For this weeks commentary I'd like to tell you a little story.  When going to the polls to vote in a few weeks, you might want to reflect on what kind of country and what kind of economic system you want to live under...

Once upon  a time there was a little red hen who scratched about and uncovered some grains of wheat. She called her barnyard neighbors and said, “If we work together and plant this wheat, we will have some fine bread to eat. Who will help me plant the wheat?”
 

“Not I,” said the cow. “Not I,” said the duck. “Not I,” said the pig. “Not I,” said the goose.

 

“Then I will,” said the little red hen- -and she did.

 

After the wheat started growing, the ground turned dry and there was no rain in sight. “Who will help me water the wheat?” said the little red hen.

 

“Not I,” said the cow. “Not I,” said the duck. “Not I,” said the pig. “Equal rights,” said the goose.

 

“Then I will,” said the little red hen- -and she did.

 

The wheat grew tall and ripened into golden grain. “Who will help me reap the wheat?” asked the little red hen.

 

“Not I,” said the cow. “Not I,” said the duck. “Out of my classification,” said the pig. “I’d lose my food stamps,” said the goose.

 

“Then I will,” said the little red hen - - and she did.

 

When it came time to grind the flour the little red hen said “Who will help me grind the flour?”

 

“Not I,” said the cow. "Not I," said the duck.  "Not I," said the pig. “I’d lose my unemployment compensation,” said the goose.

 

“Then I will,” said the little red hen - - and she did.

 

When it came time to bake the bread the little red hen said “Who will help me bake the bread?’ “That’s overtime for me,” said the cow. “I’m a dropout and never learned how,” said the duck. “I’d lose my welfare benefits,” said the pig. “If I’m the only one helping that’s discrimination,” said the goose.

 

“Then I will,” said the little red hen--and she did. She baked five loaves of fine bread and held them up for her neighbors to see.

 

“I want some,” said the cow. “I want some,” said the duck. “I want some,” said the pig. “I demand my share,” said the goose.

 

“No,” said the little red hen. “I can rest for awhile and eat the five loaves myself.”

“Excess profits,” cried the cow. “Capitalistic leech!” screamed the duck. “Company fink,” screamed the goose. “Equal rights,” grunted the pig. And they hurriedly painted picket signs and marched around the little red hen singing, “We shall overcome.” And they did.

 

For when the farmer came to investigate the commotion, he said, “You must not be greedy, little red hen. Look at the oppressed cow. Look at the disadvantaged duck. Look at the underprivileged pig. Look at the less fortunate goose. You are guilty of making second-class citizens of them!”

 

“But-but-but I earned the bread,” said the little red hen.

 

“Exactly,” the wise farmer said. “That is the wonderful free enterprise system; anybody can earn as much as he wants. You should be happy to have this freedom. In other barnyards, you would have to give all five loaves to the farmer. Here you give four loaves to your suffering neighbors.”

 

And they all lived happily ever after, including the little red hen, who smiled and smiled and clucked “I am grateful. I am grateful.”

 

But her neighbors wondered why she never baked anymore bread...


Author Unknown

Market Update
 
 
Gold is hitting new high's daily.  It is up about 10% since the beginning of the year.  But silver is up over 25% in the same time period.  In my article Gold: The "New" Money, I make the case that we are experiencing an international "walk" on gold.  One indication of that is I find myself asking for the first time, how many gold coins can I buy with my gold stocks?
 
It's not enough that my stocks are increasing in value any longer, it is whether they are out pacing the metals.  If you look at your portfolio from that perspective you may find that some are keeping up, and some aren't.  You need to start checking your portfolio -- in terms of gold purchasing power to really know how you are doing.
 
I chose to switch to silver because I thought silver would out pace gold -- and it has.  I now can by more gold with silver than at the beginning of the year. I chose CDE as my main trading vehicle because it is a marginal mine.  If you are barely making money at 18 dollar silver and it goes to 25, you should make a lot of money relative to what you were making 18 dollars an ounce.  But Gold Corp, whose costs are very low could see gold go up a hundred dollar and the percent increase in total company profits could be relatively minor.
 
Marginal mines make better trading vehicles.  But they are more speculative and must be carefully watched.  I have raised my mental sell stop to 19 on CDE where I now will not take a meaningful loss on this trade.  The next earnings report (Nov 4th) is crucial.  If it is good the stock could soar.  If it is disappointing the stock should drop substantially.
 
The stock of the week, however, is US Silver Corp, which has tripled.  This little gem is a new player in the silver mining business and it's prospects are beginning to glitter. I hear that Rochester is about to break some news on its drilling results.  This is a spec -- but a good one according to Eisenears. (This is my name for several stock researchers and stock pickers in Canada, Europe, and here in the US, that I'm in touch with.  We will all benefit from their good work.)
 
One new stock that has come to my attention is VG Gold Corp.  Rob McEwen who was a major stock investor in Rubicon sold his shares to concentrate on his other mines that he had a direct managerial interest in.  I originally bought Rubicon, and still hold it, based on his expertise and knowledge.  He is the guy that made Gold Corp what it is today.
 
While I am holding RBY as a spec, which should be more definable over the next 3 to 6 months, McEwen's new "baby" is VG Corp.  You might want to put this on your watch list.  If it does anything like his other mines, it could be a very profitable add.  Also, check out Amazon Mining Holdings.  This is a potash play and is up today about 20%, today alone.
 
These are the good times.  These are the times to get well and put your house in order.  I am personally raising cash -- and I mean CASH.  I have a margin account and as my stocks go up I am taking out the increasing cash available.  I spend a small amount on interest, but I raise my stops accordingly.  This allows me to raise cash and get more liquid without cashing in one share of stock.
 
Given the fragility of the financial system and the problems in the real estate sector I am preparing for another shock, should one come.  The rise in the market masks the underlying problems we face.  There are three camps. The first believes we are in deflation and simply want to preserve what they have regardless of the interest rate they receive. These people invest in government bonds.  The second are the stock investors which prefer to tie their fortunes to a productive company rather than a government promise.  And finally there is the hard money camp that suspects the value of paper money and prefers to hold hard assets and those companies that own resources in the ground.
 
As the dollar falls, the world grapples with overwhelming debt, and the foreclosure rate rises, today's bull run is a gift.  I intend to take what the market is willing to give me.  But there will come a time when I take all trading money off the table.  That is the time to take the money and run.
 
Oct 15, 2010