Thursday, March 31, 2011

Something's Gotta Give

Come across a nice chart from a leading silver junior producer.  If you've followed the junior silver market, you are probably somewhat familiar with the name.  The company I'm talking about is Great Panther Silver.  This is by far one of my favorite junior silver miners.

It used to only be listed on the Toronto exchange under the symbol GPR.TO, and as an American you had to buy it on the pink sheets.  However, it has gotten a listing on the AMEX and goes by the ticker GPL, and is easily bought now.  This happened in Feb of 2011

Taking a look at the longer chart view using stockcharts.com, you can see what that did for the stocks volume starting in that month.  This stock is now on the radar of many more funds and many more individuals as they can buy this farily easily.


















What has me interested right now is the following chart.  Since December, it has been trading in a range, or what I call a box below in the chart.  It consolidated for 2.5 months, before breaking out of the range.  I might add, it was due for a breather, based on the previous chart. So, it finally broke out of the trading range, and has now formed a nice consolidating wedge formation.  This acts as a spring, and I think it will launch out of this formation quite soon based on the chart.  It could go either way, but I believe this is a continuation pattern, and will break with the trend, which is up.  The cherry on the top is that the MACD looks ready to cross on an upward trajectory.  I view this as bullish as well.  A lot of silver charts have formed inverse head and shoulder patterns lately (see prior post "Danger Will Robinson" in this blog), but this one has chosen a consolidating wedge.  I think it's different because this silver panther is stronger and a leader of the others.

 






















Not only does this stock have a great chart, but it has great fundamentals as well.  The share structure is not stellar at a 133 million fully diluted shares, but I have seen a lot worse.  Take Aurcana Silver, I think they currently have over 600 million fully diluted shares.  That's a huge difference.

They have increased revenues from around 500k in 2006 to around 2.2 million in 2010.  For 2011 and 2012 they are estimating around 2.8 and 3.7 million.  Not a bad track record of turning ore into cash.  They currently have a good mix of 71% silver, 20% gold, and 9% lead and zinc.  So, 91 % of their production is in the real money of  today.  Some silver producers have mix of silver, lead, and zinc, but this is much better.

Cost per ounce is around 6.50 - 7.50 net of by products, and they have net income of 5 million.  There business model is to get into production quickly and use the proceeds to supplement exploration, development, and acquistion.  That is the best way to do it to not dillute your share structure, and give your shareholders the best opportunities for gains down the road.

Good presentaton on their website at the following address:

http://www.greatpanther.com/s/Presentations.asp

Looking at the current chart technicals and the fundamentals, I think this is a good time to pick up a quality producing silver junior named Great Panther Silver.

FD: I own this stock.  I have not been paid for writing this article.

Until the next time...

Fiat Doubter

Tuesday, March 29, 2011

Silver Quest Update

Well,

This stock has been nothing but exciting, and not for the faint of heart.  Here's an updated chart.

























This stock has some interesting technical aspects if you look closer. So, we have the decscending wedge, and a breakout on massive volume in late February.  It makes a great run for 4 or 5 days and becomes terribly overbougt.  Now, as with most stock that pop out of a formation, they pull back to the breakout offering another opportunity to get in.  That's exactly what this stock did in the middle of March.  It collapsed back into the triangle, and proceeded to launch out again, but without the massive volume.  We are now approaching another overbought point and should expect a pull back.  A good entry point would be between 55 and 57 cents.  If it does pullback to this point it would be a buying opportunity in my mind.  Another reason I think it's about to pull back is that it has been advancing on declining volume as noted by the decsending white line in the volume section.

They have had some recent news lately which includes aquiring more property and signing a joint venture project for one of their properties.  Link to is here:

http://www.silverquest.ca/s/NewsReleases.asp?DateRange=2011/01/01...2011/12/31

The other think I do suggest before investing in a stock is doing some research yourself.  You never want to buy a cow sight unseen.  I have never bought a cow personally, but it does seem like good advice.

One of my favorite things to look at in order to get a good understanding of the company is their most current corporate presentation.  I have provided that as well:

http://www.silverquest.ca/s/Presentations.asp

If after you read this, it looks like a solid company and a good opportuntiy, either take a stake in the company, or dig deeper into the news items, financial statements, etc...  You can even call the company and talk to someone in investor relations.  Ask a few more questions.  If it's not confidential information, they'll probably answer it.

FD:  I own this company.  I have not been paid to write anything regarding this company. 

Until the next time...

Fiat Doubter

Strictly Blog Related

Nothing of value here, just doing some work to get my blog registered.

NTSAF3KZYADF

Monday, March 28, 2011

Great Points on Hyperinflation

When I find a good article like this one, I will post on my website.  I'm not afraid to say that other people are more articulate than myself (at times), and I think this organization has some great points.  More important than what the title suggests (Hyperinflation) is the individual items they highlight.  Some of these signs that they list are just plain amazing, and I don't think a lot of people have thought about these with more than just a passing thought.

The organization that put out this information is the National Inflation  Association.  They've been around a couple of years, and have some good articles.  Where I find fault with them is that after a year of putting out general reports on inflation and some precious metal stock picks (they did pick some good winners though), they put out a special report on their favorite silver stock.  All you needed to do to get the report was to donate $1,000.  Seems a little steep for one pick, doesn't it?  If you watched the junior silver market, you could have figured it out yourself by watching the volume pop on that particular support.  I was already invested in it, and got the benefit, but that's too much money for one pick.  Anyways, I digress.  My comments below are in green.

