Stocks & Equities

Jeremy Grantham: 10 Investment Lessons

Warren Buffett has said that if you look around the poker table and you can’t spot the patsy, you’re it. In that spirit, another famed investor, Jeremy Grantham, is trying to deal investors a better hand.

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm. GMO is one of the largest managers of such funds in the world, having more than US $107 billion in assets under management as of December 2010. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

Grantham doesn’t mince words. In Grantham’s view, outlined in a quarterly letter published late Friday, individuals launched into the market have embarked on “dangerous investment voyages” that threaten to separate them from their money. They hear the tempting call of countless stock-market sirens — self-interested cheerleaders and barkers who promise that it’s different this time, and that you must buy now or miss the boat.

Making the journey even more perilous is that stocks around the world are either fairly priced or nearly so, he says. Investors who buy now can expect meager returns over the next seven years.

….read Grantham’s detailed version of the 10 Investment Lessons:  HERE – The Longest Quarterly Letter Ever.’

Here is a summarized version of the 10 Investment Lessons:

1. Believe in history
“All bubbles break; all investment frenzies pass. The market is gloriously inefficient and wanders far from fair price, but eventually, after breaking your heart and your patience … it will go back to fair value. Your task is to survive until that happens.”

2. ‘Neither a lender nor a borrower be’
“Leverage reduces the investor’s critical asset: patience. It encourages financial aggressiveness, recklessness and greed.”

3. Don’t put all of your treasure in one boat
“The more investments you have and the more different they are, the more likely you are to survive those critical periods when your big bets move against you.”

4. Be patient and focus on the long term
“Wait for the good cards this will be your margin of safety.”

5. Recognize your advantages over the professionals
“The individual is far better positioned to wait patiently for the right pitch while paying no regard to what others are doing.”

6. Try to contain natural optimism
“Optimism is a lousy investment strategy”

7. On rare occasions, try hard to be brave
“If the numbers tell you it’s a real outlier of a mispriced market, grit your teeth and go for it.”

8. Resist the crowd; cherish numbers only
“Ignore especially the short-term news. The ebb and flow of economic and political news is irrelevant. Do your own simple measurements of value or find a reliable source.”

9. In the end it’s quite simple. really
Estimates and forecasts such as the ones GMO makes for the next seven years aren’t complicated, Grantham says – “[GMO] estimates are not about nuances or Ph.D.s. They are about ignoring the crowd, working out simple ratios and being patient.”

10. ‘This above all: To thine own self be true’
“It is utterly imperative that you know your limitations as well as your strengths and weaknesses. You must know your pain and patience thresholds accurately and not play over your head. If you cannot resist temptation, you absolutely must not manage your own money.”

MW-AM703 granth 20110913184921 MO

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm. GMO is one of the largest managers of such funds in the world, having more than US $107 billion in assets under management as of December 2010. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

Estimates and forecasts such as the ones GMO makes for the next seven years aren’t complicated, Grantham says

“Every segment of the gold stock market is very cheap today.” Opportunities abound across the spectrum of precious metal equities, which remain undervalued as bullion prices continue their upward trends. That’s the word according to Charles Oliver and Jamie Horvat, both senior portfolio managers at Sprott Asset Management. In this exclusive interview with The Gold Report, Oliver and Horvat express cautious optimism about the prospects for gold stocks in 2012.

COMPANIES MENTIONED: BARRICK GOLD CORP. – BELO SUN MINING CORP. – CANACO RESOURCES – COEUR D’ALENE MINES CORP. – COLOSSUS MINERALS INC. – CONTINENTAL GOLD LTD. – GOLDCORP INC.– HECLA MINING CO. – LAKE SHORE GOLD CORP. – PAN AMERICAN SILVER CORP. – PERSEUS MINING LTD. –PREMIER GOLD MINES LTD. – SCORPIO GOLD CORP. – TAHOE RESOURCES INC.

