Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
After having the very fortunate opportunity of living in numerous major cities around the world, and while trying to assimilate with various different cultures, I realized that one’s perception of the truth is a matter of interpretation. What I mean by this is that even though you may have been raised to behave in a certain matter or believe in certain things, it doesn’t mean that your way is necessarily the correct way.
And, instead of criticizing and insulting those people who do not believe in the same things as ourselves, instead we should embrace their differences in case there is something we can learn from them. In other words sometimes what we see or hear may not be the truth at all. You may well be asking what this has got to do with precious metals, in particular gold, well I’m going to get to that, so please indulge me for a few minutes.
When I was traveling around the world, I was always amused at the news. Even though the various TV channels would swear that their news is impartial, all you need to do is look at another channel somewhere else in the world and see how they interpret the same event. Sometimes, it is much the same, but often you get a somewhat different picture. As far as I am concerned there is always some bias towards the country where the news channels are located. So, if you are watching an event say in the US, your perception of the truth will largely depend on how the event is interpreted by both the journalist and yourself. If you flew to the other end of the world, you may be startled to see how different the same event might be related.
Since 2001 we have seen some unprecedented events and changes especially in the financial scenario. Suddenly, just to open a bank account can be an ordeal. Sometimes you have to answer the most inane questions. I recall being asked once if the money I intended to deposit was my own money?! And, what was even more bizarre was I was asked to prove it was my own money. Yet, when I asked what proof was required, the banker couldn’t tell me. I know someone who was asked to present proof of his physical address at the very same bank that had been the mortgage holder of his property for more than twenty years! Then on another occasion after arriving in another country, when I wanted to change money at a bank, I was asked to provide proof of my physical address. As I was not accustomed to taking my latest utility bill with me on my various trips, and had not even given this one moments thought. I was appalled when the bank refused to change my money. And, now just to open an account with a stock or futures broker can sometimes test your patience to a limit. And, if you were wanted to make a small cash deposit into any of these accounts, you were deemed to be a money launderer, drug dealer or involved in human trafficking. I would understand the logic if someone walked in with a suitcase containing millions. Frankly, I fail to see any benefit these changes have made to the individual investor.
Then when the sub-prime debacle hit the markets and governments were demanding more stringent regulations, it seemed that the people who were going to be most effected by any new regulations were the people who had nothing to do with this; the individual investor. And, more recently we have seen governments determined to destroy the offshore banking sector, implying that practically anyone with one of these accounts is evading tax. Of course they failed to mention how these centers could be used to protect one’s wealth and that many of the multi-nationals use these centers to make their financial accounting less complicated. Not to mention that many of these centers provide the most efficient form of banking imaginable. Once again, where is the benefit to the individual investor?
My point is, many of us are beguiled into believing that the actions of governments are done in our own interest. They can change laws that have been in place for years, introduce new taxes whenever they want and adjust monetary policies as and when they see fit. Often, the consequence of these actions is a gradual erosion of our wealth. Up and until last year one of the best examples how government polices can totally destroy a currency was Zimbabwe where their dollar was not even worth the piece of paper it was printed on. And while the government continued with their senseless monetary policies, many of their citizens suffered while their leaders continued to live the high life. In other words, when the chips are down individuals have to do whatever they can to protect their wealth before it erodes to nothing of value. While I admit the Zimbabwe debacle is an extreme case of government mismanagement and I doubt their example will be followed by any other country, it does nevertheless offer people an illustration of how a government can totally destroy ones wealth. In these changing times anything is possible, and investors should be prepared for further government mismanagement and misinformation.
For years gold has been a store of value and a way to protect your wealth. It has also been a hedge against a declining US dollar as well as a hedge against inflation. No one can take it away from you and it has a value every minute of the day all around the world. For the last 9 years, it has protected the wealth of investors worldwide, despite the fact that we have seen financial turmoil on an unprecedented scale as well as huge currency devaluations. This is the plain simple universal truth no matter what.
As we move into 2010, while I believe that we will see a further recovery in global markets, I am not going to listen to all the rhetorical speeches suggesting that things are back to normal, and will continue to advocate the inclusion of precious metals, in particular gold and silver, to all investment portfolios. There is resurgence in the role gold plays as a global currency. This stems from a general mistrust of the current global financial and currency situation. However you want to perceive the current scenario is up to you, but for me I put my trust in gold, and silver for that matter. While gold continues to correct, I believe that we will see higher prices during the course of this year, and that long-term investors should use these pullbacks, as buying opportunities.
About the author David Levenstein is a leading expert on investing in precious metals .He brings over 29 years experience in futures, equities, forex and bullion. And, although he began trading silver through the LME in 1980, when it comes to gold, he has traded gold bullion, gold coins, gold shares, gold ETF, gold funds and gold futures for his personal account as well as for clients. Over the years, David has been published in dozens of publications and has appeared on CNBC and Summit TV (South Africa), and is a regular guest on JSE Direct, a premier radio business channel in Johannesburg, South Africa. He is also a regular commentator on www.kitco.com and www.mineweb.com David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali. For more information go to: www.lakeshoretrading.co.za Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.
