Bonds . . . James Bonds

11-4-2014 TUESDAY AFTER LUNCH MONEY MEMO
By the Financial Foghorn

Sign on the back of a Septic Tank Truck:
“Caution – This Truck is full of Political Promises”

An old Ronald Reagan story:  “Three dogs go into a bar.  An American dog, a Polish dog, and a Soviet dog.

The American dog starts by saying, “I was hungry, so I barked for an hour and my master finally brought me some meat.”

The Polish dog says, “What’s meat?”

The Russian dog says, “What’s barking?”

Today is election day.  As George Harrison said, “This too shall pass.”

VisionGold         Last week, Grant Williams in his column “Things That Make You Go Hmmm” referred to a video of a presentation he gave overseas in 2013.  It’s not available on YouTube.  It’s at Real Vision TV and is a must watch.  If you even think I’ve been making up the nefarious activities on the part of the gold establishment, this should provide valuable background.

It’s 22 minutes and 31 seconds long, and updates the plot of the Auric Goldfinger in the James Bond movie, Goldfinger.  Grant calls his update, the “Tale of Two Fingers.”

The mechanics of watching it:  If you move your cursor off the page, the time data pop up again.  It will go away.  You can pause the movie by clicking on the little lines between the minutes and seconds of the time data.  The video is narrated by Grant himself, a guy with a British accent.  It’s about gold and villainy.  There are pretty pictures, snide asides, and moving text.  What’s not to like?  http://teaser.realvisiontv.com/3747085023001

Also last week, the Cartel Bad Guys referred to in the video slammed gold and silver prices on the day Japan announced an 80 TRILLION Yen QE program. (It’s $715 Billion, in an economy of $4.8 Trillion.)

goldfingerIn light of such banker folly, I’m providing www.goldstockanalyst.com‘s most recent blog entry of Sunday, November 2 available only to subscribers.  It’s also helpful because GSA’s entire Top 10 List are covered.  [GSA has no objection to someone revealing or publicizing the Top 10...once subs have been given the picks.]
Anyway, here’s GSA’s blog entry.  We could all use some “up-ticking” here.

“Gold Below $1200 for 4th time in 18 months…Now what?”

“Gold and Gold stocks are volatile, as long time precious metal investors know and recent participants now know.  You cannot expect outsize returns to the upside from any sector without seeing some big downside moves as well.

We continue to believe the excess money printing by the world’s central banks will find its way into the inflation data as they finally achieve their universally stated 2% inflation goal… which should cause Gold to soar.  To wit:

- The US Fed may have stopped buying debt, but it will continue to rollover and reinvest as its portfolio matures to maintain its current $4.5 trillion balance sheet, more than five times larger than when the financial crisis began in 2008.

- The European Central Bank begins its own Quantitative Easing: of 1 trillion (US$1.25 trillion) bond buying program to combat double-digit unemployment rates and an 0.3% inflation rate that appears headed to deflation.  Deflation is the worst of all scenarios… just ask Japan.

- Japan’s Central Bank in an October 31 surprise announcement said it will increase its annual bond buying program from ¥65 trillion to ¥80 trillion (from US$580 billion to US$715 billion/year).

- China’s Central Bank is pumping 700 billion Yuan into its 25 largest banks to stimulate growth as it will miss its 7.5% target for 2014.

All the while, China is soaking up Gold like a sponge from the rest of the World.  There’s disagreement on whether its accumulating at ~33 mil oz/yr, or double that at ~66 mil oz/yr.  But the data shows the Chinese are willing buyers when the world is selling.  China’s Central Bank holdings have not been announced since 2009.  But we know China wants the same reserve currency status for the Yuan that’s held by the US Dollar as it allows a nation to pay its foreign debts with a printing press.  [China's last announced holding in 2009 was 1054 gold tonnes.  The Chinese update every 5 years, i.e., soon.  I think it's a five year plan thing...]

Gold is a cornerstone asset for any reserve currency.  According to the World Gold Council, in October, 2014 Gold was 72% of US Reserve Assets and 28% of the ECB’s.  China’s 34 mil oz is only 1% of its Reserve Assets, so it has a long way to grow.  The potential for a Chinese surprise in its Gold holdings is significant.

GoldChinaNo one has a crystal ball, but we have always profited by holding on and staying the course.  If you don’t have the needed courage, then sell half your Gold and Gold stock holdings.  You are sure to be half right.

Answering many subscribers’ question: What if Gold goes to $1000/oz and stays there for a year before recovering?  How will the Top 10 be affected?  We don’t think this will happen, but here’s how GSA thinks the companies would fare at $1,000/oz for the next 12 months.

Growth Producers:

Eldorado: Cash balance of $562 mil and forecast 2014 All-in Sustaining Cash cost/oz (AISC) of $850/oz; would stop its development projects and maintain production at current 790K oz/yr.

New Gold: Cash bal $416 mil and YTD 2014 AISC of $750/oz. Would stop development at Rainy River.

Yamana: Cash bal $169 mil and YTD AISC of $807.  No projects currently in development, but would probably delay the construction decision due for Cerro Moro at end-14.

Developers: This was the best performing group in the GSA Top10 for 2014 thru September; we expect them to be so again when Gold resumes its march higher.

Golden Queen: No impact as Soledad is fully financed until 2H15 when Cat truck financing will be needed plus working capital.  With a fcst AISC of $510/oz and profitable at $1,000 Gold, any funds needed will be available.

Rubicon: Fully financed w/approx $200 mil cash to finish mine construction for mid-15 prod. start w/fcst AISC of $870.

RomarcoRomarco: Mine operating permit should issue soon.  A $1,000 Gold price would likely ensure a takeover with the buyer building the mine.  [There are TEN Confidentiality Agreements outstanding on Romarco.  Ten mining companies are kicking the tires of this company.

SOMEBODY will buy them once their permits are issued!  The stock, RTRAF, traded Friday at 52 cents.]

Torex: Fully financed w/approx $300 mil cash to finish mine construction w/prod by end-15.  Forecast $504 cash cost/oz ensures profits at $1,000 Gold.

Detour: The only stock that worries us as its still ramping up production to 600K oz/yr at $US685 cash/oz. YTD 2014 cash costs are running ~$950/oz and AISC higher, so mine’s viability would be threatened prolonged $1,000/oz.

Royalty Companies: $1,000 Gold is no threat due to their low overheads and big cash balances; would create more royalty buying opportunities for both.

Franco-Nevada: 6/30/14 cash: $1,177 mil (9/30 not yet reported).

Royal Gold: 9/30/14 cash: $691 mil.”

You’ve all heard the expression, “Buy Low, Sell High?”  Well, gold and silver metals and the shares above are immodestly cheap, and governments and Central Banks are upchucking currency worldwide.  And now that FED QE ended October 31, the Japanese will take over.  The Japanese invented QE.

If you haven’t already, put some money in PMs.  If you won’t buy the minimum FIVE individual companies of the Top 10 List recommended by the best newsletter in the business, then look at the Gabelli fund, GGN, and/or the Silver Shares Fund run by Global X, SIL.

Assume that FF owns all of the Top Ten, as well as the two funds.

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