December 11, 2018 
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Ideal Time for Facts

       

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 By Michael Miller

06/09/2009  11:43AM

I currently find snippets in articles about investments that brings back memories of the fourth global American gold rush and the only one during my lifetime. The first great gold rush (1849) to the newly discovered California wilderness united our vast continent under one rule, language and currency. Historians claim it was the largest human non-warring migration (figures as high as 200,000).

Alaska was the site of America’s second major gold rush (1986-1899). What a struggle it must have been.

President FDR drove the politically initiated third American gold rush (1934). Writers always report that was when the fixed price of gold rose from $20.67 to $34.00 per ounce. Output production records rather than a mass movement to “discover” fresh gold deposits for exploitation best defines the rush. WWII killed the gold mining industry and post war inflation smothered its return to pre war conditions. What no one remembers and what I never learned in school also happened with the 1934 legislation. Americans were prohibited to own gold other than gold in coinages. Even as an Economics major at UCSB, that tasty item of western free market capitalism was ignored.

The fourth American gold rush was based on the politically driven decisions of 1934. President Nixon did not arbitrarily increase the “value” of an ounce of gold; the government cut the shackles of restrictive ownership by our citizens. In other words gold was set free to reach an exchange value with dollars and it quickly surged to new heights.

Bingo! Our local papers, the Downieville Mountain Messenger and the Grass Valley Union featured the spot price of gold on its front pages…with every edition. It was big news because this is gold country. Grass Valley is the location of California’s largest gold producer, the Empire Mine. Sierra County is the home of the Alleghany Mining District with the oldest gold Company and longest producing mines. Everywhere people gathered the biggest topic of conversation was gold. The year was 1975 and the rush lasted through the early 1980’s. Manic investors, miners and con men tromped north and south along the 200 mile California gold belt in the Sierra Nevada Mountain range. It was exciting.

One of my favorite recollections that depicts a prevailing attitude during America’s awakening to the value of gold happened in Alleghany. The Sixteen to One was looking for working capital. A Sacramento bank president drove up to see the mine. During our conversation the price of gold came up. He wanted to know my opinion. Will it go up or down? I don’t know the answer to that question. He said something about the all time high in 1980. “Those in gold production thought it was an anomaly, an over zealous feeding frenzy”, was my reply. I vocally wondered who were the buyers during the January spike. Well, he told me that he was one and bought gold at its high. He waited for months, hearing about gold, watching it steadily increase in price and jumped in at the top. Was he an anomaly or does he represent the bankers and other cautious investors?

The stage is set for another rush. Think about it. What will it take for serious people to test their mettle with gold. Maybe it is mining the stuff or speculating on its present/future price. Maybe it will be viewed as a safe haven for previously acquired wealth. Some will just gamble, an act that neither others nor I who deal in gold production practice. Risk takers and gamblers are different.

The latest reason an investment guru says for putting ten to twelve percent of your investment into gold was this. Gold does not return interest. Banks and government investments now earn low interest. Jean-Marie Eveillard told Bloomberg news today why his fund is about 10% invested in gold and gold mining securities. “It’s insurance to protect against the fact that current policies by American government and the FED are potentially wildly inflationary.” (Nothing new and exciting here.) His novel idea is gold pays no interest and banks pay nearly no interest. You can print money but you cannot print gold. So, you don’t lose because of gold’s non-interest bearing condition. I’m not saying this will launch gold into a buying frenzy but somewhere the president of some bank is watching gold, waiting on the sideline before he jumps in…at the top.
 By bluejay

06/09/2009  9:17AM

Gold Bugs At Last Have Their Perfect Trinity

China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies.

By Ambrose Evans-Pritchard
Published: 9:36PM BST 23 May 2009


The world's top hedge fund manager John Paulson has built a gold position of at least $5.5bn, the biggest such move since George Soros and Sir James Goldsmith bet on Newmont Mining in 1993.

Britain has become the first of the Anglo-Saxon "AAA" club to face a downgrade. As feared, the cancer of bank leverage is spreading to sovereign cores.


