Railroad Companies: Good, Better, Best [View article]
A clear and useful analysis.
1. I completely agree with point #1. As peak oil approaches, fuel costs will rise and rails will look wonderful compared with trucks and planes.
2. The article focuses on freight rail. However, passenger rail will be the big money maker at some point - unless the government kills it. If this is the case, the Eastern rails will have a clear advantage because of the higher population density.
3. If you look at the long term chart of the six major rails, starting int 1980, you will see that CNI has the best return. It currently has the highest ROI and profit margins. It is also the most expensive. It is an Eastern rail with the inclusion of the old Illinois Central. the next best returns are the NSC and the CSX. these are both Eastern. BNI leads UNP and CP. UNP is the worst.
Perhaps UNP is laggard because of the southern pacific acquisiton?
4. CNI and BNI are currently the most expensive. CSX was extremely expensive but has recently declined. CP is cheap and sells practically at book value.
5. If you look just a geography you might see that the Eastern ones have an advantage in terms of density and less maintenance. Shorter distances between points means less maintenance. Also fewer mountains to go up and down - saving on fuel costs.
6. Eventually, I see the government taking the rails back over again when they recover. The US government loves to destroy successful industries (i.e., rail - decades ago, auto - in the 1950's and 1960's, oil - currently, big Pharma) and reward inefficient ones (i.e., banks and autos currently).
Why Physical Gold Is Superior to Mining Stocks for Long-Term Investors [View article]
this is an excellent article that ALL investors should read and follow.
having TEN percent of the your liquid wealth in physical gold locked up in a safety deposit box or buried in a concrete bunker makes sense. this is an insurance policy for your entire wealth and your future family members inheritance.
in these times it would seem to be a no brainer. unfortunately, a common sense writer like this would be dismissed as a fanatical 'gold bug' by the popular TV commentators and people in the 'know'.
BPT has a really limited life due to the massive depletion of prudhoe bay. the current high price for BPT doesn't allow for the massive depletion. The high yield is really a mirage.
COS on the other hand is cheaply priced, has massive reserves, and is politically safe in Canada. Oil is likely to rise from these depressed levels and COS will resume their high dividends.
Obama is not likely to go after the Canadian oil sands. I think in a few years, the USA will be scrambling for what ever oil it can get and it will not have the luxury of boycotting canadian oil sands because they produce a lot of CO2 emissions versus conventional crude. Also, in a few years, Canada's conventional crude production will be low enough that they will be forced to keep most of their oil sands production at home. They are mitigating the CO2 problem by building windmills (suncor). Politically, oil sands will have few enemies in Canada.
I do not trust this market either and I'm resisting the urge to jump back into it after mostly getting out back in October. It appears that the Dow could crater to 5000 or less, and gold could rise to $5,000 or more. When this happens is anyone's guess. It took FOUR years for the market of 1929 to reach its bottom - about 90% lower!!! There were suckers during every rally that trusted the market. Those who thought this was just another recession, those who believed their own BS about a new era, those who just needed a little action ...
Remember the old line - Bull markets climb a Wall of Worry and Bear markets fall on a Slope of Hope.
If hope is the only reason for buying now, then forget it. By the time this bear market is over the Dow of 2012 - 2013 might have the purchasing power of the DOW(2009) at 1000!!!!
It appears with the BO administration that government is just as incompetent as it was during the 1929 - 1934 period. Forget Roosevelt, Hoover was the real villan who launched "The New Deal". He just didn't market it as such and make it huge. Don't worry. This time BO will not make the mistake of modesty.
With the government throwing caution to the wind, you might not really see Dow 1000, but through miracle of inflation it might feel like Dow 500.
For those who read it BS and care, here is my suggested portfolio
1. 30% gold and silver - take possession 2. 20% cash - spread it out among many currencies and take possession of some of it. 3. 30% fully paid for real estate 4. 20% speculative
if your resources are limited make the speculative part cash or gold.
