Month: November 2013

By MoneyMorning.com.au

Well that’s more like it.

After days of what we can only describe as dull market action, yesterday the Australian market took a 1.4% tumble.

We won’t say we’re glad stocks fell. We hate it when investment pros say they’re glad stocks fell.

No one likes it when stocks fall. We want stocks to go up all the time…just like house prices go up all the time [wink].

But when stocks fall, it can create an opportunity. Because right now, even though the market is full of fear, we still say this is a great time to buy stocks rather than sell. In fact, this market action is exactly why we advise readers of our paid advisory services to remain patient and disciplined when buying stocks.

Because it’s a day like yesterday that rewards investors for their patience…

As we’ve explained over the past few weeks (without much gratitude for pointing this out, based on some of the feedback we’ve received) many investors make a lot of basic mistakes when they buy and sell stocks.

One of the biggest mistakes is to be reactionary to prevailing market events.

A classic example of this was the steep market decline from the end of May through to early July.

At that time we felt like the only person in the room who didn’t panic when stock prices began a 10% drop. The front pages of the daily papers screamed about the billions wiped of the market’s value.

There were wails about rising bond yields and the inevitable collapse of…well, if you listened to them, everything.

And yet the market didn’t collapse. In fact, as we explained at the time, that period looked to be the last time this year that you would get to buy stocks that cheap.

Hindsight Investing Wins Every Time

Resource investing guru Rick Rule pointed out in his recent presentation that investors tend to make irrational decisions when they buy stocks. They jump on the band wagon and buy stocks at or near the top of the market.

And they panic and run away from the market when it’s at or near the bottom.

Now, we won’t give those investors too hard a time. We’ll admit that it’s not always easy to tell when the market is high or low. You only know for certain when you look back at the market.

At that point it’s easy to say, ‘I should have bought then.’ That’s hindsight investing. You won’t be surprised to learn that hindsight investors bag winning trades every time!

But because you can’t be a hindsight investor in the real market, it means you have to take a cautious and reasoned approach when buying and selling stocks.

That’s why in every issue of Australian Small-Cap Investigator we advise readers to stick to what we call a ‘buy-up-to’ limit. It’s a strategy you can use too. It’s a simple but effective way to make sure that you don’t pay more than you should for a stock.

It’s a strategy you can use in unison with other strategies such as ‘scaling in’ to a position (we won’t elaborate on that today; we’ve discussed ‘scaling in’ in the past).

Patience Pays When Speculating

The temptation when buying into a rising market is to think you’ll miss out if you don’t buy in right now, regardless of the price.

The temptation becomes even greater if you stop and pause and then see that the price has clicked higher again. You think, ‘Man, if I hadn’t messed around I would already be $500 richer.’

So you start entering your order and by the time you click ‘buy’ the stock has clicked higher again. That’s another $500 you could have made if only you had acted quicker.

You buy the stock, and then the inevitable happens – the price falls. Before you know it, you’re down $1,000. If only you had exercised a bit of patience and waited.

Of course, that doesn’t happen every time. Sometimes a stock is on such a tear that you buy in and it just doesn’t stop going up. But you can’t guarantee that every time. In fact, we’d say that by the laws of averages for every time that happens you’ll buy another stock that keeps going down after you buy it.

This is where a ‘buy-up-to’ price is important. In each issue of Australian Small-Cap Investigator we’ll explain to readers that they shouldn’t pay more than a certain price for a stock.

For instance, if a stock is trading at 20 cents we may advise investors not to pay more than 23 cents for it. This ensures investors don’t overpay for a stock.

Overpaying for a stock is a big no-no in investing, especially with small-cap stocks.

Get in Early, but Only at a Fair Price

When a stock is 20 cents and we’re forecasting a potential rise to 80 cents, some investors can become over-excited. They may think, ‘Hang on, if it’s going to 80 cents then why not pay 30 cents or 40 cents? I’ll still more than double my money.’

The reason you shouldn’t do that is simple. First, if you buy a stock at 23 cents and it goes to 80 cents then you’ll make a 248% return. But if you buy a stock at 40 cents and it goes to 80 cents, you’ll only make a 100% return.

That’s a big difference.

But secondly, small-cap investing is all about momentum and expectations. It may sound odd, but if a small-cap stock takes off too quickly the company may struggle to satisfy investor expectations.

Even though the news flow may be the same regardless of the stock price, if investors buy in hoping for quick gains only to realise the gains may take longer than they expected, those investors will soon become dissatisfied and can cause a lot of selling pressure.

Just look at any resource or tech stock that has taken off in a flurry of excitement, only to quickly fall again.

This is why we always publish a maximum ‘buy-up-to’ price. It’s not that we’re against stock prices taking off, it’s just that we’d rather our readers get into the stock at a good price before the excitement, rather than piling in afterwards and being disappointed by the outcome.

Cheers,
Kris+

Special Report: Read This or Retire Poor

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By MoneyMorning.com.au

In a moment, I’ll share with you two technologies that I think are possibly the most important of the next decade.

They’re often called silly, crazy and impossible. But I believe at the right time with the right companies these technologies will be unbelievably profitable.

How can I be so certain? The truth is I can’t. When I tell most people what I do they usually ask me the same question, ‘What’s the future going to be like?’

In the space of a few seconds or minutes it’s an impossible question to answer.

Typically I’ll answer the question simply with, ‘Amazing!’

But with any kind of technology there’s a whole backstory to accompany it. The story may stretch over years, with wins and losses. And sometimes even complete failures. But often a rise from the ashes story also. Until you understand the process you cannot fully appreciate the brilliance of new technology.

Why Technology Development is Crucial to Follow

Because of the intrigue in technology, people like to tell others about it. However when it comes time to recall the details many people simply don’t remember. So they just go for the good stuff.

