Gold & Precious Metals

GOLD – ACTION ALERT – BUY

Despite the lowering of margins requirements on the part of the CME (Counterfeit Mercantile Exchange), metals took a bit of a tumble on Friday and tried and failed to rally yesterday. I’ve cautioned we might be hitting a short-term trading top. We know ‘seasonality’ studies call for a top in gold by the end of February while also calling for a very choppy period in silver until it reaches its theoretical May peak. A retracement in silver to 30-31 and gold to 1610-1660 would be ‘normal’. Anything beyond that, particularly on increasing volume would be a negative. That said, I remain on my BUY signal thinking we could still see gold at 2000+ this year. Silver could well test its high at 49-50. Stay tuned.

 

Gold Fire Sale

Buy Now Sale Ends Soon

 

Inverse Lin-omena, the inverse of the Jeremy Lin phenomena where the unknown and previously discounted suddenly rise to prominence; here, the powerful and previously secure suddenly fall.

Today, central bankers, the mandarins of capitalism, are in disarray. Their attempts to contain capitalism’s current crisis increasingly resemble the tactics of a defeated army in retreat. Like Napoleon and Hitler’s respective “Moscow moments”, the 21st century economic crisis has brought to an end the bankers’ spectacular 300 year run at the table of power and wealth.

The indebting of others as a means of accumulating wealth ends when the indebted can no longer pay what they owe. The arcane and esoteric scribblings of second generation University of Chicago trained economists cannot cover up this basic fact, i.e. that the indebted are broke; and soon, their creditors will be as well.

The bankers’ franchise of credit and debt built on a leveraged foundation of paper money fractionally backed by gold allowed the West to accumulate geopolitical power and wealth on a vast scale. That era is now over.

It ended when the gold convertibility of the US dollar was terminated in 1971 when the cost of maintaining a global military presence outstripped the ability of the US to pay in gold what it owed on paper.

 

….read much more HERE

 

 

What’s Warren Buffet Buying

Posted by 24/7

on Wednesday, 15 February 2012 14:38

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Warren Buffett and Berkshire Hathaway’s latest stock holdings were released and there were some interesting additions and deletes, as well as many internal changes of existing positions up or down.

 

American Express Co. (NYSE: AXP) was over 151.6 million shares, SAME AS last quarter.
Bank of New York Mellon Corp. (NYSE: BK) was 1,793,915 shares, SAME AS last quarter.
CVS Caremark Corporation (NYSE: CVS) is LARGER POSITION at 7.106 million shares after having been a new holding in a recent quarter.
Comdisco Holdings (NASDAQ: CDCO) was roughly 1.5 million shares, SAME AS BEFORE.
Coca Cola Co. (NYSE: KO) was right at 200 million shares, SAME AS BEFORE.
ConocoPhillips (NYSE: COP) is roughly 29.1 million shares, roughly the SAME AS BEFORE but it is still lower than previous quarters.
Costco Wholesale (NASDAQ: COST) 4,333,363 Shares, SAME AS last quarter after having lowered it before.
Da Vita Inc. (NYSE: DVA) is a NEW POSITION of 2.684 million shares worth $203 million.
DirecTV (NASDAQ: DTV) is a LARGER POSITION listed as 20.348 million shares worth $870 million; was a new position of 4.249 million shares one quarter earlier.
Dollar General Corporation (NYSE: DG) is that SAME SIZE as before at 4.497 million shares; was a new position and a grown position before.  This one of our Top Stocks for the Next Decade.
Gannett Co. (NYSE: GCI) was 1.74 million, SAME AS BEFORE but decreased in prior quarters.
General Dynamics Corporation (NYSE: GD) is a LARGER POSITION of 3.877 million shares worth $257 million after being a new position before of 3.064 million shares.
General Electric Corp. (NYSE: GE) is 7.777 million shares; SAME AS before.
GlaxoSmithKline (NYSE: GSK) 1.51 million shares, SAME AS last quarter.
Ingersoll-Rand (NYSE: IR) was 636,600; SAME AS last quarter but still way down from prior reports.
Intel Corporation (NASDAQ: INTC) is a LARGER POSITION of 11.495 million shares worth $278 million; this was a new position of 9.333 million shares last quarter.
International Business Machines Corporation (NYSE: IBM) is now 63.905 million shares worth some $11.75 billion now after having been a new position with an average cost of about $170 per share.
Johnson & Johnson (NYSE: JNJ) was a LOWER POSITION of about 29 million shares; lower than 37.4 million last quarter and way under the peak of 62 million shares at one point in prior quarters.
Kraft Foods (NYSE: KFT) was a LOWER POSITION at about 87 million shares, down from 89.7+ million last quarter and this has continued to be lightened up since the Cadbury purchase.

