Greg McCoach - Angel Publishing

Financial Market Meltdown

The warning signals have been sent out and the time is NOW to seek refuge from the coming financial market meltdown that is about to engulf our world.

If you have put off preparing for this event thinking that all will be well, you will probably be feeling deep and profound regret in the very near future.

The financial system as we have known it is about to get a major reality check. This will be the first major shockwave in a series that will transform and reshape the order of things. It will bring the greatest transfer of wealth the world has ever seen.

Many will go from having money in the bank to having little or nothing at all.

Unsuspecting investors and citizens will soon learn the ugly truth that they are very low on the totem pole of priorities when it comes to decisions regarding who gets what.

Financial Market Meltdown

The recent Indy Mac bank failure is a case in point. Investors were told that depositors with less than $100,000 in the bank would be guaranteed to get their money, while those with more than $100,000 would be getting 50 cents on the dollar for every dollar over the $100,000 limit. The bank had thousands of depositors with savings in excess of $100,000.

This is only the first of what promises to be a long string of banking failures that are about to hit investors and depositors. To think that FDIC will be able to bail out all those depositors is a complete joke.

SIPC insurance, which is supposed to protect the stockholders in a brokerage, is even worse.

Just remember that when push comes to shove, the financial banking pukes who created this mess in the first place will be first in line to get theirs while the average citizen caught in an ugly bank failure will be sucking wind.

Don't think for one minute the Federal Reserve has your best interests at heart. You are low man on the totem pole and need to plan accordingly.

The reason this is happening is the mountain of OTC derivatives has suddenly become a massive landslide into the ocean causing the biggest financial tsunami the world has ever seen.

Jim Sinclair, who I greatly respect said the following regarding those who created this problem: "Those that create and peddle OTC derivatives are guilty of financial murder one."

He gave the best advice I have come across regarding what you should do about this right now.

You should hold no dollars except what is required to pay bills for six months. You know now that FDIC is grossly under-financed compared to potential claims. Get all your money out of financial entities now before you have to stand in line to get it. Screw interest rates. Keep six months of cash in your safety deposit box, invest the balance in short term treasuries of other currencies.
You should put a minimum 1/3 of your LIQUID net worth in gold and gold equivalents.
You surely know by now that SIPC is grossly under-financed when it comes to covering potential claims. The secondary insurance held by brokers is written to them for you, but not for you.

Jim mentions investing in the short-term treasuries of other currencies. I like short-term Canadian T-bill for this suggestion. And you already know my position on owning the precious metals. I recently was quoted saying, "Cash may be king in the near future, but physical holdings of precious metals will be the ultimate form of cash."

The one item I disagree with Jim in his advice above is the use of safety deposit boxes. I don't trust them. I feel it is better for people to invest in a good fireproof safe and secure this safe into a foundation wall or floor. Safeguard you own valuables, don't put them into someone else's trust, particularly a bank.

Junior Mining Shares

In the fifteen years that I have personally been trading the junior mining shares, (eight years as a newsletter writer), I have never seen such a painful, difficult period as the one we are currently witnessing. It has been an awful time.

As I see it, the current horrendous market situation is due to the following factors:

Continued naked short selling of the junior mining share market
Major redemptions with the hedge funds who are being forced to liquidate
Lack of buyers in the market
Panic selling by investors who get spooked seeing such losses

Let's look at each one of these individually so you can understand what you are faced with as an inves-
tor in the junior mining market.

First, naked short selling has devastated our market the past nine months. This activity, which is criminal behavior in my opinion, is best summed up by some recent comments by Dan Norcini who posts regularly at jsmineset.com. In that post Dan said the following:

"The bigger disappointment is in the mining share sector. Perhaps we could change the names of some of the mining issues to First Financial Gold Mine, or Federal Mining Association Inc, and then the SEC would get off their asses and crack down on the naked short selling in this sector. Folks - you are witnessing the utter corruption of our financial system where the US government decides to selectively enforce the current laws on the books regarding illegal naked short selling. What is happening is so blatantly corrupt that it rivals the kind of moral and ethical decay that marked ancient Rome as it went into its period of decline. Where in the US constitution does it confer the right upon governmental bureaucracies to subjectively enforce the laws that govern our system? Are we a nation of laws or of men? The answer, it would appear, is that we are no longer a nation of laws but one of men where certain industries or sectors have special rights and privileges conferred upon them while those of the less-fortunate, out of favor with the powers that be, apparently do not enjoy equal treatment under the law. Here, in 21rst century America, the blind-folded goddess of justice first peeks under her blindfold to see who it is that is standing before her as she dispenses justice! Should she see a natural resource entity or gold mining operation, she calls for the bailiff who promptly has them dragged out from before her tribunal and ignominiously thrown into the street to fend for themselves. It would seem that all that is left of the once-proud American Eagle is a featherless vulture which consumes the very things necessary to sustain its existence in current form."

I wholeheartedly agree with Dan's wise observation! There will come a moment, however, when the pressure will blow like a top to the upside forcing these shorts to cover.

I believe that will occur when the precious metals prices begin to rise dramatically as more and more financial institutions become insolvent. This in turn will begin to draw a larger portion of the investing public towards the precious metals and the mining shares.

The upside volatility at that point could be wicked when this occurs. This is the reason I don't recommend selling your core positions of your quality junior mining shares. Just weather the storm and know that this market will rebound with authority at some point.

Quality companies with good management teams, new discoveries, cash flow, low cost profitable production, or near-term production will be rewarded in a big way as market events continue to unfold.

Second, the hedge fund situation has taken a turn for the worse. What we saw in March and April was only the beginning of major selling on the part of the hedge funds.

As I have mentioned before, the hedge funds, who have been big supporters of our junior mining shares at times, suddenly find themselves in a selling stance.

The reason for this is simple; their customers need to raise cash and have sent in redemptions. The hedge funds then need to decide what to sell in their portfolio to raise this cash.

Since they are no longer getting full value towards their collateral requirements for holding a Canadian mining share that is priced under a dollar, they have been forced to sell a good portion of these stocks.

Unfortunately, this activity appears like it could be with us for a few more months as the financial crisis deepens and more people need to turn to cash.

CASH COULD BE KING IN OUR NEAR FUTURE, THUS THE PRESSURE ON THE PART OF MANY TO BATTEN DOWN THE HATCHES AND CASH UP.

Third, there is a very pronounced lack of buying at the moment. This is due mostly I believe to seasoned junior mining share investors sitting on the sidelines betting that share prices will be going lower before they start to move higher once again.

Those of us who have supported this market for years and haven't been afraid to buy when things are down have had been badly hurt with our purchases the past six months. When you add this fact to the two I listed above, it's no wonder we are experiencing such downside pressure.

Fourth, with such a tough market, badly shaken investors start to panic sell which only exacerbates the downside selling pressure.

All in all, with such astonishingly large losses looming over the financial world there is no perfect solution that will protect you from anything or everything that could happen.

I maintain however that the two best places to reside with a good portion of your investment dollars is in physical purchases of the precious metals and the corresponding quality junior mining shares.

A massive financial mega-storm is about to hit that will shake investors to their core. But if you remain firm in your quality positions, I believe we will be richly rewarded.

Hang tough and keep running to higher ground!

The Next Major Banking Crisis

Market conditions for the junior mining sector continue to deteriorate as we approach mid-summer. Several forces are currently at work, causing problems not only for our sector but for stock markets in general. Here is what I believe is happening:

First, fear is rapidly increasing that the next shoe is about to drop on the credit derivatives time bomb. Recent research I have been doing had led me to the conclusion that a major banking crisis is soon to unfold not just in America but Europe as well. The size of this debacle is going to be colossal. It will involve huge write-downs by the banks which in turn will cause instant liquidity problems and possibly bankruptcy for some of these institutions.

Many of these banks are already insolvent, but have been able to stay afloat using their credit lines and liquidity. What I mean by insolvent is that their debts are bigger than their assets. The problem as I see it moving forward is that not only are many of these banks insolvent, but they are about to become illiquid as well. It looks like the end of August or early September could be reckoning day for at least 20 financial institutions across the United States and Europe. The fallout will be devastating to financial stocks and depositors of troubled and or failing banks and institutions.

The Fed Response

The Fed will respond to the growing crisis with their usual denial and twisting of the facts. Recent meetings behind closed doors indicate clearly they are getting ready to deal with the next round of failures. It was one thing to bail out Bear Stearns without any comments from the public but now the Fed will be trying to bail out or benefit 17 of the largest financial institutions in the country without any public disclosure. Of course it won't be labeled a "bailout" but that is exactly what is will be. Where is the money going to come from to pay for all of this insanity? The answer is massive inflation.

All of this is in my opinion is leading up to a major banking crisis that is going to hurt a lot of innocent people. Unfortunately for many unsuspecting depositors and clients of the affected companies, looking to the FDIC and SPIC to protect your savings and investments will be a joke.

