Oldtent Archives 2007 - 2008

Has anyone thought about how long into this downturn for the juniors and explorers will it be before hedging becomes a practice again to get these new properties into production. Could this be part of the manipulation of the shares by the big money centers. And one other thought —Why couldn’t some one like James Turk use his Co. to bypass the big money centers and make the deals with the explorers & suppliers of equipment to get the gold or silver into production?  Digital Gold —GoldMoney.

Saved at Great Flation Debate

Recomended reading for all trying to decode this Indeflation …

PS…Isnt 16:30 like 5 AM there in Australia ….and a winter morning at that ?…..Insomniflation ?

What Happened to Gold Stocks in the Great Crash Era (1929 - 1935)?

In October 1929 equities had reached unprecedently high levels of valuation. Although there were several causes of the 1929 crash, much of the blame may be attributed to the abuses of the infamous investment trusts - which enjoyed wildly accelerated growth from 1924 to 1929.

It is interesting to recall that the investment trusts of the 20s were the forerunners of what we refer to today as mutual funds. It was primarily through the channeling of the public’s savings via the investment trusts that drove stock valuation ratios to astronomical - indeed unrealistic - levels in late 1929. Unfortunately, there was no securities’ law nor S.E.C. at that time to curtail market abuses, manipulations and/or excesses leading to the bear market debacle which followed. Nor was there a Fed Chairman cautioning that “IRRATIONAL EXUBERANCE MAY RESULT IN A FINANCIAL ASSET BUBBLE!”

Financial assets as reflected by the Dow Jones Industrial Average (DJIA) reached its peak value of 385 in October 1929, marking the beginning of our country’s worst bear market. And although the DJIA finally bottomed at 41 in June 1932, the vast majority of stock investors continued to suffer the effects of the languishing bear market during the next three years. By December 1935 the stock market (DJIA) had only recovered to 140 from its 1932 bottom — still down a whopping 64% from its October 1929 peak.

As might be expected, interest rate sensitive equities were also decimated during the Great Crash of 1929. In September 1929 the Dow Jones Utility Average (DJUA) hit its peak at 145. From late 1929 the DJUA tumbled to its abysmal l o w of only 15 in March 1932 and again in March 1935. The interest rate sensitive utilities had plunged a cardiac arresting 90% from their unrealistic and lofty 1929 highs.

Three years after hitting its nadir, the DJUA was still severely depressed. Imagine: A $10,000 investment in the relatively “safe” utilities in late 1929 was only worth a mere $2,100 on New Year’s Eve 1936! This is heart-wrenching financial history…
What Did Smart Money Do In the 1929 Crash and Aftermath?

During the same bear market period smart-money moved from the plunging equity markets (i.e. financial assets) to hard asset investments, like Homestake Mining - which is used heretofore as a surrogate for all gold stocks.

The stock price of this gold mining company soared relentlessly upward during the entire bear market. Homestake Mining stock rose continuously from $80 in October 1929 to $495 per share in December 1935 - which represents a total return of 519% (excluding cash dividends) during the devastating bear market period.

Contemplate and appreciate the monumental difference in investment returns during a serious bear market. Smart-money invested $10,000 in Homestake Mining (hard assets) in late 1929 - which increased in value to almost $62,000 by December 1935. This represents a compound rate of return of 35% per year in appreciation alone!

It is meaningful to note that in late 1929 the value of Homestake Mining was about $80 per share. Moreover, during the next six years Homestake Mining paid out a total of $128 in cash dividends. In fact the 1935 dividend alone reached $56 per share. That’s almost a 70% dividend yield payout (basis 1929) in only one year! Indeed, hard asset investments (gold mining shares) were islands of economic refuge during the grueling years of the Great Depression.

Unfortunately, those innocent souls who remained invested in stocks - and had a buy and hold strategy - saw their initial $10,000 investment slowly dwindle to only $3,600 by late 1935. This represented a devastating capital loss of almost two-thirds of their investment savings. T H A T’S R I G H T! The hapless naive investor with a buy and hold strategy in financial assets lost the greater part of his original stake. Pathetically, he could ill-afford to risk - let alone lose - his precious capital during the many long despairing years of the Great Depression.

One does not have to be a Ph.D. in higher mathematics to understand the 1929-1935 comparative investment results stated below.
Investment
Vehicle Investment
Date Amount Investment
Value @ Dec. 1935
DJIA Oct - 1929 $10,000 $3,600
DJUA Oct - 1929 $10,000 $2,100
Homestake Mining Oct - 1929 $10,000 $62,000
Note: For simplification cash dividends not taken into account

It is a nightmarish thought for the Buy-N-Hold advocates to take careful note that it took the next 25 years for a 1929 investment to break even! Not even Job of the Bible would have had the patience to wait.
What Happened During the Next Great Market Crash (1973/1974)?

From the market high in 1973 to its low in 1974 the DJIA and the S&P 500 lost almost half their value - while the previously high-flying technology stocks plummeted more than 60%. Enough to cause heart-failure to the credulous believers of THIS TIME IT’S DIFFERENT. Even the relatively “safe” utilities were decimated - as they dropped more than 50% from their 1973 high to their nadir in 1974. H-O-W-E-V-E-R, students of financial history took profitable refuge in gold metal stocks. The Gold Mining Index, composed of ASA, Campbell Red Lake and Dome Mining, appreciated more than 260% from its 1973 low (40) to its 1974 high (147). This merits being redundant. During the severe 1973/74 bear market, stocks lost half their value - while gold mining companies almost quadrupled.

