moore_capital54

On this subject, I highly suggest this video: http://wallstreetpit.com/83355-pimcos-gross-qe1-and-qe2-destroyed-credit-creation

Because we are printing way more. In this last cycle the US fed has increased its balance sheet by almost half the size of the Japanese GDP. Historically, there has never before been so much "printing" other than in periods of social unrest and demise of governments.

For my dear friends on the board that think QE is not money printing.. or that the fed will sell those securities. LOL Meyer actually believes that debasing currency will create sustainable jobs long-term. This is wealth redistribution par excellence. Wire: BLOOMBERG News (BN) Date: Sep 8 2011 12:21:09 Meyer Says Fed Must Shift From Inflation ‘Obsession’ to Jobs By Steve Matthews Sept. 8 (Bloomberg) -- Former Federal Reserve governor Laurence H. Meyer said the increased threat of recession means the central bank should shift from a focus on inflation to creating an environment supportive of more jobs. “I would be asking my colleagues why are they so obsessed with inflation?” said Meyer, co-founder and senior managing director, Macroeconomic Advisers LLC, at the Bloomberg Global Inflation Conference hosted by Bloomberg Link. “The Fed has to rebalance a little bit and has to focus more on what they can do about employment.” Chairman Ben S. Bernanke said last month in a speech at a Fed conference at Jackson Hole, Wyoming that the central bank still has stimulus tools, while not providing details or committing to deploying them. Policy makers will meet for two days Sept. 20-21 to “allow a fuller discussion” of the economy and the Fed’s possible response, he said. One possible move is replacing short-term Treasury securities in the Fed’s $1.65 trillion portfolio with long-term bonds in a bid to lower rates on everything from mortgages to car loans, according to economists at Wells Fargo & Co. and Goldman Sachs Group Inc. “They still have some firepower left,” said Torsten Slok, chief international economist at Deutsche Bank AG, on the same panel in New York City today. Yet after two rounds of asset purchases intended to stimulate growth, investors may be skeptical, he said. “The firepower of those tools is less than it used to be.” Inflation Expectations Inflation expectations could over time become unhinged because Bernanke has earned less credibility than prior chairmen, said Axel Merk, president and chief investment officer at Merk Investments LLC in Palo Alto, California, and another Bloomberg Link speaker. With Paul Volcker, Fed chairman from 1979 to 1987, “We know he would bring down inflation,” he said. “We think Bernanke may tolerate more inflation than past Fed governors.” Meyer disagreed and said the public’s and investors’ view of inflation is “well anchored.” “The Fed is not trying to increase inflation except up to its target” of 2 percent, Meyer said. “The Fed has all the power it needs to stop inflation.”

I must say that Mining College Video 1 starting at 58 minutes covers exactly what we do in our resource funds.

It appears some of you have again demonstrated the human naïveté. The post was not meant to de-risk a potential Y2K blackout but rather demonstrate how something that was so obviously manageable was blown out of proportion due to the perceived risk and to compare it to other events in history. It is a recurring theme in our history that whenever we are facing an event that is rapidly approaching and has a definitive cut-off date, we tend to over-blow its ultimate effects on our future. Think Elections, or even a first date. This is what is happening right now with the global financial markets. An assumption that the Euro will cease to exist or the US debt will never be paid. Obviously, when humans put their minds towards solving issues we end up solving them. “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Charles Darwin

