This is the second time I have had to write this article. The first was wiped out by a wild thunderstorm here in Nebraska. I really was quite unaware of the ferocity of the storm, until the power went off. Yeah, my article was about finished, but I’m going to believe fate had a better article in store. I took a few days off to think about and analyze the responses I received from my “Star Trek” article. All the responses I received, but one, were very favorable. The only one that could not to be construed as positive dealt with a belief that buying all the silver would not make a difference in the first place. This man’s contention was that the government owned all the silver. Although I disagree, it is something to think about.

In writing “Star Trek” the two points I wanted to get across were 1) the amount of money necessary to dry up the silver market and put an end to any possible manipulation, that has been going on for years, is very small, miniscule in the big picture of available funds; 2) we have all thought about owning the physical metal in the past, but have failed, for one reason or another to step up to the plate to take the plunge. I too, am guilty of not owning any of the physical, although 100% of my money is in the precious metals stock market.  The point here is that NOW is the perfect time to begin to establish positions. I believe as the investment purchases of gold and silver move forward, the total philosophy of the industry, which has been the norm for the last twenty years, will change. Not only will it change, but the end result could be a switching of sides by those who have been on the sell side. At some point in time it is inevitable that these people will recognize the old party has ended and a new one has begun.  At that point in time it will be very enjoyable to be on the other side of the manipulation game. Time is the only missing link and if we still have some time to kill then we are in a position to build larger positions. This can only benefit us in the end. The writing is on the wall and it is written very clearly!

There are a couple of things I want to address from current events and e-mails from my readers. The first was an e-mail from a man by the name of Rich; he has a gold mutual fund that has returns of 83% and 58% over the last two years; this year he is down only 13% and has a 70% redemption rate. Bravo Rich, it sounds like you have done a superior job for your investors; to be only down 13% this year after the way the gold market has performed is fantastic; let alone the profits in the last two years. I have a few questions to ask your investors who have redeemed your fund; “ARE YOU STUPID?” Where can an investor invest his money to have returns of this nature?  Nowhere!  How can you sell a man who has performed so brilliantly? What can you possibly ask from someone who has performed so well in managing your money or even more important than that is how come you have not directed more money his way?  This man is the only one you should be listening to. You should close your ears and eyes to those who are influencing in your current choices of investments.  I would truly love to know where you are putting your money today. Rich’s returns speak for themselves. If it were any industry other than the metals, there is no way in the world that anyone could talk you out of your investment, in fact you would be boasting your returns to anyone who would listen.

Next we have the Gold Conference in New York; again I have to ask; what is the matter with you people in New York? Whether you are current owners of precious metal stocks is irrelevant. You people had an opportunity to meet the principals of companies you own or may own in the future, for free. My three largest stock positions were represented. I would have loved to meet the people that I owe so much to. For the chance to meet the people responsible for taking care of my money, all in one place at the same time, and getting complete updates on the ongoing activities of the corporations, you would have had to throw me in jail to keep me away. Management is so important in the world of investing. To be able to have any questions answered by the principals of these corporations is a priceless opportunity. With showings like this, these people have to be asking themselves why bother? I’m sure if it were a tech conference the place would have been packed.

Lastly, I have my “Star Trek” article, the responses I received were very favorable as I mentioned earlier. I fully plan to follow-up with specifics on the questions that were asked of me. There were some excellent questions and I want to address them. I too have many questions I still need answers for. When I have the answers I will forward them to all who have sent me e-mails. I believe if I can do this properly I can take a lot of the uncertainty out of the mix of investing in the physical metal. I still have incomplete data on things I feel are very important.  Any dealers who would like to pitch in and help can e-mail me. I firmly believe the final solution to ending all the games being played in the metals markets today lie in the accumulation of the physical metal itself. When the day comes that the shorts are put in a position to deliver, in a market where they cannot find the metal, then the true reality of supply and demand will resurface and the game shall come to a very untimely end for the shorts.