Exxon Mobil Corp. (NYSE: XOM) was ELIMINATED FROM THE PORTFOLIO after having been only 421,800 shares last quarter and lowered earlier.

PAGE TWO…BUFFETT HOLDINGS ‘L to Z’ HERE

 

Real Estate: A Vital Investment Sector

Posted by Martin Armstrong: Armstrong Economics

on Wednesday, 15 February 2012 11:24

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There is no question that real estate has been one of the (5) primary sectors within the economy. Real estate speculation has been systemic. In effect, it was the inspiration behind both the South Sea Bubble and Mississippi Bubble of 1720. While I provided a forecast for real estate of the United States in the issue of November 15th, 2009, I have also written about the Athenian Real Estate Crisis and Speculative Bubble during the 4th Century BC in the October 2010 issue.

Real Estate Bubbles often preceded serious economic declines. The US Great Depression of the 1930’s Market Correlation shows the layout of the various sectors. The commodities peaked with the Great Bubble of 1919 and generally declined into 1932. The stock market bubble was brewing headed into 1929 shifting from the Railroad stocks that peaked in 1907 to the first Industrial stock boom lead by the automobile industry. Howevever, you will notice the biggest bubble was in Real Estate (TOP LINE). The most famous Real Estate Bubble going straight into 1925 was the Florida Land Bubble. People were building places, selling them to other investors, while there really was nobody actually living in a lot of the places. That was no different than the Real Estate Bubbles of the 1790’s.

Ed Note: This is the first two paragraphs plus Canada of a 33 page report analysing every significant real estate market in the world. Martin does all of the historical analysis going back 1000’s of years, and Petra Gajdosidova does the markets today. Go HERE to gain a per access service to Armstrong Economics specific forecasts for time & price.

CANADA

The Canadian housing boom shared some aspects of the US boom, including low (5%-10%) deposit and for a short period, no money down mortgages. The houshold debt to income ratio has continued climbing steadily for the last decade and is now at US and UK levels. The value of housing related debt in Canada has nearly tripled in the last decade to C$1.3 trillon (Bank of Canada). A large percentage of Canadian mortgages are insured by the Canada MOrtgage and Housing Corporation, i.e. the taxpayer (CMHC) insurance is required for all mortgages with less than 20% downpayment).

While some Canadian cities offer reasonable affordability compared to household incomes, Vancouvers housing is, by any measure, highly overvalued and vulnerable to a sharp correction. Prices have risen 55% from their 2009 trough to a level 29% above their prior peak. The average home price reached nearly C$800,000 (according to CMHC).

Strong Asian demand has provided a boost to already high prices. Thousands of mainland Chinese have moved to Vancouver (following the earlier waves of immigration from Taiwan and HK); thousands more invested in (mid-range to high end) real estate in order to park their cash in a stable Western country and/or to set their children up at Canadian colleges and with eventual Canadian citizenship, all driving prices to what are now clearly unsustainable levels.

Richard Russell: Austerity or Inflation

Posted by King World News

on Tuesday, 14 February 2012 9:24

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With investors globally wondering what central planners are up to next and how it will impact gold, today the Godfather of newsletter writers, Richard Russell, was discussing this very subject:  “A few months ago I wrote a piece about avoiding pain in the economy.  How do we do it?  We do it by turning away from austerity and embracing inflation.  And the question — will the inflationary method of avoiding economic pain kill our economy, just as the drug (taking drugs) way of avoiding pain has killed so many talented musicians?  I think the results will be the same.”

