA just one word: CRAZY.

VXN is Close to Nervous Break Down, not a good sign for Bulls

QQQQ is at the Boundary of Upper Resistance of the chanel

To those who are listening: capital preservation is N1 priority now. CS

I am never saying SELL to my bullish calls: it is always up to you: listen to me, do your thinking and establish position and then sell when it is time. Time is different for everyone, but today I will call for Capital Preservation. Take profit and go to cash at least 30% within next week. Do not rush and destroy your markets, but if decided act boldly and timely and with limits, spreading your orders. Individual charts will be published later. Nothing has changed, but do not forget that we are not marring our stocks - they are the way to create positive energy in the form of capital available for new creations. I should share my positions at the moment for more transparent play: No technology stocks, no big names, puts on GOOG, QQQQ, builders, real estate ETF, first time unleveraged and has taken profit on 30% on my biggest winning position. Reason: I feel definitely uncomfortable with general markets and would like to be in different mode: not trying to get last 20-30% on run up, but to buy value when everybody will be in panic. My value is in commodities: markets are very nervous and any drop back in China because of apparent disaster in USA and its economy could send shock waves across ALL ASSET CLASSES. Downside: Gold and Silver on the wedge of break out, but I think this time it will be VERY Political, just look at gold sales by Central banks this spring. More shake out will come. Time to build cash and build new positions on every desperate sell offs. Check your positions one by one. Fundamentals, management, TA. Will you buy it now again? If all intact: keep. If you are not sure sell 30%. Take profit on those with big run. Kill leverage. We are in the Great Bull market and survive in it. If I am wrong and our juniors will be unshaken we will enjoy further run and build new positions in places where nobody is going, no hype and pump - just value. Remember my very expensive lessons: if you feel too confident, check your cash position - Sell Off is coming. The best strategy so far is to buy when nobody wants and hold if value unchanged or going higher with metal prices and new exploration results. Never go for 50%, thousand things could go wrong - you need very big cushion of Potential value in order that its Realisation by trustworthy team will protect you from downside. What is the difference with juniors? Commodities will be needed - no questions here, if you have resources in the ground which are economical and confirmed by reputation of the Team and Industry Insiders positions - you have value in any market. Nowadays this value is exceptional and you must be prepared for the Next Big Run. Take profit where maybe 100% profit left and go where your next 500% could be. If you can not find it at the moment read some books and think, think, think with capital intact new ideas will come...

Wednesday, May 09, 2007

Gold: Behind the curtain. Harry Schultz. CS

Dear Lambs:Read our virtual obituary (yours & mine), spoken in 1991 by David Rockefeller, & oh so obvious in 2007:
"We are grateful to the Washington Post, NY Times, Time magazine & other great publications whose directors have attended our meetings & respected their promises of discretion for almost 40 years. It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is now more sophisticated & prepared to march towards a world govt. The supranational sovereignty of an intellectual elite & world bankers is surely preferable to the national auto-determination practiced in past centuries." -- David Rockefeller, Baden-Baden, Germany 1991. Frankly, dear, dear readers of mine, I fear we've lost the game. The insiders have won. They now control all the levers of power, financial & political. Many good men in public office are prohibited by the system from reforming it. Commercial, media & political power is concentrated in just a few elite hands. I've (& others) warned (loudly) for decades in HSL what was happening & what would occur if nothing was done. People were lulled into lethargy via careful massive brain conditioning, became content to watch TV 7 hours a day, accepted the misdeeds of politicians, the raging moral degradation of society, the creation of media/corp monopolies, the ruin of money worldwide--begun (via careful plan) by Washington/NY insiders. People blamed inflation for their 50% loss of buying power in last 35 years, not realizing the definition of inflation is an increase in the quantity of money/credit by banks/govt, equally. They cleverly removed gold as currency backing to give them monetary control. There is now no legal restraint on govt. Govt distorts economic data & everyone knows it, but the kept-press is kept silent & thus nobody marches in the street about their life being sacrificed on the altar of globalization--offshoring jobs--the lie called "free trade," which in fact means the opposite, like all govt legislation titles. Eg, Patriot Act is unpatriotic if U still believe the US Constitution has merit & is a lighthouse for other nations. The minority who understand all the above are mostly afraid to make waves-which is also part of the grand scheme, to intimidate or buy-off critics. When a possible leader or competent critic emerges in the US, he/she is immediately made a member of the CFR, which thereby seals his/her lips. Or else! It's a refinement of a Mafia policy. It's done in a few other countries too, but not as widely or ruthlessly as in the US. In any case, my point is, we've lost. Individual freedom & civil rights are substantially gone or compromised beyond practical application. In the past I've always said: divide your time/funds, ie, devote say 50% of your effort/ funds to fighting to save &/or restore lost individual rights/liberty/privacy, & 50% to self-preservation (as U may lose with your freedom fighting). In recent times I implied those %'s need modifying, as we're losing ground & one must save one's family/self. Today, with the devilish North American Union being cemented into the US & Canada's future, the sabotage of freedom, both individual & collective, is being completed. So, I regrettably now recom U ratchet down your %'s, maybe to 10% vs 90%. Govts are not looking after your individual freedom (esp in Anglo Saxon nations-UK/Cda/Oz/NZ/US); so if U don't row a boat with your family flag on it (not a nation flag), U may help sink your family & yourself. Will individual/personal freedom & former civil rights come back some day? Maybe. Perhaps the extremity will lead to its destruction. But, if so, we have to get through a worse period before we get there, if we do. And to get through it requires a lot of effort, especially if U live in the US in its present mode; many are leaving the US til it is "safe" to return. Washington has become an imperial govt with the public regarded as peasants, & the laws have been changed to match. Everything is a crime if civil servants wish to use existing laws. Changing presidents doesn't change new laws. Washington is Rome. Caesars come & go, each inheriting & demanding greater powers than his predecessor. (US Pres. Executive Powers now total 12K, upsetting the system's balance of power) PS: One of my inner circle advised me against running this article, showing so little hope. But my duty is to my subs. If U want sugar coating, see big media. 1. Truth is honourable. 2. Total truth is often helpful, used wisely. 3. U & HSL gain from honesty; it binds us together, & offers a potential path for survival. 4. There are no strategies useable/ available to win against Big Brother govt at this late stage of lightning-fast deterioration of democracy/liberty/ privacy, when the casino is rigged against U. In the past 4 mos that erosion velocity has increased by 80%. 5. While there is no current hope for reform/change or replacing the controlling elite, what little hope there is to simply "survive"-physical, financial, mental-will probably depend on what may be called: deeper-PT. We'll try to simply define it, but not as openly as before, as it now becomes provocative, & risks being declared "illegal" or unpatriotic. U'd better learn to read betwn the lines. Owning physical gold is a minimum essential. I suggest U reread the last 12 HSL's. It's all there. Sauvé qui peut (save who can, or every man for himself, or run for your life). Harry Schultz

