World Of Wallstreet

Elgin Mining (ELG.V) Buyout Of Gold Ore Resouces (GOZ.TO)

Elgin Mining (ELG.V) made an offer to buy out Gold Ore Resources (GOZ.TO) in an all stock transaction nominally at a premium of 66% to GOZ.TO's recent closing price. As of 9:40AM GOZ.TO is trading up 25% relative to yesterday's closing price.

Here's my take on the situation:

• GOZ.TO is a small (44K oz/year), high-cost gold producer with a mine in Sweden that is making a lot of money at current gold prices, but which has no growth prospects. 
• ELG.V is a mine reopener of a high-grade mine in the middle of nowhere (see any towns, roads, cities anywhere near the mine in the map below?) in the Northwest Territories of Canada. The mine closed in 2005 due to low gold prices. They have at least one big-name executive (founder of Kinross Gold is the Chairman).
• I hate mine reopeners as I lost a tonne of money in 2007 on base metal mine reopeners. The mines look like money makers at current metal prices and then they are un-economic and "go to zero" when the price declines.
• But, I remain bullish on the price of gold.

I've decided to sell all my GOZ.TO even though it looks on the surface like the mine reopener will work. Here's why it looks like the mine reopener will work:

• The cash cost of that ELG.V mine has got to be entirely driven by the price of fuel since there are no roads. Transporting fuel and equipment and people, etc. in and out has got to be the primary cost driver for that remote mine.
• So, whether that mine reopener remains profitable depends primarily on the ratio of the price of gold to the price of fuel (see chart below).
• The price of gold relative to oil now is approximately twice what is was in 2005 and is trending higher and has been consistently higher ever since 2009. This seems very promising.
• As long as this remains the case the mine reopener will probably "work",

However, in the light of my reasoned conclusion that Peak Oil is "real" and "significant", I just don't want to touch anything that completely depends on the price of oil staying low relative to any other thing including gold. I don't like high-cash cost gold producers that use diesel either for power generation or for open-pit mining.  I'M OUT.

MontyHigh, www.worldofwallstreet.us

P.S., I kind of suspected GOZ.TO was a value-trap when I bought. There wasn't any kind of catalyst for revaluing the company. They had:

• No growth prospects, no chance of increasing production above that 100K oz/year level that seems to cause gold miners to get a decent valuation.
• No commitment to returning profits to stockholders with either share buy-backs or with dividends.

Next time I buy into a gold-miner value play there has got to be an exit strategy.

Gold Reserves Now A National Security Issue For The World's Governments

I've been feeling that the "India buys Iran's oil with gold" story (e.g. click here) was quite important for understanding the world geopolitical situation and for gold investing, but I wasn't sure exactly how. Just last night the reasoning to support the feeling came to me.

Let's review the major, recent geopolitical gold-related news stories:

• Libya's Ghadafi pays his mercenaries with gold as he attempts to fend off the Bankster Empire attack masquerading as an Air Campaign to protect citizens from slaughter.
• Venezuela's Chaves demands the return of Venezuela's gold from London. He realizes that Venezuela is definitely on the Bankster's list of "regimes that need changing".
• Iran relies on gold to maintain international trade using gold as the Bankster Empire cuts it off from the dollar system and escalates its increasingly violent (bombs, assinations, etc.) campaign for regime change.
• India relies on gold to maintain its supply of Iranian oil.
• China and Russian, still not under the control of the Bankster Empire, eschew dollars for gold, beefing up their gold reserves as fast as they can without driving the price of gold too high, too fast.

Gold is what a nation (regime) relies on should the Bankster Empire turn against that nation.

The first thing the Bankster Empire does when its turning the screws on a regime is to freeze its assets. After that comes the kind of things happening to Iran (funding and supplying internal opponents, preventing them from doing trade by locking them out of the banking system, assinations, bombings, etc.). Throughout, gold reserves held within that nation allow the nation to continue to function and trade with other nations.

