Month: December 2013

By MoneyMorning.com.au

It’s a certainty.

The die is almost cast.

It’s just a matter of time.

The issues that have affected most of the Western world’s economies are heading straight for Australia.

If it affects the Australian market in the same way that it affected overseas markets it should be an unprecedented boom time for Australian stocks.

Of course, nothing is certain. But with the market continuing to slide, we’re firmly staking our money on this certain event happening and it providing a crucial boost for stocks…

A report in yesterday’s Australian confirms everything we’ve said for the past few months – the Australian government is in a debt hole, and it continues to dig deeper:

‘Treasurer Joe Hockey is seeking the Greens’ support for an elimination of the debt ceiling, which would do away with the need for Labor support for its proposed $200 billion debt ceiling hike.‘

This shows you the two-faced nature of politics. Not so long ago Mr Hockey was screaming blue murder about the Labor government’s debt position. Now Mr Hockey wants to get rid of any hurdles lying in the way of the government going further into debt.

Not that the Labor party can say much. You may remember that before the 2007 election Kevin Rudd trumpeted his ‘fiscal conservative’ credentials. Within a year fiscal conservatism was out the window as Mr Rudd railed against so-called ‘extreme capitalism’.

The latest move by Joe Hockey proves governments have learned nothing, and yet they’ve learned everything.

Debt Up, Rates Lower…Dollar Down the Toilet

On the one hand governments have learned nothing. You would think that after such a disastrous boom and bust period followed by five years of economic turmoil that governments would stop spending and try to reduce debt.

That’s what an individual would do if they were in a similar position. If a person had borrowed too much, gotten into a lot of trouble, but fortunately managed to keep their job, they would likely think twice about going further into debt.

More likely the person would count their blessings and make sure things never got that bad again.

But that’s not how governments work, because governments aren’t like people. Governments have one trick up their sleeve that’s not available to anyone else – if the government can’t pay its debts using its ‘wages’ (tax dollars) it can just issue more debt…and more debt…and more debt.

This is nothing new. This is exactly what you’ve seen happen overseas. It’s why we say they’ve learned nothing and learned everything.

The attempt to abolish the debt ceiling is the final proof that Australian government debt is about to skyrocket, interest rates are staying low for the foreseeable future, and the Australian dollar is about to head down the toilet.

All of which – bizarrely – should spell good news for Australian stocks…

It Doesn’t Make Sense to Hold Cash Over Stocks

The race to the bottom in the global currency wars continues.

Japan and the US have tried to destroy their currency for years. They’re doing a pretty good job of it too. The Europeans are also getting in on the act. They destroyed a whole bunch of national currencies more than a decade ago when they switched to the euro.

Now they’re intent on destroying the euro too.

Next on the path of destruction is the Australian dollar. It’s following the same path as other currencies. First the government keeps spending and issuing more debt.

It keeps raising the debt until it seems it couldn’t possibly issue any more. That’s when the central bank steps in with what the central bankers like to call ‘unconventional monetary policy’.

Overseas, that policy has involved the central bank buying government bonds. We see no reason why that won’t happen here. In fact, the government has already signalled it will do this. Why else do you think the Treasury recently shifted $9 billion back to the Reserve Bank of Australia (RBA)?

It’s so the RBA can make its first government bond purchase using ‘cash’ rather than freshly printed money. Once the markets and investors have gotten used to the idea of the RBA buying government bonds it will be so much easier to convince them that using printed money to buy bonds is fine too.

This is exactly why, despite the recent wobbly market, Australian stocks will soon hit back. You only need to look at the impact money printing has had on stock prices in Japan, the US and Europe.

Some will continue to argue that money printing is terrible and that it’s madness that the stock market should rally. We agree with that. It is madness. But we’ll also ask would you rather hold on to that devalued money as a cash investment or ditch it and hold something of value (stocks) that should appreciate as cash depreciates?

It’s a no-brainer. If you don’t own stocks not only are you holding on to devalued money, but you’re also missing out on what should be double- or even triple-digit percentage gains.

Cheers,
Kris+

Special Report: The ‘Wonder Weld’ That Could Triple Your Money

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By MoneyMorning.com.au

By MoneyMorning.com.au

The best place to park some cash in the last five years was in Bitcoin, the digital currency.

Bill Bonner wrote recently in a note to members of his family office (of which I am one):

‘The value of [Bitcoin], per unit, has gone from under 10 cents when it emerged, in 2008, to $754 at this writing. If you’d put in $10,000 a few years ago, your stake would be worth over $75 million today.‘

There’s nothing that has come close to that.

Which inspires the thoughts that follow. Below are some speculations about the nature of money, Bitcoin, the US dollar and the wealth-generating power of a simple coffee can.

I don’t know that anyone turned 10 cents into $75 million, but there are a lot of great stories out there about people reaping big gains with Bitcoin. I like the one about the guy from Oslo who bought $27 worth of Bitcoin – and then forgot about it. Four years later, he remembered, and found out his account was worth $1 million.

This story illustrates the power of what I call…

The Coffee Can Idea

The premise of the coffee can portfolio, you may remember, is to take a select group of stocks and forget about them. Figuratively speaking, you put them in your coffee can. Open 10 years later and see what you have.

What’s in your coffee can?
Click to enlarge

The theory is you’ll be richer for your negligence, which protects you against your impatient and impulsive self. There is no way our man holds onto his Bitcoin if he’s paying attention. He talks himself out of his gains long before they hit $1 million. But he coffee-canned it, and made a handsome pile.

That’s the power of the coffee can concept.