Gold and Silver Stocks Poised to Recover in 2012: Charles Oliver and Jamie Horvat

The Gold Report: When we talked in the wake of the debt ceiling crisis last fall, Charles, you expected volatility to be good for gold and forecast a continuing long-term bull market for precious metals. These days, the scary stories pertain to the European Union (EU). Will negative headlines continue to play a role in the price of gold and silver?

Charles Oliver: Absolutely. The headlines about the European Central Bank (ECB) infusion of billions of euros into the banking system has been very good for the price of gold. Since the ECB announced it would be issuing €489 billion in December, gold has had a nice little rally off its lows. I expect in the next couple of weeks a further issuance of money will be quite supportive for gold.

Europe is still a mess. Greece seems to be heading to bankruptcy in slow motion. That problem has been going on for two years and we could find these issues still persisting a year from now. Ultimately, central banks around the world will continue to print and debase their currencies, which will be very good for the gold price.

TGR: Jamie, do you agree with that? Or might Greece strike a deal to pay off its debt, turning the price of gold down?

Jamie Horvat: I think the deal is based on the fact that the only tool governments have at their disposal is the continued monetization of debt and the continual printing of money, which is always good for gold. On the other hand, if Greece does not get the sought-after debt relief and restructuring or, if it is kicked out of the EU, it could result in the unwinding of the European banking system and could have larger implications globally. If that happens, we’ll see a short-term hiccup in the gold price as it is used as a source of liquidity and investors sell their future in an attempt to live and fight today. That may be the tail-risk event as we continue to see additional quantitative easing (QE) programs all over the world. From Japan to the UK, more than $1 trillion could be spent in the next few months to provide ongoing liquidity in Europe. That is why the longer term outlook for gold is still positive.

TGR: In a November television interview, Charles, you expressed concern about China’s growth. Has that changed? And what are the implications for precious metals?

CO: The China story affects the industrial metals more than the precious metals, but I’m still concerned that we see weakness in China. The volume of loans being done now and the contraction we’re seeing there both signal that weakness. A number of other economic statistics indicate that China is clearly slowing down; the only question is how big a slowdown it is. Ultimately I think it will impact the base and bulk metals more than gold and silver—copper, iron ore, steel, those types of things.

TGR: Your $644.5 million Sprott Gold and Precious Minerals Fund ended 2011 with a tough quarter, off 10.6% compared to an 8.7% loss on the benchmark S&P. Your quarterly report cited tax-loss selling as one of the reasons for thinly trading stocks performing poorly. Have you adjusted your portfolio since then?

CO: The portfolio is continuously being upgraded. We made a number of changes during the last quarter. We did some of our own tax-loss selling in the portfolio. When I sold some of those stocks, I tried to redeploy the proceeds into some of the other names that I wanted to own that were also experiencing tax-loss selling. A lot of companies in the junior space were down 70%. It wasn’t through any fault of their own; it was just because the market had no interest in small companies because it was risk averse last year.

TGR: Were the other names you were buying into mainly juniors?

CO: Yes, there were a fair number of juniors, but every segment of the gold stock market is very cheap today. I can find great valuations in small-, mid- and large-cap stocks. All of them are extremely cheap. That’s not always the case. You might think all segments would move together, but in reality one segment often does much better than the others during a particular year. 

TGR: It appears as if about 30% of the fund is dedicated to the small-cap issuers, which have a little bit higher risk profile then the large caps. Do you see those small caps as the way to drive growth in the portfolio?

CO: If you look over the last decade, a lot of the alpha that’s being generated in the gold fund has been through small- and mid-cap names. That’s across the board. Whether in the gold space, the oil space or any other type of stock, generally speaking, small-cap stocks have better growth and long-term growth returns. 

TGR: What are some of the juniors you picked up as you were redeploying at the end of the year?

CO: I can mention a few names from my most recent year-end report for investors. Canaco Resources Inc. (CAN:TSX.V) is a small cap with a project in Tanzania. It did a financing at around $5.40/share back in March 2011. It’s a good stock, but through tax-loss selling and an aversion to small-cap stocks, it has traded down to below $1.50/share. What a great opportunity. 