In the past few weeks they talk like they are going to raise rates, but in the end as the banking crisis goes to the next level they will be left with no choice but to continue lowering rates. Raising interest rates at this point would slaughter the economy, stock and housing markets. It will also precipitate the failure of even more banks were they to raise rates. So despite what you hear in the media, know that the Fed will be forced to lower interest rates in the face of the coming banking collapse.

This is why I believe we are getting so much pressure from Dr. Evil (Hank Paulson) as he is aggressively trying to increase the powers of the Fed. This activity is frightening and should be opposed by all citizens of the United States. It is leading us down the wrong path. It also shows the Fed clearly knows what is coming and that there is little they can do about it. Giving the Fed more power at this point is not going to change the outcome; it will only allow them to steal from the average citizen even more than they have in the past!

From what I have been able to gather it appears the banks have run up against the wall with their credit derivative liabilities. A nasty reckoning day is close at hand. It will probably be round two of what looks to be a series of worsening rounds of financial debacle on an unprecedented scale. It will bring inflation to our economy with a vengeance.

So take note and be forewarned. This is one of the shockwaves that I said would hit in 2008.

What Does this Mean for Gold and Silver Prices

As these banking failures pile up starting in the next few months, look for gold and silver prices to have their biggest moves yet since the bull market in precious metals began back in 2002. These banking failures and the corresponding inflation that will take place will finally take the U.S. Dollar Index below the critical "70" level. Gold in my opinion will begin to have a series of $100 up days taking the yellow metal to $1,500 per ounce and possibly even higher before the end of the year. Silver will be trading at no less than $30 an ounce and probably much higher as well before year end.

What about our Mining Stocks

I am now changing all of our recommendations to a hold for now. I don't think anyone should consider buying at this point because it looks like the prices will be hit just like everything else will be hit. I imagine the Dow could lose 3000 points or more depending on how bad the fallout is from the coming financial crisis. If you want a preview of what is coming, just look back to Mid-August of 2007 and multiply the seriousness of the problem by a factor of ten, possibly even more.

The junior mining stocks are already getting hit with more of the hedge fund selling I have been mentioning since March. This time around the funds are dealing with major redemptions where their clients are liquidating, forcing in turn the hedge funds to liquidate. It looks like cash will be king for the immediate future and many are scrambling to raise that cash at the moment. This liquidation is beginning to ripple through the system and will take stock prices much lower unfortunately.

The good news for the junior mining sector is that as the precious metals prices make aggressive moves higher, the precious metals mining shares should kick back into gear with authority. The coming financial shockwave will finally wake up a "sleeping public" to the benefits of owning the precious metals in such a time. I see a major amount of new buyers coming into our market as the painful realities of the financial mess created by the corrupt, greedy Wall Street crowd comes home to roost in the next four to six weeks. While the initial blow-off will take our junior mining shares down for a period of time, I expect that this is where we could finally see a very volatile upside as new investors start looking for new places to protect their money.

How Should Each of Us Play This Situation

The big question many of us are asking ourselves is should we sell now and try to buy back at lower prices, or is it wiser to just stay the course and weather the worst financial hurricane this country has seen in a very long time. It is not an easy decision.

For now I am recommending to not buy anything and just continue waiting to see where prices bottom out. For some of us the question is, "Should I dump those stocks I no longer want to hold now or wait for potentially higher prices in the fall to sell then?"

To answer that I would say if you have no cash on hand, sell now and take your losses on those companies that are pure exploration plays. Having cash on hand means you should be able to pick up some incredible bargains as the effects of the meltdown swamp our junior mining shares for a season. Last August, the bargain period only lasted a few days before things solidified. This time around I imagine things will be much worse for a longer period before we see any recovery.

Personally, I am holding all my quality positions (staying the course) and looking to off-load the companies that have little in the way of assets. Those exploration juniors that should be announcing drill results shortly, like a Kettle River, are worth waiting on to see if we can get some good news before considering selling. Other exploration juniors that have no drilling going on and little money in the bank would be candidates for selling now or in the fall. I plan on doing the annual housecleaning a bit earlier this year probably around late September, or early October.

Good Investing,

Greg McCoach
Editor, Gold World

Platinum Mining Companies

Platinum is extremely rare, occurring at only 0.003 parts per billion in the Earth's crust. This makes the most precious of all precious metals about 30 times rarer than gold. In fact, it's so rare that if all the platinum in the world was poured into one Olympic-size swimming pool it would scarcely be deep enough to cover your ankles.

Unlike most other commodity metals, which are found commonly throughout the world, major platinum deposits are limited to two main areas: Africa and the Commonwealth of Independent States (the former USSR).

South Africa is by far the most prominent platinum-rich regions in the world. The country accounts for approximately 80% of the world's total annual platinum production and contains an estimated 88% of the world's platinum reserves, with a proved and probable reserve of 6,223 tons, or 223 million ounces.

There are other platinum deposits throughout Africa, including in Zimbabwe, where a significant potential source of platinum has been well-known for several decades, but it isn't until now that platinum mining companies are starting to make real progress.

Platinum Mining Companies: Tapping Into the Great Dyke

The Great Dyke is a 2.6 billion-year-old geological feature that runs right through the heart of Zimbabwe for about 550 kilometers in a north-south direction. The geologist and explorer Dr. Carl Mauch first recorded the Great Dyke in 1867, but it wasn't until the early 20th century that the presence of platinum, and other minerals, was discovered.

Early attempts at mining the platinum out of the ground were generally unsuccessful, and it has only been relatively recently that platinum production has reached significant levels.

Zimbabwe Platinum Mines

Zimbabwe's oldest platinum operation is the Mimosa mine, located in the southern part of the Great Dyke on the Wedza geological complex. Ownership of the mine is currently split 50/50 between Impala Platinum Holdings Ltd. (JNB: IMP, OTCBB: IMPUY) and Aquarius Platinum Ltd. (ASX: AQP, LON: AQP, OTCBB: AQPBF, JNB: AQP).

Platinum mining at the Mimosa complex has a long history. The deposit was exploited briefly in the 1920s, and trial mining was undertaken by Union Carbide Zimbabwe (private) between 1966 and 1975.

Zimasco Ltd. (a private ferrochrome mining and smelting company) took over the Mimosa operations in 1992. The pilot plant was refurbished, and mining recommenced in 1994, gradually building up to a rate of just under 30,000 tonnes of ore per month. Although small, the operation was very successful, and began to attract the attention of the South African platinum producers.

A proposed acquisition of the complex by Anglo American Plc (NASDAQ: AAUK, LON: AAL, NAM: ANM, JNB: AGL) collapsed in 2000. The following year Impala Platinum acquired a 35% stake in the mine. In 2002 Impala took a further 15%, with Aquarius Platinum taking the remaining 50% of the company.

Since 2002, output at Mimosa has gradually been expanded, and the mine, which is among the lowest-cost platinum producers in the world, extracts around 85,000 ounces of platinum annually.

During the early 1990s, a second mine, the Hartley Platinum project, was developed by a joint venture between the Australian companies BHP Billiton Ltd. (NYSE: BHP, ASX: BHP, LON: BLT, JNB: BIL) and Delta Gold Ltd (now a part of Zimplats). It opened in 1995, but following a string of geological and metallurgical problems, underground operations were suspended in June 1999.

BHP's interest in Hartley Platinum was sold to Zimplats Holdings Ltd. (ASX: ZIM), a spin-off of Delta Gold's platinum assets, which began to develop a new open-cast mine further south, at Ngezi. Operations began in 2001, following the acquisition of a share of the project by Impala Platinum and the South African bank Absa Bank Ltd. Over the next two years, Impala increased its holding in Zimplats, and by June 2006 it held 86.9% of the company.

In 2006, Ngezi produced about 90,000 ounces of platinum, from an open pit and from a newly-developed underground section. Impala now plans to increase production to over 150,000 ounces of platinum per annum, which will involved the construction of two new underground sections and will cost an estimated US$258 million.

A third platinum mine, Anglo American's Unki project, is expected to begin producing 58,000 ounces per year of refined platinum by 2010. Anglo American recently said that they plan to invest $400 million to build the mine despite pressure from the British government to withdraw from the country. Zimbabwe president Robert Mugabe has been condemned over violence against the political opposition ahead of the second round of presidential elections. The $400 million investment would be the largest foreign investment in Zimbabwe ever.

Until next time,

Greg McCoach

Precious Metals Mining Stocks

Investors worldwide in various markets appear to have had their fill for market risk after watching their investments lose significant value in recent months. This has been particularly true with the junior mining share market where investors have become skittish in buying shares for the time being as shares corrected beyond what most analysts had expected.

Market Risk Assessment

In recent conversations with several different fund managers, I have heard many of the same sentiments expressed that the world is awash with risk and it is better to be on the sideline at the moment. The problem is that money sitting in a bank or in U.S. dollars probably represents greater risk then the so called investment or speculative markets at this point.

