saveyourassetsfirst3 |
- Gold Production Decline Imminent
- Von Greyerz: Soaring gold and silver will be part of a really nasty world
- It’s Official – Goldman Sachs Was Buying GLD While Advicing To Sell
- Galland - Mexico Invades Syria!
- Porter Stansberry: How to make money in any market... at any time
- Eight unusual ways to hide and protect your gold and silver
- Surprising post could explain how legendary billionaire George Soros trades stocks
- Expectations For Eli Lilly's Lung Cancer Drug Rise, But Revenue Concerns Continue
- Gold and Silver Disaggregated COT Report (DCOT) for August 30
- Jim Willie: Syria, Pipeline Politics, OPEC & the USDollar
| Gold Production Decline Imminent Posted: 30 Aug 2013 03:24 PM PDT Gold's precipitous decline in the first half of 2013 sent shockwaves throughout the entire mining industry. Its scary panic-induced 28% plunge over just six months has forced the miners to revisit their development plans. And this will no doubt have an adverse impact on global mine production in the years to come. It's actually quite fascinating to observe how quickly things have changed for the miners in response to 2013's decisive move countertrend to normalcy. And in gold's case, normalcy had been a fundamentally-backed consistent and healthy uptrend in its price (2012 was gold's 12th-straight calendar year with a price increase). Interestingly 2013 wasn't expected to be any different as far as the miners were concerned. Gold's structural fundamentals were still spectacular. And though in 2012 its price was never able to revisit 2011's all-time high, it was a year in which gold sported its highest-ever average price ($1669). Given these conditions the miners were poised to do what they did best, produce gold, make money, and plow capital into developing their pipelines. But alas, this year hasn't quite been as hunky-dory as hoped. And the earliest and most transparent effect of the sharply-falling gold price has been seen in the miners' financials. With gold's average price in the first half of 2013 $150 lower than 2012's ($250 lower in Q2), margins have obviously been squeezed. And this has resulted in a lot less money being made from existing operations. Gold's much-lower prices are also forcing the miners to take huge write-downs and impairment charges (some projects are no longer economically viable, and others must be re-valued to the market). In the second quarter alone major miners Barrick Gold, Newmont Mining, AngloGold Ashanti, Goldcorp, Newcrest Mining, and Kinross Gold announced over $23 billion in combined write-downs and impairments. Given gold's consistent rise, most miners had been valuing their assets using prices on the high side of an interim range. They just assumed that gold's price would continue to rise, and that the prices they used would eventually be conservative. Gold's recent action has vanquished this mindset though. And these same miners are now nervous about the values of their assets. Unfortunately I suspect we'll see a lot more write-downs and impairment charges in the quarters to come. These accounting phenomena are non-cash, paper losses. And while they are tough to swallow in whatever quarter they show up on the income statement, they can be even more damaging from a sentiment perspective. And unfortunately sentiment takes an even bigger hit when there's a systemic issue across the entire sector. Ultimately the barrage of financial reckonings in the recent quarter has left a bad taste in investors' mouths. And the miners' stocks have greatly suffered as a result. It's been one of the worst stretches for gold stocks in this entire secular bull market. So with gold prices and stock prices way down, the miners have suddenly found themselves in a sentiment wasteland. And in this wasteland the future doesn't look as bright. The folks that run these companies aren't as confident in gold's future as they were six months ago. And with less cash flow and a much-more-challenging financing environment, their spending plans are not feasible anymore. For these reasons and more, most miners have been forced to revisit their development plans. And in many cases this has resulted in the delaying or outright shelving of expansion/development projects, as well as a huge cutback on exploration. The miners are now in capital-conservation mode, and this will no doubt have a major adverse effect on future production volume. This will of course be a shame considering all the work put into the gold-mining infrastructure over the last decade or so. Interestingly it was only just in 2009 that the miners finally got ahead of the depletion curve. Years of aggressive development led to the first material increase in global mine production in quite some time. And this was the beginning of a healthy streak, with 2012 being the fourth year in a row of production growth. The miners delivered a record 2700 metric tons to the market. But this hard-won streak is now in jeopardy as a result of gold's fluky panic. If indeed the miners curtail development and shut down higher-cost operations, production volume has nowhere to go but down. And this production decrease could play out sooner than we think. In the World Gold Council's latest Gold Demand Trends report, it states "While mine production historically has been slow to react to changes in the price, the extent of the fall in the second quarter has elicited a swift response from gold producers. Recent spending cuts and the closure of costly operations across the industry may start to have an impact on the supply pipeline by the end of this year." By the end of this year?!? Wow! This is a crazy-fast reaction by an industry where