I looked at Canaco several years ago. It was really interesting, but it was a little on the early-stage side and it got away from me. I’m not one who likes to chase stocks; I don’t run after them. And then last year, Canaco had a lot of cash on its balance sheet and suddenly came under severe selling pressure. I thought, “Great, I’m getting a second opportunity to buy something at a much better price.” Additionally, I expect its property in Tanzania will one day be a mine.

TGR: How many years away is that?

CO: Probably 5 to 10 years. The lifecycle in the mining industry is usually at least that long from a grassroots discovery through permitting, construction and ultimately getting into production. In the small-cap space, I’m always on the lookout for companies that I believe will have a mine at some point in the future. Canaco is a good example of that.

TGR: Any other examples of companies that could be big movers in 2012?

CO: Another company, Lake Shore Gold Corp. (LSG:TSX; LSG: NYSE) was down 70% in the last year. I actually owned it a couple of years ago, and thought it got expensive. It was trading north of $4.50/share not too long ago, and went down to almost $1/share. The company had a few hiccups in terms of its mine plan, but the stock has been overdone. I sold it up much higher and took this as an opportunity to get involved with it again.

TGR: How high could it go?

CO: There is no reason Lake Shore Gold can’t get back to the highs it made last year if it executes on its strategy. These things usually just take a bit of time.

TGR: Eric Sprott is probably one of the leading silver bulls in the world. In your view, what’s the ideal balance between gold and silver equities and bullion in an investors’ portfolio?

CO: I believe it makes a lot of sense to have a combination of both stocks and bullion. It really depends on the individuals in consultation with their financial advisors to get the appropriate allocation. Bullion is an asset that helps preserve capital. You’re not there to make a killing. You’re there to protect capital, especially in the context of the currency debasement that is going on. Gold stocks are more of an asset used to capture capital gains during the bull market we are in. Many studies have suggested that 5–10% on a long-term basis is a good allocation to precious metals. I’ve heard some numbers much higher at the Sprott organization, but again, I think it ultimately depends on an individual’s goals, propensity for risk and capital preservation requirements due to age and circumstances. 

TGR: What are some of your favorite names among silver equities?

CO: I like the large caps. Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ), which is trading at about 9–10 times its price/earnings (PE) ratio, has potential to double production over the next five years as it builds its Navidad mine in Argentina. Pan American is fully funded to get that growth.

Coeur d’Alene Mines Corp. (CDM:TSX; CDE:NYSE) is another one trading at about 9–10 times its PE ratio. It has doubled production over the last four to five years. This company actually has done a great job; it’s one of the few over the last couple of years that have managed to do a pretty darn good job of keeping cash costs very low. If you look at almost all of the large-cap silver names, you’ll find most of them trading either at high single-digits to low double-digit PE ratios. They are extremely cheap. 

TGR: What are some catalysts that could take Coeur d’Alene to the next level?

CO: I think it’s just a matter of time and execution. Ultimately these companies will make good earnings and cash flows at the current price. One of the things we’ve seen in the gold sector, and are certain to see a bit in the silver sector, is that a lot of these companies are starting to initiate dividends. Last yearHecla Mining Co. (HL:NYSE) announced a plan to pay a dividend linked to the silver price. In a recent presentation I attended, Coeur d’Alene suggested that it might start looking at paying a dividend sometime next year. 

TGR: Could that have a big impact on the share price? 

CO: We will have to wait and see, but I think investors look for good companies that pay nice yields.

TGR: What are some other promising silver names?

JH: On the development and exploration side, Tahoe Resources Inc. (THO:TSX) has great potential as it moves toward production on its flagship Escobal project in Guatemala. We like what we see in Tahoe’s exploration there—the whole development story. It may have a world-class asset with the resource and reserves it currently has on hand—plus significant exploration upside as well.