Exxon is a poor choice right now. It is just overpriced and pays a very small dividend. It has held up because it is perceived as a risk free investment. It will likely continue to hold up because of its massive balance sheet and superior management. However, when oil prices begin to move up again, Exxon will likely just stay flat.
Better to buy a depressed company that can double when oil goes back up than Exxon. None of the oil majors are anywhere near bankrupcy. So buy a depressed one, collect 5%+ and wait for oil to go back up.
Analysts on Canadian Oil Sands' Higher Than Expected Distribution Cut [View article]
COS cut the distribution farther than was necessary. I suspect a $0.25/unit distribution was quite possible. This reflect's the company's conservative outlook and reluctance to take on debt for either expansion / environmental remediation or distributions. Also, COS was able to pay this level of distribution years ago when oil prices were in the $30's and the upgraders were not even finished.
Capital costs are less of a factor at COS than at other oil sands producers. The COS site is mostly finished and major upgrades have not really been started (they will not be until the oil price recovers). Also, both labor costs and nat gas costs have fallen along with oil. Unlike, many gloom and doomers out there, I don't see the combination of low oil prices and high nat gas and high labor costs existing together for very long.
The Canadian Trust tax and the excessive royalties are already baked into the cake and are not likely to get any worse. They can only get better.
Finally, low oil prices are really just a mirage that will soon fade away as the storm of oil depletion hits. Demand destruction is almost destroyed, but supply depletion continues to eat away at the margins.
Mexico's oil production is depleting at 8% per year and is already down 40% from the peak year of 2005.
Russia's oil production is down.
North Sea production has been halved since 1999.
US Gulf of Mexico production has likely peaked. We won't really know until the recession is over.
Middle East oil production is down and has most likely peaked.
Given all this COS is a little jewel in Canada. BUY, BUY, BUY !!!
Flush Kinross Likely Looking for a Deal with Yamana - Credit Suisse [View article]
combining with Kinross would be a dumb move for Yamana for a couple of reasons.
1. Yamana is quite depressed and currently under valued. With gold rising, it is only a matter of time before AUY starts up towards $20/share again. If gold declines, AUY can just defer the start up of its new mines and keep the gold in the ground. It is pointless in the long run to deplete mines at a high rate when gold is low or falling. I suppose Kinross would accelerate development - hedge is forward forever at low prices and take on tons of debt in the process.
2. Yamana just went through a big merger with Meridian Gold. Lots of new shares and overhang with weak holder who wanted out. They are likely 'out' now - hedge fund liquidations. AUY should start rising again - why get mixed up in a new merger?
3. The Yamana management are empire builders. I suspect Kinross would sack most of them.
4. Kinross is deeply involved in Russian gold. Yamana is not. That is why I bought Yamana and not Kinross. This combination makes no sense to a risk averse investor who wants to avoid Russia. The Russian's are famous for allowing the Western company to build the mine, sink the costs and then Nationalize it for the 'common good'.
Algonquin Power: A Promising Renewable Energy Income Investment [View article]
The other problem that algonquin has is a Quebec problem. they have at least three dams in Quebec that have to be shored up according the provincial government. This is not a corporate crusher, but is quite material to Algonquin's weak balance sheet.
As a result, it is high unlikely that any dividend growth will appear for long time (so get used to 2 cents per share per month - at best!). At current prices this isn't too bad (i.e., 10 - 12%). I doubt that Algonquin will have much capital for acquistions either. Power prices are quite low in Canada 2 - 3 cents per kilowatt-hour and rarely rise much.
The debt is also quite high because of the high distribution payout. In fact, for years they were merely borrowing or eating away at their capital just to pay the distribution (Can you say Bernie Madoff??). They were always in acquistion mode - never in shoring up the dam mode. Now these dummies are stuck with their finger in dike (almost literally!). The best thing that could happen is that alternative energy gets hot, hot, hot! and these dummies sell the company.