The over-riding guideline of my precious metals’ research was aptly described by one of Wall Street’s legendary wizards, Bernard Baruch - unfortunately, unknown to most of today’s investment Pollyannas. His observation still rings with logic and clarity:

“Gold has worked down from Alexander’s time…..
When something holds good for two thousand years,
I do not believe it can be so because of
prejudice or mistaken theory.”

“Central bank Governor Gideon Gono announced on Wednesday that inflation had
surpassed 2.2 million percent, though some economists put it much higher.”

……..Gideon Gono…?…..LOL….as in my Curency is a gono ?
……..2.2 Million Percent ?….and thats after Government Hedonic Adjustments ?
……..Uh Mr Gono….how about trying to bring in a new Currency…call it the gono…..and exchange it 1 for 100 Billion Zimbobos……then it would be a 1 Gono Note that buys a loaf of bread..sheesh

“Two weeks ago a German firm, Giesecke and Devrient, stopped deliveries of
banknote paper to Zimbabwe following pressure from the German government
amid international criticism of Mugabe’s widely condemned re-election. Gono
said Zimbabwe had made alternative arrangements.”

……yes they are printing the new Gonos on 2 ply toilet paper……so I guess the Bottom is In in Zim..

….and how ironic is it that the Germans wont support hyperinflation any more..they finally learned..hehe

…..If I didnt know better I would think that article is a very funny joke…whoever said reality is stranger than fiction …..there’s proof !

Hold that thought.

GR

arm getting tired here

10 Best Performing Industries
. . . . .This past week . . . . .

DJ US Airlines Index
… +24.85%

DJ US Mortgage Finance Index
… +24.05%

DJ US Banks Index
… +18.05%

DJ US Recreational Services Index
… +17.81%

DJ US Automobiles Index
… +16.44%

DJ US Home Construction Index
… +14.86%

DJ US Furnishings Index
… +13.07%

DJ US Investment Services Index
… +12.36%

DJ US Toys Index
… +11.48%

DJ US Specialty Finance Index
… +11.45%

….from BigCharts.com

~ ~ ~ ~

Impressive gains this past week for some sectors, to say the least. But throughout history the most vicious and explosive rallies have come from extremely oversold levels within bear markets. The traditional summer rally appears to have begun, but thinking here that it won’t last past Labor Day.

The performance of some of those sectors that just exploded this past week, is still overshadowed by their performnace over the last 52 weeks:

DJ US Mortgage Finance Index -82.64%
DJ US Full Line Insurance Index -59.73%
DJ US Airlines Index -54.32%

……to single out just a few

JBI

wj

ps: edit: unfortunatly silver dropped .75 cents after the ‘lock in’ but a ‘lock in’ is “”Always”" respected in the gold and silver world. 6 figure ‘lock ins’ are common place in the pm world and excersized simply by a telephone call and the fix of ‘lock in’. sometimes its also in the other direction too! cheers and the best.

That is a very good price.  You must have some very good connections to get such nice coins so reasonably.  ;->

 http://www.financialsense.com/editorials/loeffler/2008/0718.html

silver halves at 13x face is an excellent price. i just aquired some morgan and peace dollars in xf-au [no beaters] at $15 per.
i just love this job! [g] wj

yes i do 2 banannas a day and i was taking potassium tabs from the doc to elivate from 2.5 now 4.2 and ok. moggy mentioned a product called ‘kali mur’ [potassium cloride] which i assume one gets in a health food store. i shall tomorrow find some.
oh yeah the IV is what lethal injection is all about. potassium cloride is injected in a massive dose and stops the heart. bye bye birdie. wj

Thanks to Oahugold for reminding me the collectible show is on.  Went down this morning and came back with less paper and more silver and gold.  Got another Buffalo BU in mint shrink wrap for $1050.  Silver halves at 13x face.  The dealer was an old friend who was a commercial real estate agent during the go-go 80s here.  He’s independently wealthy, flashy car, big diamond ring… doesn’t need to work anymore.  Says he’s been dealing coins and bullion last five years ‘for a hobby’.  He looks at me and asks…”what ya gonna do with all the silver?”  Big smirks on both our faces as I said… “Storage.  Retirement.”  I’m quite sure a lot of his wealth is in metal, too, and he’s just having fun with his hobby.  He sees what is coming, and he got out early.

“So, the crux of the ‘flation argument to me, is, whether the Fed will try to monetize their way out of the situation, and if they do try, whether it will work”

That has always been the question as far as I can tell.  No doubt we started with a massive deflationary backdrop to begin with. 

Hold that thought.

GR

I will second 2-Point on that reco.   Find some ’salt substitute’ or ‘no-salt’ at the grocery store, and use it liberally and guilt-free on your food.  Quick and easy potassium chloride supplement.   I’ve found it helps tremendously with arthritis aches, also.  I went so far as to get some lab-grade stuff as potassium chloride and also potassium citrate.

MDs obsess about ‘too much’ potassium, but only because they prefer to inject it IV wise… which can kill you with too much.   But taken orally, the body has some absorbtion limits and it is very difficult to ‘overdose’ taken orally.  Used to be plenty of it in our fresh foods, but with soils depletion… not anymore.  Bananas are good, too.  The body cells actually prefer potassium over sodium… and we get way, way too much sodium in our lives, so potassium replacement is generally a good thing.

‘Folinari’ Pinot Grigio, nice and cold fits the bill for a summers evening cheers. Mrs Winedoc and I enjoyed a glass or two with “trota saporita”…… trout with savory grape sauce, with a little instruction from La Cucina Italiana Magazine Aug 08 issue page 52.

Drumming up an appetite to buy some more silver.

Winedoc