D. Stewart Armstrong
Preface and Insights
One of the questions I receive most frequently is why xyz stock is down (never why is it up)? When the gold price is moving up, everyone is smiling, but when gold and the precious metals markets are moving downwards, everyone is doom and gloom and wants a reason—now! The financial press is only too happy to oblige with a daily commentary of blather. In other words, gold was up because the dollar was down, vice versa, or some other reason as for movement. Of course sometimes they have it right, but so often I feel their commentary is just to fill up space and appease the masses with a reason, any reason!
I want to suggest an insight to both investors and management. Nothing occurs in a vacuum. Another insight is that try as you might, you cannot talk up a stock or a company over the long term. I’ve seen companies “throw” a million dollars at promotion and move a company stock up to $3.00 only to see that stock fall to $.25 when the promotion stops and the tenor of the market changes. We also have to remember that sometimes these orchestrations are nothing less or nothing more than “pump and dump” machinations.
Therefore consider the cost averaging approach to both purchasing stocks (investors) and promoting them (management). My job then becomes to keep a certain stock of some quality in your consciousness—over time; up or down, expensive or er, less expensive. Get the picture? Fundamentals basically run the story—the story does not run the fundamentals.
Companies should “keep on keeping on” just like the old hippies used to “keep on truckin’”? Why? Because that is what they do. Some do it more successfully than others but that doesn’t change the fundamentals of the basic equation.
Making sense of Golden Phoenix
I must admit I’ve been trying to make sense out of Golden Phoenix being at $.15. That is what most investors are primarily concerned about—the $.15 share price so I will address that topic first. However, my opinion is that we have to transcend the share price and look closely at how the company is functioning in these treacherous financial waters especially within the context of the entire junior mining sector. Should one be asking the question “how can Golden Phoenix be an American success story when their share price is at $.15?” Or should they be asking “what is Golden Phoenix doing to create shareholder value and protect their assets?”
My understanding, from talking with Rob Martin is “damn the torpedoes, full speed ahead!” I would then respond to you by saying that it’s not always about the share price of a company but how that company is responding in an economic environment that is absolutely challenging beyond belief. Regardless of the price, and I know it is so very important in everyone’s decision-making process, I have to say that this is an environment where one needs to look at the underlying value of the company and what they are attempting to accomplish.
Indeed, we could go on about these dismal financial markets ad infinitum and ad nauseam because they truly are nauseating. Suffice it to say for this exercise, Golden Phoenix is a reflection of how all of these markets, and the puppeteers behind them, are pulling the strings. Jim Sinclair (www.jsmineset.com) has recently released a list of 22 criteria for investors to review in the choosing of a quality junior company. I am going to begin using this list as I review my own portfolio. Of course, I will also use my own standard five point criteria which I’ve been advocating for seven years:
- Quality, Experienced Management
- The Willingness to Promote
- Company Ethics beyond Reproach.
As you combine these two lists, you’ll see where there is a great deal of overlapping. My list has room under each major category to include Jim’s specific ideas so you might consider mine as the one simplified and easy to remember, a broad overview list and Jim’s as the more detailed (refined) one.
My feeling is that Golden Phoenix meets most of these criteria.
Jim Sinclair’s criteria to consider (verbatim) for the selection of a precious metals junior is as follows:
1. Management ethics, found out by checking litigation, criminal and credit records. All this information is now easily attainable.
2. A property or properties with outstanding upside promise sustained supporting data.
3. History of success both on the ground (properties to mines) and in the financial markets (stock performances of at least 10 to 1 value).
4. Strong hands on board
5. Key man insurance
6. Order of succession in place.
7. No anti-takeover devices written into the indenture of your certificate.
8. Availability of knowledgeable person in the company to speak with.
9. You retain a property-qualified geologist to perform a desk review of all exploration, development and production information at company headquarters.