Over the longer term (> 5 years) if algonquin isn't sold off, the dividend should pay $1.25/share and the cash flow can pay down the debt and be used to fix the dams. I might get my money back in FIVE years and I purchased the stock at $4 canadian!!!!
I bet all this makes you want to just jump right into algonquin.
Algonquin Power: A Promising Renewable Energy Income Investment [View article]
I think the information regarding the purchase of Clean Power Income Trust is WRONG. Fortunately, I do not think Algonquin was successful in its purchase of Clean Power. Someone else got stuck with it and Algonquin got a one time break up fee payment instead.
After analysing 10 years worth of annual reports and looking at most of their acquistions and debt / equity issues (and after losing half of my investment - so far), I'm NOT so positive about Algonquin.
The management of this company is extremely poor. They took a business that a child could run and ruined it with poorly timed and dilutive acquistions. In the beginning it was water running over rocks to generate power. The only issue was -- how much water was there and how strong were the rocks. Not content with that business, they branched out into power plants that burn waste, water supply businesses and windmills.
They always issued too big of a distribution and ran up $500 million of debt in 10 years. The total cash flow is only about 90 million.
Also, Now the advantage of Trusts is gone in Canada so taxes will have to be paid.
If this turkey gets back to $4.00 canadian - I'm gone at least for awhile. Clean energy is UNPROFITABLE energy.
Will Chesapeake Outperform the United States Oil Fund ETF? [View article]
David Bui, Some commodities can sell below the cost of production for years - even decades (witness silver - primary extraction without base metals is much, much higher than current prices) because of massive above ground inventories or because they are renewable (i.e., corn). However, oil CANNOT sell below its cost of production for very long.
Huge oil inventories do not exist (daily production is always a sizeable fraction of the total inventory) and oil is NON Renewable. Thus, no company can for very long pump and sell at a lower cost than it takes to produce. Fully paid for wells may be allowed to deplete, but new ones will not be drilled or they will be capped. The remaining reserves are way to valuable to just 'give' away.
With their stock trashed, CHK has few acquistion opportunites and less opportunity for capital. Thus, they must cut their development budget and wait for higher gas prices, and deliver into their hedges. Gas and oil prices will rise when the hedges run out.
As an additional topic I would suggest a Google on "Hotelier's Oil Pricing model". Way back in the 1930's he worked on an elegant (and apparently incorrect) model for oil prices. There is no rhyme or reason to oil prices, but the cost of new production is a fair gauge as to the value of remaining reserves.
The oil consensus is WRONG again. Just a few short months ago when oil was $140+/bbl and going to $200/bbl the experts forecast ever rising prices on the back of supply shortfalls. After all geological limits were overtaking supply and forcing it down through depletion at a rate of 5% - 8% per year.
Clearly, then NO ONE factored in DEMAND! WOW!!!
Now the price is down, and the 'experts' are forecasting even greater loss of demand and gigantic increases in supply. What a crock! The loss of demand was about 2 million bbls per day. With gasoline back to $1.50/gal all of this demand will soon be back. Meanwhile supply is still declining due to depletion and few, if any, new supply is coming to market next year. We will soon be bumping back up against a peak oil supply of about 86 million bbls per day. If this goes on long enough, the world peak of 86 million bbls per day will NEVER be acheived again due to massive depletion of major oil fields.
Clearly, NO ONE is factoring LOSS of Supply into their equation! WOW!!
As for OPEC - history isn't going to repeat. This time around they will CUT and force the price back up, perhaps not instantly, but within six months to a year. Here are some good reasons why this will be the case.
1. OPEC has a larger marketshare than it did 25 years ago. The world is more dependent on them than ever before.
2. China and India are new customers than didn't exist 25 years ago to any great extent.
3. The Russian economy collapsed faster in the late 1980's than its oil production. This allowed for greater exports. Now both the Russian economy and oil production are falling due to depletion. This could still be a factor, but not the BIG factor it was 20 years ago.
