United States Corporate Tax Rate Flawed Companies Relocating Policies clinton buffett rule takeovers

The average corporate tax rate among 20 competing markets is under 20%, but in the United States this number is 35%.
A 2016 report by Ernst & Young found that a reduction in that rate to the more competitive level of 25% would have "prevented foreign takeovers of 1300 companies".  This doesn't even account for the losses attributed to tax inversions; Fewer companies relocating is a double blessing for the United States because
1) the federal government would take in more tax revenue without having to raise the rate on remaining companies.
2) becomes more attractive to foreign entities interested in relocating their legal domicile to a more tax friendly jurisdiction.  Because America is such a large market with many net benefits this should be considered the limiting factor and thus consequential.

Between 1986 and 2016 the number of US companies ranking among the world's top 500 by revenue fell from 218 to 128.  To maintain tax revenue, the country has had to raise the rate on the remaining companies - this hasn't helped the situation which has gotten out of control : $300 billion worth of companies taken over in 2016 highest in almost two decades.

Points to consider when voting in the next election: Policies and business


My opinion

• since when does a bankrupt nation have the luxury of choosing expensive energy? Clinton wants to add trillions more in debt to build the infrastructure needed to produce energy at a rate of 80+ cents per kwh when coal and gas is only 25 cents.  The transition to alternative forms is the reason Nova Scotia has the highest utility rates in Canada.
• The Trump Plan will lower the business tax rate 35%->15% and eliminate the corporate alternative minimum tax.
• unlike Trump, Clinton is not proposing a full overhaul of the tax code.  her plan is intended to make sure the wealthy pay their "fair share" in income tax. Under her the code more complex, particularly for high-income earners who might or might not meet the Buffett Rule (every individual and company making more than $250 thousand have to pay a minimum of 30%); they could also be subject to her proposed 4% income surtax on income over $5 million.

Palladium Is Widely Used, Similar to Platinum and A Lot Cheaper than Gold & Platinum Group Metals (Rhodium) so Bullion Investment Should Increase; 2011 Production Down 5.4% but Automotive Demand Up 6.7% (Norilsk, Anglo Platinum, North American Palladium)

        Palladium is a widely used durable and versatile metal. Though useful in plating jewelry, clothes fasteners and engine systems (aircraft and automotive) most of the demand comes from industries that require catalysts (mainly catalytic converters, useful due to its light weight, high boiling point, is an oxidizing agent) and versatile metals used in plating conductive materials; In electronics, palladium is preferred over nickel and platinum (plating the electrodes of capacitors is either alone or palladium in conjunction with silver); For plating electrodes, the only alternative to palladium is nickel but nickel has its limitations, it can only be used in less demanding applications. In automobile circuits, palladium holds silver plated conductive tracks in place. (Platinum today: Electric Components) Some types of jewelry prefer palladium to gold/platinum for reasons which include color (44% whiter than platinum), weight (38% lighter than gold), hardness (harder than gold meaning that even at high purity it's highly resistant to scratches), and price (cheaper than gold and platinum). Even with those advantages the jewelry industry uses most of it only as a hardening and whitening agent that's alloyd with gold (white gold can't be made without platinum group metals like palladium which is notable considering that white gold is gaining popularity particularly among brides preferring white gold wedding rings). The process of transforming yellow gold to white gold is made easier when gold-palladium alloys are used because gold and palladium are soluble in one another. Palladium is also used to purify hydrogen gas because when heated, the metal allows hydrogen to diffuse through it, a process that's made easier by the metals' high melting point.
       Other info: The Spanish were among the first to discover it when they mined for silver in Colombia. Palladium was first isolated by WH Wollaston in 1803, at the same time he discovered Rhodium. In late 2010 George Soros affiliated fund, Soros Fund Management raised its stake in Platinum Group Metals Ltd (one of Canada's largest platinum group metals exploration companies) to 9.73% from under 1%. Platinum Group's primary asset is the Western Bushveld Complex in South Africa (74% interest/20 year mine life @ 275,000 ounces/yr but the mine will cost over $400m & take two years to construct); Platinum Group Metal's shareholders include JP Morgan and TD Asset Management. The ETF Physical Palladium Shares (PALL) holds over $500M worth of palladium (in terms of bullion weight, the etf's holdings are presently 6X more than they were just 4 years ago).

