2008-2009 World and Financial Prophecies

Mahendra Sharma was born in Northern India in a state called Rajasthan in 1967 in a Hindu family. He has a Bachelor of Science Degree in Business Management, with a Major Concentration in Finance.

Mahendra is best know to me as a author and I recall meeting him the first time at a gold conference in Vancouver British Columbia in the year 2003. He presented me with his book 2003 World Prophecies, and it outlined many events that did indeed prove accurate.

Recently, we spoke and he sent me his latest book, "2008-2009 World and Financial Prophecies." First, it must be noted that his forecast for the gold and silver markets are very similar to what I see going forward for the rest of this year.

Mahendra's view of the U.S. dollar stands alone from what I have been able to determine. This gentleman does not alter his work based upon what is popular, but rather gives you his viewpoint in clear unambiguous terms, take it or leave it.

I finished reading the book last night and suggest anyone looking for an overall perspective on commodities, currencies, real estate, and a country by country analysis should consider this book.

More information about Mahendra can be found at his website: http://www.mahendraprophecy.com/default.asp

More information about his book can be found here:
http://www.mahendraprophecy.com/orderform_2008.asp

Like myself who donates proceeds of my book sales to Habitat for Humanity, Mahendra donates some of the proceeds of his book sales to assist HIV/AIDS infected children.

In closing, let me Thank Mahendra Sharma for his time, effort, and generosity.

The Silver Investor

Mining Company Risk

Mining Company Risk
By David Morgan
May 07, 2008

In last weeks column we discussed some risks associated with the junior mining sector. In this week’s article it is important to recognize what has just been reported about mining operations in Venezuela, an article posted on International Business Times yesterday stated, "Hecla Mining’s Isidora gold mine is the third operation in just one week in Venezuela’s mineral rich Bolivar State to suffer a roadblock. Venezuelan workers have stalled operations of the country’s largest gold miner, citing poor working conditions and demanding that President Hugo Chavez nationalize the mine."

In the March issue of The Morgan Report (TMR) we interviewed Laura Skaer of the Northwest Mining Association to look at some potential mining law changes that are proposed in the United States. But we went on to state that we forecast more difficulty in the mining sector on a worldwide basis. The Hecla situation will most likely be resolved and we are not out to make more of it than is evident, but we consider it our duty to give you the big picture and the long-term perspective. Most people do not follow the mining industry closely but some proposed changes have potential long-range effects.

The U.S. House of Representatives passed House Resolution 2262, "The Hard Rock Mining and Reclamation Act of 2007," on November 1, 2007. This bill is a disaster for the United States mining industry and potentially other jurisdictions as well. This bill will create serious problems for the mining industry in the United States if it becomes law.

There are many significant changes in HR 2262, but some of the high points are that it imposes a 4% gross royalty on existing operations with commercial production and an 8% gross royalty on all other claims, subjecting the Unites States to significant takings litigation. Why? Because the United States Supreme Court has ruled that valid, unpatented mining claims are exclusive possessor interests in federal land for mining purposes, which entitle claim holders to extract and sell minerals "without paying any royalty to the United States as owner." Union Oil Co. v Smith, 249 U.S. 337, 348-349 (1919). So as this proposed change moves through the Senate, we expect to see several modifications made. However, this does not mean that the compromises made will be beneficial to mining in general.

Our thinking is that the royalty will be knocked down for existing miners and perhaps made into a net royalty rather than a gross royalty. This still would put many projects into jeopardy and it could hurt the mining industry. Additionally, our guess is that new mines or start-ups would be charged at a higher proportion. If our guess were correct, this would make it even more difficult for a new project based in the U.S. to be built. It could put further pressure on new projects, and we think, possibly, that companies that already are mining might be at an advantage over those that need to be developed.

Our concern went beyond the United States when in our report we asked, “What is to prevent Mexico, South America, Canada or Australia from looking at the U.S. as a guideline for them to impose new mining legislation that profits government and hinders the mining industry?”