reaction is typically slow and methodical. Gold's 2013 panic sure did scare the miners, which is readily apparent by the tone of their recent press releases. They are now positioning themselves so they don't get caught with their pants down again. And I believe the result will be prolonged lower production levels driven by three distinct phases, closure, delay, and backfill. Closure is the first and most immediate phase that will negatively impact production. Within this phase are two methods of closure. The first is full closure, the outright cessation of all mining operations. If a mine can't make money at lower prices, it will be shut down. This shutdown is usually temporary at first, with the hope that higher prices would again make it economically feasible. Regardless of downtime, this is production that comes right off the market. The next kind of closure is a partial closure, or source closure. Some mines run multiple mining methods, multiple ore types, and/or multiple processing circuits. If one is not economically feasible at current prices, it'll be shut down. And this would obviously reduce output. Some mines also blend material, meaning lower-grade ore is mixed in with the higher-grade stuff. At lower prices many mines won't be afforded this luxury. So rather than just increase the higher-grade material (which would drastically reduce the mining life), most miners will simply stop running the lower-grade material to reduce operating costs. This would get them back in the money, but again volume would be down. Closure is something we are already seeing today. And we'll likely see more at operations that just can't turn a profit at lower prices. Interestingly analysts have recently been estimating that all-in sustaining costs for the industry average around $1200. If this is the average, then the topside outliers are in big trouble. In the onset of 2013 most of us expected another record production year. But with closures mounting, this may not come to fruition. Reductions in output from this first phase may just be enough to offset new volume from some big operations that came online earlier this year. And when you compound closures with development delays, we're almost certain to see less mine production in 2014 and beyond. Development delays have been the talk of the town. As publically-traded companies, the miners must keep investors in the know regarding any material decisions. And there's been a throng of announcements over the last couple quarters that have outlined radical alterations to numerous miners' tactical and strategic plans. From a tactical perspective we're seeing a lot of mining companies rein in spending for the remainder of the year. And while it may not seem like a big deal, it actually is. Whether pulling drill rigs from the field, holding off on equipment ordering, or anything else that would slow the advancement of a project, this type of activity delays future production. From a strategic perspective, we're seeing some miners outright suspend development plans they had in the works. This includes both expansions at existing mines, as well as brand-new mine development. As you can imagine, this development is crucial for sustaining current production levels. Mines are constantly being shut down due to depletion and/or economic viability, and there naturally needs to be a steady flow of new development to replace the production that's being lost. Unfortunately a degree of paralysis has gripped many miners as a result of the shock from seeing the economics of their development projects radically change over such a short period of time. Some projects are flat-out uneconomic at lower prices (these are the ones being written off), and the rest have IRRs and NPVs that are well lower than anticipated. Sadly this paralysis is preventing many miners from pulling the trigger on development, even if their projects still have positive economics. And these delays are mostly financially driven. The miners are either conserving capital out of fear that gold prices may go lower, or they are concerned over their ability to fund these developments. Over the last four years, new development has stayed ahead of depletion. But it won't take many development delays to fall behind the curve. And if the delays already announced hold true, then there will no doubt be a negative impact on future production levels. The final phase of future production pressure will be a product of insufficient backfill. As mentioned depleting/closing mines need to be replaced by a constant flow of new development. And it is a strong pipeline of development-stage projects that allow for this to happen. In order to maintain a strong pipeline of development-stage projects though, there needs to be a steady flow of discovery and advancement at earlier-stage projects. These projects are the ones that backfill the development projects when they are removed from the pipeline. And if there's a shortage of them, it will eventually be felt on the production side of things. I truly believe it will be the lack of backfill that will smack the gold-mining industry the hardest. Not only are the large producers cutting way back on their exploration spending, the junior sector has all but ceased exploring and advancing projects. I discussed the huge crisis of confidence currently strangling the junior sector in a previous essay. And it's not hard to conclude that a lack of activity in this realm will adversely impact global mine production in the years ahead. Overall gold's 2013 panic makes a global mine-production decline imminent. And I suspect this will be the case even if June's low holds and there's a quick reversion