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Gold: longest losing streak since AugustGold prices tend to slide in late May and languish through the summer, because of the seasonal ups and downs of jewellery demand. The trader reflex would be to short gold at this stage after its $90 vault to $959 an ounce over the past month. They may think again this year.

Paulson & Co has bought $2.9bn in SPDR Gold Trust, the biggest of the gold exchange traded funds (ETFs), which now holds 1106 tonnes − three times the Brown-gutted reserves of the United Kingdom.

Mr Paulson has also built up a $2.3bn holding of Anglo Ashanti, Goldfields, Kinross Gold, and Market Vectors Gold Miners. The fact that he is launching a "Paulson Real Estate Recovery Fund", reversing the bet against sub-prime securities that made him rich, tells us all we need to know about his thinking. This is a liquidity-reflation play.

He may be wrong, of course. In his early fifties, he belongs to the baby-boom cohort most psychologically vulnerable to the 1970s "paradigm-error". And perhaps he has never lived in Japan.

It is striking how many of those most alert to the deflation danger are either veterans of Japan's Lost Decade or close students of it: Albert Edwards at Société Générale, Russell Jones at RBC Capital, Nobel laureate Paul Krugman, the Fed's Ben Bernanke, and Athanasios Orphanides, who helped draft the Fed's study on the Japan trap. "People always thought Japan's bond yields had to rise, but they kept falling and Japan is still not really out of deflation," said Mr Edwards. Indeed, 20 years after the Nikkei peaked at over 39,000 it stands today at 9,280. Interest rates are 0.01pc. The yield on two-year state bonds is 0.34pc. Still there is not a whiff of inflation.

A number of readers have written to me in tones of polite reproach asking why I fret about deflation when governments everywhere are spending and printing as if there was no tomorrow. I admit to being tortured by self-doubt, like others grappling with this extraordinary situation.

What we know is that inflation is already negative in Ireland (-3.5pc), China (-1.5pc), Thailand (-0.9pc), Korea (-0.5pc), US (-0.7), Japan (-0.3), Switzerland (-0.3, Spain (-0.2pc). The eurozone may be negative by July. Alistair Darling said Britain's retail RPI inflation used to set wage deals will be minus 3pc by September.

Does this constitute deflation in a meaningful sense? Not yet, perhaps. But it is moving too close for comfort in a world stretched by extreme leverage. The economies of the US, Japan, the eurozone, and Britain have been contracting in "nominal" as well as "real" terms – which smacks of the 1930s.

The "yen GDP" of Japan has shrunk by 10pc in one year; the "euro GDP" of Germany has shrunk 6.2pc, and Italy's by 4.7pc ; the "dollar GDP" of the US has shrunk 3.3pc. Debts are not shrinking, however.

GMO's Jeremy Grantham says in his latest note, Last Hurrah And Seven Lean Years, that the market value of equities, houses and commercial property in the US reached $50 trillion in the boom. This "perceived wealth" sustained $25 trillion of debt.

The crash has cut this wealth to $30 trillion, but the debts are still there. America's debt-gearing has exploded, as it has in the UK and Europe. This looks awfully like Irving Fisher's "debt deflation" trap of 1933. It will be a long slog for households to bring their debt-to-wealth ratios down to manageable levels.

You can argue – as do UBS, Merrill Lynch, ING, and Capital Economics, to name a few – that massive global stimulus is merely struggling to off-set a massive deflationary shock.

So how will gold fare in a "Japanese" stalemate world where neither inflation nor deflation gets the upper hand? The eight-year rally that has lifted gold from $254 to $959 may lose momentum for a while.

"The air is getting thin up here," said John Reade, precious metals guru at UBS. "Rich investors are no longer rushing out to buying gold bars as they did after the Lehman collapse. Still, we think it is highly significant that both China and Russia – two of the biggest holders of foreign reserves – are both buying gold," he said.

Personally, I remain a gold bug out of fear that the most corrosive phase of this crisis lies ahead. There are two more boils to lance: Europe and China. As the IMF keeps telling us, Europe's banks are still covering up their vast toxic debts. Nor has the G20 begun to address the root cause of the global crisis, which lies in excess exports from East (aided by currency manipulation) to an over-spending West. China is putting off the day of reckoning with its crisis response, which is to build yet more plant to flood the world with yet more over-capacity.