And as people tell other people it plays out like a game of Chinese whispers. Each time the story gets shorter. It gets to a point where the only part remaining is the end bit. Eventually the story starts to lose its appeal as people don’t appreciate the bigger picture.

At some point it comes full circle and you hear about this new tech from someone else. But by then the enthusiasm is gone, and it’s usually dismissed as a fad or crazy idea.

But most people don’t appreciate the blood sweat and tears that goes into bringing technology to market. Most people don’t understand the story behind these cutting edge technologies.

What we do at Revolutionary Tech Investor is to find the early stage technology. Then we tell subscribers the full story. Where it’s come from, and importantly where it’s going. And most importantly, how to profit from it.

More often than not the technologies we talk about seem wild, silly or even impossible. But at the end of the day, you understand that the crazy and impossible are usually the ones with the greatest potential.

These are the best kinds of stories to follow. Of course our main goal is to find investable companies that will profit from these technologies. However a big part is to identify opportunities before they present themselves. That places us in a position to let readers know quickly, so they can begin to profit from it.

When we identify technology to get excited about it won’t always have an investment opportunity. But more often than not at the right time, the right opportunity presents itself. And that flags us to let subscribers know about it.

I have a watch list of technology I keep track of. That brings me back to the two technologies I’m most excited about for the future. I’ll introduce you to the tech and to a couple of private companies involved in it all…

Bigger than the Discovery of Fire

I believe the first of these will have the biggest impact on mankind since the discovery of fire. That might sound like a grand statement, because it is. But this technology has the possibility to change everything.

It’s Fusion Power.

We’re talking about safe, clean, free, infinite power. When fusion power reaches its tipping point of efficiency, it becomes profitable, and then company making.

Say goodbye to fossil fuels. Oil will become redundant. Gas irrelevant. The power of the Saudis, Russians and Americans will wane as the world ceases its reliance on oil and gas.

Renewable energies, solar, wind, hydro, thermal…whatever they may be, will become pointless. Renewable energy is great to bridge the gap between where we are now and the arrival of fusion power. But eventually it will become as irrelevant as oil and gas will.

As it stands, there is no publicly investible company to capitalise on Fusion power right now. But that’s not to say there aren’t companies working on bringing fusion power to reality.

There are two I’ve kept my eye on for some time. One is General Fusion, a Canadian company with some strong private equity behind it. One of their investors is Bezos Expeditions, the private investment fund of Amazon’s CEO Jeff Bezos.

The other is Helion Energy. Helion have just brought their 4th prototype online. Helion aims to have profitable fusion energy in 2019. That’s just 6 years away.

Fusion essentially generates the power of the sun, but without the sun. It’s got enormous potential to reshape human history, from transport and space to energy and nuclear waste disposal.

It’s always been one of those technologies that’s been 20 years and 20 billion dollars away. But between Helion and General Fusion, Fusion Power is just around the corner.

To give you a comparison, just 10 years ago, the idea of commercial space travel seemed a lifetime away. Yet now multiple firms are working on it, to the extent that commercial space travel is just a matter of months from becoming reality.

The New Era of Computing

The second key technology on my watch list is Quantum Computing.

The rapid advancement over the last 30 years in computing has been extraordinary. Computer power has increased as microchip sizes have decreased. No doubt you’ve heard of it commonly referred to as Moore’s law.

Some of humankind’s biggest advancements are in part due to computer technology. The Human Genome Project, landing on the Moon and the internet are just some examples.

However, the world is approaching a point where technology is limited by the speed of existing computers. Computers and microchips aren’t getting small enough or fast enough to keep pace with new technology and science.

That means the next step in accelerating human advancement will come as we usher in a new era of computing. And that’s through quantum computing.

A quantum computer is like conventional computing on steroids. In a recent comparison a quantum computer was 50,000 times faster than a ‘normal’ high spec system. That’s right, 50,000 times faster!

However there is some debate about whether quantum computing is even real. I think there’s a bit of ego involved in it all. If a company can make the world’s most advanced computer, others should be trying to figure out how to beat it. That’s what competition is all about. Not bickering and squabbling.

Anyway, there is one company that has laid claim to having made the world’s first proper quantum computer. It’s a bold claim, which many scientists have disputed.

But regardless of the quantum mechanics deemed to make an official ‘quantum computer’ no one else seems to be even close to Dwave quantum computers.

The technology must be good. Otherwise Google and Lockheed Martin wouldn’t have shelled out possibly millions of dollars for one each.

Dwave’s computers are the very beginning of a new era of computer technology. It’s immensely exciting. The potential of quantum computing is like being back in the 80′s again.

In just 30 years think about how far the world has advanced because of computers. Now imagine that starting all over again, but 50,000 times more…and faster. It’s mind blowing.

With Fusion Power and Quantum computing some may say I’m a nutter or misguided. That’s fine by me. As long as you’re aware of these technologies and their potential, then when the time comes, you’ll know what to do and where to invest while others won’t.

Sam Volkering+
Technology Analyst, Revolutionary Tech Investor 

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By CentralBankNews.info
    Mozambique’s central bank maintained its benchmark standing facility rate at 8.25 percent, saying inflation remains in line with the bank’s objectives although the international and domestic risks have risen and could upset the macroeconomic balance.
    The Bank of Mozambique, which has cut its rate three times this year – most recently in October for total rate cuts of 125 basis points – also said it would intervene in money markets to ensure the monetary base does not exceed 45.893 billion meticais by the end of November, up from the target of 44.729 billion by end-October.
    Mozambique’s inflation rate was largely steady at 4.42 percent in October compared with September’s 4.52 percent and has fluctuated between 4 percent and 5 percent since February.
    In its inflation report released this week, the bank forecast inflation of 5 percent to 6 percent for the fourth quarter, in line with its inflation target for the year.
    Citing recent data, the bank said business confidence improved in September following a deterioration in the previous two months, but overall the economic climate deteriorated in the third quarter due to a fall in the outlook for demand.

