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

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

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

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

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.

Position	Symbol	Cost	Current Value	Gain/(Loss)
GDXJ	Aug -11 35 Call	540	610	13.0%
Scorpio Mining	SPM.TO	1.12	1.17	4.5%
Silver Quest	SQI.V	0.65	0.66	1.5%

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

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

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/