Anyway, the guy wound up cashing in his Bitcoin once he found out his stash was worth a million bucks. He used one-fifth of that stash to buy an apartment in an expensive part of Oslo. Nicely turned.

Predictably, mind-boggling returns in Bitcoin have led to the creation of lots of new digital currencies: peercoin, namecoin, worldcoin, gridcoin, fireflycoin, zeuscoin, hobonickels and more. According to The Wall Street Journal, there are more than 80 such variants.

And why not? It’s of a piece with speculative mood of the times. Frankly, I don’t know what to make of it all.

I know a lot of people frame Bitcoin as some sort of free-market competitor to the US dollar – or to any state-backed currency. On one level, this is obviously true. Bitcoin is an option of something you can hold instead of dollars, at least for a time. It’s a competitor to the dollar in the same sense as an ounce of a gold, a share of stock, a barrel of oil or a piece of real estate.

But Bitcoin isn’t a threat to the US dollar as a currency – at least for the American taxpaying population – unless one thing happens: The government accepts it for the payment of taxes.

I know that’s about as likely as snow in Miami.

But it’s useful to think about because it gets to a question of why we accept paper dollars at all. Why does the US dollar have any value at all?

There are many theories on the nature of money. I have become enamoured lately with the ideas of a little-known writer named Alfred Mitchell-Innes. He wrote a pair of essays in 1913 and 1914 that explored the history and nature of money.

The essays got quite a bit of attention in their day, even drawing the review of John Maynard Keynes. But economics went in another direction, and Mitchell-Innes got lost in the mists until a recent revival by a fringy group of economists and anthropologists.

The full story, as interesting as it is, would take us too far afield. Mitchell-Innes, though, made one point in these essays that is a timeless observation relevant here. He wrote, ‘Government money is required everywhere for the discharge of taxes or other obligations to the government.‘

It’s pretty simple. If he’s right, then acceptance of the dollar depends on the ability of the US government to collect taxes. And the US is very good at collecting taxes, which any number of otherwise hard-to-bring-down criminals have found out. (They got Al Capone on tax evasion, don’t forget.)

So the US levies taxes on the US population, and when combined with its fearsome tax-gathering goons and prisons, it instantly turns everyone in dollar-seekers to settle those obligations. I think people tend to forget this elemental truth, especially when they start talking about Bitcoin.

Does Bitcoin Belong in a Long Term Plan?

It’s been true since the time of kings and explains why all kinds of odd things have been money at some point. Randall Wray, who seems like a bit of a nut, sums it up nicely in a book about the work of Mitchell-Innes (Credit and State Theories of Money):

‘Why would the population accept otherwise ‘worthless’ sticks, clay, base metal, leather or paper? Because the state agreed to accept the same ‘worthless’ items in payment of obligations to the state.‘

This doesn’t mean Bitcoin can’t grow in value or settle transactions among individuals. Of course it can. And it doesn’t mean the dollar can’t lose value over time. Of course it does.

The dollar, despite its ability to settle up with Uncle Sam, isn’t an investment. It’s really a token, a way of keeping score. It’s something to tally up credits and debits. This is an idea Mitchell-Innes understood.

And Bill Bonner, to bring the thing ’round to where I began, also knows this: ‘Money is just a placeholder,‘ he wrote. ‘It has no value in itself. It just signals your position relative to everyone else… It doesn’t really matter what you use as money. But some things work better than others.‘

As for Bitcoin, your guess is as good as mine what happens. (I don’t own any.) As for the US dollar, until the facts discussed above change, we’re stuck with the US dollar. But I wouldn’t put it in your coffee can.

Chris Mayer
Contributing Editor, Money Morning

Ed Note: Why Bitcoin is Not a Threat to the US Dollar originally appeared in The Daily Reckoning USA.

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By MoneyMorning.com.au

Source: Kevin Michael Grace of The Gold Report (12/2/13)

http://www.theaureport.com/pub/na/no-title-15737

The end of the year is in sight, and many investors will soon be forced to take painful losses. David H. Smith, senior analyst at The Morgan Report, says that smart investors will take care to cull the weakest mining stocks from their portfolios and reinvest the proceeds in truly undervalued companies. In this interview with The Gold Report, Smith contends that once the market has worked through this process, a rejuvenated bull market in precious metals will eventually lead to a vertical rise in equities, with platinum group metals leading the way.

The Gold Report: With not many weeks left in 2013, gold remains under $1,300/ounce ($1,300/oz). Is this a bottom, or will it fall lower still?

David H. Smith: Gold is substantially below $1,300/oz, true, but, at this writing, it is still higher than its June low of $1,170/oz. Nothing is 100% certain, but David Morgan believes that the bottom is probably in. A stab into new lows is certainly possible, but I would be watching to see how a move like that is handled. A key reversal day, followed by higher prices, could be very bullish. What makes me tend to agree is looking at the mining stocks I follow. Many have begrudgingly and rather slowly declined, in relationship to down-days in the gold price.

TGR: It seems that gold will end 2013 lower than the 2012 year-end price of $1,655/oz. This will break a long streak.

DHS: Yes, we actually had 12 consecutive years of higher year-end closing prices, which is something I can’t find repeated in modern history. And this 12-year bull market was a relatively gentle rise; it has not been vertical. So this tells me that the bull-market trend still has a lot of power, and it might be years before it ends.

TGR: The silver/gold price ratio remains more than 60:1. Do you expect that to change? Does a silver price increase depend on a gold price increase?

DHS: Adam Hamilton of Zeal Intelligence has studied this, and his work shows a 92% correlation between changing gold and silver prices.

