The bulk of the assets held by life insurance companies (which account for a significant majority of the assets held by all insurance companies) are held in fixed income obligations, including mainly bonds, mortgages, and mortgage backed securities. This is both a requirement of regulators, and a result of insurance company asset-liability management.
The problem with keeping money in cash equivalents is that the money itself is going to be devalued. We didn't have that problem in the 1930's but there are too many reasons why it will happen now. The insanity of unrestricted deficit spending, selling dollars to governments with questionable currency, and the gigantic transfer of wealth to foreign interests will eventually force us to choose between national security and a devalued dollar.
I'm not one of those "sky is falling" types who is predicting this tomorrow (It might take 50 years) but if the policies of our government don't change, it is an absolute certainty.
"...reality has a well-known liberal bias." -- Stephen Colbert
Could it be that those Caribbean accounts are just more Arab and Asian money that is interested in a little privacy?
Greenspan's Bond Conundrum Ripens Into an Enigma: Mark Gilbert June 3 (Bloomberg) --
The 10-year U.S. Treasury note was a ``conundrum'' to Federal Reserve Chairman Alan Greenspan in mid- February at a yield of about 4.10 percent. After cracking the 4 percent barrier this week, it looks more like Winston Churchill's Russia: ``a riddle, wrapped in a mystery, inside an enigma.''
The median forecast of 62 of the finest minds in finance, surveyed by Bloomberg News in December, was for the 10-year bond to yield 4.78 percent by mid-year. Instead, the note pays about 3.9 percent, the lowest in more than a year. Barring a market crash in the next four weeks, that's quite a margin of error.
Bond mavens are now lining up to call for lower yields. Morgan Stanley Chief Economist Stephen Roach said earlier this week he's turning bullish on bonds, with a 3.5 percent level possible in the coming year. Bill Gross at Pacific Investment Management Co., never shy to predict an increase in value for the securities he owns, said May 18 that the 10-year rate could drop to 3 percent by the end of the decade.
June 06, 2005 Another Mortgage Refinancing Wave? by Clif Droke
"Big surge in price of US homes fuels fears of bubble," writes the Financial Times newspaper. Meanwhile, another major news wire did a weekend report on the top 10 U.S. cities most susceptible to a hit in the event of a burst housing bubble. But what has been mostly overlooked has been the possibility that yet another wave of mortgage refinancing may be imminent, thanks in part to the fresh new lows in the 10-year Treasury yield, which mortgage rates are keyed off of.
The game in Japan was borrowing ( not individuals) from the central bank there and buying treasuries here, all the while the real estate went down down down. In some cases losing 90% of it's value ( imagine that one!)
Yeeeech! Why take such a risk when there's Hong Kong?
Tom Last things first. I am not sure Hong Kong is a great place for the Arabs to go since they are in competition with the Asians, and I am sure the Japanese’s would not go there with all the Chinese trouble they are having.
You seem to know this Asian area as well as any one here, so perhaps you can answer this question or even venture an educated guess.
Does it not seem a little strange that the Japanese have been in a “recessive/depression for what 12 years, and yet they have billions each month to buy OUR debt, sell billions worth of products here each month, have some of the largest industrial complexes on the planet i.e. auto’s etc.
Perhaps all those years ago they looked into the inflation abyss and decided to reverse that trend opting for nearly permanent price deflation to continue to build their country.
Yes their bank interest is 1% but does that not keep the world away from their banks?
Yes their labor costs dropped but is that not good for selling products to Americans?
Yes the prices of their real-estate drop and folks can afford it again, is that bad?
Yes their stock market dropped by two thirds but then are their companies now reasonably priced with good consistent returns?
And their bond market and mortgaged backed securities pay very low rates so what foreigners want them?
Sorry but my only experiences in Asia with the Japanese have not been the greatest. I don't think many other Asians like the Japanese and as such your mentioning Japanese not being in HK might be accurate. I don't know. I know that even the Vietnamese slap the Japanese around pretty good ( In Vietnam). The Chinese are eating them alive. However, Asians in general are "savers" so there's probably lots of cash the Japanese haven't even looked at yet and they certainly have dominated the auto and motorcycle markets worldwide until the Chinese started building momentum. The Japanese still make a much better product than the Chinese but the gap is narrowing for sure.
I have zero experience with Arabs in SE Asia. I met a few Muslims but that's about it.
I can write a book though about my experiences and friendships with Chinese, Vietnamese and to a lesser extent, Thai. In my opinion, despite what this government did to them, the Vietnamese definitely could become our greatest friends and allies in the region and have the tenacity and honor to watch my back anytime.
I guess an accurate statement in Asia though is every dog has his day.
The game in Japan was borrowing ( not individuals) from the central bank there and buying treasuries here, all the while the real estate went down down down. In some cases losing 90% of it's value ( imagine that one!)
The Japanese were the major game in town when it came to buying up our debt 1-3 years ago. With the interest rate spread between our bonds they were making an excellent play in the "carry trade." You could say the Japanese almost singlehandedly carried us for a couple of years. There still is enough difference for them to make some money.
However the short term and long term rates in the US are now only about 1/2% apart and spells an end to the carry trade here. All the corporations, banks, and funds that ate this up as a gift from the FED for the past few years will have to fund another "sure" thing to bet on.
I no longer consider mortgages or mortgage backed securities as a risk-free bet. The insurance companies have plenty to lose here.
"You could say the Japanese almost singlehandedly carried us for a couple of years"
Or maybe for more than a decade depending on how you define "carry".
It was actually a good relationship -- both sides got what they wanted (US -- subsidized consumption, Japan -- stability) -- but it can't go on forever.
More unfunded liabilities. Oh well what’s another half a Trillion.
By GLEN JOHNSON The Associated Press Tuesday, June 7, 2005; 2:16 AM WASHINGTON -- Fearing that airlines and other struggling industries could present the country with its next S&L crisis, Congress and the White House are pushing an overhaul of pension-funding rules that has been overshadowed by Social Security.
The heads of three major airlines were called to appear Tuesday before the Senate Finance Committee. Its leaders are alarmed that the Pension Benefit Guaranty Corp. _ the federal agency that insures private pension plans _ already has a $23.3 billion deficit because of defaults. · More than half of the 100 largest plans had less than their promised benefits on deposit, which the committee's chairman blames on lax rules that are supposed to guarantee full endowment.
About 34 million people _ roughly 20 percent of the nation's workforce _ expect to receive payments from their employers through defined benefit plans.
The risk those workers face was highlighted last month when a federal judge allowed United Airlines to default on $9 billion in pension obligations as it attempts to emerge from bankruptcy. The ruling shifted responsibility for paying benefits for 120,000 current and former workers to the PBGC, but the agency will pay only about two-thirds of promised benefits.
"As the $9 billion hole in United's pension plans has made painfully clear, a company's pension promise is only as strong as the rules that require companies to fund these plans," Sen. Charles Grassley, R-Iowa, said in a statement issued before his committee hearing. "We saw similar practices and events at Enron, but, unfortunately, this time it's perfectly legal."
The pension funding problem recalls the savings and loan crisis of the 1980s, when hundreds of thrifts became insolvent and were taken over by the government. A congressional study in 1996 put the price tag for the S&L bailout at $480.9 billion.
Re - pensions - the sad part of this story is that the problem has been obvious for many years, and pointed out by people who are respected and get a lot of press (eg - Warren Buffet). Even now, if our legislators act responsibly and take aggressive action to correct, the cost can likely be kept well below half a trillion. Delay may result in the holes getting bigger, and harder to fill.
What do you think the implications will be if many baby boomers move their money (bulk of) to bonds? Will all that cash chasing limited issues be good or bad?
What if the prime rate drops to 3% for 5 (or more) years?
~g
I listen to your voice like it was music, [ y o u ' r e ] the song I want to know.
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ... and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
By Market Watch Last Update: 4:27 AM ET June 7, 2005
TOKYO (Market Watch) -- CNOOC Ltd., China's biggest offshore oil producer, , said Tuesday it continues to mull buying Unocal Corp., potentially threatening Chevron Corp.'s $16.4 billion bid for the U.S. producer.
CNOOC said in a statement to the Hong Kong Stock Exchange that it was "continuing to examine its options with respect to Unocal. These options include a possible offer by the company for Unocal, but no decision has been made in this respect."
