Wednesday, January 19, 2011

Eric Coffin: Winter White Sale in the Yukon

The Gold Report: You and your brother David will be making online presentations for The Yukon Room, an online investment conference focusing on the Yukon—perhaps the hottest area for gold exploration. What do you plan to discuss?

Eric Coffin: Part of what we want to cover is why we consider the Yukon an area play. Area plays are different from your average speculation because you're not speculating on just a given company, you're speculating on how the play as a whole will progress. You're speculating on the success of the lead companies in that play, regardless of whether you're actually trading those companies. This is the first time in 15 years that we've called something an area play.

The Yukon is not a digital-staking jurisdiction. That means someone has to go up there and put posts and lines in the ground. That means a major is less likely to come in and blanket stake the whole place. I would guess there are about 100 companies involved here right now. That gives you the critical mass, the promotional activity and news from a lot of companies to help drive the play.

You also have three geographically and geologically diverse discovery areas. The White Gold discovery was a different type of gold discovery than anybody had previously made in the Yukon, at least in terms of its size and average grade. That opens up a whole bunch of real estate that people either haven't looked at before, or they haven't looked in that way before. It allows a large number of companies to argue they might have something—that drives the promotional activity. (more)

Chart of the Day

Rare Earth Elements: Who Is Poised to Takeover?

While the embargo against North America and Europe for Rare Earth Elements (REE) was dropped after a short period in October, the impact on prices for REE companies had already been seen. High-tech electronics producers flinched madly, as the need for REE in the manufacturing of their products was briefly held hostage, especially for those companies in Japan which had an even longer embargo placed upon them from mid-September to late-November. Another spike at the tail end of 2010 resulted from the announcement that China (which controls 95% of the world's current supply of REE) would be restricting rare earth exports by 35% for the first half of 2011. Not even a month after the dust cleared from that announcement, now reports are coming out that hold implications into the future, as stricter environmental guidelines will be enforced upon China's producers in the near future.

In the aftermath of such changes, we are looking at everything from potential catastrophic shortcomings of supply by 2012, to at the very least a surge in price that will benefit all foreign companies that have amassed operations in the leadup. Already we've seen a surge from $70.52/kg from the end of 2010 to $75.23/kg in current prices. That's nearly 7% in two weeks. This jump doesn't read as anything alarming, but the average Nolans value over 2009 was $11.17/kg, which shows a jump of 673%. Something is obviously happening here.

But, while the spectre of a massive price increase in these elements looms, I feel it necessary to quell the fears of my tech savvy friends out there who love their gadgets. Rare earths only represent a small fraction of the cost of a finished product in the tech world, thus Steve Jobs and his ilk can continue to sleep soundly on their money covered beds. If anything, the manufacturing costs will not increase sharply, but supply runs could cause longer lineups by the next Black Friday. (more)

I Warned That Banks Will Soon Be Forced To Walk Away From Homes… Guess What!

About 4 months ago, I claimed that In summary:

Without an economic incentive to foreclose, it would not be in the bank shareholders best interests to pursue foreclosure even though borrowers clearly defaulted & owe money to the lender. The economics of distressed assets in mortgage and commercial banking are quickly changing. I am quite open to discussing this in the mainstream media if any are interested in hearing the “Truth go Viral!” I want all to keep this in mind when pondering the release of reserves by the banks.

This was taken by many readers as sensationalist and unlikely. As a matter of fact, much of my writing is taken in a similar way, most likely due to the fact that I have an uncommon proclivity to state things exactly as I see them, sans the sucrose patina. This is not a pessimistic (bearish) outlook, nor an optimistic (bullish) outlook. It is simply called, the TRUTH! Realism! Something that is increasingly hard to come by in these days of media for a purpose and embedded agendas.

You see, the United States, much of Europe, and China have sever balance sheet issues that are ravaging their respective economic prospects. The media, analysts, and investors are gingerly mozying along as if this is not the case. Well, no matter how hard you ignore certain problems, no matte how hard you try to kick the can down the road – the issues really do not just “disappear” on their own.

With these points in mind, let’s peruse this piece I picked up from the Chicago Tribune: More banks walking away from homes, adding to housing crisis blight: the bank walkaway. (more)

Silver: From $30/oz to over $500 by 2020

Silver: From $30/oz. to over $500 by 2020. In under a minute, I can tell you why that price must happen, and likely when. It seems to me that the public will one day wake up and start buying silver to protect from inflation. Thus, long before, say 10-20% of people buy silver, at least 1% of the American public will buy silver. We can calculate what might happen to the silver price when that happens.