    Mozambique’s economy improved sharply in the second quarter, with Gross Domestic Product up by 6.2 percent from the first, for annual growth of 8.7 percent, up from a 4.3 percent rate in the first quarter.
    Mozambique’s net international reserves rose by US$ 62 million to $2.919 billion at the end of October, helped by the inflow of foreign aid, net purchases of $11 million by the central bank, remittance of income from mining worth $5 million. This was countered by payments to the state of $18.3 million and external debt service payments totaling $14.1 million.
    Mozambique’s currency, the medical, was quoted at 29.87 to the U.S. dollar on the last day of October, a depreciation of 0.03 percent for the month and a year-on-year fall of 4.11 percent.
   
        www.CentralBankNews.info 
   

Source: Special to The Gold Report (11/13/13)

http://www.theaureport.com/pub/na/eric-muschinski-investor-psychology-can-trump-market-fundamentals

With gold and silver equities markets as volatile as ever and assets of many miners valued at pennies on the dollar, Eric Muschinski, editor of the Gold Investment Letter, believes being on the right side of the emotional curve when investing is critical. He pays as much attention to investor psychology as he does to market fundamentals. In this interview with The Gold Report, Muschinski explains how investors can use knowledge of market cycles to their advantage and profiles undervalued companies flying under the radar.

The Gold Report: You have published a recent e-letter for investors called “Fighting Battles to Win the War.” Please sum up the major themes of the issue, especially around how small-cap stock investors can combat impatience and deal with the emotional stress associated with temporary market downturns.

Eric Muschinski: Investor psychology is a major passion of mine and I write about it frequently. Stocks go up and down and sometimes moves are cyclical (shorter term) and some secular (long term). The “war” is referencing where we are in the junior mining, gold, and silver markets cycle and where we are heading. The battles referred to several of our recommendations that were experiencing retracements at the time. It’s good to remind myself and readers about the bigger picture because the battles are inconsequential if you have your head on straight, are patient and know the ultimate victor of the war.

Gold went up for 12 straight years from 2000–2011; that is simply unheard of in any asset class secular movement. If we take a step back and put that into perspective, it makes sense that gold would take a “breather” and consolidate for two or three years before its imminent “blow-off” phase.

Frankly, the fact that we haven’t given up 50% since the 2011 highs is a testament to how strong this bull market is overall. The people who have emotional stress at this juncture likely were buyers when gold was $1,800/ounce ($1,800/oz) and silver in the $40s/oz, whether mining stocks or the physical metals.

However, I am quite confident that the market is going much higher and I am joyful beyond belief because this is gifting me more time to accumulate my favorite assets and mining stocks at substantial discounts. If gold is going to $3,000/oz or silver to $150/oz, do you want to own a little or a lot? This is a secular bull market that I am betting so significantly will change my life forever net worth-wise. I would encourage folks who have emotional distress to hit the reset button and get in the game; now is the time to be a buyer. Once gold is much higher, I’ll be selling it to investors who buy based on emotion and excitement; anyone who has a habit of buying/selling on emotion will always lose money over time.

TGR: Are the prices of shares in precious and base metal mining firms directly correlated to the overall market, or do they have some independent movements?

EM: It seems as though share prices of precious and base metal mining companies are now lacking correlation with the overall markets, which is good. Many investors are chasing the indices now for returns/alpha when the contrarian and wise investors are looking at hated assets like junior mining stocks. However, I learned years ago that any given stock tends to trade based on this breakdown, more or less: 50–60% due to overall market, 30–40% the sector it trades in and 10–15% the company’s business performance itself. This explains why all gold stocks are in the gutter. People often ask what’s up with this company or that and my typical reply is. . .nothing.

For big gains in mining stocks, we generally have to wait for the sector to turn in earnest and the tide will lift all boats. Sometimes, with very special discoveries, a junior can buck the trend, as we saw with our top pick the last year, Zenyatta Ventures Ltd. (ZEN:TSX.V), but large counter moves to a sector are rare. If the general market gets smoked and it’s a liquidation race, gold and silver stocks will get hit, but they tend to recover after the initial blast. And once we’re in full stride of the phase 3 bull frenzy, we will likely see the market going lower and mining stocks skyrocketing.

TGR: The gold markets have been lingering low for a while now. Why should investors contemplate buying gold stocks? Is bullion preferable to stock? If so, why?

EM: I recommend a mixture of both bullion and stock. First and foremost, investors in the space should initially take a position in physical gold and silver bullion, which is money. Second, mining companies indeed have leverage to the prices, as we’re experiencing now on the downside, and will again experience on the upside. The ounce-in-the-ground valuations for mining stocks are the lowest I’ve ever seen since I’ve been following the sector.

However, there are a handful of markets where the cyclical bear move was similarly devastating; 1975–1976 was very brutal and many investors capitulated right before we saw a four year, 850% rocket in the price of gold. Thirteen months after a bottom in gold stocks the average weighted return tends to be around 80%. That’s a violent bounce because it is a volatile sector, but I suspect the major move in gold stocks will see many multibaggers occur.

Once gold breaches $2,000/oz, the leverage in the junior miners will be incredible. There were gold stocks that went from pennies to hundreds of dollars per share between the mid-1970s and 1981. Even if we don’t see anything close to that, sometime in the next couple of years returns from current levels will be quite attractive.

Bottom line, every single soul in the world should have at least 10% of his or her investable assets in gold and silver. Folks with a lower risk tolerance who mainly want to protect their purchasing power should swing heavily in favor of gold. Those who want to take on more risk may want to weight more exposure in silver and mining stocks.

