 Crystal Clear
Mike Hoy
February 25, 2005
Let's just assume for a moment that you had a crystal ball; let's
also assume that crystal ball was letting you in on its secrets
and was revealing to you that certain stocks and certain industries
were about to begin a journey that would give you returns of
10-15 times on your investment over the next 3-5 years. What
would you do and what would your strategy be?
I have to believe that very few of you would have any doubts
as to exactly what your plan of attack would be. You would step
up to the plate, invest your money and wait for payday. Without
a doubt, you would climb on board and have the ride of your life.
Most of you would be able to make enough profit that the dreams
you have today would easily be able to be realized at the end
of this ride; assuming of course that the money is worth anything.
The important point to this is the fact that you would not allow
short term price volatility to stand in the way of the end objective.
This is the type of mindset that allows an individual to get
from where we are today to where we want to be in the end. We
must recognize that we are a very small minority in the huge
investment pool. In the end I believe that everyone will want
a piece of what we have today. You must remember that the total
value of all precious metal companies is roughly one hundred
billion dollars. What will this industry be worth when those
entities, who possess hundreds of billions of dollars, decide
to diversify into gold and silver as a foundation for their reserves,
versus holding paper, whose overall quantities, seems to multiply
faster than horny rabbits?
I believe that 2005 will be the year that the rest of the world
will finally begin to gain an understanding of what economic
debt, trade deficits, growth in third world countries, such as
China and India, and a falling US dollar are all about. The list
can go on and on but I think you see my point. The world is approaching
the point in time where the standards that have been accepted
as normal for the last three decades are about to undergo a facelift.
The point of all this is real simple; the rubber band has very
little elasticity left in it. For three decades the US has had
a free ride in comparison to the rest of the world when it comes
to playing the game by the same rules the rest of the world has
to play by. There has never been any question that the policies
followed by this country and others like it, could only end with
an outcome other than what our leaders have led us to believe.
There is a day of reckoning when the issue of debt and the further
creation of debt are called into question.
This is not rocket science, anyone willing to learn the truth,
with an open mind, already understands this. Many people seem
to be of the belief that the US is different and the events that
go on in the rest of the world can't happen here; or those currently
in power and making the rules have the ability to dictate their
own end, wrong! Not only can they happen here but when the do
happen here the reality of the situation is that those earlier
events will pale in comparison.
Let us take the recent events in Argentina; there is an Argentine
bond due in 2008 with a coupon of 15%. The government is attempting
to redeem these bonds for $.25 on the $1.00. Do you understand
what this means? To put it bluntly, there are a whole lot of
poor investors that are going to get only a quarter of their
principal back. Can this be writing on the wall?
Now let's look at the greatest debtor nation in the world; but
things are different here. What happened in Argentina can't happen
here, can it? Why doesn't Argentina just do what the US does?
Why don't they just print more paper? The answer is pretty simple.
They can't print more paper because no one wants to own it. Do
you see a change in the appetite for foreigners when it comes
to the willingness to buy more US paper and hold on to it as
a reserve currency? Seems to me that Japan and Italy just issued
the US a "very polite Margin Call" dealing with the
dollar; in essence they are putting the US on notice. China has
made it crystal clear that their tastes have changed. Think about
what these dollars are going to be spent on and also the impact
their liquidation will have on interest rates. Things are changing
and it is crystal clear to those who open their eyes and their
minds.
What really blows me away is when I see those in office, who
are running the greatest deficits in the history mankind, stand
up in front of the cameras and tell the listening public how
"fiscally responsible they are." They just don't get
it! They have put the citizens of the US between the proverbially
"rock and the hard place."
I could carry on for hours about the reasons why we have our
problems; but I won't and that is not what this piece is about.
This article is about the fact that those who have our debt are
changing their habits and they are going to cash those dollars
in and put them to work where the outcomes will benefit their
own best interests rather than the interests of the US. We see
this in the fact that China is already spending dollars to buy
the natural resources to fund their growing and insatiable needs.
They are entering the 21st Century and acquiring the assets and
the way of life that the "Smith's and Jones's" have
accepted as normal. This new way of life is going to consume
a whole lot of natural resources, which simply do not exist in
the necessary quantities to satisfy this growing demand. As a
result, these countries that have amassed trillions of dollars
are beginning to spend them for their own well being. They are
beginning to take the steps necessary to guarantee their own
needs; who do you think is paying for it and who do you think
they are trying to secure the future consumption of those assets
from? This is the first step.
The next step will be to exchange those investment dollars, that
just seem to increase in numbers and decrease in value, into
an asset that will hold its value under times such as these.
Historically, gold has not been an investment to make money but
to preserve the value of ones assets. The fact that gold has
a limited supply, versus the unlimited expansion of fiat paper,
is the reason why gold and silver has their best days in front
of them. Until I can see a point in time where are leaders are
able to show me that they are willing to take the steps to balance
our checkbook and encourage the citizen to save I will have nothing
but contempt for our current policies and a steadfast desire
to own investments in the precious metals.
A monumental event has recently occurred with the Governors of
the Mexican Provinces unanimously stepping up together and backing
the re-monetization of silver. This is very important and the
consequences of this act cannot be seen as anything other than
the beginning of a new era. You might think of this as the first
"domino." This is a huge step and again it is a crystal
clear signal that the mistaken ways of the last three decades
are about to revert back to the true norms of fiscal responsibility.
