Kerry Lutz Interviews Kirsty Hogg: Vancouver Resource Investment Conference 2012

I had the pleasure of having a meeting with Kerry Lutz of the Financial Survival Radio Network on Sunday Jan. 22^nd, 2012 at the 2012 Cambridge House Investors Conference. Kerry has been putting out a tonne of fabulous interviews with gold and silver experts from all around the world.  You can find all his shows at Kerrylutz.com.

Kerry and I chatted briefly about the great opportunities at the show for investing in the junior mining stock sector.  We reminded everyone to proceed with caution and do their own due diligence as this kind of investing is pure speculation and very risky.  Thankfully, there are some expert newsletter writers in the industry who can help the lay investor navigate their own way in this 1700 + company sector successfully.  An example of this kind of newsletter writer is Mickey Fulp, The Mercenary Geologist.  Mickey publishes a variety of musings targeted at the lay-investor (be sure to go back into his archives to access all of his previous articles and videos).  These musings specifially offer tips and tutorials that empower people to do their own effective research and potentially make some money along side the experts who have been doing this for 30 years.

If you want to learn more, I enourage you to go to Mercenarygeologist.com – Simply provide a name and email address to get full access.  Mickey was also listed as the top source of investment advice in mining by Mining.com on Jan. 2nd, 2012. Everything is totally free to his subscribers.

A Holiday Greeting from Kirsty

Dear Members of Why Buy Gold? (and Silver!):

No one knows what is in store for us in 2012, but we certainly have a very good idea after reading and viewing all of the amazing resources posted and provided by you in the past two years in Why Buy Gold? (and Silver!). Armed with this knowledge, we have the power to take action and prepare for an economic tsunami of which so many are not yet aware. The reason why this group is successful is because enlightened and knowledgeable members continue with the desire to spread the word on reasons people need to buy gold and silver and other “stuff” that will aide us in the future if the SHTF. I express my heartfelt thanks for your support and input to the group over the last year and wish you and yours a very Merry Christmas and a special holiday season.

My goal is to grow the membership of this group at least another 1000 people in 2012. Growing this group is always a challenge, so if anyone has an idea on how to help, please add your comments below.

We will continue to spread the word on the importance of physical reserves and how we protect our savings by storing a portion of our wealth in precious metals.

As we look ahead to the coming year, we should always remain optimistic in our outlook and not cave under the weight of dreary doom and gloom opinion day after day. To paraphrase Chris Martenson, we know there is a definite outcome to this 40 year fiat money experiment, and it will be the same as has occurred throughout human history. It is simply how we deal with this outcome that matters most.

All hail physical gold and silver!

Kirsty Hogg

Founder of Why Buy Gold? (and Silver!).

The CME Margins Advisory: Manic Monday or Business As Usual?

On November 4th, the CME put out short and obscure margin advisory stating it is raising rates to ensure adequate collateral coverage, apparently to back futures trades to ease the bulk transfer of accounts held by MF Global Holdings customers.


I wanted to discuss the panic that ensued after Zerohedge sounded the alarm Friday, Nov. 4th, about the imminent margin calls predicted for Monday morning and its overall effect on the silver market.  Here's an excerpt from the ZH article in reference to the implications of the fallout of the announcement: “Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America… and the world.”

This message is spreading like wildfire on the social networking sites prompting youtubers to make videos appealing to people to dump their silver contracts first thing Monday morning. Check out this one I stumbled across on Youtube.  It is a very compelling message.... It makes me want to get out of paper...Oh yeah, I already did that early 2008!


Here's Kid Dynamite's take on the announcement.  He writes “... the initial margin is almost always larger than the maintenance margin (initial margin is how much collateral you have to post when you buy the contract. Maintenance margin is lower because otherwise you’d have to replenish your margin every time the contract falls in value – instead you only have to do it when you reach certain “maintenance” thresholds).