So, we strongly appeal to our readers to take action, get on the North West Mining Association Web site and send letters to those who represent you if you live in the U.S. We also suggest that those in the industry take our lead and get this message out to the press, radio, and even the business television audience. This, in our view, is the most important issue in the mining industry today, and hardly anyone is talking about it. It might just be one of the reasons the junior miners are doing so poorly. Perhaps the market senses some very detrimental legislation over the next few years.

Mr. Morgan has followed the silver market daily for over thirty years. Much of this Web site, www.silver-investor.com, is devoted to education about the precious metals.

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May 2008 --Morgan Report

The precious metals markets have been moving in extreme fashion recently. We took a step back and looked at our Asset Allocation model and found most of our solid investment had done as well as the HUI and two of the group (we normally hold 6-8 total) had year over year returns of 50% in one case and nearly 70% in the other. Certainly those that follow our model cannot be too unhappy since our approach is for serious precious metals investors, and serious money requires serious analysis.

Having stated the above facts, our junior mining portfolio has been changing rapidly. We were stopped out of three positions last month and one more hit our stop sell this month. We are not giving up, and we are not being stubborn either, but we have found a few companies that we truly think will be providing superior returns in the months ahead once this market regains strength.We commented on some recent news pertaining to silver applications in nano-technology, proposed mining law changes, and some of the more interesting issues presented by this years Silver Yearbook 2008 presented by the CPM Group in New York.

Finally we spoke about the recent investment conference in Stuttgart Germany, and the trip to Argentina hosted by two fellows that were responsible for discovery of the Mina Martha mine.

The Silver Investor

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Junior Mining Company Risk

May 01, 2008
Dear David,

Thank you very much for your hard work and excellent research. Your level approach to the metals has long been a beacon to follow.

Thank you.

I am writing to inquire about your opinion of the coming need for companies to follow the FASB-157 accounting rules. There has been some speculation on Web forums (such as PrudentBear Chat) that there could be some fall out in the coming months as companies which have been calling derivatives and other "mark to model" assets cash and short-term cash on their balance sheets.

What level of risk is there that the junior mining companies might be bitten by this bug-bear? I would imagine that any producing mines could simply point to their ounces in production as an offset to any suddenly weakened assets that come to light via FASB-157, but wonder what impact this might have on the junior sector as a whole.
Kind regards,
Chris

Comment: Thank you for the kind words. A lot of what makes my work so enjoyable is hearing from subscribers such as you. Soon after the initial fallout of the derivatives mess last fall, which several prominent resource sector writers such as Jim Sinclair and Greg McCoach (and I) have been railing against for some time, a number of the mining companies we follow were quick to assure shareholders that they did not have exposure to these financial time bombs.

You are correct to wonder if, as the new accounting rules take effect, this might be a cause for concern. My studied response is as follows: First, I don’t believe that our sector has seen the level of participation in these investment vehicles that has been taking place in, say, financial houses, pension plans, and banks. Second, there is a simple way to find out . . . go to their Web site and see if they mention their involvement, or lack thereof, in these derivatives. If they don’t have a statement, call the IR of the company in question and ask them point-blank. I think you will find them to be upfront about it. (And if they aren't, that tells you something too, doesn't it?)

Actually I am much less worried that the sector will be tarred with this brush than I am about the ability of many of these “blue sky” explorers to raise the cash they need to keep drilling. Money is going to be harder to come by, it will cost more to get it, and shareholders will expect to see tangible results for the expenditures. If a company is not looking to either start production by themselves, JV with a major on a project, or at least have some very good-looking property to prove up over the next 12-18 months, they could be in real trouble.

My longer term view is as expressed in the past columns, we will see higher precious metals prices by year end, but may see the summer doldrums again this year. Four known metals personalities were recently on a “Metals Roundtable” sponsored by Financial Sense News Hour. Each of us were asked to forecast the gold and silver price by the end of the year, and without exception all of us saw gold over the recent high of $1000 per ounce, and silver over $21 per ounce.


Mr. Morgan has followed the silver market daily for over thirty years. Much of this Web site, http://www.silver-investor.com/, is devoted to education about the precious metals.