Investment Options: ETF'S - Top pureplay options are NYSE:PALL Palladium Silver Shares ETFS and NYSE:LPAL VelocityShares 2x Long Palladium ETN.  PALL holds around 700,000 ounces of the white metal but has exceeded one million ounces as recently as 2011 (holdings increased with the dramatic rise in palladium prices).  VelocityShares ETN is relatively new; ETN's are debt instruments so they are not considered great options for long term buy and hold investors (why VelocityShares holdings of palladium are wildly inconsistent).  VelocityShares began trading mid October 2011.  Diversified ETF options Zurich Cantonal Bank, or ZKB ETF has holdings of palladium (387,257 ounces) and platiunum (366,957 ounces).

The number 1 source of demand is vehicle manufacturers who make use of its capabilities as a catalyst in catalytic converters. The catalyst is required to stimulate an oxidation reaction that ultimately converts toxic combustion byproducts to carbon dioxide and water (reduction of NO to O and N is by rhodium).
Palladium accounts for 90-95 % of precious metals used in catalytic converters (95% for gasoline/20% in diesel powered vehicles) and even more noteworthy, palladium's share of diesel catalysts rose from 7% in 2007 to 20% in 2009. Each catalytic converter uses 4 grams of palladium and platinum. Palladium shares many characteristics with platinum, not surprising given that palladium is one of only six transition metallic elements comprising the Platinum Group of the periodic table (the other four being rhodium, ruthenium, osmium and iridium). Among their similarities: all are great catalysts, are hard metals making them resistant to scratches. They also have high boiling points and are noted for their electrical properties. As for platinum, its share of diesel catalysts fell to 80% compared to 86% in 2008 owing to the increased popularity of palladium. Between June 2010 and June 2011 3.1m oz of platinum was used by automakers (compare that to 5.4M ounces for palladium) however jewelry demand for platinum waned (15% less, bringing it down to 2.4M ounces; palladium jewelry demand fell 20% to 0.6M ounces), that's in contrast to late 2008/2009 when lower prices boosted demand by jewelry 70% with growth recorded in China. (Northram Platinum Ltd July 2011 Annual Report. Angloplatinum 2009 Report) With regards to rhodium, South Africa produces 60% of the extremely reflective/corrosion resistant platinum group metal ranking just ahead of Russia. In 2009 the spot price of rhodium dropped like a rock; it averaged only $1,509/oz that year after averaging $5,174/oz the year before. In 2009 gold was the only metal with an iso currency code to avoid a price decline (averaged price). One of rhodiums key uses is in the production of nitric acid (nitric acid is one of the compounds usedby jewelers to verify whether or not something is real gold). Supplementary info Trends in the gold to silver & gold to platinum ratios Palladium demand by end-market : auto catalysts (54%), electronics (14%), investment (9%), dental (9%) & jewelry (8%). (Stillwater Mining 2010 annual report)

In 2010, 80% of the world's palladium came from Russia (2.7-2.9 million ounces, steady from 2008 to 2009 but down 16% from 2006) and South Africa (2.485M oz same as the previous year but down 11.3% from 2007). South Africa is home to some of the biggest platinum-palladium mines in the world namely those in the region of the Bushveld Igneous Complex (South Africa just behind Russia at 40% for palladium production but leads all countries in platinum supplying 80% of that metal (4.725M ounces). The 2011 global supply of palladium is forecast to decline 5.4% yoy to 6.8M oz from 7.1M oz in 2010 & 7.6M oz in 2009. 6.3M oz of the supply was mined. Palladium supply from the top 3 sources (Russia, South Africa, North America) is down 18% in just the last four years (2006: 6980M oz vs 2010: 5545M oz). There are a number of problems regarding supply, firstly mine depletions particularly in Russia where Norilsk has become the only major producer, also Russian stockpiles are dwindling which is significant given that traditionally it has been the largest source of non mined production (total non-mined prod: approximately 1.3 million ounces annually). Also of concern: deeper mine shafts in South Africa (mines are being made deeper because that's where the high grades are) and so there are safety concerns, the country is also struggling with foreign exchange rates and their affects on currency losses. (Stillwater Mining Company: March 2011 Presentation) Palladium primary production has fallen even faster than it has for platinum (-15% vs -12% since 2006). Stockpiles in Russia, the source of 17% of Pd supplies since 1984 are almost entirely exhausted.

