China Government’s Secret New Gold Investment

By Travis Johnson, Stock Gumshoe, July 31, 2009

Now that Matt Badiali’s S&A Oil Report has renamed itself the S&A Resource Report, it shouldn’t be any surprise that he’s looking not just at the energy companies that have been a big part of his focus over the past several years, but at gold.

Lately, I’ve been seeing a lot of his ad that talks up a potential 500% gain from some Chinese gold miners …

Now there’s a promise, eh? Gold and China, probably the two most-teased investment themes of the past two years, and here we are combining them together. Not bad!

The promise this time is that Chinese state sponsorship is about to help investors in some specific miners reap incredible rewards.

Here’s how the ad launches:

“China Govt’s Secret New Gold investment could pay 500% over next 2 years …

“The specifics of this opportunity have NEVER been written about in The Wall Street Journal, The New York Times, or any other U.S. newspaper or magazine.

“Yet this could be the easiest way to make a fortune over the next few years. The last time the Chinese Gov’t created a similar investment (2002) it returned 1,084%.

“Princeton University investing legend Burton Malkiel says: ‘With the government in control, [this type of investment] will never fail.'”

That quote from Dr. Malkiel, by the way, is from his 2007 book, From Wall Street to the Great Wall. And it is, of course, not about the specific stock teased here — the full quote is “Those who favor SOEs [state-owned enterprises] point out that with the government in control, these companies will never fail.”

He goes on to present the counter-argument on that same page, by the way — noting that many investors think the smaller, entrepreneurial companies without state ownership are more potent growers … but more importantly, he goes on to say that diversification in all kinds of companies in key, and “most should consider only diversified portfolios of Chinese stocks rather than individual companies.”

But where’s the fun in that?

The ad goes on to tell us that China has gone gold-crazy, with the government adding to its gold reserves — and that, while it’s all very secretive, the theory essentially can be summed up thus: They’re trying to spur successful gold mining so they can buy it at home and not have to deal with the global markets. At least, ...

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