Liberty here is a primer I put together for friends/family and investors that want to get started in this space. First, you need a basic understanding of geology. For this I suggest: http://www.gril.net/education Start with the videos on Ore Deposits. They are long and you may need to watch them twice, but if you wan't to get serious about this business, you need to have a basic understanding of geology, fluids, sulphides, and mineralization. You need to understand the basics of crustal abundance and what it takes for an economic concentration of minerals to form in the earth's crust. This is an absolute. Next, watch the videos on the same page named "Mining Investment College". These aren't amazing, but they are very good. The problem is that they are a little outdated. Next, you must understand the CIM guidelines and definitions. You need to understand the difference in resource categories: Inferred, Measured, Indicated. You need to understand the difference between Reserves and Resources, and what it takes to convert a resource into a reserve. These skills will help you assess when a company has reached that inflection point, way before an independent report confirms this to the market. http://www.cim.org/committees/cimdefstds_dec11_05.pdf Next, I suggest you watch as many videos of Brent Cook as you can. He is a skilled economic geologist and loves to share his opinions and thought process with the public. Subscribing to his newsletter would not be a bad idea either, his track record speaks for itself. http://www.youtube.com/results?search_query=brent+cook&aq=f The more videos you watch the more well rounded your understanding will be. Next I Suggest two free websites which are very good for finding ideas, and tracking the good companies in the space: 1) www.resourceintelligence.net - Specifically watch the daily resource estimates and financings, these are great tools. 2) www.miningalmanac.com - The site has a great tool where you can screen based on total resources. Analysts to read or Follow: 1) John Tumazos - http://www.veryindependentresearch.com/ 2) Richard Gray - Cormark 3) Adam Graf - Dahlman Rose When you start finding juniors, make sure the first thing you do is view their latest presentation. In this industry that is where most of the focus is on continually updating the public month in, month out, if a company cannot provide an update at least once every two months they are not doing a good job. Remember these companies are in a business where they are actively developing an ore body. The more communication the better. This is not Biglari holdings or Berkshire Hathaway, you want to know what is going on and as soon as it happens. Read the Presentations of the Majors at least once a month: Barrick, Kinross, Agnico Eagle, Newmont, they are very informative and will give you an idea of the trend at the top. Everything in this business starts with the producers, the majors. Read everything you can about BHP, Rio, Vale, Norilsk Nickel, ENRC, Kazakhmys, Fortescue, Inmet, Lundin, Teck. Listen to what they are saying. They have no reason to lie. When they say they are finding less gold, that is the truth. When they say they are mining lower grades, that is the truth. When they say their costs are rising, it is the truth as well. This business is truly global, you cannot just read about what is going on in North America, demand is coming from 7 billion human beings and you need to make sure you have a good pulse on that demand. The very best group for Macro Research is CPM Group (Jeffrey Christianson) and Metals Economic Group. Anything they publish even if it's delayed will educate you. Conferences One of my favourite things about this business, is that even retail investors have the ability to meet management face to face, almost every few months. Start learning about the conference circuit, and make it an issue to visit at least one a year. My personal favourite is the Denver Gold-Show, where a committee chooses the companies that are allowed to present. Don't waste your time on anything the Cambridge House is planning, and especially any conference in Vancouver. The Casey conference in Florida, is good. PDAC is great, and even the Hard Asset Conference is good for a new investor in the space that wants to get a feel. The key is to get out there, meet management meet the geologists look at the core, learn everything you can about the deposit you are investing in. Don't leave any rocks unturned :) Books - Unfortunately there are no good books describing how to invest in this business. We have thought about writing a guide, but it would take too long and nobody has the time. These are Just "OK" Buy only one if you have to, you will learn more doing what I said before than reading any of these books. http://www.amazon.com/Mining-Valuation-Handbook-Investors-Management/dp/0731409833/ref=pd_sim_b_1 http://www.amazon.com/Insiders-Guide-Mining-Sector-Depth/dp/1905641559/ref=pd_sim_b_3 http://www.amazon.com/Investing-Resources-Profit-Outsized-Potential/dp/0470613262/ref=pd_sim_b_4 http://www.amazon.com/Mining-Economics-Strategy-Ian-Runge/dp/0873351657/ref=pd_sim_b_2 In closing I have attached a pdf I already attached before on this thread but which I think is good for the beginner investor, it's from Jennings Capital and it's published once a month called "Rock Talk". Jennings isn't the best firm out there, but to their credit this is a nice report. Most of the companies mentioned here are good places to start in terms of visiting their websites, reading their presentations and reading their 43-101's. There are absolutely no good junior investment message boards. Don't even waste your time. The smart money in this business speak over the phone, or meet face to face at conferences. Or engage in large email chains. The posters on the boards are all novices, with very little skill.