Personally, mining stocks are so cheap I have been putting new money 2-to-1 into the stocks over physical bullion. I also own more silver than gold, which as the poor man’s gold will kick in big time toward the end of the cycle because the common man may not be able to afford an ounce of gold at $2,500–$3,000/oz.

I have long-term price targets of $3,200/oz gold and $150/oz silver. The rationale is quite simple: If you take the percentage move that gold had in the 1970s ($35/oz low to $850/oz high) and cut it in half, you get $3,200/oz gold. A typical 16-to-1 ratio on silver at that price is $187.50/oz, which I cut down to $150/oz to leave room for error. Gold and silver may indeed go much higher but these are the price targets I am banking on and will not consider selling any physical metals until they hit these price targets. You can argue all day that the environment today should propel a much more severe percentage gain from the 1970s but I feel the analogy above is reasonable.

The important thing is to know how secular bull/bear markets work—this thing is not over yet. Bull market frenzies don’t end with virtually nobody yet owning the asset. Even in 2011, how many of your friends and relatives had 10–20% of their assets in gold? Maybe 1 out of 100 even in my circles, but that ratio will be much higher in the blow-off stage when the public comes in en masse. In contrast, a market bottom typically sees vast investor hatred, frustration, disgust, aversion, avoidance and indifference. Does this sound like the recent sentiment of your favorite gold stock?

TGR: Please define the term “market fundamentals” and explain why investors should pay attention to the much talked about Pareto Principle. Given that it may be a true principle after the fact, how can an investor make predictions using it in real time?

EM: I’ll give the exact definition of the Pareto Principle here from Investopedia and then comment: “A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes. Also referred to as the ‘Pareto rule’ or the ’80/20 rule.'”

The Pareto Principle could actually discount the validity of market fundamentals. His theory is translated that 80% of a market’s movement will occur in the last 20% of time. This has proven very true in the work I’ve done looking into secular bull markets. It speaks to the “frenzy or blow-off” stage of markets. Frankly, whether it was Internet stocks in 2000, real estate into 2007 or eventually gold and gold stocks in the future, it makes no difference. The investor psychology component seems to be the driving force of ultimate returns as the masses slowly then quickly get involved in these markets toward the end while smart money is selling. Look at what gold did from 1978–1980 or Internet stocks from 1998–2000 and it would seem this principle holds water. It’s also a very exciting theory because, if true, “we ain’t seen nothing yet” as it pertains to precious metals and mining stocks.

This speaks to why being on the right side of the emotional curve when investing is critical. Fundamentals are important to me as a back stop and we’re now in a junior mining market where the fundamentals and assets of many of these companies are being valued at pennies on the dollar. Fundamentals will improve drastically when gold goes up but I consistently stress the importance of regular accumulation of your favorite assets until the asset exceeds your buy price. For example, I’m a regular buyer (monthly or when I have a cash infusion) of physical gold up to $1,600/oz. I just buy it wherever it is as long as it’s below that price. That way, the longer the cyclical bear correction lasts or the lower it goes, I will have more ounces when it eventually goes up, at an average price accumulation.

This also speaks to “stress free” investing as it does not put pressure on me to buy the low all at once, which is highly unlikely even for the best of us. This is a psychological defect that cripples many investors. They tell themselves it’s all or nothing and zero or hero—no middle ground. However, I’ll gladly buy a stock at $2 then $1.75 then $1.50 then $2 if it is eventually going to $5. If I didn’t buy at $2 initially, chances are that I would not have pulled the trigger at the low of $1.50. Investing is a process for me and operating this way also allows for the fun in it to flourish, versus much undo pressure people put on themselves when they allow no flexibility for volatility, which is normal.

TGR: How does a wise investor hedge gold investments? How do inverse funds work?

EM: There are plenty of simple hedges these days that can be bought just like a stock. PowerShares DB Gold Double Short ETN (DZZ), VelocityShares 3X Inverse Silver ETN (DSLV) and Direxion Daily Gold Miners Bear 3X Shares (DUST) are all examples of leveraged shorts on gold, silver and mining stocks. These can come in handy when investors are jittery about their holdings or when gold or silver breaches a key technical support level. Instead of rushing to the dealer with a 42-pound monster box of silver American Eagles, you can simply buy DSLV as a hedge on your holdings. I only use these vehicles for trades, not against long-term holdings.

TGR: Are dividends worth the trouble of keeping investments in the gold companies when share prices are stuck low? What about royalty companies?

EM: Dividends definitely help! There are some awesome companies in the gold mining sector that pay handsome dividends currently. I like IAMGOLD Corp. (IMG:TSX; IAG:NYSE), which is paying 5.4%, and Market Vectors Junior Gold Miners ETF (GDXJ), the junior mining index, is actually paying out a hefty 7.3% annually right now. Not only is there big upside in these companies long term, but we can also get paid for our time holding with juicy distributions. One other one worth mentioning is Gabelli Global Gold, Natural Resources & Income Trust (GGN), which is paying $0.12 cents per month and you can buy it under $11/share. This trust has paid a very consistent dividend around this level for a decade and I like it for a yield play right here.

TGR: What do you think of royalty companies?

EM: Royalty companies are the cream of the crop due to the way they structure their deals with producers. They do not suffer from cost problems because their take is on gross revenues/production so the income streams are much more predictable and the overhead for the companies is usually very low.Silver Wheaton Corp. (SLW:TSX; SLW:NYSE) has a $7 billion market cap and only 28 employees. There’s a similar situation at Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX). Those two are the blue chips in the gold and silver royalty space and are worth having a piece of in one’s portfolio.

TGR: You have been championing Zenyatta Ventures for a while. But its stock slipped from $5 to $2/share. That is bad news for those who bought in at the high, is it not? Is it good news for investors looking to buy in at a low? What does Zenyatta have going for it in the graphite mining, copper and platinum space?

