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  1. First Majestic/ Mining Finance

    Generally speaking, when you own shares in a gold/silver mining company you are getting two kinds of leverage. There is the leverage that comes from the fact that a small percentage increase in metal price leads to a bigger percentage increase in profit margin. The second is that if the miner is only barely profitable, or even unprofitable, at the current price, an increase in the metal price can push them into profitability and make an otherwise worthless company valuable. Companies that are unprofitable at the current price are sometimes called optionality plays and they are risky but can give good results if the price rises. First Mining Finance (FF) is a kind of optionality on steroids, because they are just acquiring assets and holding them until a higher price arises. The shares are highly volatile because whenever they make a new purchase, they fund it by issuing new shares, which dilutes the existing shareholders. As a shareholder you have to trust that the management knows what they are doing and that the purchases are adding enough value to offset the dilution. First Majestic (FR) is a miner and is actually producing product. They got hyped quite a lot last year and the price went high and has settled down a bit. It didn't help when they had an accident and some miners were killed. The share price is still arguably a little on the high side, but if you expect silver to go up, it is one of the better managed miners. Depending on how large your portfolio is, you might want to consider diversifying into a few other silver miners as well, such as Pan American, SSR Mining, Hecla and Fortuna. As you say, Keith N has a good reputation in the industry, though it does annoy me when I hear him being interviewed because he always trots out the line that the ratio of the price of gold to silver should be nine, because this is the ratio at which they come out of the ground. The two ratios are of course completely unrelated. As to silver production, more silver has been consumed than produced for several years now, so either stocks are running down or a lot of recycling is going on. Despite this, the price hasn't gone up much. Keith did actually attempt to organise a kind of production boycott among miners in order to force the price up, but there was little enthusiasm from other miners, and he was threatened with a lawsuit for attempted price fixing. As to what happens to gold/silver miners during crashes, this is a difficult and perplexing question. Sometimes, such as in 2008, they crash with everything else. At other times, they don't. Bear in mind that these days lots of market participants use high levels of leverage, either by using debt, or trading on margin accounts, or by using leveraged products. If there is a crash, they may be forced to sell everything they hold to meet a margin call, or to satisfy withdrawal requests from investors. My guess would be a panic sell across the board, but with metals and miners among the first to recover. This means you probably want to hold some cash in order to take advantage of distressed prices. Usual disclaimers: this is not investment advice. I own, or have owned, FF and FR.
  2. @HawkHybrid Savings and pension contributions in the UK are not sufficient to allow people to retire comfortably. When the bulk of the baby boom generation reaches retirement age and discovers they cannot afford to retire, there will be hell to pay. There will also be a deflationary impact on the economy, because people who retire tend to spend less: they replace their car less frequently, for example. In the USA, it is noticeable from the non-farm payroll numbers since 2008 that the numbers of people in employment in the over-55 category has increased. This suggests that older people either cannot afford to retire or are being forced out of retirement and back into the workforce because of low returns on their investments. @reidpj I don't buy the idea that sovereigns with their own currency can create limitless amounts of currency with impunity. Currency depends on confidence to function, and any country that creates large amounts of currency without respect to its ability to cover it with future tax income risks a currency collapse. The UK can indeed print any amount of sterling to pay off its sterling-denominated bonds, but foreigners will not turn up to bond auctions to buy any new ones if they know the currency is at risk. Japan is - for the present at least - getting away with huge amounts of money printing because nearly all of its debt is owned by Japanese savers. The USA can also get away with money printing because the USD is still functioning as the world's reserve currency, so there is a steady demand for it. For other countries, especially the UK which is a trading nation and needs foreigners to trust its currency, printing currency is highly perilous.
  3. So, great news today (Aug 12) - the UK exceeded its inflation target of 2% and turned in a stonkingly good 2.9%. Hooray! And on that splendid news sterling goes up 1% against most major currencies, because inflation is really good for the currency, right? Has the world lost its sanity? The only possible explanation is that the market believes the BoE will be forced to raise interest rates, though I doubt we can count on that.
  4. Gold Monitoring Thread £ only

    Not sure why my post went in 3 times - I think the server was slow to acknowledge so my browser retried automatically. Maybe a mod can delete the duplicates. Thanks.
  5. Gold Monitoring Thread £ only

    It is rarely a bad idea to cost average yourself in by buying small tranches, even after a rise in price. The price could go much further up from here and you might miss out. There was a further attempt at a smash down in price yesterday (Aug 29), probably because this is the expiry date for futures contracts and some market participants wanted a lower price to get their positions into the money. After an $18 fall, the price seems to be recovering again. If the price holds above £1310 for a few more days, the momentum traders may switch to a long position and drive the price much higher - maybe up to £1350 or more.
  6. Gold Monitoring Thread £ only

    I doubt the Korean crisis is all that significant. Donald Trump and Kim Jong-Un are feeling insecure and are playing to their respective home audiences by talking up the issue, but it is in neither of their interests to do anything but talk. I think it is more likely to be a combination of some major investment companies switching to a long position because of fears of a recession, and the start of seasonal buying, Sept-Oct and Jan-Feb being usually strong for gold demand.
  7. Gold Monitoring Thread £ only