Richard Russell continues:

“The world has drunk at the punch-bowl of good times and debt ever since World War II.  The world has avoided the discipline of pay-as-you-go and austerity for decades.  But sooner or later the piper must be paid.  Up to now, the piper has been ‘paid’ with vast amounts of fiat paper.

The politicians want to make the people happy.  The Fed is beholden to the politicians.  The voters want it all, and they don’t like pain.  The Fed and the politicians want to make the voting public fat and happy causing as little pain as possible.

Examples: courtesy of Bill Gary’s great publication, ‘Price Perceptions.’

Last week the Fed announced that they were extending the current near-zero interest rates out to the end of 2014.

The European central bank gave in and finally reduced interest rates to 1%.

The Bank of England is meeting next week to decide on another round of QE. (money printing).

This week the Bank of Australia will decide on whether to reduce rates again. 

The Swiss National Bank placed a currency floor of 1.2 francs per euro in September to prevent further strengthening of the franc.

Japan has been printing for years in an effort to keep the yen cheap and competitive against other currencies.

Every nation wants a cheap and export-friendly currency.  The result is a blizzard of (fiat) paper money blowing across the face of the earth.

Inflation is the central banks’ method of avoiding the pain of austerity.  Inflation is the current economic narcotic that is used by modern nations.  It’s the old ‘beggar thy neighbor’ system, and it will ultimately result either in all out hyperinflation and a collapse of the fiat currency system or a corrective deflationary crash.  Either way, the last currency standing will be gold.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE. 

The resource markets have weathered some death defying ups and downs lately. But Michael Ballanger, senior investment advisor with Toronto-based Union Securities, is looking for a renewed period of growth in the TSX Venture Composite Index. Is it too soon to see such a heady rebound? In this exclusive interview with The Gold Report,Ballanger makes his case for history repeating itself.

The Gold Report: The TSX Venture Composite Index reached a bottom of around 1,300 in October after it more than tripled from 2009 to early 2011. You believe the index is poised for another two-year gain. It’s an interesting theory. Why should we believe that history will more or less repeat itself so quickly?

Michael Ballanger: It’s all about mathematics. However, underneath that forecast lurks a much deeper premise. I’m a member of a very small minority that believes we’re now in the continuation of a massive bull market in resources. The TSX Venture Exchange has had one sharp correction since 2008. It’s now resuming its uptrend. 

I’m also looking for a resurgence of the “manic phase” of markets. During the last manic phase in 1978–1981, the Vancouver Stock Exchange quadrupled in an 18-month period as gold went into its final ascendancy. 

TGR: What were some characteristics of the market in the ’70s that are comparable to what’s happening now?

MB: Psychologically there are a lot of similarities to 1978 because investors have been behaving like scared rabbits. Fund managers were throwing things under the bus in October that I couldn’t believe. It was mass liquidation for no reason. It was a generational buying opportunity.

TGR: There seems to be a lot more global instability now. Are you expecting “black swan” events in the next few years that could create further instability?

MB: I’m not looking for Armageddon at all. I think we are going to have a really good two-year run. There will be bumps along the way as the world financial system irons out its issues. Nothing cures debt levels better than inflation and growth, however. 

TGR: This does seem to be a very friendly environment for commodity prices and resource companies. But aren’t we just one negative macroeconomic data point away from being right back where we were? 

MB: The problem with the media is that it continues to use European and North American data as its guidepost. Developing nations are creating demand for resources like I’ve never seen before. The population is growing and resources are being used at an increasing rate despite Europe, Japan and the U.S. struggling. 

A lot of these populations approach gold and silver differently than the West does. They’re not looking to trade it. It is part of their legacy that they pass down to generations. That’s where the demand for the precious metals will come from. It’s a shift in demand. 

TGR: Most of the junior mining companies listed on the TSX Venture Exchange are gold companies. If you believe the TSX Venture Index is going up, you have to believe the gold price will head higher, too. What’s your trading range for gold in 2012? 