TGR: Some analysts cite a historical ratio of 16:1 and suggest that we will see future movement toward that ratio. Do you agree?

DHS: The ratio fell below 20:1 during the 1980 bull market. But I think the Dow/gold ratio is more important because if we come to the point where an ounce or two of gold will buy the Dow, that suggests we may have reached a major top.

TGR: Where do you think the Dow is heading?

DHS: Over the intermediate to long term, it’s likely to go much higher, especially if the Federal Reserve keeps pumping more money into the economy.

TGR: Some people argue that this is an aspect of inflation. The banks aren’t lending this new money, and it’s ending up in equities.

DHS: More important than how much money is out there is its velocity. A lot of the money being created is turning over once and then going into the stock market rather than into the general economy. With abnormally low interest rates, people are putting their money into riskier arenas.

TGR: Andrew Huszar, who established the Federal Reserve’s $1.25 trillion mortgage-buying program in 2009, wrote in The Wall Street Journal that the Fed “continues to spin” quantitative easing “as a tool for helping Main Street,” but it is really “the greatest backdoor Wall Street bailout of all time.”

DHS: I totally agree. Most of that money has gone to the oligarchs of Wall Street and the political class; a fair amount has trickled down to the bottom, but little has reached the middle class. A strong middle class is essential for political and social stability, and statistics demonstrate that its real purchasing power is lower today than it was in the 1970s.

TGR: You pointed out that the disconnect between precious metals prices and precious metals equities exceeds two standard deviations. Could we see a rally in precious metals equities without significant increases in precious metals prices?

DHS: When you stretch a rubber band to its maximum length, the tension must be reduced or the band will snap. So, it would not surprise me at all to see mining stocks strengthening before the metals. In fact, I think that’s what we are seeing right now. However, if we blow out the lows—$18.70/oz for silver and $1,170/oz for gold—that could change.

TGR: David Morgan says that bull market corrections “will either scare you or wear you out.” How do investors protect themselves from burnout, especially now that the fall rally so many expected has fizzled out?

DHS: Investors must align their behavior with what they believe. For instance, if they don’t believe we are still in a gold and silver bull market, then they probably should get out or cut back. One of the best approaches is to try to go against your emotions, to fight “the twin dragons of fear and greed.” Investors become afraid when prices are falling and get greedy when they’re rising. You can get chewed to pieces that way.

TGR: Would you give an example of non-emotional investing?

DHS: Find a company you really have confidence in. Then take your core position and hold onto it, but keep some money in reserve. If your idea was to have 3,000 shares of a company, no matter what the price is doing when you get started, do not buy the full 3,000. Buy enough to get your feet wet, so that you feel okay if it doesn’t go well. And if it does go well, buy more.

This way, you’re almost happy to see low prices. None of us likes to see red ink on our income statements, but that’s what we are dealing with now. If you can buy lower (as prices go down, and you feel that company is one you want to hold), you have an excellent chance of becoming a winner. All of the greatest investors have done this. Jesse Livermore, Rick Rule, Jim Sinclair, David Morgan. They win against their emotions. They didn’t buy into froth, but they sold some into froth. When prices dropped precipitously, they bought the best of the best.

TGR: You’ve said that when the bull market in gold and silver equities returns, it will result first in nominal all-time highs and then in a “public mania phase.” Can you expand on this?

DHS: The public wants to be involved in something positive. That’s why the stock market, even though it doesn’t have great participation, is going up. So when we see all-time highs in gold and silver–gold above $2,000/oz; silver above $50/oz–people will say, “I’ve got to have some of that.” But they’re not going to find very much, and they’ll be competing with everybody else. So, if they want to be in gold and silver, they’ll have to get into mining stocks and ETFs.

I believe that, ultimately, this will lead to a blowout on a scale perhaps even larger than the dot-com mania of 2000. As David Morgan has pointed out, about 80–90% of the entire profit potential of an entire bull market will come during the last 10% of its run. If this becomes a 15-year bull market, the vast majority of its profits will be taken in the last 8–12 months.

TGR: Are these independent traders we’re talking about? I’ve been told that brokers have a very strong bias against mining stocks.

DHS: You’ve been told the exact truth. Frank Holmes and others have done extensive research proving that the beta coefficients of gold and silver and of precious metals stocks are no more risky—and in many cases less risky—than the stock market in general. But brokers still believe gold is too risky, even after 12 years of a rising market.

TGR: Why do you think platinum group metals (PGMs) will be the likely bull market leaders?

DHS: PGMs are a “two-doors metal,” just like silver. They have an investor quotient and an industrial quotient, and they have moved into a supply-deficit phase, which should last for some years. Finally, PGMs come from just a few (mostly high country risk) locations in the world, which causes sustained supply problems.

TGR: Which locations?

DHS: South Africa and Russia. South Africa is where most platinum comes from, and most of the operators are losing money at current prices. They have all sorts of social and labor issues. There were 34 protestors massacred at the Marikana Platinum mine last year. And I had not realized until recently just how difficult it is for miners to get palladium and platinum (and gold) out of the shallow reefs in that country. PGMs are mined from crawl spaces, often just a few feet wide—so it’s hot and dangerous.

There are properties being developed in South Africa that are amenable to automation, but they are maybe three to five years away.

TGR: How is Russia problematic?

DHS: Palladium comes mostly from only one location there, Norilsk, and the current sources are kind of played out. Alternative sources in that zone could take 5 to 10 years to reach current supply levels. My guess is that the PGM shortage will last a minimum of three years and a maximum of six years.

TGR: What is your favorite of the PGMs?