The implications for the baby boomers is dire since they will be locked into 4% while real inflation destroys their retirement. This is probably part of what's going on. The smart money will always seek to take money away from the majority, even people who need it.
The implications for the market is a short term pressure torwards lower interest rates (happening now) and slightly less capital available in stocks and other investments. Because of wealth disparity and the creation of the mega rich, (Howard Hughes might have been worth 1 billion dollars, about 3.4 billion adjusted for inflation) I doubt baby boomers will have the ability to influence the market much.
"...reality has a well-known liberal bias." -- Stephen Colbert
When you're investing money, you never want to be with the majority. That's why baby boomers are gonna get screwed, they are all betting on the same horse.
"...reality has a well-known liberal bias." -- Stephen Colbert
What if the prime rate drops to 3% for 5 (or more) years?
Low interest rates harm current retirees. Grandpa and Grandma used to get 5% on their CD's, and now are stuck with 1/2 of that. Yet expenses keep rising, not to mention double digit tax increases on property and sales taxes.
Secondly, harm is done to the younger kids of single parents. For many their grandparents play an essential role, and taking money from grandparents means less is spent on the grandkids. Low interest rate car loans are of no benefit to these kids, since their parents cannot afford new cars anyway.
<< <i>When you're investing money, you never want to be with the majority. That's why baby boomers are gonna get screwed, they are all betting on the same horse. >>
Being in the first part of the baby boom group I pay a great deal of attention to that sector. In addition as I have mentioned I have a short term consulting job with a mortgage firm with office in five states, and our plan for that company requires lots of attention to this large group.
The size of this group is estimated at 77 to 79 million and spans 16 years. The largest majority of which is in the first one third which means full retirement in 3 to 5 years depending on whether its 62 or 65.
One additional surprise, that no one I have read has yet calculated, is just how many took early retirement or became semi- retired during the big high tech and manufactures lay off that occurred during the last several years.
Several of the comments above are good ones, as the boomers on average still have heavy debt, and current interest rates do not cover real inflation. In addition there will obviously be a shift to safety in the next few years and part of that must have already started. No one wants to be in the stock market when the boomers start closing their mutual fund accounts, paying off debt, and reducing their monthly nuts.
As far as future interest rates who knows, but there will never be a shortage of debt to buy, as just the Federal government is so deep in the hole currently with trillions of unfunded liabilities that it’s appetite can continue for decades.
The two biggest problems facing this group, and indeed the Nation, is that the majority of the boomers are not students of economics and have never faced any real financial crises, and therefore are still asleep at the wheel.
Secondly the real intellectual property in American corporations, and the majority of tax payees, are as a general rule in this group. When this group is finished lots of things are going to be finished.
The next 5 to 10 years will be the most interesting economically of any time in the history of the World; this boomer group is a World phenomenon not just a U.S. one.
When you're investing money, you never want to be with the majority. That's why baby boomers are gonna get screwed, they are all betting on the same horse.
Exactly, that's why the whole population cannot keep stocks long term and then everyone prospers. The whole country cannot continue to get "wealthy" and retire off standard cookbook investments and 401K's. And the boomer generation will put a quick end to all this. First ones out will prosper, the majority will get sliced and diced if they are not properly diversified. And 30% growth stocks, 20% small cap, 25% tech stocks, and 24.9% bonds and 1 US gold eagle (.1%), ain't gonna cut it.
I spoke to an old gf today. She was a waitress at Ruth's Chris steakhouse in Ft Lauderdale. Bought a little house 6 years ago in Wilton Manors, right in an area where you would need to learn Creole to get around. Paid 110K for it. Sold it 3 years ago for.....................................325K.
Then bought a waterfront house in the same town. Paid 325K Just sold it for 650K and is moving OUT of the whole area .
Regarding stocks and demographics -- keep in mind that although the US is aging, the US demographic situation is really quite good, especially compared to other countries, such as those of Western Europe, Japan, and even China.
Over the next 50 years, the US is likely to grow from about 300 million at present to 400 million. During this entire period, we will be younger than Japan is at present. From an economic perspective, this is a manageable and healthy growth rate, and will almost certainly facilitate real economic growth. This in turn will afford investment opportunities.
Part of the recent conservative mythology (read pack of lies) is that creating jobs requires capital and by cutting taxes for the wealthy, we will stimulate investment and create a financial utopia for all including low unemployment and increasing wages.
The brutal nasty little secret is this: The government and federal reserve will not allow the economy to grow faster than 4-6% annually without putting on the breaks. Factoring in slow years and recessions, this means about 2-4% annual growth. ALL investment must be examined in this context and the following rules apply and cannot be violated:
1. Anyone increasing his/her yearly income or wealth aquisition is taking it from someone else. An economic conservative's rebuttal to this is that "we all have opportunity and everyone can prosper" This is false. If some miracle happened and everyone in the country increased productivity to give the entire population a 10% raise, then the fed would immediately and forcefully act to cool the economy to a slower level. This is economics 101.
2. The 2-4% yearly growth allowed by the federal government approximates our annual population increase. Here is the real shocker. The economy is a system to maintain the current aristocracy and stop the fast creation of new wealth. Individually it is possible to prosper, but you will always be taking it from someone else as long as the government controls growth.
3. Since the stock market is an estimation of our economic health, and economic growth will always be capped at 2-4%, the public cannot earn more than 2-4% annually in the stock market. You'll never hear this on CNBC. Part of the fraud is that the best companies are picked for the indexes like the Dow and S&P, therefore when an analyst touts the market as an excellent investment, he can point to the most elite corporations on the Dow industrials and say "See? We all made money!"
"...reality has a well-known liberal bias." -- Stephen Colbert
Aristocracy? When last I looked, education and hard work were the keys to success in our country. Throw in some entrepreurism, and you have all the makings for success. This certainly is NOT the time to be a factory worker. The big myth is that showing up for work every day at the factory is the key to long term financial security. You have to manage your own situation, not be dependent upon the decisions of others.
Retired United States Mint guy, now working on an Everyman Type Set.
I am not sure where you are getting all of this info. but it really makes no sense to me. First, it is not important what has happened in the past, most of that cannot be fixed simply because the problems are too big. In addition it was the American people that demanded all of these programs and politicians from all sides that voted them in.
If you barred all conservatives from holding office, what would change? The fact is all governments in this country are way to big and their programs are not sustainable. Even in the Clinton years 1.5 trillion was added to the national debt.
As far as this statement goes, “Anyone increasing his/her yearly income or wealth acquisition is taking it from someone else.”
This would only be true if the printing presses were not running day and night.
Think about this for a minute. The entire net worth of the wealthiest Americans, the Forbes 400, which includes all the billionaires in the country, is ONE TRILLION DOLLARS. In the last two years the Asians alone have bought more U.S. debt than all of these folks net worth.
the public cannot earn more than 2-4% annually in the stock market
The stock market has a historical return of about 8-10% per year. This takes into account wars, depression, recessions and political instability. There has never been a greater "investment vehicle" in the history of the United States. Yes, I have a vested interest or biased viewpoint, but I can not see any investment outperforming the stock market in my lifetime.
I think it is very important here to make the following point. There is NO wealth transference going on in this country from the middle class citizens to the rich unless it is voluntary.
Forced wealth transference only happens via TAX systems. So if you want your money force transferred, vote for more TAXES.
What we have in this country and around the World is legal printing of wealth.
If you wonder why they’re where 3 billionaires in this country in 1980 and 400 now the answer is simple, they are printing their own money. If you are also wondering why all these folks are billionaires, and you are not, the answer is that they have two things you don’t, a printing press and good salesmen on Wall street.
Here are a couple of examples.
The Google brothers come to you a few short months ago and say, Wow look at this deal, were big, were the best, we are slick, we are neat, we can take over the internet, hey man don’t you want some of this? We have plenty to go around we just printed millions of shares. You are a worker on the line at Ford, and have $1,000, so you buy the shares at $100. They hire some Wall street Guru’s and bing, bang, boom the stock goes to $300. You sell and buy a small boat. Oh I forgot the most important thing just before they sold you those shares they printed themselves up millions of shares. Now that the stock is worth $300 they are billionaires. Did they confiscate any money from you via forced transference? NO. All they did was print the stock and hire the salesmen.