Scorpio Gold Corp. (SGN:TSX.V) is a junior that has come off the bottom. Scorpio has been viewed in the past primarily as a base metals company and a zinc producer, but most of its upside in terms of both exploration and production now comes from silver exposure. I continue to like Scorpio. 

TGR: With so many companies in the small- and large-cap area beaten down, how do you determine which ones will deliver?

JH: As Charles mentioned, valuations are pretty depressed. Looking at the large caps broadly, you have to distinguish between those that are executing projects and those that aren’t. Among the companies reporting recently, Agnico-Eagle Mines Ltd. (AEM:TSX/NYSE) and Kinross Gold Corp. (K:TSX; KGC:NYSE) are two examples of companies that unfortunately lost some ground. Agnico enjoyed a premium thanks to its growth profile, but lost that premium because it didn’t execute on that growth profile. Kinross, too, has declined due to the lack of execution. 

On the other hand, Barrick Gold Corp. (ABX:TSX; ABX:NYSE) was in line and Goldcorp Inc. (G:TSX; GG:NYSE) was above estimates. Both Barrick and Goldcorp have growth projected into 2016, but they’re trading at depressed multiples to the group. Goldcorp has 60% growth ahead of it.

Investors who have been going to the price participation of exchange-traded funds or gold bullion will slowly start coming back to the market if some of these companies continue to capture that cash-flow margin and continue to increase dividend payments. They will be attractive to investors if they show a willingness to return capital to shareholders. In terms of the market in general, investors seem to want to be paid to participate in the market, so they are looking for companies with yield.

TGR: What names fit the criteria you mentioned for companies that have upside ahead of them?

JH: Based on projects in development and assuming they continue to execute and move the projects forward, some of the names I like are Belo Sun Mining Corp. (BSX:TSX.V)Colossus Minerals Inc. (CSI:TSX)Continental Gold Ltd. (CNL:TSX)Premier Gold Mines Ltd. (PG:TSX) and Perseus Mining Ltd. (PRU:TSX; PRU:ASX). These are all things I continue to monitor and continue to like.

TGR: Belo Sun is sitting at about $1/share now. What do you like about it?

JH: Belo Sun’s 100% owned Volta Grande project in Brazil is located in an area with good infrastructure and the government is building the world’s third-largest hydro-damming facility just to the north. It’s a really good project with recent—and continuing—exploration success, in a good jurisdiction with good economics around the project. I believe that has the potential to be a mine one day. 

Belo Sun also has added significantly to the resource and continues to move the project forward. I’ll continue to like those types of projects as long as they continue to execute. So far, though Belo Sun hasn’t been rewarded for its success. Small caps were down 38% on average in 2011.

TGR: Do you have favorite jurisdictions? 

CO: When you look at the jurisdictions in our portfolio, about 80% of the companies are domiciled in Canada while 80% of the operations are international. We do have some big concerns about politics and country risk. A couple of years ago, when a lot was going on in Africa, we decided to cut back on some of our African names. Not eliminate them, but reduce the weighting and redeploy those funds into operations in North and South America. Now we are unfortunately experiencing some issues in South America, such as what is going on with the governments and some of the mining projects in Peru today. As with Africa earlier, last year we made an active decision to reduce exposure in Peru because of those concerns. 

You can’t pick where the mines are—that’s geologically where the gold deposits are and it takes you to some challenging places. That is why we like to be in a lot of different countries, to diversify that risk. I have concerns about Peru but I’ve got a little bit of Peru. I don’t like Russia particularly, but I’ve got a little bit of Russia. Having a basket of these cases can minimize the risk. Having said that, I should be able to buy these companies in higher risk regions at cheaper valuations. Otherwise I certainly wouldn’t invest there.

TGR: Do you agree with that Jamie?

JH: Definitely. Taking a basket approach and diversifying the risk within the portfolio has been our practice for a long time. There have been a lot of discussions around people seeking more politically secure jurisdictions. But even in Canada, even in British Columbia, we have seen mines not get permitted based on native land rights issues, water usage issues and other local issues. So risk isn’t confined to places such as Africa or Peru. Using that basket approach definitely helps mitigate the jurisdictional risk. 

