Daily Updates

Peter Grandich: As readers know, I am a believer that the Yukon Gold Rush in 2011 can be as big, if not bigger than 2010 as things come together for this seasonal play. I have found an interesting speculation to add a side pot bet for true high risk speculators wishing to participate in gold, junior resources and the Yukon Gold Rush. (Again, as I have discussed in the past, I encourage you to read the information on the Yukon Gold Rush by two of the best newsletter writers in the junior resource space, the Coffin brothers, Dave and Eric).

Read more on Peter’s article “A Side Pot Bet On The Yukon Gold Rush” HERE

More Articles on the Yukon Gold Rush:

1. The Yukon: The New Address for Gold HERE by Mining & Markets

2. Mining Mavens grab Norther Tigers Tail HERE by Investor’s Digest

3. Dawson City’s new Yukon gold rush becomes subject of U.S. media fascination HERE

4. Eric Coffin on the Yukon Gold Rush on YouTube below:

 

 

5. THE NEW YUKON GOLD RUSH by the Northern Miner HERE

6. Wall Street Journal: The Stakes Are Real in the Yukon as a Modern Gold Rush Is On – HERE

Who says the U.S. has never defaulted?

Despite all the grandstanding and dirty politics in Washington, any day now the United States debt ceiling of $14.294 trillion will be raised.

I have no doubt about it. And quite frankly, it doesn’t really matter what agreements they come to in order to raise the debt ceiling. In the grand scheme of things, whatever they do will be nothing more than kicking the can down the road.

Because the United States government is in worse shape than being flat broke. It’s completely insolvent. The debts and IOUs the government has racked up are patently unpayable.

Don’t get me wrong. There is going to be pain ahead for everyone. Social Security benefits are going to be cut … Medicare, too. A lot of us are going to suffer. I am not unsympathetic.

The simple truth of the matter is that I have never relied on the government for anything, and I am not about to do so now. Neither should you.

You need to take your fate into your own hands and fend for yourself. Period.

The way to do that is with the types of investments I recommend in my Real Wealth Report — in tangible assets and natural resources such as gold and more. And by investing in economies that are solvent, not insolvent — such as Asia.

But there’s also another way to protect your money and grow your wealth. I’m not talking about investments. I’m talking about recognizing the truth. The historical truth.

Anyone who tells you that the United States government has never defaulted on its debt is simply either completely ignorant or, worse, being outright irresponsible.

The fact of the matter is that …

The United Sates Has Effectively
Defaulted At Least Six Times

Default #1: The Continental Currency Default of 1779

Largely to fund the Revolutionary War, the Continental Congress of 1775 issued notes totaling 241 million Spanish milled dollars over roughly a two-year period.

They were the first of the so-called “Continental dollars.” But since Congress had no power of taxation, it made each of the then-13 states responsible for paying them off, prorated based on their population.

But the states couldn’t pay them off. So in November 1779, Congress agreed to redeem the notes — with currency worth less than 1/38th the Continental’s original value.

Default #2: The Default of 1790

In addition to its currency issuance, the Continental Congress borrowed money both domestically and abroad. The domestic debt totaled approximately $11 million Spanish dollars. The interest on this debt was paid primarily by money received from France and Holland as part of separate borrowings.

When foreign lending dried up, Congress defaulted on its domestic debt starting on March 1, 1782 — by refusing to pay and, instead, accepting the notes for payments of taxes.

By 1790, Congress repudiated these loans entirely.

Default #3: The Greenback Default of 1862

In August 1861, to fund the Civil War, Congress created a new currency which became known as the “greenback” due to the green color of its ink.

The original greenbacks were $60 million in demand notes in denominations of $5, $10, and $20 — redeemable at any time at a rate of 0.048375 troy ounces of gold per dollar.

But in January 1862, only five months later, the U.S. Treasury defaulted by refusing to redeem them on demand.

Later, the Treasury issued “greenbacks as non-redeemable legal-tender.” They traded hands at discounts from the original greenbacks of as much as 40%.

In effect, the currency was devalued by as much as 60% to finance the Civil War.

Default #4: The Liberty Bond Default and Gold Devaluation of 1934

The financing of the United States government stepped up to an entirely new level as a result of the cost of World War I. So starting in 1917, Congress issued “Liberty Bonds.”