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Not Enough Silver?

In my article “Silver is too bulky,” we examined a hypothetical look at the average baby boomer placing ten percent of their net worth into the precious metals, split 50/50 gold and silver. At the time, silver was trading over $15 per troy ounce. Since publishing that article silver has traded over $21 and is now trading between $17 and $18.

Many in the mainstream understand portfolio diversification, true diversification as outlined in the Ibbotson Study, which states that precious metals are the only asset class that truly moves opposite to stocks and bonds. Now let us look a little deeper into what a ten percent allocation to precious metals would mean. First, we examine just how many boomers exist in the United States. The statistics vary, and for our purposes we will use 75 million baby boomers in the U.S.A.

Is there enough silver if just ten percent of the baby boomer population were to allocate five percent of their net worth into silver, could it be accomplished? This might seem like a totally absurd question, yet the answer may begin to sink into the collective unconscious of today’s investor. When the Secretary of the Treasury uses the words “financial crisis” more than five times in a recent speech, the attraction to precious metals becomes more urgent.

In the “Silver Is Too Bulky” article, we found the medium net worth of the boomers was about $180,000. So ten percent of this would be $18,000, but remember, for the purposes of this discussion we are going to divide our ten percent allocation to both silver and gold on a fifty-fifty basis. This means $9,000 into gold, and $9,000 into silver!

If ten percent of the boomers allocated $9,000 to buy silver, we would have 7.5 million (ten percent of the boomer population) times $9,000. Pretty simple arithmetic; the product is $67.5 billion. But wait just a moment! Something must be erroneous—the amount of investment grade silver (bullion and coins)* is about one billion ounces.

At our $18 per ounce, that is obviously $18 billion to purchase the entire silver supply, including all .999 fine bullion and silver coins! Perhaps now you can appreciate why the most enlightened financial planners talk in gold terms only; either they know the silver market is pitifully small (unlikely), making it extremely attractive, or they feel safer with gold because gold has become mainstream.

Consider that boomers are defined as being born between 1946 and 1964. During that entire timeframe each and every boomer had a form of money that is far different from today. The United States of America was using dollars backed by silver.

Take a look at the Silver Certificate below.




Notice that this is a certificate and not a “note.” Many of you have recently asked about taking possession of your having your stock certificates mailed to you as a precaution to the possibility of further financial problems.

This certificate represents that there was a dollar* on deposit in the Treasury of the United States of America. Additionally this dollar was payable to the bearer of this certificate on demand. In 1964 the M1 money supply was 153 billion. This would represent a silver supply of 153 billion Dollars (371 4/16 grain (24.1 g)) pure silver. In familiar terms 371.25/480 = 0.7734 troy ounces. And in 1964, the United States held 1.2 billion ounces of silver, not counting the 139.5 million ounces held as a strategic stockpile. Source: The Silver Institute and Silver Bonanza, page 89.

What kind of silver wealth would that represent? Approximately sixteen ounces of silver for every boomer born. That’s correct—each boomer had 16 ounces of silver. However, that was then, and here we are today: the official silver holdings of the United States Treasury is gone, even the strategic stockpile is gone.

Along the road from silver-backed currency to today’s electronic miracle money, a funny thing happened. Nearly one hundred percent of these very same boomers believe with all their might that not only is silver not money, most don’t even know that at one time (during their birth and prior) the only lawful money was silver.

Silver Coins

Silver Coins can be broken down into several subsets, and for the purposes of this article some, not all, of the major broad categories will be examined.

One of the main subsets is bullion coins. These mainly comprise silver coins struck by government mints around the world and include Silver Liberties (U.S.), Silver Maples (Canada), Silver Pandas (China), and some other lesser-known bullion coins. Most of these coins are tightly held and many are dispersed so far and wide that bringing them back to the market is a fantasy. As an example, some percentage of these coins are held as single pieces, where a single coin was given as a gift of some type. In those instances it is very unlikely that these single unitholders are waiting for the day to cash in on their silver investments. The total amount of Silver “Eagles” minted since inception (1986) to present is approximately 160 million ounces. If we are generous and round up to 200 million we can account for Silver Maples, Pandas, and Australian Silver mintages.