DHS: Palladium is the strongest, technically speaking. I wouldn’t be surprised to see it trading at new intermediate highs of $800–850/oz by spring.

TGR: Which PGM companies do you like?

DHS: Stillwater Mining Co. (SWC:NYSE) is a producer, one of the rare North American ones. It’s very interesting that its share prices have reflected PGM demand.

I’ve visited Prophecy Platinum Corp. (NKL:TSX.V; PNIKF:OTCPK; P94P:FSE) and written about it forThe Morgan Report. The company’s shares are only $0.47. Prophecy has the very interesting Wellgreen PGM-nickel-copper exploration property in the Yukon.

TGR: Does being in North America give Stillwater and Prophecy an advantage?

DHS: It certainly does. Country risk is such a big factor, one that should be on every investor’s mind when determining whether to buy a particular company. Some countries have fabulous deposits but political risk that is just too disproportionate. Fruta del Norte in Ecuador was one of the largest gold discoveries of the last 20 years, but Kinross Gold Corp. (K:TSX; KGC:NYSE) walked away from it after a $1 billion ($1B) investment.

I’ve visited Navidad in Chubut Province in Argentina. It has 700 million ounces of silver, but Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ) wrote off $100 million ($100M) there because of the regulatory regime. And, of course, there’s Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and its $5.1B write-off of Pascua-Lama in Argentina and Chile.

TGR: Is high country risk ever worth a gamble?

DHS: Well, there’s one PGM company in South Africa that I have a small position in: Ivanhoe Mines Ltd. (IVN:TSX). The company has the properties I mentioned above that are three to five years away. I understand that I could lose 100 cents on the dollar, if things go really wrong, but I also know the potential could be enormous.

TGR: You like streaming and royalty companies, right?

DHS: I really do, even though they haven’t been spared from the declines we’ve seen in the resource sector, much better than anyone else. But those that are well run have the potential to bounce back. I like their business model because they are spared much of the risk the typical mining company carries.

TGR: Can we talk about specific companies in that sector?

DHS: Some that come to mind are Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), which everybody knows about, and Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX). The one I like the best (I’m a shareholder) is Sandstorm Gold Ltd. (SSL:TSX).

TGR: Are Sandstorm Gold and Sandstorm Metals & Energy Ltd. (SND:TSX.V) related?

DHS: They share the same management but focus on different metals. CEO Nolan Watson and Senior VP David Awram were present at the creation of the silver-streaming model with Silver Wheaton Corp. (SLW:TSX; SLW:NYSE). I’ve interviewed them a couple of times, and I really believe they have the right idea.

TGR: Sandstorm has a much smaller market cap than Franco-Nevada and Royal Gold. In the present climate, is this an advantage?

DHS: There are advantages and disadvantages. Sandstorm doesn’t have the cash that Franco and Royal have, but it does have a nice credit line. And Sandstorm’s streaming agreements tend to be non-dilutive. Management keeps tweaking its model and learning how it can do better next time.

I call Sandstorm a lean, mean, fighting machine. That could change, though, if its alliance with Entrée Gold Inc. (ETG:TSX; EGI:NYSE.MKT) on Rio Tinto Plc’s (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) Oyu Tolgoi copper-gold project in Mongolia comes through for it. We won’t know for a few years, but this is the kind of potential I like to see.

TGR: How do you rate Silver Wheaton?

DHS: The company has cash and good streams. It was going to get a big chunk of the silver from Pascua-Lama, and that has to be renegotiated. Silver Wheaton represents good value in a company that will continue growing. And if we see the prices for silver I think we’re going to see, it should do very well.

TGR: Talk about Mexico’s proposed new tax regime and its likely effects.

DHS: Profits were already down because of metal prices, so it’s very misguided and poorly timed. The tax increase—from 30% to 37.5%—will take effect in January, and it’s going to affect everybody. Mexico is the world’s largest silver producer, so we’re not going to see a wholesale abandonment of that country. The best companies, the most profitable companies, will come out okay. Over time, they’ll learn to live with the new regime. But this is a high-risk business already, and I worry about companies further down the food chain trying to get financing in an already difficult environment.

TGR: How has this new reality affected your investment strategy?

DHS: I’m watching to see how the tax rise plays out over the intermediate term before I add more to my holdings, unless I see prices go down to what some people call “stupid cheap” territory. In that case I will add to my positions.

TGR: Which silver producers in Mexico are likely to flourish, even under the new regime?

DHS: People considering investment in Mexico should take a serious look at First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE), which has five mines there.

TGR: Any others?

DHS: I’ve been to Mexico twice in the last two months, and I just visited Avino Silver & Gold Mines Ltd. (ASM:TSX.V; ASM:NYSE.MKT; GV6:FSE) for the first time. It wasn’t until I started kicking the rocks that I realized the unique management system the company has. This is an extremely underappreciated company that should do well going forward because of the care it takes with their operations.

I’ve visited Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE) three times in the past five years. It has one of the best management teams around. Endeavour took over El Cubo in July 2012. It was a very high-cost operation with almost every problem you could imagine. It is now half way to turning it around, just as it did with Bolañitos. (I own shares in all three of these companies.)

TGR: What other silver and gold companies are positioned to come back strongly in a bull market?

DHS: Goldcorp Inc. (G:TSX; GG:NYSE) is one, based both on current operations and what it has in the pipeline. Its per-ounce gold costs should fall on some of its properties. Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) is another one. Its management has proven itself time and time again.

TGR: For years, Pascua-Lama was hanging over Barrick like the Sword of Damocles. Now that the company has taken the write-off, does this enable it to consolidate and move forward?