Recent news regarding the latest problem children, Wachovia Bank and Washington Mutual, show just how bad the cancer is spreading throughout the body of the so called banking elite. And many rumors keep surfacing regarding the names of financial firms that are against the ropes and fading fast into oblivion.

Information that is seeping out from behind closed doors quickly points to the fact that the mother of all financial meltdowns is in the making. Look at some of these quotes pulled from the mainstream media recently:

Residential Capital LLC, the mortgage lending unit of GMAC LLC, said Tuesday it needs more than three times more cash to stay in business than it estimated just weeks ago. ResCap estimates it now needs about $2 billion in cash by the end of June to meet liquidity demands, according to a regulatory filing with the Securities and Exchange Commission. It previously estimated it needed just $600 million by the end of the month.

Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. declined in New York trading after Standard & Poor's lowered credit ratings for the investment banks, saying they may have to book more writedown's on devalued assets.

Morgan Stanley, the second-biggest U.S. securities firm by market value, was cut one level to A+ from AA-, S&P said today in a report. Merrill Lynch, the third-biggest, was also cut one level to A from A+, as was Lehman Brothers, the fourth-biggest. Goldman Sachs Group Inc., the largest of the group, was affirmed at AA-. The outlook on all four New York-based companies remains negative, S&P said.

Battling to relieve stressed credit markets, the Federal Reserve said Tuesday it has provided a total of $435 billion in short-term loans to squeezed banks since December to help them overcome credit problems.

David Einhorn, in his remarks at the conference held by Grant's Interest Rate Observer, notes that in the case of Carlyle Capital, the publicly traded fund collapsed due to the noxious combination of agency securities and 30:1 leverage. "Given the historical safety of instruments, Carlyle and its lenders judged thirty times leverage to be appropriate," said Einhorn, who added that the world learned as a result that "investment companies with thirty times leverage are not safe."

These are just a few of the glaring news items we are seeing on a daily basis, let alone the things we don't yet know about that about to head south.

The average citizen is beginning to realize that market risk is a bigger concern than they have been led to believe. While they may not understand the specifics of what is causing the problems they see, they can sense that all is not well and have started to learn more about how they can protect themselves. A recent poll by ABC showed economic anxiety among citizens at its highest level since 1981. 68% of respondents said they were concerned about their ability to keep up their current lifestyles, a 17% jump just in the last five months.

The two main causes for concern that are threatening our wealth and prosperity are:

Systemic risk to the financial system caused from OTC derivatives
The continuing collapse of the U.S. dollar due to rapid inflation and political stupidity

Precious Metals as Protection

As regulators and investors try to grapple with the deepening losses caused by the collapse of the OTC derivative market, and the rapid deterioration of the U.S. dollar, more and more people are going to discover the benefits of owning the precious metals as protection against such problems. We may even see governments trying to go back to some kind of gold standard in a last ditch effort to restore investor confidence as things worsen and counter-party risk shows its ugly head. Remember that counter-party risk is when your investment is dependent on someone else's promise. Lots of these paper promises will be broken as the inevitable debacle in OTC derivatives continues to grow and the U.S. government continues down the road to fiat currency destruction. The rapid acceleration of both of these problems is very alarming.

A quote I recently saw from Warren Buffet's father when he was serving in Congress sums up the only solution I see for the country. He made this statement on May 4th, 1948. Too bad very few have listened then or now to such common sense.

"Our finances will never be brought into order until Congress is compelled to do so. Making our money redeemable in gold will create this compulsion."

The counterpart risks that exists in the markets worldwide today because of the problems listed above are absolutely staggering.

Central banks and government regulators will eventually be brought to the realization that that no amount of incremental tweaking, central bank maneuvering or manipulation will address the coming collapse of the U.S. Dollar and OTC derivatives. The economic effects to individual investors because of these failures will be nothing short of catastrophic.

Invest in Precious Metals & Mining Stocks

To remove yourself from as much risk as possible and protect your family, buy the precious metals, particularly gold and silver and avoid exposure to the U.S. dollar. You can accomplish this through physical purchases of gold and silver, owning quality precious metals mining stocks, and getting money into other tangible assets. It is also wise to consider putting money into another country like Canada, keeping as much of your wealth as possible away from the U.S. Dollar.

Until next time,

Greg McCoach

Gold Investment Advice

If you found yourself having to sell your junior mining shares the past month in order to pay for capital gains taxes, then you need to pay attention to what I'm about to say...

There are two types of investors, those who play the market and those that get played by the market. If you were selling junior mining shares this past month (probably the majority of investors), then you were being played by the market having to sell at such low prices. You were selling at a time when plenty of others were forced to do the same thing for many of the same reasons.

Conversely, those who were doing the buying in April (the minority) are setting themselves up for significant profits when the market rebounds at some point. They are playing the market wisely and represent those investors who are most successful at profiting from junior mining stocks.

Ultimately, the choice is yours as to whether you play the market or are played by the market. But if you are tired of finding yourself on the wrong end of this equation, then learn your lesson and vow that you will never let this happen again.

One experienced junior mining stock investor recently told me it took him 14 years before he finally figured this out. So don't beat yourself up, and just realize that playing the market is not easy and begin to make changes on how you can be on the winning side of more of your trades.

Here is some gold investment advice to consider in this regard...

Gold Investment Advice: A Lesson in Building Wealth

The reason most investors found themselves in such a bad position is that they don't keep cash on hand or properly prepare for paying their upcoming tax bill. In most cases they are too fully invested in the market. This is a huge mistake.

Another reason for this failure is investors get too greedy when our market is running hot and the paper profits are piling up. You must discipline yourself at these times to take money off the table and cash up for the next cycle. I always recommend taking 25 to 35% off the table when our market is running to new highs as we last witnessed in October / November of 2007. Personally I wished I had taken more profits at the time but such is life. I had to learn myself by sad experience as most of us do, but I have been through these cycles enough times in the last ten years to know that you must cash up when things are good. Otherwise you may find yourself in a very uncomfortable position as the market corrects and the tax bill comes due.

What has been surprising to me as I have interacted with subscribers lately is that so few cashed up at all when I was telling you to take money off the table last fall. Several subscribers told me recently that they just couldn't bring themselves to sell any of their profitable positions as the market was running higher. This is called the greed factor and a major deterrent to your success! Check yourself in this regard and make sure you are adequately cashing up for your future tax needs and special buy opportunities.

All of us hope for the parabolic moves that could be a part of our future, but to not cash up when things are good is a critical mistake. How much you cash up is always a personal choice, but as for me I will always take at least 25% off the table when everything looks rosy. This next round higher I may take even more.

The junior mining share market is volatile and that volatility is only going to get worse. Yes, there could be rip-roaring parabolic up-moves at some point in our future, but what we may have to pass through in terms of downside volatility while we wait for that to happen could be very costly and painful.

I believe our junior mining share market will be in a bull market for many years to come and that we can make significant profits with quality long-term holdings. That doesn't mean we shouldn't sell some at times to make sure we always have enough cash on hand to take advantage of unforeseen opportunities that arise.

Your junior mining stock cash account is sacred and only to be used for the purpose of paying taxes or extreme buying opportunities. Hold onto cash and learn to be more judicious as to what you allow in your portfolio and at what price. Learn to say "no" more often and for the right reasons. This will take more time and dedication on your part in doing your due diligence but the rewards will be greater.

Keep track of your selling for each calendar year on an excel spreadsheet and always know what your capital gains tax liability is at all times. In this manner you are constantly aware of how much you're going to owe and are more prone to prepare and sell when the time presents itself. People who don't know how much they owe at all times tend to overbuy.

When September / October comes around make sure you sell any tax losses for the year before the crowd does in late November and December. Again, you don't want to be doing things when the crowd is doing things. You must train yourself to avoid the crowd.

Manage Your Cash Carefully

The most important part of your junior mining stock portfolio is your cash account within that portfolio!

How well you manage that cash will largely determine how successful or unsuccessful you will be at investing in junior mining shares. When you learn how to effectively do this you will be buying when most others are selling and selling when most others are buying. You are then playing the market at that point for bigger profits. An investor like this understands that volatility is their friend, not their enemy so they prepare for it and take advantage of it. You should do the same.

An investor that is fully invested most of the time with little cash on hand is going to find it difficult to buy low and sell high during the year. In order to buy low, that means that you need to have cash on hand from selling when prices were high and putting that money away until the market retreats. This downturn may take four, five, six months or more and you need to exercise patience and not get antsy. Let the market come to you.

As is often the case with these juniors you get multiple chances over time to buy low. The trick is to stay disciplined and not spend this money until you feel we are close to a bottom. If you can buy within 20% of the bottom you're doing great.

Most investors want to stay fully invested all the time so even when they sell something; they are usually buying something else right away. Again, this kind of thinking will more time than not put you in the victim stance, not the winner stance.