The amount of money in US Banks is about $18 trillion. 1% of that is $180 billion.

Very little silver is left; it's mostly all been consumed, so most of what is available to buy is the annual new mine supply which is 700 million ounces.

$180 billion is $180,000 million. Divide that by 700 million, and we get an implied price of $257 per ounce. Do the math yourself. I'll wait.

But that price would mean that there is no newly mined silver left over for any industrial use, and that nobody else outside of the USA could buy any of the world's newly mined silver. Clearly that can't happen; those two groups would continue to buy silver, competing to buy, and driving up the price even more.

Thus, silver is very likely to be about $500/oz., by about the time that 1% of the American public wakes up and starts to buy silver. That will be the very beginning of the bull market in silver, when measured by "popular demand" -- and at that price, silver would still be very unpopular.

Just remember these key facts, and don't let anyone, or even yourself, trick you out of this developing bull market in silver. Don't try to time the peaks, don't wait for dips, just buy and hold real silver, not any kind of paper silver promise. (more)

BNN: Top Picks

Paul Gardner, Partner and Portfolio Manager, Avenue Investment Management, shares his top picks.

click here for video

Top Food Inflation Stock Picks: DE, AGU, CF, SYT

While many of us here in the United States are focusing on economic recovery, much of the rest of the world is concerned about more basic needs — like food. In fact, the world is reeling from a food price shock, aka, food inflation, which was exasperated after the U.S. Department Agriculture (USDA) surprised traders by cutting their forecasts for key crops, which sent corn and soybean prices to their highest level in 30 months.

Specifically, the USDA said corn inventories are expected to decline 5.5% this year to the lowest level in 15 years. Corn is used to make ethanol, which is causing gasoline prices to rise and is an important ingredient in animal feed, so meat prices are rising. The United Nations Food and Agriculture Organization recently warned the world could see another food crisis as grain prices rise further.

Although rice prices, which spurred the last food crisis in 2008, are stable, high grain prices, especially corn, soybeans and wheat, have already caused riots in Algeria and Mozambique. In emerging economies, food is a larger portion of spending than it is in developed countries, and that is why people in emerging countries feel the pinch the most when prices rise. India reported on Friday that their wholesale prices rose to an annual rate of 8.43% in December, up from 7.48% in November. (more)

Lindsey Williams: Insider Source Says Food, Gas Prices to Soar

The Alex Jones Channel
January 17, 2011

On the Sunday edition of the Alex Jones Show, Alex talked with longtime Alaska oil reserves expert Lindsey Williams, author of The Energy Non-Crisis. In December, Williams told Jones he’d learned recently from two of this longtime friends, both retired top executives of major oil producers, that the price of crude oil is slated to move to $150-200 per barrel soon.

Real Estate: Finally a Good Investment?

The housing market still looks pretty bleak: There were a record one million foreclosures last year, home prices are still falling in many regions and the number of "underwater" properties is at a record high.

And things don't look much better in other areas of real estate. The number of construction jobs continues to decline, even as other parts of the economy have added jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up during the past few months.

Basically, the real estate market remains a mess.

Real estate encompasses a wide range of markets – homes, apartments, hospitals, office buildings, strip malls, dormitories and other properties. But for our purposes, let's focus on residential real estate, or homes. Here are four reasons to think residential real estate might represent a bargain – with one big caveat. (more)

US public pensions face $2,500bn shortfall

US public pensions face a shortfall of $2,500bn that will force state and local governments to sell assets and make deep cuts to services, according to the former chairman of New Jersey’s pension fund.

The severe US economic recession has cast a spotlight on years of fiscal mismanagement, including chronic underfunding of retirement promises.

“States face cost pressure, most prominently from retirement benefits and Medicaid [the health programme for the poor],” Orin Kramer told the Financial Times. “One consequence is that asset sales and privatisation will pick up. The very unfortunate consequence is that various safety nets for the most vulnerable citizens will be cut back.”

Mr Kramer, an influential figure in the Democratic party and still a member of the investment council that oversees the New Jersey pension fund, has been an outspoken critic of public pension accounting, which allows for the averaging of investment gains and losses over a number of years through a process called “smoothing”.

Using data from the states, the Pew Center on the States, a research group, has estimated a funding gap for pension, healthcare and other non-pension benefits, such as life assurance, of at least $1,000bn as of the end of fiscal 2008. (more)