4. The North Sea was new and a high producer then. It is now almost gone. If OPEC cuts, it cannot make up the difference.
5. Mexico and the Gulf of Mexico were new and high producers. These are now almost gone. If OPEC cuts, they cannot make up the difference.
6. The 1973-74, the 1979-80 and the 1991 oil price spikes were ALL political events and mostly War related. The 2005-2007 price spike was NOT War related. Iraq's oil production remained around 2.5 million bbls per day throughout the period. It fell briefly in 2003 at the start of the War, but was restored. The cause of the 2005-07 price spike was geological depletion - production could not be increased fast enough to keep up with demand.
Canadian Royalty Trusts in Need of an American Revolution [View article]
The Canadian government mostly screwed their own investors and themselves. The stocks of these trusts have dropped 50, 75 even 90% since the halloween massacre. The tax take is quite small from the new higher taxes, but the loss of capital gains is gigantic - $50 billion and counting. Add in the royalty increases and environmental mandates, there will be little left over for the investors in oil sands.
I don't know the exact dollar amount for gold five years hence nor do I know the exact dollar amount for the S&P five years hence. NO ONE knows!
However, here are few things I think I know...
1. The US and World economies are going to decline in real terms over the next FIVE years. This might happen fast (two years) or slower (5 to 10 years). The US economy needs to be completely restructured away from speculation, consumption, government and services and back into manufacturing, mining and agriculture. This of course doesn't mean the former are going to disappear, but only shrink some.
2. If deflation strikes hard, the stock market will fall faster than gold. The dow jones / gold ratio used to be 40 to 1. Now it is about 12 to 1. It is on its way to 2 to 1 or less. Under this scenario the dow jones would fall to about 1000 - 1500. This is the 1929-1934 scenario. Under this scenario a prudent investor should sell all and wait in cash or safe bonds. What constitutes safe is a good question.
If inflation strikes hard (1970's style), both the market and gold will likely increase. The market only marginally, but gold will skyrocket - $10,000 / oz.
If hyperinflation occurs (unlikely) ... we are all toast anyway.
Under inflation cash and bonds lose value, stocks are mostly stagnant.
3. Bottom Line - In five years I expect to be able to purchase up to 10 times as many shares of companies than I can now. These companies will be of higher quality than the current ones. In order to survive the fire, balance sheets will have to be deleveraged and management focused on short and long term survival rather than pure enrichment of themselves.
David, Rather than produce an article with an unsubstantiated claim (apparently purposely false), why don't you spend the time actually researching the situation and make your best estimate of how much silver production is likely to decline as a result of base metal production drops?
Financially strong miners will close down the marginal mines. However, weak miner might not. The fixed costs may be huge and the variable costs might be small. Under those conditions the miner may 'have' to produce the commodity at or above cost for some time just to get the cash flow to pay fixed expenses. This kind of scenario makes it hard to make an accurate estimate of how much production will be shut in.
Railroad Companies: Good, Better, Best [View article]
1. I completely agree with point #1. As peak oil approaches, fuel costs will rise and rails will look wonderful compared with trucks and planes.
2. The article focuses on freight rail. However, passenger rail will be the big money maker at some point - unless the government kills it. If this is the case, the Eastern rails will have a clear advantage because of the higher population density.
3. If you look at the long term chart of the six major rails, starting int 1980, you will see that CNI has the best return. It currently has the highest ROI and profit margins. It is also the most expensive. It is an Eastern rail with the inclusion of the old Illinois Central.
the next best returns are the NSC and the CSX. these are both Eastern. BNI leads UNP and CP. UNP is the worst.
Perhaps UNP is laggard because of the southern pacific acquisiton?
4. CNI and BNI are currently the most expensive. CSX was extremely expensive but has recently declined. CP is cheap and sells practically at book value.
5. If you look just a geography you might see that the Eastern ones have an advantage in terms of density and less maintenance. Shorter distances between points means less maintenance. Also fewer mountains to go up and down - saving on fuel costs.