to the mean. The damage has already been done. And regardless of gold's price, the miners will be gun-shy on the capex front for some time to come. Declining production obviously has huge implications for investors, especially if demand remains high. Since mine production is by far the largest source of supply, a decline would create a supply-side economic imbalance. More money would be chasing after less gold. And this is actually quite bullish for the price of gold, as it must rise until a balance is met. As gold climbs higher, the miners should also attract investor interest. Those that have survived and thrived in 2013 will take a leading role in the next leg of this metal's secular bull. The producers will be well positioned to leverage their profits, and the junior explorers with quality projects to feed the pipeline will sell for a hefty premium. At Zeal we believe we're in the early stages of a major gold upleg. We've thus been loading up on gold stocks amidst the panic and its aftermath. And we've already seen some excellent unrealized gains on many that we've recommended in our acclaimed weekly and monthly newsletters. Subscribe today to get unmatched contrarian market analysis and to find out which stocks we're trading. The bottom line is 2013's infamous gold panic will prove to be a game-changer on the supply front. It really freaked the miners out! So much so that we're already seeing huge spending cuts and mine closures. We're also seeing an onslaught of suspensions and delays in the development projects that are supposed to replace depleting operations in the near and long term. And to top things off, exploration is at a near standstill as the miners seek to conserve capital. This will lead to an imminent production decline, which will ultimately be bullish for the price of gold in the years to come. Scott Wright August 30, 2013 So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence, that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research as well as provides in-depth market analysis and commentary. Please consider joining us each month at … www.zealllc.com/subscribe.htm |
| Von Greyerz: Soaring gold and silver will be part of a really nasty world Posted: 30 Aug 2013 03:02 PM PDT GATA |
| It’s Official – Goldman Sachs Was Buying GLD While Advicing To Sell Posted: 30 Aug 2013 02:50 PM PDT We have expressed earlier this year our suspicion about the aggressive price drop of the metals. Our main point was that the ferocity of the drop was out of proportion. Moreover, in “Gold In 2013 – Too Many Mysteries Remain Inexplicable” we showed several evolutions in the gold market that defy any normal measure. We did so based on facts and figures only as we remain strongly unbiased in our writings. One of the points we made in the article was the following:
We remain convinced that the most important question was who has been purchasing the gold in both the physical and paper market. As far as the physical market is concerned, we know meantime that a large part has been bought by central banks in non-G8 countries as well as Asian citizens. But here is the surprise of the day (or maybe no surprise at all), as reported by Zerohedge:
In addition, Zerohedge provided evidence of their finding. The following screenshot shows the GLD purchases in Q2 of this year.
Any other questions about the price smash? Any wonder JP Morgan and Goldman Sachs are breaking every imaginable trading record with almost 100% of profits when measured on a day basis? The “golden” lesson? Don’t trade gold and keep possession of the metal in physical form outside the banking system. |
| Galland - Mexico Invades Syria! Posted: 30 Aug 2013 02:24 PM PDT David Galland, Managing Director at Casey Research writes a provocative, timely piece on Syria. David begins: As I write, the Mexican president and his senior military staff are finalizing plans to respond with force to the Syrian government's purported use of chemical weapons on the United States' Islamist allies. "Eeets an outrage!" said President Enrique Peña Nieto in his best English. He then went on to detail how his secretary of defense, working with allies in Bangladesh and Mozambique as a "Coalition of the Absurd," was moving troops into place to "respond decisively" to the Syrian government's decision to commit collective suicide by engaging in the one act sure to bring international forces into the conflict on the side of the revolutionaries determined to overthrow it. When asked if it wouldn't be more prudent to wait until the UN inspectors in Syria issued their findings—you know, to avoid a repeat of the mistake the US made when it ignored the UN inspectors' report that there were no weapons of mass destruction in Iraq—Maria Harfarta, Secretario adjunto del Departamento de Estado, snapped, "We are making our own decisions on our own timeline, and we believe that the UN inspection has passed the point where it can be credible." At which point El Presidente Nieto raised a carbine over his head and, in a particularly deep and masculine tone, yelled, "¡A las armas! Vamos a ir a la GUERRA!!!!" Of course, dear reader, I have purposely misled you—all in the hopes of making a point. Namely that it makes no more sense for the United States, the United Kingdom, and France (among others) to attack Syria than it does for Mexico, Bangladesh, and Mozambique. In an attempt to support that contention, it may prove helpful to engage in the Socratic exercise of asking questions, in the hope of finding answers. For example… What national interests are the Western powers defending? Given that creating a power vacuum in Syria will likely result in yet more chaos in the Middle