A September to Remember
D. Stewart Armstrong, September 25, 2007
Prelude
Nothing has changed in the financial arena and yet everything has. Is that a paradox? Yes, of course it is, but in actuality it’s always been that way and we simply have to be able to keep up with those changes. It occurs to me that the imbalances are more severe than usual and it becomes incumbent upon us to try and understand the main “story lines” if we are to personally have a financial future. I am also sensing more angst that usual from the many emails that I receive.
If we bury our (collective) heads in the sand at this point in time (especially the “boomers”) we will be courting disaster. It is time to be proactive. The boomers were instrumental in the 60’s and 70’s. I think we have one last hurrah left in us and we should use it!
This is starting out to be a September to remember.
I know it is difficult to understand what everyone appears to be talking about; especially when it comes to sub-prime mortgages, banks facing defaults or restructuring on billions and billions of “paper”, hedge funds going belly up and so on and so forth. But we’ve got to try and understand the basics even if they do sound like Greek. Please refer to my archives on www.goldseek.com and look for the “Gifts to the Gold Community” series wherein I suggest where to acquire excellent advice. Bill and LeMetropole have been at the top of the list for close to six years. Now, off the top of my head here are the usual gang of suspects and all as usual, on top of their game:
www.the-privateer.com Bill Buckler
www.dowtheoryletters.com Richard Russell
www.tradertracks.com Roger Wiegand
www.jsmineset.com Jim Sinclair
www.goldseek.com Peter Spina
www.lemetropolecafe.com Bill Murphy
www.dtanalysis.com Enrico Orlandini
www.miningstocks.com Jay Taylor
www.fmr.com James Turk
Keep up with even half of these folks and you’ll have a pretty good idea of what is occurring in the world and in the markets. I have to say that Roger Wiegand and Enrico Orlandini continue to impress me as a tag team “futures” phenomenon. Additionally they both have this thing called common sense. How utterly refreshing! You don’t have to trade futures to benefit from the wisdom of either gentleman. And please, don’t become involved with futures or options unless you are experienced.
There are several reasons why I write about these authors and their letters: It has to do with many intelligent heads being better than one or two intelligent heads.
- The world is interconnected as never before. It is becoming ever smaller.
- No one person has all the answers. We need to cast our net for the truth in ever larger circles.
- I personally believe that the main stream press is bought and paid for; especially the financial press.
- At some point the American people are going to have to want to get their country back—we are going to need real intellectual leadership if we are ever to see America the Beautiful again.
- I am only the messenger; the analysts, authors, and web sites are presenting the real issues of the day. We all need to pay attention.
Freedom slips away ever so slowly if we are not there to protect it.
I am struck by how so many Americans and to some extent Canadians, are stuck in a vise. We’re squeezed from every angle and we’re feeling powerless. Do you feel that your elected representatives are representing you?
I continue to believe that Bill Buckler has an excellent geopolitical perspective—so much so that I have to force myself to read his missives. It isn’t pleasant but you know in your gut, that what he is saying is true. If you want to follow gold, there are no better places to get the “blow by blow” plays than from “Uncle” Bill Murphy and Jim Sinclair “MR. Gold”.
Honestly, how many times—years, do Murphy (and Powell, et al) have to be correct before they are taken seriously by the major media?? Again, it’s not what you want to hear, but the guys have been pretty spot on for the last seven years.
Speaking of the Café, I have no read a more erudite series of articles than the ones recently written by Antal Fekete:
Sinclair needs no introduction and by all means follow Goldseek Radio’s interview with him. One is currently in the queue and one is due out on September 15th. Peter Spina is the grease holding a lot of moving parts together and only gets better with time. His Gold Forecaster with Julian Phillips is excellent and the Silver Forecaster is equally as good. Russell needs no introduction and it is still a valuable use of time to keep up with him. I don’t always agree with him—with all of them for that fact; but a 90% agreement rate ain’t too shabby.
Before I close this section, I have to give three honorable mentions. One is Bob Chapman and the other is Jim Willie. I only know what I read in open venues but both impress with their knowledge and their honesty. I would be remiss if I did not mention John Embry from Sprott Asset Management. You might “google” him” for his latest musings; or go to Sprott Asset Management and under his photo you’ll find his latest article titled Lending Crisis sets U.S. Dollar on Fatal Course.