I was reading an old annual report today from 1998, and ran into this paragraph: YEAR 2000 STATUS Most computer systems in use today use a 2-digit field to handle years. This practice was devised in the early 1950s in order to save on the costs associated with data storage, and over time it became an implied standard. Now this simply means systems will interpret "00" year fields as 1900, not 2000, the result being inaccurate calculations, incorrect logic or total system failures when dealing with dates beyond December 31, 1999. A recently published Statistics Canada survey indicates that companies have been slow to address the issue, and, if it is not dealt with, this will have drastic effects on the Canadian economy. There is a common misconception that the Year 2000 problem only affects large companies with legacy systems. This is untrue. All hardware and software that have not been modified to deal with the Year 2000 correctly will be affected. The Company's board of directors have contracted the responsibility of dealing with Year 2000 issues to its corporate secretarial service, Fastcorp Management Ltd. regarding accounting, administration and statutory filing matters. Fastcorp Management Ltd. has invested heavily in up-to-date, state-of-the-art computer hardware and software. Year 2000 transactions were simulated using the systems of Fastcorp Management Ltd. and under direct supervision of the Company's management. The systems demonstrated that they were fully capable of properly dealing with transactions beyond December 31, 1999. This to me, is a perfect example of how stupid human beings can be when they let fear take hold. I remember those days and those elements are reminiscent to some of what is driving the fear trade today. It's amazing to think how human beings actually thought that come year 2000 we could experience significant economic shock due to the placement of two digits, and how the fear reached a stage where a public company would have to include it as part of it's corporate governance procedures. This also reminds me of the "Great horse manure crisis of 1894" http://www.thefreemanonline.org/columns/our-economic-past-the-great-horse-manure-crisis-of-1894/ My advice to current value investors that are frustrated with this environment (me being one of them) Stay Focused! and don't stop looking for bargains! Logic will prevail, this is an incredible time to buying equities.

Hawks we have been building a position in AQM Copper recently, thats pretty much it for the Copper Basket. Great Deposit and great partner, trading at ridiculous EV. The fundamentals of copper are good long-term but tricky for the next 2 years, so we are not as overweight unless we see a very good deposit. Our last copper play was NCU which we rode very nicely. The pumpkin hollow deposit will definitely be a mine one day. We have our eye on Baja Mining as well as it get's closer to production but no position yet. We have also been picking at ENRC LN which has a mix of Copper and other base metals, it's getting very cheap here. SCCO may be interesting as well but no position. I prefer buying MT here and gaining the Iron Ore portfolio for free.

And as we are on the subject, another consolidation in the space today. Minera Milpo of Peru acquired Inca Pacific (IPR.V) for $35mm in cash or $.61 cents a share. IPR owned the Magistral deposit which contained over 2 billion pounds of copper. If you ask me the buyout price is too low and I think shareholders got sold short. We are not buying the arb as we think Rick Rule (largest shareholder) will agree to the offer. With Hathor we did buy the arb, we think Cameco will raise. 2 Consolidations in less than 2 weeks. This is why this space is not a bubble, the world needs copper and lots of it. The juniors are the only ones actively exploring for new deposits. For those that are interested here is a 43-101 level feasibility study on Magistral which I consider to be fairly good. http://www.incapacific.com/i/pdf/MagistralFFS-43-101.pdf An intelligent investor reading this report can develop a pretty good understanding of the economics of the asset while employing various internal risk adjustments.

I will answer Bmichaud later just wanted to help the two Eric's. I have attached a research report from Jennings Capital, if you turn to page 6, you will see a nice table and how the industry generally values the producers, Page 8 is more interesting and is where our primary focus is. One more thing, do not forget NAV. In the natural resource space, almost all M&A is done under NAV valuations. What we do is do NAV valuations for each asset, and then reconcile with P/E and EV/Total Resources. Ive said this before, but there is nothing I would like to see more than value investors enter this space. It is an incredible frontier. Enjoy! JenningsCapitalRockTalk.pdf

Packer your post made me think of this quote, which I think is very true for all the gold bashers on this board: “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”

Wonderful idea.. I just don't see obama doing any tax cutting, but that was a very good one. Or even abolishing the capital gain all together, see what happens then. "Capital gains taxes are included in income tax revenue, and the OMB doesn’t give a breakdown for that. According to a 2002 Congressional Budget Office report, capital gains taxes "normally make up about 4 percent to 7 percent of individual income tax revenues" and are usually 2 percent to 3 percent of total federal tax revenues. " These are two fiscal policies (yours and mine) that could easily be implemented even for 3 years and would work very well imho.

