Learning from History to Reform Wall Street
In his weekly address, President Obama applauded the House for passing
financial reform legislation and called on the Senate to continue
working toward meaningful reform that stands up for consumers, sets
clear rules of the road for businesses and investors and restores a
sense of responsibility and accountability to both Wall Street and
For the last six months, we have been a big supporter of
gold, silver and resource stocks. Since March, during the historical bottoming
of the markets, we told our readers to follow the smart money and load up on
"The big players in the investment business have all
come to play ball on the resource sector's home court. Do you want to be
sitting in the nosebleeds when the game begins or do you want a spot in the
starting line up?" - Playing Ball with Resources April 5, 2009
At that time, we were shunned by many. We were told the
bottom hasn't arrived; that the uncertainties in the markets were too great to
be placing any bets. To add insult to injury, we were told by some analysts
that investing in these plays -
especially the juniors - was plain stupid, as financing for these companies was
To some degree, they were right. Many companies folded
during that time. But those who made it past the few rough months...Well, just
take a look at the one exchange dominated by resource and mining plays, the TSX
Take a look at the two companies we have continually
Teck Resources (TSX: TCK.B)
Ivanhoe Mines (TSX: IVN)
Just imagine for one second that you had invested in either
of these companies. Well the big money has. Over $45 billion were put into
mining and resource plays at that time. For example, our mention of Kinross Gold when it was nearing its 52-week low of $16.52 has since bounced back to
hit highs of over $25.
Needless to say, we are still confident and bullish on
resource and mining plays moving forward.
There's no doubt that uncertainty remains prominent in the
markets. Looking at the numbers alone, the stock market really shouldn't be at these levels and many are already preparing for a correction.
But think about it this way. If the bubble was to burst once
again, there could be another opportunity to participate in the starting line up
of another resource bang. If it doesn't, there is still plenty of upside
potential in this sector, especially in gold and silver-related plays. (see the Report that Shocked the World)
Follow the Smart Money
We always like to follow the smart money and the big players
when making our investment decisions. This year, we followed the smart money
that was pouring into the resource sector when all else had failed and the
results speak for themselves.
We are not about to change that approach.
Some of the world's best money managers have already taken
large positions in gold. Big names like John Paulson, Paul Tudor Jones, and George Soros, are among the many already
invested gold. The list of smart money and big-time hedge fund managers
investing in gold runs deep.
They're not alone.
Life insurance companies are doing the same. Northwestern
Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales,
has bought gold for the first time in the company's 152-year history to hedge
against further asset declines according to a report from Bloomberg.
Goldman Sachs, probably the biggest player of them all, is predicting that
gold will shoot past $1,400/ounce by 2011 on the basis that central banks are becoming
net buyers of gold, that gold ETFs are continuing to buy substantial volumes,
and that real estate prices will remain depressed.
Right now Central banks are drastically curtailing their
sales of gold and many are continuing to buy large quantities. For the first
time in 22 years, these banks are net buyers of gold. According to a report by
precious-metals research firm GFMS, for the first time since 1987, central
banks around the world bought more gold in the second quarter than they sold. They
are also bound by an agreement that imposes limits on sales.
Never Forget China
China, whose foreign currency reserves holds $2 Trillion with only 2% in gold (vs. a
10% worldwide average), is still looking to buy large quantities -
especially on the dips.
The Chinese are seeing the value of their foreign currency
reserves lose value every day and are doing everything in their power to keep their Yuan down. If China makes the logical move to increase
its gold reserves and reduce its fiat currency exposure to even just the worldwide
average, gold prices could move substantially higher.
China's state-owned Assets Supervision and Administration
Commission (Ji Xiaonan, the Chief) said, "we
recommend China increase its gold reserves to 6,000 metric tons within three-to-five
years and possibly to 10,000 tons in eight to 10 years."
According to the calculations of David
Rosenberg, Former Chief North American Economist at Bank of America-Merrill
Lynch in New York:
"...if China were to lift their gold reserves to 5,000
tonnes, which is equivalent to about two years of global production, that shift
in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based
on our models. If China moves towards 10,000 tonnes, well, that would end up
taking the gold price to $2,623/ounce if our calculations are in the ball-park."
China isn't the only country continuing to buy gold. India just
recently bought 200 metric tons of gold from the IMF, at $1,045
Even small countries such as Sri
Lanka and Mauritius
are buying large quantities of gold.
Where is the Gold?