So the initial/maintenance ratios were previously greater than 1.0. They are being LOWERED to 1.0. There are two ways for this to happen, obviously: 1) Raise maintenance margin requirements or 2) lower initial margin requirements. If the CME was hiking maintenance margins across the board, it seems that they could have more accurately used the term: “maintenance/initial” ratio to describe the change.”


In response to the on-line reaction, Saturday, Nov 5th, there was a press release from CME to apologize and clarify the previous advisory. "Nov. 5, 2011 -- /PRNewswire/ -- CME Group today is clarifying its notice to clearing firms regarding margins. In light of the issues customers transferring out of MF Global are facing, while still maintaining appropriate risk management protections for the market, CME Clearing is setting the "initial" margin upcharge to zero. This upcharge is normally applied to customer accounts when they are receiving a margin call. The intention and effect of these changes are to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members not to increase them.

This is a short term accommodation to maintain market integrity and provide temporary relief to customers whose accounts have been disrupted by this event. We apologize for any confusion our initial advisory may have created."


The lack of clarity and professionalism in the initial announcement has the CME’s reputation in question.  And in this instance, many people are accusing the CME Group of changing the rules to service their own position.


This is what whistle blower Andrew McGuire had to say about this subject to King World News today “Now it’s obvious that a self regulated organization like the CME has its own clients’ interests at heart and not the interests of the public. So I’m absolutely incensed that any dispersions have been put upon Gensler for any failure to discover the MF Global problem when they (the CME) were actively blocking his request for extra staff. The CFTC has been facing an incredible headwind from the CME and their members to stop any form of progress on the Dodd Frank Act. This is yet another example of the power of the banking cartel and their constant abuse of power.”


Here is another less benign view from an editorial by Bix Weir (Bix is rather radical but I tend to agree with his overall message): "You know what that will most likely mean for silver…ANOTHER MASSIVE SILVER SLAM! The ONLY institutions that can make these kinds of margin deposits without selling off assets are the big banks. VOILA…massive long silver liquidations. On a brighter note, it is likely the LAST silver slam we will have to ride out…EVER! This is the END GAME of 40 years of computer price manipulation. Expect it to get a little crazy”.

I got out of paper early 2008, thanks to the warnings by the likes of Philip Judge, Franklin Sanders, and Peter Schiff et al. I sleep much better now that my involvement in market is to preserve my wealth in inflation proof assets and serendipitously capitalizing on the initial and massive break out they will both make in the coming months/years.  For the people who remain long in physical gold and silver, these are very interesting and exciting times and I smell another potential buying opportunity beginning next week.


I am extremely curious to find out what happens in the market on Monday (Nov. 7th, 2011). Will there be massive liquidation? Or will the market only have small sells offs and basically remain unchanged? I guess I will put an addendum to this entry as it unfolds.


Best to you.
As you know I am not a financial advisor in this jurisdiction or any other. As well, I am not a speculative investor and remain a proponent of physical bullion ownership only; no paper.

EDIT (Nov. 8, 2011):

What an anti-climax! It looks like CME back-pedaled after the amount of complaints received from their initial advisory last Thursday and therefore it was business as usual on Monday.
A couple of things of interest from today:
1) Now that the dust has settled, some may be overjoyed to find out that “CME Is Legally Liable For MF Global Customer Losses”, says Avery Goodman at Seeking Alpha.
 2) A Market Nugget from Debbie Carlson of Kitco.
Market Nuggets: CME Group: Verifying All MF Global Account Transfers Are Accurate, Complete; Collateral In Trustee's Control
08 November 2011, 1:50 p.m.
By Kitco News
(Kitco News) - The CME Group says in a letter to members dated Tuesday that it is working to verify that all account transfers are accurate and complete regarding MF Global’s customer accounts. "When the verification process is completed and we confirm that all monies and positions have been transferred correctly, customers will be given access to cash in their accounts," says the exchange, which had frozen the access to that cash. However, the exchange says all property is subject to the control of the trustee, which is SIPC. "In the ordinary course, he will reduce all assets, including securities, letters of credit, warehouse receipts and other delivery certificates to cash, and make a pro-rata distribution among the commodity customers based on their relative account balances," the exchange says. Customers of MF Global have complained that regulators are treating them as similar to unsecured creditors, rather than clients whose funds were to be segregated from the firm’s money. Their concern is that they will receive just a portion of the cash they had in their accounts.
Debbie Carlson of Kitco News; dcarlson@kitco.com