For now, I hope these words will be of some help to you in your quest for greater returns in the junior mining stocks. You just need to make the choice and begin implementing.

So choose to be a winner!

Until next time,

Greg McCoach

Dollar Vs. Gold Price

Here's the general programing lineup for any major news network tonight:

The government media complex has put a full-court press attack on the precious metals and commodities markets in the past month.

Everywhere you turn in the main-stream media lately—CNBC, Bloomberg, CNN, Fox and the like—you hear about the death of the gold and the commodities bull markets. But when you look at the price of gold versus the value of the dollar, another truth becomes evident...

Gold Price Manipulation

The amount of disinformation, outright lies, and complete non-sense being spewed to the public by these manipulative vermin gives you a sense on just how desperate things have become.

Not to worry though. Every time the media has started a campaign like this in the past seven years, it's usually been a sign that precious metals are ready to make another move higher. It really has been quite predictable.

This time around however, with the mother of all monetary crises knocking on the door, the latest smear campaign appears even more desperate than anything I have seen in the past.

Two quotes come to mind in this regard:

"There seems to be a correlation between the intensity of the official attacks on gold and the severity of the monetary crises" — Hans Sennholz, Advisor to Central Fund of Canada

"If ever there was an area in which to do the exact opposite of that which the government and media urge you to do, that area is the purchasing of gold" — Robert Ringer, Author of Restoring the American Dream

So, stay focused and don't let all the rabble rousing from the powers that be get you upset. The acceleration of negative events is coming much quicker than expected and almost guarantees that precious metals are ready to make their biggest moves yet.

The current secular bull market in gold will continue to move forward in stages of increasing stature. No government agency or media report can prevent this from happening. All they can do at this point is to use their rapidly eroding power and influence to micromanage a very difficult and complex situation.

The U.S. Dollar Vs. The Price of Gold

Everytime I am asked to go on one of the main stream media venues to talk about the precious metals, they always have an anti-gold, anti-commodity person on board to bash whatever I say.

On one of the recent shows they asked me if I wanted to use any charts to explain my position.

I said, yes, I would like to use the US Dollar Index chart of the last ten years. As you may guess, they didn't want any part of showing this pathetic chart, it just reveals too much shocking truth for the establishment to handle.

But here it is, the ten year chart of the US Dollar Index:

It shows a stomach turning fall that starts back in 2001 and represents a 40% drop in the value of a buck against a basket of six major world currencies during this time.

The future of the dollar against other world currencies is even more dismal and the main thrust for much higher gold prices.

How many times have we heard the main stream media in the past ten years try to talk up the dollar? It's a complete joke and obviously has not worked. The same can be said about gold. How many times have we heard this crowd tell us gold is not going higher? A Bazillion times in the past seven years, and they have been wrong on every occasion. And do they ever acknowledge this fact? NEVER!

Regardless of how the PTB (Powers That Be) want to spin their webs of deceit, the one thing that tells the truth is the price of gold as priced in terms of a U.S. Dollar. The truth they can't avoid at this point is that gold is going higher and the dollar is going much lower.

Which brings me to another great quote attributed to the German philosopher Arthur Schopenhauer:

"All truth passes through three stages. First it is ridiculed. Second it is violently opposed. And third it is accepted as being self-evident."

With regards to the truth about where the gold price is heading, it looks to me like society is now deeply entrenched in stage two. Unfortunately, the coming financial shockwaves that will bring the world to stage three will be devastating.

Good Investing,

Greg McCoach
www.GoldWorld.com

P.S. About a year ago, I began telling reader about a special situation taking place in Northern China. A North American gold company landed a find so massive that investors could pick up an ounce for just $57. At that time, the stock was trading for $1.17 a share. Today the company sells for $2.48 - already turning every $10,000 into more than $21,197. But this thing is just getting started. Check this out....

P.P.S. Below you'll find a list of upcoming investment conferences that I'll be attending:

Las Vegas Hard Assets 2008
September 27-28, 2008
www.iiconf.com

Toronto Resource Investment Conference
Oct 4 - 5, 2008
www.cambridgehouse.ca

New Orleans Investment Conference
November 13-17, 2008
www.neworleansconference.com

San Francisco Hard Assets 2008
November 30-December 1, 2008
www.iiconf.com

Outlook for Gold

I don't like the way the US markets are looking. And I'm increasingly fearful about what we're seeing.

When you consider liquidity problems in the market, derivatives, the adjustable rate mortgage dilemma on the heels of all of this subprime mess...just to name a few...it's clear that we've got some major problems to deal with. And the outlook for gold is stronger than ever.

We have the US dollar hitting a all-time lows against many other currencies. At last look the US Dollar Index was just over 72. And we're getting to that critical 70 benchmark, which, once broken, I believe gold will start having $100 up days instead of $20 up days.

Outlook for Gold and Junior Mining Stocks

Needless to say, I'm very bullish on gold. In fact, I think gold prices may move from $1000 to $2000 an ounce in a matter of six to eight months, depending on how the issues with the dollar pan out from here. So be prepared.

However, junior mining stocks are in a real funk. There's no denying it. And I think that we're going to stay in that funk until we get past the capital gains taxpaying season. After that I think higher precious metal prices are going to start pulling junior mining stocks out of the trough and moving them much higher.

There are three or four big hedge funds in New York that have gone long gold with all the majors, but have shorted all the juniors. But as gold an PM prices keep going higher, the juniors are going to move higher, and these guys are going to have to run to cover their short positions. And that should launch our junior market up to new highs. So, my outlook is to stick with it.

Gold and silver Are Now Money

They're also commodities, and when paper markets and governments are performing well, precious metals like gold and silver go back to their status as commodities. What we're seeing now, however, because of the lower dollar and investor flows because of safe haven type of purchasing, everyone is looking to the precious metals, and they're moving into the precious metals to protect their hard-earned savings. And so gold is becoming money again.

Silver is also becoming money again, and it moves from its status as a commodity to the status as money when these times hit.

All commodities are doing well, not just the precious metals market. Grains and other commodities are doing very well, consquently helping to drive up food cost. Almost everyday I hear someone saying that they just dropped $250 or $300 at the grocery store.

Food prices are rising in part because we have 3 billion people in the emerging nations of the world who are embracing capitalism at 100 miles an hour. As I travel through the world, it's so apparent to me the growth that is occurring, not just in China and India that we hear about, but in all of Southeast Asia, Indonesia, Argentina, Brazil, etc.. An amazing growth in infrastructure building is occurring in these countries.

And that takes a lot of base metals, such as copper, nickel, and zinc to build refrigerators, houses and cars, etc.

As opposed to some people who are very negative about base metals, I am actually very bullish on them. Some say that if United States goes into recession, then that's it for the base metals and the commodities. Absolutely not. And that's because the world is no longer centered around the United States.

This is an unprecedented moment in history...an infrastructure-building boom of this magnitude where you're talking about 3 billion people.

The only thing you can compare it to is what happened after World War II in the United States. It was the greatest infrastructure-building boom the world had ever seen. In my opinion that's bullish for all of the commodities for many years to come, not just a couple of years.

I predict the metals market will be in a bull market for at least 10 to 15 years. The outlook for gold, other metals, and commodidties as a whole are still very strong. Don't drop out yet. Stay long on gold and precious metals.

Good Investing,

Greg McCoach
www.GoldWorld.com

U.S. Economic Collapse

A plethora of accelerating alarming events in the news lately has convinced me that we are on the verge of shocking changes in our country and world. Most people don't see what these events really mean and how all of us stand to be affected.

You don't have to look very far in the news to see one shocking headline after another. The New York Sun suggests that A merica is on the verge of food rationing while the Washington Post reports that burglaries have surged 21% in Washington DC, the absolute heart of the United States, because of a slumping economy. It's absolute madness. In fact, just take a look a property crime map of Washington D.C. for the year. Below are the locations of burglaries by block address. Some blocks have had as many as five burglaries, while some ares are almost completely blanketed with property crimes.

And for the most part I think people have almost become immune to the negative information that surrounds us on a daily basis and figure that since there is no immediate crisis why worry. But just because we are not surrounded by an immediate crisis, doesn't mean one is not coming.

Economic, Social, and Political Calamity

I recently began to list the major factors that I believe have now set the stage for economic, social, and political calamity unlike anything America has ever witnessed. The items that will have the most impact on us in the near term and long term are as follows:

The coming complete collapse of the U.S. Dollar due to decades of loose fiscal policy;
Massive foreclosures coming in the next 12 months taking real estate prices much lower and bankrupting tens of million of citizens;
Credit derivatives causing gargantuan losses for major financial houses in the U.S. and around the world;
Rising geopolitical problems especially with the Middle East, but also in other parts of the world as well;
Aging crisis with baby boom generation;
The major economic recession this year due to the above items; and
Even higher oil prices, which will bring gas prices in line with what the rest of the world is paying $4 to $5 dollars a gallon or more causing consumer prices to continue rapidly rising.