    On Friday Aug 25 2017 an attempt was made to drive the price of gold down by selling 21,000 contracts on NY Comex in the space of a few minutes. A contract is 100 ozt of gold, so this amounts to over 2 million ounces, or over $2.5 billion worth of gold. This is actually not uncommon, particularly on Fridays, but this time it didn't work. The price bounced straight back. Look at the green lines on the charts below. This seems to me quite positive. In recent years when gold was knocked down it stayed down, but now it is proving resilient. This may well be an indicator that serious amounts of buyers are starting to move back into gold and are keen to buy the dips.
  8. I think it is worth distinguishing the state pension from occupational pensions. I agree that state pensions will not be affordable either, so the government will raise the eligible age gradually to 70 and will apply a means test to it. But the scary and depressing part is that the government will grab your company pension and your SIPP, or in the USA your 401K and IRA. At that point nearly every person of pension age will be dependent on government handouts.
  9. Some thoughts about the future of pensions. This applies to the UK, but I strongly suspect that other developed countries, including the USA, are in the same boat. We can divide the issue into three points. The first concerns the state of private sector pension schemes, the second concerns the state of public sector pension schemes, and the third is the conflict that is likely to result because of the previous two. 1. Some private sector schemes are of the defined benefit kind, while others have a defined contribution. Many, if not most, defined benefit schemes are hugely underfunded or actually insolvent. This is because highly rated bonds and stocks, which are the staple investment of pension funds, are expensive and have a tiny dividend yield. Pension schemes are subject to actuarial audit, but actuaries are permitted to assume a 7.5% compound annual future return on investment. This is still the standard percentage in use, even though interest rates and levels of economic growth are much lower. A lower and more realistic assumed percentage would result in a huge deficit when compounded year on year over the lifetime of a pensioner. Defined contribution schemes cannot strictly speaking be underfunded, but the problem is similar because a realistic rate of return would show that most people will not be able to afford to retire at the level of income that they expect or need. 2. Most public sector schemes are of a defined benefit kind with inflation linking. Some are entirely unfunded and are in effect just Ponzi schemes. Others are partially funded but typically in the same underfunded state as defined benefit schemes in the private sector. The difference is that the tax payer is liable for meeting these pension obligations. The unfunded or underfunded pension liabilities are not an explicit part of the national debt but are 'off balance sheet'. The scale of the national debt together with these unfunded liabilities is so great (and growing) that it will become unaffordable. A point will be reached when the governments of the developed world will be compelled to default on or inflate away some of their liabilities. Inflation is the softer option, but this conflicts with the inflation linking that is part of pension benefits. 3. This brings us to the coming clash. Price inflation reduces the value of private sector pensions and leaves pensioners with reduced purchasing power. Inflation linking theoretically leaves public sector pensioners with a constant purchasing power, but these pensions are unafforable and have to be paid for out of general taxation. Public sector pensioners will say: we worked our lives in the expectation of receiving this index-linked pension, and it is part of our contract of employment, so we are entitled to it. Private sector workers will say: you have contributed little or nothing to the cost of your pension and we are now forced to pay out of our taxes for you to have a pension that is far better than what we can afford for ourselves. Both parties will be correct. Any attempt to reduce public sector pensions will bring the public sector unions out on strike. Any attempt to seriously disadvantage private sector workers and pensioners will cost the government the next election. I speculate that in order to avoid this conflict, governments will nationalize private sector pensions. Occupational schemes and individual pension schemes will be taken into public ownership in exchange for a promise of pension payments from the government. This will not solve problems one and two. The private sector pensions are still underfunded and by nationalizing them the government will be taking on more liabilities than assets. But the investment assets can be set against liabilities on the balance sheet, bringing down the official government debt, while pension liabilities remain off balance sheet. The government's financial status will look much better. Also, it places private sector and public sector pensioners on the same footing. Both are now dependent on government payments. Both groups are likely to see their benefits reduced to make them affordable, but at least they are not being disadvantaged in comparison to the other, which defuses the conflict.
  10. Gold Monitoring Thread £ only

    The main resistance point seems to be about $1300 or £1010 per Toz. I would wait to see these levels hold for a few days running before calling a breakout.
  11. The euro may be good in the short term because of the strength of the German economy, but Europe faces headwinds at least as strong as those of the US. Europe has an aging population, huge debt, unaffordable welfare programmes, insolvent banks, high unemployment in the PIIGS countries, and a migrant crisis. If you want a model of where Europe, including the UK, is going in the next 20 years, look at Argentina. It was once one of the most prosperous countries in the world; then it caught a bad case of socialism and spent the next 40 years lurching from crisis to crisis, defaulting on its debts, and suffering high inflation and unemployment. I would say if you are looking for relatively safe currencies you are better off with the Singaporean dollar, NZ dollar or Norwegian krone.
  12. Gold Miner Picks