EM: I scoured the earth looking for stocks that could give us good returns last year when I thought the gold junior market had further to fall. I coined Zenyatta as my top pick in August 2012 when the stock was near $0.20/share. It utterly skyrocketed to $5 in less than a year.

Similar to what I mentioned with gold going up 12 years in a row and needing a breather, Zenyatta’s pullback is healthy. There were too many Johnny-come-latelys piling into Zenyatta who heard about it from a friend and didn’t understand its business. Now those investors are puking out in the $2s and I think it’s a perfect time for investors to take a very serious look at it. I decided to write a thorough report just a few weeks back that readers can review here.

I’ve learned that a stock can go up 25-fold and people can still lose money! Seriously, it’s a shame when investors write me that did see me recommending Zenyatta well under $1/share only to finally buy at $4 and then sell at $2.50 because they got freaked out. I was actually taking profits there but some people really do trade mainly on emotion and Zenyatta was rocking this past summer.

Zenyatta is just a couple of weeks away from releasing a maiden NI 43-101 on its very special Albany graphite deposit. This is the real deal. Zenyatta’s graphite is a freak of nature and the company has a LOT of it. My report link above takes time to walk through some economics but I think a couple of impactful things will happen soon:

1. The NI 43-101 will allow some serious institutional money to buy shares; they have been on the sidelines until Zenyatta proved it has what it has said it has drilled. The stock is too heavily retail focused and institutions, not retail, take stocks from $2 to $10/share.

2. I think there’s better than a 50/50 chance someone tries to buy Zenyatta before it releases the preliminary economic assessment (PEA) in Q1/14. What price? Who knows, but I’ve stated I would not entertain anything under $500 million ($500M) and that takes the stock to nearly $10/share. If I’m right, there’s still a lot of room to get involved here. So, yes, I believe the recent retracement in the share price, which is very volatile, is a blessing for new people learning about the story here.

TGR: How about rare earths? Do you have any picks in that space?

EM: I only like Medallion Resources Ltd. (MDL:TSX.V; MLLOF:OTCQX; MRD:FSE) in the rare earth sector. The company is shortcutting the entire exploration/production cycles that every other public rare earth company has to do. Many times rare earth projects have severe metallurgical challenges that companies gloss over to their investors. It ends up that the projects cost much more than initially planned, take way longer to get into production and fall short on actual producing of materials.

Medallion doubled after we picked up coverage from $0.20 to $0.43/share over the summer but is now back in the low-mid $0.20s. I think it’s an excellent buying opportunity. I wrote a detailed report on Medallion fairly recently on my blog as well.

The report walks through Medallion’s financial partners in the Middle East and other key factors to consider when assessing the company for a potential investment. It is still fairly early in Medallion’s development but the company is knocking out huge barriers to entry with recent alliances in Oman. Its financial partners on this project are huge and eager to create jobs in the Middle East and enter the rare earth sector, diversifying out of oil money.

Medallion will likely structure a deal that carries the company to production (or most of its costs to production) while maintaining control and majority ownership in the project. I expect a lynchpin monazite supply agreement and coverage by a reputable brokerage firm by year-end. Early next year I see many possible catalysts, including initial results from an environmental study, securing financial terms with partners and accelerated plans to get to production in 2015–2016. This is eventually a cash flow play; Medallion could earn $50M to $70M in its first year of production, but it’s a tiny $15M market-cap stock, so the upside is enormous if it pulls this off.

TGR: Now for gold: I hear you like Timberline Resources Corp. (TLR:NYSE.MKT). Why? Its share price has been falling off a cliff of late.

EM: Timberline is now a part of our very select “$0.20 to $2 within 2 years” focus list. Details about the company from a vantage point of a new investor taking a look at it can be read here.

All the juniors have fallen off a cliff. There’s nothing specific to Timberline’s story that caused it to get walloped except a financing the company did at $0.20/share in September. It cooled Timberline off quicker than the other juniors that rallied big in late summer. Timberline basically doubled this summer before coming back under $0.20.

TGR: Timberline has been selling off properties and seems to be betting on finding new gold in the Butte Highlands project. What are the chances of that? Does it have partners with deep pockets?

EM: Butte Highlands is a key piece to Timberline’s story. In addition to the details in the report linked above, I will say the company was carried to production by a very strong financial partner. Timberline owns 50% of the mine and will have circumvented nearly $40M in development costs to take the mine into production. It is VERY close after years of work in Montana in getting the final operating permit. I still think we see final approval around the end of the year and Timberline could be pouring gold 30–60 days thereafter, maybe 90 days. The company should produce 40,000 oz per year at around a $900/oz cash cost. Initially, Timberline takes 20% of revenues until the backer is paid from carrying development, then it flips to 50/50.

I estimate numbers in my report but, essentially, after Timberline pays this thing off, it could be cash flowing more than $10M per year at Butte. That may take three years but its market cap is nothing. Butte isn’t even Timberline’s flagship project; that is South Eureka/Lookout Mountain in Nevada. I just went to visit a few weeks ago and it’s a huge property that has multimillion-ounce potential. Timberline’s share of the Butte development cost OR Nevada is getting zero value in the marketplace, and they are both valuable assets. With Timberline, you get exploration upside and revenues/cash flow in the very near term.

I suspect Timberline will need to do another financing fairly soon. The stock is so cheap I would begin buying now, then after any financing, load the boat. I don’t think the company will have to raise a lot of money and I also believe it could cut a similar deal in Nevada to what it did at Butte. If so, Timberline essentially just needs to pay its bills and can make huge progress. Once cash flow pours in from Montana and/or market conditions improve, it can drill out Nevada into a very attractive resource.

TGR: Any other juniors that tickle your fancy?