Gold and Silver Lone voice in the desert

Lately I thought that everybody is fully crazy about Gold/Silver story, but apparently it is not the case. Dear Google shareholders you are welcome to our party!

Where have all the gold bugs gone?

Sunday, May 06, 2007

HUI/Gold Ratio at BUY by Hamilton

Perfect educational article:
"The HUI/Gold Ratio is as simple as it sounds, it is calculated by merely dividing the daily close of the HUI unhedged gold-stock index by the daily close in the price of gold. When this resulting ratio is graphed over time, it vividly illustrates the ever-shifting relative strength of the gold stocks versus gold."

Friday, May 04, 2007

Google GOOG the last straw to break the camel's back?

With slowing growth and falling EPS Google will not be able to justify its bubble valuation any more. "Strategic acquisitions" of YouTube and DoubleClick do not work and are depleting war chest of cash in front of severe competition from MSFT/YHOO. With this deal Yahoo! will receive a new push in right direction and access to Microsoft cash pile and software giant finally will have a chance to get it right in Internet space.
Microsoft eyeing deal to buy Yahoo: reportFriday May 4, 4:49 am ET
NEW YORK (Reuters) - Microsoft Corp. (NasdaqGS:MSFT - News) has intensified its pursuit of a deal to take over Yahoo Inc. (NasdaqGS:YHOO - News), asking the company to re-enter formal talks, the New York Post reported on its Web site on Friday.
While the two companies have held informal deal talks over the years, the latest approach signals a new urgency on Microsoft's part, the paper said, citing unnamed sources.
The approach follows an offer Microsoft made to buy Yahoo a few months ago, the Post reported, but Yahoo spurned the advances.
The Post said Wall Street sources put a roughly $50 billion price tag on Yahoo.
Microsoft and Yahoo could not immediately be reached for comment."

Wednesday, May 02, 2007

Barrick posts loss on charge to exit hedges

This is very significant development one of the biggest Hedgers in the market decided that gold will be going up and not down contrary to what they were thinking for years. I would say that we are standing right at the pivotal point in this Bull market. Technicals clearly showing this kind of development.
"TORONTO (Reuters) - Barrick Gold Corp. (ABX.TO: Quote) reported a first-quarter loss on Tuesday as it took a $557 million charge to exit hedge positions and take advantage of strong spot gold prices.
The world's biggest gold producer reported a loss of $159 million, or 18 cents a share, compared with a year-before profit of $224 million, or 29 cents a share.
Stripping out the charge to eliminate forward sales contracts, adjusted earnings were $398 million, or 45 cents a share, up from $263 million, or 33 cents a share.
Barrick said its hedge book for current production has been completely eliminated, although the company still has hedges related to projects still in development, particularly the Pascua-Lama project on the border of Argentina and Chile.
"It's great news that they have reduced their hedges, because that was an albatross around their neck," said John Ing, analyst sand president of Maison Placements."