East, which translates to higher oil prices, it certainly doesn't seem to be in the interest of the cash-starved flailing "democracies." (I put that word in quotes because according to the latest Gallup polls, 90% of Americans are opposed to siccing the US military onto the Syrians.) In addition, the action will deepen the strain between the US, Russia, and China, with Russia being a long-term staunch ally of Syria's and China being the largest holder of US Treasury instruments in the world. It also sets the "West" against the Arab League, which opposes yet another in an almost unbroken string of Western assaults on their region over the last 1,000 years. For the record, the Arab League includes Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Tunisia, UAE, and Yemen. While the leaders of certain Arab League countries, for example the Saudi royal stooges, are against the Assad regime, among the 300 million people on the Arab Street there's a strident level of opposition to yet more Western bombs landing in their backyard. Thus the imminent military action could be like throwing a lit match into a puddle of gasoline, igniting the simmering resentment of the downtrodden in Saudi Arabia and Bahrain (among others) and leading to something approaching an energy apocalypse. After all, over 50% of the world's oil reserves reside under the sand of the Middle East. And much of the rest is located in Russia, the world's largest oil producer. Furthermore, any serious attack on the Syrian military's ability to defend itself will almost certainly tip the balance of power and allow the rebels to gain control. At which point the US will have delivered yet another large piece of territory unto the Islamists. For a quick lesson in how that has worked out so far, take a glance over at Libya, Iraq, and Egypt. I don't know, but the last time I checked, it seemed to me that the West was at war with the Islamic extremists. If eating the lungs of their opponents, as one of the commanders of a US ally in Syria did, isn't considered extreme, I'm not sure what is. So, if an attack doesn't serve the interests of the Western countries now revving up for war in Syria, then whose interests does it serve? There are two clear winners from the attack. Based strictly on the hard evidence, one would have to mention Israel (immediately triggering a rainfall of reflexive charges of anti-Semitism on the head of anyone daring to mention it—which is why it's never mentioned in the mainstream press). Though the end of Assad in Syria means delivering the country into the hands of more overtly anti-Israel extremists, simple observation tells us that once an Arab state fails, it tends to stay failed for many years. That's because it invariably sets off internecine fighting—often supercharged by religious passions—which acts like a cancer, quickly spreading throughout the inner workings of a previously reasonably cohesive state. Put another way, whereas a well-armed and well-organized Syria under Assad may represent a threat to Israel, a Syria descended into chaos represents no threat at all. Of course, over time some new strongman is likely to emerge, but I suspect that whoever ultimately prevails over the competition will only do so with help from powerful and deep-pocketed friends… in the West. History tells us that is how puppet governments are created. The other clear winners are, of course, the rebels. While unfortunate in the extreme for those caught out by the chemicals, a decision by Assad's military to cross the red line on using chemical weapons would be the single best way to bring powerful allies to the side of the rebels. Not to put too fine a point on it, knowing full well the consequences, the only possible explanation for Assad green-lighting a chemical attack would be a psychotic breakdown. Especially considering that he allowed UN chemical weapons inspectors into the country the very day before the chemicals were unleashed. Which begs the knock-on question, "Would the rebels really use chemical weapons on their own fighters and innocents?" In addition to a certain callousness (not to mention poor taste) attributable to the eating of human body parts, one could certainly see the rebel leaders doing the math and deciding it was acceptable for a few hundred people to die from a false-flag operation in order to bring the world's most powerful military into the conflict on their side. After all, far more would die should the rebellion stretch out for months or even years. Of course, at this point all we have is conjecture, though something a little harder than that is starting to bubble to the surface… this just in from the Live Trading news website… Testimony from victims now strongly suggests it was the rebels, not the Syrian government, that used Sarin nerve gas during a recent incident in the revolution-wracked nation, a senior UN diplomat said Monday. Carla del Ponte, a member of the UN Independent International Commission of Inquiry on Syria, told Swiss TV there were "strong, concrete suspicions but not yet incontrovertible proof," that rebels seeking to oust Syrian President Bashar al-Assad had used the nerve agent. But she said her panel had not yet seen any evidence of Syrian government forces using chemical weapons (CW), according to the BBC, she added that more investigation was needed. (Full story here.) So, given all the rhetoric about punishing the perpetrators of the chemical attack on the outskirts of Damascus, one has to wonder whom Obama et al. will smite should the attack be found to have emanated from the rebels? Hmm… At this point, given the scale of the rhetoric, I suspect any evidence pointing in the