TGR: You mentioned investors might start moving from bullion back into the stocks after a year when equities weren’t performing in line with the metals prices. The cliché is that investors are always wavering between greed and fear. What will give investors confidence to take a chance on some of these undervalued juniors?

JH: I think it all comes down to execution. Are you executing on that project? Are you moving it forward? Are you building per-share value by growing the resources and converting them into reserves? Are you advancing the project and doing the feasibility studies? Are you wrapping the economics around the feasibility of the project and the value and the leverage that you can obtain from putting that into production in the market? Companies that continue to execute and build their resources and reserves will get rewarded. Unfortunately, a lot of companies have made some missteps in the market.

TGR: Any other thoughts you would like to leave our readers with before we say goodbye?

CO: Gold equities didn’t do very well in 2011. It was a tough year. The last time we had equities perform so poorly was 2008. Then 2009 and 2010 were exceptionally good years for gold stocks. That pattern makes me cautiously optimistic that 2012 will be a very good year for gold stocks. 

JH: I totally agree—2011 was a “lite” version of 2008. Small caps were down 78.5–79% in 2008, and last year they were down 38% on average. The U.S. banks and the mortgage-backed securities issue were at the heart of the 2008 liquidity crisis, and in 2011 the issues have rolled into a European bank and sovereign debt crisis—with the U.S. opening up the swap lines again, with unlimited U.S. dollar amounts to help with liquidity to European banks through to February 2013, I believe. Taking all of that into account, I’m cautiously optimistic. I’m hoping that as in the second half of 2009 into 2010, when we had a significant recovery in the precious metal space, we will see a similar type of recovery in 2012.

TGR: Thank you, gentlemen.

Bringing more than 21 years of experience in the investment industry, Charles Oliver joined Sprott Asset Management (SAM) in January 2008 as an investment strategist with focus on the Sprott Gold and Precious Minerals Fund (TSX:SPR300). Prior to joining SAM, he was at AGF Management Ltd., where he led the team that was awarded the Canadian Investment Awards Best Precious Metals Fund in 2004, 2006, 2007, and was a finalist for the best Canadian Small Cap Fund in 2007. At the 2007 Canadian Lipper Fund awards, the AGF Precious Metals Fund was awarded the best five-year return in the Precious Metals category, and the AGF Canadian Resources Fund was awarded the best 10-year return in the Natural Resources category. Oliver obtained his Honors Bachelor of Science degree in geology from the University of Western Ontario in 1987 and his Chartered Financial Analyst (CFA) designation in 1998.

Jamie Horvat joined SAM in January 2008. He is co-manager of the Sprott All Cap Fund, the Sprott Gold and Precious Minerals Fund, the Sprott Opportunities Hedge Fund LP and the Sprott Opportunities RSP Fund. He has more than 10 years of investment experience. Prior to joining SAM, Horvat was co-manager of the Canadian Small Cap, Global Resources, Canadian Resources and Precious Metals funds at AGF Management Ltd. He was also the associate portfolio manager of the AGF Canadian Growth Equity Fund, as well as an instrumental contributor to a number of structured products and institutional mandates while at AGF. He joined AGF in 2004 as a Canadian equity analyst with a special focus on Canadian and global resources, as well as Canadian small-cap companies. Horvat spent five years at another large Canadian mutual fund company as an investment analyst before joining AGF. He holds a diploma in mechanical engineering technology from Mohawk College and earned an Honors Bachelor’s of Commerce degree from McMaster University. He is a member of the International Research Association and a licensed international financial analyst. He is also a member of the Ontario Association of Certified Engineering Technicians & Technologists.