While all of these items are very troubling, several things come to the forefront.

A few months back I have heard the message of a man named David Walker, who is the head accountant, the controller general for the United States and in charge of running the U.S. Government Accountability Office.

He was touring the United States with an urgent message, which he called the "Fiscal Wake Up Tour" for any who will listen. I admonish you to hear what he has to say by clicking on the link below. I believe his message is of paramount importance if America has any chance of avoiding economic oblivion in our future.

http://www.youtube.com/watch?v=OS2fI2p9iVs

After listening to what David Walker is saying, a quote from Thomas Jefferson comes to mind.

"And to preserve their independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude."

This is a "when" not "if" issue. The United States is on the verge of collapse due to decades of fiscal irresponsibility that has come about because we want to do everything for everybody. Sorry, we can't do it. Just as each of us can't get everything we want because there are certain restraints that limit us. The government has been acting like there are no restraints with an endless supply of checks to write for whatever they need. It just doesn't work that way.

The consequences for our apathy as Americans in letting this happen is now about to come due as the U.S. dollar closes in on its intrinsic value, ZERO, and the government then starts the new currency, the Amero.

If you are not yet attuned to that word, you better start listening to what key political figures are saying in Canada, Mexico and the United States. David Dodge, the Bernanke of Canada has been introducing the term to Canadians as recently as last summer. Mexican and U.S. authorities are also starting to use the word in relation to the North American Union, which combines Canada, United States, and Mexico into one borderless country with one currency.

Is it any wonder then why our government is unwilling to enforce our border with Mexico, and why certain politicians are trying to bring about amnesty for illegal immigrants when Americans by a huge majority are screaming no way! When you start to wonder why so many strange things seem to be happening and start asking the question, Have the people leading our government lost their minds? No, they have not lost their minds, it is simply that they have another agenda they are trying to implement without your knowledge. They are fully aware of the dilemma they have created and are quietly opting for the new currency.

As this changeover in currency occurs, those who keep their savings in U.S. T-bills, U.S. dollar denominated bank accounts, CD's etc, etc, will wake up and find that they have lost the bulk of their wealth. It will be a simple statement something to the effect that "For every $100 US DOLLARS you have, you will now get 10 or 20 Ameros, and by the way, the price of goods and services will remain the same."

Protect Your Assets With Gold and Silver

Gold and silver will soon go to levels the average person can't even understand as the U.S. Dollar descends lower and lower until foreigners who are holding the worthless paper in their central bank vaults suddenly run for the exits.

Leverage yourself to gold and silver mining stocks and physical holdings of the precious metals. Stay out of debt as much as possible and watch closely to what is happening as shocking events begin to unfold in 2008 and beyond.

During the great depression after the stock market crash of 1929, the people who survived the best, were the ones who had little or no debt and had exposure to the precious metals. Surviving as best you can is the ultimate objective.

With you all the way,

Greg McCoach

P.S. There's a modern-day black gold rush happening right now... and it's right in our own backyard.

Thanks to a unique technological breakthrough, a group of scientists just unlocked the largest oil deposit in U.S. history... potentially 503 billion barrels worth. And they can now extract it for just $16 a barrel.

With oil breaking $117, news of this momentous discovery is already boiling over.

The three outfits leading the way each averaged 21% gains within the past 11 days. And they're just getting started. F ind out how each one could triple your money - this year.

Contrarian Value Investing

I feel the need to once again remind investors that we need to stay the course in our junior mining shares, especially during times like now when everything seems so gloomy. This too shall pass, as I like to say, and our markets will be moving to new highs. The metals bull market is not understood by even sophisticated Wall Street firms, let alone the typical investor in America or the main stream media. For the most part they remain CLUELESS!

Don't panic when the chips are down, but learn from these experiences to become a better investor. As you do so, greater profits will come your way. After you have been through a few of the cycles, even the most hard-headed amongst us get better at when to buy and when to take some profits. This, in my opinion, is the secret to investing success, getting better at when to buy some and when to sell some.

The selling part is harder than the buying part. Discipline yourself to take profits off the table when the market is running hot. To survive the ups and downs of the junior mining share market you need to have a good sense of who you are as an investor, and a healthy respect and belief in yourself. Have confidence in what you are doing. This takes a tremendous amount of guts. It is necessary to break away from the crowd mentality.

My Contrarian Value Investing Philosophy

I remember when I realized who I was as an investor. I was 42 at the time and had just read J.P. Getty's autobiography. After reading the book, I realized for the first time that the only way to make big money at investing was to invest in things that nobody had any interest in, and waiting until the market cycled around. In other words, I realized being a contrarian value investor was the only sure way to make money over long periods of time consistently.

Since reading that book, it certainly has worked out for me. I looked around in 1998 at what was totally out of favor and the most out of favor market I could find was the precious metals and mining stocks. I immediately dove in and began to learn all I could. I started AmeriGold, a bullion dealership dedicated to educating investors on the issues of owning the physical precious metals. I also ended up starting The Mining Speculator in June of 2000.

It has been a wild ride, but one that has brought great satisfaction to me in helping others to make money. What is even better is that the best is yet to come for the precious metals and the mining shares. Stay tuned, stay focused and don't let this bull toss you off its back. It is kicking and bucking to knock as many of you off as possible. Hang tight, it will be worth the ride in the end.

Always remember that volatility goes both ways and after we have experienced the down side volatility (like now), look for the upside volatility to begin. It is definitely going to come again for our junior mining shares in the near future.

Good contrarian investing,

Greg McCoach
www.GoldWorld.com

Junior Mining Companies

Events last week have prompted me to send out this communication regarding the sudden collapse of the precious metals market. Let's take a look at what caused the collapse and why junior mining companies are the one glimmer of hope amid the chaos.

Bear Stearns, J.P. Morgan, and the Precious Metals Market

The demise of Bear Stearns, which was reported to the public last Sunday evening and Monday, has in turn caused their assets to be sold off in masse this week.

On their book of liquid assets was a rather large, long gold position. It is being sold off in order to raise cash to offset their massive losses. The spot prices have been hammered because of this activity, but it will be short-term in nature. If you're looking to buy physical precious metals to diversify your portfolio at this point, you are being given an unexpected gift to do so. It won't last long.

Another item in Bear Stearns closet was a massive short-position in the ten year treasury. This of course is being unwound this week, which is making the dollar look a bit stronger than it really is. However, don't be confused by this nonsense, the dollar will soon resume its downward trend.

The fact that Bear Stearns was shorting the dollar to such a degree shows that they were not playing along with the the Federal Reserve banking crowd. And they have been severely punished by the powers that be.

What brought Bear Stearns to its knees was their own riverboat gambling mentality that not only jeopardized them, but the financial system as a whole. This story is just the beginning of what will be a long list of companies that meet a similar fate. Will the Fed and the citizens of the United States be able to bail out all the financial sewage that is about to be uncovered?

What the Fed is doing is nothing more than sleight of hand trickery to gain the assets of Bear Stearns. As I have said before, the Federal Reserve is no more "Federal" than Federal Express. It is a private organization owned and controlled by shareholders, the largest of which is J.P. Morgan Chase.

J.P. Morgan Chase, in other words, is the Federal Reserve... so don't be surprised that they end up with the assets while you and I pay for the debts from the whole mess.

When are people in the United States going to wake up to the ugly realities that are now upon us? This ongoing calamity of financial chaos is going to cause extremely serious consequences to each and every American. Your wealth, security and lifestyle are all at stake as the coming months and years unfold.

4 Ways to Protect Your Financial Security

You should be doing everything you can, including:

Avoiding, paying down and paying off debt
Buying physical precious metals - particularly gold and silver
Getting money outside the country or at least in a better currency
Getting away from dollar-denominated risk

There are going to be banking failures in the United States and around the world. You should be evaluating the merits of who you bank with. Most of the big banks are in a world of hurt. The smaller, independent banks have not leveraged themselves like most of the big banks. So they may fare better, even though they don't offer all the nice, online services the big banks have.

What to Expect From Junior Mining Companies

As far as junior mining stocks go, they will rebound. Right now they are getting hit as investors like us prepare to write checks for our capital gains taxes. Yes, it appears many of us have waited till the last minute to raise money to pay for these taxes. Most of us will have to sell something to pay for them.

So, in the next few weeks, expect further weakness as this takes place. The better companies will be hit with this activity as well. Those who have the cash will be given the best opportunity to buy low and sell high.

After tax season however, and as the precious metals prices begin to make very large moves in April, the bigger junior mining companies will also make their move... going to much higher levels.

As we move forward in the next six to eight months, I see a time where we will begin to beef up positions in companies that are either in production or are near-term producers. Companies that are more speculative and do not have any near-term production capacity will be eliminated. The reason for this is that the risk capital markets are going to be getting much tighter moving forward, and many junior mining companies that are still in the speculative phase will find it much harder to raise monies moving forward. I will be talking more about this in the coming months.

