Wednesday, September 12, 2007

SFEG - Santa Fe Gold Corp Delivers 28% Return on its 1st Day of Trading


Since March 2007, the company has been paying principal and interest by the issuance of its common stock. The last three payments total approximately $1.0 million, with the final payment scheduled January 1, 2008.

Pierce Carson, CEO, said, "Our stock price has declined over the past several months. The amount of stock we issue for payments is tied to our stock price and we have had to issue more stock as the price has declined. We have determined that this trend is not in the best interest of stockholders.

"With respect to our stock price, we believe there now is a very significant disconnect between the stock price and the fundamental value of the company's assets, considering our substantial precious metals resources and based on peer company comparisons."
The main purpose of the 2006 financing was to provide cash for acquisition of the Summit silver-gold project, which the company acquired in May 2006. The Summit project is now ready to proceed to production, subject only to the arrangement of construction financing. (more)

Why Gold and Why Now?

Do you remember the last time gold sold for over $2,000 an ounce?

Of course you do. Maybe you didn't think of that way. But actually, gold has already sold for more than $2000 per ounce. Let me show you.

First, you have to think for a moment like it's 1971. Gold is selling for $35. This is the year Nixon breaks it from ties to the dollar. Gold prices start climbing. By 1975, it's hit $196. And by 1980, we're talking $850. Sure, you say, that I remember.

But maybe you also remember, back then you could you could also make $27,700 a year and it was a pretty decent living. About as good as making $100,000 per year today.

You could also buy a house for $50,000 then and, just on an inflation basis, it would be worth $250,000 today. (In real estate terms, it might sell now for $500,000 or more).
And back then, you could retire on $270,000 in savings... and it would be as good, today, as being a millionaire.

So you can see, trying to compare yesterday's gold price to today's -- on an even basis -- is like trying to compare apples and armadillos!

Take a look at this chart...

In today's dollars, 1975 gold at $196 is more like $750 in the current market. And 1980 gold, the peak year at the historical price of $850, would now clock in closer to $2,176 . And remember, this is only what you get using the most conservative market calculation of gold's worth. There are other, even more telling ways to value gold.

Try this on for size...
$38,349 per Ounce!

Remember, for a good part of America's history, every dollar in your pocket was a dollar backed by gold. So it's not so crazy to ask yourself... if America has 8,180 tons - or nearly 261.7 million ounces - of gold in reserve... how many dollars does that buy?

The answer will shock you.

When dollars became unhinged from gold, the printing presses at the Fed cranked up. By 1980, for every ounce of gold in America, the financial system carried $6,966 in cash. That's $1.8 trillion total. But get this, by the end of 2005, the total real money supply shot to over $10 trillion.

That's $38,349 in circulation for every ounce of gold in reserve!

Of course, it's even higher now. The printing presses are still cranking, well into 2007. Only now, it's much harder for you to know how fat the actual money supply has gotten. See, by March 23, 2006... the number had gotten so embarrassing... the Fed actually "retired" a number called "M3," which was the most broad-reaching measure of how much cash floats around in the system.

Yep. Instead of fixing the problem, the politicians just stopped talking about it. Is that any surprise? Fortunately, you don't need Washington's help to get the real picture of what's happening today in the economy... or to find out what's next for the price of gold.
Because you can just read on and see for yourself...

Precious Metals Megatrend: 3 Charts and the Truth

I'm about to show you three charts.
Take a look at these first two side by side...

A hundred different snapshots could show you the mess we're in. Soaring personal and government debt. A plunging savings rate. Record-high mortgages as a percentage of GDP. Soaring but "hidden" unfunded government liabilities, to the tune of $53 trillion...
But none show it better -- and more plainly -- than these two I'm showing you right here, above. The first is our skyrocketing money supply. The second is our plummeting purchasing power. That's about as plain as you need to get.

How so?

Because this is the starkest vision you'll ever get of the absolute carnage that's piling up in a "secret war" Washington's fighting right now... and has fought, unsuccessfully, for the last 20 plus years. No, not the war in Iraq. Or Afghanistan. Or even some possible future conflict with Iran.

This is another kind of war... right here at home.

The enemy is the dark nemesis of a dead and stagnant economy. And the Fed secretly fights to hold it off desperately every single day. This is a worse enemy than recession. It's the enemy called deflation, an economy where nothing moves and nobody buys a thing.

The weapon of choice in this ongoing secret war is to flood the market with cash and easy credit. Because regular cash and credit injections make everyone feel rich. The theory goes, when you've got cash and low-priced credit, companies borrow and expand. Consumers borrow and spend. Families borrow and buy homes.

Which is why, since 1950, the total amount of money in circulation has soared well over 3,000%! And it's all good... or seems good... until it goes all wrong.

See, the trouble is, even money can't escape the natural law of supply and demand. When there's too much of it floating around, each dollar is worth that much less relative to the whole. Suddenly, you've got price inflation.
Suddenly, every dollar you have in the bank is worth less.
Hemingway called it the "first panacea of a mismanaged nation."