EM: I’ll give you two new juicy picks, both outside of the gold box. The first is Cardero Resources Corp. (CDU:TSX; CDY:NYSE.MKT; CR5:FSE), trading at $0.14. This is a coal play and it is terribly cheap. An insider has stepped up to finance the company after a previous partner tried to steal its world-class Carbon Creek resource in Canada for pennies. This insider is in it for the long term so money is not an issue for the company. I believe Cardero will sell in the future for a significant premium to current prices. It was a $5/share stock in 2006 and $1 not long ago. Tax-loss selling is in effect and I have my catcher’s mitt on, gobbling up a large position here in the teens.

Coal stocks are in the gutter just as gold and silver stocks are, but the market will turn around just as the sun rises in the east and sets in the west. When it does (and there are early signs that it is now), it will be fierce as coal is a very volatile commodity. I haven’t written a public report on this one so your readers have to do their own homework. But I don’t think the company would sell for less than $1/share and if you look at comps from other deposits bought by majors in the area (there are only two left owned by juniors and Cardero is much further along and is higher quality), we could justify closer to $3/share as the ultimate price tag. This one won’t happen overnight but for patient investors, the price here is a total steal.

The next pick is Poly Shield Technologies Inc. (SHPR:OTCBB). This is an incredible story and it seems no one knows about it yet. I haven’t written a report on it yet but I will. For now, here’s a good intro interviewwith the company’s chairman and founder, Rasmus Norling.

The float is very tight on Poly Shield and I believe the company plans on cancelling a big chunk of its shares outstanding by the end of the year, essentially cutting the market cap in half overnight. The upside potential here is just massive. In fact, I think it may be one of the fastest companies ever to go from zero to more than $1 billion in revenues in history. Poly Shield has the only solution in a new market being created in the huge shipping/maritime industry due to government regulations to reduce sulfur output. The company’s solution is one-tenth the cost of competitors and has massive size and operational benefits as well. The maritime industry has a gun to its head to do something and Poly Shield will get a huge chunk of this business.

Poly Shield has contracted more than 40 ships already but it is really just the beginning. I believe we’ll see an accelerated pace of big contracts going forward and an even greater pace once we break into 2014 and shippers are forced to act or are left out in the cold. If Poly Shield signs on 500 ships between now and next fall, it’s a $10 stock, and with 1,000 ships, it could be a $20 stock. Again, the upside is massive here; I’ve never seen anything like it where I got involved this early and all the stars were lining up.

Most of the companies I’ve mentioned have big upside but I always remind people that with that potential typically involves correlated risk. So, I’d remind everyone to do their own homework and be prepared for volatility if buying any of the names mentioned in this interview.

TGR: Thank you for your insights.

Readers can receive Eric Muschinski’s Gold Investment E-Letter for free here.

Eric Muschinski, the editor of Gold Investment Letter, is founder and CEO of Phenom Ventures LLC, president and co-founder of Investor Media Inc. and co-founder and managing member of Diadem Media Group. Muschinski has been recommending gold and silver accumulation since 2003 to his clients and has over 15 years of diverse experience in the capital markets. Initially as a general securities broker, and later becoming recognized as a specialist assisting the needs of high-net-worth investors, Muschinski focused his practice on alternative investments, including venture capital, private equity and alternative investment management, exclusively for accredited investors and institutions. Prior to Waveland Capital Partners where he worked from 2006–2011, Muschinski was vice president and co-founder of GunnAllen Venture Partners and has also served in the Private Client Group with McDonald Investments Inc. Muschinski studied business economics and psychology at the University of Wisconsin-Whitewater while interning at both Piper Jaffray and Merrill Lynch.

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Article by Investazor.com

The BOE’s Governor Mark Carney hold today a press conference through which brought positive news for the British economy and the worldwide investors. Considering the recent events, we can observe a sustained growth rate, even if the Euro zone is still transmitting an instability feeling.

Analyzing the recent developments, July may be considered the latter period of worrying, when they raised the issue of households and companies which seemed to move more slowly. Also during this period, inflationary pressures were considered as priority issues. Moving forward in August, Bank of England looks ready to intervene if the situation demands it. In fact, it did nothing but encourage the rhythm of growth that already started. In October, having the benchmark maintained at 0.5% and the stimulus program in place, the unemployment rate started to slow down and the GDP advanced 0.8% (mainly sustained by the services sector).

Today, the BoE’s officials could proudly affirm that the British economy is strongly recovering. The unemployment rate decreased to 7.6%, closer to the Bank of England’s key threshold of 7%. Economists are now tempted to see the key threshold touch late in 2014, two years earlier than it was expected in August. Yet, some realistic voices suggest 2016 as a more appropriate term for the unemployment rate to rich the desired verge. Likewise, Mark Carney announced that the central bank raised its growth forecasts for 2013 by 1.6% and for 2014 by 2.8%.

After the aforementioned mentioned news released, investors started worrying about an interest rate increase, but Mark Carney assured everybody that and interest rate increased increase is not taken into consideration at least until the unemployment rate gets to 7%. He also highlighted that the economy condition of the country is giving the impulses for changes in any of the Central Bank’s tools.

The post Bank of England Gives Good News, Again! appeared first on investazor.com.

By CentralBankNews.info
    Pakistan raised its policy rate by 50 basis points to 10.00 percent, as expected, describing inflationary pressures as “resurging,” with the result that the inflation rate is likely to remain between 10.5 percent and 11.5 percent and this could damage the productive capacity of the economy, encourage an outflow of capital and increase the pressure on the exchange rate.
    It is the third change in rates by the State Bank of Pakistan (SBP) in 2013, for a net rise in rates of 50 basis points. SBP cut its rate by 50 basis points in June as it continued a two-year easing cycle that lowered the policy rate by 500 basis points. But in September the SBP reversed course, concluding that interest rates were not the cause of low credit demand, and raised its rate by 50 basis points to combat rising inflation.
    Pakistan’s inflation rate rose to 9.08 percent in October, the fifth month in a row with rising inflation after reaching a year-low of 5.13 percent in May, the culmination of 12 months of falling inflation.
    Economists had expected the rise in inflation to lead to a rate rise by the SBP and some see further tightening in early 2014.