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Updated: Rock Solid Gold – Timing and Targets from 3 of the Best

Update February 29, 2012: A key phrase from Mark Leibovit’s VRGold Letter “Action Alert” dispatched today:

“Gold prices were selling off Wednesday after Federal Reserve Chairman Ben Bernanke indicated that an additional round of quantitative easing was becoming increasingly unlikely. We’re experiencing a ‘flash-crash’ type scenario today which in my view presents a bigger picture buying opportunity.” – VRGold Letter

Update 3:18pm Feb 27: Gold (below) has formed a broad head-and-shoulders bottom with the upside breakout coming in at 1800. April gold has been hammering on the 1700 support level for days, and so far 1700 has held. If 1700 won’t give way, then gold should be able to take out 1800. What won’t go down — should go up. At least that’s the theory – written 2/27/2012 in Dow Theory Letters

6.2C34

Meanwhile, gold pops 20 bucks. Pick a hammer and hammer down on a wood board 20 times. The board doesn’t break, which means that’s a mighty tough board. Now hammer down on 1700 dollar gold 20 times. And the 1700 base refuses to give. So you know that 1700 is a tough base for gold. Today April gold closed up over 32 dollars to 1758.50. This puts gold over the halfway point of 1750 and looking at 1800. If gold won’t break below 1700, will it go over 1800? There’s at least a good chance. – written 2/21/2012 in Dow Theory Letters

GOLD – ACTION ALERT – BUY

(written Feb 27/2012)

Spot gold touched 1789.10 Thursday and retraced to 1769.20 on Friday. We should have seen 1764.00. Downside risk is back to the 1730s should we see another ‘smackdown’. Next upside objective 1840. Spot silver continued high Friday trading at 35.84. I would like to see a pullback to 34.60. Still targeting to 37 and then the low 40s. Copper pushed higher touching 3.8823. It’s coming off 3.702. That was the recent low following the February 8 high at 3.9850. I’m looking for 4.48+. Both Palladium and Platinum corrected Friday following new recovery highs Thursday at 729 and 1740, respectively. – Sign up for a 30 Day Trial offer with Mark Leibovit’s  VRTrader. More information at the end of this article.

Gold, Silver, Platinum & TSE Gold Index Charts & Technical Analysis below by Don Vialoux:

Gold gained $49.50 per ounce (2.87%) last week. Support is at 1,523.90. Resistance at $1,804.40 is being tested. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains slightly positive.

gold

Silver gained $2.14 per ounce (6.43%) last week. Intermediate trend changed from down to up on Friday after resistance at $35.70 was broken. Silver also broke above its 200 day moving average on Friday. Short term momentum indicators are overbought, but continue to trend higher. Strength relative to gold remains slightly positive. ‘Tis the season for silver to move higher!

silver

Platinum gained another $87.50 per ounce (5.37%) last week. Intermediate trend changed from down to neutral on a break above resistance at $1,676.40 per ounce. Platinum also broke above its 200 day moving averages last week. Short term momentum indicators are overbought, but continue to trend higher. Strength relative to gold remains positive. ‘Tis the season for platinum to move higher!

plat

The TSX Gold Index gained 16.47 points (4.46%) last week. Support is at 346.24 and resistance is at 395.64. Short term momentum indicators are trending down. Strength relative to gold remains negative.

metalsindex

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The Greatest Episodes of Market Manipulation…Is $200 Silver Next?

From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors. 

And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934– it’s as American as apple pie. 

Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar. 

The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff. 

Jim Cramer, the host of CNBC’s “Mad Money,” said he regularly manipulated the market when he ran his hedge fund, calling it “a fun…and lucrative game.” 

Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers – are most likely to be the perpetrators. 

To give you an idea of how things work, here are three notorious examples of market manipulation.

Stock Market Manipulation Is 
as Old as the Hills


1) The Erie War: In 1867, American financier and railroad builder Jay Gould sat on the board of directors of the financially troubled Erie Railroad. 

In what is known as the ‘Erie War’ Gould fought to keep Cornelius Vanderbilt from acquiring Erie and consolidating the industry. 

To pull it off, Gould issued 100,000 shares of new Erie stock by illegally converting debentures. 