Incidentally, I don’t receive a penny for telling you about any of these folks. But if you follow their advice you are going to be a heck of a lot more in tune with the financial / geopolitical environment than by reading some of the major financial newspapers. These people assist us in understanding the big picture scenarios which may ultimately translate into some serious returns on our investments. Finally, I’d be remiss if I didn’t mention Camino Coin in Burlingame, California as a very good coin and metals dealership. I’ve mentioned this before but Ron Paul, is part owner in the business and I for one, am endorsing Dr. Paul and will continue to support him in every way possible.
These people will also be referred to in this web site www.seacoast-consulting.com. Right now there are so many questions and so few answers. These folks will lend a hand.
Understanding the World Around Us
We don’t have to be economics majors or financial gurus, but we do have to understand the displacements that are occurring all around us. These displacements can be as simple as quality applicants being turned down for “A” paper because the banks are concerned about their own balance sheets to the idea that certain countries have fiat currencies they are desperately trying to defend against all odds.
The answers for US citizens lay deep within a government that has become less transparent by the day while simultaneously becoming more vulnerable. You must realize what a toxic combination these two forces can create.
Da Boyz, as they are frequently referred to, are trying to outdo each other and more specifically; the big boys are trying to outdo each other in a big way. That’s another way of saying that while the behemoths are endeavoring to devour one another, it is a good thing for the rabbits to use what has always been their best asset—speed. The major indices, the options arena, and to some extent the futures arena are not where “Moms and Pops” should be playing. In other words, step aside and let the big boys do their thing. There are plenty of good investment ideas, especially in the precious metals complex where you are not going head to head with da boyz.
Jim Sinclair at www.jsmineset.com has offered us two novel clues. One is that $1650 gold is now a modest expectation and two, get out of debt before acquiring any gold shares. This is a bit of a change of tenor because at one point a $1650 gold target was a huge stretch. Now $1650 gold is a modest expectation. Whether good or bad, I couldn’t agree more. Several years ago, Richard Russell stated that he thought that he would see an intersecting between the Dow and Gold. That would be something like $4000 gold and 4000 on the Dow. And now to quote Jim:
“So now the dollar rules gold and the impact of the Formula on the TIC report has the ability to BURY the US dollar lower than most (rational) dollar bears can possibly conceive. Now you know why $1650 is a modest expectation.” “Protect yourself. Pay off all debts. Do not carry margin on anything.
Do this before you buy gold or derivative risk free precious and base metal shares.”
While in theory this is what we all want. I can’t help but wonder how people can make such blanket statements given the idiosyncratic finances of each individual or family.
I cannot Offer Investment Advice
I cannot offer investment advice. For my own situation, I am going to try and use the leverage in quality Junior Mining Companies to create enough wealth to get myself out of debt. If a guy has just lost his job and his kids are having medical problems and he is on the verge of a mental breakdown—I don’t see how he is going to simply “get out of debt”. I hear that all the time—get out of debt. But there are always contingencies such as medical bills and ARM’s and lost jobs and children gone wild. There has to be a plan.
If one is serious about getting out of debt in a big way while still maintaining a certain life style, I still see the precious metals complex and a few of their vehicles as the place to be. Yes, we’ve been waiting for seven years, but better too early than too late. Remember that gold, silver, the PM complex, along with oil and gas will meet up one day and will be beneficiaries of a Fed rate cut in one way or another.
And while we contemplate why the quality juniors are not going ballistic with gold once again through $700, we must also remember that we were also thinking those same thoughts when gold went through $500 US, $600US, and now $700US. I hate to use the same old banality of patience; but patience and knowledge will get us where we want to go.
I see this coming financial environment as being very inflationary. Gold Bulls have been waiting a very long time for this scenario to unfold. By the same token, I’ve said be careful what you wish for meaning that yes, we have a gold bull market resuming, but at what cost to the rest of society.
Is it going to become so calamitous that there will be no food on the shelves and you’ll have the National Guard out to quell civil disobedience? I certainly hope not. Nevertheless, it doesn’t hurt to be as prepared as you possibly can be given the current set of circumstances pointing towards a perfect financial storm.
I would suggest that we look for quality junior mining companies that have gold, silver, copper and other metals of value. I believe there are many out there; we simply have to find them and stick with them. For while the US is going to have its share of problems, and even if there is an economic slowdown of global proportions, there will still be opportunities.
I am currently tracking several junior companies that are not on the radar screen as of yet. When I believe they are on a firmer footing, I will bring them to your attention.