And in our case, it's helped plummet the purchasing power of our dollars by a mind-blowing 96%. The dollar's worth today is just pennies compared with what it bought a century ago. In fact, its worth is just a fraction now -- as we just demonstrated -- compared to the last time gold prices boomed, in the 1970s and early 1980s.

Only now, unlike then, the "wiggle room" we have left now between us and a complete dollar implosion is so thin it's practically transparent. Could total implosion actually happen? Absolutely.

Take what Ben Bernanke famously said before becoming Fed Chairman, during a speech at the National Economists Club in Washington, in November 2002...
Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost... We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

In other words, if you want to juice an economy... turn on the printing presses and make it as easy as all get-out to borrow money at a low, low rate of interest. Bernake and others in the Fed think that's no problem. They think they can handle it, just so long as short-term interest rates don't go to zero.

Flooding the market with easy money is like burning your furniture to keep warm. It cannot last as a stopgap measure. It's courting disaster.

Ludwig von Mises when said...
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
See, thanks to all that Fed-driven loose credit, consumer debt has soared. It's never been higher. In 1987, when Alan Greenspan first took his job in Washington, consumers were in the hole by about $10 trillion. Where are they now? An unbelievable $37.3 trillion in the red - or nearly 350% of GDP!

Think about that.

As a whole, Americans owe three and a half times more than the entire U.S. economy -- the largest in history -- produces in a year. If you or I owed that much on a personal level, we'd be suicidal.

Meanwhile, the government doesn't seem to worry. They spend money even faster. They borrow even deeper. Even this administration now, with full knowledge of the implications of a credit disaster, has already borrowed more money since 2000 than every White House since the time of Washington!

By 2017 - says the Heritage Foundation - our federal deficits should be soaring by at least $1 trillion per year. After that, it will jump to $2 trillion. That's not how much we'll owe. It's how much we'll add to what we owe... every 12 months, for as far as the eye can see.

Doesn't that sound, to you, like we're at a turning point?

Then, they had Paul Volker, who crushed inflation. Today, we've got Ben Bernanke, who embraces it.

Then, they had a national debt of just $845 billion. Today, it's between $8.9 trillion and $53 trillion , depending on who you believe.

Then, we had a hostage crisis in Iran. It ended. Today, we've got Iraq, Iran, North Korea, Nigeria, Afghanistan... and an unending "war on terror." Plus bin Laden still hiding in caves and Chavez mouthing off in oil-rich Venezuela.

Then, you paid 78 cents for gas. This spring, it hit as high as $3.22. Oil cost $38 per barrel. Today, it's closer to $80. Then, the oil shortage was political. Today, it's physical - supply just can't meet higher demand.

Then, the weak dollar still bought more than the dollar today. And our only real economic competitor was Japan. Now you've got China, India, the euro... and a resurgence in Japan.
Brace yourself. Because while this might spell doom for most Wall Street stocks, it virtually guarantees a global resurgence for resource investments, silver and especially gold. Protect your wealth and grow your riches .................

This is what's called a "yield-curve inversion."

The recent one you're looking at above first happened on Dec. 28, 2005... and it has remained inverted... on this last occasion, it's basically been upside-down for the last few months. This is bad. How bad?

Think dynamite and a tripwire.

See, normally a yield-curve inversion should be an extremely rare event. Until very recently, it's only happened six times since 1970. And guess what... five out of those six times, a major recession followed within the year .

This is so precise an indicator of recession , in fact, that it has only been wrong once in the past 40 years . One study published by the New York Federal Reserve pegged it as a better measure of what will happen to the U.S. economy than the U.S. stock market or any other general index of other leading indicators .

Translation: When the curve flips, we'd better listen.

On the day of this inversion above - practically at the moment the lines crossed - the Dow plunged 105 points. What happens the next time, when the curve inverts not just for an afternoon, but for a week or more? Or months at a time?

This is like holding back a flood with a cork. The longer the yield curve is out of balance, the bigger the disaster that follows. And there's only one way to stop a yield-curve inversion from happening.

The Fed has to slash short-term rates. Will they?
Bernanke would love to.
But he's trapped between a rock and a hard place.

Slashing the rates means an even bigger dollar collapse. And even higher credit debt, at a time when few Americans can afford it. It would also mean less overseas confidence in the U.S. economy. And that alone could spark a whole new wave of disaster.

See, when all those overseas bondholders out there see the United States disintegrating its economic base, that's all she wrote! They'll start dumping the dollar and our debt investments with abandon. I'm sure you're smart enough to see where this is headed...

That kind of unraveling is the perfect recipe for $2,000 gold. Which is why I want to make sure you're in a good strong position before this next radical power move in gold unfolds...
(Thanks to our friend Bill Bonner and The Daily Reckoning)

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