By Kirsty Hogg

http://www.fundsingold.com/
Goldvestments Copyright © 2011

The Pan Asian Gold Exchange (PAGE) to Destroy the Remaining Gold and Silver Shorts.

Kerry Lutz interviews Kirsty Hogg on September 8th, 2011 about the Pan Asian Gold Exchange. (Article below video).




This year, at the end of June, a new gold exchange opened in Kunming City, Yunman Province China. The Pan Asian Gold Exchange (PAGE) is part of China’s12th five year plan that was released in March 2011.  In communist China, they have a series of five year economic plans dating back to 1953 that are carefully planned and methodically executed.  PAGE is part of a long-term strategy to resurrect Kunming City’s role as a trade interface with India and Southeast Asia. Yunman Province has trading history of about 2400 years and PAGE is part of an initiative to attract investors and restore Kunming as a gateway to Southeast Asia.


There has been a remarkable lack of mainstream media coverage on PAGE. It's been suggested that it is because it is a Chinese initiative as opposed to an American or European effort, as well, there’s not a lot of information available about it on the internet. Even PAGE's official website is quite cryptic.  Furthermore, other Asian exchanges have opened in the past with no dramatic effect on the market.  E.G. Hong Kong and Beijing, CN  This could be why media outlets perceive it as a non-event.  As well, mainstream media does not possess the mindset or responsible journalism to find out how PAGE will be unlike any other gold exchange to-date.

Currently, PAGE is running a 10 ounce mini physical gold contract for the domestic retail market. This contract allows the average retail investor to buy physical gold or set up an account with a brokerage firm and trade futures. This enables all of the customers of the Agricultural Bank of China who are approx 320 million retail customers and 2.7 million corporate customers, to buy and sell these contracts straight from their bank account in Renminbi (RMB is the Chinese currency of mainland China). This could impose a big draw down on the physical market. In fact, Andrew Maguire said “To give a further idea of scale, if just 1% of their customers bought a single 10 ounce contract, that would equate to 1,000 tons of physical gold being drawn down....”

Another important point to make is that International investors will now have access to the Renminbi through these gold contracts.

The most severe impact will be with the international facing spot contract. The spot market is where the real weight of money is in the gold market, and this October, people will be able to buy into a 90 day rolling spot gold contract in Renminbi.  Each contract will be backed 1:1 with allocated gold.  The investor will have the choice to either take delivery of their gold or be paid in Chinese Renminbi.


Six major Chinese banks will fix the gold price every morning at 8am their time.

Until now, the mechanism has been that the futures market in London drives the spot price of gold. The LBMA and COMEX are supposed to have 90% unallocated versus 10% allocated contracts, so for every 100 OZ's of paper gold, there is only 10% allocated backing them. Some gold and silver market experts like Adrian Douglas of GATA suggest there’s even less than that.


James Turk of GoldMoney recently put up a video featuring Ned Naylor-Leyland of Cheviot Management where they discuss the paper market and how it currently drives the physical market but in actuality, it should be the other way around. It is the physical market that the paper market should price itself off of. Even though the physical market is much larger, and it is more logical that the price discovery would be based on physical, the public has become quite complacent in accepting that the futures market controls the spot price.  This is now all going to change with inception of PAGE, and per CFTC hearing whistle blower and bullion trader, Andrew Maguire, “we now have an additional factor to be vended into the supply demand equation. This factor will ultimately destroy the remaining short positions in both gold and silver.”