Another subset is loosely defined as “coins.” These are known in the trade as medallions although they have all the characteristics of coins but are minted privately and often carry the name “silver rounds.” Many of these “rounds” are nothing more than a convenient way to invest in silver and sell for very close to the spot price of silver. However, there are also many that carry very large premiums as they are low mintage and used in many instances to signify a certain group, club, event, historic moment, or what have you; these are normally keepsakes and in most instances will not be coming back to the marketplace.

The junk silver market is another arena of silver coins. These are coins that were minted by various governments around the world that trade for their silver content. The amount of “junk” silver is small at this point because much of this silver has been melted down and refined into silver bullion for industrial purposes. However, there is an active market for this type of silver and it is usually the lowest premium form of silver available for investment. Almost all of this silver is marked as “investment” and willing to come back to the market at some price.

The last subset we will discuss is the numismatic market, which is the rare coin market. This is the collector market and is certainly part of the overall picture. These coins will not come back to the market for their silver content. They will continue to trade among silver coin collectors and investors, but this subset does not represent any significant amount of silver rushing back into the marketplace. In fact, the opposite is true: this silver (admittedly small) is not coming back to the market to fill industrial demand.

David Morgan

*Dollar =three hundred and seventy-one grains and four sixteenths parts of a grain of pure silver. See coinage act of 1792

Mr. Morgan has followed the silver market daily for over thirty years. Much of this Web site, http://www.silver-investor.com/, is devoted to education about the precious metals.

Subscribe To The Silver Investor Today. Details Here.

IRA Investors Increasingly Turning To Precious Metals

IRA Investors Increasingly Turning To Precious Metals

By Allen Sykora
DOW JONES NEWSWIRES

Demand for precious metals in self-directed U.S. Individual
Retirement Accounts is growing for many of the reasons other
investors have been drawn to the metal - a hedge against
inflation, dollar weakness and credit-market worries.

Purchases of gold and other metals for IRAs make up a minute
portion of overall investment demand, and observers said many
investors don't realize they can use gold for IRAs. Nevertheless,
observers have noticed a significant pick-up in gold IRAs over the
last half year.

"Even though it was available, it was not very well promoted by
anyone," said David Morgan, an independent precious-metals analyst with Silver-Investor.com who will be speaking about metals IRAs at the Money Show in Las Vegas next month. "It's rather cumbersome for bullion dealers to set it up."

But with the credit crisis, investors are looking for ways to buy
gold, and retirement accounts make it possible to do so with funds
they already have, he continued.

George Cooper, senior account executive with Centennial Precious
Metals, has been handling gold IRAs for 17 years. Back in the
mid-1990s, he said he might get one such call every month or two.

Interest in IRAs using precious metals began picking up around
2000, as the ratio of the Dow Jones Industrial Average versus gold
hit an all-time high, Cooper said. Interest further picked up after
the Sept. 11 terrorist attacks in the U.S.

The combination of gold hitting $1,000 an ounce, the Bear Stearns
bailout and the arrival of the April 15 income tax filing deadline
spurred further investment. Cooper said suddenly he was getting up to 50 inquires daily and was working 12-hour days to keep up with the demand.

Trey Hightower, trust officer who oversees precious-metals IRAs
with the retirement-services company GoldStar Trust, said the
firm's precious-metals transactions climbed 523% during the last
eight months, and there are 6,500 to 7,000 current precious-metals accounts. The value of metal in retirement accounts through GoldStar as of Dec. 31 was $312 million, out of total retirement accounts of $770 million.

Many of the rules governing these accounts came about through the Taxpayer Relief Act of 1997, he said.

The Entrust Group, another company specializing in self-directed
retirement plans, just recently began offering metals IRAs to
clients, among other investment options.

Hugh Bromma, CEO of Entrust, said investment in metals IRAs is "small but growing." His firm handles roughly 50,000 total retirement accounts, and only about 1% include metals. However, he said, metals inquires are now five to 10 times greater than a year ago.