Until next time,

Greg McCoach
www.GoldWorld.com

An Investor's Guide for the Short and Long Term

This article from Greg McCoach was originally published on GoldWorld.com on February 1, 2008.

Read the full article here: http://www.goldworld.com/articles/changes-stock-market/211

Regards,

Greg McCoach

South African Gold Mining

Assisted by Canadian- and Australian-led projects that aim to add millions of ounces to world gold supply, China became the world's largest gold producer in 2007.

China produced 276 metric tons of gold last year, equal to about 9.7 million ounces. That's up 12% from 2006 and represented just over one-tenth of the world's supply.

The new ranking pushes the mighty gold producer South Africa into second place. And for the first time the gold giant has lost its top ranking since 1905.

South African Gold Mining

According to new figures from Statistics South Africa, total domestic mining production was 0.2% lower in 2007 compared with 2006. This 0.2% drop in annual mining production is followed by a 1.5% decline in 2006 and a 1.3% increase in 2005.

Significant contributors to the annual decrease include nickel, copper, and other non-metallic minerals such as diamonds. However, it was the gold industry in South Africa that really pitched in the most toward the annual production decrease.

South African gold mining production fell by 6.5% in 2007 in volume terms against the previous year. Meanwhile production of the yellow metal fell 4.1% in December compared to December 2006 and a full 7.8% during 4Q 2007 over the previous year.

Overall mineral production has leveled off in the past three years. The chart below shows the seasonally adjusted figures and trend series for the index of mining production between January 2003 and December 2007.

The trend series rose from the beginning of 2003 until February 2004, but leveled off until November of the same year. The trend reached a peak in April 2005 and a trough in January 2006. From February 2006 the trend increased until November 2006 but started to decline thereafter.

This general leveling off of South African mine production may have dramatic effects on global mine supply and prices in the short-term future because despite losing the title as world top gold producer to China, South Africa still produces a significant amount of the yellow metal.

New gold mines are always being developed, serving to replace the loss in current production. However, new mines can often taking up to 10 years to come on stream, mean mining output is relatively inelastic and unable to react quickly to a drop in new mine supply. So a significant drop in mine supply should result in a long-term rally of gold prices. The leveling out of South African gold mining is yet another compounding fundamental added to our bullish position for gold.

Until next time,

Greg McCoach

Changes in the Stock Market

I wanted to share with you a segment of my Mining Speculator hotline I wrote on January 18th to address some of the recent changes in the stock market. In that Hotline I said the following:

*****

I have been concerned for several months now that we could be approaching a point where the second shoe is about to drop on the liquidity crisis. For me the mid-August sell-off last summer was just a warning sign of what is coming.

The Fed most certainly is having some emergency meetings to see if anything can be done. Let's hope this is the case. The first shockwave of 2008 however may be upon us. Unfortunately, we are at one of those critical moments where stocks of all kinds may start to sell-off as we see a rush for the exits in order to raise cash.

The junior mining share markets look like they are going to take a nasty drop as well. Don't panic and sell. I sense this one is going to be worse than the mid-August meltdown so be patient and just hang in there.

*****

Just three days after saying the above, our stock market did indeed take a "nasty drop"; much to the chagrin of investors worldwide.

To understand what is happening with our investment prices and why, we need to delve into a serious discussion on economics, politics, and what governments are doing. The reason for this I have stated before but it needs to be reinforced, particularly during moments like we are currently experiencing.

The prices of our stocks are mostly determined by economic conditions, and economic conditions are created by politics. So in order to know what our investments will do, we must understand what governments are doing and will do.

It would be nice if we could be successful with the junior mining stocks based just on the fundamentals of that market, (i.e. evaluating the companies on their merits, supply/demand scenarios, visiting the properties, talking with the management teams, etc.). But this is not the case, as we have just witnessed this past week with good companies, and great stories selling off in droves. One conference attendee at Vancouver I talked to aptly described the unfolding scenario at the time as "trying to catch falling knives."

So let's dive into the economic and political issues that are running the show at the moment and try to gain some clarity on what we need to do about it.

Bailing Out the US and World Economy... and What About the Stock Market?

Is there any doubt in your mind at this point as to what extent the Fed, or any Central Bank around the world for that matter will go to in order to keep the existing economic order from collapsing? From what we have just witnessed in the past several weeks you should have no doubt whatsoever concerning this point. The system has to be highly manipulated in order to keep things going. From the false economic data that is published routinely by governments to keep you in the dark, to their willingness to flood the earth with money for the sake of bailing out their banking friends who have major problems, you should clearly understand what a tenuous situation we are facing.

In the past week or so the US Treasury and White House in collusion with the Federal Reserve made dramatic moves to salvage the stock market and economy from collapse, indicating even more just how bad the situation has become.

The Fed made an emergency interest rate cut of ¾'s of a point. This is on the heels of two back to back aggressive ½ point cuts within the last few months. The last time the Fed made such a dramatic ¾ point cut was back in August of 1982. And it looks like another rate cut of at least ½ point is on the way. This would take interest rates in the U.S. to 3% while Europe is raising rates. Anybody see a problem here for the U.S. dollar?

Both Bush and Bernanke touted economic stimulus packages to ease stock market fears and avoid talk of a recession but neither worked as stocks worldwide sold off anyway and the reality of the "R" word hit home. And right on cue to bail out the plunging stock market, we now have the official naming of what many have referred to over the years as the PPT (Plunge Protection Team). I had a good laugh this past week when the Washington Post wrote a piece naming the organization that uses government money to intervene in private markets as "The Working Group on Financial Markets".

In that article the Post said this group is composed of the secretary of the treasury and the Chairman of the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission. In addition to the permanent members who attend these meetings, the head of the President's Economic Council, the chairman of his Council of Economic Advisors, the comptroller of the currency and the president of the New York Federal Reserve Bank often attend as well.

The Stock Market Lessons To Be Learned from all this...

The general stock market in the U.S. has to be primed again and again artificially to keep the whole thing going. What we saw last week on the part of this "working group" was nothing short of outright massive buying as the selling panic threatened to cause the biggest single day drop in the Dow history. As the Dow opened last Tuesday morning to a 400 point drop, it looked like we were headed to a 1000 point loss similar to those witnessed the previous two days in Europe and Asia. But miraculously, the tide was suddenly turned as the "working group" did its thing.

How much longer they can continue to keep all the financial balls juggling in the air is the big question, but it looks like they will pull it off yet again at least for the moment. Should we be thankful for this reprieve or should we be upset that free markets are not allowed to take their due course? Just as a forest needs a burn every so often to remain healthy, trying to avoid or postpone the inevitable consequences is just making things worse.

In my opinion, the pain and consequences are coming regardless of government intervention.

The fundamental economic problem that has engulfed the U.S. and world economy is the mountains of bad debts and insolvency with banks and large financial institutions. This debt must be dealt with. It must be cleaned up. Providing liquidity is only a temporary fix or stop-gap measure. It will not solve the problem of insolvency. These consequences are yet to be felt. We are only in the beginning stages of what looks to be a long and protracted period of great difficulty due to the unwinding of these debts.

The bailouts that we have seen thus far are only the beginning of what I see on the horizon. The amount of money that will need to be created out of thin air will continue to accelerate as the crisis worsens in stages. Each successive stage will be worse than the last one until all this bad debt is removed from the system. There is no way of knowing just how big the final number may be since the public is only privy to a small portion of these losses. Joel Skousen in his "World Affairs Brief" (www.worldaffairsbrief.com) had this to say about the potential problems that still exist in the system:

"Examining the nature of the assets being written down suggests that we are not close to the end of Wall Street's bad news. Subprime mortgages and the asset-backed derivatives thereof form a large part of the write-offs, but even in this area we do not appear to be approaching the bottom of the cycle....While Wall Street houses do not directly own more than a modest fraction of the $11 trillion in US mortgage debt, their share of both the lower quality debt and the more recent debt, the two sectors most likely to suffer losses, is very much higher. A total housing finance write-off in the $300 billion range for Wall Street, with the remaining $700 billion falling on investors, foreign banks and the two behemoth housing finance entities Fannie Mae and Freddie Mac, would seem a reasonable expectation".

"This will not however be the end of the story. Wall Street's woes and those of the City of London are not limited to the mortgage sector. Credit card debt, leveraged buyout debt and emerging market debt all seem likely to leave their imprint on Wall Street's balance sheets as well. In addition, there is a huge quantity of toxic waste from the derivatives and private equity businesses that is currently infesting Wall Street's balance sheets, and those of London house."

How the bozo banking regulators in Washington and New York allowed such stupidity and risk taking in the financial markets is beyond belief, yet here we are.