10. A property visit by this consultant if the position is to be of significance.
11. The company has access to financing.
12. The company has used financial restraint, therein having control over insider options, preferably none.
13. The company has no warrants outstanding.
14. A significant short position at this time is highly desirable.
15. The market must be liquid so therefore some respectable listing is preferable.
16. Preferably not listed on the Frankfurt Bremen Exchange.
17. Key executive and board members hold a reasonable amount of shares.
18. Goodly number of stockholders.
19. Owned by but not primarily owned by some respected fund interest.
20. Preferably not in any index.
21. The company has a good Sarbanes Oxley program with financial checks and balances.
22. Audited by a respectable firm with special attention to who does the subsidiary audits if offshore to the venue of incorporation and trading.
What more can you say? Jim, as usual, along with Dan and Monty and the entire crew have hit the nail on the head. I would say that it is almost impossible for most companies to hit on all 22 cylinders but I think something in the vicinity of a 75% score would certainly be worth considering. I find it quite interesting that Mr. Sinclair mentions ethics as the number one criteria. In this day and age, if you are falling short in the ethics department, you are certainly letting your shareholders down.
Finally I would say that Jim is really referring or at least considering his own company Tan Range Explorations as the template for compiling these 22 criteria. More power to him– he has worked very diligently on behalf of the gold mining community and has never pushed his company out front and center. He is an extraordinarily respected member of this community–and for good reason.
Review the GPXM Website.
As always, I suggest that you review their excellent website at www.golden-phoenix.com. Pay special attention to the Highlight section which is on the front page. The company normally places the latest news in this section.
Then, I suggest that you go to menu bar heading “Everything Else” and look under the sub-headings of “facts and figures ” and find “Photos, and especially “Spotlight” wherein they lay out an excellent historical perspective of the company. It is truly a well presented web site and it deserves your attention. If a picture is worth a thousand words, GPXM is worth a few million.
There are two products for which Golden Phoenix is in the hunt. One is molybdenum, and the other is gold. They are already a producer of molybdenum or “Moly” to which it is commonly referred. But remember that this company does have cash flow, they are a producer, and they will eventually be a discoverer of additional molybdenum and in my opinion they will also be a discoverer of gold at their Mineral Ridge property.
Several Questions
First of all, the web site specifically addresses commonly asked questions under the heading “Everthing Else” and “Chat Shack”
There are several questions that come to my mind when I review this company. First, how is the price of Moly holding up? Secondly, how is the price of gold holding up? Thirdly, what is the financial condition of Golden Phoenix?
The last time I looked, the price of Moly was in the mid-$30 level, holding strong. Additionally, there is serious demand for the product. Molybdenum is used as an alloy to strengthen metal. This alloy of moly and steel creates a material with a special kind of tensile strength– both strong and flexible. This is the perfect metal utilized in constructing pipelines and things of that nature. The emerging markets of the world have a great need for Moly and the grade of Moly found at the Ashdown mine is of exceptional quality. As far as the price of gold is concerned, I think I might be preaching to the choir when I say that I believe it is going well past $1500 an ounce within the next several years.
Short term, it is anyones guess and it may even get back into the $850 range but I strongly doubt that. It is probably the most manipulated commodity on the planet and that is why we have to view the gold charts with somewhat of a jaundiced eye. Personally, I’d be more than happy to purchase gold at $850.
In terms of the financial state of Golden Phoenix, I think we could say that it is on solid footing. Money is not wasted in this company nor is it peeled off to be used as huge bonuses for management. No, I’ve always found Golden Phoenix to be more of a “mom and pop” operation– one where shareholders are taken seriously and where they are not considered to be collateral damage or a Collateral necessity.
I think we also need to remember that management has their own futures tied to the success of this company (#17). That means in effect that if Golden Phoenix does poorly, many of these people who put their life savings into the company are also going to be doing poorly. They are not operating in a vacuum and they have the interest of shareholders firmly in mind. read more
D. Stewart Armstrong
Introduction
Fodder for the masses has to do with how “the powers that be” address all of the turmoil in which we as a nation currently find ourselves in mid-2008 and how those same political entities downplay, manipulate, orchestrate, and deal with this turmoil. It doesn’t matter that they have created this turmoil through misguided policies and printing and wasting humongous amounts of fiat currency which is being created at an ever increasing pace. This will of course end in rampant inflation which cannot be hidden or bluffed away. We will once again reiterate that inflation can be classically acknowledged as an increase in the monetary supply and that rising prices are a result of too many dollars chasing too few goods.