6. Eventually, I see the government taking the rails back over again when they recover. The US government loves to destroy successful industries (i.e., rail - decades ago, auto - in the 1950's and 1960's, oil - currently, big Pharma) and reward inefficient ones (i.e., banks and autos currently).
Why Physical Gold Is Superior to Mining Stocks for Long-Term Investors [View article]
having TEN percent of the your liquid wealth in physical gold locked up in a safety deposit box or buried in a concrete bunker makes sense. this is an insurance policy for your entire wealth and your future family members inheritance.
in these times it would seem to be a no brainer. unfortunately, a common sense writer like this would be dismissed as a fanatical 'gold bug' by the popular TV commentators and people in the 'know'.
Voices About Oil [View article]
COS on the other hand is cheaply priced, has massive reserves, and is politically safe in Canada. Oil is likely to rise from these depressed levels and COS will resume their high dividends.
Obama is not likely to go after the Canadian oil sands. I think in a few years, the USA will be scrambling for what ever oil it can get and it will not have the luxury of boycotting canadian oil sands because they produce a lot of CO2 emissions versus conventional crude. Also, in a few years, Canada's conventional crude production will be low enough that they will be forced to keep most of their oil sands production at home. They are mitigating the CO2 problem by building windmills (suncor). Politically, oil sands will have few enemies in Canada.
Where Are Jim Rogers, Marc Faber and Doug Casey Investing Their Money in This Market? [View article]
Do Not Trust This Market [View article]
Remember the old line - Bull markets climb a Wall of Worry and Bear markets fall on a Slope of Hope.
If hope is the only reason for buying now, then forget it. By the time this bear market is over the Dow of 2012 - 2013 might have the purchasing power of the DOW(2009) at 1000!!!!
It appears with the BO administration that government is just as incompetent as it was during the 1929 - 1934 period. Forget Roosevelt, Hoover was the real villan who launched "The New Deal". He just didn't market it as such and make it huge. Don't worry. This time BO will not make the mistake of modesty.
With the government throwing caution to the wind, you might not really see Dow 1000, but through miracle of inflation it might feel like Dow 500.
For those who read it BS and care, here is my suggested portfolio
1. 30% gold and silver - take possession
2. 20% cash - spread it out among many currencies and take possession of some of it.
3. 30% fully paid for real estate
4. 20% speculative
if your resources are limited make the speculative part cash or gold.
avoid BONDS!
avoid Stocks for now
Big Oil: Dark Skies Ahead? [View article]
It will likely continue to hold up because of its massive balance sheet and superior management. However, when oil prices begin to move up again, Exxon will likely just stay flat.
Better to buy a depressed company that can double when oil goes back up than Exxon. None of the oil majors are anywhere near bankrupcy. So buy a depressed one, collect 5%+ and wait for oil to go back up.
Analysts on Canadian Oil Sands' Higher Than Expected Distribution Cut [View article]
Capital costs are less of a factor at COS than at other oil sands producers. The COS site is mostly finished and major upgrades have not really been started (they will not be until the oil price recovers). Also, both labor costs and nat gas costs have fallen along with oil. Unlike, many gloom and doomers out there, I don't see the combination of low oil prices and high nat gas and high labor costs existing together for very long.
The Canadian Trust tax and the excessive royalties are already baked into the cake and are not likely to get any worse. They can only get better.
Finally, low oil prices are really just a mirage that will soon fade away as the storm of oil depletion hits. Demand destruction is almost destroyed, but supply depletion continues to eat away at the margins.
Mexico's oil production is depleting at 8% per year and is already down 40% from the peak year of 2005.
Russia's oil production is down.
North Sea production has been halved since 1999.
US Gulf of Mexico production has likely peaked. We won't really know until the recession is over.
Middle East oil production is down and has most likely peaked.
Given all this COS is a little jewel in Canada. BUY, BUY, BUY !!!