Fed gives me a dollar for my bond. I don't have to put it in the bank, I can buy another asset. But that just means somebody else has the cash. That person may buy a new asset, then somebody else has the cash. It knocks the bid up on several assets but somewhere it hits the bank, where it becomes yet another deposit. I think you are right, it is inflationary. That however does not mean we will get inflation. There are offsetting headwinds. I think that's what Gary Shilling was saying to Schiff -- revolving debt is declining. Money is created when reserves are lent against. It's destroyed when lending falls. Schiff's argument is QE2 therefore hyperinflation, without taking account the effect of falling economy being an offsetting deflationary force. I summarized it wrong, but I don't think Shilling is wrong (might have misstated himself in the interview). Eric all this proves is how bad things are, and how dependent we are on QE from now on, and this quite poetically brings us back to the original point of this thread. We know the fed needs inflation and we know its only going to get it by printing more money. So why in this environment is gold in anything near a bubble? :) Good Night Folks.

RRJ I really don't think this is going to happen because the politicians would rather have the fed print money to support their fiscal disasters than inject capital directly to the investor class that fuels the economy. It also sounds as though you are favoring the investor class over the machine workers for example (the rich guys). I don't think it will ever fly. That being said, here is why I think it would work much better and create a lot more jobs. If the fed bought say 5% of the current US Market Capitalization which is roughly $11T, that would cost $550B. The fed would then retire these shares, so effectively existing owners who did not sell would own more of their companies. Dividend yields would grow and P/E ratios would decline. Moreover, the $550B which flowed into the hands of investors would look for ways back into Equity markets or comparable asset classes, as opposed to boring treasuries. This would fuel demand for Corporate Bonds, with lower ratings, and provide much needed air for those small to midsize businesses, moreover lots of new technology businesses would find much needed seed and vc capital creating even more jobs. That $550B of capital which represents what is the most "speculative" sliver of the asset pyramid, would look for a comparable and aggressive investment program. This is my personal dream but it won't happen.

Ubuy its not the best and safest bet. I don't advocate buying gold at spot to anyone here as an investment. I advocate that people on this board who have reached a stage in their life where they can afford to diversify, to ask themselves a simple question: Why shouldn't I own some physical gold somewhere? Just in case even 1 ounce. And most people will agree it makes sense to own just a little. If you understand that logic you can understand that gold is not expensive as only 93mm ounces are produced each year. I personally love buying companies that own or are developing proven gold deposits as I gain leverage to the gold price while maintaining a margin of safety so long as I am buying them at an in-situ price (price of gold in the ground + production costs) which is substantially less than what I view as the long-term price of gold. Say I think the long-term price of gold is $750 an ounce, well today I can buy companies trading at $100 in situ while production costs are roughly $400-500. That is a good way for me to gain exposure. That is how we played it. Our resource funds have averaged over 35% CAGR since 2001 and have only been 50% weighted in gold. We absolutely killed it in the space, investing in this way and never owned any bullion. I personally own bullion and have purchased some as recently as $1,300 an ounce and will never sell it. It represents maybe 3-4% of my total assets at this stage and when I started buying it maybe represented 0.5%. Packer, you can now use gold to buy food in Utah and Virginia, here is the Press Release: http://www.sltrib.com/sltrib/home/51364301-76/silver-gold-legal-tender.html.csp :)

First off I want to say its never painful listening to you. You are definitely one of my favourite posters on this board. From your post history I infer that you apply mathematics, and do it well, when assessing the value of securities. Something most people don't. For that I am impressed. My response to your last post is that, I am satisfied you agree that QE is money printing. With regards to the disappearing ink, it is a naive comment. First, the fed did not just buy 6 month securities. In some cases they bought very long-dated securities. Great piece on this here: http://www.nytimes.com/2011/01/11/business/economy/11fed.html?pagewanted=all Second the seller of securities may turn and buy other assets and does not necessarily have to keep the funds on deposit. The argument about the Fed being able to sell back the long-dated securities is BS. It won't happen. And the leakage you speak of (the difference between what they buy and sell) is in fact an absolute increase in the money supply that is given in the form of a "gift" to wall street intermediaries or investors. I seriously believe that a more effective QE would be to buy shares in SP500 companies and retire them. It sounds insane, but I bet the results would be much better. We need capital formation which is derived from equity markets nowadays not more debt infused economic expansion.