So, to any nation that is not fully integrated into the Bankster Empire (a non-aligned nation), gold reserves aren't a nice investment, they are an integral part of National Security (survival). As we know in the USA, national security trumps all other political priorities.

Here's my quick estimate of those nations which constitute the core of the Bankster Empire (dark green) and those nations that are clearly either close allies or vassals of the Empire (light green). Dark yellow constitutes those nations which are clearly outside of the control of the Bankster Empire with light yellow nations constituting those that I deem to be mostly outside of Bankster Empire control. Countries which are white are countries that I just don't know enough about to categorize. Please leave me a comment if you think I have a country misclassified.

As a result of the pattern formed from the Libya, Venezuela, Iran, China, Russia (all non-aligned), I'm expecting that every nation in the world (beginning with the non-aligned nations, but continuing to fully aligned nations like Germany) are going to making the accumulation a significant, no-kidding physical gold bullion reserve located on their own soil as a matter of national security, a top priority.

This major geopolitical shift is an unexpected consequence of the Banker Empire's squeezing of the Iranians that has enormous long-term bullish implications for the price of gold.

It seems Saddam Hussein's decision to sell oil in something other than the US dollar (Euros) was the final straw that drove the Bankster Empire to attack Iraq. I think that the Bankster Empire is not at all amused by the Iranian Gold For Oil deal and that they will be escalating their attack on Iran. Jim Rickards and Ron Paul are right. In my view, sanctions are a prelude to war and war with Iran is already underway and that will become more apparent as time goes by. That seems bullish for oil and gold for the short and medium-term.

MontyHigh, www.worldofwallstreet.us

Off-Topic: My New Specialize Blog...

Here's a link to my new, rather specialized, blog: (My Ubuntu Evil Empire Escape). The real purpose of this post is to give the search engines a link to the blog. This is probably not of interest to the typical World-Of-Wallstreet reader.

MontyHigh, www.worldofwallstreet.us

 

Toyota Must Be Getting Really Desparate

There are no magnet known to man comparable to those using rare-earths. A discovery of a comparable material would be a major scientific break-thru of the Nobel Prize winning variety. Heard about that lately.

Toyota must be really desparate as far as Rare-Earth supply goes that they are trying to bluff the Chinese like this. I flat out missed the first big run in Rare-Earths. Maybe its time to buy some neodymium-rich near-term producers for a Toyota-inspired takeover play.

MontyHigh, www.worldofwallstreet.us

Gold Interventional Outlook

There's a quite a pile of Interventionals coming up. Here's the outlook for Gold Interventionals for the next week plus:

• Tuesday 1/24 - Turd's "Happy Tuesday" (click here) - where the Evil Empire attempts to cover some gold and silver shorts to make the commitment of traders (COT) report look good. I expect we'll get some positive action thru the close here so that the Evil Empire will have plenty of ammunition for the Interventions that should follow.
• Wednesday 1/25 - FOMC Meeting Announcement w/Chairman Press Conference - gold will be driven down so that it doesn't make the Almighty Fed and its Chairman Bernanke look bad. 
• Thursday 1/26 - Durable Goods Orders and New Home Sales - not a big interventional but we need to keep gold looking bad for the big ones which are Friday and Monday the 30th.
• COMEX Gold And Silver Options Expiration - which influences the next day, Friday.
• Friday 1/27 - Q4 GDP which will, of course, be "better than expected" with gold being taken down to help form the impression that "we're saved!".
• Friday 1/27 - Day after COMEX Gold And Silver Options Expiration - gold is forced down so that anyone who exercised their call options is motivated sell their futures and not take delivery of the physical gold / silver. The close on Friday should be a good entry point. 
• Monday 1/30 - After the retail gold bugs are whipped up by cheerleading over the weekend, they typically bid up the price of gold stocks for the Monday open. Gold stocks typically fall throughout Monday to demoralize those new buyers.