All of the precious metals - gold, silver, platinum and palladium - can be purchased for IRAs. However, Bromma said, probably 90% of the interest is in gold.

Gold IRA Money Tends To Be Rollovers, Transfers

Observers say the bulk of the money going into precious-metals
IRAs comes from transfers or rollovers from already-existing
retirement accounts, rather than new IRAs. For one thing, the
annual limit for new IRA contributions for people age 49 and below
is $5,000, which doesn't allow for much gold at $900 an ounce.

IRA metals demand tends to come from more sophisticated investors looking to put a percentage of their retirement savings into gold. Most advisors typically recommend only a small portion of a portfolio should be in precious metals, as they offer a hedge against inflation and disruptions such as the recent credit-market crisis. Thus, a couple of account executives reported having handled gold IRAs of anywhere from $500,000 to $800,000.

Centennial doesn't do such IRAs for less than $12,000 because they are both capital and labor intensive, Cooper said. It can take 10 days to two weeks to set up a gold IRA, starting with the
paperwork to transfer money from an investors' current IRA trustee. Gold must be insured and physically shipped, before going into storage.

"There are real costs associated with this," Cooper said. Still, Hightower described the process as "easy" for investors themselves. There is a form to open a new account, a transfer request if the money is coming from another IRA or a direct-rollover election form if the funds are coming from an employer plan, and finally a metals-direction form telling the firm which bullion dealer an investor wants to use.

Analysts and account executives said tax treatment of gold IRAs is the same as other retirement accounts. The government, however, has strict rules governing them, including the quality of coins or bullion.

American Gold Eagle gold coins are allowed for IRAs, Morgan said. Other gold coins must be "at least .995 fine," or 99.5% pure. This means Canadian Gold Maple Leafs, Australian Kangaroo Nuggets, Austrian Philharmonics and the Perth Mint's Lunar Series are also on the list, Morgan he said. Additionally, .995 fine gold bars are approved, fabricated by refiners approved by Comex.

Metal must be physically stored through an approved depository, meaning investors cannot keep coins in a closet.

Account executives and analysts said IRA metals investors have the option of taking their distributions in either cash or by delivery of the metal itself.

IRA investors tend to hold precious metals for the long haul, just as they do in stocks, Morgan said.

He suspects there would be substantially more precious-metals IRAs if all first-time IRA holders realized they could include precious metals.

"But since almost everyone opens up an IRA at a bank and brokerage house, they don't tell them anything about owning gold," Morgan said.

It's conceivable that this demand some day could be significant
enough to impact metals prices, even if only 10% of all IRA
holders put only 10% of their investment in precious metals,
Morgan suggested.

-By Allen Sykora, Dow Jones Newswires; 541-318-8765;
allen.sykora@dowjones.com

Ted Butler Interview with SilberInfo

Just got back from Stuttgart Germany, and my Silver Friends sent me this interview with the Famous Ted Butler...

Ted Butler, independent US Silver Analyst gave silberinfo the following exclusive interview:

silberinfo:
Ted, since our last interview of April 2007, the price of silver rose around 30%. What do you consider to be the main reasons for this development?

Ted Butler:
There are so many reasons, it’s hard to pick just one. Among them would be the general institutional investment flow into commodities and natural resources by the index funds and the silver ETFs specifically, the continued demand for raw material from China and developing countries, trading on the COMEX, and continued investor demand in physical silver.

silberinfo:
Lately one can hear a lot that the silver market is not in a supply deficit anymore. This is also coming from some analysts that used to be very bullish on silver earlier. What do you think about that, are they right or is this just another attempt to manipulate the price of silver?

Ted Butler:
I look at it differently. I think the old familiar structural deficit ...

The rest of the interview can be read here...

http://www.silver-investor.com/pdf/silberinfo-InterviewTedButler.pdf

Don't forget we post audio files every week on the Silver Market

See: http://www.silver-investor.com/audio.html

Enjoy the Interview,

The Silver Investor

http://www.silver-investor.com/