The last bond issue, October 24, 1918, was a $7 billion, 20-year, 4.25% percent issue, payable in gold at a rate of $20.67 per troy ounce.

By the time Franklin Roosevelt entered office in 1933, the interest payments alone were draining the Treasury of gold. In addition, the country’s total debt had climbed another $18 billion to $22 billion. Yet, the Treasury had only $4.2 billion worth of gold.

Also, during the Depression, Americans were attempting to redeem their dollars for gold and then hoarding that gold like crazy.

End result: President Roosevelt decided to default on the domestically-held debt by refusing to redeem dollars in gold and, instead, confiscating gold and then devaluing the dollar by 40%, which was essentially also a default on America’s trade partners.

Default #5: Nixon Permanently Severing the Dollar’s Link to Gold

On August 15, 1971, President Nixon abolished the dollar’s link to gold. This was because there had been a run on the dollar in the late 1960s, since the United States was printing far more money than it could possibly back with gold.

So, foreign holders of our dollars wanted their gold, period. Nixon told them to take a hike and permanently severed the dollar’s convertibility into gold.

In effect, it was a 100% devaluation of the dollar. Since 1971, the value of gold has soared from $35 an ounce to today’s roughly $1,600. Which is merely another way of saying that the U.S. dollar has lost an amazing 97.8% of its value since 1971.

Put another way, in 1971, one U.S. dollar would have purchased you 1/35th of an ounce of gold.

Today, one U.S. dollar purchases just 1/1,600th of an ounce of gold.

And put yet another way, for every $1 Uncle Sam borrowed in 1971 that may still be an outstanding debt — he can now pay that debt back now with currency worth 1/1,600th of its former value.

Call it whatever you want, but as far as I’m concerned, that’s an all-out default. In fact, any time the government devalues the purchasing power of its currency, it’s a default, plain and simple.

So even if the government continues to pay its bills, as long as it’s paying them with currency that it plans on being worth less, it’s still a default.

Default #6: Ongoing: The Intentional, Further Devaluation of the U.S. Dollar

Despite the euro sovereign debt crisis being out in the open, the dollar is plunging in value against the Swiss franc, as well as the Aussie and Canadian dollars. Plus, it has just plunged to a 17-year low against the Chinese yuan.

This is all part of “Bernanke’s Secret Debt Solution” for the United States. He knows darn well that we can never repay our debts without inflating them away … by devaluing the dollar.

So do many others in Washington.

The SINGLE BEST thing you can do to protect your wealth is recognize this and take appropriate action by investing in asset classes that will preserve and grow your wealth.

Those asset classes are gold, natural resources in general, and Asian economies.

In fact, all the “great rebalancing” talk you hear out of Washington these days when they speak about the global economy is nothing more than code speak for devaluing the dollar even further, and largely to get Asia — and China, in particular — to spend more money.

Which is precisely what Asia is doing these days. Their economies are running on all eight cylinders!

Best wishes,

Larry

P.S. Make sure you check out the archived online event that Asia analyst Tony Sagami and I hosted last week on “Hidden Asian Profit Opportunities.”

It’s online now. Don’t miss it. It’s critical to understand what’s happening in Asia, and you’ll also get details on three triple-your-money opportunities that can help grow your wealth. To view the event, click here now.

Market Buzz – Debt Ceiling Looms for the US Government

The TSX Composite index closed the week at 13,495 on Friday, July 22nd, up 60 points for the day and 195 points (or 1.47%) for the week. In the U.S. market, the S&P 500 finished the week at 1,345 points, marking a weekly gain of 29 points, or 2.19%.

The closing bell on Friday brought the global community one business day closer to the looming debt ceiling in the U.S., which is expected to hit on August 2nd. For those not familiar with the subject, Congress provides the U.S. Treasury with the power to issue government backed debt up to a specified limit, which is referred to as the debt ceiling. In the words of the U.S. Treasury, “failing to increase the debt limit would… cause the government to default on its legal obligations – an unprecedented event in American history.”