Well, that's my short-term trading outlook based on the Interventionals. I expect I'll hedge some of my Gold call options beginning sometime Tuesday (probably near the 4PM close) and exit on Friday at the close with a little more short-term trading as things go along.

Gold has had a good 10%ish ($150ish) run from the lows around $1525 to nearly $1570 in just a couple of weeks and a few day pullback seems like something to prepare for. Got any dry powder?

MontyHigh, www.worldofwallstreet.us

 

Don't Believe Everything You Hear, Even From Jim Rickards + Revised 2012 Estimated Closing Gold Price

I have great respect for Jim Rickards, Sr. Managing Director for Tangent Capital, and I find that his latest King World News podcasts (click here) has a lot of valuable information. But, you can't believe everything you think you hear even from someone you genuinely admire.

Allow me to be a little bit picky. Here's a quote from the interview beginning at 18:23 sec mark: "By the way, in the last eleven years gold has hit the annual high in the first half of the year, I believe, ten out of eleven times. Check that. I'm highly certain its almost every time."

Well, that sounded interesting and tradeable to me, so I decided to check it out. I dumped the daily historical data for GLD into a spreadsheet (click Download 20120115gldhighofyear) and produced the graph that follows:

The graph provides the price of gold (using GLD as a proxy) and, the high of the that year. As you can see, the high for the year (which I presume is the same as Rickard's "annual high") occurred in the first half of the year only twice out of seven times. So, it seems that Rickards (at least as I understand him), is flat out wrong on this one. I'll be happy to retract this statement in all humility if I got it wrong or misinterpreted his statement.

The lesson I take away from this is "It's worth your time to check out as much of what an expert says as you can prior to using his analysis as the basis for an investment or trade."

Actually the above graph seems very bullish to me and here's why:

Every year for the last six years the Gold's high of the year has exceeded the previous year's high. That means we should see an all time high for Gold in 2012 (1911$+) provided the trend continues. This trend probably continues back at least a decade, but the data set I'm using only goes back to 2005. 

Here's another graph inspired by Rickards' getting me thinking about annual highs:

We see that in each of the previous six years we convenient have data for that Gold ended the year higher than the annual high of the preceding year. This analysis suggests, again assuming the previous trend remains intact, that my previous forecast (click here) for the 2012 price of gold closing price of "a little over $1800" was too conservative. In the graph above, the only year where the closing price of gold was even close to the prior year's high was 2008. So, if we think (as I do) that 2012 will not have a 2008 type financial crisis and the gold bull market remains intact, then the forecast closing price for 2012 should be substantially above $1900.

The graph that follows looks at the percentage gain of the high of one year relative to the high of the prior year and the percentage gain of the close of one year relative to the high of the previous year.

Using the above graph we can estimate the high of 2012 will be between 18% and 35% higher than this year's high price giving a 2012 high price target of between $2255 and $2580. Seems high, doesn't it?

Using the above graph we can estimate the closing price of 2012 will be between 4% and 20% higher than 2011's high price with the higher likelihood of the closing price being 18% or higher (4 out of 6 years). Those prices are $1987, $2293 and $2255/oz respectively.

With this post I increase my estimated closing price of gold for 2012 to $2255/oz. It will be interesting to test this estimate with the results from 2002, 2003 and 2005. I may follow up this post with another completing the analysis.

I hope you find this discussion useful.

MontyHigh, www.worldofwallstreet.us

 

 

yfcsvfix.rb, A Ruby Script To "Fix" finance.yahoo.com Historical CSV Downloads

I found that finance.yahoo.com historical downloads (e.g. http://finance.yahoo.com/q/hp?s=GLD&a=00&b=1&c=2005&d=00&e=15&f=2012&g=d) came with the date formatted as YYYY-MM-DD, (e.g. 2012-01-14) and that my preferred spreadsheet program, LibreOffice Calc, couldn't parse that date format.