For "political bears" the risk is that the EU polity fragments under strain, and that governments restrict basic markets to defend themselves – whether by imposing exchange controls to stop bond flight, or shutting derivatives markets used as hedges, or putting up trade barriers. We will find out if and when unemployment hits 10pc in America, 12pc in Germany, and 20pc in Spain, or if migrant workers rampage in Shenzhen.

Some call this the "Armageddon case" for gold. That is going too far. However, gold has outperformed Wall Street's S&P 500 index by 500pc so far this century, as if able sniff out trouble in advance. Such runs tend to finish with a "parabolic" blow-off before they die. Mr Paulson may yet make another fortune, whatever his reason.
 By martin newkom

05/28/2009  1:26PM

Two great sayings:
Yoga Berra: When you come to
a fork in the road, take it.

It aint over until it's over.

Best of "BIGRE!"(fr) nuggets to all.
 By Dave I.

05/25/2009  1:53PM

I regret to inform that Sb 670 is alive and well, I believe there is a sense in the state Legislature to get even against the people for voting down their pay raise. Is this a new concept for California of Government against the people?
 By Rick

05/22/2009  7:55PM

Thanks for chiming in again, everyone.

What are we going to do? Here're some thoughts.

I've decided to engage any of friends who have a big glass of cool-aide in front of them to think twice. Currently I have a few ongoing email discussions with political adversaries who have written to me listing their "fears" of conservative takeover and "concerns" for un-caring policies of the freedom wonks.

Yes, there is actually a profile offered on FaceBook that allows one to take the "Test: what kind of Republican would you be?"

???

And everyone is having a big hoot about which idiot republican they would be, based on their answers.

Yesterday I read one that referred to "That nebulous thing called freedom."

I'm serious. There is actually a group and groundswell of modern neo-statists who are considering "freedom" something to laugh at.

Go look for yourself. Pull up a Google search for 'FaceBook, What kind of Rebublican would you be'...and see what happens.

Cool-aid city.
 By Michael Miller

05/22/2009  11:31AM

An insightful piece of writing, thank you Bluejay, for finding it. It brought a smile to my face and hope in my soul that our precious company in one of the world’s highest-grade high-grade deposits will become of interest to people about gold. An understandable (not necessarily true) outtake on the junior gold companies was that the exploration phase of mining has the sizzle and potential huge stock appreciation over the gold producers. Gold investment writers’ touted exploration would lead to a take over by major, sending stock prices through the roof. It developed into a belief that once a company began production, financial forecasts became dull and predictable.

The flaws in this opinion are obvious: evaluate the risk/reward for dollars spent; start up time and infrastructure costs befitting the proposed deposit, corporate overhead is usually hidden from the grade of ore/cost of mining analysis, dependence on others and mobility.

Ray Wittkopp has great stories about some of the gold mining capitalists he worked with in Nevada that followed the behavior of industry heroes. Move quickly, cut the check, the future is ahead and the past instills wisdom. The big mining companies have been bogged down for years, successful but few of their leaders have the spirit of what made mining a proud and vital industry. I don’t see significant changes even though the article below takes a reader along the path to the future.
 By bluejay

05/22/2009  12:28AM

The following article written by David Duval appeared on jsmineset.com tonight. I thought Mike, especially, would enjoy the historical references made to Homestake Mining along with the writer's thesis that small mining operations can be quite positive.

With Commodity Prices Trending Upward, Near-Surface Mine Development and Royalty Model Become Options for Junior Explorers

By David Duval

The contemporary wisdom that “bigger is better” has taken a well-deserved beating since the credit crisis unfolded and destroyed some of the world’s largest financial institutions in its wake.

With large-scale project financing options limited or non-existent because of the credit crisis, many of the smaller players in the global mining industry have been forced to review their growth strategies, a trend that could see historic mine development practices making a comeback and less mainstream business models adopted.