DHS: It does. As you know, Peter Munk, Barrick’s founder, has announced that he will not stand for re-election to the board. So the company is evolving to new management, and if it comes up with a new philosophy, it could do well. The jury is still out on how well Barrick will make that transformation, however, and I don’t envy what it will have to go through.

TGR: How about among the juniors?

DHS: I’ll mention a couple. The first is Alexco Resource Corp. (AXR:TSX; AXU:NYSE.MKT), which operates in the Keno Hill silver district in Yukon. The company’s silver properties are some of the richest anywhere. They are remote; it is a fly-in and fly-out type of thing. But I think they’ll do well.

TGR: And the second?

DHS: Colossus Minerals Inc. (CSI:TSX; COLUF:OTCQX) in Brazil, which has streaming agreements with Sandstorm Gold for gold/platinum and Sandstorm Energy for palladium. Colossus’ Serra Pelada project is complex, and the company has had difficulties in bringing it toward production, but both its gold and PGM values are almost off the charts. The stock was more than $4.50/share earlier this year and is now $0.17. There might even be a rollback, which, as an investor, I hope it doesn’t do. Even if it does, however, owning stock in that company makes sense for me. I’m willing to accept that high level of risk, considering its apparent high grades.

TGR: Many cash-poor investors will be forced to cull their portfolios before the end of the year. What kind of stocks should they sell, and what should they keep?

DHS: Let me tell you what I learned in 2008. You remember that we had a financial meltdown so dire we came to within hours of the whole system stopping. I looked at my stocks, and some of them were down 90%. Many were dogs that weren’t likely to hunt anymore. It wasn’t fun, but I sold those for 10 cents on the dollar.

TGR: What did you do with the cash?

DHS: I put those meager funds into companies that I thought would do well and survive, companies like Silver Wheaton. At the time, they were all down into territory you couldn’t believe. NOVAGOLD (NG:TSX; NG:NYSE.MKT) was at $0.35/share—it had been a $22 stock. (I didn’t buy it, but I wish I had. It went back up to $14/share within a year.) Some of the stocks I bought went up 6 to 15 times from their lows.

I had taken my 10 cents on the dollar, and this became $1.20. I was back to where I had been in less than a year. So this is my suggestion—sell your dogs, and put the money into companies you feel strongly that they are going to rebound.

TGR: Final thoughts?

DHS: All the companies we’ve discussed need higher metal prices to be fully restored to good health. Sure, some of them are making money, but if long-term prices remain the same, all will underperform. But, if we see $35/oz silver and $1,700–1,800/oz gold, the best of these companies are going to be on steroids. And if we see all-time highs, well then, what can I say?

TGR: David, thank you for your time and your insights.

David H. Smith is senior analyst for The Morgan Report, as well as a professional writer and communications consultant through his business, The Write Doctor Inc. He is a regular on HoweStreet.com. Smith has visited and written about properties in Argentina, Chile, Mexico, China, Canada and the U.S. He is an investment conference/workshop presenter at gatherings in Canada and the U.S. His work for subscribers can be found on Silver-Investor and for the general public at Silver Guru.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: Prophecy Platinum Corp., Royal Gold Inc., Colossus Minerals Ltd. and NOVAGOLD. Franco-Nevada Corp. and Goldcorp Inc. are not associated with The Gold Report. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) David H. Smith: I or my family own shares of the following companies mentioned in this interview: Alexco Resource Corp., Avino Silver & Gold Mines Ltd., Colossus Minerals Inc., Endeavour Silver Corp., First Majestic Silver Corp., Goldcorp Inc., Ivanhoe Mines Ltd., Prophecy Platinum Corp., Sandstorm Gold Ltd. and Sandstorm Metals & Energy Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By Chris Vermeulen, The Gold and Oil Guy

How to turn your trading into a simple automated trading strategy: you know the difference among a winning and losing trade – we have all experienced both and know the excitement and the frustration associated with it.

The brutal honest truth is a tough pill to swallow. The fact that most of the time it’s not the strategy that has failed; it’s you (the trader) which is why you need a simple trading strategy drawn out on paper with detailed rules for you to follow.

In today’s report I am going to talk about how you can stop losing money and become a successful trader. We all know that before you even enter a position, you must know where you place your stop-loss order. If you don’t know where you stops are to be placed then you are trading with a major disadvantage.

Your position entry is not complete without having a stop price figured out. It blows my mind why so few investors use stop-losses. If you are guilty of not using stops, you need this information. It might be the difference between retiring on time with a big nest egg or retiring later and still just churning your account.

If you plan and place stops you are planning to win, but prepare to take losses because you will get stopped out and you will have to get back up, brush yourself off and trade another day. So with that said we need to look at the psychology around taking losses because it’s not easy to manage, and is the main reason individuals do not use stops. Being proved you were wrong flat out SUCKS!

Successful traders understand they must know where they are going to be stopped out before they enter a position. They have to know ahead of time what a wrong trade looks like so they can exit it quickly. This is a rudimentary fundamental that EVERY trader knows the answer for.

Do You Have A Trading Strategy That You Can Trade Like a Robot?

Can You Answer The Following Questions?

1. How do you know when to sit tight or cut your losses?

2. Do you have rules to tell you when to sell a losing position?

3. Do you have rules of when to move your stop to breakeven?

If you cannot answer these questions properly, you are not alone. And what it means is that you need to establish some rules for yourself. All the trading rules in the world are meaningless if you do not use them. That is why I am telling about what’s really going on with you when you refuse to manage your risk in a proactive and professional way.

Most traders refuse to take a loss for two basic reasons:

1. They cannot admit they are wrong.

For most traders, this is just too painful to admit. It’s interpreted as failure or feeds a persistent, negative self-image which none of us enjoy feeling.