While everyone is chasing gold to protect themselves from a
falling Dollar, producers aren't keeping up. Gold production was down 3% last
year, and it was flat in the most recent quarter. Although mining companies are
spending more on new production, especially in China and Russia, that is not
enough to offset dwindling output from mature mines. Don't forget China has
drastically increased its gold production outputs making it the largest gold
Aaron Regent, CEO of the worlds largest gold producer Barrick, said that global output has been falling by
roughly one million ounces a year since the start of the decade. Total mine
supply has dropped by 10% as ore quality erodes, implying that the roaring bull
market of the last eight years may have further to run. He continued to say
that, "Production peaked around 2000 and it has been in decline ever
since, and we forecast that decline to continue. It is increasingly difficult
to find ore."
There are simply too many concrete reasons why gold and
precious metals will most likely continue their run.
In the short-term, gold could have its dips (as with every
tradable investment) fuelled by a declining stock market which we believe
should not be where it is today. If the stock market drops, the Dollar will
more than likely rise sending gold down with it.
In the end, however, gold should prevail as inflation kicks
into high gear within the next 5 years.
The road to the top will not be a straight line so it only makes
sense to take advantage of the inevitable corrections.
Buy on the dips, and sell on the bounces.
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Until next week,
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|Zacks Investment: Unemployment Shocker and the Market|
November's Employment Situation report was much better than expected. Discover what it means and how to invest now.
Click the video to play.
More Zacks videos:
> New Top 5 Sectors
> Value Stock Picks - December 7, 2009
> Aggressive Growth Stock Picks - December 8, 2009
A Hot Future for Geothermal
Co-Written by Marin Katusa & Marc Bustin, Editors of Casey's Energy Report
Capturing energy from the earth's heat is pretty easy pickin's for
geologically-active areas of the world like Iceland, Indonesia, and
Chile. In some locations, hot fluids are so near the earth's surface
that heat from naturally-occurring hot fluids can be directly
circulated through buildings for heating. Iceland, in particular, takes
advantage of this low-hanging energy fruit.
However, in most areas of the world where geothermal energy is captured, the heat is used to generate electricity.
Conventional Geothermal Energy
Unlike some of the more common alternative energies - hydro, solar, and
wind - geothermal is impervious to weather conditions. This
independence means it provides excellent base load electricity.
Currently all commercial geothermal electricity is generated by
so-called conventional systems, whereby naturally- occurring hot water
or steam is accessed at comparatively shallow depths in areas of very
high geothermal gradient. Wells are commonly drilled to depths on the
order of 2 km. The water or steam they produce is used to spin turbines
that in turn generate electricity.
The success and sustainability of a geothermal reservoir...
Click Here to Continue Reading
More Casey Research Articles
> How to Predict the Price of Gold
> Canadian Gold Juniors Soar - Should You Buy Now?
|Technical Trading with Harry Boxer
Harry Boxer has more than 40 years of Wall Street investment and
technical analysis experience, including eight years on Wall Street as
chief technical analyst with three brokerage firms.
Watch the video as he walks you through his technical analysis on China Marine Food Group, JAZZ Pharmaceuticals, Lithua International, Netlist, Kandi Tech Group, Asia Info Holdings, and a whole bunch of other stocks. To see more videos, Click Here.Like his analysis?
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Disclaimer and Disclosure
Regarding Historical Data: All resource estimates presented in this report for Silvermex other than their San Marcial project are historical and were prepared before the introduction of National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").
Historical resource estimates may not be relied upon until they are confirmed using methods and standards that comply with those required by NI 43-101. The potential for the exploration target to replicate the historical resource, or to reach the indicated range of tonnages, is conceptual and is based on historical reports, which cite approximately lengths, widths, depths, grades and projections of the historical resource. Readers are cautioned that a qualified person has not completed sufficient exploration, test work or examination of past work to define a resource that is currently compliant with NI 43-101 for historical resource estimates in the Silvermex Reports. We further caution that there is a risk that exploration and test work will not result in the delineation of such a currently compliant resource. Neither Silvermex nor its personnel treat the historical resource estimate or the historical data as defining a current mineral resource, as defined under NI 43-101, nor do they rely upon the estimate or the data for evaluation purposes; however, these data are considered relevant and will be used to guide exploration as the Company develops new data to support a current mineral/resource estimate in accordance with the requirements of NI 43-101.
For more information on Silvermex Resources, investors should review the Company's registered filings that are available at www,sedar.com.
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