So why are most all the billionaires on the Forbes list, billionaires to begin with? You got it, they have printing presses and you don’t.
Here is a more practical example. You know the little mortgage company that I have talked about. I told you we were taking it public; it comes on the over the counter market in a few weeks.
We analyzed the company as a private company several months ago and made a determination that it could e sold for 3 million.
We also analyzed the stock market and found that companies of this size and type were trading at about $3.00 per share. We issues the two principles 10 million shares and we fully expect the stock to trade at $3 within 30 days of the market opening.
Wow the principles will have 10 million shares at $3 so $30,000,000 worth of stock compared to $3 million from a sale. With the help of a few Wall Street types, and a little pay-o-la, the stock can stay at $3 for years. So is their $30,000,000 in stock real money, sure why not, they can sell some anytime they want.
The stock market has a historical return of about 8-10% per year. This takes into account wars, depression, recessions and political instability. There has never been a greater "investment vehicle" in the history of the United States. Yes, I have a vested interest or biased viewpoint, but I can not see any investment outperforming the stock market in my lifetime.
I'm sorry, but this is not true and CANNOT be true. If an economy grows at 2-4% yearly then the representation of that economy (the stock market) cannot over the long term exceed this amount. DON'T BELIEVE PEOPLE WHO WANT YOU TO BUY STOCK!!! Don't worry, I'll provide proof:
At the peak of the 1929 stock market, the dow was selling for a little over 3000 in inflation adjusted dollars. Don't take my word for it, do the calculation yourself. Here's the link you'll need to convert 1929 dollars to 2005 dollars. The peak of the lastest bull market was about 13,000. This represents an annual return of 1.9%. During that same 76 years, the dow earned approximately 2.3% in dividends giving you a peak to peak net gain of 4.2% annually. DON'T TAKE MY WORD FOR IT, get the numbers and do the calculations yourself. They are all public and the math is easy.
So what am I leaving out? Taxes! All stock market gains and dividends have been taxible at the NON-inflation adjusted amounts leaving a net real gain of 3% or less. But guess what, we're not done............
As I said before, the Dow Jones represents the most elite corporations in the country. When a company is seen as on the decline, it is REMOVED from the dow then replaced by a corporation seen as on the rise. This happened recently when AT&T was removed, but SBC was added. The TOTAL stock market will give you returns that are worse than the Dow and S&P. Furthermore, the MAJORITY of shareholders sell at the bottom and buy at the top. The public at large will LOSE money playing the stock market because they are uneducated as to how markets work and will make mistakes.
That's it, there is my proof and it's all easily available on the internet.
"...reality has a well-known liberal bias." -- Stephen Colbert
Actually, Iwog, I recently read a little article that noted how stocks dropped from the S & P 500 had outperformed the stocks that were added. I can't remember where I read that.... might have been this thread!
It's possible, but remember that there are hundreds of stocks that never make it to the Dow and S&P that go bankrupt losing 100% of the investor's money. The New York stock exchange and Nasdaq will eject any company that can't maintain a stock price of over $1. This means that almost all of the reported index figures are false when applied to the GENERAL market.
"...reality has a well-known liberal bias." -- Stephen Colbert
Iwog -- From the perspective of an average investor, I think you're essentially saying that if you buy an index fund, over long periods of time you can hope to achieve a small real gain, but far from the 8 - 10 % figures that seem to make the rounds.
www.AdrianDayAssetManagement.com The outlook for the silver price, based on supply-demand fundamentals, is very compelling, while it is a very thin market, meaning the price is susceptible to sharp run-ups providing investors with good profit opportunities. At the same time, there are relatively few good stocks with exposure to silver; the traditional standbys are either bankrupt (Sunshine), mine more gold than silver (Hecla), or such that you might not want to own (Coeur d’Alene). Some of the biggest silver producers are diversified mining companies, with very little exposure to the white metal.
There are, however, a handful of solid companies with good leverage to silver, suitable for investors with different risk profiles. We’ll look at these in a minute. First, let’s look at silver itself.
Silver’s supply demand outlook is positive
The fundamentals for the market are strong. There has been a deficit between current supply and demand every year since 1990. At the beginning of this period, the deficit was met with drawdowns from large stockpiles.
Although the deficit has shrunk in recent years, known stockpiles have shrunk even more, representing today an estimated four months worth of supply. This compares with over 17 years worth of supply for gold, admittedly not a completely fair comparison. Nonetheless, known above-ground supplies have fallen sharply; according to the Silver Institute, identifiable silver stocks (including Comex, European dealers and government stockpiles) have fallen almost exactly in half from 1994 to today’s 700 million ounces.
So even as the current deficit has shrunk, there are fewer and fewer stockpiles to bridge the gap. This means the price must rise to reduce demand and increase supply.
Digital photography not a big threat
Demand has dropped marginally from the late 1990s, primarily because the recession of 2001 and 2002 reduced electronic demand. Demand for silver in photography has remains relatively constant over the past 10 and more years, despite the growth in digital photography (which uses no silver). Though this appears incongruous, it can be easily explained: digital photography use has grown, but only in North America and Western Europe. At the same time, in these regions, the use of disposable cameras, which do use silver to develop film, has also grown. Similarly, in the underdeveloped world, photography has grown in popularity, and it is primarily through traditional silver-based film.
Perhaps most compelling of all is the fact that some 70% of silver used in photography is recycled, so if the demand for silver in photography were to decline, so too would the supply of metal available for recycling. Moreover, other new uses for silver has arisen; flat screen televisions, for example, are significant users of silver.
In addition, there is a lack of new supply over the next few years. New mines supply will be flat to modestly rising over the next five or more years. Even in the “best” circumstances, if even known economic deposit were to come on stream, the increase in mine output—allowing for declines from mature mines—would be only 5% per year. So the outlook for silver and the potential for sudden price spikes is very real.
There are only a handful of pure silver companies
But the paucity of good-quality companies with sensitivity to silver remains. We like a handful, each with its own potential and risks, suitable for different types of investors.
One of our long-time favorites is the silver-indexed Freeport preferred D (FCXprD, NY), which pays a quarterly dividend and redeems based on the prevailing silver price. These partial redemptions, annually for the equivalent of half an ounce of silver, have nearly run their course; there will be a redemption of half the value of the issue in August with the final maturity one year later.
Thus buying the preferred today means one will receive about half that back in two months as a return of capital, and one is betting on the silver price appreciating over the next 14 months to make any profit. In addition, there is a quarterly dividend approximating to a 4% yield (at today’s prices). With the stock selling (at $7.27) at a modest discount to NAV—silver closed at $7.40—it is a relatively conservative way of investing in silver, though clearly not a long-term investment.
An innovative investment offers low-risk returns
Another relatively conservative investment is an innovative vehicle that came out towards the end of last year. Silver Wheaton (SLW, Toronto, C$3.77) neither mines nor explores for silver but acquires the silver revenue stream from other mining companies. It does this by making an up-front investment and a clearly defined cost per ounce. It is thus not dissimilar to a royalty company, and has modest risk, but positive upside should the silver price appreciate.
Its main risk at present perhaps is the small number of mines in its portfolio, but the company, run by Ian Telfer (CEO of Goldcorp which recently merged with Wheaton River, from which Silver Wheaton as spun off), has aggressive growth plans. It is arguably the least expensive of the silver stocks, certainly selling at a significant discount to the NAV of the producers and exploration companies.
The world’s largest primary silver producer
Pan American Silver (PAAS, Nasdaq, 14.40) is neck-and-neck as the world’s largest primary silver producer (and will probably overtake Coeur d’Alene this year). It has six producing mines throughout the Americas, with another two scheduled to commence production in the next two years. It production growth over its 10-year life has been phenomenal.
But it has production risk, and this has been amply demonstrated over its history, with production losses and difficulties at many of its mines at different times. Indeed, Pan American reported its first ever earnings at the end of last year. In the latest quarter, it was back to a loss as costs rose (with cash costs up 72 cents to $4.50 an ounce).
Nonetheless, the company is well run, has a solid balance sheet (with virtually $100 million in cash and no debt), and a strong growth profile. The stock is highly liquid and an institutional favorite, so in a sustained silver bull market, Pan American should be a prime beneficiary.
