GATA chairman Bill Murphy’s Bloomberg TV appearance

For those gold bugs that might have missed it, GATA Chairman Bill Murphy 's appearance last night on Bernie Lo's "Asia Confidential" program on Bloomberg Television has been posted at YouTube in three parts here:

Gold’s Real Value - $4,000 to $11,000 per ounce

It is often refreshing when one sees someone that understands the basic principles of gold’s real value and just doesn’t dismiss gold as a shiny metal. This is why with great pleasure I listened to Jim Rickards interview on CNBC today wherein he was discussing what gold’s real value should be and why most people underestimate or fail to grasp the concept of why gold is still historically cheap.

Jim Rickards, senior managing director of market intelligence at Omnis, shared his insights with CNBC today and among some of his comments we heard that “Gold is not moving on a monetary vector, it’s moving on supply/demand fundamentals.” He added, “Very few people think of gold as money. If you think of gold as money, that level is a range between $4,000 and $11,000 an ounce—that’s the price gold will have to be to support the money supply.”

Hard to argue with someone who “GETS IT” You can watch the full interview HERE.

Explor Resources Update For November 19, 2009

I thought I might chime in today to talk a little about Explor Resources as I often get emails asking me what my take still is on what I have pegged my favourite junior exploration company.  I used to frequent the public chat boards but just found that I could not handle all the obsessive individuals who hum and haw over every little penny tick on the stock price.

One question I received has to do with why the stock price upward movement has stalled.  My reply is simple.  Because nothing goes straight up.  Every stock must take a breather.  Recently, two very prominent newsletters have recommended Explor to their subscribers.  Sure, that causes an initial buy spike but that soon levels off as most of the subscribers establish their positions.  But to sell a stock only a week after a recommendation or to sell a junior who has just announced they are ready to drill one of their most prospective properties next to a massive intercept in one of the most prolific mining districts in the Canada?  Come on….that one should be obvious.  You don’t sell juniors starting such high potential drill programs.  PERIOD.

There is often a saying in the junior exploration investment world.  That is, you don’t drip over a fifty dollar bill to pick up a quarter.  You don’t buy a junior looking to make 20% especially noting that 20% intraday swings in stock prices in these types of issues become common place when the masses take positions and the deal starts to get its legs.  What you hope to do when you buy these stocks is that you hope you have done your homework, picked the best of the lot and that you will be rewarded for being diligent in the end.  Many an investor has traded themselves out of a position trying to time the market with these stocks and at the end of the day, when the stock does finally make its big pop, they are left with only a fragment of their initial position.

So we analyze the pros and cons at this stage of the game.  Here are the pros.  They have perhaps one of the best land portfolios in the arena.  They have confirmed discoveries at their Eastford Lake and PG-101 properties. That’s two discoveries under their belt already. They have a very high potential property in West Timmons on which they just announced the commencement of a 10,000 m drill program.  The cons? They need money.  If they announce a financing in and around these levels then I would perceive that as very bullish as it would give them the money that they need to move forward with much more advanced exploration.

The name of the game is leverage.  Neighbours Lake Shore Gold and West Timmins Mining have had major moves off their discovery.  Their continued expansion of those discoveries will only aid their share prices but will also serve to aid the increase in value for Explor. A discovery for Explor on their West Timmins block which is part of the same system that Lake Shore Gold hit on would quickly put dollar signs in front of their share price.

So, to answer multiple emails with one post, the answer is NO, I haven’t taken any stock off the table and YES, I am more excited now more than ever. Who in their right mind would sell heading into perhaps their biggest drill program ever?

Sure, the stock price has trickled down after making a new 52 week high of .67 cents.  But where does it sit?  at .47 with massive bids building and with the stock forming a nice new base, people with a longer term view should not be too concerned.  Then again, you must all make your own decisions and form your own opinions.  I am merely giving you mine.

Billionaire John Paulson Makes Big Bet on Gold

The Wall Street Journal is reporting that one of the best hedge fund managers over the last 2 years is launching a special fund dedicated to buying up shares of gold miners and other gold related investments according to their sources.  From the WSJ:

One of the biggest investors is placing a big new bet on gold.

John Paulson, who scored about $20 billion of profits for his hedge fund between 2007 and early 2009 wagering against the housing market and financial companies, is launching a fund dedicated to buying up shares of gold miners and other bullion-related investments, according to three investors.

