Precious Metals Stocks is the Place to Be


The Warrant Report
August 8, 2011

Precious Metals Stocks is the Place to Be

In this issue:

  • Monday Morning Markets Will Be Interesting
  • Precious Metals Stocks is the Place to be

Monday Morning Markets Will Be Interesting

With the downgrading of the credit rating of the U.S. after the markets closed last Friday, what should we expect on Monday’s open?

Frankly, this is anyone’s guess as to the direction of the financial markets but it has to be just one more significant reason to be an investor in precious metals, gold and silver.

After watching the Sunday morning talk/political shows in the U.S., it seems clear, to me, that no one can agree on anything, absolutely nothing!

Why did Standard and Poor’s downgrade the credit rating of the  U.S.? Was it about the debts of the U.S. or the obvious inability of the government to reach a compromise of substance and pushing the U.S. to within hours of a technical default?

We are unfortunately witnessing a total political dysfunction of the U.S. Government.

There is no willingness, yet, to compromise, and now that is a dirty word. Kind of like, it is my way or the highway approach to government. Let’s see how far this gets?

Why is the discussion of budget cuts so difficult?

Each of us reading this can probably say, that we are wasteful in numerous ways and that we could ‘easily’ cut back a minimum of 5% to 10% of our spending without any real change in our lifestyle.

The U.S. Government should be able to make a “10% across the board cut” in ALL agencies without any significant harm. This would only cut out some of the wasteful spending while not impacting the benefits (assuming there are any benefits) of each program.

Everyone knows of the massive waste in Government spending. Any employee of any agency, albeit, Federal, State or local, sees this waste on a daily basis.

It is only those that sit in the ivory tower of governments that fail to acknowledge the wasteful spending. It is the political leaders in both parties and of course, those always present lobbyists, that are creating, not solving, the problems.

Are you telling me we cannot find substantial cost savings in Medicare, Defense Department, IRS, etc.? Of course we can.

A blanket 10% across the board would force each agency to clean up its house.

Unfortunately, there is no will power to make decisions. Sure the Dems have their ideas and the Republicans their ideas, but they cannot agree on anything and the government continues its path to total gridlock and closer every day to a failed state.

This is no doubt the real reason for the downgrade of the U.S. credit rating as ‘they’ see little chance of significant changes being addressed.

Seems only a matter of time before discontent and riots come to streets in the United States as forced cuts in the budgets will be necessary. The time is drawing near.

So, Monday morning will be interesting for sure. While there will probably be much volatility in the markets, much of this downgrade was not a total shock as the S&P has been flashing it warning for months so there is a chance of only minimum damage to the financial markets and bond market, but it could be a good day for gold.

Precious Metals Stocks is the Place to be

With gold trading at historic highs, and going much higher over time, we must be aware of the possibility of a short to immediate term correction. Nothing goes up forever, so let’s not chase gold higher right here. But the shares are looking better every day as they have greatly underperformed relative to gold and we continue to believe a major rally in the juniors is in the cards and investors should be positioning themselves for this great ride.

Our friend, Steve Saville at The Speculative Investor concurs with his recent comments:

 “This year’s weakness in gold stocks relative to gold bullion has been remarkable, but if gold continues to trend upward relative to most industrial commodities then gold mining stocks WILL eventually move to much higher prices to account for their vastly improved profit margins (or profit potential in the case of non-producers). In the meantime, however, we should be careful not to under-estimate how far stock prices could move counter to the fundamentals before they come back into line with the fundamentals.”

We saw this interesting quote recently:

….” if we are all in the parade who is going to watch us walk by”

Think about this the next time you try and convince a friend or family member to invest in resource shares or warrants. Most just don’t get it, at least, not yet.


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    Dudley

Dudley Pierce Baker – Owner/Editor – Guadalajara/Ajijic, Mexico
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