MB: Industrial metals, like zinc, copper and nickel, are going to outperform the precious metals in 2012. Just as the base metals got hammered violently in ’08, the same occurred in the latter half of ’11. The resultant rebound should show a greater percentage move based on the global recovery. 

Silver could outperform gold in 2012 due largely to the supply-and-demand situation. However, gold and silver could both take out their 2011 highs this year. Gold at $1,525/ounce (oz) and silver at $25/oz will be seen as the correction lows in this multi-decade bull market. Those are two levels I wouldn’t want to see violated. 

TGR: What’s the upside for gold and silver prices?

MB: Gold and silver could both take out their 2011 highs, but I don’t like picking numbers. It just gets meaningless. It is an absolute breeding ground for gold and silver bugs. Not that I’m one of them, but it is a very favorable environment for the metals. If you’re on the right side of the trend, you make money in the junior mining stocks.

TGR: You created a 2012 list of your top value plays. Could you tell our readers about some of those names?

MB: We emphasized Yukon stocks last spring and our two picks, Kaminak Gold Corp. (KAM:TSX.V) andATAC Resources Ltd. (ATC:TSX.V), hit record highs in July. The bright spot for this summer was the relatively superb performance of Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK), which closed 2011 above the July 2011 financing crisis of $0.35. 

Another favorite that we’ve been involved with for four years and participated in multiple financings for is Explor Resources Inc. (EXS:TSX.V). It reported an NI 43-101-compliant 800,000 oz resource recently. It has been one of our top five companies since 2007. 

Kaminak is still our darling of the Yukon. There’s a lot of wannabes running around, but Kaminak is superbly run by Rob Carpenter. 

Our junior penny stock in the Yukon is Stakeholder Gold Corp. (SRC:TSX.V). It is sandwiched between Kaminak and Kinross Gold Corp. (K:TSX.V; KGC:NYSE) in the Ballarat Creek area, which is located on Thistle Mountain. 

TGR: Tinka’s Colquipucro silver-lead-zinc project in Peru looks promising. What do you know about what’s happening there?

MB: I must confess, Tinka has been a nice surprise. It was orphaned after the 2008 meltdown despite having drilled off an NI 43-101-compliant silver resource of 20.3 million ounces (Moz). It has two drills working about 1 kilometer apart at its deposit and at a new discovery, Ayawilca. 

It’s all open-pittable. Just move the top of the rock off, throw it on a crusher and you’re away to the races. It’s an engineer’s dream. The first game plan is to get that resource up to north of 30 Moz. Now the blue sky becomes what is happening at depth underneath this oxide cap. 

Just to the south is Cerro de Pasco, which is owned by Peruvian mining company Volcan Compania Minera SAA. It’s the fourth biggest mine in Peru, one of the largest in South America and it is a massive epithermal. What’s interesting about Cerro de Pasco is that the mineral rhodochrosite is prevalent there. Rhodochrosite isn’t prevalent except in an epithermal. Tinka recently indicated that it has rhodochrosite at Ayawilca. There isn’t enough drilling into it yet to confirm it’s an epithermal, but Ayawilca’s blue sky just lights up like a Christmas tree when you look at it.

TGR: How does its valuation compare with other companies at similar stages?

MB: It’s too early to value Ayawilca, but you can value Tinka’s silver. Tinka’s got 20.3 Moz Inferred, but I have confidence it’s going to move to 30 Moz. 

With a rising silver price and the investment public warming to juniors again, it could reach a market cap of around $60–75 million (M) up from $38M today. That’s based on the known. The unknown is where you accelerate your return. Ayawilca is the blue sky. If Mother Nature and Lady Luck bless us then we’re going to be looking at the Ayawilca zone adding a lot more upside in the future.

TGR: Kaminak just recently optioned some potash properties in Michigan. Do you have any idea why?

MB: Shareholder value. Rob Carpenter knows that the ultimate rate of return for Kaminak is going to be the Coffee gold project in the Yukon. Kaminak has other assets that aren’t being paid much attention. The best way to get shareholder value out of those is to let somebody else go to work on them while maintaining focus on a flagship property like Coffee. Let other people bear the risk and costs of exploring those properties.

