We disseminated the following letter in October. Due to the events of this week and subsequent market behavior I feel a reprint is in order.
The Gold price approaches $1,400/oz and the Silver price is poised to breach $27/oz. A paradigmatic shift is occuring in the precious metals arena. Understanding and awareness will be required for those wishing to enjoy the parabolic price moves higher in the coming months…..
September was a rewarding month for our investment philosophy. Gold crossed $1,300/oz and Silver $21.50/oz as the global currency debasement theme shifted into high gear. Our commitment to precious metals, emerging markets and selective domestic high growth companies made for an exciting month in our quest for Fortune’s Favor.
Attached please find an article titled, “Why QE2 + QE Lite Mean the Fed Will Purchase Almost $3 Trillion In Treasuries And Set The Stage For The Monetary Endgame”. This article expresses many of our own beliefs and can be viewed as a roadmap to $5000/ounce gold and $100/ounce silver.
Bret and I struggle every day trying to balance the opposing forces of government market support intervention and deteriorating economic fundamentals in structuring our investment philosophy. Until and/or unless we see evidence to the contrary, we believe Bernanke will press forward with aggressive monetization with the goal of inflating all asset classes.
In addition, we believe that U.S monetization will force all other central banks to follow suit or face the prospect of a rapidly deteriorating trade position (which would be unacceptable). In a world of inflating money supply and close to zero interest rates (an impossible scenario in the textbooks of my generation), one of the best usages of free corporate cash flow would be to stockpile inflating industrial raw materials and/or acquire other companies.
The Chinese have cornered the market on rare earths (critical industrial and military raw materials) and have already announced their plans to favor domestic usage. As you know, silver is also a critical industrial/military raw material and, while larger than rare earths, its total market size is quite small relative to its strategic importance. The entire above ground world silver supply (in deliverable condition) is estimated to be less than one billion ounces (there is evidence that naked shorting of silver may exceed above ground supplies several times) and would be inelastic to a sharp change in demand for several years. Therefore a move toward industrial stockpiling may easily lead to a run on silver and a material change in price.
For the last few years we have worked diligently to protect capital and position ourselves for what we believe will be the “end game”. It is now more important than ever to access our website (www.rosenthalcapital.com) and read Bret’s blog (http://blog.rosenthalcapital.com) as world events that affect our markets are likely to unfold at an accelerating pace.
Warmest Personal Regards,