Major Changes for the Stock Market

The quickly changing landscape within the stock market and the Wall Street financial world is going to look a lot different in the near future. Instead of getting wild bonuses by selling corrupt derivatives deals, Wall Streets brokers are more likely to get a pink slip. Layoffs within the big financial houses are already underway along with many restructuring deals to absorb weaker financial institutions that already are stamped "TOAST." The recent takeover of Countrywide Mortgage by Bank of America is a case in point. In addition, fourth quarter numbers are starting to come in and analysts are expecting a US$15 billion write-off for Merrill Lynch and an $18 billion write-off for Citigroup. Again, this is just the tip of the iceberg and greater fodder for even more bailout behavior.This leads me to some conclusions:

We now know with almost absolute certainty what governments and politicians will be doing. They will manipulate and hype-inflate like there is no tomorrow to avoid and postpone economic consequences. Unlimited spending and total fiscal irresponsibility on the part of the U.S. government is what lies ahead. Bank on it.

How much longer they can keep this going is anybody's guess, but the powers that be who are running this farce clearly understand they can't do it indefinitely.

Stock Market Liquidity Issues:

Further waves of liquidity selling are on their way. The problem with liquidity issues is that you can never really know what is going to sell-off and when. This is because it is nearly impossible to do research on those who are in trouble and what they hold in their portfolios that most likely will need to be sold at some point. This is why there is no rhyme or reason at times as to why some company stocks get hit worse than others. When the need to sell comes for these troubled players, they offload anything in their portfolios that is liquid regardless of quality.

World Politics, War, and Oil

The war in Iraq appears to be a war without end. It is at the center of the growing problem regarding our dependence on Middle East oil to fuel our economies.

The growth of China and their rapidly increasing thirst for oil now has them as the number two consumer on the planet behind the U.S. Shortages of fuel in China have recently caused riots as stranded drivers went on a rampage when gas stations ran dry.

You don't see this widely reported on TV or the international press, but China has had major problems keeping up with their demand for oil.

In the city of Hubei recently, the entire fleet of public buses ground to a halt because of lack of fuel. As a result, more than 100,000 angry commuters were forced to the streets on most days.

From one end of China to the other, drivers are waiting in line for hours to get to the pumps. And when they finally get there, they're likely to be rationed five gallons per customer. Dozens of cities are now deploying riot police to maintain order at the pumps.

Officials in China are pulling out all the stops in a desperate attempt to increase oil imports.

Around the world, key oil producing countries are faced with depleting oil fields, combined with soaring domestic consumption that is cutting into supplies that would normally be available for export. Any significant decline in exports is going to ignite a wild worldwide scramble to secure oil interests and send prices to much higher levels.

This could be the trigger that finally sends oil prices above US$100 a barrel to stay.

And this is without a crisis in the Middle East. Can you imagine where oil prices will go if a major geopolitical scenario unfolds that destabilizes the region? How likely or unlikely that is I can only guess at this point, but if it did occur, oil prices would be on their way to $200 a barrel.

Competing governments around the world trying to secure their own oil interests will only add to the problem and possibly lead to further and greater wars.

The conclusion I come to on these topics is that the world is becoming an increasingly more volatile place geopolitically and another major factor for us to watch in regards to how we invest our monies.

The Coming Election in the US

I can't even watch the political debates anymore between the various candidates running for the office of President of the United States. It is just too depressing and gets me to the point where I am screaming mad and want to do something about it.

Lee Iacocca recently went public with his personal disgust with the situation in his book "Where Have All the Leaders Gone?" Check out some quotes from the book below:

"Am I the only guy in this country who's fed up with what's happening? Where's the outrage?"

"So here's where we stand. We're immersed in a bloody war with no plan for winning and no plan for leaving. We're running the biggest deficit in the history of the country. We're losing the manufacturing edge to Asia, while our once-great companies are getting slaughtered by health care costs. Gas prices are skyrocketing, and nobody in power has a coherent energy policy. Our schools are in trouble. Our borders are like sieves. The middle class is being squeezed every which way. These are times that cry out for leadership.".

"But when you look around, you've got to ask: Where have all the leaders gone? Where are the curious creative communicators? Where are the people of character, courage, conviction, omnipotence, and common sense?... Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo? We've spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened. We should be screaming bloody murder. We've got a gang of clueless bozos steering our ship of state right over a cliff, we've got corporate gangsters stealing us blind, and we can't even clean up after a hurricane much less build a hybrid car."

"But instead of getting mad, everyone sits around and nods their heads when the politicians say, "Stay the course, stay the course. You've got to be kidding. This is America, not the damned Titanic. I'll give you a sound bite: Throw all the bums out!"

"You can't call yourself a patriot if you're not outraged. This is a fight I'm ready and willing to have"

Amen brother!

The only choice for me out of all those who are running for office is Ron Paul, a true leader and American patriot. But Ron Paul is the arch enemy of the establishment and is basically not electable. Such is the current situation in America. It's deplorable.

I have little hope that we will see anything significantly change for the better politically in the United States regardless of which bozo gets elected in the coming election.

What to do About All This... An Investor's Perspective on the Markets

The superficial economy continues to grind it out as the massive liquidity injections flow through the system giving us a false sense of security that all is well. For now it looks like we will get another reprieve and the economy will continue along for the time being.

Don't become overwhelmed by short-term events. Take a deep breath and focus on the BIG PICTURE. The only way to keep your head about you in such times is to understand what is happening and plan accordingly.

The bottom-line to all of what was said above is that the dollar is doomed, and gold, silver and their respective mining shares will be going much higher. Owning the physical precious metals and the quality mining shares represents the best way to play the economic circumstances we are dealt by politicians and governments. Click here to learn more about my Mining Speculator service.

You've heard me preach from the pulpit so to speak about owning the precious metals over and over. I don't believe I know another newsletter writer on junior mining stocks that is more outspoken about owning the physical metals than I am. Those who have listened have doubled and even tripled their money in most cases with the prospects that it will go a great deal higher.

The present decline in commodities and mining stocks is nothing more than a temporary situation which presents us with a buying opportunity. What looked good at $1.00 is even better at $0.70 cents. The volatility I keep talking about is certainly with us and perhaps will get even worse. But remember volatility goes both ways and this is why I don't recommend cashing out of all your stock positions. I expect the moves upward to be very big and swift when they happen. If you cash out completely thinking you will buy back in later, I believe you could miss a good part of the action. The best way to play this market is to cash up some when the market is running in our favor.

These junior mining shares, especially the better companies with precious metals exposure will rebound nicely and run to even greater new highs than we have seen in the past. Relax, enjoy the ride. If we don't go into the mania phase, which I expect is still in the more distant future, then we will probably see another pullback with yet more liquidity selling which gives us further opportunities to buy low and sell high.

Personally, I am being extremely selective as to what I am buying at the moment. If you are doing any purchasing now, pick away with smaller purchases as you see the companies you like retreat in price. How low can we go this time around who knows? The trickier part is selling within 20% of the top when things are running. That is where my service comes in. In Mining Speculator , I take the guesswork out of buying and selling at the right time. I send simple alerts to inform you when to buy and when to sell. And as you get more experience with trading these markets, you will learn to better trade with the volatility that presents itself.

Also, taxes are right around the corner; April 15th for US investors and April 30th for Canadians. If we do see some strength in the next few weeks, I recommend trying to cash up earlier than trying to sell in April in order to raise monies for taxes. I would look to our more profitable positions to take some money off the table to pay taxes.

You may also look through your portfolio to see if there are companies you no longer like as much as you once did and sell those positions first to raise the needed cash. I will be looking to do so myself in the next few weeks on any strength.

Click here to sign-up to Mining Speculator service and get my report on a $3 Chinese gold stock that should perform quite well during this next leg up absolutely FREE!

Regards,

Greg McCoach
Editor, www.GoldWorld.com and Mining Speculator

US Dollar Value

The US dollar value continues to bleed in 2008 as fears of a recession were intensified following disappointing employment numbers.

US Dollar Value Hemorrhaging

The US Labor Department reported on Friday that the unemployment rate in the United States unexpectedly surged to 5% in December, making its steepest one-month increase since the economic tailspin of late 2001.

Analysts on the street were expecting US employers to add 70,000 new workers to their payrolls last month. But even that lackluster performance couldn't be achieved. According to the Labor Department, only 18,000 new jobs were created nationwide.

December's dismal job production was the lowest level since August 2003, when the economy was still recovering from the 2001 recession.

The jobless rate, which had been expected to inch up to 4.8% from November's 4.7% reading, instead climbed by three-tenths of a percentage point to 5.0%.

And while the government jobs report doesn't mean a recession is inevitable, it definitely represents a major warning that the US dollar and overall economy could be in trouble.

At last look the US dollar index, an index of the US dollar relative to a basket of six foreign currencies, was at 75.92, only one and an eight points above a multi-decade low. The US dollar index has fallen a staggering 37% in the past six years.