For many years, the masses have been told that “inflation was under control”. This is what I call “fodder for the masses”. But is it under control? Ask any housewife that does the shopping at the local market or anyone who fills up their car with gasoline?
We are the masses—you and I—doctors, lawyers, writers, teachers, carpenters, nuclear physicists, and Indian chiefs. We are fed the fodder and we are supposed to believe it! What the government tells us, what financial TV tells us, what society tells us, and what one left wing, right wing or other group tells us is supposed to be truth. But is it?
Any time you go against one major entity or another you pit yourself against some formidable forces.
We’re not looking for a fight, we’re looking for the truth.
But here is the crux of it. You can make fodder as simple as you want or as complex as you want. You can accept it or you can reject it. I think it was Jim Sinclair who suggested that all of the fodder constantly being thrust upon us to manipulate the masses to accept the status quo and to reject gold is nothing but “noise”. Noise is all around us just like fodder. It’s up to us to choose, but when you really break it down to the lowest common denominator it is really about the truth. All the rest is noise and the fodder is simply a smokescreen to cover the lies.
It’s just like we all learned in the second grade. Tell the truth (don’t lie), get along with your classmates and your fellow students, don’t steal, and play nice.
Protect yourselves and your Families!
You read these pieces that I write with the understanding that hopefully I will bring some enlightenment into your life. By writing these pieces, you bring enlightenment into mine. It is a quid pro quo. So, I’ll cut to the chase. It is not too late to participate and invest in the precious metals complex. But there are three things that I would suggest to you. The first is don’t do anything that is uncomfortable for you such as dealing with futures contracts and especially options. There are no get rich quick schemes in precious metals. We must always have a full understanding of what we are doing, and why we are doing it. We must also listen to people who can be trusted. That can be a sticky one so I recommend you once again review: “The Gift to the Gold Community”, and article found on www.seacoast-consulting.com
Secondly, it is not too late to purchase physical gold or silver. You can do this and still achieve a profit or you can do it as many people do and simply purchase the physical metals as a safe haven. You can still double or triple on your money over the next 5 to 10 years simply by purchasing the physical metal and storing it in a safe place (but not in a safe deposit box). Finally, do not purchase exchange traded funds or ETFs. They make too tempting a target for any government entity which finds itself in a pickle. I will also reiterate that you can start with a simple roll of pre-1964 (90% silver) dimes or quarters.The issue is simply to do something–get started now!!
Mining stocks of all shapes and sizes are still viable and we are afforded the luxury of being able to purchase some very good companies at extraordinarily attractive prices. The last 18 months has been dismal for the juniors but that doesn’t mean the juniors are dismal. It simply means that the environment in which gold shares have been depressed has never been worse. This is because once again, gold competes with fiat currency. Gold is the barometer of the economy and if you can break that barometer you can fool many people most of the time. But remember, you will never fool all of the people all the time. I will update some of the junior mining companies in the very near future. When I update a company, remember that I do it within the context of the market at large because nothing occurs in a vacuum.
Nothing occurs in a vacuum!
First of all, why do I say this? I want you to keep remembering that the world is interconnected and nothing occurs without some prima facie cause. The Housing Crisis didn’t occur out of the blue because people stopped wanting places to live. The dot com bubble in 2000 didn’t happen because people stopped using computers. And people don’t hate the United States because we have a “pretty country”. For the most part, Americans are a kind and generous people willing to give you the shirt off their back if you ask them for it. Most of them will also allow you to “cut in line” if you simply ask them. Force the issue, i.e., butt in without asking, and you’re likely to initiate an ugly exchange. Think about that one because it’s a simple metaphor for “cause and effect”. Most educated Americans do understand what is occurring in this Country–at this point it is simply easier to go along to get along. But this can only continue for so long and when the hard earned money of Americans is at stake, the rules and the attitudes will change overnight–on both sides of the issue. This is what Mr. Ginrich accentuates in his piece posted below.