Perhaps not since the turn of the 19th century has the appeal of “small” become so attractive. Indeed, today’s examples encompass a broad range of industries including power generation (wind turbines, small hydro, solar etc.) and small mining operations that provide feedstock to portable or centrally located process plants and refineries, a practice that is relatively common in Asia and Africa.

Not being major enterprises with large industrial footprints, long permitting periods, and high capital costs, these businesses can be developed incrementally from ongoing cash flows, substantially reducing the risk to investors. In the “good old days” this scale of development was the rule rather than the exception and most of the world’s major gold camps were discovered and developed on this basis over a century ago.

In his book titled, "History of Dakota Territory" George W. Kingsbury describes the development of the Homestake Mine in these words:

“When the claim was purchased by the Homestake Mining Company the exploration consisted of small surface pits only and some mining men considered its value as doubtful although there were a number of favorable surface indications. The company immediately began the further exploitation of the property and two shafts equipped with hoisting engines were sunk and various drifts were soon under way.

By July, 1878, or the year after the purchase of the claim, the first mill of eighty stamps was constructed and in commission. With the first dropping of stamps it was proved that the mine was a producer and from that small beginning the mine has steadily expanded, breaking all records and setting a new pace in the world of gold mining. Although it is a very low ore, illimitable tonnage is at the disposal of the company and large mills, the most improved mining machinery and great mechanical power enable the mine to pay large dividends.”

It’s worth noting that Homestake was listed on the New York Stock Exchange in 1876 and its now dormant South Dakota mine produced approximately 40 million ounces of gold over a 120 year period before the mine’s economic reserves were exhausted in late 2001.

Mimicking the discovery of other major gold finds at the time, Homestake began as a surface showing with gold values occurring in vein material that was easily distinguishable from adjoining wall rock. Pick and shovel mining provided a bulk sample for metallurgical test work and grade estimation.

First off, however, the miners recovered gold from alluvial gravels that were eroded from the hard rock vein material. Exploration shafts were then sunk to evaluate the vein material at depth, producing gold in the process to offset exploration costs.

In many parts of the world (including Africa and Latin America) artisanal miners have already gained access to sub-surface vein material by hand sinking small shafts and mining along the vein structures. In fact, you would be hard pressed to find a major mine in Africa that didn’t have such workings within its property boundaries. These old workings facilitate target selection and the development of a resource base for production purposes.

Because of its high specific gravity (gold’s relative weight to that of water) gold concentrates in stream beds within alluvial gravels and it can be extracted by mechanical methods that take advantage of the fact it is 19.3 times as heavy as water.

Gold occurs in many different geologic settings but two basic types of occurrences or deposits are recognized: primary and secondary. Both rely on similar chemical and physical processes to produce economic concentrations of gold ore.

The Homestake discovery didn’t have the advantage of present day drilling technology to confirm the existence of an orebody whose life would extend for more than 100 years. Instead, the economic viability of the mine was established by mining and processing the easily extractable surface material with equipment that used gold’s specific gravity to produce a saleable concentrate. In the late 1890s, cyanide was employed to recover fine gold from rocks and is still used under carefully controlled conditions.

Even today, gravity separation is the best proven and accepted technique of concentrating minerals due to its high efficiency and low cost. In addition to gold, gravity separation remains a primary means of concentrating iron, tungsten, tin and coal ores.

Process plants (mills) for gold need not be large and in fact they are often manufactured and assembled in large industrial centers where skilled trades people are readily available. By employing modular construction techniques, equipment can be brought into a mine site by truck, air transport and in the case of tidewater locations, by sea barge. The various modular sections are simply joined together like a kid’s Lego set on the mine site. As the operation expands, new modules can be shipped to the site and added to the existing plant facility.

In order to reduce capital requirements, companies often employ contractors to mine their mineral deposits at a fixed price, locking in costs for the term of the contract. With contract mining, a company need not acquire in-house mining expertise or equipment that would only be utilized on a seasonal basis in any event. For smaller operations, contractors can provide services for a sufficient length of time to develop a stockpile for year round milling operations.