So, I wrote a little Ruby programming language script to do it (click  Download yfcsvfix.rb to download the script). Of course, you'll need the Ruby interpreter on your PC to run the script (click here to go to the Ruby Download page).

Running the ycsvfix.rb with no command line parameters provides the documentation for the program. Here's that documentation:

yfcsvfix <inpath> <outpath>
  yfcsvfix takes a finance.yahoo.com historical price csv download
and changes the format of the first field from YYYY-MM-DD to MM/DD/YYYY.
When <outpath> is not provided the file at <inpath> is overwritten.
yfcsvfix also changes the order that CSV records appear outputting them
with the oldest records first.

I'm publishing this simple program into the public domain. No guarantees are made of its correctness or absence of bugs.

Here's the source code:

puts "yfcsvfix <inpath> <outpath>"
puts "  yfcsvfix takes a finance.yahoo.com historical price csv download"
puts "and changes the format of the first field from YYYY-MM-DD to MM/DD/YYYY."
puts "When <outpath> is not provided the file at <inpath> is overwritten."
puts "yfcsvfix also changes the order that CSV records appear outputting them "
puts "with the oldest records first."

if (ARGV[0])
# Read the file in ar
hdr = nil
ar = Array.new
File.open(ARGV[0], "r") do |fin|
  while line = fin.gets
    if (hdr)
      ar << line
    else
      hdr = line
    end
  end
end
ar = ar.sort

outpath = ARGV[0]
if ARGV.length > 1
  outpath = ARGV[1]
end
puts "outpath=" + outpath


File.open(outpath, "w") do |fout|
  fout.puts hdr
  ar.each do |line|
    sp = line.split(',')
    dsp = sp[0].split('-')
    odsp = dsp[1] + '/' + dsp[2] + '/' + dsp[0]
    oln = odsp + ',' + sp[1] + ',' + sp[2] + ',' + sp[3] + ',' + sp[4] + ',' + sp[5] + ',' + sp[6]
    fout.puts oln
  end
end
end

Hope someone finds this useful. Leave me a comment if you do as it will encourage me to keep sharing what I make.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Pento On Inflation And Deflation

This King World News with Michael Pento (click here) is one I can recommend.

The really interesting part starts are around 7 minutes in. The really interesting idea is his proposal for a simple way to trade the current markets. He proposes:

• Having two portfolios, an inflation portfolio and a deflation portfolio.
• Switching between them depending on the action in the US dollar.
• When the dollar is falling you switch to the inflation portfolio.
• When the dollar is rising you switch to the deflation portfolio.

Anybody who has been paying attention is aware that either the risk trade is ON or the risk trade is OFF, so Pento's proposal is not exactly new. The cool part about the proposal, from my perspective, is having two default portfolios set up and ready to go ahead of time. With the portfolios prepared ahead of time you can take plenty of time to get them right and then focus on getting the timing right on when to use them.

So, here's my challenge. Help me work out the following:

• If you are managing with an IRA account and can't go short or trade leveraged futures or do anything but covered call options:

                What goes in the inflation portfolio?

                What goes in the deflation portfolio?

                Are there any core positions?

• Same questions if you have a trading account where everything is possible.

Leave me a comment with your thoughts. If I get the time I'll put my own thoughts on this up in a separate post.

MontyHigh, www.worldofwallstreet.us

 

Hussman's 2012 Outlook And Mainstream Retirement Planning Alternatives

Here's a dressed up version of an email I just sent out to my two brothers and sister. I'm running about 40% of my 80-something mother's retirement money (the part not locked up in trusts):

"Here's a good piece by the best of the mainstream investment columnists: http://www.hussman.net/wmc/wmc120103.htm. Being mainstream, Hussman does not take into account out of the mainstream risks, including.:

• risks to the whole system from the fraudulent fiat-currency system,
• risks to the middle-class from the "banksters" (the banking, corporate, government elite running the system) or
• Peak Oil.