direction of the rebels will be discarded or denounced in favor of alternative evidence conveniently uncovered by military spying apparatuses. They are good at that sort of thing. Of course, the US isn't the only Western power with an itchy trigger finger. Socialist French patsy François Hollande has also signed on for a tour of duty, as has UK prime minister David Cameron who said in Parliament yesterday, "This is not like Iraq. What we are seeing in Syria is fundamentally different." Yes, one country is spelled I-R-A-Q and the other S-Y-R-I-A. How much more different could things be than that? Just because it's kind of interesting, the map here shows—in white—the countries that Britain has NOT invaded over the centuries. Must be something in the Anglo-Saxon DNA that periodically requires us to take the show on the road. How else to explain the illogic of attacking Syria? And I have little doubt that the attack is coming, if not now, then on some other pretense in the weeks just ahead. Evidence that the attack will happen sooner than later are comments made by one of the participants in a meeting in Istanbul earlier this week, where Western diplomats from the 11 countries that make up the "Coalition of the Willing" "Friends of Syria" met with rebel leaders… "The opposition was told in clear terms that action to deter further use of chemical weapons by the Assad regime could come as early as in the next few days." —Reuters If it makes no obvious sense for the US and its allies to once again start firing heavy metal into the Middle East, why would they do it? Several possible explanations… Wag the dog. As I don't need to tell you, the degrading Western democracies are broke as broke can be. In the case of the United States, the next debt ceiling will be reached in mid-October, after which the government will have to effectively stop answering the phones. Having run out of money for bread, putting on a circus might seem just the thing. The military-industrial complex is alive and well. I assume every one of you dear readers has already seen Dwight Eisenhower's incredible farewell speech to the nation in which he warned against allowing the rise of a military-industrial complex. Unfortunately, not enough of the right people paid attention to 'Ike," and the military-industrial complex has grown huge… and politically very powerful. War is the health of the state, opined Randolph Bourne. And right now, the state could use a booster shot. US foreign policy has been hijacked by the Neocons. This notion is something I have written about before. Evidence for it arrived earlier this week in a short video forwarded by a dear subscriber. The video, which appeared on ZeroHedge, is from 2007 and features Gen. Wesley Clark calmly describing how in the days immediately following 9/11, a general working with the US Joint Chiefs of Staff showed him a memo outlining a US plan to take out seven countries in the Middle East, including Iraq, Syria, and Libya, before ultimately finishing up with Iran. It certainly seems a plausible scenario to me.Here's the video… it's pretty eye-opening. As I go to press, it seems as though the rush to war that was so evident as recently as Wednesday is running into a wall of public opposition. So much so that David Cameron has started back-pedaling and Obama begun waffling. Unfortunately, for strictly political reasons, the odds are high that President Obama won't back down completely. If he did, the loud-mouthed opposition would pillory him as being weak and indecisive, and we couldn't have that. So, he'll take action, if only to fire off a few billion dollars' worth of missiles at random Syrian military targets. (Speaking of loud-mouthed opposition, I feel compelled to mention John McCain, whom I now firmly believe to be insane. No, really. He has become a dangerous character á la Dr. Strangelove, advocating the invasion of Iraq and, to this day, defending it as a good idea. As bad as Obama is—and in my view he's about as bad as the younger Bush—I think we'd all be scraping for food through radioactive rubble if McCain had won the presidency. Since we're chatting about radioactivity, a song of the dramatic genre I so enjoy recently caught my ear—though I suspect it will appeal only to the headbangers among you. The song is a live version of Radioactive, by Imagine Dragons.) Finally, what consequences might there be to a Western attack on Syria? There are many words and phrases used in describing war, including "fog," "hell," and "wow, never saw that coming." At its very core, war is unpredictable: any conceivable outcome can occur once the bombs start flying. But we can make some general assumptions as to how things might work out. For example, we know that military leaders tend to fight the last successful war. Having been burned by the long-term consequences of putting boots on the ground in Iraq and Afghanistan, it is probable that in Syria the US military will look to follow the script from Kosovo where the war was fought almost entirely from a distance using long-range cruise missiles and fighter planes. It was, as far as the West was concerned, a wonderful little war in that there were no NATO casualties as a direct result of the conflict. If the Syrian war goes according to that script, the Syrian military response will be limited to hiding in bunkers and muttering angry prayers to an angry god as missiles rain down upon their heads. Back at the US fleet, the sailors would spend their free time sunning on the decks and painting snappy slogans on the side of missiles yet to be deployed ("Special Delivery DAMASCUS" and "Next Stop Syria!"