Humans by nature prefer to remain in denial instead of acknowledging their losses are causing them pain. This type of trader often has to lose it all before he begins to change (or gives up trading). I know this very well. I lost it all twice when learning to trade. It was not until the second time that I hit rock bottom (financially and emotionally) that I embraced trading rules and hired a mentor to help keep me inline with my trades.

2. The loss is too big relative to their overall portfolio size so they can’t afford take the loss. 

Know this, there’s no such thing as just a paper loss. The investment (stocks, etf, options or futures contract) is worth what it’s quoted whether you realize it or not by closing the position.

Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from.

If what I am saying here is making you uncomfortable or bringing up feelings of anger or powerlessness, then that is a good sign. It means you have enough common sense and self-awareness to change what you are doing.

Example of How You Can Make Your Trading Strategy To Be More Automated:

A successful trader uses a different strategy from that of a losing trader (you) by looking at the pain from the loss in an impersonal way. They know the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.

Winning traders separate who they are from what they do. They learn and know, that their trading losses lie in their approach to trading the market and not a reflection of whom they are as a person. The pain they feel is quickly transmuted into motivation, which fuels their desire and determination to become a better trader through refining their trading strategies to better navigate the financial market place.

Both are learned responses and within your control. The opportunity for growth from the pain of our losses are the same. It’s what we do with this emotional pain of a loss that matters, not the loss itself.

Stick with my proven Simple Automated Trading System
Make winning a habit.

Chris Vermeulen – Get 12 Months for the Price of Only 6 Months – Black Friday Special

London Gold Market Report

from Adrian Ash

BullionVault

Mon 2 Dec 08:25 EST

FRIDAY’S late 1.1% rally in gold was reversed in Asian and London trade Monday morning, with the metal trading back below $1240 per ounce as world stock markets also slipped with commodities.

 Silver tracked gold lower, falling from $20 per ounce at the start of Asian dealing to hit near 1-week lows $19.63.

 The rising Pound meantime, touching its highest level since Sept.2011 after stronger-than-forecast UK house price and manufacturing data, pushed gold in Sterling terms down to new 3-year lows beneath £755 per ounce.

 “We are looking for a push toward the [Dollar] range lows near $1180,” says London market-maker Barclays in a note, pointing to the 3-year low gold hit at end-June.

 “It would take a break back above former range lows in the 1520 area to suggest any kind of a base developing…If equity markets remain firm and if prices breach $1200, the weakness is likely to be exacerbated.”

 “Many countries stock exchanges,” Germany’s Der Spiegel quotes economist and financial historian Robert Shiller, “are at a high level, and prices have risen sharply in some property markets.

 “I am most worried about the boom in the US stock market…because our economy is still weak and vulnerable.”

 But looking ahead to Friday’s US jobs data in the monthly Non-Farm Payrolls report, “as long as US economic data shows improvement, the probability of sooner-than-later tapering becomes more real,” says chief investment strategist Wang Xiaoli at China brokerage CITICS Futures Co.

 With officials from the US Federal Reserve saying again last week that better jobs data could spur them to cut the $85 billion of monthly quantitative easing in place since end-2012, “That should keep downward pressure on gold,” reckons Wang.

 Gold managed “something of a recovery at the end of last week,” says one London trading desk in a note.

 Friday’s rally, reckons Edward Meir writing for US brokerage INTL FCStone, came “on news of political tensions emanating out of Asia,” with China’s airforce scrambling jets in response to Japanese and US flights over airspace claimed by the Communist state.

 US vice president Biden is this week visiting China, Japan and South Korea.

 Looking at the gold market, “Physical flows were limited last week with the Thanksgiving holiday,” says a note from ANZ Bank, “but light physical related selling [was] seen above $1250 per ounce.”

 New data released Friday by the London Bullion Market Association showed the average daily volume of wholesale gold traded in October between the LBMA’s clearing-member banks rising slightly from September.

 Coming just shy of Oct. 2012 at 19.8 million ounces, however, that was the lowest October reading since 2010.

 Last month saw sales of gold coins by leading bullion refiner the Perth Mint in Western Australia fall by one third, it said on its website.

 Amid the drop in prices – the worst Dollar price drop since 1978 – “Evidently, some buyers still expect gold to fall even further,” notes Commerzbank’s commodity team, “and have thus been exercising restraint when it comes to purchasing coins.”

 With Google searches for the word “Bitcoin” rising 7-fold in the last month alone, the Financial Times reports that the UK’s Royal Mint – currently state-owned – is considering “the possibility of manufacturing a physical commemorative coin with a Bitcoin theme.”

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 John Whitefoot for Daily Gains Letter

You really can’t beat the Federal Reserve. Despite weak underlying fundamentals, Wall Street continues to rack up strong gains. So long as the Federal Reserve continues with its more-than-generous quantitative easing policy, the markets will continue to defy the laws of physics and climb higher.

For example, in the lead-up to the corporate earnings season, a record 83% of all S&P 500 companies revised their third-quarter corporate earnings guidance lower; so far, 486 companies on the S&P 500 have reported their third-quarter corporate earnings for fiscal 2013. The average increase in corporate earnings per share for the quarter is up 3.4% year-over-year. Take out all of the stock buybacks, and you’ll probably find that third-quarter corporate earnings were essentially flat.

With 97% of S&P 500 companies having already reported results, the percentage of companies reporting revenue above guidance (52%) is below the four-year average of 59%. As for the fourth quarter, 88% of reporting S&P 500 companies have issued negative EPS guidance. (Source: “Earnings Insight,” FactSet web site, November 22, 2013.)