12 Warning Signs of U.S. Hyperinflation

One of the most frequently asked questions we receive at the National Inflation Association (NIA) is what warning signs will there be when hyperinflation is imminent. In our opinion, the majority of the warning signs that hyperinflation is imminent are already here today, but most Americans are failing to properly recognize them. NIA believes that there is a serious risk of hyperinflation breaking out as soon as the second half of this calendar year and that hyperinflation is almost guaranteed to occur by the end of this decade.

In our estimation, the most likely time frame for a full-fledged outbreak of hyperinflation is between the years 2013 and 2015. Americans who wait until 2013 to prepare, will most likely see the majority of their purchasing power wiped out. It is essential that all Americans begin preparing for hyperinflation immediately.

Here are NIA's top 12 warning signs that hyperinflation is about to occur:

1) The Federal Reserve is Buying 70% of U.S. Treasuries. The Federal Reserve has been buying 70% of all new U.S. treasury debt. Up until this year, the U.S. has been successful at exporting most of its inflation to the rest of the world, which is hoarding huge amounts of U.S. dollar reserves due to the U.S. dollar's status as the world's reserve currency. In recent months, foreign central bank purchases of U.S. treasuries have declined from 50% down to 30%, and Federal Reserve purchases have increased from 10% up to 70%. This means U.S. government deficit spending is now directly leading to U.S. inflation that will destroy the standard of living for all Americans.

So, when Hanky Bernanky tells us QEII is ending this June, I have to ask the question, "Who is going to buy US Treasuries?"  Maybe they will sell them at McD's with the purchase of a quarter pounder.  For an extra 100 dollars, you can have a 1 month Treasury Bill.  Would you like to supersize that?

2) The Private Sector Has Stopped Purchasing U.S. Treasuries. The U.S. private sector was previously a buyer of 30% of U.S. government bonds sold. Today, the U.S. private sector has stopped buying U.S. treasuries and is dumping government debt. The Pimco Total Return Fund was recently the single largest private sector owner of U.S. government bonds, but has just reduced its U.S. treasury holdings down to zero. Although during the financial panic of 2008, investors purchased government bonds as a safe haven, during all future panics we believe precious metals will be the new safe haven.

Oh, guess my McD's idea won't work.  Maybe they can pitch T-Bills during Saturday morning cartoons, and kids will whine to their parents until they buy some.  You know, animate them, and have them dance around the screen, so kids think they must have them.

3) China Moving Away from U.S. Dollar as Reserve Currency. The U.S. dollar became the world's reserve currency because it was backed by gold and the U.S. had the world's largest manufacturing base. Today, the U.S. dollar is no longer backed by gold and China has the world's largest manufacturing base. There is no reason for the world to continue to transact products and commodities in U.S. dollars, when most of everything the world consumes is now produced in China. China has been taking steps to position the yuan to be the world's new reserve currency.

The People's Bank of China stated earlier this month, in a story that went largely unreported by the mainstream media, that it would respond to overseas demand for the yuan to be used as a reserve currency and allow the yuan to flow back into China more easily. China hopes to allow all exporters and importers to settle their cross border transactions in yuan by the end of 2011, as part of their plan to increase the yuan's international role. NIA believes if China really wants to become the world's next superpower and see to it that the U.S. simultaneously becomes the world's next Zimbabwe, all China needs to do is use their $1.15 trillion in U.S. dollar reserves to accumulate gold and use that gold to back the yuan.

Great points.  China has been busy setting up swaps with Russia and Brazil in order to forego trading in US dollars to settle transactions.

It's sort of like the Brett Farve scenario for the US Dollar.  He thinks he can play forever, and be the most dominate force on the football field.  However, as we all know, a younger and faster QB took his place in Green Bay, and he won the Superbowl last year, not Farve.  My apologies to any international readers who don't know the US Football scene.  I'm not well versed enough to throw out a soccer example, the true world sport.

4) Japan to Begin Dumping U.S. Treasuries. Japan is the second largest holder of U.S. treasury securities with $885.9 billion in U.S. dollar reserves. Although China has reduced their U.S. treasury holdings for three straight months, Japan has increased their U.S. treasury holdings seven months in a row. Japan is the country that has been the most consistent at buying our debt for the past year, but that is about the change. Japan is likely going to have to spend $300 billion over the next year to rebuild parts of their country that were destroyed by the recent earthquake, tsunami, and nuclear disaster, and NIA believes their U.S. dollar reserves will be the most likely source of this funding. This will come at the worst possible time for the U.S., which needs Japan to increase their purchases of U.S. treasuries in order to fund our record budget deficits.

Japan is going to need massive amounts of cash to rebuild their infrastructure, not to mention come up with a different source of energy if they begin to shun nuclear power due to the Fukushima crisis.  Say a prayer for all those in Japan both in the plant, and around the plant.
5) The Fed Funds Rate Remains Near Zero. The Federal Reserve has held the Fed Funds Rate at 0.00-0.25% since December 16th, 2008, a period of over 27 months. This is unprecedented and NIA believes the world is now flooded with excess liquidity of U.S. dollars.