What’s surprising about today is the reluctance of many companies to consider the small scale, staged development of mineral deposits which is much less risky from both a financial and technical standpoint. In gold’s case, some of that reluctance no doubt relates to the belief by analysts that any company producing less than 100,000 ounces won’t get adequate market recognition. But as we’ve seen during the global financial crisis, analysts sometimes make a habit of being just plain wrong.

Nonetheless, in an escalating commodity price environment, the appeal of these modest-sized operations is certain to increase, especially where possibilities exist for multi-sourced production that will boost consolidated output to even more attractive levels. This has been a feature of China’s mining industry for generations and is certain to catch on in the West before too long.

Physical gold output – even on a small scale basis – provides price leverage to companies in the marketplace, especially for situations where the exploration potential leaves room for future production growth.
 By Dave I.

05/21/2009  11:36PM

I hope we have a big choir. Freedom to all.
 By bluejay

05/21/2009  4:30PM

Rick

Re what we are going to do about it?

I think the Tea Parties that were well organized as a show of discontent with those in power were a good start.

I am a firm believer in what Gandhi and Martin Luther King advocated in dealing with injustice, organized nonviolent resistance.

Get organized, prepare signs to convey your message, select a location, advise the media and present your case in public, the more the merrier.
 By Rick

05/19/2009  6:07PM

An essential reality I've known since a very very small little guy, is how love of freedom comes from love of country, hence why my counrty was founded: with Constitutional principals.

Essential to the very core of this love is defending any assault to the contrary, and keeping in the forefront of any afront that our country has a government, not the other way around.

This current government actually believes IT has a country, not the other way around.

I feel like I'm writing to the choir.

WHAT ARE WE GOING TO DO ABOUT IT????"
 By bluejay

05/18/2009  7:53PM

I had a thought, maybe the State thinks they can help balance their budget by putting State employees in the streams after they tell us to "take a hike." I hope it didn't happen today and I hope the two Senators I contacted did the right thing for us.

I've learned an important point, when governments get into trouble they'll do whatever it takes to stay in power and that means taking it from the citizenry.

Stay informed, read http://www.jsmineset.com. Martin Armstrong, the living legend, has related with his graph what we are expected to witness upcoming in the world of business. Also, Jim Sinclair has some interesting comments tonight which precede some informative articles.
 By Dave I.

05/18/2009  4:34PM

Thank You everybody for your concern and help with the opposition to SB 670. It was item 41 on the Senate Floor session today. Senator Wiggins was kind enough to "pass" when it was requested for consideration.
 By Dave I.

05/17/2009  10:46PM

The one good thing that has come from this threat that it has alerted and united we the people of the future legislation that will destroy our rights under the 1872 Mining law, This fight is only beginning.
 By Dave I.

05/17/2009  10:40PM

We know the Truth,the Senator who wrote SB 670/Wiggins,Vacuum or suction dredge Equipment, knows the truth, but has chose to ignore the truth for the prejudice of her own advocacy to destroy our rights to dredge for gold in our rivers and streams.
 By Rick

05/17/2009  6:21PM

In combination with Mike's letter to the Gov, including the latest Misc topic additions concerning the pending vote to abolish dredging:

WHY? Because they can? Becuase they have no clue of physics or history or logic? (Ahem, Rick....yes...)

Wake up!!!!!!

Those of us taking up the challenge to contact "representatives" (I want to gag sometimes when I need to refer to them as such) ....please remind them of this truth:

Rocks in the rivers are round because they roll. Theyv'e been rolling around for billions of years because water rolls them. Water is a force made from snow. It's caused by weather. The weather has been happening for 4.6 billion years.

The weather and rock-rolling didn't start when this current group of idiots believe their own personal short-sided version of history started.

Rocks the size of busses, even ten busses roll and shape our rivers every year. Give me a freaking reality check.

The rocks in our rivers are and have been rolling around and re-creating habitat for longer than human-kind can even fathom. Except, wait....history just started for idiots with self-centered short-brained reference points.

Let me see..."we'd better outlaw dredging the rivers because it disturbs the habitat" or whatever other anthropomorphic pipe-dream reaches their egotistical and blind reasoning.