TGR: Kaminak and ATAC shares have started to climb higher this year. ATAC reported a nice intersection in early December of 44 meters at about 4.5 grams/ton gold at its Osiris zone. Is ATAC going to return to its 2011 high?

MB: When a stock like ATAC, which moved to $10/share in July, is thrown irreverently under a bus, I have to ask why. I still can’t figure that out. It wasn’t the retail public. It had to be quasi-professional investors. ATAC has an excellent chance to get back to the midrange between where it bottomed around $2/share and its high of $10/share last year. 

I think Kaminak is a takeover waiting to happen. The way that the Coffee property is being developed, there could be 6–8 Moz there. It has only drilled off 15% of the land package. 

TGR: Stakeholder Gold is a micro-cap company with a market cap of just a few million dollars. Are they going to be drilling anything soon? 

MB: Stakeholder had originally planned to drill the Ballarat property in July, but through some unfortunate developments it wasn’t able to. I’ve looked at all the soil and trenching analysis. Various creeks flow down the sides of the mountain into the Yukon River. Where theses creeks flow is where the Klondike Gold Rush was. The source of that mineralization was in the upper elevation where Stakeholder’s Ballarat property is. Stakeholder has excellent soils. It has good trenching results. It has two anomalies there. That property’s got to get drilled. It’s got every bit as much of what I call “geochem evidence” as Kaminak did before it drilled the Coffee property. 

Yes, Stakeholder is a micro cap. But some Yukon juniors had $35M market caps when they didn’t have any discoveries two years ago. I view Stakeholder as a bottom-feeding expedition now that it has dropped down to $5M. Stakeholder has got an excellent land package. It’s compelling. That’s why we like it.

TGR: Some market pundits feel that the junior exploration and mining sector has been hurt over the past decade as it moves from being a retail investor sector to an institutional investor sector. 

A share price would jump on news and the retail investor would cash out and watch the stock come back down and buy back in. The retail investor would make money two or three times while supporting the stock price. Now the institutional investors get in, make their money and get out and stay out. What are your thoughts on that?

MB: If a management group executes its plan, the company gets rewarded whether it has an institutional, retail or a combination shareholder base. Take Kaminak as an example. Despite the recent correction, Kaminak has been a very successful company. 

People have asked me, “Why aren’t the juniors attracting the same kind of dominance they had in the ’90s and the late ’70s?” There are other reasons than the institutional involvement, such as the advent of exchange traded funds (ETFs). I’m going to get into hot water, but I absolutely detest ETFs. They’re a financial product developed by and for the express benefit of the financial industry as opposed to the investor. I don’t believe in them, I don’t agree with them and I don’t use them. 

The problem with ETFs is they create this risk on/risk off attitude that the junior mining sector is a basket and it doesn’t matter what Tinka’s got or Explor’s got or Kaminak’s got. That’s what happened in the latter part of 2011. Investors said, “Oh, we better get out! We’ll sell everything.” They didn’t care that Kaminak’s last three drill holes were spectacular. It didn’t matter. They sell their ETF associated with junior mining companies and all the companies that are covered by that ETF get blown off. 

TGR: Do you have any parting thoughts for us on this sector?

MB: In 2009, I predicted higher gold and silver prices and a booming mania-driven junior mining sector. We got the move in the precious metals. We have yet to experience anything close to the mania that we saw in 1978–1980. The TSX Venture Exchange traded to a new low on Oct. 4 relative to the gold price. It was absurd by any measure. Companies are taking the risks to find new deposits. That’s precisely where the big upside is moving forward into 2012.

TGR: Thanks, Michael.

Michael Ballanger currently serves as an investment advisor at Union Securities, Ltd. He joined the investment industry in 1977 with McLeod Young Weir Ltd. His substantial background in financing junior resource companies is further informed by his 30 years of experience as a junior mining and exploration specialist. Ballanger earned a Bachelor of Science in finance and a Bachelor of Arts in marketing from Saint Louis University.

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