When the nuclear reactors in Japan began overheating two weeks ago after their cooling systems failed due to a lack of electricity, TEPCO was forced to open relief valves to release radioactive steam into the air in order to avoid an explosion. The U.S. stock market is currently acting as a relief valve for all of the excess liquidity of U.S. dollars. The U.S. economy for all intents and purposes should currently be in a massive and extremely steep recession, but because of the Fed's money printing, stock prices are rising because people don't know what else to do with their dollars.

NIA believes gold, and especially silver, are much better hedges against inflation than U.S. equities, which is why for the past couple of years we have been predicting large declines in both the Dow/Gold and Gold/Silver ratios. These two ratios have been in free fall exactly like NIA projected.

The Dow/Gold ratio is the single most important chart all investors need to closely follow, but way too few actually do. The Dow Jones Industrial Average (DJIA) itself is meaningless because it averages together the dollar based movements of 30 U.S. stocks. With just the DJIA, it is impossible to determine whether stocks are rising due to improving fundamentals and real growing investor demand, or if prices are rising simply because the money supply is expanding.

The Dow/Gold ratio illustrates the cyclical nature of the battle between paper assets like stocks and real hard assets like gold. The Dow/Gold ratio trends upward when an economy sees real economic growth and begins to trend downward when the growth phase ends and everybody becomes concerned about preserving wealth. With interest rates at 0%, the U.S. economy is on life support and wealth preservation is the focus of most investors. NIA believes the Dow/Gold ratio will decline to 1 before the hyperinflationary crisis is over and until the Dow/Gold ratio does decline to 1, investors should keep buying precious metals.

I agree wholeheartedly. READ THAT LAST SENTENCE TWO OR THREE TIMES. Dow/Gold ratio to 1:1.  I do not believe this will be over until we reach that ratio.  Would I wait until that ratio hits before I start selling?  Probably not.  I think I'll start cashing out when ratio hits 2:1 and be fully out when she hits 1:1.  Will I leave money on the table?  Sure, but lets not be greedy pigs. Remeber, PIGS get slaughtered, and other PIIGS get credit crises.  Sorry, couldn't resist.  Don't worry, the USA will have its own crisis before this is all said and done.

6) Year-Over-Year CPI Growth Has Increased 92% in Three Months. In November of 2010, the Bureau of Labor and Statistics (BLS)'s consumer price index (CPI) grew by 1.1% over November of 2009. In February of 2011, the BLS's CPI grew by 2.11% over February of 2010, above the Fed's informal inflation target of 1.5% to 2%. An increase in year-over-year CPI growth from 1.1% in November of last year to 2.11% in February of this year means that the CPI's growth rate increased by approximately 92% over a period of just three months. Imagine if the year-over-year CPI growth rate continues to increase by 92% every three months. In 9 to 12 months from now we could be looking at a price inflation rate of over 15%. Even if the BLS manages to artificially hold the CPI down around 5% or 6%, NIA believes the real rate of price inflation will still rise into the double-digits within the next year.

The biggest con in America right now is how CPI is calculated.  Look up John Williams shadowstats to see what inflation would be if we still calulated it 20 years ago.  You'd be astonished.

7) Mainstream Media Denying Fed's Target Passed. You would think that year-over-year CPI growth rising from 1.1% to 2.11% over a period of three months for an increase of 92% would generate a lot of media attention, especially considering that it has now surpassed the Fed's informal inflation target of 1.5% to 2%. Instead of acknowledging that inflation is beginning to spiral out of control and encouraging Americans to prepare for hyperinflation like NIA has been doing for years, the media decided to conveniently change the way it defines the Fed's informal target.

The media is now claiming that the Fed's informal inflation target of 1.5% to 2% is based off of year-over-year changes in the BLS's core-CPI figures. Core-CPI, as most of you already know, is a meaningless number that excludes food and energy prices. Its sole purpose is to be used to mislead the public in situations like this. We guarantee that if core-CPI had just surpassed 2% and the normal CPI was still below 2%, the media would be focusing on the normal CPI number, claiming that it remains below the Fed's target and therefore inflation is low and not a problem.

The fact of the matter is, food and energy are the two most important things Americans need to live and survive. If the BLS was going to exclude something from the CPI, you would think they would exclude goods that Americans don't consume on a daily basis. The BLS claims food and energy prices are excluded because they are most volatile. However, by excluding food and energy, core-CPI numbers are primarily driven by rents. Considering that we just came out of the largest Real Estate bubble in world history, there is a glut of homes available to rent on the market. NIA has been saying for years that being a landlord will be the worst business to be in during hyperinflation, because it will be impossible for landlords to increase rents at the same rate as overall price inflation. Food and energy prices will always increase at a much faster rate than rents.

CPI excluding food and energy. Why don't we rename that to be called "Another worthless stat from the US Government".  I'll take back that comment if anyone emails me and tells me the last time they went 12 months without using food and energy.  If I get an email, it could only be from a dead person.  That would just be scary.

8) Record U.S. Budget Deficit in February of $222.5 Billion. The U.S. government just reported a record budget deficit for the month of February of $222.5 billion. February's budget deficit was more than the entire fiscal year of 2007. In fact, February's deficit on an annualized basis was $2.67 trillion. NIA believes this is just a preview of future annual budget deficits, and we will see annual budget deficits surpass $2.67 trillion within the next several years.

