Wednesday, November 25, 2009

SFEG / Santa Fe Gold Corp - Emini Futures Trading - Wednesday November 25th, 2009

It's no great secret around the CFRN Studio's that my personal portfolio is 95% invested in one equity - SFEG. I understand that most economists, financial theorists, and college professors would heartily disagree, not with my choice, but simply my philosophy.

There is however, at least one fellow who based on his legacy, did understand our long-term strategy. You may even have heard of him - Andrew Carnegie

"Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket."

Many of our listeners came to know SFEG as Azco Mining in the .10 / .50 range. Many are asking themselves, and us, what course of action they should take given the current market conditions and share price. We are not investment advisors. The disclaimers on this blog as well as on our radio program fully disclose that you should seek qualified and licensed counsel before making any investment decision.

However, without any degree or license, I can still tell you the truth, which is the same truth I have told you for years (just go back and listen or read). The money I have invested in SFEG is not really mine. It's on loan from God. He has called me by His Word to be a good steward and faced with the myriad of investment choices available, I chose to choose AZMN (now SFEG). I won't go into great details here but I chose to choose that which God himself was directly involved with. God created man but He did not create the internet, biotech, or many of the other things that men today choose to invest in. I'm not saying any of those things are wrong or amiss, I'm just saying that given all the opportunities to invest His money in, I chose to put it into something that He Himself directly placed in the belly of the earth thousands of years ago.

Does that mean this stock or any other natural resource stock is a sure-fire winner because of the God Factor? Nope! More money has been stolen from hapless investors in the name of God than for any other valid reason I can think of besides perhaps, pure old-fashioned greed.

Yes God created the Gold, Silver, Copper, Moly, and the many other marvelous metals and minerals that lie beneath the crust. However, He also created man. Not only did he create man but He gave man, free will. (gasp)

Cheat, Steal, Lie, Whatever.

What was God thinking? That's a far deeper discourse than we have time for on this blog but perhaps you should tune into our radio program if you truly want a better understanding of the nature of God.

Bottom Line -
You have to look at the "Men Behind the Metals"

God created them both (men & metals) but he only gave one of them free will.

For the last 5 years my self-imposed job as both an investigative journalist and steward of His money, has been to investigate the "Men Behind the Metals" of SFEG.

The commodity I found there, is far more precious than silver or gold.

But why should you believe me? I'm merely a man.

You could read the most excellent column I've provided below and make a decision, or, you could just talk to Him. See what He has to say. Believe it or not, no matter how much you may have misused that free will He gave you, He misses you. He longs to walk with you in the cool of the garden, and maybe even give you some investment advice....

But if none of the above or below floats your boat, there's always Cramer and CNBC..............

(i'm just saying)

How to Invest in Gold Mania
By Jeff Clark
Stowe, Vermont

"There's no doubt in my mind that we'll have a mania in gold. And because the gold and especially silver markets are so tiny, the rush into them will be like trying to push the contents of Hoover Dam through a garden hose. Our positions will go absolutely ballistic." - Doug Casey, September 2009

There's certain to be a rush into gold and silver, and buying before Main Street catches gold fever is the only way to play this trend. Because when Midas fever hits, prices will explode to the upside, for both the metals and the stocks. How do we know that?

First, let's look at gold. If we added up all the gold ever mined on the planet, its total value would equal no more than $5 trillion at today's prices. Yet, look at how this compares to the debt and bailouts and other monetary mischief of current governments...

Gold Price vs. US Liabilities

Let's make this chart very clear. Of the $5 trillion in gold ever mined...

  • The US government has thrown over twice as much at the economy in the past 12 months.
  • The US debt is more than double this amount so far this year.
  • Total global government bailouts are almost four times larger (and this is a conservative figure; one estimate puts it at $24 trillion).
I intended to include annual gold production as one of the comparisons, but the chart isn't big enough and neither is your monitor: 2008's global gold production equaled about $73 billion, and to make that figure discernable on the chart would require the Global Bailouts bar to hit the ceiling above your head. That's how small the gold market is.

The implications are undeniable: when the greater public rushes into gold - whether in response to inflation, dollar woes, war, whatever - the price will be forced up by an order of magnitude.

While physical gold will protect our wealth, it's the gold stocks that can potentially make us wealthy.

Once again, to get a sense of the Lilliputian size of the gold industry, I compared it to several other leading industries and stocks.

Strong Gold Mining Socks

The value, as measured by market capitalization, of all gold producers around the world is less than Wal-Mart's. Every gold stock would need to nearly double just for the industry to match ExxonMobil. The oil and gas industry is about 12 times bigger.

When your neighbors and relatives and co-workers and friends all start clamoring to buy gold stocks, the pressure on prices will be enormous, rocketing our positions upwards.

Meanwhile - and admitting we're first and foremost gold bugs - the picture for silver is even more dramatic. The potential for silver stocks is jaw dropping.

If the gold industry is tiny, then silver's $9 billion market cap makes it a nano industry. The entire silver industry is over 21 times smaller than gold's! If gold explodes, silver will go supernova.

Consider these macro-facts about a micro-market and what they reveal about silver's enormous potential:

  • There are over 200 companies in the S&P 500 with a market cap larger than the entire market of silver producers.
  • There are five times more gold stocks than silver.
  • Total silver production in 2008 was valued around $10.3 billion (at today's prices). That represents just 1.5% of the $700 billion bailout last year, and 0.006% of the current US monetary base.
  • Of the 20 largest silver producers, only five actually call themselves a "silver" company, due to the fact that about 73% of all silver mined is a byproduct of other metals mining.
Any flood into the silver market would overwhelm it. In other words, the rise will be stunning. While it's not going to happen tomorrow, I strongly suggest you get on board before that rocket ship takes off.

Just putting these charts together stirred my feelings of restlessness, making me anxious for the mania in precious metals to arrive. But the timing is not up to us. Be patient, because if you're invested in gold and silver and the respective, high-quality stocks, you're on the right side of this trend.


Jeff Clark
Senior Editor, Casey's Gold & Resource Report
for The Daily Reckoning

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