I am ashamed of my own human species trying to take credit for why river rocks are roundy. Give me a flying break!!!!
 By Rick

05/05/2009  4:39PM

In hind-sight, I wish it hadn't turned into hind-sight....Bluejay, you called it when the Dow was still around 13500, and I didn't get out and into gold, although...so I'm riding this one through, to a point. This time my exit point is quite relatively low.

Strange as it is, gold is a super buy, even at $1000, considering the looming inflationary inevitablity...yet another derivative. This time I'm listening.
 By bluejay

05/05/2009  12:26AM

"How Wall Street And Washington Betrayed America"

http://www.kitco.com/ind/Wilson/may042009.html

Let the light shine brightly on the truth!
 By Rick

05/03/2009  5:36PM

Good commentary, Bluejay.

One key phase that you wrote, "Doesn't the government know...?" is unfortunately answered in truth:

My commentary, "Yes, with the super-majority, the government does know what it's doing..."

And that is: a Statist agenda.

This is all happening not by chance, but by the purpose of destroying the free market.
 By bluejay

05/02/2009  11:24PM

Rick

My Congressperson knows exactly what I feel which is no different, I'm sure, with the way you are feeling. I've told her that I'm extremely unhappy with the way the bank lobbyists are running our Representatives to legislate against us while they were placed there by the voters not the bankers.

I have told her that it wouldn't surprise me if none of the current Congressional Representatives were returned to office once the people have their next turn. I have told her that a seriously backed third party will emerge to vote them all out with new people who are more inclined to represent the will of the voters and not the highly paid banking lobbyists with money paid to them probably from our TARP funding that was ordered by King Paulson.

We need real reform in this country and I am directly referring to how the current government operates and especially, the judiciary.

The biggest problem from where I view it is the current ability of judges to play god with people's lives on cooked up charges from Federal prosecutors who are just interested in their convictions rate to put on their resumes for a better paying jobs.

In our country the conviction rate for Federal prosecutors is in the range from 98% to 98.5%. This is a higher rate that existed during the times of Nazi Germany and the Spanish Inquisition.

I'm not the only one that feels this way. In Martin Armstrong's letter of April 15, 2009, available at http://www.scribd.com, entitled "Financial Panics = Political Change" he gets into the topic of judicial reform with examples of past abuses by judges.

The major problem with judges is there in no public tribunal of accountability and even the Senate or Congress doesn't possess the current will to rake them over the coals when events dictate it.

Aside from the judges, the SEC and Commodities Futures Trading Commission are no better. The big fish seldom gets hooked. When was the last time the Sherman Anti-Trust Act was used to catch a big fish?

Doesn't the government know what the banks have done to all of us on interest rates and fees on their charge cards? I call this a cartel effort to suck blood from us when all the way back to the Roman Empire usuary laws protected its citizens with a cap of just under 10%. The reason why the economy is sick and getting worse is because we are paying a great deal of our income for interest to the banks and it is being withheld from going directly into the economy. It is a moral crime to allow the banking institutions to act as a loan shark business when lower rates would create jobs and put some people back to work.

If anyone is inclined to get a little more educated, I suggest that they access Martin Armstrong's mentioned essay under the sub-topic of "Judicial Reform Is Vital To Our Economy" in his April 15, 2009 letter.
 By Rick

05/02/2009  9:13PM

I almost wrote under the topic "Another US Citizen goes Foreign" but I haven't left yet....because I still have some fight in me.

Our slanderous whipping by the unconstitutional rulings by the Statist judicial crap concerning the CDAA's railroad construction planted over Constitutional civility was on;y a precursor to what is unravelling in front odf all of us....what is happening in Washington, both from the executive and congressional branches? Tyranny! It is the very nightmare our Founders rebelled against....

Yet...I sit here and witness ignorance, passivity, capitulation, dilution of principal, to name a few symptoms of our otherwise former fighting sovereign nation of freedom fighters and defenders of the Constitution.

IS EVERYONE ASLEEP????

Where and when can we mount a Constitutional challenge to this aggregious mess?

George would be the first to knock down the door. Both of them.

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