Over the course of a year in which corporate earnings have been flat and revenues subpar, the S&P 500 is up almost 30%. That economic disconnect cannot continue forever—but it will, as long as the Federal Reserve fuels the fire.

A number of transportation stocks could be well-positioned to capitalize on improving micro and macroeconomics. The Dow Jones Transportation Average (DJT) is trading at an all-time high and is outpacing the S&P 500, up more than 36% year-to-date. Supporting the strength in transportation stocks is improved unemployment claims and an increase in building permits. Solid travel numbers over Thanksgiving and encouraging holiday shopping season data could help transportation stocks climb higher.

Delta Air Lines Inc. (NYSE/DAL) is one of the largest airlines in the world, serving around 320 destinations in more than 60 countries. The company operates a mainline fleet of 700-plus aircraft, as well as maintenance, repair, and overhaul (MRO) and cargo operations. The company reported that third-quarter corporate earnings increased 31% year-over-year to $1.41 billion, or $1.59 per share. Revenue increased 5.7% to $10.49 billion.

The Canadian National Railway Company (NYSE/CNI, TSX/CNR) operates the largest rail network in Canada and the only transcontinental network in North America. The company serves close to 75% of the U.S. population and all major Canadian markets. Revenues in the third quarter increased eight percent to a quarterly record of C$2,698 million, while corporate earnings were up six percent at $705 million, or $1.67 per share.

Old Dominion Freight Line Inc. (NASDAQ/ODFL) operates a fleet of more than 6,070 tractors and more than 24,000 trailers from about 220 service centers. In addition to its core services, the company offers a broad range of logistics services, including ground and air transportation, supply chain consulting, container delivery, and warehousing and household moving. The company said that third-quarter revenue was up 12% year-over-year at $616.5 million; third-quarter corporate earnings increased 17.8% to $60.1 million, or $0.70 per share.

Investors will eventually wake up from their Federal Reserve-induced investing coma and focus on corporate earnings and growth potential. Those companies whose share prices have been artificially propped up by the Federal Reserve’s easy money policy will face the harsh reality of a well-earned correction.

On the other hand, there will be those stocks that have performed solidly because of strong fundamentals, and they are the ones that are most likely to enjoy further gains when the U.S. economy gains sustainable traction.

See Original: http://www.dailygainsletter.com/stock-market/strategies-to-cash-in-on-u-s-growth/2159/

By HY Markets Forex Blog

Contracts for both WTI and Brent advanced on the first day of the trading week, as the world’s largest oil importer showed an upbeat-data and supply from the Organization of Petroleum Exporting Countries (OPEC) dropped to a two-year low in November.

WTI contracts for December rose 0.51% higher to $93.17 a barrel at the time of writing on New York’s Nymex, while the European benchmark Brent climbed 0.39% to $110.12 at the same time in London.

The Chinese industrial activity rose to an 18-month high, as a separate data released show that the HSBC Purchasing Managers’ Index (PMI) for November came in at 50.8.

“Output and new order growth both increased at their strongest rates in eight months in November, but renewed job shedding led to a solid increase in outstanding business,” the report stated.

Meanwhile in Libya, the holder of Africa’s largest oil reserves, continued to be the focus for oil traders as the country’s security situation continues to weigh on the oil market. The country’s shipment dropped to 250,000 bpd towards the end of the month, from 350,000 bpd in November

Crude Futures – OPEC

Organization of Petroleum Exporting Countries (OPEC), is expected to meet in Vienna to discuss and consider adjust its production target of 30 million bpd.

Analysts are forecasting the group to increase its shipments by 700,000 bpd to 24.05 million barrels in the period ended December 14, reports from Oil Movements confirmed last week. OPEC crude production fell to a two-year low in November, analysts said. OPEC’s output slipped by 245,000 to 30.007 bpd million in November, down from 30.252 million recorded in October.

Meanwhile, negotiations between the western powers and Iran continue this week to ease the extensive nuclear program in the country in return of an estimated $7 billion-worth of sanctions.

The US crude output increased by the shale oil fields, which climbed to 8.02 million bpd in the week ended November 22, data from the Energy Information Administration confirmed.

Visit www.hymarkets.com  today and find out more on how you can how you can trade Energy products with only $50.

The post Crude Oil Futures Rises amid Decline in OPEC Supply appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The New Zealand dollar rose for the second day against the greenback on Monday, driven by the upbeat manufacturing PMI from China. The kiwi rose 0.71% higher to $0.8190 against the US dollar as of 6:14am GMT, climbing for the second day from Friday’s low of $0.8083, seen in September 12.

In China, the government posted the country’s Purchasing Managers’ Index (PMI), which stood at 51.4. The reading remained unchanged from October’s figures and exceeding analysts’ forecasts of 51.1.

The HSBC Purchasing Managers Index PMI for November came in at 50.8, slightly down from October’s reading of 50.9, but higher than the bank’s estimates of 50.4 last week. The index was above the 50-threshold which separates contraction from expansion.

New Zealand’s terms of trade rose 7.5% in the third quarter, biggest advance in 40 years, the statistics department confirmed.

The Governor for Japan’s central bank, Haruhiko Kuroda said he sees some stability in the currency exchange market, which is very important for the Japanese economy.

Kuroda’s statement came in just when the country’s currency trades more than a half-year low against the US dollar, as the yen dropped to its lowest level since May 23 over the weekend.

The Japanese yen edged 0.06% lower on Monday, to 102.44 yen against the US dollar at the time of writing.