—that sort of thing). While there is little chance that Syria could prevail against the West under pretty much any circumstance, it might be premature to think they have no means of retaliation. For instance, in the world of today—as opposed to at the time of the Kosovo conflict—there is such a thing as computer hackers. And (surprise, surprise) there is actually a group called the Syrian Electronic Army that, this week, took down the New York Times website. Could this group—or someone who uses the group as cover to pursue a separate agenda—tip the switches on the fragile North American power grid? Or cause the US air traffic control system to take a nap at a busy time of day? It's not out of the question. Then there are the Russian shore-to-ship missiles deployed along the Syrian coast. One assumes the US Navy is smart enough to have calculated their effective range and is parking its billion-dollar ships well outside of that range, but what if there has been a miscalculation? Or the Russians have secretly upgraded the Syrian missiles? Could happen. Or what if Iran, seeing the cards on the table for what they are—i.e., that they are next—decided to take an active role in the conflict? Maybe by closing the Persian Gulf? Unlikely, I know, but what if? Could the attack trigger a quick and violent sympathetic public uprising in Saudi Arabia, sending the Saud family on the run and oil prices to $200 or more? In terms of consequences of a less violent nature, what if the Russians and the Chinese, the latter being Syria's largest trading partner, decided to protest by dumping some of the massive amount of US dollars they hold? I could go on, but won't. Instead, I'll leave off by saying that, given the risks vs. the rewards of yet another Western attack on the Middle East, I personally couldn't be more opposed to it. Hopefully there are enough people in what's left of the degraded Western democracies who feel the same way (and who are willing to express themselves): that the politicians should follow Mexico's example and mind their own business, rather than blundering forward into Syria with blunt force. Hopeful thinking, I know. But one does like to try and walk on the sunny side of the street whenever possible. *** Source: Casey Research http://www.caseyresearch.com/cdd/mexico-invades-syria *** Please note: Comments by guest authors are provided as-is, without editing and do not necessarily represent the views of this blog or GGR staff. |
| Porter Stansberry: How to make money in any market... at any time Posted: 30 Aug 2013 01:22 PM PDT From The S&A Digest: In this week's Friday Digest… we take a breather from worry. No fretting about debts or government policies. No watching interest rates rise with bated breath. No concern about the large and growing list of big companies (more than $10 billion in market cap) trading at absurd valuations (over 10 times annual sales). No… in today's Digest, we're going to show you something that you can use to make money in any market, at any time, whether stocks are going up or down. As always, our predictable warning before we begin… We know few things in life for certain. The love and dedication of our mother, for example, is something we can always count on. The loyalty of our dog (the ever-faithful vizsla, Ruby) is another… Last summer, Ruby took a rattlesnake bite to the face while protecting our children, who were playing in the backyard of our mountain cabin. That's a damn good dog. We know, with almost as much certainty, that if you teach someone about trading options safely, he will sooner or later give into greed. He will take the safe strategies and morph them into the most risky strategies imaginable. Great losses will follow. Therefore… before you read today's Digest… you should be aware of two things. First, we are going to analyze a call-option recommendation that Jeff Clark made in April of this year on Seabridge Gold. As you'll see, Jeff's trade was very profitable. That's significant because during the course of this year, Seabridge's share price has gone down a lot. The stock started the year trading around $20 per share… but fell to less than $9. (You can only make a profit buying a call if the stock goes up. You lose money if the stock goes nowhere or down.) The other thing you have to know is that Jeff followed up on his initial recommendation (which he made to subscribers of both his S&A Short Report and S&A Pro Trader) to buy a call option on Seabridge Gold with a series of other trades in the S&A Pro Trader. The S&A Pro Trader is designed for traders who are comfortable executing advanced options-trading strategies. The chart below explains the facts of what happened. Gold stocks entered a terrible bear market this year. Seabridge, which owns a large undeveloped gold asset, sold off heavily. (The black line in the chart represents the share price of Seabridge gold.) Jeff noticed the volatility. Using a variety of tools, he determined Seabridge had become heavily "oversold." To represent the conditions in the market, we've included a basic moving average convergence/divergence (MACD) graph below the share price. Jeff actually uses a different primary indicator of sentiment, but the MACD is close enough to show you what was happening in the market. Without going into the technical details, the MACD is a momentum-based technical indicator that displays the strength or weakness behind a stock's trend. If the MACD is rising while the stock is advancing (or falling while a stock declines), then the trend is strong and likely to continue. But if the direction of the MACD diverges from the price trend – meaning it rallies while the stock price falls or vice versa – the price trend is weak and