I feel Americans are a good and decent people; we’re tolerant and exceptionally generous. We simply want a level playing field–this is why the immigration issue causes such heated emotions. The masses are told one thing or another; but they never seem to happen leaving Americans feeling violated because they are paying for illegal health benefits when Americans themselves are paying through the nose for their own very expensive health care and health insurance. Illegals walk into just about any emergency room and have the same health care as most Americans. All the extraneous reasons and excuses given for this state of affairs is simply fodder for the masses.
So, How many times have you heard me say that “nothing occurs in a vacuum”? When we hear about Freddie Mac and Fannie Mae and all of the things that have gone wrong in our financial system, we understand that these issues have all been predicated upon one misguided policy or another. Invariably somebody has not been telling the truth and there is certainly a lack of transparency centering on many of the issues facing the United States today. It is downright frightening and if we don’t find a way to the truth, we won’t find our way at all. It’s that simple. There is a huge disconnect between Washington, DC and the individual states just as there is a huge disconnect between local politics and individuals in those communities. Then there is the largest disconnect between Washington DC and the citizens of this Country.
The fodder for the masses has gotten so ingrained in the public consciousness that we don’t even challenge the mis-guided policies, we don’t even fight for the truth. It’s just too much trouble because we “feel” we don’t have the power to do anything, and besides “they’re” going to win anyway. So don’t fight City Hall; just try to get by. After all, something is amiss when the presidential election process costs in excess of $2 Billion dollars. “What do you expect me to do about it”? That is a prevalent attitude.
This kind of a national mentality develops over years and slowly but surely our civil liberties are eroded away (by design), and the principles upon which our country was founded begin to dissipate. We are all left scratching our heads saying how did this happen? Where did we go wrong? We should know how it happened. It happened because little by little we were manipulated, we were apathetic, we made bad political choices, and we probably spent too much time trying to make a million dollars as opposed to trying to make the country and ourselves just a little better.
Currently this country is not “by and for the people”—it is by and for the special interests. These are the same special interests which have a great deal of power and really only care about themselves and the bottom line– oh yes, they do care about the quality of that fodder. It wouldn’t be so bad, it would almost be acceptable if they contributed something towards our dying planet, and our “bought and paid for” political system, our debased currency, but that doesn’t seem to be the case. Its war over dialogue, it’s ostentatious over substance, and its “bait and switch” on a national level. Look, I don’t want to get too macabre here, too depressing, but I would challenge each of us to spread the message that we are on a fast track to hell in a national hand-basket.
But surely this can’t be a surprise. If it is, you haven’t been reading between the lines. In actuality, we are all so busy trying to raise a family, trying to make a living, accepting our status quo, that we’d just don’t feel we can make a difference. So we accept the fodder which eventually turns into a slaughter of the real freedoms and liberties which are slowly disappearing. It is all interconnected–nothing occurs in a vacuum.
Fodder, Politics, and Gold.I don’t think of myself as a self-absorbed political animal but if you’re involved with gold, or gold-mining, in some ways you are indeed involved with politics—like it or not. The reason is that gold is currency and gold competes with fiat currencies. Therefore, like it or not, I’m involved in politics because gold is a political metal as Bill Buckler so eloquently puts it.
Yesterday (June 18, 2008) in Bill Buckler’s weekly Gold letter (www.the-privateer.com) he stated that a prosperous nation really doesn’t take that much to function. It takes private property being sacrosanct; you need free exchange (I would add in both dialog and ideas) for which you need sound money first and foremost. After that you need a set of inviolable and unchanging laws designed specifically to protect individuals against force and/or fraud perpetrated by anyone including the government (I would add especially the government). For the latter, a well thought out Constitution is also necessary, a constitution laying down the laws which the government must obey. That’s about it.
This brings us full circle to the simplicity issue. I think that the entire financial fiasco facing the US today is really because government, special interests, and multinational corporations have been extraordinarily preoccupied with hiding the truth from us so they can maximize profits, solidify power at the expense of the ideas of our founding fathers.
I honestly believe that we have some congress people that would like to do the right thing but their arms are twisted by fellow legislators, and tainted with party politics to the point that if they want to get reelected, or if they want to be appointed to any of the powerful subcommittees, and they have to go along to get along. And of course there’s always that question of getting reelected– which is far more important than any other issue facing them. They all get caught up in this ego maniacal self- importance of participating in the halls of power we know as government. read more