The number of responses I received off my article were greater than any of my previous articles; although I believe they fell short of what they should have been. This is not much of a surprise when one considers all the turmoil within the precious metals industry itself. I believe many of the articles being written today are more detrimental than helpful to investors. If I did not have twenty-five years worth of experience behind me I too would be confused. To have the beliefs that most of us share, as seen in the reading of the websites that we read, is not an easy task to bear. I believe that through hard work and plenty of research an individual can succeed in managing his or her hard earned monies. I have run out of patience with people who close their minds to the truth. I am sick and tired of being labeled as negative by these people who chose to close their minds to the truth and hope that everything will be ok. I fail to see how someone is negative when he understands that the events going on in today’s world are not in actuality what they are being portrayed to the masses by those who want to keep things the way they have been. All I have ever wanted to do is help them take care of what they have worked so hard to accumulate. But it is impossible to help people who know it all. I could write a book about the experiences I have had over the years. I still chuckle when I think about the past discussions I have had with people. I remember one man who told me I was stupid not to own tech stocks in March 2000. It was at this time the NASDAQ was at or approaching the 5000 level. I have never brought the subject up to him since. I have made many mistakes in the past; I have more scars than a body should be able to carry. It is because of these hard earned lessons that I feel I have something to contribute to investors today. The main thing I have learned is patience, do your homework, learn, absorb and when you feel you have the answers, remember one very important point; you are way ahead of the pack. The educated masses, of those who always seem to know everything, are still way behind you in the game. Timing is everything in this business. I believe the most intelligent investors, in the world today, are those who have the knowledge to understand that the garbage that is being fed to investors by our government officials and the press is nothing more than a set of well formatted lies. Any sane person can see that inflation is rising in leaps and bounds. Any sane person knows that the accumulation of debt is never a healthy financial habit. Any sane person must realize that the day will come when the 50% of our governments’ debt that is owned by foreigners is going to eventually make its way back home, causing interest rates to skyrocket and the stock market to crash. This is not rocket science; you do not have to have a large IQ to figure these things out. You do need to have patience once you do understand that the world we live in will change and the changes will not be for the better. Many times, such as now, it takes a long time for the rubber band to reach its end before it snaps. It took the balance of the 70’s for the demand for oil to peak after prices started rising in 1973; but it did peak and the natural laws of supply and demand came back into focus. This time the laws are on the other foot when it comes to oil, in the 70’s there was plenty of oil to meet the demand. Today there is a huge and growing demand for oil without the refinery capacity to increase supply, if it were there to begin with. While we are fully aware that the demand for oil is growing the rest of the world is in denial, by saying there is a $10-$15 premium built into the price of oil.

The only time to truly accumulate anything at bargain basement prices is when prices have fallen and no one wants to buy the inventory. After taking everything into consideration, that I hear and read today, I feel the precious metals market is in this position now. When investors fail to take advantage of seminars and redeem very successful mutual funds I have to feel the worst is unquestionably behind us. How anyone can feel negative on the metals is beyond me. I could care less about the short term fluctuations in price; my only thought deals with where things are going to be down the road. I could care less about charts; the reality of charts is; in the thinly traded markets that we are dealing with; any well placed order either buy or sell can influence a market over the short term. The long term is a different matter. When I look at the monthly charts on gold and silver I see a completely different picture. I see two markets, which have been bull markets, taking a break and pulling back to long term support. If we are in a bull market this is creating opportunity that comes along only once in a while. When I analyze the events that have been going on and then couple that with the selling I have seen in the stocks I have to believe the worst is truly behind us. Why would anyone sell these stocks at these levels? You have to be nuts not to recognize that fundamentally your companies are much better off today than they were a year ago. My three largest holdings are doing super as far as ongoing concerns. Even though there has been weakness in the prices I could care less. My only concern is to build my positions.  If I can successfully do that then I will truly be a happy man. The only people who need be concerned are those people using margin. You may still be challenged in the future; then again I believe the worst is over and you have survived. The world today is a powder keg, anything can come along and set it off. I don’t want to hear excuses from those who are long the Dow and the S&P by using the next train wreck as a reason things happened the way they did. It doesn’t take any brains to recognize that all the surprises that will significantly move a market in one direction or another are positive for the metals and negative for the Dow and S&P.  Rising interest rates will guarantee negative economic surprises; oh and by the way I think it is very important for everyone to realize that interest rates will rise because of the necessity to continue to attract foreign fools, I mean foreign funds, into buying our bonds and holding them. When these foreign investors realize that the loss of money, because of the weakness in the dollar and because of their principal is being killed as a result of rising rates, there could then be a flood of bonds on the market. Rates are not rising because the economy is recovering as some well positioned people would like you to believe. Rates are rising to keep attracting funds into the bond market. Greenspan truly is caught between the rock and the hard place. There is no middle of the road, there is no choice between inflation and deflation, that choice is already a foregone conclusion; inflation will be much more preferable to deflation. The sad truth is Magoo can only postpone deflation while he hyper inflates. In the end we will still fall into deflation, except this time there will be a lot more debt on the books. As a result of this debt we, in my opinion, will have deflation with rising interest rates. Most people assume that rates will fall during a recession or a depression; not me, I believe rates will be rising this time we face the inevitable.

One topic I believe for certain is the fact that the hyper creation of money and liquidity can only mean gold and silver have much better days in front of them. For those people who have been the ultimate benefactors and accumulators of this easy money; for us to assume that they will not eventually roll their acquired wealth into the precious metals sector, is an assumption that only George or Magoo would make. There is no doubt that when the time comes for foreigners to liquidate their bond portfolios that a percentage of that money will find its way into the metals market.  It could wind up being a large percentage that moves into the metals market. Just a small amount of the trillions of dollars that will be looking for a new home will have a phenomenal effect on the price of gold and silver. Like I have said from the beginning, I am in the metals and natural resources because I fear owning any of the historic alternatives.

© 2004 Mike Hoy
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Mike Hoy
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