Top exploration company has matured
My favorite exploration company is Silver Standard (SSRI, Nasdaq, 11.77), though to call it such belies its tremendous growth in recent years, and its near-term productions potential. The company has among the largest silver resource of any company, with almost 1 billion ounces of silver at 17 projects in seven countries. But the company has no producing mines, preferring, until recently, to eschew production to avoid the pitfalls that often accompany mining, as well as to keep its resources until prices are higher.
Partly for this reason, and because it is among the purest of the silver companies (with over 2/3rds exposure to the white metal), the stock has arguably the most leverage to silver of any silver stock.
More recently, given the higher silver price—at $7.40, not far off its recent high, and nearly twice where it traded throughout most of the 1990s and 2000s—as well as the company’s greatly increased balance sheet, the “no-production” policy has shifted. Though the company intends keeping most of its projects “in reserve” for now, it is advancing towards production at several projects and will likely be producing at two (or even three) projects within the next couple of years.
Near-term production and two high-growth exploration projects
These include Manantial Espejo, a joint venture in Argentina with Pan American Silver, which will be the operator, and a second, one of two exploration projects returning exciting results, and at which Silver Standard is exploring aggressively.
One of these is Pitarrilla in Mexico, a grass-roots venture 18 months ago. Results have been very strong; one hole returned 385 feet of 2.4 ounces per tonne of silver (including 105 ft of 6.6 oz), and the project is already at the pre-feasibility stage. At its new Berenguela project in Peru, where Silver Standard has an option to earn the silver revenue from this copper-manganese mine, recent exploration returned strong results, including a phenomenal hole of 213 feet averaging 18 ounces of silver per tonne. Both of these projects has the potential to grow significantly through Silver Standard’s aggressive drill program.
In the past, given its lack of production, the company was forced to make several trips to the equity well to fund its ongoing exploration and acquisition work. Although the process was always accretive, as silver and gold resources per share grew consistently over the years, from less than 10 ounces per share in 1998 to over 20 ounces per share today (over $150 worth of metal in the ground for each share), nonetheless it kept a lid on the stock price.
Strong balance sheet and quality management
Today, however, as a result of these equity issuances (and their accompanying warrants), the company is extremely well financed, with cash of US$33 million and another $14 million of physical silver. Together with marketable securities, the company has over $50 million, with another C$14 million to come in from in-the-money warrants.
All in all, the company is in the enviable position of being able to fund all its activities, including its share of capital costs, from existing resources, putting it in a very strong position to negotiate with lenders.
Like Ross Beaty at Pan American, Silver Standard’s Robert Quartermain is known as a cost-conscious and ethical manager, as well as for his technical skills.
These four stocks offer the investor good leverage to the silver price in low-risk companies, three of which also have inherent growth potential. All are good buys at their current prices. ------------------------------------------------------------------------
Adrian Day is President of Adrian Day Asset Management, which offers discretionary accounts in both global and resource markets. He may be reached by phone at 410-224-2037, by mail at P.O. Box 6643, Annapolis, MD 21401, or on the internet at www.AdrianDay.com.
The public at large will LOSE money playing the stock market because they are uneducated as to how markets work and will make mistakes.
This I will agree with you 100%.
The numbers can be played with anyway you like. The peak of the market would be 4300 converted into todays dollars. Your money would be worth 2.4x now and you did not keep up with inflation. At the trough in 1932 the market would be 650 in today dollars. Your money would be worth 16x now and you dramatically outperformed inflation.
You did include dividends, but not reinvesting those dividends. The returns would be much higher. Also taxes are not a consideration unless you sell.
You may be correct that investors can only expect 2-4% but this is AFTER inflation. In the end there I believe there is no better investment for the long haul.
<< <i>Aristocracy? When last I looked, education and hard work were the keys to success in our country. >>
The key to success in this country is being born in the right family. Contrary to the BS out there, 97% of the rich people in this country were born rich. They prosper because the system is designed for money to attract money and the working man putting in his 45+ hr/wk till hes 65 is lucky if he can afford a new car every few years.
This wealthy class is the Aristocracy and just because the averge Joe has a better chance of improving his life than ever before in history doesn't take away from the fact that the 3% "wealthy class" is born that way and control 95% of the wealth in this country.
I saw the Frontline report on the hype of WorldCom. Don't forget when you IPO that you need to reserve some shares to sell to the Brokerage Market Analysts at par AFTER the price rise so that they will issue the BUY recommendations.
That was an amazing story of the ripoff of the JoeShmoe stock investor by the Brokerage houses.
Boy oh boy, you must be really old Oreville. I mean cmon, these are fellow Americans we're talking about. Destined to rule the world! Manage everyone, everywhere. No need to create., manufacture, know other languages or even have a passport. Why? We're invincible.
Further still, why should Americans even have to work? Just get a loan company to loan you the downstroke to a house/condo etc, and sell it every couple years and make a few hundred grand. See? Simple! And it should go on for pretty much however long you want it to!
Now what would really be good is the socialism here to INCREASE! You say what? I said increase! Yes yes, 50% taxations not enough. No way, not to have paradise comrade. Not enough to pay the interest on that pesky debt either. Raise it to 90% and then have enough to maybe invade a few more countries ( to promote freedom of course, after all war is peace and harmony), and don't forget to take care of the children ( that should be everyones mantra don't ya think?). Then we will all be happy!
You can make it in America today...but it will cost you in time and effort...First you have to decide what it is that people will always need in a good economy or bad...this is the key...if you put 100% of yourself into this effort for 3 years...you will be a wealthy person....I know it can be done...I have seen it with my own eyes by my brother in law...came here with nothing and has built an emipre.
<< <i>Aristocracy? When last I looked, education and hard work were the keys to success in our country. >>
The key to success in this country is being born in the right family. Contrary to the BS out there, 97% of the rich people in this country were born rich. They prosper because the system is designed for money to attract money and the working man putting in his 45+ hr/wk till hes 65 is lucky if he can afford a new car every few years.
This wealthy class is the Aristocracy and just because the averge Joe has a better chance of improving his life than ever before in history doesn't take away from the fact that the 3% "wealthy class" is born that way and control 95% of the wealth in this country. >>
That's actually quite funny! At parties hearing "old money" complain about all of the "new money"... only to remember the complaining when the (current) old money was new...
There are more millionaires right now, that ever before... if memory serves me correctly, there are 30% more millionaires now when compared to when Bush entered office.
Benefits of a (long) continuous (family) history: sometimes you're up, sometimes you're not... but are you happy?
Class warfare isn't going to get us anywhere.
Work hard & smart...
~g
I listen to your voice like it was music, [ y o u ' r e ] the song I want to know.
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ... and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
<< <i>There are more millionaires right now, that ever before... if memory serves me correctly, there are 30% more millionaires now when compared to when Bush entered office. >>
Paper millionaires yes, how many of them have that much in equity, not assets. And how many have it in Real Estate which is getting ready to tank.
Besides, a million just isn't in the "wealthy" class anymore.
<< <i>You can make it in America today...but it will cost you in time and effort...First you have to decide what it is that people will always need in a good economy or bad...this is the key...if you put 100% of yourself into this effort for 3 years...you will be a wealthy person....I know it can be done...I have seen it with my own eyes by my brother in law...came here with nothing and has built an emipre. >>
Exactly....Just as it has been for the past 200 years.
Iwog -- From the perspective of an average investor, I think you're essentially saying that if you buy an index fund, over long periods of time you can hope to achieve a small real gain, but far from the 8 - 10 % figures that seem to make the rounds.
The 8-10% figure is just fiction.
After taxes and inflation, I doubt the average investor can make any money at all in the stock market. One of the flaws in my analysis was using the 1929 peak as my first reference point, and the 1999 peak as my second reference point. In 1929, the average PE ratio was about 20 while in 1999 the average PE ratio was OVER 30! What this means is that the 1999 market (if you can believe this) was MORE speculative and less connected to the real value of a corporation than the pre-Great Depression boom market was. To make it simple, investors in 1999 were more insane and disconnected from value than their 1929 counterparts.