Hey, I thought OBAMA said we'd only have a deficit of 1.5 trillion this year?  Oh well, Ben will just keep hitting the print button.  Oh wait, we're done with QEII in June.  This may get interesting.

9) High Budget Deficit as Percentage of Expenditures. The projected U.S. budget deficit for fiscal year 2011 of $1.645 trillion is 43% of total projected government expenditures in 2011 of $3.819 trillion. That is almost exactly the same level of Brazil's budget deficit as a percentage of expenditures right before they experienced hyperinflation in 1993 and it is higher than Bolivia's budget deficit as a percentage of expenditures right before they experienced hyperinflation in 1985. The only way a country can survive with such a large deficit as a percentage of expenditures and not have hyperinflation, is if foreigners are lending enough money to pay for the bulk of their deficit spending. Hyperinflation broke out in Brazil and Bolivia when foreigners stopped lending and central banks began monetizing the bulk of their deficit spending, and that is exactly what is taking place today in the U.S.

Unless the US Federal Reserve changes its mandate to become a foreign country, I think we are in serious trouble. 

10) Obama Lies About Foreign Policy. President Obama campaigned as an anti-war President who would get our troops out of Iraq. NIA believes that many Libertarian voters actually voted for Obama in 2008 over John McCain because they felt Obama was more likely to end our wars that are adding greatly to our budget deficits and making the U.S. a lot less safe as a result. Obama may have reduced troop levels in Iraq, but he increased troops levels in Afghanistan, and is now sending troops into Libya for no reason.

The U.S. is now beginning to occupy Libya, when Libya didn't do anything to the U.S. and they are no threat to the U.S. Obama has increased our overall overseas troop levels since becoming President and the U.S. is now spending $1 trillion annually on military expenses, which includes the costs to maintain over 700 military bases in 135 countries around the world. There is no way that we can continue on with our overseas military presence without seeing hyperinflation.

We just can't mind our own business as a nation.  Exactly what the Founders of the US feared.  The Roman empire was quite extended before they imploded as well.  Not too mention the fact that their currency was massively debased as well by the time was all said and done.

11) Obama Changes Definition of Balanced Budget. In the White House's budget projections for the next 10 years, they don't project that the U.S. will ever come close to achieving a real balanced budget. In fact, after projecting declining budget deficits up until the year 2015 (NIA believes we are unlikely to see any major dip in our budget deficits due to rising interest payments on our national debt), the White House projects our budget deficits to begin increasing again up until the year 2021. Obama recently signed an executive order to create the "National Commission on Fiscal Responsibility and Reform", with a mission to "propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015". Obama is redefining a balanced budget to exclude interest payments on our national debt, because he knows interest payments are about to explode and it will be impossible to trul y balance the budget.

Just like CPI.  If you don't like the results, just change the definition so future comparablitly is so dillutive and complex, that no normal person will ever understand how to compare 2 sets of data.

12) U.S. Faces Largest Ever Interest Payment Increases. With U.S. inflation beginning to spiral out of control, NIA believes it is 100% guaranteed that we will soon see a large spike in long-term bond yields. Not only that, but within the next couple of years, NIA believes the Federal Reserve will be forced to raise the Fed Funds Rate in a last-ditch effort to prevent hyperinflation. When both short and long-term interest rates start to rise, so will the interest payments on our national debt. With the public portion of our national debt now exceeding $10 trillion, we could see interest payments on our debt reach $500 billion within the next year or two, and over $1 trillion somewhere around mid-decade. When interest payments reach $1 trillion, they will likely be around 30% to 40% of government tax receipts, up from interest payments being only 9% of tax receipts today. No country has ever seen interest payments on their debt reach 40% of tax receipts without hyperinflation occurring in the years to come.

This is frightening, and why ever increasing debt levels are truly a destroyer to both individuals and governments.  How long can we make the "minimum payment" before we never have a chance of getting out of the hole?

This is a tune dedicated to all of those statistics we get from government agencies.

Enjoy.

http://www.youtube.com/watch?v=PA43ETEU1Vg


Until the next time...

Fiat Doubter

Sunday, March 27, 2011

A Tale of Two...Opinions

If you get aboard this precious metals train, you need to make some determinations as to what all the experts are saying.  Some will say, "We're headed up", some will say, "We're headed down".  It's never easy to know who's right, but you have to make a stand.  Or you'll never make any money.  It's easy to sit on the sidelines, and honestly, sometimes that's the best decision you can make.  Especially when the precious metals are taking a real beat down.  However, I do not believe the beat down is upon us quite yet.  My opinion is that we have a final push in silver in gold to around the $42+ area for silver and the $1,500 + area for gold, before we get a hefty correction.  Do you want to wait until after the correction?  I wouldn't fault anyone for using that logic. However, I am a speculator, and I try to make money while we still have movement, and I believe we have more coming.

Here are a couple of opinions to show you what I am talking about.

For silver's final push:

http://profitimes.com/wp-content/uploads/2011/03/silver3.png

And for the drop:

http://www.321gold.com/editorials/moriarty/moriarty032511.html

I ask you to consider this though.

Gold made a previous high in 1980 around the $850 mark.  It has blown away that mark by 67%.

Silver made an all time high in 1980 as well, around $50.  It's still 26% below that mark.  If silver got to the same point as gold is now, it would be trading at $85.50.

I have a quote from a movie that explains how I feel when talking about gold and silver.  Here it is.  Know what it's from?

