[Ed. note: Here is our latest contribution from longtime reader Myron Martin. He has agreed to our trading restrictions, and, as usual, we have not reviewed, approved or screened his stocks or ideas, and the opinions he expresses are solely his own. Many of the stocks Myron covers are microcap “penny stocks” that can move dramatically with or without fundamental reasons, so please be cautious. Myron’s past commentaries can be seen here.]
Public opinion as we enter 2014 seems to be divided between two factions. First, those who “see the glass as half full,” and fervently hope and pray that things will soon return to normal (whatever that is). That group hangs on every pronouncement from the President and the government that things are getting better, that the housing market is improving, jobs are being created, deficits are being reduced from previous highs, and we can soon expect our lives to improve as a rising tide lifts all boats.
Countering that rosy picture are what have been dubbed the “doom and gloomers,” who see the proverbial glass as “half empty” because government statistics are not reliable, and politicians lie and only protect the interests of their wealthy supporters (particularly bankers), whom they rely on to get re-elected in safe government jobs where they can prosper on inside knowledge and ensure themselves of a cushy retirement. Quite a contrast in outlook, so maybe you are asking, where do I fall on that divide?
Long term, I am bullish about the future and consider myself a realist, meaning I am not swayed by political rhetoric, partisan politics, or self-serving commercial interests. My personal focus is “digging deep” to get at provable truth, based on history and mathematics as a foundation on which to apply common sense and sound logic and reason.
The opinions to which I give the most credence are those who have “been there and done that,” particularly successful businessmen and entrepreneurs who have been at the forefront of advancing our quality of life with innovation, critical or outside-the-box thinking, contrarians who are not afraid to take a stand against a self-serving establishment.
One can not help but wonder whether our situation as a nation would not be much better had more such successful people stood for office, as opposed to lawyers who love nothing more than enslaving the people by more and more confusing legislation, rules and red tape that hinder free enterprise and entrepreneurship that expands economies and provides jobs. I am all for less government and more private initiative to create jobs that add to our productive capacity, instead of the burdens imposed by mostly parasitic bureaucrats that suck the blood out of otherwise viable businesses with red tape and punitive taxes.
With that as a background, consider the reality check found here.
As a lead-in to this column’s focus on preparing for more difficult times ahead, I would first of all like to address our biggest enemy, irrational fear! That can take many forms. Maybe you have a reluctance to pull the trigger for fear you might lose money on a stock purchase, which is certainly possible. The important point is to expect it and cut your losses short while letting your winners run. Another fear many have is the government confiscating any gold or silver you might accumulate. The rational thing is to realize that the government is already confiscating your wealth through inflation and has been ever since the Federal Reserve Act was enacted in 1913. That escalated in 1971 when Nixon abolished the gold standard. In recent years we have approached the “end game” where the dollar is in danger of losing its status as the world’s reserve currency and the wealthy are accumulating “hard assets” to protect their wealth. This video makes a good case for why there is not likely to be a repeat of the 1933 Roosevelt confiscation of private gold and silver holdings.
While I can not promise every future column will have three choices to invest in (more than any other newsletter I am aware of in over 10 years in the business), currently there are so many undervalued companies to report on, I do not see myself running out of interesting companies to profile for the rest of the year. This time I am reporting on the number one gold stock in terms of volume of accumulation over the past quarter without a real serious breakout in price, though it is poised to do so once a takeover is finalized and investors realize what an incredible value it really is based on its assets. For balance, I am also profiling a not-well-known silver company that is considered by many analysts to be the lowest-cost silver producer in Mexico, with excellent management and reserves that can be ramped up in production once the market price justifies it. Finally, I am reporting on one company I do not yet own, but have been following for years, and that is poised to go into production of a base metal where as many as six major mines are likely to be shut down over the next couple of years with a predicted supply shortage developing. I refer to zinc, and as some of you may know, zinc and lead mines almost always produce silver as a by-product that lowers mining costs. With silver expected to at least double in 2014 according to the best experts in the business, this one justifies being early to catch the likely increases in silver and zinc pricing.
I first bought B2Gold Corp. (BTO.TO BTG) exactly two years ago for reasons that have only become stronger with the passage of time. The name at first glance may sound a little strange, but not when you come to understand the story behind it. Years ago I also owned Bema Gold, who sold their previous holdings to Kinross Gold Corp. (K.TO KGC) for $3.5 billion in 2007. Based on subsequent but unforeseeable events, Kinross overpaid, which is why its stock price is now in the $5.00 range compared to the $21.00 at which I sold. The good news is that the successful Bema management team used the profits to launch a new company and repeat their success, i.e. “Bema 2.” They obviously couldn’t use the name Bema again, hence it just became B2. Just an interesting sidelight to the company, very capably led by CEO Clive Johnston. Do you hear an echo? Yes I like these “second generation” plays, much like Balmoral Resources, Ltd. (BAR.V BALMF), from my previous column, but this one is much bigger, already producing from three mines, with total production for 2014 estimated to fall in the range of 395,000 to 420,000 ounces of gold.
B2Gold is a very unique company, a hybrid if you will, because exploration and mine building/production are really two different businesses requiring different skills and mindsets, but with their previous experience, they already have the people in place to do both. And, with a cash flow of $100 million cash and credit, they are in a position to make good acquisitions in today’s depressed markets without overpaying, as so many bigger companies did in years past. This means that recent acquisition Volta Resources (I owned it before takeover, increasing my B2Gold holdings) is now a 100% owned subsidiary of B2Gold. As such, it can be almost immediately accretive, instead of writ