Remember, it is the nature of the population of the United States to be deeply in dept. Some of us are “more deeply” than others. Is this environment in which we find ourselves a fluke? Unfortunately, it is not. My opinion is that it is financial scenario gone terribly awry. And like many such scenarios, we did not choose to “fix” the problem when we had the opportunity. And the problem did not mysteriously appear overnight. This is a problem that has been allowed to emerge, develop, and grow over many years; through countless elections, and through several generations. Please remember this when the next election comes around and choose carefully.
An Endorsement for Ron Paul
Ron Paul is the only Candidate who I see that has the intellectual capacity and the intestinal fortitude to implement a true change. He’s a Republican in name only. He actually is aligned much more on the Libertarian side of things. This time, don’t vote for someone because they “can’t win” and you believe you’re wasting your vote. This time vote your conscience. Read up on Dr. Paul. He is a Congressperson like no other. At the end of the day, we’ll all hate him because he won’t “cotton” to special interests. Americans are a funny lot. Sacrifice is a noble endeavor as long as it comes from the other side and not our own. I believe that is why he’ll ultimately be successful if given the opportunity. He sees a thousand x 100,000 ways to save money in the Federal Government. Sometimes it is not how much money you have but how you choose to spend or not to spend the money.
We must realize that this country wastes at least 50% of our precious tax dollars by “greasing the skids” of one special interest group or another. In other words half of the local, state, and federal budgets are really unnecessary because the money is wasted on what is called Pork barrel projects! And it occurs as much on local and state levels as it does on the Federal level. The most difficult thing in the world is to get those pork barrel projects eliminated because it will cost someone votes or money.
I think that Ron Paul understands this and that is why I say that when a politician is doing the right thing for their Country someone somewhere is going to complain because it is going to hit the pocketbook.
The Current Financial - Geopolitical Environment
This is greed gone mad combined with a US administration that could never quite face up to reality, combined with a global economy that took notice of such an administration and acted accordingly, combined with a Congress more concerned with their own agendas as opposed to what is good for the country. We can add to that the fact that the greed has turned to fear and the usual levers that were pulled in the past to rectify such displacements no longer work because of derivatives and counter party risk that never really understood the risk. More importantly, the levers don’t work because they are broken. I hate to say it; I don’t want to say it, but the US has lost a good deal of its credibility in the world.
We also have to realize that this game of investing by both by the hedge funds and by Mom and Pops all have to hit the moving targets. Rules are constantly changing. Bait and switch tactics are common place, and we all have to adjust to the fine print which keeps getting “finer”.
The sub prime mortgage fiasco is just the tip of the iceberg. The United States is basically broke and we are at great risk of losing the reserve currency status of our dollar. That is the one thing that keeps Washington Politicians at wake at night. That will mean that we have to do as other countries and other families have to do—we’ll have to live within our means. This, after the banks, credit card companies, mortgage companies, and hedge funds have all pointed us towards a different path for all these years. If it just doesn’t seem fair, you’re right—it isn’t! In fact it’s down right criminal. Bait and switch is a credit card company that offers you a teaser product at 8% (used to be 4.5%) and then it goes to 32% after one late payment.
Remember when the stories about the family dog putting in applications for credit cards and actually receiving them!!?
But What Could We Do?
While many of us realized what was occurring within and without of the US, we also felt that there was little that we could do. Write to your congressperson only to be responded with a form letter? In all fairness there are some congressman that have instructed their staffs to be aware and respond with respect and dignity that Americans deserve.
There is a terrible anger in this Country regarding the uneven playing field. Americans are raciest when they demand that the borders be secured and that non Americans otherwise known as illegal immigrants be sent back to their countries of origin.
The other side of that coin is that if by some magic stroke every illegal immigrant were magically transformed back to their homes, the United States would stop on a dime. Those illegal immigrants have so ingrained themselves into the fabric of America that the Country literally cannot function without them.
That is not the case however. If those businesses that hired those illegal individuals were to pay a decent wage, others would step up to fill their shoes. I’m not certain if I really believe that and the wage would have to be some $18-$25 an hour with benefits. That might bankrupt many of those businesses and I’m not certain if the kids today even have the work ethic that many of their parents developed out of necessity.
Tom Brokow calls them the greatest generation. They are the ones who put their lives on hold and went out and fought WW II. We are now repaying them by making them choose between food and medicine. We repay them by telling them that there is no inflation and therefore their cost of living adjustments (COLAS) should stay basically the same.
However, there is inflation and it is going to get much worse before it gets better. The best way to protect ourselves against inflation is to purchase gold and silver and gold and silver equivalents.
