The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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Last Thursday I ended my e-mail by saying I see the current equity markets as very uncertain and volatile, and that I can’t over-emphasize what I consider to be the importance of ‘thinking for yourself’ in these and prospective market conditions. This was reinforced for me again Friday morning when I opened my computer to learn that on Thursday night the Asian markets had dropped precipitously (the AORD, NIKKEI and HSI being down 2.8%, 3.2% and 4.8% respectively), and that gold had fallen at 3:00 a.m. ET Friday by approximately $50 to $1,140. By 9:00 a.m. Friday morning, the FTSE was down slightly, gold had recovered to $1,154 (and later Friday recovered further to about $1,174), and the Dow Futures were down 211 about 25 minutes before the NYSE opened for an abbreviated 4 hour trading day (it closed Friday down 154 points, or 1.5%).

This activity was (and continues to be) largely attributed by commentators and analysts to Dubai ‘stunning investors’ (see article by clicking here) by requesting lenders to Dubai World, Dubai’s main investment vehicle, to suspend payments on U.S.$59 billion in debt for 6 months. To me, the skittishness of the world equity markets to such a request again emphasizes the short-term thinking and immediate reaction (over-reaction?) to any news – be it positive or negative. I do not believe such activity is the hallmark of a disciplined market populated largely by thoughtful, long-term investors. Certainly if nothing else, such activity for me belies the ‘efficient market theory’ espoused by so many market followers – a concept I personally have never given much credence to going back at least 20 years.

As I see it, this is indeed a ‘Market for those with Strong Stomachs’ where:

· the more you study macro-economics, and what I see as rapidly developing changes and weightings in the world order;

· the more you study the equity markets and develop an ‘investment philosophy and strategy’ that is ‘right for you’ given your own personal risk tolerance;

· the more you study the companies you invest in, and form your own opinions as to the risk profiles of those companies and whether those risk profiles comply with your investment philosophy and strategy; and,

· the less you rely on third parties to make your investment decisions for you

the better off you will be, the less you will need to regularly ingest a ‘Maalox type product’, the better you will sleep at night, and the happier you are likely to be.

On my continuous point of taking a large (for many people I am sure ‘greater’) role in making investing decisions with respect to your own capital, Thursday a reader took the time to send me a thoughtful e-mail setting out his general views on interacting with investment advisors. In essence he expressed the view that he thought my advice to people who participate in the equity markets who are not knowledgeable investors is ‘as good as any’ other advice (i.e. spend a lot of time talking and consulting with your investment advisor). However, he also expressed the view that knowledgeable investors should be encouraged to have specific discussions with their advisors to determine how much those advisors really understand about the various aspects of gold and silver investments, both as insurance and, in the case of mining stocks, as investments (read equity investments generally).

This suggestions make good sense to me, and captures an idea I haven’t expressed in these e-mails, but frankly (perhaps in error) have taken for granted. Simply put, the more you know, the better position you are in to determine how knowledgeable your investment advisor is – and hence how valuable to you the advice you receive from him/her is to you. Clearly, if at any time you are not confident in your assessment of your investment advisor’s level of knowledge, in my view you ought to find an investment advisor whose knowledge base is at a level you are satisfied with. I think that by not continuously making such ‘investor advisor assessments’ you do yourself a disservice.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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U.S. Thanksgiving

First, I would like to wish all our U.S. Subscribers and friends a ‘very Happy Thanksgiving’. On a personal note, my wife and I spend 3 months each year in North Carolina, and currently are in Pinehurst. Good friends here have invited us to share their Thanksgiving celebration and we are looking forward to our 2nd Thanksgiving dinner of the year later today. To explain, my wife and I are Canadian residents. Canadians celebrate Thanksgiving in early October each year, where Thanksgiving is an important ‘family day’ but not seen as nearly as important a holiday as it is here in the United States.

As I am sure readers know, tomorrow is referred to in the U.S. as ‘Black Friday’. Historically Black Friday has been, and again this year almost certainly will be, the biggest shopping day of the year in the U.S. It is the day that begins the U.S. Thanksgiving – Christmas ‘purchasing season’ that in the past has taken many U.S. retailers from being ‘in the red’ to being ‘in the black’ (i.e. going from a ‘year-to-date loss’ to a ‘profit for the year’. I suggest you carefully watch the retail sales numbers that are (usually) reported tomorrow (Friday) night. I think they could have a large psychological impact on both the U.S.$ and U.S. equity markets next week – which if I am right may have a (perhaps significant) near-term impact on the gold price.