"This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes."

One of these days people are going to realize why no fiat currency has endured the test of time.  It's always too easy to debase your currency.  It's been proven over the ages.  Gold was money from 700 BC, and silver since around 4000 BC.  Anyone seen some fiat dollars from that time period?

Until the next time...

Fiat Doubter

Saturday, March 26, 2011

Is that gas I smell?

Not of the human orgin, but rather Natural Gas.  Natural gas is a very cheap commodity compared to many out there right now.  Let's take a look at some of the stats, and some charts of course.

First off, based on an energy equivalent basis, crude oil and natural gas prices should have a 6 to 1 ratio. So, what's the current ratio?  If you had 23.55 units of natural gas, then you could  buy one barrel of oil.  Here's a link to the chart:

http://stockcharts.com/h-sc/ui

You can see that after the credit crisis of 2008 oil came on big time, and got to a ratio of 28:1.  It subsequently corrected, and got back to around 14:1 in Sept of 2009.  I'd like to see it come back to 14 again, and if it does could be very profitable.  If oil remains around $105 a  barrel, that's natural gas at $7.50. That would be a nice gain from here when NatGas is trading at $4.48 currently.

The proxy for NatGas is UNG.  It's not a great proxy for NatGas, but it is an ETF that you can use to bet on the rising price of NatGas.  If we reach the level we were at at the beginning of 2010, we would get back to UNG at around 20-22.  Currently, we are at 11.80.  See chart below.

























Now why would NatGas increase?  Well, if you need energy, you may consider switching to NatGas as is is a lot cheaper in terms of energy output.  As the energy ratio is 6:1, you can get more for your energy money by using NatGas than oil at this point.  How about monetary inflation?  Here's a nice chart to show you what's going on with the monetary base.  Apparently, Ben hit the "create" button pretty hard at the beginning of the year, and the button is stuck in the on position.  After the money creation (explosion in this case) comes inflationary effects in prices.  It's showed up in many commodities already, but has yet to manifest itself in the NatGas market.
























What might cause NatGas to take off?  How about a large country that plans to increase it's usage of natural gas in the next five years?  China, maybe?

http://www.bloomberg.com/chart/iG.YJK3Tb3ik/

Although NatGas is usually a domestic product, it can be converted to Liquid Natural Gas, and shipped out to countries that need it.  How about we actually sell something to China for a change.  Maybe we can export some of our excess NatGas and bring down our account balance with China.  I know they would like that.  They definitely don't want anymore dollars, that's for sure.

Best way to play this trend is with UNG LEAPS.  I'd recommend taking a look at the Jan 2013 calls.  Focus on the calls that are in the money.  If you want to be more conservative, buy deeper in the money calls like the 6's or 7's.  If you want a larger reward if UNG takes off buy close to the money calls like the 10's or 11's. 

Full Disclosure:  I own UNG 2013 calls stirke price of 10.

Until the next time...

Fiat Doubter

Friday, March 25, 2011

Thoughts from a Precious Metals Guru

Found this quote from Richard Russel on Eric King's website:

With gold and silver on the move, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, There is only one certainty regarding paper money -- the longer you hold it, the less it will buy in terms of real goods or real money -- gold.  But there's a big difference between the current precious metals bull market and the bull market of the 1970s. The 1970 bull market drew tremendous interest (I was there). Everybody I knew (even the gold haters) were watching that bull market with keen interest, particularly during the wild "blow off" days of the late 1970s, when silver was rocketing higher -- rising every day by limit up.


“In comparison, today's huge precious metal bull market is greeted with yawns, that is, if it is greeted at all. I've been calling the current gold/silver market the "great stealth bull market." Ask the average man or woman on the street what's happening to precious metals, and they'll give you a blank stare and maybe a "Duh." Ask them if they own any gold or silver, and they'll give you a sheepish "Nah."

Gold (April) closed on March 2 at 1437.40, a record high. On March 9 silver closed at 36.04, highest since 1981. Yesterday both marks were bettered. Where's the excitement, where's the interest, where are the articles in the newspapers?

Time to study the chart (above). As I've been saying, gold in its advance has periodically tested its 150-day moving average over the past few years (150-day MA is shown as the blue line on the chart). Note that on the most recent "correction," gold didn't even test its 150-day MA. When I saw this, I realized how powerful the forces under gold were.

Gold is now "out in the open" with no overhead resistance and no overhead supply. So far the bull market advance since 1999 has been steady, quiet, and orderly. Except for its spectacular slow and relentless climb, there's been no excitement in the gold bull market.

I don't think this is going to continue. Some where ahead the precious metals bull market is going to turn wild and speculative. Only one phenomenon will serve to create this excitement. That phenomenon is HIGHER PRICES. The public can resist anything in markets except steadily rising prices.

As for steady higher prices and excitement, I suspect that silver is about there. As for gold, maybe not yet. But somewhere ahead gold is going to catch fire. That will be the time when the great American public will decide that they have to have some gold, maybe just a coin or two, or maybe just a few shares of GLD -- but that time is coming.”