From an investor stand-point, the advantages PAGE provides are invaluable because it offers a fully backed 1:1 allocated gold contract, and gives people looking to diversify their fiat currencies access to RMB.   What international investor would want to continue to invest in 10% backed paper contracts vs. the 100% physically backed spot contract PAGE is launching? This aspect of the new exchange is of tremendous significance in the international gold market and could put an end to paper gold as well as change the price discovery mechanism for gold. It will be interesting to watch what happens in October when the 90 day spot contracts are available and then measure what impact it has by the end of the year on the markets.

Addendum: I have been updated by one of the people closely involved with PAGE that the exchange may take a couple of months more to be fully operational than expected.


By Kirsty Hogg
http://www.fundsingold.com/
Goldvestments Copyright © 2011

Kerry Lutz Interviews Kirsty Hogg Mid $1700 Gold, US Credit Rating Downgrade and the Decline of the West

I was interviewed by Kerry Lutz on the Financial Survival Radio Network, August 8th, 2011 about mid $1700 gold, the US credit rating downgrade, the decline of the West and whose fault is it? You can listen to the interview below:

Part 1


Part 2


By Kirsty Hogg
http://www.fundsingold.com/
Goldvestments Copyright © 2011

Financial Survival Radio Network - Kerry Lutz and Kirsty Hogg

I was interviewed today on The Financial Survival Radio Network by Kerry Lutz.  This is a discussion about the gold and silver market, gold manipulation, hyperinflation and QE3.



This is my second interview in a bi-weekly series I will be doing with Kerry on the Financial Surival Radio Network. Please send me any questions you have to Kerry Lutz and we can use them for topics on future shows.

By Kirsty Hogg
http://www.fundsingold.com/


Goldvestments Copyright © 2011

The Life Cycle of Money

Many are becoming increasingly alarmed by the way western governments are currently managing fiat currencies. A growing number of analysts and media pundits have been highlighting the debasement of currencies via quantitative easing and other massive money creation schemes worldwide. This Keynesianism on Steroids approach to global economic recovery is fast tracking all nations to ever-increasing rates of inflation. This said, monetary debasement is not a new or recent phenomenon; in fact it is the natural life cycle of money.

There are seven stages in the life cycle of money that every dominant civilization has followed for the past 5000 years of recorded history:

A Free Market Emerges


Societies organize and begin to function with a basic barter system for trading goods. Incipient barter is a direct exchange of goods for goods. Goods are defined as wealth, and wealth is produced when humans apply labor to extract natural resources from the earth. As the civilization progresses, services become valued and are bartered. Other than hard assets, real estate, and sundries, many necessary items are highly perishable, so there is limited savings and investment. In this case, the goods and services that a person barters and the perceived value of those particular entities in the community represents the productive capacity of individuals, groups, and family wealth.

Free Market Money Emerges


After a barter / exchange economy is well-established, a society progress to the concept of free market money and a currency system emerges. Having a recognizable, reliable, and uniform unit of monetary exchange makes it simpler to conduct commerce, business, and trade within and between communities and societies. Traditionally, these monetary systems have been based on hard assets that were highly valuable, scarce, easily commoditized, durable, and easily transportable. Because of this, the primary currencies of choice, for the past 5000 have been gold and silver. Many civilizations have selected precious metals as their natural monetary foundation based on common sense and reason, in many cases independently of each other. Aristotle laid out the following criteria for the perfect money nearly 2500 years ago: It must be durable, portable, divisible and consistent, and have intrinsic value. As such, gold has been determined, over human history to be the best store of value because of its relative scarcity; it can be minted in uniform pieces; it is small enough to transport great distances; it does not tarnish or corrode; and it is easily stored. Although not as immutable or scarce as gold, silver often has served as the primary instrument of monetary trade and exchange, often functioning as the poor man’s gold. .