Paulson had earlier in the year announced a large buy in bullion and suggested that he expects big returns going forward with the yellow metal.  This fund in my view is further evidence that he feels that Gold has only one way to go from here.  You guessed it. UP.

New Housing Slumps “Big Time”

I wrote yesterday evening that the delinquency rate on mortgages was actually climbing when compared to a year ago and relied on the Associated Press’ article in so doing.

This morning we get further evidence that the housing sector, specifically the new home sector is also being walloped.   Remember, the stimulus was supposed to kick start the economy but what most people that I speak to still don’t realize is that a good 90% of the so called stimulus never made it down to main street.  Any money injection went straight to the banks who are hoarding their cash and still not providing vital credit to the American Consumer.

Reuters reported this morning that new housing starts fell to their lowest level in 6 months which, if you have been reading my posts should not have come as a surprise.  I wrote early on in the summer that we were going to see better housing numbers throughout the summer months because that is typically the seasonal high for real estate, even in bad times.

Today’s news from the Commerce Department was that housing starts dropped 10.6%!  Digging deeper into the numbers, we were also told that single-family home starts fell 6.8 percent last month to an annual rate of 476,000 units, the lowest since May.  An even bigger decline was seen for multifamily segment homes, which are typically more volatile.  Starts in that sector tumbled  34.6 percent to a 53,000 annual pace, extending the previous month's slump.

Whose the heck wants to buy a new home when existing home prices are still falling and with what I see as a rash of new foreclosures about to hit the market as hinted by yesterday’s delinquency report?

We are also starting to see small cracks in the inflation armor.  Inflation crept up over this last reporting period and while the Government will tell us that it is still in check so to speak, it is not.  Anyone wanting to know what the rest of world feels about inflation need only look to the weakness of the US dollar and to the strength of Gold.

Explor Resources Update – The Rigs are set to Turn in West Timmins!!

Some significant news out of Explor Resources today.  They announced that they have commenced drilling their highly prospective gold property in Bristol Township, West Timmins Ontario.  This is the property adjacent to the West Timmins Mining discovery, now being taken over by Lakeshore Gold.  This will be THE new gold camp in Ontario and as the market eagerly awaits further progress reports from the lead dog in the camp, Lake Shore Gold, we got news today that the second biggest landholder in the area, you got it, Explor Resources, has mobilized the drill rig to test high priority targets.  You can see the full news release by clicking HERE.

The Explor Resources Property is contiguous with West Timmins Mining Inc.  where WTM intersected 83.40 meters (273.55 feet) grading 12.75 g/t (0.37 oz/t) on their property (WTM Press Release June 24, 2009).  For more background on the exceptional prospects for this property please refer to my detailed due diligence report on the land block HERE.

Lets read between the lines shall we?  Explore announced the commencement of a 10,000 metre drill program.   Anyone following the “model” in place knows that these are going to be deep holes.  You will note from the due diligence report above that all historical drilling has been shallow.  West Timmins and Lakeshore Gold showed that the plate west of the Mattagami River Fault may have shifted downward which could explain why their significant intercept was at significant depth.  If I read the news release properly, EXS has committed to at the very least ten 1000 metre drill holes, of course depending on what they start to find as the drills turn.  You see, in junior exploration if it is felt that a hole is just not getting the proper content, or if it is not within the structure the hole is abandoned to save costs. 

Here’s an exciting part about this exploration program.  Lakeshore Gold to the West has identified a significant gold showing.  If we look at the porphyry associated to their discovery and compare it to the porphyry on the EXS parcel of land there is no comparison to be made.  The shear size of the porphyry on the EXS property is huge compared to the one on the  LSG/WTM ground.  (all relevant maps are within the above noted due diligence report).  In mining terms, the bigger the porphyry the bigger the associated gold deposit….theoretically.

Here is another very exciting part.  Explor resources has over 120 holes worth of drill hole data and they have the modelling from the WTM and LSG discoveries to work with.  Suffice to say that they not only have a fantastic prospect, but they have a significant head start!  Remember, former owners Cameco, now the world’s largest Uranium player suggested that their drilling was suggestive of a major gold deposit.  The former owner’s head Geologist Chris Dupont recommended DEEP DRILLING to the board of directors of Tom Exploration but they couldn’t raise the capital.  Mr. Dupont is now president of Explor so he is very familiar with the land he has.  Put the pieces together it isn’t hard to see why the stock has climbed to .64 on some very significant volume.  A look at the charts of West Timmins Mining, Lake Shore Gold and Explor Resources might better explain why I remain very bullish and excited with this deal.  Remember…DO YOUR OWN DUE DILIGENCE and consult a licenced professional before making any investment, especially in the high risk junior gold exploration investment space.