Richard Russell is correct, a mania lies somewhere ahead and the public will be heavily engaged in the gold and silver markets.  The question is will this gold and silver bull market dwarf the one from the 70’s?  Time will tell, but for now just sit back and enjoy the ride.
Link is here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/25_Richard_Russell_-_Gold_To_Catch_Fire_%26_the_Public_Will_Notice.html
KWN Blog




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I have to ask, how many of you out there have invested in any precious metals?  Can you name me 5 major gold stocks or 5 major silver stocks?  Ask your friend if they can?  Bet you a couple of brews that they can't do it.  Unless of course, you know me.  Then I guess I'd lose.  Compare that to the last 2 bubbles we've had in the housing market in the US and the Naz bubble from 2000.

Here's a good story to illustrate my point. Back around the September  before the tech wreck I was working in public accounting, and on this job we had a couple of interns on the job.  I can literally remember one of these yahoos getting a grin on his face during the day and I asked him what was going on.  He proceeds to tell me his stock Broadcom was up 5 or 10% that day, and that he's made at least 100% on it in only a couple of months...or something very similar to that.  He then tells me about all the other tech stocks he would like to buy.  I mean, an intern, who makes crap, is telling me what stocks to buy. 

Back to the present.  I have not talked to one person in the past 5 years who have talked to me about investments and mentioned anything about precious metal stocks.  Hell, even when I ask people what they think the price of gold or silver is at...they look at me like I'm on drugs.  If some are close, they guess around $1000 because that's the last real media attention that gold got.  I'm telling you, the general public is not yet close to buying precious metals and PM stocks "en masse", and we will not hit the final blowoff stage until this happens.  Will we get pullbacks and corrections in the meantime?  Oh yeah, definitely.  But once again, sell into strength, and buy into weakness until this bubble has played itself out. Keep you eye on the ball, and mine is looking for the 1:1 Gold/Dow ratio.  Until that happens, I'm not souring on this investment trend.

Gold and silver did not end the week as I had hoped, but they are up for the week, and you can't get all that upset about that.

For all of those people who are into the nitty gritty and like details, I read this guys blog nightly.  It has a bit of a conspiratorial slant to it regarding gold and silver, but if you hadn't guessed already, that's the kind of stuff I find very interesting.  His name is Harvey Organ and here is the link:

http://harveyorgan.blogspot.com/

Have a great weekend and..

Until the next time...

Fiat Doubter

Thursday, March 24, 2011

Printing money like Widgets

If the USA keeps printing what happens to the US Dollar?  Here's one man's view of the situation:


There is so much debt being created globally, that it will never be paid back in currencies that presently exist. At some point, precious metals will have to back a new global currency at an exchange rate so high that debts in current fiat paper can be cancelled. In other words, the final solution will be to create a value for gold, perhaps by Federal Reserve, Treasury Department, or even G-20 Nation edict, at some ridiculous number, say $10,000 an ounce, backing a new currency at this exchange rate, then calling in all former currencies in exchange for a fraction of the new currency (similar to a reverse stock split) since former currencies will be essentially worthless. Under this scenario, debts are essentially repudiated, instead of paid back.

 Read that again if you don't understand it the first time.  So, there are two options to paying back debt when you own a printing press.  You can either pay it back with money you actually earn, or you can print new money to pay back the existing debt that you have built up.  In one situation, your economy suffers because you will have to either raise revenues (taxes up) or reduce spending (bigger recession) to get a surplus, or your currency takes the hit due to excessive dollar creation (i.e. buying our own treasuries).  Currency down, everything more expensive, especially anything imported...like oil for instance.  We get over half our oil from outside the USA.  Around 11 million barrels a day.  Devaluing your currency is great for exporters, but sucks for the consumer as you can't keep up with rising prices.

So, if you don't want your currency to depreciate, you need to exchange it for something that will do well in a currency deflation situation.  Anything tangible that you can touch and feel (and has a use other than being a currency) would be better than paper dollars.  As you know, I prefer the precious metals, but to each their own.  If you want to buy cigarettes and liquor, and stockpile those in your basement, it would still be better than holding cash. 

Gold and silver took a nice ride today, first up, then back down. After hours they are coming back from the retreat they took today.  Silver margin requirements were raised today, so silver took a hit.  Raise somebody's margin and they either need to put in more cash, or cash out some open contracts and use to meet margin.  I think it was the latter today.  Most commodities take a dip when the margin requirements are raised.

Gold and silver are headed up this spring, and you want to be on the train people.  Will it fall back?  Oh yeah, but the goal is to ride these advances, and lighten up on positions during the decline.  You can either liquidate positions into the rise, and then buy back into the dip.  Or you can hedge your portfolio using bearish silver and gold ETF's near the top, and then selling those into the dip, and using proceeds to buy even more.  Or to just hold in cash.  If you don't want to incur excessive trading fees, then I suggest using the bearish ETF's to hedge near the top. 

Long Term:  I am looking at a ratio of 1:1 for the Gold to Dow ratio, and a 15:1 Gold to silver ratio before I start cashing in all my positions.  Last bull market in PM's was back in the late 70's and early 80's.  Dow was around 850 and so was 1 ounce of gold.  Selling all your gold and buying equities at that point would have set you up for one of the biggest equity runs of all time.  Everything comes in waves.  Fiat and equity reign for 20-30 years, and then it's commodities.  Oh, don't forget bonds either.  After Volker (former Central Bank Head like Hanky Bernanky is now)  raised rates to choke off rampant consumer inflation, bonds have been on a 30 year tear.  The upside in bond prices right now is small, the downside is huge!  Play inverse rate bond funds to play this trend.  One I have in my portfolio right now is TBT.  



