The prospect of a weaker US dollar, higher oil prices, and geopolitical risks equal one inevitable outcome: Higher Gold Prices.

All this added to the micro fundamentals of poor mine supply, limited Central Bank sector sales, solid investor demand, and increasing jewelry demand, I see gold trading above $900 an ounce within the next few months.

Stay long gold,

Greg McCoach

Gold Futures in China

The Shanghai Futures Exchange, one of China's major futures trading venues, has recently received approval to launch gold futures trading in China. The new gold futures investment vehicle emphasizes the increased refinement of the country's financial markets and, most importantly for us, rising investor interest in the precious yellow metal.

New Gold Futures in China

After the successful launch of zinc futures in March 2007, the China Securities Regulatory Commission has approved gold futures trading in China. Futures trading is slated to begin on January 9^thwith simulated trading set to initiate on Wednesday.

Like all other futures trading systems around the world, the new gold futures in China will offer investors, from large financial institutions to individuals, a hedging option to avert risks against the strongly fluctuated gold prices through future trading.

The Shanghai Futures Exchange currently offers cash and cash-deferred contracts for gold, platinum, and silver. But trading these contracts is difficult and expensive for the Regular Joe, or should I say the Regular Chung, investors. The new futures trading system will save money for Chinese investors from the much lower transaction costs of gold futures.

Aside from the investors, this is excellent news for the gold mining industry as well. Chinese producers will now be able to hedge against their own gold production to manage their finances better.

China's gold production has risen more than 20 tonnes in each of the past four years and will likely increase to 260 tonnes in 2007, putting it on course to surpass the US as the world's second-biggest producer.

With this huge mid-term growth in production there is a large demand from producers who don't want to be subject to fluctuations in the spot market. These companies want to be able to hedge, particularly if they are making large purchases over time.

Turnover (the value of contracts traded) on the Shanghai Futures Exchange, surged 76% to 20 trillion yuan (US$2.74 trillion) in the first 11 months of 2007. Total turnover in 2006 was 12 trillion yuan (US$1.64 trillion) according to data on the Shanghai Futures Exchange's website. Trading volume also rose 44% to 152 million contracts in the first 11 months of 2007, compared with 116 million in all of 2006.

The new gold futures trading system in China is yet another small piece adding to the larger gold bull puzzle.

Until next time,

Greg McCoach

Platinum Spot Price Record

Amid increasing demand and a shortage of mine supply, the platinum spot price rose to an all-time record high. Check out the platinum spot price chart below...

The platinum spot price rose to a record $1,526.40 an ounce as supply disruptions in South Africa and growing industrial and investment demand pulled positively on the market.

Supply Shortages Support Platinum Spot Price

A shortage of mine supply has plagued the platinum market for the past few years. When it's all said and done, we expect a supply deficit of about 265,000 ounces in 2007, making this the seventh in the past eight years the market will record a shortfall. In 2006, there was a small mine surplus of about 65,000 ounces.

Most recently a string of deadly mining accidents in South Africa has slowed and in some cases even stopped production in South Africa, where 90% of the world's platinum is mined from only three major deposits. More than 180 South African workers have been killed this year in mine accidents, prompting nearly 250,000 workers to strike in a one-day protest earlier this month.

I expect these mining accidents to increase the already rising production costs as a result of tighter regulations within the South African mining industry. This will in turn continue to negatively effect platinum mine production in 2008 and beyond and positively support the platinum spot price.

Increasing Demand Supports Platinum Spot Price

Platinum demand is expected to increase by 195,000 ounces, or 2.9%, to a record 6.925 million ounces this year.

Most of the demand for platinum (about 50%) is industrial. Industrial usage of platinum is forecast to increase 40,000 ounces or 2.1% to 1.91 million ounces, with the automotive industry providing the main source of growth which uses platinum in catalytic converters. Increasing usage of fertilizers to meet rocketing biofuel demand has also increased platinum consumption in the catalyst gauzes used in nitric acid production.

Other platinum demand can be chalked up to jewelry manufacturing (about 40%) and investment (about 10%). This is unlike gold, where most of supply is used for jewelry (about 70%) and investment (about 20%).

I don't expect a significant decline in demand for the metal any time soon. In fact, I expect the exact opposite.

While the western world's industrial demand is a function of economic growth, which increases at a moderate rate, demand for platinum in countries with rapidly emerging economies--like China and India--is exploding.

It is well known that China has enjoyed the highest percent of annual economic growth of any nation in the world during the last ten years. And there doesn't seem to be any slowing in the foreseeable future. The country's platinum consumption has grown apace with its annual industrial production increases. I expect that China's future platinum demand alone will tax the world's current production capacity.

Platinum Spot Price in 2008

From what we're seeing today, I believe that the platinum spot price will continue to be strong in 2008. After a brief consolidation in the general metals market during the beginning of the year, I expect that we could see the platinum spot price as high as $1,700 or $1,800 in 2008.

Until next time,

Greg McCoach
www.GoldWorld.com

South African Gold Production

In its December Quarterly Bulletin, the South African Reserve Bank (SARB) reported that South African gold production costs are among the highest in the world.

High South African Gold Production Costs Sting Mining Firms

The SARB published, "Gold mining was adversely affected by the continued increase in input costs, with South Africa's gold production costs among the highest in the world."

The high cost of South African gold production was said to have "an adverse affect on gold mining in the third quarter of 2007."

However, overall South African mining output (both gold and non-gold) strengthened during the third quarter after contracting in both the first and second quarters. (Read more about the decline of South African gold production in 2006 )

Subsequent to an annualized decline of 3% in the second quarter, real output of the mining sector increased at an annualized rate of 4% in the third, thereby contributing a quarter of a percentage point to quarterly South African GDP growth, the SARB said.

The reserve bank attributed the turnaround to an improvement in non-gold mining, particularly to the production of diamonds and platinum. Platinum and platinum group metals benefited from strong commodity prices and the increased demand for emission control catalysts and jewelry.

Mining Accounts for 14.6% of New Jobs in South Africa

The SARB reported that both gold and non-gold mining contributed to significant job creation during 2Q 2007.

While total employment growth in the non-agricultural sector slowed to 2.6% in the second quarter from 4% in the first quarter, employment across the mining industry grew by 6.4% during 2Q.

Jobs in the non-gold sector jumped 8.2% while those in gold mining rose by 2.9% during the second quarter of the year.

The mining industry as a whole added 34,651 jobs from the second quarter of 2006 to the second quarter of 2007. This means that the mining industry accounted for 14.6% of the 237,624 new jobs created across all sectors over the same period.

Overall, the SARB says that the South African economy continued to grow in the third quarter of 2007. Growth in real gross domestic product accelerated from an annualized rate of 4.5% in the second quarter of 2007 to 4.75% in the third quarter. This was the result of stronger growth in the real output of both the primary and tertiary sectors.

The high costs of South African gold production will likely be passed on to the consumer and will have a positive upside effect to gold prices in the long-run. This is yet another factor that will lead to +$1,000 gold in the next few months.

Until next time,

Greg McCoach
www.GoldWorld.com

China Copper Imports

DENVER, CO--China, the world's largest copper consumer, produced a record tonnage of the industrial metal in October to meet rising demand from builders. Consequently, refined copper imports to the world's fastest-growing major economy may take a nosedive.

Data from China's National Bureau of Statistics released over the weekend put total Chinese copper output at 358,000 tons during October. Production showed an increase of 15% from September and a 43% increase from October 2006.

The following table lists China's production of copper and other non-ferrous metals in October and for the first ten months of 2007.

*Figures are in tons and percentage changes are from a year earlier.

In the first nine months of this year, China's refined copper imports have surged 98.1% to 1.2 million tons because of attractive margins for imports in the first half. Exports, on the other hand, fell 59% to 93,375 tons, making net inflows at 1.1 million tons.

It's estimated that China will consume between 4.25 and 4.5 million tons of refined copper for the year, an increase of +9% over 2006. But by the end of 2007, data crunchers believe China may still end up with a surplus of up to 360,000 tons of refined copper versus a deficit of 260,000 tons last year.

This surplus might encourage merchants to book fewer term copper imports for 2008 leaving many who are betting on China's rising consumption out in the cold.

In 2008, it's estimated that China's consumption of refined copper will increase 8% to 4.58 million tons. However, officials are also expecting output to continue to increase 15% to 3.9 million tons, putting the country's net imports at 680,000 tons next year. This would be 44% lower than this year.

An analyst from the Beijing Antaike Information Development Co., a state-owned research group, said that China built stocks of 427,000 tons in the first eight months of 2007 and the country added at least 500,000 tons of refined copper capacity in the second half of the year.

Smelters have increased overseas purchases of raw material, both concentrate and scrap, to feed their production during 2007. But increased domestic supplies may lead to a plunge in overseas purchases from the world’s fastest-growing major economy. Be careful of companies banking on exporting copper to China.

Happy Thanksgiving,

Greg McCoach