A much more accurate measure of stock market appreciation would be comparing the 1929 Dow to the 2005 Dow. Both markets have an approximate PE of 20, but using the lower figure means that the appreciation of the Dow Jones after factoring inflation (but not taxes) is little more than 1%!!!!
"...reality has a well-known liberal bias." -- Stephen Colbert
I think I got away from my original point. There is no doubt that someone who works hard can beat the system, my point was that your government will NEVER allow everyone to prosper. Economic success is graded on the curve in this country with the only variable being how much wealth flows to the top versus the bottom.
Which brings us to wealth disparity and the Great Depression. After 20+ years of Reaganomics, most people actually think economic recession is caused by lack of capital. Besides being a stupid theory, supply side economic theory was destroyed in the 1930's after years and years of tax cutting. Bush wasn't the first president to cut estate taxes, Calvin Coolidge did it in 1926. Corporate taxes were drastically cut in 1928 and again in 2004. The top tax rate was falling in the 20's. Sound familiar?
My first premise is that you cannot increase your net worth unless you take wealth from someone else. This is because growth is capped in this country. My second premise is that wealth disparity causes depressions. Funny how this was accepted fact in the 30s and 40s and has since been forgotten. My third premise is that the flow of wealth from the consumer class to the ultra-rich is controlled by tax policy, and this important limit to capitalism has been systematically dismantled by every administration since Kennedy. (Clinton was an exception, he halted tax cutting and raised taxes briefly. It cost the Democrats control of congress)
My conclusion is that we're headed into another depression and it will begin as soon as the consumer class has exhausted their money and credit and can no longer fuel the economy. The massive layoff at GM might be the beginning, or it may take another 10 years. But it's inevitable.
"...reality has a well-known liberal bias." -- Stephen Colbert
As long as people work for someone else past, present and future...you will never ever be wealthy...they system is made that way...it is to keep the haves, having and the have nots never having...you must learn the in's in out's of our government...problem lies with people not knowing their own rights and knowing the tax structure of our system...you must learn the tax holes and the loops...cause I can guarantee you all the foreigners know them inside and out....and they will become the new American...the ones who will succed and prosper....this is the land of opportunity and it is greater than what they came from....what you waste and throw away will be his gold...what you are not willing to learn will be to his advantage...it is left up to you as an American born and bread to change the direction of your future...for it is in your hands...do blame the government because it has always been the same ...
Comments
I'm not one of those "sky is falling" types who is predicting this tomorrow (It might take 50 years) but if the policies of our government don't change, it is an absolute certainty.
Greenspan's Bond Conundrum Ripens Into an Enigma: Mark Gilbert
June 3 (Bloomberg) --
The 10-year U.S. Treasury note was a ``conundrum'' to Federal Reserve Chairman Alan Greenspan in mid- February at a yield of about 4.10 percent. After cracking the 4 percent barrier this week, it looks more like Winston Churchill's Russia: ``a riddle, wrapped in a mystery, inside an enigma.''
The median forecast of 62 of the finest minds in finance, surveyed by Bloomberg News in December, was for the 10-year bond to yield 4.78 percent by mid-year. Instead, the note pays about 3.9 percent, the lowest in more than a year. Barring a market crash in the next four weeks, that's quite a margin of error.
Bond mavens are now lining up to call for lower yields. Morgan Stanley Chief Economist Stephen Roach said earlier this week he's turning bullish on bonds, with a 3.5 percent level possible in the coming year. Bill Gross at Pacific Investment Management Co., never shy to predict an increase in value for the securities he owns, said May 18 that the 10-year rate could drop to 3 percent by the end of the decade.
June 06, 2005
Another Mortgage Refinancing Wave?
by Clif Droke
"Big surge in price of US homes fuels fears of bubble," writes the Financial Times newspaper. Meanwhile, another major news wire did a weekend report on the top 10 U.S. cities most susceptible to a hit in the event of a burst housing bubble. But what has been mostly overlooked has been the possibility that yet another wave of mortgage refinancing may be imminent, thanks in part to the fresh new lows in the 10-year Treasury yield, which mortgage rates are keyed off of.
<< <i>Could it be that those Caribbean accounts are just more Arab and Asian money that is interested in a little privacy?
Yeeeech! Why take such a risk when there's Hong Kong?
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The game in Japan was borrowing ( not individuals) from the central bank there and buying treasuries here, all the while the real estate went down down down. In some cases losing 90% of it's value ( imagine that one!)
Yeeeech! Why take such a risk when there's Hong Kong?
Tom
Last things first. I am not sure Hong Kong is a great place for the Arabs to go since they are in competition with the Asians, and I am sure the Japanese’s would not go there with all the Chinese trouble they are having.
You seem to know this Asian area as well as any one here, so perhaps you can answer this question or even venture an educated guess.
Does it not seem a little strange that the Japanese have been in a “recessive/depression for what 12 years, and yet they have billions each month to buy OUR debt, sell billions worth of products here each month, have some of the largest industrial complexes on the planet i.e. auto’s etc.
Perhaps all those years ago they looked into the inflation abyss and decided to reverse that trend opting for nearly permanent price deflation to continue to build their country.
Yes their bank interest is 1% but does that not keep the world away from their banks?
Yes their labor costs dropped but is that not good for selling products to Americans?
Yes the prices of their real-estate drop and folks can afford it again, is that bad?
Yes their stock market dropped by two thirds but then are their companies now reasonably priced with good consistent returns?
And their bond market and mortgaged backed securities pay very low rates so what foreigners want them?
Sorry but my only experiences in Asia with the Japanese have not been the greatest. I don't think many other Asians like the Japanese and as such your mentioning Japanese not being in HK might be accurate. I don't know. I know that even the Vietnamese slap the Japanese around pretty good ( In Vietnam). The Chinese are eating them alive. However, Asians in general are "savers" so there's probably lots of cash the Japanese haven't even looked at yet and they certainly have dominated the auto and motorcycle markets worldwide until the Chinese started building momentum. The Japanese still make a much better product than the Chinese but the gap is narrowing for sure.
I have zero experience with Arabs in SE Asia. I met a few Muslims but that's about it.
I can write a book though about my experiences and friendships with Chinese, Vietnamese and to a lesser extent, Thai.
I guess an accurate statement in Asia though is every dog has his day.
Rgrds
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The Japanese were the major game in town when it came to buying up our debt 1-3 years ago. With the interest rate spread between our bonds they were making an excellent play in the "carry trade."
You could say the Japanese almost singlehandedly carried us for a couple of years. There still is enough difference for them to make some money.
However the short term and long term rates in the US are now only about 1/2% apart and spells an end to the carry trade here. All the corporations, banks, and funds that ate this up as a gift from the FED for the past few years will have to fund another "sure" thing to bet on.
I no longer consider mortgages or mortgage backed securities as a risk-free bet. The insurance companies have plenty to lose here.
roadrunner
Or maybe for more than a decade depending on how you define "carry".
It was actually a good relationship -- both sides got what they wanted (US -- subsidized consumption, Japan -- stability) -- but it can't go on forever.
More unfunded liabilities. Oh well what’s another half a Trillion.
By GLEN JOHNSON
The Associated Press
Tuesday, June 7, 2005; 2:16 AM
WASHINGTON --
Fearing that airlines and other struggling industries could present the country with its next S&L crisis, Congress and the White House are pushing an overhaul of pension-funding rules that has been overshadowed by Social Security.
The heads of three major airlines were called to appear Tuesday before the Senate Finance Committee. Its leaders are alarmed that the Pension Benefit Guaranty Corp. _ the federal agency that insures private pension plans _ already has a $23.3 billion deficit because of defaults.
·
More than half of the 100 largest plans had less than their promised benefits on deposit, which the committee's chairman blames on lax rules that are supposed to guarantee full endowment.
About 34 million people _ roughly 20 percent of the nation's workforce _ expect to receive payments from their employers through defined benefit plans.
The risk those workers face was highlighted last month when a federal judge allowed United Airlines to default on $9 billion in pension obligations as it attempts to emerge from bankruptcy. The ruling shifted responsibility for paying benefits for 120,000 current and former workers to the PBGC, but the agency will pay only about two-thirds of promised benefits.
"As the $9 billion hole in United's pension plans has made painfully clear, a company's pension promise is only as strong as the rules that require companies to fund these plans," Sen. Charles Grassley, R-Iowa, said in a statement issued before his committee hearing. "We saw similar practices and events at Enron, but, unfortunately, this time it's perfectly legal."