Special Junior Mining Companies and how to Relate to Them!
Oromin Explorations: They just came out with a new press release with amazingly good results—again! Think of OLEPF as a circle of deposits covering miles and miles. Think in terms of a very large circle with metal deposits around the periphery and then consider that there might be a mill in the center of that circle. This could be one scenario. Regardless, this group is on the right track and 12-15 months worth of patience from these levels could make one quite comfortable in one’s old age. Currently around $2.40 C.
Buffalo Gold: A very undervalued company with excellent drill intercepts on many of their properties. BYBUF is working on all cylinders. However, I believe that so much as been happening so quickly that the public just can’t keep up. They will. It is currently around a buck and a good buy at these levels in my opinion.
Madison Minerals: Think of MMRSF as a stand alone project in Nevada, even though they have a JV with Buffalo on Mt. Kare in PNG. It is my firm belief that one of these days Madison is going to “pop” when people begin to understand exactly what they have going for them. Sitting next door to Newmont’s 8M ounce Phoenix Fortitude complex, it is easy to draw comparisons—especially future ones. It has been a roller coast of a ride but with two drills currently turning and only about 25 million shares outstanding, they are in excellent shape to face the future.
Geocom Resources: John Hiner is a fine gentleman and an accomplished geologist. When I think of GOCM, I think of their business model. Create strong JV partnerships with strong partners and then work to help that partner succeed. A recent Press Release with Kinross indicated exactly such a partner ship created to develop three extraordinary properties in Southern Chile. Other partners are Latin American Minerals and BHP. This one is so far under the radar as to be ridiculous. There time is coming but if you have the opportunity please do avail yourselves of their latest press release. Some of the values discovered in Southern Chile are truly historical.
Golden Phoenix: I think of GPXM as a “sleeper”. This company was almost extinct and a core group of business people and geologist went in and have spent the last three years of their lives making it live up to its name—The Phoenix—rising from the ashes. They now have a producing molybdenum mine and a gold mine in Nevada. Their JV partner, Winn Eldridge (WEX) is also on the radar screen of many in this sector and Peter will have more to say in the upcoming months about it. We are planning on doing a dual report; he on WEX and I on GPXM.
Newport Gold: When I think of NWPG, I think of a gold play on the Burnt Basin Property in BC, Canada along with a very fine geologist whose name is Derek Bartlett. An “old school” geologist in the vein of John Hiner, and Chet Idziszek, Derek knows his stuff. It is only a matter of time, especially in this environment before things start to break loose for this company.
I’ll have more on all of these companies in the near future. There are several more new ones that I am waiting to see how they unfold. One of them could be an absolute blockbuster, but let’s see how things go first. After all, the first rule in making money is not to lose it and I don’t want anyone getting off on the wrong foot.
Conclusion
I can’t but believe that there will be a trigger point for gold and gold shares. Of course, the average public will become involved well after the “easy” money has been made. It always happens that way. Remember, there is no rush like a gold rush and ladies and gentlemen, we have a gold rush!
It is true that we all need to get out of debt and it is true that the US is in trouble and NOT because of any direct result of what hard working Americans have been doing. There has been a let down in Washington and that all too familiar disconnect between Main Street and Wall Street has been recognized by many for some time now.
If we plan on getting out of debt, we all need a plan and most likely we are going to need financial leverage from some sector. Choose wisely. My plan is to stick with a few quality junior mining companies specializing in gold, silver, copper, oil and gas that I believe still have a chance to quadruple or better. We all have our favorites. Once our new site is up and running, I’d like to hear about your favorites. You don’t even have to wait—go ahead and email me your ideas!
I also realize that I have to really understand what is going on “out there” in order to react in an intelligent and timely fashion. Most of you are already on that same page and I wish us all the best of luck because I believe we are going to need, knowledge, patience, and a little luck.
I’ve offered you a great group of contacts where you can keep up as little or as much as you’d like. The answers are out there if you choose to search for them.
I am currently in the process of creating a new web site which is www.seacoast-consulting.com.
Its main focus is to bring investing ideas to you in a timely fashion and to help us all understand the unfolding geopolitical financial landscape. Just one company can often make the difference between investing success and failure for an entire year.
If you’d like to be on our mailing list, please send your Email address along with your city and State to consulting@seacoastpub.com.
Until next time,
D. Stewart Armstrong
Consulting to the Junior Mining Sector
Posted by D.Stewart Armstrong in Articles