In catalytic converters, palladium now accounts for over 95% of the catalysts used, up from 85% in 2007 (Stillwater Mining, March 2011) meaning that the automotive industry (a growing industry sector with 40-50 million people entering the middle class each year in China, Brazil and other rapidly developing countries) is becoming ever more reliant on palladium (6% increase in palladium use by automakers in 2011, 5.5M ounces, each catalytic converter uses 4 grams of palladium + platinum). In 2010 72 million light vehicles were produced and that number is expected to grow to 88 million by 2013 reaching 100 million by 2016. Strict pollution controls mandate the use of catalytic converters. (North American Palladium, October 2011)

September 2011: HSBC, the world's #2 bank outside China, raised its 2012 price forecast for palladium by 8% to $810/oz citing the fact that demand will outstrip supply (in stark contrast to the previous two years). Long term price forecast raised by 21% to $850/oz. However other top banks are forecasting even higher palladium prices in 2012; JP Morgan and Credit Suisse have the spot price pegged at $938/oz and $950/oz respectively (the lowest forecasts were made by UBS ($825) and BNP Paribas ($810) *of note RBC lowered its outlook from $1000/oz to $860/oz. Between October 2008 and September 4, 2011 spot palladium increased by over 290% compared to 133% for platinum, 200% for gold and 0% for rhodium. Despite similar production (over 6M ounces), demand for palladium by end market users exceeded platinum demand by 24.0% (7.0 vs 5.72 million ounces). (Stillwater, March 2011) 91% of the world's 6.8M ounces of annual palladium supply comes from South Africa (42%), Russia (40%), and North America (9%) (includes about 1.3M ounces of secondary supply). (North American Palladium, October 2011) Here is more info on gold/silver investing

 More Reason To Like Palladium: Shipments to Switzerland (1 of only 2 main hubs in Europe for storage of the metal) from Russia (world's largest primary producer of palladium) are down to 500,000 ounces in 2010 (average 1.3M ounces for the last 20 years); The main reason for the decline is that Russia used to have four big producers but today they only have one, the rest have nearly exausted their reserves (the largest of them, OAO GMK Norilsk Nickel could also be deplete of palladium by 2015-2020). For 2011 output is forecast to fall by 5.4% to 6.8M ounces even though demand from carmakers alone will increase 6.7% to 5.5M ounces. Russian stockpiles form the fourth biggest source of palladium supply. The price of palladium peaked in 2001 at $1,090/oz when concerns regarding supply caused many to hoard the white metal. There are also ETF's that hoard palladium; they first began trading in 2007 and have since grown their assets to over 2M ounces (currently they trade in Europe (Zurich, London), the United States (NYC) and Japan). Total annual supply of palladium was as high as 8.58 million ounces in 2007 but has since fallen to around 7 million (6.8M in 2010/7.1m oz in 2009) a 17.2% decline even though total gross demand only fell by 7.4%; During that time Russian supplies fell 19.93% and that's directly responsible for 61.15% of the global drop in supply (1.48m ounces). (Aquarious Platinum) 2009 combined production of platinum group metals was only 16% as much as gold (Au: 2572 tonnes about the same as in 2005); Three of the top five sources of gold, the USA, South Africa, Australia combined, produced 21.1% less of the yellow metal in 2009 than in 2005.