The pension funding problem recalls the savings and loan crisis of the 1980s, when hundreds of thrifts became insolvent and were taken over by the government. A congressional study in 1996 put the price tag for the S&L bailout at $480.9 billion.
Now it time for a little bouce, although I am not going to play it. I see smoething better.
Knowledge is the enemy of fear
What do you think the implications will be if many baby boomers move their money (bulk of) to bonds? Will all that cash chasing limited issues be good or bad?
What if the prime rate drops to 3% for 5 (or more) years?
~g
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ...
and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
By Market Watch
Last Update: 4:27 AM ET June 7, 2005
TOKYO (Market Watch) -- CNOOC Ltd., China's biggest offshore oil producer, , said Tuesday it continues to mull buying Unocal Corp., potentially threatening Chevron Corp.'s $16.4 billion bid for the U.S. producer.
CNOOC said in a statement to the Hong Kong Stock Exchange that it was "continuing to examine its options with respect to Unocal. These options include a possible offer by the company for Unocal, but no decision has been made in this respect."
<< <i>What do you think the implications will be if many baby boomers move their money (bulk of) to bonds? >>
What money?? Most are in debt to the gills. Its still the top 3% who own 90% of the wealth and they keep getting wealthier.
The implications for the market is a short term pressure torwards lower interest rates (happening now) and slightly less capital available in stocks and other investments. Because of wealth disparity and the creation of the mega rich, (Howard Hughes might have been worth 1 billion dollars, about 3.4 billion adjusted for inflation) I doubt baby boomers will have the ability to influence the market much.
Knowledge is the enemy of fear
Low interest rates harm current retirees. Grandpa and Grandma used to get 5% on their CD's, and now are stuck with 1/2 of that. Yet expenses keep rising, not to mention double digit tax increases on property and sales taxes.
Secondly, harm is done to the younger kids of single parents. For many their grandparents play an essential role, and taking money from grandparents means less is spent on the grandkids. Low interest rate car loans are of no benefit to these kids, since their parents cannot afford new cars anyway.
<< <i>When you're investing money, you never want to be with the majority. That's why baby boomers are gonna get screwed, they are all betting on the same horse. >>
or house
Knowledge is the enemy of fear
Being in the first part of the baby boom group I pay a great deal of attention to that sector. In addition as I have mentioned I have a short term consulting job with a mortgage firm with office in five states, and our plan for that company requires lots of attention to this large group.
The size of this group is estimated at 77 to 79 million and spans 16 years. The largest majority of which is in the first one third which means full retirement in 3 to 5 years depending on whether its 62 or 65.
One additional surprise, that no one I have read has yet calculated, is just how many took early retirement or became semi- retired during the big high tech and manufactures lay off that occurred during the last several years.
Several of the comments above are good ones, as the boomers on average still have heavy debt, and current interest rates do not cover real inflation. In addition there will obviously be a shift to safety in the next few years and part of that must have already started. No one wants to be in the stock market when the boomers start closing their mutual fund accounts, paying off debt, and reducing their monthly nuts.
As far as future interest rates who knows, but there will never be a shortage of debt to buy, as just the Federal government is so deep in the hole currently with trillions of unfunded liabilities that it’s appetite can continue for decades.
The two biggest problems facing this group, and indeed the Nation, is that the majority of the boomers are not students of economics and have never faced any real financial crises, and therefore are still asleep at the wheel.
Secondly the real intellectual property in American corporations, and the majority of tax payees, are as a general rule in this group. When this group is finished lots of things are going to be finished.
The next 5 to 10 years will be the most interesting economically of any time in the history of the World; this boomer group is a World phenomenon not just a U.S. one.
Exactly, that's why the whole population cannot keep stocks long term and then everyone prospers. The whole country cannot continue to get "wealthy" and retire off standard cookbook investments and 401K's. And the boomer generation will put a quick end to all this. First ones out will prosper, the majority will get sliced and diced if they are not properly diversified. And 30% growth stocks, 20% small cap, 25% tech stocks, and 24.9% bonds and 1 US gold eagle (.1%), ain't gonna cut it.
roadrunner
Then bought a waterfront house in the same town. Paid 325K Just sold it for 650K and is moving OUT of the whole area .
I think she's being real smart getting out.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Over the next 50 years, the US is likely to grow from about 300 million at present to 400 million. During this entire period, we will be younger than Japan is at present. From an economic perspective, this is a manageable and healthy growth rate, and will almost certainly facilitate real economic growth. This in turn will afford investment opportunities.
The brutal nasty little secret is this: The government and federal reserve will not allow the economy to grow faster than 4-6% annually without putting on the breaks. Factoring in slow years and recessions, this means about 2-4% annual growth. ALL investment must be examined in this context and the following rules apply and cannot be violated:
1. Anyone increasing his/her yearly income or wealth aquisition is taking it from someone else. An economic conservative's rebuttal to this is that "we all have opportunity and everyone can prosper" This is false. If some miracle happened and everyone in the country increased productivity to give the entire population a 10% raise, then the fed would immediately and forcefully act to cool the economy to a slower level. This is economics 101.
2. The 2-4% yearly growth allowed by the federal government approximates our annual population increase. Here is the real shocker. The economy is a system to maintain the current aristocracy and stop the fast creation of new wealth. Individually it is possible to prosper, but you will always be taking it from someone else as long as the government controls growth.
3. Since the stock market is an estimation of our economic health, and economic growth will always be capped at 2-4%, the public cannot earn more than 2-4% annually in the stock market. You'll never hear this on CNBC. Part of the fraud is that the best companies are picked for the indexes like the Dow and S&P, therefore when an analyst touts the market as an excellent investment, he can point to the most elite corporations on the Dow industrials and say "See? We all made money!"
I am not sure where you are getting all of this info. but it really makes no sense to me.
First, it is not important what has happened in the past, most of that cannot be fixed simply because the problems are too big. In addition it was the American people that demanded all of these programs and politicians from all sides that voted them in.
If you barred all conservatives from holding office, what would change? The fact is all governments in this country are way to big and their programs are not sustainable.
Even in the Clinton years 1.5 trillion was added to the national debt.
As far as this statement goes,
“Anyone increasing his/her yearly income or wealth acquisition is taking it from someone else.”
This would only be true if the printing presses were not running day and night.
Think about this for a minute.
The entire net worth of the wealthiest Americans, the Forbes 400, which includes all the billionaires in the country, is ONE TRILLION DOLLARS. In the last two years the Asians alone have bought more U.S. debt than all of these folks net worth.
The stock market has a historical return of about 8-10% per year. This takes into account wars, depression, recessions and political instability. There has never been a greater "investment vehicle" in the history of the United States. Yes, I have a vested interest or biased viewpoint, but I can not see any investment outperforming the stock market in my lifetime.
Knowledge is the enemy of fear
Forced wealth transference only happens via TAX systems.
So if you want your money force transferred, vote for more TAXES.
What we have in this country and around the World is legal printing of wealth.
If you wonder why they’re where 3 billionaires in this country in 1980 and 400 now the answer is simple, they are printing their own money.
If you are also wondering why all these folks are billionaires, and you are not, the answer is that they have two things you don’t, a printing press and good salesmen on Wall street.
Here are a couple of examples.
The Google brothers come to you a few short months ago and say, Wow look at this deal, were big, were the best, we are slick, we are neat, we can take over the internet, hey man don’t you want some of this? We have plenty to go around we just printed millions of shares. You are a worker on the line at Ford, and have $1,000, so you buy the shares at $100. They hire some Wall street Guru’s and bing, bang, boom the stock goes to $300. You sell and buy a small boat.
Oh I forgot the most important thing just before they sold you those shares they printed themselves up millions of shares. Now that the stock is worth $300 they are billionaires. Did they confiscate any money from you via forced transference? NO. All they did was print the stock and hire the salesmen.
So why are most all the billionaires on the Forbes list, billionaires to begin with? You got it, they have printing presses and you don’t.
Here is a more practical example. You know the little mortgage company that I have talked about. I told you we were taking it public; it comes on the over the counter market in a few weeks.