likely to turn the other way. .png) Looking primarily at the market's trading dynamics (not the fundamental value of the business), Jeff decided Seabridge shares were due for a short-term rebound. So on April 4, he recommended subscribers pay $1.90 a share to buy a Seabridge call option with a strike price of $13… The call gave holders the right to buy Seabridge shares at $13, regardless of what the stock was doing in the market. The higher Seabridge shares rose, the more valuable the call would get. (Of course, if the stock fell to less than $13 a share, the call would lose value and investors risked losing the money they paid for it.) He was making a bet that Seabridge's price would pop higher as the market sentiment improved. And it did. Seabridge shares traded up from $13.52 to $14.28. Rather than closing the position and taking profits, Jeff put out an alert recommending S&A Pro Trader subscribers "hedge" the position by selling an out-of-the-money call, with an $18 strike price and an identical expiration date on the same underlying stock (Seabridge). The cash generated by selling this option – called the "premium" – allowed Jeff's subscribers to immediately recoup nearly 60% of their capital in this trade. (Of course, anyone who sold the call was obligated to sell the stock if it traded for more than $18 a share by the time it expired in January 2014.) Hedging the position was brilliant because what happened next was brutal. The stock fell dramatically as sentiment got worse and worse. By mid-July, investors had become as soured on gold stocks as I've ever seen in my entire career. Seabridge was trading for less than $9 a share. The original calls he recommended buying at $1.90 (with a strike of $13) were now worth just $0.43 a share. For many people, holding onto a position showing this size loss would have been impossible to bear… Except that S&A Pro Trader subscribers had collected $1.10 by selling the other option on April 10. By adding the $1.10 they had collected in call premium to the $0.43 the options were still worth, subscribers were sitting on a 19% loss rather than a 77% loss. In short, what could have been a catastrophic loss was turned into a minor bump in the road. Following the most recent low in the stock… Jeff's indicators told him Seabridge was likely to rebound. To generate more "premium," he recommended selling a put option on the stock with an $8 strike price and collecting $1.25 in premium. Remember, selling a put option would obligate subscribers to buy the stock at $8 a share if Seabridge traded for less than that by the time the options expire. If the shares rebounded back to above $10, Jeff's traders would keep all of this money they received for selling the $8 put. So… over the last few months, as Seabridge mostly fell… Jeff collected total options premiums of $2.35 (the call option he sold plus the put option he sold). This income greatly reduced his expense on the call option he'd bought earlier in the year. Generating this capital from selling options was critical – or else Jeff would have stopped out of the trade. Two days ago, Jeff closed out one of his hedges, the $8 put. He bought it back for $0.15, leaving his traders with $1.10 in profit on the put. The other two legs of the trade remain open. With Seabridge trading today for a little more than $16 a share, the $13 call option Jeff recommended for $1.90 is now worth $4. That equals $2.10 in profit on the $13 call. The $18 call option Jeff sold at $1.10 is now trading at $1.54. If Jeff were to close this out today, he'd book a $0.44 loss on the $18 call. Closing out everything today, Jeff's traders could collect net profits of $2.76 ($3.20 in profits minus $0.44). The return generated on this series of trades would be greatly influenced by the amount of capital individual brokers would have required upfront. (To show you can cover the obligation to buy shares… brokers will require put-sellers to deposit some cash upfront. That's called "margin.") Assuming a conservative amount of margin, investors would have earned at least a 173% return in about five months. That's pretty incredible. Keep in mind… these trades all occurred in an asset that went mostly down. At S&A, we have a long track record of showing subscribers how to make safe, profitable options trades… In his Retirement Trader advisory, Dr. David "Doc" Eifrig has now closed out 129 profitable options positions in a row. He's never closed a losing position since we started this advisory in July 2010. The average return (based on capital at risk, not margin) is around 5% with average duration of two to three months. These are unbelievably large and consistent gains. In my options service, Stansberry Alpha, my team has recommended 10 positions since last December. We've either closed out at a profit or we are solidly in the black on nine out of these 10 trades. Our average gain (based on capital at risk, not margin) is 13%. The average duration has been four months. Again, these are unbelievably large and consistent profits. Many of Jeff's recommendations in S&A Pro Trader (like his Seabridge trades)… all of our Stansberry Alpha positions… and Doc's Retirement Trader recommendations require selling options. The ability to sell options is critical. This allows investors to generate capital that can be used to reduce risk. Strangely, many discount brokers will not allow clients to sell options. If your broker won't let you sell options, share this e-mail with him. Explain that we're selling options to reduce our risk. If he won't give you permission to use options in this way, find a new broker. (You could try calling a full-service broker. He will charge