If you wanted to invest in a company here are a few to keep in mind:

Stillwater Mining produces 63% of the palladium coming out of North America (or 5.7% of the global supply) which is notable since North America is the world's #1 source of palladium demand (29% in 2010 ahead of China at 20%). Stillwater's reserves are at 19.9M ounces (palladium and platinum). In 2010 metals recycling contributed 6.8% of total revenue ($11.5m/$168.5m) down from 7.9% in 2009 ($6.5m/$81.8m). Average price realization per ounce of metal produced: $1,046 up 34.3% from the year before ($779/oz). Since 2002 it has had business relations with Norilsk, that has opened the door to more investment from abroad (though sales of palladium received from Norilsk ended in 2006). 2011 capex at $120 million up 139% in just the last year. Stillwater is a primary producer of platinum and palladium meaning that anything else that it mines (rhodium, gold, nickel, silver and copper) is produced as a byproduct. About 3/4 of Stillwater's output of platinum group metals comes from the Stillwater Mine (the other 133,000 oz is produced at East Boulder). North America contributes 9% of total supplies of Pd but 11% of primary production. Last year Stillwater Mining paid $118 million for the Marathon mine in northern Ontario (2.4M ounces of palladium 2P reserves/total resource 5.4M ounces).

(gold:platinum ratio 2007-May 2011)
North American Palladium (tsx:PDL, amex:PAL) (41% fall in stock price over last 12 months means it has a high beta value) - The company is the only primary producer of palladium in Canada. Flagship mine is Lac des Iles abbreviated LDI, located in Thunday Bay, Ontario; LDI is currently undergoing a $250 million shaft expansion (October 2011) intended to eventually raise production at the mine to 250,000 ounces by 2015 (when cash costs are forecast to be lower at $200/oz). LDI: The second quarter of 2011 produced 28.9% more ore than Q` and at a 29.4% higher grade (cash costs fell 35.5% quarter to quarter). First phase of the project commences producing the last quarter of 2012. 2012 production for NAP is expected to be in the range of 190-200,000 ounces. The company's other operating mine, Sleeping Giant is part of its gold division and is located in Quebec. Sleeping Giant has very high cast costs (over 1550/oz) because ore grades have been low (but will climb due to deeper access later on). Sleeping Giant was acquired in 2009 from iamgold (expected to produce 40-50,000 ounces in 2012). (Miningweekly: NAP expects palladium output to rise 75% this year) Total palladium production by NAP was 95,100 ounces in 2010 but is forecast to increase by 75% in 2011 to 165,000 ounces, palladium cash cost in 1Q11 was $519/oz but that dropped to under $400/oz by Q2. NAP has operated in Thunder Bay for over 17 years. Overall production costs for NAP are forecast to drop to $125/oz from $325/oz in 2009 (60% decrease). (ThunderBaybusiness.ca: North American Palladium Mine Celebrates Reopening) Between November 2010 and February 2011 North American Palladium stock increased by 51% on the back of higher palladium prices (week of January 30,2011 spot price was above $800/oz). The other gold mine, nicnamed Vezza is located just north of Sleeping Giant. The whole Vezza-Sleeping Giant region contains 1.379 million ounces of M&I + Inferred gold but 2P reserves are only at 52,000 oz so a lot of investment is needed to upgrade resources. Vezza isn't expected to come on tap until 2013 but when it does it will immediately add about 40,000 ounces of gold to production (combined with Sleeping Giant total production could be as high as 80,000 ounces). Palladium production: 95,057 oz (2010), 145-165,000 oz (2011). About 90% of revenue comes from palladium (4Q10 revenue: $35.2M from LDI, $4.2M from Sleeping Giant).

Norilsk - One of the world's main sources of nickel also supplies the world with 11% of its platinum and 20% of its palladium. 2P reserves: 68.457M ounces of palladium (55.018M oz) + platinum (13.439M oz). (Norilsk 2011 Fact Sheet) In 2010 9% of Norilsk's revenue came from palladium (compared to 12% for platinum; largest was nickel at 53% and copper at 24%, gold was only 1%). Norilsk accounts for virtually all of Russia's production right now with the other 3 Russian companies having resource problems. In Russia and South Africa palladium is produced as a by product of other production (platinum/nickel), only a few of the world's mines focus on palladium as the primary source.

