Preface to the Gift to the Gold Community
Part I
Ladies and gentlemen:
Introduction
It’s that time again-time to list the top 10 gold and financial newsletters that I personally feel have the most qualitative and accurate information. Remember first and foremost that this is a purely subjective evaluation and I am certain that I will inadvertently eliminate at least 20 or 30 really good ones. Therefore, I shall try and post a few additional titles at the end of this article–something like an honorable mention.
There are literally hundreds of newsletters, websites, and commentaries oriented towards gold, silver, and the precious metals complex. Keep in mind that these are not the base metals such as copper and zinc which of course is obvious to some of us but if we want to expand our numbers we have to explain ourselves and our message clearly. Some of these letters will be focused on the physical markets while others will be focused on the futures markets, otherwise known as the “paper markets”.
The one thing that neophytes to the Precious Metals community must realize is the difference between the physical (purchasing actual gold and silver coins, and other products) and the paper markets (options, futures, ETFs, and other leveraged products). It is unfortunate but we must remember that in the precious metals markets, the tail wags the dog which is to say that the paper markets are manipulated to the point where they actually significantly impact and frequently control the physical price of gold and silver. This has been the prime message of The Gold Antitrust Action committee for the last 10 years. Strange as it may be, I’ve noticed a huge movement towards the acceptance of this concept by some well-positioned and high profile individuals who would have nothing to do with that idea just a year ago. And lest we forget, there are many high profile investors who still refuse to believe in the “manipulation” mantra.
We live in treacherous times and we had best be prepared for them. Knowledge is the key and if you don’t have that knowledge you will be left behind. Knowledge is not always about simply picking this stock or that stock– it is about understanding the overall atmosphere, both financial and social, in which we currently find ourselves. Therefore many of these letters will not offer you a single stock to trade while others will. I shall try and delineate the ones which will offer actionable advice. But please remember that in order to be well-educated, and understand what is truly occurring, we need to read those letters and visit those websites that give us the background as to why gold and silver and the precious metals complex are going to be the “go-to” investments in the coming years. In other words we need to understand the big picture in order to make money in the small trades. That being said, we all have to do our own due dilligence because there are many different opionions. Mine just happens to coincide with Bill Murphy, Chris Powell (www.lemetropolecafe.com) and James Turk (www.fmr.com).
Informational overload
I think we are all on information overload and it is difficult to read 10 or 15 newsletters on a regular basis not to mention the fact that if you’re subscribing to all of them, it can be quite expensive. Therefore, I will try and offer you groupings of two or three letters which work well together. The key to this exercise is balance. We need sufficient information to make good decisions, but not so much information that we simply cannot keep up. And some of these authors write on a regular daily basis and it can be quite daunting to keep up with everyone.
Making money-advancing your financial Goals
I believe that the primary reason for subscribing to these newsletters, and websites is that of making money. However, in order to make money, especially in the precious metals sector one has to be totally informed because there are shifting sands and the entire precious metals complex is a smoke and mirrors game.
That is to say that if you don’t understand that these gold and silver markets are truly managed (manipulated), that they are not accurate and honest markets, it will be like playing tennis using a golf club. Well you you might ask, if that’s the case, why get involved in a crooked market? The answer is because it truly is the only game in town and it is becoming more so on a daily basis. When we read and understand the geopolitical implications of what is occurring to our currency, our government, and are economy vis-à-vis the international community, the answer becomes quite clear. One does not create $5 trillion in new currency without a vengeful repercussions. I think we will also reach a point of critical mass which is to say that more and more investors are willing to explore the precious metals complex. Younger investors have been conditioned to believe that the dollar is “as good as gold”. I think in the months and weeks ahead we will discover that this simply isn’t true.
We also need to understand that in order to control the paper markets in gold and silver, there has to be a certain amount of physical gold and silver behind the scenes and operating in concert. That physical gold is disappearing as fewer bullion banks are willing to part with their inventories. Additionally, local coin shops are running inventories that are quite low implying that there is a great deal of buying occurring in these physical markets. If you ever stop and study silver you will see that the situation if five times worse than it is with gold. Certain major players in the silver market are controlling it with minimal amounts of physical while they trade enormous amounts of paper that are supposed to be represented by that physical. Long story short: it just ain’t there! If all silver investors would take possession of their silver positions at the same time on the same contract, someone would be left very short. It would be like playing musical chairs with 23 people and three chairs.
The physical gold is literally disappearing before very eyes. That is to say those small denominations of gold and silver such as the 1 ounce coins are becoming increasingly difficult to purchase. As the year wears on, and as the inflationary implications become ever more evident, this condition is only going to worsen. I would urge you to purchase what ever you can in terms of small denominations of gold and silver coins and by all means don’t forget to stockpile food and water. That’s another story altogether and one that we will cover in the future. Survivalist mentality? Perhaps, but better be safe than sorry.