He then used the money to bribe New York legislators to make the conversion legal. Outfoxed, Vanderbilt settled, receiving $1 million as a sweetener. 

Afterwards, Gould vastly expanded Erie’s debt and launched it on an expansion campaign. Meanwhile, he sold its stock short, and made a killing before Erie went bankrupt in 1875. 

2) The Enron Scam: After merging two gas pipeline companies to form Enron Co. in 1985, Ken Lay helped establish the market for selling electricity. Later, he successfully lobbied the U.S. Congress to deregulate the sale of natural gas. 

Enron soon began trading these markets to drive up energy prices and significantly increase its revenue. Meanwhile, Lay and CEO Jeff Skilling used accounting loopholes and misappropriated investments to keep billions in debt off the books.

But perhaps their greatest feat was their ability to pressure Arthur Anderson & Co. staffers to cooperate in fooling the board of directors and audit committees.

Investors lost more than $70 billion when the Enron scandal ended in one of the biggest bankruptcies in history, driving its stock down from a high of $90 per share in mid-2000 to less than $1 by the end of November 2001. 

Andersen, one of the five largest accounting partnerships in the world, lost most of its customers and shut down. 

The scandal eventually led to the enactment of the Sarbanes-Oxley Act to expand the accuracy of financial reporting for public companies and punish those attempting to defraud shareholders.

3) The Internet Swindle: It used to take rooms full of stockbrokers feverishly working massive phone banks to manipulate a company’s shares. 

Now anyone can reach millions of potential traders instantly, all while remaining completely anonymous.

In 1999, two UCLA students drove the stock of a bankrupt printing company from 13 cents to more than $15 in twotrading days, dramatically demonstrating how the Internet had transformed the old game of stock market manipulation.

The students had spent two weeks acquiring 97% of the thinly traded stock of NEI Webworld Inc., The New York Times reported. After the market closed on Friday, they sent out hundreds of messages on Internet bulletin boards touting a takeover and the huge profits to come. 

On Monday, based on orders made by those who believed the fake postings over the weekend, the stock rocketed up 106,600% to $15.50a share–in a half- hour. 
The students sold their shares into the buying frenzy and eventually bagged over $350,000 in profits. NEI shares closed that day at 75 cents.

Is Silver Next?

The latest market manipulation could be ripped from the pages of a Hollywood thriller, according to Peter Krauth, a highly regarded expert in metals who runs the Global Resource Alert investment service. 
Only this story is not fiction… and it’s happening now, he says.

Krauth spent the last six months conducting an exhaustive investigation of a backroom deal to keep the price of silverartificially depressed. Now he’s ready to expose what’s been going on behind the scenes in the silver market and why the price is headed to $200 or more.

He reveals all the details – and how investors can profit – in a free report

You can access it HERE.

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A Teeter-Totter of Perception- Bulls heavier than Bears?

One of the ways I look at the market is in terms of a giant teeter-totter…I see the market swinging up and down as psychology changes from bullish to bearish. I try to judge what the prevailing mood is, relative to whatever time frame I’m using, and then either establish a position in line with the trend or look for signs that the trend is about to change. I use hard data such as the COT reports, gut instincts such as how a bull market takes bad news, and chart patterns to gauge whether a trend is likely to continue or reverse. I’m mindful that market trends often go far beyond what I think is reasonable so I’ve developed a risk management technique I call, “Anticipate…but wait for confirmation,” to restrain myself from trying to pick tops and bottoms.

We had the biggest credit blow-out in history in 2007-08 (after 30 years of boom times) and asset markets collapsed in anticipation of a depression. Authorities around the world countered the deflationary forces with massive fiscal and monetary stimulus (again and again and again.)

stimulus-bull

In teeter-totter terms the market will rally when it thinks that the authorities are prevailing (like now) and will fall (like August/September of last year) when it thinks that the authorities are losing the battle against deflation. So we have risk-on, risk-off, as public confidence in central planning waxes and wanes.

…..read more of Victor’s analysis  HERE