Anglo Platinum - One of only a few companies that actually increased palladium production in 2010 (by 9% up to 1.485 million ounces - 2.5699 million ounces for platinum also up but by half as much 4.8%). Rhodium produced: 329,000 oz down from 350,000 oz in 2009. 2P ore reserves (platinum, palladium and rhodium (2011): 165.5M oz down from 170.5M oz in Jan. 2010: 53% of 100% owned production reserves are at UG2 Reef (there are four sources in total). There's also another 0.8M ounces at a tailings facility and about 5M ounces stemming from interests in a mine named Unki. In addition there are antoher 620M ounces of measured and indicated resources. In fiscal 2009 Anglo's revenue fell 28% to R36,947M under R39,000M for the first time since 2005; gross profit margin down to 5.4% from 33.7% owing to the global financial crisis reducing demand and prices starting in late 2008; prices and demand didn't recover until the second half of 2009. Cash from operations fell from over R18,000M to under R6,000M in 2009 the lowest level in more than five years. Anglo Platinum ranks third among major producers in terms of its PGM reserve life, 36 years which lags only Anooraq (47) and Stillwater (40).

Since 2001 The Price of Gold Is Up 600% linked To Central Bank Purchases & Investment Related Demand, overall Net Hedging by Mining Companies Up Only Twice in Last Five Years (quarterly)

   Since April 10, 2001 when the price of gold hit a low of about $256/oz it has been steadily increasing on the back of higher investment related demand (represented 37% of total demand in 2010 up from just 4% in 2000), higher overall demand (3,812.2 tonnes 9% higher than 2009), and greater interest shown in the yellow metal by Asia (China's demand for bars and coins accounted for 13.5% of all gold demand by value, that's up 70% in just one year). (World Gold Council) Jewelry accounts for roughly 50% of gold demand down from 85% in 2000 but up from 43% in 2009. In the first quarter of 2011 Chinese demand for gold (25% of all gold demand) exceeded demand from Indians (23% of global gold demand) who were previous to that the largest consumers of gold (90.9 metric tons compared to India's 85.6 metric tons, China's represented a doubling over the previous year) (China Is Now Top Gold Bug); In 2010 consumer demand in India led all countries, it accounted for 25% (963.1 tonnes) of all global demand for gold, that's up from 16.6% the year before. In other countries like Greece, economic turmoil is causing demand for bullion to spike. (Financial Times: Greek savers rush for gold)

China: If, as many suggest, the People's Republic of China lets the RMB increase in value relative to the USD, that will weaken demand for gold in the short term as investors see the new exchange rate as a sign of economic stability but in the long run, the stronger RMB will increase Chinese demand for Gold due to its greater purchasing power. Also, a stronger RMB will raise Chinese import demand, indirectly propping up gold demand abroad too.

Because of weakened global reserve currencies (euro/usd) and a low portion of portfolios (1% but begining to show growth) and central bank reserves in gold (central banks sold much of their holdings in the early 2000's/since 2009 they have become net buyers) gold prices are in the midst of a long term upward trend. (Pierre Lassonde, Franco-Nevada) In 2009 central banks held 17.5% of all gold estimated to exist above ground (940M out of 5.5B ounces). As recently as 2005 central banks gold selling contributed as much as 14% of the gold supply. (Seeking Alpha: Gold Soars on Falling Supply and Rising Demand) In early to mid 2011, the central banks of Mexico (99.1 tonnes), Russia (41.8 tonnes), South Korea (25 tonnes) and Thailand (just over 9 tonnes) were among the largest buyers of physical gold. As of 2011 the world's largest exchange traded fund, SPDR Gold Shares ranks 6th among all entities in terms of its gold reserves, it owns 1213.9M tonnes of gold which is 4.5% more than China (1161.6M), 30.96% more than Russia (926.9M) and 97.5% more than India (614.6M). SPDR has just over half of all the gold held by gold etf's. (cnbc: The World's Biggest Gold Reserves)