    The SBP, which targeted inflation of 9.5 percent in 2012/13, said “resurging” inflationary pressures could be seen in the first four months of fiscal 2014, which began on July 1, and both food and non-foods were contributing to the rise.
    “With the continuation of these trends CPI inflation is likely to remain at an elevated level, between 10.5 to 11.5 percent,” the bank said.
     The bank added that higher inflation could raise the incentives for borrowing and discourage savings, raising demand pressure through consumption and dampen investment and thus the productive capacity of the economy.
    “In addition, with fragile external flows, a negative real return can encourage the outflow of foreign exchange, increasing the pressure on the exchange rate,” the SBP said.
    Pakistan’s rupee started depreciating rapidly toward the end June, with the rupee trading around 107.5 to the U.S. dollar today, down 8.5 percent from 97.35 at the end of last year.
    Pakistan’s economy slowed slightly in the 2012/13 fiscal year with Gross Domestic Product expanding by 3.59 percent, down from 4.36 percent the previous year.
    The SBP said the fundamentals of the economy appeared stable and was encouraged by a successful political transition following election,  the resolution of energy related circular debt and further structural reforms that are underway.
    “Although it is too early to conclude about their impact, there are some indications of a pickup in economic activity,” the bank said, adding exports had picked up by 1.3 percent in the first quarter of the current fiscal year.
    But weak financial inflows continued to lead to a deterioration in the external accounts with a current account deficit of US$1.2 billion in the July-September quarter, the same as in the previous quarter, and a wider trade deficit due to imports rising faster than exports.
    Including substantial repayments to the International Monetary Fund (IMF), SBP’s reserves declined by $1.3 billion in the first quarter to $4.2 billion as of Nov. 1.

    www.CentralBankNews.info

London Gold Market Report
from Adrian Ash
BullionVault
Weds 13 Nov 08:55 EST

ANALYSTS cited comments from a US Fed policymaker on a likely reduction next month in the pace of asset purchases for a new 1-month low in gold Wednesday morning, with prices eventually bouncing $15 from $1262 per ounce as world stock markets also slipped.

 QE tapering “could very well take place” in December, said Atlanta Fed president Dennis Lockhart late Tuesday.

This jars with analyst forecasts, which after the central bank failed to start tapering in September now see the Fed waiting until March according to Bloomberg News’ latest survey.

 Current vice-chair Janet Yellen, due to be installed by then as Fed chief, speaks to US lawmakers tomorrow to defend her nomination.

 “Technically, gold is finding strong support at $1275,” says a note from South African investment bank and global bullion dealers Standard Bank.

 But “a break lower is likely in the absence of strong physical demand…Demand from China has improved marginally, but is still weaker than the last time gold was trading below $1300 in mid-October.”

 “Gold’s negative reaction,” Bloomberg quotes HSBC analyst Howard Wen, “to the possibility of a December Fed tapering indicates that the bullion market is likely to remain sensitive to expectations for changes in monetary policy.

 “We expect the bullion market to remain data-dependent.”

 “Price action is weak,” says a technical analysis from Scotiabank, “with the metal registering 7 down days in the past 10 trading session.”

 Now more bearish on gold than silver, SocGen technician Stephanie Aymes says that “short-term, 1285/89 will limit upside” in gold, now most likely heading to the recent low at $1251 before dropping to $1222 over the next 3 months.”

 “In terms of maintaining the immediate pace of descent,” Credit Suisse analyst David Sneddon told Reuters on Monday, “I would feel more comfortable seeing $1268 broken, but our bias is for prices to come through there.”

 “For me,” says Richard Adcock at fellow Swiss investment bank and London market-maker UBS, also speaking Monday to Thomson Reuters, “the more significant support would be the 50% retracement of the February 2001 to September 2011 advance, which stands at $1082.60.

 “That for me would be the next longer-term target level to look for over the next weeks and months.”

 Gold for UK investors meantime fell again through £800 per ounce on Wednesday, as the British Pound reversed yesterday’s drop following improved economic forecasts from the Bank of England.

 UK interest rates are not certain to rise, however, if unemployment falls to 7%, said central-bank governor Mark Carney, addressing recent talk of a possible rise in UK interest rates when presenting the latest quarterly Inflation Report.

Seven per cent “is just a staging post,” said Carney, putting the odds of a drop to that level by end-2014 at 40%.

UK joblessness fell to 7.6% over the summer, new data said today. Average earnings, however, continued to lag the rate of consumer price of inflation.

Following gold lower but failing to rally as hard, meantime, silver today touched a 1-month low at $20.60 before recovering to $20.80, some 3.4% down for the week so far.

Silver investment demand in 2013 will account for some 24% of the total market, said Andrew Leyland of Thomson Reuters GFMS, presenting at last night’s Silver Institute dinner, up from 4% a decade ago.

That rise mirrors the decline GFMS reports in photographic demand, down from 25% of the global silver market in 2003 to just 5% today.

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

by Mohammad Zulfiqar, BA

Emerging market equities have taken center stage these days because, according to some, the key stock indices in the U.S. economy are reaching the overpriced mark. Investors’ returns aren’t going to be as robust going forward; there’s a significant amount of noise about them taking the shape of a bubble.

With all this happening, investors are asking which emerging market economy they should invest in. Should they buy companies operating in India? Or is China still the best emerging market economy in which to invest?

The answer to this question is not as easy as it may seem to some. Investors have to keep in mind that each emerging market is unique—it presents different opportunities, risks, and rewards.