Australia

The Australian dollar rallied from its lowest level in three months. Demand for the Aussie may be resilient ahead of the Reserve Bank’s meeting tomorrow, where analysts are expecting the bank to maintain its interest rates at 2.5%.

The Aussie climbed 0.5% higher to $91.54 at the time of writing, after dropping to a low 90.56 on Nov 29, its lowest since September 4. The Australian dollar rose 0.5% to 93.78 yen.

Visit www.hymarkets.com   to find out more about our products and start trading today with only $50 using the latest trading technology today.

The post Kiwi Climbs after Upbeat Chinese PMI appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By Moe Zulfiqar for Daily Gains Letter

As the key stock indices are going higher, there’s a growing concern among investors that we are reaching a top. There’s a significant amount of noise that says the key stock indices are running on nothing but free money and the fundamentals that drive them higher are dead. We’re hearing that it’s all going to fall soon.

To some degree, I agree that easy money has a hand in the rise of key stock indices, and that current corporate earnings aren’t all that impressive. However, while observing the markets over time, I have learned that tops and bottoms are not easy to predict; in fact, it’s impossible. That’s because it isn’t clear when they happen and they can only be identified once they have been made.

Going back to 2009—when the key stock indices weren’t in such good graces—there was a significant amount of noise saying they were going much lower. At that time, the bottom was placed in, but it didn’t become clear until later. In 2007, the key stock indices made a top, but it wasn’t apparent until they started to slide lower.

Investors who think the key stock indices are about to form a top, or have already formed one, have to be really careful in their predictions. If they believe their convictions are going to be correct, then they should go in with stops, in case the trade works against them.

Going forward in December, here’s what else investors need to know.

December is generally a quiet month on the key stock indices. For example, the average return on the S&P 500 in December from 1970 to 2012 was 1.79%. The maximum return was 11.07% in 1991, while the smallest return was negative 6.03% in 2002. (Source: “Past Data,” Stockcharts.com, last accessed November 27, 2013.)

Mind you, the average return is based on past information, and shouldn’t be taken as cold, hard fact indicating where the key stock indices will be heading for the month.

On the fundamentals front, investors have to keep few factors in mind going forward.

The third quarter was interesting when it comes to corporate earnings. For example, the corporate earnings growth rate for S&P 500 companies was 3.4%, based on 486 S&P 500 companies that have reported as of November 22. I also found that 73% of the S&P 500 companies that reported were able to beat the corporate earnings estimated by the analysts. Sadly, only 52% of the S&P 500 companies were able to beat the revenue expectations—are they not selling as much? (Source: “Earnings Insight,” FactSet web site, November 22, 2013.)

We have also learned that there weren’t many changes in the U.S. economy; the unemployment rate has stayed very similar and the jobs growth has been in low-wage-paying sectors. This means that consumer spending, which drives the U.S. economy forward, might be in trouble.

At this point, irrationality might continue to prevail in the key stock indices, which may continue to increase. If this becomes the case, then investors may be able to profit from securities that track the key stock indices. One example would be the SPDR Dow Jones Industrial Average (NYSE/DIA). This exchange-traded fund tracks the performance of the Dow Jones Industrial Average.

See Original: http://www.dailygainsletter.com/stock-market/expect-irrationality-buy-stocks/2161/

By George Leong for Investment Contrarians

Reflecting on this past Thanksgiving weekend, there was a lot to be thankful for, especially if you have been long in the stock market for the past four years. Now is a time for reflection.

The advance in the stock market has been stellar following the bottom in March 2009. The S&P 500 is up 171% since March 6, 2009 for a four-year annualized gain of about 38%.

In Japan, the Nikkei 225 is at a six-year high and over in Germany, the benchmark DAX is also at a record high.

However, the records in the stock markets are falling, not just in good old America, but worldwide. Of course, there are the exceptions, such as China, which I still consider to be undervalued and worth a look for investors searching for growth in foreign stock markets. In China, you can play almost anything due to the country’s insatiable appetite for goods and services. Some of the top areas for growth in China are the technology, health care, travel, and financial services sectors.

Yet while all of the stock market records are being set, I wonder if this is simply the new reality for stocks, or are we just setting ourselves up for a massive hangover when stocks fall?

The Russell 2000, for instance, is a play on the economy. The idea is that small companies tend to fare better when the economy recovers, as these companies tend to be more flexible. The index is up over 35% this year and more than 40% year-to-date. That’s a great advance, but the index is also trading at over 70 times its trailing earnings, which is massive for small stocks. And if you consider that revenue growth in corporate America continues to be sluggish in the low single-digit range and isn’t expected to really pick up anytime soon, you have to take a step back and reevaluate the valuation and apparent pricing mismatch in the stock market.

Now, I’m not saying we are heading for a stock market crash, but a major adjustment would help. Recall my previous article when I discussed the NASDAQ and its rise from the ashes in 2000. The index is looking higher but again, you have to wonder about the rate of the advance.

At the end of the day, thanks for the stock market advance not only in America but around the world should be given to the Federal Reserve and other world central banks and their strategy to pump cheap money into the global economic system. Now we have a world that is addicted to cheap money, just as a drug addict may be to crack cocaine.

My fear is that when the flow of easy money begins to dwindle, we will likely see shakes in the stock market, as market participants try to get accustomed to paying for the use of capital. Of course, this may not happen for a few more years. For now, I suggest investors remain active in the stock markets as they continue to hover around record highs and enjoy the gains in the meantime.

See Original Post: http://www.investmentcontrarians.com/stock-market/have-you-thanked-the-fed-for-your-stock-market-gains/3369/