you more than the online services. But he may also help you gain the experience you need to qualify for an options-selling account with a discount broker.) Whatever you do… know that selling options indiscriminately can be extremely risky. Make sure you don't go chasing premium by selling puts on risky stocks. Never, ever, sell a put on a stock you don't want to own at a price that you believe is a bargain. Following this simple rule is the key to reducing risk when selling options… Most people believe that options are always risky. They don't realize that for most active investors, options are an excellent low-risk way to generate high returns. And… if you want to make a lot of money in stocks… that's the key to success. If you'd like to learn more about Jeff's options strategies… I encourage you to try a subscription to his S&A Pro Trader. A subscription comes with excellent educational material explaining the details of safe, profitable options trading. And if you sign up now, you get a free year of Jeff's S&A Short Report along with your S&A Pro Trader subscription. To learn more, click here. More from Porter: |
| Eight unusual ways to hide and protect your gold and silver Posted: 30 Aug 2013 01:22 PM PDT From LewRockwell.com: ... As a bullion investor, whether you have purchased government-minted bullion coins or bullion bars, your metal’s value is mostly dependent on its intrinsic value, not aesthetic properties. However, regardless of your storage selection, certain precautions should be taken to account for gold’s malleability and silver's tendency to tarnish. Protective layers, cases, tubes, linings, etc., may help prevent structural damage or oxidation and are always practical for keeping your metals in good condition for if and when you choose to sell them. OK, now that we have the formalities out of the way… let us share with you some creative options and ideas for hiding your gold and silver bullion... More on precious metals: |
| Surprising post could explain how legendary billionaire George Soros trades stocks Posted: 30 Aug 2013 01:22 PM PDT From Economic Policy Journal: ... George Soros, one the greatest hedge fund managers of our time, trades stocks differently than a mutual fund or hedge fund manager might today. Soros was trained in economics at the London School of Economics. His view on stocks is driven by his macro view. He is less interested in what a company does or anything about its financials or fundamentals. Soros trades stocks in sectors he expects to perform within his macro view. When he likes a sector he usually purchases 2 stocks from it: First, the market leader... usually the largest market cap company. The second stock he usually purchases is the cheapest, lowest priced stock in the sector. He does this because he believes that if the sector takes off, the cheapest, most speculative stock will double or triple while the industry leading stock will just slowly go up over time... More on George Soros: |
| Expectations For Eli Lilly's Lung Cancer Drug Rise, But Revenue Concerns Continue Posted: 30 Aug 2013 12:47 PM PDT Eli Lilly Co. (LLY), in desperate need of a blockbuster new drug, may have struck gold when its lung cancer drug, necitumumab (IMC-11F8), was shown to extend patient survival in a phase 3 study. Necitumumab has met its primary endpoint in improving overall survival in patients who received the drug in combination with gemcitabine and cisplatin as a first-line therapy for metastatic squamous non-small cell lung cancer (NSCLC) when compared with chemotherapy alone. Necitumumab is a fully human IgG1 monoclonal antibody designed to block the ligand binding site of the human epidermal growth factor receptor (EGFR), which is a target in several anti-cancer treatments because it sparks cancer progression, both by promoting angiogenesis, or the formation of new blood vessels for tumors, and by inhibiting apoptosis, or cell death. Necitumumab: From The Ash Heap To Blockbuster Drug? Lilly expects to submit necitumumab for approval to the Food |
| Gold and Silver Disaggregated COT Report (DCOT) for August 30 Posted: 30 Aug 2013 12:42 PM PDT HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below. As we have done for some time now, this week we are also adding in the net positioning of traders the CFTC classes as "Commercial" in the Legacy COT report. (DCOT Table for August 30 and Legacy COT commercial positioning for data as of the close on Tuesday, August 27. Source CFTC for COT data, Cash Market for gold and silver.) Please note: Data auto retrieved and unverified until this note removed. In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter. All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report. We also focus on the Legacy COT positioning of traders deemed "Commercial" by the CFTC, which includes Producers, Merchants, Processors and Users, plus Swap Dealers in a single category. The Legacy COT report preceded the Disaggregated COT report and we have tracked and charted it for many years, focusing on the movement and positioning of commercial traders – The "Big Hedgers." |
| Jim Willie: Syria, Pipeline Politics, OPEC & the USDollar Posted: 30 Aug 2013 12:30 PM PDT Syria is about the last gasp for the Petro-Dollar, the emergence of energy pipeline geopolitics, the rise of the NatGas Co-op, the new dominance of Russian Gazprom, the eclipse of OPEC, the fall of the house of Saud, and a grand adjustment process in global commerce and banking. The NatGas Co-op eclipses OPEC and ushers [...] The post Jim Willie: Syria, Pipeline Politics, OPEC & the USDollar appeared first on Silver Doctors. |
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