Government Emerges and Regulates the Free Market

Communal order is needed in a functional society and therefore, some type of government is formed. As societies become increasingly complex, industrial and populous, the government naturally seeks to expand their influence and control over business, commerce, and the market. Laws, rules, and regulations are instituted to regulate and control trade through tariffs, taxes, quotas, and penalties. Taxes are imposed to support the government agenda and as a means to control of wealth. Society is moved away from a free market and operates in a growing regime of regulation of the marketplace and money supply.


Government Monopolizes Money Supply


The government takes control of the money supply and sets up a currency system by issuing official coinage from a central mint. It controls the size, design, weight, and purity of the coinage. The government may issue paper promissory notes redeemable in coinage and decrees these notes are exchangeable for goods or services. This money is called a "fiat" currency, meaning "by decree". Backed by law, the government owns the money and allows its citizens to use it as a medium of exchange. Citizens and banks are forbidden to compete with the government by creating or issuing private money..


Government Debases the Money


Government must increase taxes to support its continuing growth and the citizens object to increased taxation and seizure of their wealth. In order to fund itself and to soften dissent from higher taxes, the government finds itself in a position that in order to maintain social spending, it begins to debase the value of money. Historically governments have shaven off pieces of coins, issued smaller coins, or made coins with less gold and silver content. Eventually it removes all precious metals from the coinage. Ultimately it declares that its promissory notes are no longer redeemable in precious metals. At this point, there is no hard asset backing or basis to the monetary system.

Issuing more money with no precious metals backing allows the government to create money at will for its own purposes. No longer able to support runaway spending, the military / industrial complex, and welfare state entitlements, through taxes, governments print more money into existence and continue to spend. When the money in circulation increases but the availability of goods and services remain the same, the prices for the goods and services increase. The increased money supply results in dilution of the purchasing power of the currency, which is the true nature of inflation, robbing citizens of wealth and savings through decrease in purchasing power. The hidden secret of inflation is that it is really just another tax. If the government can’t raise taxes due to popular resistance, it simply prints money, and passes along the cost of running the state and all its sucklings to the people through inflation.


Non-Confidence and Collapse of Money


Inflation, debt, and deficit increase and citizens realize that the fiat money representing their labor, savings and wealth is rapidly losing its value and purchasing power. By-products of poor money management such as food inflation and shortages, personal debt, and civil and political unrest begin to accelerate. This leads to a confidence crisis and currency collapse.


The Re-Emergence of Gold and Silver as Money


Citizens desire to return to a monetary system more secure and less inflationary. They realize that gold and silver offer safe haven for preservation of value and wealth and an insurance policy against current and future currency debasement. People demand more gold and silver and accumulate the metals as a key component of their overall wealth within the society.

By observing the history of past states and accurately recognizing our current position within the cycle of money, we can make informed decisions and position ourselves to mitigate the risk and maximize the opportunities that come with currency collapse.

Throughout history, even though it is through government intervention and mismanagement of the monetary system that causes the money to enter a cycle that leads to its ruin, the burden of dealing with the negative outcome always rests on the shoulders of the people.

Western governments have debased money without gold and silver backing for the past forty years. Banks are failing or are being bailed out by governments issuing more money. Repeated currency crises, food inflation, rioting, and the overthrow of oppressive governments are on-going. Clearly we have entered Stage 6 of the Life Cycle of Money: Non-Confidence and Collapse.

We now have an opportunity to acquire physical gold and silver at relatively low prices. Gold and silver supplies are limited. As more and more citizens flock to gold and silver to protect their wealth, prices will soar. For that reason, I urge you to consider making physical gold and silver an integral part of your net asset portfolio sooner rather than later.



By, Kirsty Hogg

Goldvestments Copyright (c) 2011 http://www.fundsingold.com

Sources:
A lecture by Philip Judge "Life Cycle of Money" 2010. 

Philip is the author of "Stories from the Desk of a Bullion Banker". 

This entry was also published at 24hGold.