While gold demand is rising from all areas (consumer, jewelry, central banks, industry: total up 9%) total supply is not (up only 2% in 2010) and that's putting even more pressure on the price. (http://www.gold.org/download/pub_archive/pdf/GDT_Q4_2010.pdf) Output from gold mining makes up about 60% of the supply (gold output from mining declined in the seven years leading up to 2008). Another reason to expect higher prices; Companies are closing their hedge books (Barrick Gold led the charge in 2009 it cost them $5.6B, AngloGold Ashanti in October 2010 after it raised $1.58B to close it, Kinross Gold removed 90,000 ounces hedged in the first quarter of 2011 however it was the only major company to do that in 2011). Total gold hedged by miners amounts to 4.88 million ounces (1Q 2011); The first quarter of 2011 was just the second of 21 quarters since 2006 to show any increase in net hedging. (Gold miners hedge in Q1, big sales unlikely: report) Also to consider, the ceo's of Newmont Mining and AngloGold Ashanti the second and third biggest gold producing companies, predict that gold will exceed $2,200 an ounce by 2012. (reuters: Mining CEOs expect gold prices to keep rising)

If, as Franco-Nevada suggests, Asian central banks increase their minimum weighting in gold to 15% another 17,000 tonnes would be added to demand over the next few years. Gold ETF's could hoard more gold too with interest in physical gold higher than at any point in their history (in the USA they only date back to November 18, 2004, StreetTracks Gold Trust exchange-traded fund but since then they accounted for 2,300 tonnes of net demand). Gold companies for the most part have wide profit margins making them popular among both institutional investors and others.

Investing In Gold and Silver Physical Gold or Stocks and Which Companies To Look For (production by company)

&nbsp&nbsp When high inflation follows the beginning of a recession, they combine to produce long term stagflation making true hedges against inflation harder to come by due to the compound effect and its impact on currency markets. (high inflation in the world's developing economies is one of the key factors propping up long term gold prices) Currently, a number of the world's major economies find themselves in that situation and that's threatening to destabilize the world economy; Because of the changing face of the world's economy (relatively new sectors like the Quaternary playing a larger, central role), the way people do business and most importantly the much more deeply rooted connections nations have with each other, history can't be used as a guide for people looking for answers. Though risky, during the year, bonds have had the second highest rate of return second only to gold (price of gold up 43.93% or $527.70 (August 9, 2010 - August 9, 2011). The market volatility, inflation and overall economic tightening are errily reminiscent of the 2008 recession, the big problem now though is that the US government has used up most of its arsenal (quantitative easing, stimulus) leaving it highly vulnerable.

What is certain is that when money devalues, commodities like gold, silver and oil don't. Gold and silver have intrinsic value that isn't easily replaced (few substitutes); their properties are valued both economically (industrially) & aesthetically and according to history, are reliable stores of money (gold was used as legal tender even before the first coins, silver use in rfid scanners and tracking devices is one of the sources of demand growth). Also, overall base metal production has been falling, at the same time central banks which used to be net suppliers have become net buyers. Countries like the United States have become increasingly reliant on quantitative easing to stimulate the economy; Quantitative easing has as a direct consequence the devaluation of curency which contributes more to inflationary pressures (if the effects aren't felt immediately they ultimately do later on when the economy heats up).

U.S. deflation is part of the reason quantitative easing is such an attractive option (increasing the money supply lowers interest rates which raises prices through foreign currency markets) however the root of the deflation America is attempting to correct isn't even a result of high interest rates (more recently) or a money supply problem meaning the government may just be creating a new problem. (thetombstonenews: 'Quantitavie Easing') Some interesting facts about gold: 3/4 of all the gold ever extracted from the earth was mined after 1910. South Africa was the largest producer in most years since that time. Switzerland was the last country to tie its currency to the price of gold (1999). Until May 2009, all the gold ever extracted amounted to 5,835,876,025.6 ounces or about 85% of an ounce per person (165,446 tonnes). Gold weighs 19.3 times as much as water, is even more rare than diamonds, never oxidizes (maintains its shine), and in its more natural form is one of the softest metals.