On Saturday the 10th of January, 2009 the Hubert financial Digest announced that gold was suspect due to the fact that so many newsletter writers were bullish. I understand the sentiment but I believe that these are extraordinary times and that the reason so many people are bullish on gold is that the roadsides are painted with huge markers indicating that one cannot print $8 trillion of Fiat currency without repercussions. That being said, who would have believed that the dollar would have maintained its level at 85-87 on the US $ index in this type of environment? I throw these things out only as a counterbalance. You will ultimately have to make your own decisions but I believe that the people who I am suggesting to you will help you with your decision making processes.
In the trenches?
It’s very difficult for the average person to realize that major financial markets can be manipulated. For those of us who’ve been in the trenches for these last 10 years and some of us who’ve been in the trenches for the last 20, it is the easiest thing to understand because we’ve seen it unfold on a daily basis. Folks new to the sector may have a difficult time understanding the level of corruption that goes on in these markets. I had a difficult time believing it myself until I had my nose rubbed in it so many times that all logic pointed to the direction that something just didn’t pass the smell test. As a prime example, we would all watch the gold price come into New York and then precisely at nine o’clock California time or 12 o’clock New York time, the paper markets in gold would just drop through the floor. Honest markets just simply don’t trade that way day after day after day month after month, year after year! So Mark Hulbert please tell me what is the reason for this clock like regularity of gold price disintegration at exactly 12 o’clock Eastern standard Time for the past 12 years? Today is January 28, 2009 and gold was up $20 surpassing the $900 mark. Gold always climbs a wall for and bull markets are absolutely renowned for this type of activity. If you become involved in these markets be sure to good counsel and a strong stomach
.
I specialize in the junior mining companies because I’ve realized for quite some time that even though they are small, undercapitalized, and often times penny stocks, 70% of all the major gold discoveries come from the sector. In other words, the junior mining industry offers the greatest leverage but also the greatest risk. However, I personally believe that some of these juniors are going to bounce back in a very big way. I’ll have more on that later but let me complete this section by saying that I realize that many people have been severely damaged by the junior mining market collapse over the past six months. Few companies have gone unscathed. Some are down 90% some are down 50%. Some will never come back and that’s a shame because they did have good properties. There will be mergers and acquisitions. But just as past performance is no indication of future gain, past performance does not mean the sector will not recover. It will recover but only the cream will rise to the top. Our job will be to discern identify and purchase that cream which will indeed lead to 1000% gains.
Yes I know we all wish we could have been geniuses and sold at the top six months ago but we didn’t as a consequence many of us have been decimated in terms of our portfolios. I would encourage you to look up and look ahead. Salvage what you can and put it into companies that will indeed multiply by a factor of 10 or more in the coming months. I have a least a dozen of them which I believe will do quite well.
Don’t beat yourself up!
The one thing we should not do is to beat ourselves up which is the easiest thing to do. “Woula coulda shoulda” The hardest thing to do is to learn from the mistakes and to push onward and upward knowing that our idea was correct but the timing was not propitious. In addition, gold is a political metal and so there are always those forces fighting against it in order to make the dollar look better, inflation look less than it is, and a plethora of other concepts which benefit the powers that be, the stock markets, the government, but not gold.
In addition the subprime mortgage mess started a chain reaction which none of us thought would take the gold sector and especially the junior mining sector down to levels it did.
There are two points I would like to make on this. One is that even when gold was $1000 so many of the juniors never really reflected the excitement of that kind of a price point. There was always a cloud hanging over the community and consequently even though there were some companies that had excellent gains, on balance there were not the huge gains that many of us anticipated. Excitement never reached that fever pitch indicating a market top. But then again remember, gains are relative. One man may be happy with a 20% gain while another will not be happy with 200% gain. People do not invest in junior mining companies for 20% gains. Why? Because the reward does not warrant the risk.
The second thing I want to point out is that few people felt that the decline was going to reach the levels of severity it did. Many thought that there was going to be a divergence between gold stocks and the other indices. But in the rush for liquidity, the baby was tossed out with the bathwater. That was always my greatest fear and sure enough that is what occurred.
By the same token, now is the time to get back into these markets–especially over the next six months. REVALUATE in MAY!! My good friend Roger Wiegand from Trader Tracks has said that the old adage of selling in May and going away may take on particular significance this year! Time will tell but I believe that gold is going to bounce back with a vengeance and silver will follow. There are going to be feints and dodging along the way but don’t become discouraged. Gold and silver have history on their side and remember above all things that our founding fathers insisted upon physical gold and silver as being the backbone of the currency of this new nation. How do you think they would feel reviewing the current environment?
Coming up: “The picks”
Until Next Time
D. Stewart Armstrong
Consultant to the Junior Mining Community
Posted by D.Stewart Armstrong in Articles