Mortgage Delinquencies Continue to Climb to Record Levels

First and foremost this has nothing to do what what the stock market should or should be doing.  This post is meant to underscore the continuing deterioration of the US economy and real estate market.  News like this gets little play in the mainstream media because it isn’t optimistic and doesn’t paint the rosy picture that Government wants to paint.

The Associated Press today release news that Mortgage delinquencies hit another record in the third quarter of this year. Yes, just when you started to believe all the “smart” pundits permeating the airwaves, we get news that things are actually getting worse, not better.  Is it really a surprise with the rate that unemployment is rising?

As reported by AP: (FULL STORY)

NEW YORK — The pace at which people fell behind on their mortgages slowed during the summer for the third consecutive quarter, but the overall delinquency rate hit another record, a new report shows.

For the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That's up 58 percent from 3.96 percent a year ago. [my emphasis]

Being two months behind is considered a first step toward foreclosure, because it's so hard to catch up with payments at that point.

The rate was up 7.6 percent from the second quarter. That's a much smaller jump than the 11.3 percent rise in the second quarter from the first, and the 14 percent leap seen in the quarter before that.

The statistics, which are culled from TransUnion's database of 27 million consumer records, show that mortgage delinquencies remain highest in the four states where the crisis has hit the worst.

• In Nevada, the rate reached 14.5 percent, up from 7.7 percent a year ago.
• In Florida, the rate was 13.3 percent, up from 7.8 percent last year.
• In Arizona, the rate hit 10.4 percent, up from 5.5 percent in 2008.
• In California, the rate jumped to 10.2 percent, from 5.8 percent last year.

Lets all dig a little deeper when we hear the media try to proclaim recovery.  The truth is, we are nowhere close to a REAL recovery with unemployment rising and more people headed to foreclosure.

Has the World Reached PEAK GOLD?

What I am referring to is not in reference to the price of gold but actually in reference to the fact that we have reached the peak of production and that finding more gold, especially gold deposits of significant size is going to become extremely difficult as most of the world’s monster gold deposits have been found and many are reaching the ends of their output.  Barrick gold has also shut down its hedge book too which gives us indication from the world’s largest gold producer that they too feel that the price of gold is expected to climb.

Read the London Telegraph’s report on this subject.  They noted:

Global gold production is in terminal decline despite record prices and Herculean efforts by mining companies to discover fresh sources of ore in remote spots, according to the world's top producer Barrick Gold.

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

"There is a strong case to be made that we are already at 'peak gold'," he told The Daily Telegraph at the RBC's annual gold conference in London.

"Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said.

So we can either take comments from the likes of Dennis Gartmen and other gold bears who are calling gold in a bubble or we can consider the fact that simply on the supply side, there does not appear to be much of the golden metal coming out of the ground anymore.  Think about it…how often have you heard the words “massive gold find discovered” lately?  That phrase is becoming a rarity.  This is why any company that can confirm a world class deposit will reap the rewards and to a greater degree than any other time in history.

Meredith Whitney Calls Stocks Overvalued – TELL US SOMETHING NEW

Well well… isn’t this what the fundamentalists have been saying ever since the markets rallied off the March lows?  Many long time staunch market observers have been saying this ever since stocks bounced to what were then thought to be recovery highs in July but then again, we have been watching fundamentals while the real catalyst for stocks has been the liquidity being pumped into the system by the federal reserve. 

David Rosenberg, an analyst I truly respect and follow has being saying this since at least early October yet he gets laughed at by the cartoon characters on CNBC.  Meredith says it and she gets headline billing at our favourite network.  Read Rosenberg’s comments in my October 6, 2009 post HERE.

While Meredith goes on the networks to call stocks overvalued and calling for a double dip I urge you all to re-read the post that I made with permission from a very close friend of mine.  Turns out his outlook and viewpoints are actually more accurate than anyone else I listen to or follow.  I posted his comments back on September 12, 2009 in a post titled THE GREAT MARKET MELT-UP.