    Novo Resources Corp (CVE:NVO) has been on a tear recently because of rumours that it has hit a large deposit in Australia that might be geologically related to the giant Witwatersrand deposit in South Africa. Their share price has more than trebled in the last three weeks. Here is an interview that discusses it:
  13. Here's a thought I had about how it might be possible to save some tax. It is intended to apply to the UK, but it might well carry over to other jurisdictions. Let me know if you think it might work. To explain it, I'll start with something that doesn't work, then say how my idea differs. Suppose I wish to buy an item in a shop that costs, say, about £270. The shopkeeper is the owner of the shop or at least is empowered to make business decisions. Instead of offering to pay with money, I offer to barter the item for something that I possess. Even if the shopkeeper agrees to the barter, this does not save tax, because under UK tax law the transaction would have to go through the shopkeeper's books on the basis of a fair value being assigned to the bartered item. Of course, the shopkeeper could decide not to record the transaction, but that would be fraudulent. But now suppose instead that I go into the shop and ask the shopkeeper for a discount on the item. I would like him to sell me the item for £1. Why should he offer me this discount? Because if he does, I'll pay with a gold sovereign. (At the time of writing, worth about £250.) A gold sovereign is legal tender in the UK and has a face value of £1. So the shopkeeper can legally put the transaction through his books as having a value of £1. This involves writing down the value of the sold item to £1, which entails making a loss that can be set against other profits. It also avoids the profit that would be made by selling the item at the ticket price. Naturally, the sovereign doesn't go into the till, he just swaps it out for a regular £1 coin. Net result is that if he is paying tax at say, 20%, he is saving himself about £50 in tax and can afford to part with the £270 item in exchange for a coin that he can sell to a dealer for £250. He and I both benefit and the taxman is down on the deal. I don't see how this would be illegal. It differs from the barter case, because I am not bartering the coin, I am offering it for the settlement of a debt at the value set for it by the Bank of England. In effect the scenario is created by the fact that the Bank of England, in issuing both regular £1 coins and gold £1 coins with the same face value, has violated the fungibility of currency.
  14. Cryptocurrencies are a different issue from blockchain technology generally. The reasons to use them are: 1. It cuts out the commercial banks as intermediaries, saving on transaction fees. 2. It cuts out the central banks as issuers of currency, which avoids the debasement suffered by fiat currencies. 3. Transactions are difficult to track. 4. Transactions are irreversible, which is good for merchants accepting payments. Other claimed advantages are not so certain: 5. Cryptos are more secure in some ways but introduce other security problems of their own. 6. Cryptos avoid currency conversion fees, but since there are many cryptocurrencies, converting between them may become an issue. 7. Transactions are claimed to be very quick, even internationally, but this has not held up. Bitcoin has become quite slow. The main drawbacks are: 8. Prices are volatile compared with fiat currencies. This is particularly an issue for merchants wanting to price their goods, but there are services providers starting to appear that will guarantee an exchange rate for a given period. 9. We don't yet know whether cryptos will scale to high transaction volumes. Bitcoin transactions are currenctly a tiny fraction of the volume handled by Visa, for example, and already Bitcoin has become slow. 10. There may be hidden bugs or exploits that could completely kill off a cryptocurrency. 11. There are many cryptos and likely many more to come. We don't know which ones will succeed. 12. Cryptos such as Bitcoin that use decentralised mining are effectively under the control of those miners. Mining mostly happens in countries with cheap electricity. This leads to those countries effectively having considerable influence over the currency. Over 90% of Bitcoin transactions happen in China because electricity is cheap there. If China were to ban Bitcoin the effect would be substantial. 13. Governments may come to regard cryptos as a threat to their own fiat currencies and their ability to debase them. In the same way that governments are making war on cash, cryptos could be next. The pretext will be that cryptos are used for criminal purposes. Cryptos could be banned or regulated so tightly they become useless.
  15. Gold down

    It is nearly impossible to predict the price of gold accurately, particularly on a short timescale. Technical analysts are fond of drawing lines on charts and saying this pattern indicates such and such, but patterns can usually only be recognised after the event. Such analysts tend to say that *if* the price goes up and breaks this resistance level it will continue to go up, and *if* the price goes down and breaks this support level it will continue to go down, and *if* it does neither then it will remain within a channel. Of course this is of no use whatsoever because all possibilities have been covered. It just amounts to saying the price will rise, fall, or stay about the same, which we knew already. Fundamental analysts identify considerations such as rising demand, falling production, rising interest rates, rising inflation, investor risk appetite, geopolitical uncertainty. These have the benefit of being tangible causes of price movements, but they are of little use in timing price moves. Maybe gold is undervalued by all kinds of measures, but who is to say it cannot remain undervalued for a long time or go down even further? The best thing to do with gold itself is treat it as insurance rather than as a speculative investment. Own as much as you reckon it would be helpful to have in the event of a financial collapse and hope you never have to use it.