When deciding on Gold ETF's/Gold Stocks consider this : contracts like the precious metals loan device (government/central banks) and those made by NYMEX/COMEX and London Precious Metals Clearing Limited (involves 6 big banks including JP Morgan) are short by a significant margin when it comes to the amount of gold and silver they need to cover those positions. Also, JP Morgan is now owner of a vault license, throwing more uncertainty into the equation as JP Morgan has used unallocated gold and silver to cover contracts. Though riskier, gold stocks also pay dividends annually or quarterly, in 2011 Q2 Barick Gold's African subsidiary doubled its dividend up to 3.2c/share for the quarter alone. or consider Palladium investing

Investing In Gold and Silver Physical Gold or Stocks and Which Companies To Look For (production by company)

When high inflation follows the beginning of a recession, they combine to produce long term stagflation making true hedges against inflation harder to come by due to the compound effect and its impact on currency markets. Currently, a number of the world's major economies find themselves in that situation and that's threatening to destabilize the world economy; Because of the changing face of the world's economy (relatively new sectors like the Quaternary playing a larger, central role), the way people do business and most importantly the much more deeply rooted connections nations have with each other, history can't be used as a guide for people looking for answers. Though risky, during the year, bonds have had the second highest rate of return second only to gold (price of gold up 43.93% or $527.70 (August 9, 2010 - August 9, 2011). The market volatility, inflation and overall economic tightening are errily reminiscent of the 2008 recession, the big problem now though is that the US government has used up most of its arsenal (quantitative easing, stimulus) leaving it highly vulnerable.

What is certain is that when money devalues, commodities like gold, silver and oil don't. Gold and silver have intrinsic value that isn't easily replaced (few substitutes); their properties are valued both economically (industrially) & aesthetically and according to history, are reliable stores of money (gold was used as legal tender even before the first coins, silver use in rfid scanners and tracking devices is one of the sources of demand growth). Also, overall base metal production has been falling, at the same time central banks which used to be net suppliers have become net buyers. Countries like the United States have become increasingly reliant on quantitative easing to stimulate the economy; Quantitative easing has as a direct consequence the devaluation of curency which contributes more to inflationary pressures (if the effects aren't felt immediately they ultimately do later on when the economy heats up). U.S. deflation is part of the reason quantitative easing is such an attractive option (increasing the money supply lowers interest rates which raises prices through foreign currency markets) however the root of the deflation America is attempting to correct isn't even a result of high interest rates (more recently) or a money supply problem meaning the government may just be creating a new problem. (thetombstonenews: 'Quantitavie Easing') Some interesting facts about gold: 3/4 of all the gold ever extracted from the earth was mined after 1910. South Africa was the largest producer in most years since that time. Switzerland was the last country to tie its currency to the price of gold (1999). Until May 2009, all the gold ever extracted amounted to 5,835,876,025.6 ounces or about 85% of an ounce per person (165,446 tonnes). Gold weighs 19.3 times as much as water, is even more rare than diamonds, never oxidizes (maintains its shine), and in its more natural form is one of the softest metals.

When deciding on Gold ETF's/Gold Stocks consider this : contracts like the precious metals loan device (government/central banks) and those made by NYMEX/COMEX and London Precious Metals Clearing Limited (involves 6 big banks including JP Morgan) are short by a significant margin when it comes to the amount of gold and silver they need to cover those positions. Also, JP Morgan is now owner of a vault license, throwing more uncertainty into the equation as JP Morgan has used unallocated gold and silver to cover contracts. Though riskier, gold stocks also pay dividends annually or quarterly, in 2011 Q2 Barick Gold's African subsidiary doubled its dividend up to 3.2c/share for the quarter alone.