We analyzed the company as a private company several months ago and made a determination that it could e sold for 3 million.
We also analyzed the stock market and found that companies of this size and type were trading at about $3.00 per share. We issues the two principles 10 million shares and we fully expect the stock to trade at $3 within 30 days of the market opening.
Wow the principles will have 10 million shares at $3 so $30,000,000 worth of stock compared to $3 million from a sale. With the help of a few Wall Street types, and a little pay-o-la, the stock can stay at $3 for years. So is their $30,000,000 in stock real money, sure why not, they can sell some anytime they want.
I'm sorry, but this is not true and CANNOT be true. If an economy grows at 2-4% yearly then the representation of that economy (the stock market) cannot over the long term exceed this amount. DON'T BELIEVE PEOPLE WHO WANT YOU TO BUY STOCK!!! Don't worry, I'll provide proof:
At the peak of the 1929 stock market, the dow was selling for a little over 3000 in inflation adjusted dollars. Don't take my word for it, do the calculation yourself. Here's the link you'll need to convert 1929 dollars to 2005 dollars. The peak of the lastest bull market was about 13,000. This represents an annual return of 1.9%. During that same 76 years, the dow earned approximately 2.3% in dividends giving you a peak to peak net gain of 4.2% annually. DON'T TAKE MY WORD FOR IT, get the numbers and do the calculations yourself. They are all public and the math is easy.
So what am I leaving out? Taxes! All stock market gains and dividends have been taxible at the NON-inflation adjusted amounts leaving a net real gain of 3% or less. But guess what, we're not done............
As I said before, the Dow Jones represents the most elite corporations in the country. When a company is seen as on the decline, it is REMOVED from the dow then replaced by a corporation seen as on the rise. This happened recently when AT&T was removed, but SBC was added. The TOTAL stock market will give you returns that are worse than the Dow and S&P. Furthermore, the MAJORITY of shareholders sell at the bottom and buy at the top. The public at large will LOSE money playing the stock market because they are uneducated as to how markets work and will make mistakes.
That's it, there is my proof and it's all easily available on the internet.
Actually, Iwog, I recently read a little article that noted how stocks dropped from the S & P 500 had outperformed the stocks that were added. I can't remember where I read that.... might have been this thread!
June 8, 2005
www.AdrianDayAssetManagement.com
The outlook for the silver price, based on supply-demand fundamentals, is very compelling, while it is a very thin market, meaning the price is susceptible to sharp run-ups providing investors with good profit opportunities. At the same time, there are relatively few good stocks with exposure to silver; the traditional standbys are either bankrupt (Sunshine), mine more gold than silver (Hecla), or such that you might not want to own (Coeur d’Alene). Some of the biggest silver producers are diversified mining companies, with very little exposure to the white metal.
There are, however, a handful of solid companies with good leverage to silver, suitable for investors with different risk profiles. We’ll look at these in a minute. First, let’s look at silver itself.
Silver’s supply demand outlook is positive
The fundamentals for the market are strong. There has been a deficit between current supply and demand every year since 1990. At the beginning of this period, the deficit was met with drawdowns from large stockpiles.
Although the deficit has shrunk in recent years, known stockpiles have shrunk even more, representing today an estimated four months worth of supply. This compares with over 17 years worth of supply for gold, admittedly not a completely fair comparison. Nonetheless, known above-ground supplies have fallen sharply; according to the Silver Institute, identifiable silver stocks (including Comex, European dealers and government stockpiles) have fallen almost exactly in half from 1994 to today’s 700 million ounces.
So even as the current deficit has shrunk, there are fewer and fewer stockpiles to bridge the gap. This means the price must rise to reduce demand and increase supply.
Digital photography not a big threat
Demand has dropped marginally from the late 1990s, primarily because the recession of 2001 and 2002 reduced electronic demand. Demand for silver in photography has remains relatively constant over the past 10 and more years, despite the growth in digital photography (which uses no silver). Though this appears incongruous, it can be easily explained: digital photography use has grown, but only in North America and Western Europe. At the same time, in these regions, the use of disposable cameras, which do use silver to develop film, has also grown. Similarly, in the underdeveloped world, photography has grown in popularity, and it is primarily through traditional silver-based film.
Perhaps most compelling of all is the fact that some 70% of silver used in photography is recycled, so if the demand for silver in photography were to decline, so too would the supply of metal available for recycling. Moreover, other new uses for silver has arisen; flat screen televisions, for example, are significant users of silver.
In addition, there is a lack of new supply over the next few years. New mines supply will be flat to modestly rising over the next five or more years. Even in the “best” circumstances, if even known economic deposit were to come on stream, the increase in mine output—allowing for declines from mature mines—would be only 5% per year. So the outlook for silver and the potential for sudden price spikes is very real.
There are only a handful of pure silver companies
But the paucity of good-quality companies with sensitivity to silver remains. We like a handful, each with its own potential and risks, suitable for different types of investors.
One of our long-time favorites is the silver-indexed Freeport preferred D (FCXprD, NY), which pays a quarterly dividend and redeems based on the prevailing silver price. These partial redemptions, annually for the equivalent of half an ounce of silver, have nearly run their course; there will be a redemption of half the value of the issue in August with the final maturity one year later.
Thus buying the preferred today means one will receive about half that back in two months as a return of capital, and one is betting on the silver price appreciating over the next 14 months to make any profit. In addition, there is a quarterly dividend approximating to a 4% yield (at today’s prices). With the stock selling (at $7.27) at a modest discount to NAV—silver closed at $7.40—it is a relatively conservative way of investing in silver, though clearly not a long-term investment.
An innovative investment offers low-risk returns
Another relatively conservative investment is an innovative vehicle that came out towards the end of last year. Silver Wheaton (SLW, Toronto, C$3.77) neither mines nor explores for silver but acquires the silver revenue stream from other mining companies. It does this by making an up-front investment and a clearly defined cost per ounce. It is thus not dissimilar to a royalty company, and has modest risk, but positive upside should the silver price appreciate.
Its main risk at present perhaps is the small number of mines in its portfolio, but the company, run by Ian Telfer (CEO of Goldcorp which recently merged with Wheaton River, from which Silver Wheaton as spun off), has aggressive growth plans. It is arguably the least expensive of the silver stocks, certainly selling at a significant discount to the NAV of the producers and exploration companies.
The world’s largest primary silver producer
Pan American Silver (PAAS, Nasdaq, 14.40) is neck-and-neck as the world’s largest primary silver producer (and will probably overtake Coeur d’Alene this year). It has six producing mines throughout the Americas, with another two scheduled to commence production in the next two years. It production growth over its 10-year life has been phenomenal.
But it has production risk, and this has been amply demonstrated over its history, with production losses and difficulties at many of its mines at different times. Indeed, Pan American reported its first ever earnings at the end of last year. In the latest quarter, it was back to a loss as costs rose (with cash costs up 72 cents to $4.50 an ounce).
Nonetheless, the company is well run, has a solid balance sheet (with virtually $100 million in cash and no debt), and a strong growth profile. The stock is highly liquid and an institutional favorite, so in a sustained silver bull market, Pan American should be a prime beneficiary.
Top exploration company has matured
My favorite exploration company is Silver Standard (SSRI, Nasdaq, 11.77), though to call it such belies its tremendous growth in recent years, and its near-term productions potential. The company has among the largest silver resource of any company, with almost 1 billion ounces of silver at 17 projects in seven countries. But the company has no producing mines, preferring, until recently, to eschew production to avoid the pitfalls that often accompany mining, as well as to keep its resources until prices are higher.
Partly for this reason, and because it is among the purest of the silver companies (with over 2/3rds exposure to the white metal), the stock has arguably the most leverage to silver of any silver stock.
More recently, given the higher silver price—at $7.40, not far off its recent high, and nearly twice where it traded throughout most of the 1990s and 2000s—as well as the company’s greatly increased balance sheet, the “no-production” policy has shifted. Though the company intends keeping most of its projects “in reserve” for now, it is advancing towards production at several projects and will likely be producing at two (or even three) projects within the next couple of years.
Near-term production and two high-growth exploration projects
These include Manantial Espejo, a joint venture in Argentina with Pan American Silver, which will be the operator, and a second, one of two exploration projects returning exciting results, and at which Silver Standard is exploring aggressively.