Until recently, the concept of the U.S. government defaulting on its debt obligations was considered incomprehensible by the global financial markets. From Finance 101 text books to the real life offices of financial and credit analysts, U.S. government treasuries have for decades been touted as the international risk free benchmark of investment grade debt. Over the next week, President Obama and the U.S. Congress will undertake the task of determining whether or not the debt ceiling should be raised or eliminated outright. Although the long-term consequences of accelerating deficits and debt balances threatens to truly destroy the once great U.S. economy, a government default would undoubtedly send ripples through the global community to the extent of precipitating another financial crisis.

It is for this very reason that we in no way believe that the U.S. government will allow itself to default on its obligations. In our view, the debt ceiling will be increased before August 2nd and the nation’s politicians will continue to debate the importance of austerity measures and deficit reduction while continuing to do little to truly address the problem. This situation is comparable to an individual who allows themselves to build up mountainous quantities of consumer debt that they cannot service and then complains to their creditors that if they are not provided with more financing, they will not be able to pay the interest on their loans. While much more is at stake with the world’s largest economy, this practise provides no happy ending until truly drastic and painful measures are pursued. We can only hope that the U.S. government will develop the political will to address the problem, but we are not holding our breath.

Considering the state of affair in our modern world, it is no wonder that some seem determined to transfer all their assets to gold and head for the hills in preparation of Armageddon. We understand the fear, but we also advise investors to control their emotions in these uncertain times. With uncertainty does come opportunity. There is a human tendency to sometimes only focus on the bad news when it is more prevalent, but although negativity in the modern economy is available in abundance, there are also sources of strength and hope. So invest intelligently and selectively, perhaps defensively; diversify, and by all means, feel free to keep some capital on the sidelines for a rainy day, but don’t head to the hills just yet. As long as there are people on the planet that live and consume, there will be opportunities in business and investment.

For those who are interested, KeyStone Financial analyst Aaron Dunn was once again interviewed on BNN (Business News Network) at approximately 8:15 PST on Friday, July 22nd. The interview was a continuing of the discussion with BNN that began on July 8th and can be viewed at http://watch.bnn.ca/#clip497671.

Looniversity –  It’s All About Earnings

You can’t get far in the stock market without understanding earnings. Everybody from CEOs to research analysts is infatuated with this often-quoted number. But what exactly do earnings represent? Why do they attract so much attention? We’ll answer these questions and more in this primer on earnings.

What Are Earnings?

A company’s earnings are, quite simply, its profits. Take a company’s revenue from selling something, subtract all the costs to produce that product and voila, you have earnings! Of course, the details of accounting gets a lot more complicated, but underneath all the financial jargon, all that’s really being measured is how much money a company makes.

Part of the confusion associated with “earnings” is caused by the many synonyms used to describe them. The terms profit, net income, bottom line, and earnings all refer to the same thing.

Earnings Per Share

To compare the earnings of different companies, investors and analysts often use the ratio earnings per share (EPS). To calculate EPS, you take the earnings left over for shareholders and divide by the number of shares outstanding. You can think of EPS as a per-capita way of describing earnings. Because every company has a different number of shares owned by the public, comparing only companies’ earnings figures does not indicate how much money each company made for each of its shares, so we need EPS to make valid comparisons.

Put it to Us?

Q. I am relatively new to the investment arena. While I have done well with your research this year overall, recently I lost on one company from another advisor and some of the prognostications have made me very nervous about the markets of late. Any advice to help me sleep better?

– Ted Walters; Calgary, Alberta

A. When investors lose their comfort level because of losses or volatility, they become consumed with terrible emotions such as fear, greed, and superstition, which often provoke mistakes. Volatility in the stock market can make even the savviest investor uncomfortable. Unless you know how to interpret and take advantage of day-to-day price movements, you may have to refrain from being consumed by them.

Volatility is a reality of the stock market, so before you invest, you must know how you are going to deal with volatility and then act accordingly. If price fluctuations leave you with sleepless nights, perhaps a lower risk investment would be better for you.

You may also want to look at a strategy know as “comfort investing,” which links your money to a particular corporation that has provided a strong reason for you to purchase their stock. In the end, investing is not about “playing the market,” but rather about maximizing the return on opportunities that are suitable to your risk tolerance and your skill level.

KeyStone’s Latest Reports Section

The challenge now becomes finding those REE juniors where real “value” exists

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Only six years in the past four decades that the gold market has managed to make a new high for the year in July

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