Also consider that the rise and fall of stocks isn't entirely determined by commodity prices. Other factors such as the enterprise value (see Yamana Gold blog entry), free cash flow (cash flow minus capital expenditure) and most importantly total cash cost per ounce (the main reason Canadian companies like Goldcorp and Eldorado Gold make it to the top in terms of market value while others like AngloGold and Gold Fields which produce and own a lot more than their counterparts, aren't ranked significantly higher) tend to have more of an effect on prices. There are many examples of gold companies that have a market value close to what it was 2 years ago despite commodity prices being many times higher; there was less than a 30% difference in market value for Agnico-Eagle Mines, Yamana Gold, Gold Fields, Kinross Gold (not considering the Red Back acquisition its capitalization was actually steady) while others like First Majestic Silver realized the change in price (was worth US $215 million in 2008 ten times less than in 2010 despite only producing 1.89 times less silver). Also, consider this: For most of 2008 when gold prices started their overall upward trend, it was the large cap companies that outperformed the small cap; the opposite was true in the summer of 2011 when gold prices broke through new levels, the change in behavior might simply be the result of a much higher support level for gold prices making high production costs less of an issue for startup companies (many more juniors entered the market in 2011 than in 2008). Physical gold and physical silver remains the safest investment option as there is less risk (no concerns regarding delivery of the asset) and the investor gets to realize 90-100% of the rise in gold and silver prices (on demand price paid by bullion dealers at coins stores for the metal). What the physical gold investor loses out on are dividends paid out by gold mining stocks. A major factor affecting spot prices, which is unrelated to stocks are margin calls. For example in early August of 2011 (when there was a lot of economic uncertainty) gold and silver spot prices declined at the same time major stock indices fell by their largest margins since the 2008 recession, the commodities selloff was sparked by a margin call (temporary selloff due to traders being required to meet call options). Recently, South Korea, Thailand and even debt-laden Greece added more gold to their reserves. (Gold Cartel losing, price to top $3000) On August 8, 2011 when stocks performed poorly, gold spiked again (gold is the first thing central banks/banks/investors hoard when they want a stable investment medium, also when banks realize they might have to fulfill their significant short positions) but don't be concerned about the more gradual silver rise (historically, silver has lagged gold (time) when increases occur; the reason is that banks and large investors tend to wait until gold gets too expensive before buying the white metal); also when gold gets too expensive jewelers, industrials turn to alternatives and silver is one of them. Also consider the gold/silver ratio which is 44 (August 8, 2011), much higher than the historic ratio of under 20. Silver has, in just 5 years gone from $14/oz to a support level of between $34 and $40 per ounce.

Goldcorp (GG), the lowest cost per ounce producer of gold among tier 1 companies. In 2010 it produced 23 million ounces of silver giving it the distinction of leading producer of silver among gold companies that year, though production was still only about half of BHP Billiton's (46.6 million ounces) it was high enough to rank 4th among all companies, ranking just behind Pan American Silver (24.3 million ounces). What's more, 77% of Goldcorp's 2P silver reserves (1.0 of 1.3 billion ounces) are at Penasquito, Mexico, a property that hasn't even reached commercial production yet.

First Majestic Silver (FR) has significant resources that don't show up as reserves because of their status, has one of the lowest cash costs industry-wide, nearly doubled silver production in 2010 and mints its own bullion bars and rounds (unlike many of its competitors like Pan American Silver which produce and market bullion through other companies (Northwest Territorial Mint for example).

Silver Standard Resources (SSRI) is another to keep watch of. The company is already a major producer and that's with only 1 of its 4 properties producing. Cash costs are still high because many new mines have high initial production, initial construction and other development costs.

Hecla Mining Company - The gold to silver ratio remains high (about 43 compared to 35 on May 3, 2011 (Silver 44, Gold 1540)) but is starting to come down; August 19-22 gold was up about 5.5% but silver was up more than 9%). Hecla Mining, like many other silver miners, has suffered from volatile prices since silver recorded a high of about $49/oz on April 29, 2011 however with gold about 20% higher than it was at that time and silver 10% lower, silver should eventually break through into the $50 level again. Hecla Mining has high growth potential relative to other silver miners because its fall over the last couple months has been more pronounced (as of Monday morning Aug 22; -33% last 6 months, -11.6% last 3 months, -13% last month compared to Coeur d'Alene (-6.7%, +.24%, -8% respectively) and Silver Standard Resources (-3%, -9%, -12.6% respectively); during that period First Majestic released reports confirming growth in production and earnings in 2010 and 2011 (71.8% rise in silver production in 2010 with cash costs among the lowest industry-wide (near $7/oz) compared to $12/oz for Pan American Silver (largest pure-play silver producer). Hecla also has low net cash costs realized (-$1/oz in 2010).

Primary silver producers (2010)

Fresnillo (38.6 million), Pan American Silver (24.3 million), Silver Wheaton (23.865 million up 37%) Coeur d'Alene Mines (16.8 million), Hecla Mining (10.566 million down 3.8%), First Majestic Silver (6.56 million up 72%), Silver Standard Resources (6.302 million up 48%) and Silvercorp Metals (4.624 million up 10%). (individual company notices)