What does all this mean? Again this is a very simple question
to answer. What it means is that we are in the infant stages
of this bull market in precious metals and natural resources.
We must realize that our numbers are miniscule in relation to
the where they will be in the years to come. I always like to
compare it to a room full of people where all the people are
on one side of the room and I am alone on the other side. I have
no doubt that the exodus from their side of the room to mine
is on the way. It is like the first lifeboat on the Titanic being
filled with lucky survivors. Very few of them realized, at the
time, the urgency of having a seat in that boat. Very few of
the passengers believed that the "unsinkable Titanic"
could sink! Kind of like the NASDAQ in 2000.
The fundamentals behind natural resource ownership become clearer
each and every day. What we must realize is the fact, in the
end, that we are all individually responsible for the decisions
and investments that we make and with proper due diligence and
work we can make intelligent and informed choices; or suffer
the consequences.
When I reflect on the circumstances and events surrounding my
investments I know that the fundamentals have never been better
or more obvious. I believe the value presented in many companies
today, as a result of successful programs, possess value far
in excess of what the current market price reflects. I follow
the bulletin boards of a couple of companies and I am amazed
at the whining and complaining that goes on. To be honest I have
to confess that I love it because I know from past experience
that this is pure opportunity.
Now let's go back to that crystal ball; after briefly discussing
the timely fundamentals that currently exist in the world today
and understanding that the numbers of investors, who are even
remotely in touch with these fundamentals, are miniscule, at
best; do you really have any doubt about the prospects for large
capital gains in the future? If the future of the precious metals
and natural resources is as bright, as I believe it is, then,
I am also forced to believe that the future prices of these natural
resources will be an extension of the highs that were reached
in the late 1970's and early 1980's. If this is correct then
I believe the initial assumption of 10-15 times on your money
may be conservative in this unfolding bull market.
Many of you may think I am nuts to think this way but common
sense and logic leave me no choice. The games that have been
played for years with hedge funds, derivatives, and companies
like Fannie and Freddie are about to end. I believe hyper-inflation
will be our leader's answers to these problems and in the end
that will only make matters worse. I will be correct in my assumptions
simply because there shall be no viable alternatives for investors
to flock to for safety.
As the urgency to liquidate dollars and real estate becomes crystal
clear, down the road, the only question that one needs to answer
is where is the money going to go? The precious metals and natural
resources will win by default. There will be no other alternatives!
The question of alternatives exist today, but as time moves forward
each of these alternatives will be eliminated as viable, do to
the unfavorable circumstances that will surround them; such as
rising interest rates.
I find it very difficult to comprehend that the total value of
all gold and silver companies is less than $100,000,000,000.
This total is 1/3rd of Microsoft's Market Cap. and 1/4th of GE's
Market Cap.; think of the funds that will become available to
enter the precious metals markets and the natural resource markets!
Think of all that money being spread around the few companies
in the metals and resource sectors. Still think I'm nuts?
Do you begin to see what that crystal ball is showing you? Do
you really think that these people who are trying to trade the
precious metals and precious metals stocks really have a clue
of the opportunities they will forfeit as a result of being caught
on the sidelines or sold out too early when these stocks take
off? If you could understand this, do you really think that you
would be concerned with the current prices of these stocks? Do
you think you would be concerned with anything other than what
it takes to increase the size of your position? This is how I
view weakness and I love it. I have been able to take advantage
of special situations, and I am thankful for the opportunity.
The only question that I continually ask myself is the question;
"am I in the right stocks?" This is the toughest of
all questions and only time will give me the correct answer to
that question.
If you all remember, my number one position and savings account
is Novagold Resources ng. I feel pretty good in knowing that
we have just begun the next leg of this great bull market in
the metals and natural resources and my number one position is
performing as though it was steroid enhanced.
Remember, do your homework; read, learn absorb as much knowledge
as you can about the companies that you own. There is no substitute
for knowledge.
For those of you who believe that bonds will be a place to hide;
then I want you to answer one question I have about interest
rates. When individuals are financially moving backwards; do
the creditors lower their interest rates or do they raise them?
I want you to show me a credit card company that lowers your
rates if you miss a few payments because your financial position
has changed for the worse; good luck!
As far as nations go, do not forget Argentina; that 15% coupon
at $.25 on the dollar is a current rate of return of 60%. If
you think that interest rates will fall in the next big recession
then I have news for you. Of course the powers that be will hyper-inflate
until there is no tomorrow and I believe this will be our future
for several years.
Yeah, I believe the long term future is "Crystal Clear"
and the short term price fluctuations in stock prices should
be viewed as long term opportunities.
For those of you on my e-mail list you should have received an
e-mail article from me in the last few days; if you did not receive
the e-mail then you need to reply to the e-mail address below
as there is a problem with your current e-mail address on my
list. Include your proper e-mail address; if you would like to
include your name, phone number and the state of residency I
would appreciate it. I plan on getting to know as many of you
as I can as I believe 2005 offers a wealth of opportunity for
those who want to take advantage of the opportunities at hand.
I am very excited about what my "Crystal Ball" is telling
me.
-Mike
Mike Hoy
email: mhoy@neb.rr.com
321gold Inc
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