Now's your time to ask this one to dance...last chance.

http://www.youtube.com/watch?v=L5pHM-o2_Dk

Take the minor pull back today to buy some PM stocks.

Until next time...

Fiat Doubter

Wednesday, March 23, 2011

Danger Will Robinson! Danger!

To all those who read this blog (all 3 of you maybe), do yourself a favor and follow the Burl Ives strategy of investing:

I'll let him tell you personally with this link.

http://www.youtube.com/watch?v=oMlqn_Hjyi8

I know what you're thinking. What the hell is this guy talking about?  Why would I?  Well, I ask why wouldn't you?  Gold and silver area couple of the best performing assets in the last decade.  Don't believe me, check it out?  On to some of my favorite silver stocks.

First chart:  This is symbol SIL which is a Global Silver Miners ETF.


























Next up is SLW, Silver Wheaton:


























OK, another bellweather silver stock, Silvercorp or SVM.
























Oh, and here's the dollar these days.  Hmm, I guess when you make so many of these things out of thin air, they just aren't that valuable anymore.  It's econ 101, and that's supply and demand.  Supply goes up, demand goes down, the value tanks.




















Oh, and here's a little song in it's honor and trend as well.

http://www.youtube.com/watch?v=ZarmRLa2p9Q

Put your dollars in some tangible assets.  Why not put them in gold and silver which have been around for thousands of years?  Or silver and gold stocks to leverage even better.

Until the next time...

Fiat Doubter

Friday, March 18, 2011

Hi Ho Silver?

Has silver finished its correction?  Maybe, maybe not.  I'd urge everyone to be cautious, but let's look at a few charts to take a look at what we are dealing with on a technical base.

Let's look at some bellweather silver companies.

First SVM, Silvercorp.






















First, it broke out over long term resistance of 13.50.  It then proceeded up to 15 before pulling  back to around 12 recently.  So, a drop of around 20%.  Not a bad correction.  A lot of times a stock will pull back after a breakout to the breakout point.  In this case it pulled back all the way to 12, but was still a secondary support after the 13.50.  I think if it clears 13.50, this will now act for support on this stock.  Also, look at the volume on this pullback.  It has been declining, so it does lack some conviction.  Unless the silver market implodes, I am somewhat bullish on the short term prospects.


Next, SLW, Silver Wheaton




Silver Wheaton has a similar story.  It broke thru the resistance at around 42, ran to 46.5, and has drifted back to the 38 level on declining volume.  If it breaks back above 42, I think that will be the new support.


So, I would still be cautious in taking any positions, but look for these stocks to break thru once again.  If they do, I would add these to my portfolio.

Full Disclosure - I own SVM and SLW.

Until the next time...

Fiat Doubter

Sunday, March 6, 2011

Great Source of Info on Juniors

Just came across this link while surfing my regular precious metals websites.  It is a great guide put out by Dundee capital markets.

I haven't gotten through this document, but from what I have read (page 66 so far), it gives great insight on the junior miners that they follow.  Hoping to come up with some picks out of this as I do see some that are looking good on the technical side of things.  Here's the link.

http://research.dundeesecurities.com/Research/PDAC2011.pdf

Just checked the metals as they are trading on the NY Globex and Hong Kong right now, and both gold and silver are up.  Both are really extended from a technical point of view, but with all the tensions in the Middle East right now, I'd be a holder rather than a seller.

Be on the lookout this week for precious metal stocks that have broken through a prior overhead resistance level (See my post with the SVM chart), and may pull back to this level.  It could be a buying opportunity.

Until the next time...

Fiat Doubter

Saturday, March 5, 2011

Recommendation Update

I'd like to put my recs to the test, so from time to time I am going to update buy prices and current prices.  What's the use of recommending stocks if you aren't going to keep track of your picks?  And you will see that I do disclose if I hold positions in the stocks I am recommending.  Mostly, I will hold a position as I will be writing about what I see as a good opportunity.  So, here's where I am at so far.


PositionSymbolCostCurrent ValueGain/(Loss)
GDXJAug -11 35 Call54061013.0%
Scorpio MiningSPM.TO1.121.174.5%
Silver QuestSQI.V0.650.661.5%


Obviously, nothing spectacular at this point, but I haven't held them that long.

More picks to come as there are always low-risk entry points (technically speaking) in some PM stock out there.

Until the next time...
Fiat Doubter

Thursday, March 3, 2011

Vision Quest? Quest for Fire? No silly - A Silver Quest

Well, here we are again and the Gold and Silver train have stopped to take a rest today. Whew...it's been quite a ride since late January.  Now, what you are going to find is that the silver and gold stocks are going to take a small breather, and probably come back to their breakout points, and then power higher into the April - May timeframe.

For example we have this chart of SVM.  You can see that SVM powered through the almost 4 month resistance of 13.60, and did so on heavy volume.  It is always a good sign to see stocks break resistance on heavy volume.  It means they are serious, and are very likely to keep going.  Now, will it drop below 13.60?  Maybe, but don't worry.  Even if it does, it will probably just hit the ascending trendline and find support there.





