Ubuy, so now the argument shifts to, QE is printing money, and QE is inflationary, unless the fed sells back these securities when times get better to prevent inflationa nd does so with iscar blade like precision :) You are fooling yourself sir, those securities will NEVER get sold back. It's never gonna happen. Packer, I enjoyed the book very much and am familiar with this cycle, but you have to understand that in the end the fed will get it's inflation. We are going to see QE3, very shortly here. Your comemnts relating to gold are disappointing, gold is not a commodity it is a currency or financial asset. I completely disagree with your assessment of what drives the price of gold, I suggest this essay for you sir: http://mises.org/daily/3593/Does-Gold-Mining-Matter If gold was a true commodity it sure as hell has never acted as one. In 2008 the price of all commodities collapsed while the price of gold went up.

http://www.goldsheetlinks.com/capita.gif A wonderful graph. In 1980 there was about 0.7 ounce of gold per capita and today there is about 0.7 ounce of gold per capita. The perfect money! Truly a shame we went off the gold standard.

And you can bet your arses the US Central Banks would NEVER put out a video like that. Remember these are the same guys that wouldn't disclose to their citizens (owners) who they leant money to for almost 3 years. IT took Bloomberg personally backing a lawsuit and freedom of information act request until finally congress stepped in and ruled that they need to make everything public. To Bloomberg's credit he has done a wonderful job of parsing all the data. It was quite ugly. Central Bankers in the US are elitist, it is a culture that was instilled from the GreenSpan era. Their speak is ambiguous and they genuinely think they are smarter than everyone else. They sit their in the mahogany room on the top floor of the federal reserve and get to act out g-d. In reality most of them are huge narcissists with napoleon complexes that have no clue about the real world. Be it human interaction or actual capitalism. I urge you all to watch this video for example: Mishkin exemplifies the typical US Central Banker.

Eric please watch this video, its not rocket science and given your post history it will "click" in two seconds. If you still think Shilling was right, please let me know.

So now the argument has shifted to"QE is printing but not inflationary" LOL That post too was pathetic, again with respect. Debate me on the fundamentals, I've got all night, lord knows I am waiting for the European open tonight.

Bmichaud if it is such a non-event why did equity markets bottom exactly when it started and peak exactly when it ended. That paper is nonsense. I sold some treasuries to the fed during the time they were buying which formed part of the cash which was then paid out to me personally as part of my quarterly incentive allocation. I then used that cash to buy a new home, how is that a non-event? I don't necessarily have to re-purchase treasuries with this new money. I can do whatever I want. At some point it all becomes inflation. The problem is that there aren't many people in my position that needed a home and have no existing debt. There is little demand for new assets which historically were fuelling the previous boom cycle. That is the issue. When housing bottoms fundamentally we can start to see the light at the end of the tunnel.

I just don't understand why the vanilla equity value investors on this board care so much about Gold's rise. If they can fundamentall state why it's overvalued (which they cannot) than short it and call your position. Otherwise, I enjoy debating the fundamentals as I have plenty on this board. I consider myself first and foremost an equity investor , a follower of Graham & Dodd, I have applied their methodology and it has worked fabulously for almost two decades. I would much rather prefer spending my time on this board debating equity ideas such as BAC, and sharing value themed videos etc. But the problem is that I feel as though I am the only one that "get's" it when it comes to gold here, and I have to respond to some of the nonsense. I apologise if I am coming off too strong!

And another video - This one is actually the best and more straightforward. The Central Bank uploaded it and says "QE = CREATING MONEY ELECTRONICALLY" How anyone can argue that QE is not money printing is insane. Actually I prefer if everyone just watch this video for simplification and time.

Here is a great video for all you guys that have absolutely no clue about central banking (seems like a lot of you) Most people get caught up in the verbiage and lose sight of the target. QE = MONEY PRINTING PERIOD. Here is another good one: Note the date and how "dangerous" sounding QE was. Who would have even imagined we would resort to two rounds of QE, and now thinking of a third round. This was unheard of in the history of central banking, sans Japan. The rulebook has been thrown out!