The Circus Rider & The Markets

Two evenings ago my wife and I had dinner with good friends. Both are investment advisors, have ‘good brains’ and common sense, are highly entreprenurial, and (in my view very importantly) care deeply for the financial well-being of their clients. As usual these days, the discussion turned to the U.S. economy, the rise in the equity markets since last March, and in particular the rapidly rising price of gold over past weeks.

When able to ‘get a word in edgewise’ – our friends will laugh if they read this – I said that I thought the physical gold market and the equity markets where out of sync. I compared them to the circus performance you likely all are familiar with – the one where a rider stands atop two horses with one of his/her feet on the back of each and parades them around the circus ring. In order for the rider to do that successfully, he/she must coordinate two animals each far more powerful than they, control both at the same time, while themselves performing a difficult ‘balancing act’ – quite a feat when you think about it. If one likens one of those horses to the physical gold market, and one to the equity markets, it strikes me one ought currently to see a significant dichotomy between the two. One can postulate that the physical gold market has been telling us every day lately that the U.S. dollar (read the U.S. economy) is in a downward spiral that is likely to continue, while concurrently the equity markets are telling us the U.S. economy is in a recovery that is significant in economic terms and is going to continue. Pity the poor rider trying to ride both horses simultaneously. Chances are as a minimum they would hit the floor of the circus ring hard, and as a maximum could be trampled and killed. It seems logical to me that if you are an American circus performer and you think your two horses are likely to go in different directions, it is sensible to pick only one to ride and not both – or simply elect to sit at home today and enjoy your Thanksgiving dinner.

That said, tomorrow and the next weeks and months are of course a different story. For what it is worth, on a second personal note I continuously think about what I see as dichotomous gold and equity market conditions, and currently am being far more cautious than I normally am in what I see as very uncertain and volatile markets. Once again, I can’t over-emphasize what I consider to be the importance of ‘thinking for yourself’ and being in constant contact with your investment advisors in these, and what I see as likely prospective, market conditions.

Research Gold Stocks

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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Qualification

This e-mail (read ‘blog post’) has been prepared for background information only, and should not be taken or otherwise construed as either U.S. or Canadian Income Tax advice. Any reader owning or contemplating owning physical gold or shares of a gold ETF should seek the advice of their own income tax counsel with respect to the income tax treatment of their respective gains or losses on the disposition of either physical gold or gold ETF shares in the jurisdiction(s) in which they pay income tax.

Last week a friend of mine sent me an article that purported to discuss the tax treatment afforded U.S. taxpayers who purchase physical gold or gold ETF shares (the article also implied silver ETF shares would be afforded the same U.S. tax treatment as gold ETF shares). In its simplest terms, the article said that the U.S. Internal Revenue Service (IRS) considers gold to be a ‘collectible’ and not a ‘capital asset’ – and that in these circumstances gains on physical gold are treated as ‘ordinary income’ for U.S. income tax purposes if that gold is held for less than 12 months, and can be subject to a 28% ‘maximum tax rate’ if held for more than 12 months (the U.S. capital gains tax apparently is 15% for capital assets held more than 12 months). A comment appended to that article by a reader says the IRS has made an exception for gold and silver ETF’s held in a U.S. Individual Retirement Account (‘IRA’). I am simply reporting this without knowledge of U.S. income tax laws.

Following my review of that article and the comments appended to it I again reviewed my understanding of the Canadian Revenue Authority’s (‘CRA’) view on this issue. In the simplest of terms, in 1978 the CRA issued an Interpretation Bulletin (IT-346R if you want to sound particularly knowledgeable when you talk to your Canadian income tax advisor) that deals with speculators’ ability to report commodity gains/losses on account of capital (i.e. and not as ‘income’) so long as a consistent approach is taken on all commodity transactions. There are also instances where Canadian Courts have found that gains from trading gold were on account of capital. Those things said, my experience in acting over the past 40 years both on behalf of Canadian taxpayers and the CRA in business valuation consultancy matters is that the CRA’s views in any taxation matter are dictated by the facts specific to that matter – such that generalities may not apply to a specific taxpayer’s (i.e. each individual reader’s) circumstance.