Flush Kinross Likely Looking for a Deal with Yamana - Credit Suisse [View article]
1. Yamana is quite depressed and currently under valued. With gold rising, it is only a matter of time before AUY starts up towards $20/share again. If gold declines, AUY can just defer the start up of its new mines and keep the gold in the ground. It is pointless in the long run to deplete mines at a high rate when gold is low or falling. I suppose Kinross would accelerate development - hedge is forward forever at low prices and take on tons of debt in the process.
2. Yamana just went through a big merger with Meridian Gold. Lots of new shares and overhang with weak holder who wanted out. They are likely 'out' now - hedge fund liquidations. AUY should start rising again - why get mixed up in a new merger?
3. The Yamana management are empire builders. I suspect Kinross would sack most of them.
4. Kinross is deeply involved in Russian gold. Yamana is not. That is why I bought Yamana and not Kinross. This combination makes no sense to a risk averse investor who wants to avoid Russia. The Russian's are famous for allowing the Western company to build the mine, sink the costs and then Nationalize it for the 'common good'.
Algonquin Power: A Promising Renewable Energy Income Investment [View article]
As a result, it is high unlikely that any dividend growth will appear for long time (so get used to 2 cents per share per month - at best!). At current prices this isn't too bad (i.e., 10 - 12%). I doubt that Algonquin will have much capital for acquistions either. Power prices are quite low in Canada 2 - 3 cents per kilowatt-hour and rarely rise much.
The debt is also quite high because of the high distribution payout. In fact, for years they were merely borrowing or eating away at their capital just to pay the distribution (Can you say Bernie Madoff??). They were always in acquistion mode - never in shoring up the dam mode. Now these dummies are stuck with their finger in dike (almost literally!). The best thing that could happen is that alternative energy gets hot, hot, hot! and these dummies sell the company.
Over the longer term (> 5 years) if algonquin isn't sold off, the dividend should pay $1.25/share and the cash flow can pay down the debt and be used to fix the dams. I might get my money back in FIVE years and I purchased the stock at $4 canadian!!!!
I bet all this makes you want to just jump right into algonquin.
Algonquin Power: A Promising Renewable Energy Income Investment [View article]
After analysing 10 years worth of annual reports and looking at most of their acquistions and debt / equity issues (and after losing half of my investment - so far), I'm NOT so positive about Algonquin.
The management of this company is extremely poor. They took a business that a child could run and ruined it with poorly timed and dilutive acquistions. In the beginning it was water running over rocks to generate power. The only issue was -- how much water was there and how strong were the rocks. Not content with that business, they branched out into power plants that burn waste, water supply businesses and windmills.
They always issued too big of a distribution and ran up $500 million of debt in 10 years. The total cash flow is only about 90 million.
Also, Now the advantage of Trusts is gone in Canada so taxes will have to be paid.
If this turkey gets back to $4.00 canadian - I'm gone at least for awhile. Clean energy is UNPROFITABLE energy.
Will Chesapeake Outperform the United States Oil Fund ETF? [View article]
Some commodities can sell below the cost of production for years - even decades (witness silver - primary extraction without base metals is much, much higher than current prices) because of massive above ground inventories or because they are renewable (i.e., corn). However, oil CANNOT sell below its cost of production for very long.
Huge oil inventories do not exist (daily production is always a sizeable fraction of the total inventory) and oil is NON Renewable. Thus, no company can for very long pump and sell at a lower cost than it takes to produce. Fully paid for wells may be allowed to deplete, but new ones will not be drilled or they will be capped. The remaining reserves are way to valuable to just 'give' away.
With their stock trashed, CHK has few acquistion opportunites and less opportunity for capital. Thus, they must cut their development budget and wait for higher gas prices, and deliver into their hedges.
Gas and oil prices will rise when the hedges run out.