Now, what is the stock du jour?  Today, I am continuing on with the silver juniors.  This one is not a producer, but rather an exciting explorer.  They have properties in mining friendly countries such as the US and Canada.  Specifically, British Columbia, Ontario, and the Yukon.  Today they came out with a 43-101's for one property today which is Caboose in BC:

Indicated Resources:
383K of gold ounces, 26.5 million silver ounces, 137 million lbs of zinc

Inferred Resources:
443K of gold ounces, 29.5 million silver ounces, 219 million lbs of zinc

So, they have established that there is something there.  Without further ado, I give you the chart.

The reason I like Silver Quest Resources is that they are in mining friendly countries, the outstanding shares are around 82 million, it's price will track silver over the long run, and the chart is spectacular. We have a descending wedge which has formed since last September, and just broke out of the wedge 2 days ago on GINORMOUS volume.  So, we got some interested parties once again taking an interest in this stock.





















Now, here's an interesting twist.  Let me set this up with a quick example.  I've got a small liquor store on the corner, and you are a customer who is throwing a blow out party next week. So, you approach me and say, if you give me a decent discount, I'll buy out half your stock.  Ok, I take less margin, but I make it up on some nice volume.  "OK, it's a deal", I say.

Well, from the website of Silver Quest comes this:





Silver Quest Closes Private Placement

Vancouver, BC - Silver Quest Resources Ltd. (SQI-TSX.V) (the "Company") is pleased to report that it has closed its non-brokered private placement (the "Offering") consisting of 2,542,832 flow-through common shares for gross proceeds of $1,907,124 announced December 9, 2010.





The Company has paid cash finders' fees totaling $137,670 and issued an aggregate of 137,670 compensation warrants entitling the holders thereof to purchase such number of common shares for a period of 12 months from closing at an exercise price of $0.75 per share.

The proceeds of the Offering will be used for general exploration expenditures, which will constitute qualified Canadian exploration expenditures, as defined in the Income Tax Act (Canada) and flow-through mining expenditures on the Company's prospects.

All securities issued or issuable in connection with the Offering are subject to a four-month hold period expiring April 21, 2011.


In case you don't like math, here it is.  $1,907,124 divided by 2,542,832 is 75 cents.  It was trading for less than 75 cents on December 9th (date of private placement), and still is.  Do you think someone is going to give 75 cents a share for a stock, when it is trading below that in the market (paying a premium), and not know that this is going to pan out?  I highly doubt this investor is looking to take a loss on his investment. When do you pay a premium for something?  When you know it's worth more than what it is selling for, that's when.  That huge volume pop that we had two day ago, tells me they are probably right.

Buy this before she breaks the 75 cents level.  I think I'll be holding this for awhile.

FD - I bought this stock yesterday, so you can get in even lower tomorrow if the price stays the same.

Silver Quest Resources
http://www.silverquest.ca/s/Home.asp

Until the next time...

Fiat Doubter

Wednesday, March 2, 2011

Hunting the Silver Juniors - What a find!

Many a silver articles have been written on the most obvious silver miners like Silver Wheaton, Silvercorp, Hecla.  These miners and one royalty company are producing many ounces of silver per year.  Not to say that the run is over by any means on these silver majors, but if you want to have even more leverage to silver, it's sometimes better to go hunting names in the junior sector, with market caps less than 400 Million.

I'll admit, there aren't a whole lot of names out there, but with a little digging I have found a name that seems to be worthy of some serious speculative money consideration.

Here's the graph of this stock as of today:




As you can see, the name of the company is Scorpio mining.  I like to break down the technical aspects as well as the story to see if it has good potential. In 2010, the stock made it up to 1.00 on heavy volume in the April timeframe.  Then after this advance of 60+%, it took a breather and went back to the break out point of 1.00.  It finally cleared the 1.00 resistance in early Nov 2010.  It shot through on heavy volume again, and made a new high around 1.20.  It has since come back to the breakout, and even hit the support line of around 85 cents.  It has subsequently broken out of a falling wedge pattern with MASSIVE volume.  Someone has taken a serious position in this stock besides myself!

Here's the story:  This company is a current producer of silver in Mexico.  A nice safe country for precious metals production.  They just came out with results for 2010 and they produced 2.1 million silver equivalent ounces.  To be fair, they produce silver, zinc, copper, and lead.  They actually produced 910 k ounces of silver, and the rest of the metals equalled approximately 1.2 million ounces of silver.  So, how are they going to increase production to 6 million in 2 years?

Per the companies website they acquired Platte River Gold in April of 2010.  The addition of Platte's properties through acquistion will allow them to increase their production as follows per the 4/21/10 news on their website.


2011 - Silver to 1.2 million ounces, silver equivalent ounces to 4.1 million.

2012 - Silver to 1.9 million ounces, silver equivalent ounces to 6.2 million.

Here's the real bonus:  The above calculations are based on the following price assumptions:

Metal prices used to calculate silver equivalent ounces are as follows: Lead US$0.80 per lb; zinc US$0.80 per lb; copper US$2.20 per lb and silver US$13 per ounce.

Current prices: Lead US$1.16 per lb; zinc US$1.13 per lb; copper US$4.49 per lb and silver US$34.71 per ounce.

Even if the price goes nowhere from today, we are talking about a significant increase in silver equivalent ounces!

I'm long this junior producer, and you should definitely check out Scorpio for yourself. 

SPM.TO
http://www.scorpiomining.com

Until the next time...

Fiat Doubter
http://pmsurfer.blogspot.com/