Take China, for example. As key stock indices in the U.S. economy have increased this year—the S&P 500 is up more than 23% so far—the stock market in the Chinese economy hasn’t performed as well; in fact, the key stock indices there have declined. Please look at the chart below: the Shanghai Stock Exchange Composite Index has declined more than 6.4% between January and October.

            Chart courtesy of www.StockCharts.com

Does this mean there’s room for growth? Don’t be too quick to judge. The Chinese economy is going through a bit of an economic slowdown. This year, the country’s gross domestic product is expected to increase much less than its historical average; the growth of the Chinese economy is projected to be lower next year as well. At the same time, there’s noise stating that there may be a credit crisis in the country.

If all of the trouble growing in the Chinese economy picks up speed, then China is certainly not the emerging market to invest in.

Investors need to consider that those investing in just one emerging market are exposing their portfolio to too much risk. To reduce their risks, they should diversify their holdings in multiple emerging markets.

The reasoning behind this is very simple: if their exposure is with different emerging market economies, their portfolio won’t see as much fluctuation as it would have just by investing in one certain country. As mentioned earlier, investors would have losses in their portfolio if they thought China was the best emerging market to invest in.

Thanks to financial innovation, this process is much easier now. Through many different exchange-traded funds (ETFs), investors can add emerging market equities to their portfolio.

One ETF investors can use to expose their portfolio to the emerging markets is iShares MSCI Emerging Markets (NYSE/EEM). This ETF provides investors exposure to emerging market economies like South Korea, Brazil, Russia, India, and many others. In addition to all this, it also diversifies into different sectors. (Source: “iShares MSCI Emerging Markets ETF,” iShares web site, last accessed November 7, 2013.)

This article Profit from Emerging Markets with Just One Investment was originally published at Daily Gains Letter

By RoboForex.com

Analysis for November 13^th, 2013

EUR/USD

The H4 chart of the EUR/USD currency pair shows correction, which is indicated by Hammer and Harami patterns. Three Line Break chart indicates descending trend; Heiken Ashi candlesticks confirm that correction continues. Upper Window is resistance level.

The H1 chart of the EUR/USD currency pair shows correction within descending trend. Three Line Break chart indicates descending movement; Heiken Ashi candlesticks confirm that correction continues.

USD/JPY

The H4 chart of the USD/JPY currency pair shows bullish tendency. Three Line Break chart and Heiken Ashi candlesticks confirm ascending movement; Evening Star pattern indicates possibility of bearish pullback.

The H1 chart of the USD/JPY currency pair shows correction within ascending trend. Three Line Break chart and Heiken Ashi candlesticks confirm descending movement.

RoboForex Analytical Department

by Sasha Cekerevac, BA

Of all the central banks around the world, the European Central Bank (ECB) has rarely surprised markets by making monetary policy adjustments without some hints to the market first.

But this is exactly what happened last week when the ECB lowered its benchmark interest rate to a record-low 0.25% in hopes to spur economic growth. (Source: European Central Bank, November 7, 2013.)

This monetary policy change is a much bigger deal than many people realize.

First of all, as I just discussed last week, many investors have been expecting economic growth to finally emerge within the eurozone. This change in monetary policy by the ECB just validates what I’ve been saying for some time: that economic growth is nowhere in sight.

This is not news. How many years has it been since the Great Recession, and where can you find true, fundamentally strong economic growth?

All I see are central banks trying to outdo each other with easier and easier monetary policy (money printing).

With the ECB benchmark interest rate now at 0.25%, how much more ammunition does the bank have left? Does anyone really believe that a quarter-point drop in interest rates will revive economic growth for the region? I certainly don’t.

But this goes beyond just the eurozone. What the ECB is doing with monetary policy is more than simply printing money; it’s trying to lower the euro currency. And while the central bank isn’t explicitly stating that this is its plan, in my opinion, it is still a significant consideration.

Look at what the Japanese central bank has done. Japan has enacted one of the largest monetary policy (money printing) programs ever in an effort to stimulate economic growth. What Japan’s really trying to do, with some effect, is lower its currency to boost exports.

But there’s a problem with that model. Over the long term, no country has ever devalued its way to true economic growth. Sure, over the short term your export industries might get a boost, but the citizens lose their wealth as buying power is eroded.

Even in Japan, exports are benefiting, but citizens are not seeing wages increase and the prices of imports (including energy) are rising.

The entire world can’t simply continue devaluing currencies and printing money forever. For decades, we’ve seen South American nations try the same tactics and ultimately fail.

This monetary policy action by the ECB is yet another shot at trying to boost economic growth by lowering the region’s currency.

So where does this leave the Federal Reserve? Can it really begin reducing its monetary policy program when central banks around the world are printing money like it’s confetti?

If the Federal Reserve does begin to reduce its monetary policy stance, this would (on the margin) drive investors to boost the U.S. dollar versus nations that are more aggressive in their money printing. This action would create pressure on our economy, fragile as it is, by weakening exports.

The situation might then arise where all of the central bankers are looking over their shoulder at each other, waiting for inflation to flare up before reducing their money printing. But it could be too late by then, as bubbles continue to build in many markets globally.

These are difficult times; there’s no question about it. This also means that citizens in nations where monetary policy keeps money printing going at a rapid rate are subject to a loss in purchasing power (wealth).

Central banks are adamant that they want to see higher levels of inflation through monetary policy to support economic growth. The only question is: can they rein in inflation if it gets out of hand? Only time will tell.

Until then, investors should look to hard assets as a store of wealth. As I’ve discussed in this column before, it’s no secret that the wealthy are trading their paper dollars for hard assets, as there is a growing demand for real estate, diamonds, art, and physical precious metals. Having some sort of hedge to any one currency is a prudent move for investors at this point.

This article What the New Record-Low ECB Interest Rate Means for U.S. Investors was originally published at Investment Contrarians