One of these is Pitarrilla in Mexico, a grass-roots venture 18 months ago. Results have been very strong; one hole returned 385 feet of 2.4 ounces per tonne of silver (including 105 ft of 6.6 oz), and the project is already at the pre-feasibility stage. At its new Berenguela project in Peru, where Silver Standard has an option to earn the silver revenue from this copper-manganese mine, recent exploration returned strong results, including a phenomenal hole of 213 feet averaging 18 ounces of silver per tonne. Both of these projects has the potential to grow significantly through Silver Standard’s aggressive drill program.
In the past, given its lack of production, the company was forced to make several trips to the equity well to fund its ongoing exploration and acquisition work. Although the process was always accretive, as silver and gold resources per share grew consistently over the years, from less than 10 ounces per share in 1998 to over 20 ounces per share today (over $150 worth of metal in the ground for each share), nonetheless it kept a lid on the stock price.
Strong balance sheet and quality management
Today, however, as a result of these equity issuances (and their accompanying warrants), the company is extremely well financed, with cash of US$33 million and another $14 million of physical silver. Together with marketable securities, the company has over $50 million, with another C$14 million to come in from in-the-money warrants.
All in all, the company is in the enviable position of being able to fund all its activities, including its share of capital costs, from existing resources, putting it in a very strong position to negotiate with lenders.
Like Ross Beaty at Pan American, Silver Standard’s Robert Quartermain is known as a cost-conscious and ethical manager, as well as for his technical skills.
These four stocks offer the investor good leverage to the silver price in low-risk companies, three of which also have inherent growth potential. All are good buys at their current prices.
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Adrian Day is President of Adrian Day Asset Management, which offers discretionary accounts in both global and resource markets. He may be reached by phone at 410-224-2037, by mail at P.O. Box 6643, Annapolis, MD 21401, or on the internet at www.AdrianDay.com.
This I will agree with you 100%.
The numbers can be played with anyway you like. The peak of the market would be 4300 converted into todays dollars. Your money would be worth 2.4x now and you did not keep up with inflation.
At the trough in 1932 the market would be 650 in today dollars. Your money would be worth 16x now and you dramatically outperformed inflation.
You did include dividends, but not reinvesting those dividends. The returns would be much higher. Also taxes are not a consideration unless you sell.
You may be correct that investors can only expect 2-4% but this is AFTER inflation. In the end there I believe there is no better investment for the long haul.
Knowledge is the enemy of fear
<< <i>Aristocracy? When last I looked, education and hard work were the keys to success in our country. >>
The key to success in this country is being born in the right family. Contrary to the BS out there, 97% of the rich people in this country were born rich. They prosper because the system is designed for money to attract money and the working man putting in his 45+ hr/wk till hes 65 is lucky if he can afford a new car every few years.
This wealthy class is the Aristocracy and just because the averge Joe has a better chance of improving his life than ever before in history doesn't take away from the fact that the 3% "wealthy class" is born that way and control 95% of the wealth in this country.
Interest-Only Mortgages All the Craze
<< <i>GoldSaint >>
I saw the Frontline report on the hype of WorldCom. Don't forget when you IPO that you need to reserve some shares to sell to the Brokerage Market Analysts at par AFTER the price rise so that they will issue the BUY recommendations.
That was an amazing story of the ripoff of the JoeShmoe stock investor by the Brokerage houses.
Look again. The Aristocracy is an exclusive bunch, and no, hard work will not gain anyone entry that club. Brilliant ideas will not, either.
Shoot, look at Bill Gates.
<< <i>We are indeed back in the summer of 1929.
Interest-Only Mortgages All the Craze >>
Boy oh boy, you must be really old Oreville. I mean cmon, these are fellow Americans we're talking about. Destined to rule the world! Manage everyone, everywhere. No need to create., manufacture, know other languages or even have a passport. Why? We're invincible.
Further still, why should Americans even have to work? Just get a loan company to loan you the downstroke to a house/condo etc, and sell it every couple years and make a few hundred grand. See? Simple! And it should go on for pretty much however long you want it to!
Now what would really be good is the socialism here to INCREASE! You say what? I said increase! Yes yes, 50% taxations not enough. No way, not to have paradise comrade. Not enough to pay the interest on that pesky debt either. Raise it to 90% and then have enough to maybe invade a few more countries ( to promote freedom of course, after all war is peace and harmony), and don't forget to take care of the children ( that should be everyones mantra don't ya think?). Then we will all be happy!
Get with the program man. Jeeesh.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>
<< <i>Aristocracy? When last I looked, education and hard work were the keys to success in our country. >>
The key to success in this country is being born in the right family. Contrary to the BS out there, 97% of the rich people in this country were born rich. They prosper because the system is designed for money to attract money and the working man putting in his 45+ hr/wk till hes 65 is lucky if he can afford a new car every few years.
This wealthy class is the Aristocracy and just because the averge Joe has a better chance of improving his life than ever before in history doesn't take away from the fact that the 3% "wealthy class" is born that way and control 95% of the wealth in this country. >>
That's actually quite funny!
There are more millionaires right now, that ever before... if memory serves me correctly, there are 30% more millionaires now when compared to when Bush entered office.
Benefits of a (long) continuous (family) history: sometimes you're up, sometimes you're not... but are you happy?
Class warfare isn't going to get us anywhere.
Work hard & smart...
~g
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ...
and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
<< <i>Look again. The Aristocracy is an exclusive bunch, and no, hard work will not gain anyone entry that club. Brilliant ideas will not, either. >>
Forget the status, I'll just take the money!
<< <i>There are more millionaires right now, that ever before... if memory serves me correctly, there are 30% more millionaires now when compared to when Bush entered office. >>
Paper millionaires yes, how many of them have that much in equity, not assets. And how many have it in Real Estate which is getting ready to tank.
Besides, a million just isn't in the "wealthy" class anymore.
<< <i>You can make it in America today...but it will cost you in time and effort...First you have to decide what it is that people will always need in a good economy or bad...this is the key...if you put 100% of yourself into this effort for 3 years...you will be a wealthy person....I know it can be done...I have seen it with my own eyes by my brother in law...came here with nothing and has built an emipre. >>
Exactly....Just as it has been for the past 200 years.
Knowledge is the enemy of fear
The 8-10% figure is just fiction.
After taxes and inflation, I doubt the average investor can make any money at all in the stock market. One of the flaws in my analysis was using the 1929 peak as my first reference point, and the 1999 peak as my second reference point. In 1929, the average PE ratio was about 20 while in 1999 the average PE ratio was OVER 30! What this means is that the 1999 market (if you can believe this) was MORE speculative and less connected to the real value of a corporation than the pre-Great Depression boom market was. To make it simple, investors in 1999 were more insane and disconnected from value than their 1929 counterparts.
A much more accurate measure of stock market appreciation would be comparing the 1929 Dow to the 2005 Dow. Both markets have an approximate PE of 20, but using the lower figure means that the appreciation of the Dow Jones after factoring inflation (but not taxes) is little more than 1%!!!!
Which brings us to wealth disparity and the Great Depression. After 20+ years of Reaganomics, most people actually think economic recession is caused by lack of capital. Besides being a stupid theory, supply side economic theory was destroyed in the 1930's after years and years of tax cutting. Bush wasn't the first president to cut estate taxes, Calvin Coolidge did it in 1926. Corporate taxes were drastically cut in 1928 and again in 2004. The top tax rate was falling in the 20's. Sound familiar?
My first premise is that you cannot increase your net worth unless you take wealth from someone else. This is because growth is capped in this country.
My second premise is that wealth disparity causes depressions. Funny how this was accepted fact in the 30s and 40s and has since been forgotten.
My third premise is that the flow of wealth from the consumer class to the ultra-rich is controlled by tax policy, and this important limit to capitalism has been systematically dismantled by every administration since Kennedy. (Clinton was an exception, he halted tax cutting and raised taxes briefly. It cost the Democrats control of congress)
My conclusion is that we're headed into another depression and it will begin as soon as the consumer class has exhausted their money and credit and can no longer fuel the economy. The massive layoff at GM might be the beginning, or it may take another 10 years. But it's inevitable.
Inevitable? Is your money short the Nasdaq? Or better yet.... the SOX?