The key fact in this piece is that the best you can expect from passive, 100% invested in the stock-market investing for the next decade is 4.9% returns minus management fees and taxes compounded annually. I believe Hussman is talking about real returns computed by deflating with the bogus government manipulated CPI numbers, but I'm not sure.

There are a few takeaways from this article:

• The best estimate of what to expect from the investing of our dear mother's retirement money is 2.4% (i.e. 4.9% minus say 1.5% for management expenses minus another 1% for taxes) for the next 10 years. If she lives on what she expects to spend (around $50K/year) and actually gets this return then she should be able to make it to around 100 without running out of money, but without leaving much behind when split four ways.
• The best estimate of what to expect from your own retirement savings (401K or IRA) is 3.4% (4.9% minus something like 1.5% for management expenses).
• Bruce, with his US Post Office pension, should compare what the pension fund is expecting to the article's 4.9% to evaluate the likelihood of his retirement payouts taking a hair-cut.
• If this article seems like boring, complete gobbledy-gook then you should ask yourself how best to take responsibility for your retirement planning. There are no low-risk approaches unless you already have saved way more than you'll need. You can either:
  • save retirement money in tax-protected accounts (IRAs and 401Ks) and live frugally enough to get by on:
    • the gains (losses) from the passive, globally diversified approach (ETFs or Mutual Funds), probably around 3.4%. The risk here is that situation is worse than the best mainstream guy's estimate and "THEY" are going to plunder those tax-deferred savings accounts.
    • the gains (losses) from a top-gun who can play to win with your money without risking it all and who has enough integrity or personal connection to you to actually look out for your interests and save enough. Finding such a guy is harder than it sounds. There's a big straight jacket on your guy if what he's running is in a tax-deferred account. The risk here is either that he plunders your money (e.g. Madoff) or that he isn't really a top-gun and he loses a bunch of your money or "THEY" are going to plunder the tax-deferred savings.
  • spend a few thousand hours spinning up to become a top-gun yourself and retire on your "winnings" from your own savings. The risk here is that you don't actually become a top-gun and don't have "winnings" to retire on or that the investing system is so rigged that small-time top-guns can't make real money.
  • save in the form of physical gold enough and live frugally enough to get by on a fixed number of oz of gold per year. The risk here is that the physical gold is stolen, taxed to death or confiscated by the government or that it doesn't hold its value over the long-term.
  • plan on working as long as your are able and depending on family thereafter.
  • some other thing that doesn't occur to me right now.
  Respectfully and with much love..."

MontyHigh, www.worldofwallstreet.us

 

Follow Up: $USD And 2012 Gold Outlook Based On The 10-Year Historical Trend

Here's a follow up round on this recent post:2012 Gold Outlook Based On The 10-Year Historical Trend

2b (a remarkable micro-cap stock picker) responds: "My only question would be how gold has correlated to the U.S. dollar and what effect a strong dollar might have on your future price prediction."

Good question. Best gold type podcast I've heard in a while was Sinclair is linked from here: http://www.jsmineset.com/2011/12/26/a-modest-1700-2100-gold-price-in-2012/

 

He claims Pierre Lassonde (King World News) is expecting gold between $1500 and $1800 in 2012 and that is based on strong dollar. Sinclair's call ($1700 to $2100) is based on the dollar not being as strong as expected.

 

 

But here's a chart of the dollar action for the four big corrections. I find for the three previous corrections:

(a) The dollar rises up until the end of the correction.

(b) What the dollar does after the gold bottom varies from one correction to another.

 

So, if the dollar keeps rising at this point, I expect that the bottom is not yet in for this correction. I guess you are expecting further dollar strength as Europe continues to look risky. The "Japan is next" buzz is starting to get thicker also. Japan right now seems to be like Italy was when all eyes were on Greece. The smart guys were talking about Italy. Now the smart guys (Kyle Bass...) seem to be talking about Japan.

 

MontyHigh