RANTING ANDY – It looks like the inflationary tsunami so long predicted by the minions in our “shadow world” is coming to pass.
Despite all its warts, the Euro is soaring against the U.S. dollar, as is every major (and minor) currency on earth due to the dollar’s terminal, cancerous condition. Only the yen is falling against the dollar, and only due to QE2A, or the “global quantitative easing” undertaken after a real tsunami engulfed Japan’s financial condition.
Treasury bonds are falling rapidly while commodities surge to new all-time highs, led by crude oil, the most widely used (and thus most inflationary) commodity on earth, and silver, which to many people’s chagrin is the SECOND most widely used commodity on earth, NOT INCLUDING its dominant monetary characteristic.
The incessant capping of gold at $1,440 finally fell this week thanks to two of the smartest people in the PM community, the venerable Eric Sprott, who has officially taken the mantle as the most important figure in the global fight against the Gold Cartel, and the more reserved Stefan Spicer, whose family has run the fantastic closed-end fund Central Fund of Canada (CEF) for nearly 50 years.
The battle for $1,440 gold has been particularly fierce in recent weeks given the fact that silver has been soaring each day, this morning surging past $40/oz (in the paper world) like a knife through hot butter. In the REAL world, of course, the silver price is closer to $45/oz, if you can find it, and will shortly pass the all time high of roughly $49/oz hit for two fateful days in January 1980. Actually, I’d bet anything that JP Morgan paid quite a few COMEX March silver longs above $50/oz to persuade them to not take physical delivery last week.
And in this case, the “Bulge” was finally won by two stock offerings, the first late last week by Spicer’s Central Fund of Canada (CEF), for $360 million and the second, the “coup de grace”, earlier this week by Sprott’s Physical Gold Trust (PHYS), in the amount of $311 million. CEF, mandated to own roughly 50 ounces of silver for every ounce of gold, has become decidedly silver-heavy in recent months as the gold/silver ratio has declined from nearly 70 in October to 36.5 today, and now sports a nifty market cap of $5.8 billion, while PHYS, a 100% gold trust, has already reached the $1.2 billion market cap level in just its first year of existence. Not too shabby.
These closed-end funds, as well as Sprott’s PSLV (Physical Silver Trust), Spicer’s GTU (Central Gold Trust) and SVRZF (Silver Bullion Trust), and James Turk’s goldmoney.com, in my view, are THE best ways on earth to own “paper gold and silver”, the only viable alternatives to owning physical bullion yourself that I see. And this past week, these offerings helped tip the scales against the evil Gold Cartel, particularly the PHYS deal, which sported the lowest price dilution of any such offering I have witnessed in nearly a decade of watching. PHYS was trading at just a 3.5% premium to NAV when the deal was priced, and pricing was at an amazingly low 1% below the prior closing price. Sprott obviously took matters into his hands in convincing his clients that the time was NOW to take perhaps the last chunk of available, sub-$1,450 gold off the market that we may EVER SEE IN OUR LIFETIMES!
So Kudos to Sprott and Spicer, two of the leaders in the battle to help investors preserve their wealth against the forces of inflation!
Separately, it needs to be noted that I have FINALLY started to see signs that PM companies are starting to think proactively about investors’ needs. It should be no surprise that the maverick gold investor Rob McEwen recently put a large swath of the proceeds of a February $100 million stock offering for his U.S. Gold (UXG) vehicle into physical gold and silver (nice trade!). McEwen regularly held treasury funds in physical gold while the CEO of Goldcorp (GG) a decade ago, but upon leaving, his successors wisely (FACETIOUS) decided that CASH was a smarter investment. And now he brings that same M.O. to U.S. Gold, making it a significantly more valuable investment.
But more shocking is the fact that, of all companies, staid old Newmont Mining (NEM) announced yesterday a new dividend policy that directly links investor payouts to the GOLD PRICE, to the tune of $0.20/share for EACH $100 price increase in gold. Now THAT’S something to get excited about, and not surprisingly Newmont the dinosaur, the same company that just realized it needs to ACQUIRE new assets to replace the depletion of old ones, was up sharply yesterday on its highest volume day in nearly a year!
As you all know, I do not use my RANTS to discuss the merits of mining stocks, and I will continue to not do so. But if anyone DOES NOT realize the insane VALUE in junior mining stocks today, than they will never understand the VALUE of ANYTHING! Valuations of junior miners based on resources in the ground, ON AVERAGE, are 50%-75% below peak levels reached four years ago, when the TSX-V last peaked. Majors like Newmont and Kinross are aggressively acquiring assets as we speak, and gold and silver prices are going stratospheric. Five years from now, I predict that 80%+ of all producing gold/silver mining companies will have been acquired, no different than what happened in the oil sector in the late 1990s to early 2000s.
Be careful with your personal investment policy, of course, but be sure to consider the upside opportunity in the juniors, perhaps LARGER than that offered by the emerging INTERNET SECTOR in the mid-1990s.