It follows from the foregoing I would not – nor do I believe should you – purchase or trade in physical gold or gold (or other) ETF shares without first seeking the advice of your income tax advisor with respect to how, based on your own specific ‘fact circumstances’, realized or unrealized gains or losses that accrue to either you or your Estate (on your death) will be treated for tax purposes in the jurisdiction(s) in which you pay, and your Estate may pay, income tax or capital gains tax.

Research Gold Stocks

See Blog Legal Disclaimer

Possibly Related Posts:

• Three Types of Investors – and What About Traders?
• Dow Weekly Gains/Losses!
• What Value Do You Give To Your Time?
• Coming Derivatives Crisis?
• The Equity Markets and Value?

The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

* * * * *

U.S. Housing Update

An article late last week titled ‘U.S. housing crisis hits new level‘ says that a record one in seven U.S. mortgages are in foreclosure or delinquent, that even those with safe credit ratings are losing homes, that mounting unemployment is pushing foreclosure rates higher in the United States, and that all this is driving even Americans with good credit from their homes in greater numbers. The article also says:

· the housing market accounts for about 20 per cent of the U.S. economy where a strong housing sector is seen as key to any economic recovery, but rising unemployment and a stagnant economy threaten to erase recent signs of stabilization;

· worsening the problem, millions of unconventional mortgages issued to Americans who didn’t even have to prove they had a job are due to reset in the next two years, further harming the sector’s prospects;

· the Mortgage Bankers Association said on November 19 (a record) one in seven U.S. mortgages, or four million homeowners, were in foreclosure or at least one payment late in Q3 2009;

· Americans with solid credit ratings comprised 33% of Q3 2009′s foreclosures; and,

· analysts said the next wave of bad loans will likely come from alternative mortgages that de-emphasized credit ratings and employment, most of which have five-year reset rates that start coming due in January.

U.S. Resident ‘Dependency Factor’

A second article titled ‘In Survey, Hard Times Before Slump‘ reported a 2005 survey by the U.S. Census Bureau of 14% of all Americans suggests that even before the recession, more than one in five Americans could not pay for basic needs (paying bills for basic needs, avoiding foreclosures, and buying sufficient food) without help from family, friends or outsiders.

U.S. Government Frustration

A third article titled ‘House Attacks Fed, Treasury‘ late last week said “Political frustration over the rescue of Wall Street and high unemployment erupted in the House Thursday, with one committee threatening to impose tighter scrutiny on the Federal Reserve and another trading verbal insults with Treasury Secretary Timothy Geithner”.

My Comments

· first, I can’t imagine the U.S. jobs/unemployment situation is likely to improve in a meaningful way in the near term. In fact, I think it more likely to deteriorate over the next few months than to improve. I will be very surprised if the overall U.S. housing situation improves prior to the U.S. jobs/unemployment situation turning positive. That said, it was reported yesterday by the U.S. National Association of Realtors that sales of previously owned U.S. homes jumped 10.1% month/month in October to their highest level in more than 2-1/2 years;

· second, it seems obvious that if the same ‘Resident’s Dependency’ survey were done today the results would be worse, and likely far worse, that the 2005 survey results. I consider the results from the 2005 scary for the U.S. economy going forward from here – although I would like to know more about the components of the demographic cited in the referenced article; and,

· third, it strikes me that any elected U.S. politican who thinks Timothy Geithner or any other individual is capable of waving an magic wand and returning the U.S. economy to a pre-September, 2008 condition is, to state it charitably, unrealistic. I see this type of ‘politican commentary’ as nothing more than ‘looking for a scapegoat’. The U.S. bi-annual election process will get seriously underway early 2010 in anticipation of fall-2010 elections. I think it will be very interesting to see how the U.S. populace deals with its current elected representatives both during that process, and when it votes.

Research Gold Stocks

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Possibly Related Posts:

• More On Greece!
• Christine Lagarde – Listen Between the Lines!
• World Leaders – Greek Emotion?
• Roubini at Davos!
• The Baltic Dry Index!