In that piece my friend who chooses to remain anonymous wrote:

As I stated in my last report to you, I continue to believe that once we see the $1,000 level for bullion successfully breached on a three-day-closing basis, we will enter the next speculative mania that propelled the junior resource arena in the late ‘70’s to significant valuation levels. Even in the 90’s within the 1980-2002 bear market in gold, junior discoveries were assigned market capitalizations in the hundreds of millions of dollars while the per ounce multiples for juniors was five or six times current levels.

Current market conditions around the globe are experiencing a “melt-up” but in this writer’s opinion, it has nothing to do with “green shoots” or “economic recovery”; it is about global reflation of the financial system. It is the “Zimbabwe Effect” and it is underscored by the old axiom used here ad nauseum that investors and speculators should NEVER UNDERESTIMATE THE REPLACEMENT POWER OF EQUITIES WITHIN AN INFLATIONARY SPIRAL. I believe that the real returns on stocks versus the metals will once again favour the latter once the debilitating effect of the upcoming inflation numbers begin to attack P/E multiples thereby setting apart gold/silver ownership from the industrials and the techs. This is where all of the talk about the Coming Crash is flawed. The “crash” will be in the under- performance of the non-metals but it will not be a “crash” in real dollar terms unless we see a massive shift in policy.

This is all about policy – global monetary policy – and the Chinese are no different than the West in acting in support of financial markets. You dare not be “short” in a period in which the printing presses are blasting away and until those spigots are shut and shut hard, equities will rise as a replacement for fiat currencies. In my view, long before that occurs, the PM’s will have had the Ride of the Century with the leverage being in the juniors.

You see, realists like this never get the air time that they deserve.  They have seen many different market dynamics over the course of their long careers and can speak from experience.  What has happened since September 12, 2009, the date I published that piece?  Let’s see.  Gold is at all-time highs, the US dollar is nose-diving, the markets have indeed “melted-up” to new recovery highs and the flood of liquidity has almost drowned the market.  Inflation is also rearing its ugly head and my friend’s call appears to be right.  That is, that the real returns on stocks vs. the metals will once again favour the later once the debilitating effect of inflation begins to attack P/E multiples.  I for one believe we are getting dangerously close to that scenario and in fact, it might have already started.

When he wrote that report the CDNX was at 1262.  Today’s CDNX closed at 1377.  Gold was flirting with $1,000.00 an ounce and today it is sitting at new all time highs.  My favorite junior is up over 55% since that time too and many junior exploration companies are making new 52 week highs.  Is this the late 70’s all over again?

So I look to Meredith Whitney’s comments today wherein she said "I don't know what's going on in the market right now because it makes no sense to me,"  Dear Meredith….we’ve been saying that for months.   Taking a look at the piece my friend contributed and I know exactly what has been going on in the market.  Something most talking heads including Meredith missed.  That you NEVER UNDERESTIMATE THE REPLACEMENT POWER OF EQUITIES WITHIN AN INFLATIONARY SPIRAL.

Granted, in talking with my dear friend we have of late both been astounded with the continued surge of the equity markets.  While he subscribes to his aforementioned theory, and has converted me, neither of us expected the market rally to actually last as long as it has. The melt-up hasn’t been so surprising as has been the length of the “bounce” rally.  An equities bubble is certainly getting ready to pop.  The only question that remains is how much more money the FED can pump into that balloon before it actually goes boom!

Yes, fundamentals will always rule the roost at the end of the day but until stimulus is withdrawn and the printing presses stop running 24 hours a day, we will continue to be mesmerized by the markets.  However, make no mistake.  When the spigot is turned off, we can see real damage…and FAST.  Also, because the FED has almost guaranteed inflation, gold and associated equities in my view, should continue to reap the rewards.  In my view, the real party in gold and related equities in only just getting started. Central banks are about to become net buyers of gold.  To put it simply, there has just been too much money printing going on to NOT at some point face the piper.

• You can read the highlights from Meredith Whitney’s comments HERE
• You can read the post titled The Great Market Melt-up Here
• Central Banks to become net buyers of gold can be read here

Another Huge Hit to the FDIC as three more banks fail

THREE MORE BANK FAILURES REPORTED FRIDAY BY THE FDIC

Pacific Coast National Bank, San Clemente, CA
Orion Bank, Naples, FL
Century Bank, FSB, Sarasota, FL

Total hit to the FDIC as a result of these closures is roughly 1 billion dollars.  Orion was the biggest hit with the failur costing the FDIC an estimated 650 million dollars.