As an additional topic I would suggest a Google on "Hotelier's Oil Pricing model". Way back in the 1930's he worked on an elegant (and apparently incorrect) model for oil prices. There is no rhyme or reason to oil prices, but the cost of new production is a fair gauge as to the value of remaining reserves.
Oil: A Slippery Slope Ahead? [View article]
Clearly, then NO ONE factored in DEMAND! WOW!!!
Now the price is down, and the 'experts' are forecasting even greater loss of demand and gigantic increases in supply. What a crock! The loss of demand was about 2 million bbls per day. With gasoline back to $1.50/gal all of this demand will soon be back. Meanwhile supply is still declining due to depletion and few, if any, new supply is coming to market next year. We will soon be bumping back up against a peak oil supply of about 86 million bbls per day. If this goes on long enough, the world peak of 86 million bbls per day will NEVER be acheived again due to massive depletion of major oil fields.
Clearly, NO ONE is factoring LOSS of Supply into their equation! WOW!!
As for OPEC - history isn't going to repeat. This time around they will CUT and force the price back up, perhaps not instantly, but within six months to a year. Here are some good reasons why this will be the case.
1. OPEC has a larger marketshare than it did 25 years ago. The world is more dependent on them than ever before.
2. China and India are new customers than didn't exist 25 years ago to any great extent.
3. The Russian economy collapsed faster in the late 1980's than its oil production. This allowed for greater exports. Now both the Russian economy and oil production are falling due to depletion. This could still be a factor, but not the BIG factor it was 20 years ago.
4. The North Sea was new and a high producer then. It is now almost gone. If OPEC cuts, it cannot make up the difference.
5. Mexico and the Gulf of Mexico were new and high producers. These are now almost gone. If OPEC cuts, they cannot make up the difference.
6. The 1973-74, the 1979-80 and the 1991 oil price spikes were ALL political events and mostly War related. The 2005-2007 price spike was NOT War related. Iraq's oil production remained around 2.5 million bbls per day throughout the period. It fell briefly in 2003 at the start of the War, but was restored. The cause of the 2005-07 price spike was geological depletion - production could not be increased fast enough to keep up with demand.
Canadian Royalty Trusts in Need of an American Revolution [View article]
Gold Bugs Beware [View article]
However, here are few things I think I know...
1. The US and World economies are going to decline in real terms over the next FIVE years. This might happen fast (two years) or slower (5 to 10 years). The US economy needs to be completely restructured away from speculation, consumption, government and services and back into manufacturing, mining and agriculture. This of course doesn't mean the former are going to disappear, but only shrink some.
2. If deflation strikes hard, the stock market will fall faster than gold. The dow jones / gold ratio used to be 40 to 1. Now it is about 12 to 1. It is on its way to 2 to 1 or less. Under this scenario the dow jones would fall to about 1000 - 1500. This is the 1929-1934 scenario. Under this scenario a prudent investor should sell all and wait in cash or safe bonds. What constitutes safe is a good question.
If inflation strikes hard (1970's style), both the market and gold will likely increase. The market only marginally, but gold will skyrocket - $10,000 / oz.
If hyperinflation occurs (unlikely) ... we are all toast anyway.
Under inflation cash and bonds lose value, stocks are mostly stagnant.
3. Bottom Line - In five years I expect to be able to purchase up to 10 times as many shares of companies than I can now. These companies will be of higher quality than the current ones. In order to survive the fire, balance sheets will have to be deleveraged and management focused on short and long term survival rather than pure enrichment of themselves.
Silver Production Falls by 70% [View article]
Rather than produce an article with an unsubstantiated claim (apparently purposely false), why don't you spend the time actually researching the situation and make your best estimate of how much silver production is likely to decline as a result of base metal production drops?
Financially strong miners will close down the marginal mines. However, weak miner might not. The fixed costs may be huge and the variable costs might be small. Under those conditions the miner may 'have' to produce the commodity at or above cost for some time just to get the cash flow to pay fixed expenses. This kind of scenario makes it hard to make an accurate estimate of how much production will be shut in.