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Buy this essay and others in Jim's new book Being Sovereign.

The Indomitus Report

22 November 2004

Special Report
New Orleans Investment Conference 2004

Dr. Steve Sjuggerud writes in the 12 November 2004 "Investment U E-letter" that New Orleans Conference organizer Brien Lundin told him attendance at this year's conference was 1,200. We counted 113 exhibitors. So, it was quite a show.

We arrived on Tuesday 9 November in time to check in at the beastly Sheraton Four Points near the airport. There was no room at the conference Sheraton downtown. We would recommend that the Sheraton Four Points be swallowed by the Earth.

Wednesday 10 November

Conference registration opened at noon on Wednesday. Of course, the registration process itself is boring, but the conference loot bag is always fun. This year International Uranium Corporation gets the bozo award for giving blue balls to the conference participants. Blue, squishy, hand-sized balls with their corporate logo-type and web address. How droll. Plenty of pens, John Henry Oil throwing in a pad of paper with their pen, and Platinum-level co-sponsor North American Resource Group providing a nice coffee mug, perhaps in hopes we'd be awake for their presentations. Various flyers and the conference program book were pleasant, but the real scene-stealer was the multi-pocket tote bag with space for a water bottle, cell phone, pens, and other utilities.

The "warm-up" presentations were a lackluster options boot camp with Robert Meier as master of ceremonies; a poorly attended gold stock investors forum missing both Kinross and Harmony Gold presenters with Frank Holmes as master of ceremonies; and a very enjoyable metals and mining panel with our old friend Rick Rule as master of ceremonies.

Robert Meier made the interesting point that options were invented at least as far back as 530 B.C. by Thales, who optioned all the reserve olive press capacity at the tail end of a drought in anticipation of better weather. When the weather did improve, the options proved to be worth a fortune.

Frank Holmes made the interesting point that the traditional seven years from date of discovery to product on the streets has now become more like ten to twelve years, especially in so-called advanced economies where environmental regulations and licensing run rampant. He made a specific recommendation of Cambior, which was one of the companies which made a presentation at his panel. In addition to their precious metals, Cambior has about 15% of the niobium market with one of their properties.

Rick Rule remains the iron man of the New Orleans conference. His inside back cover full page advert as Global Resource Investments, Ltd., one of two platinum-level sponsors of the show, details his seventeen separate presentations and events at the conference running from 0715 to 2000 hours on various days.

In his panel Wednesday evening, Rick pointed out that the very successful Silver Standard organized in part by Jim Blanchard in 1992 had as its strategy buying known resources of large size and leaving these in the ground until the price rose. Rick's introduction of Ross Beatty of Pan American and Lumina suggested that Beatty was following the same strategy. Basically, it comes down to the question, "Why mine?" Why mine the resource now when the price is low and expected to go higher? It isn't like the metal in the ground is going somewhere, especially if the resources are in mining friendly countries where political risk is small. Once the price rises to a satisfying level, the resource may then be mined or sold to a mining company at a sizable premium.

Ross Beatty started his presentation by saying that the copper market was perfectly cyclical, showing a peak to peak cycle of exactly eight years. In the question period, we asked for the month and year of the last peak, a point on which he demurred. We suspect, from a peek at his company's exhibit that the last copper market peak was about 9 years ago. (So, we looked it up at futures.tradingcharts.com and we think July 1995 was the last peak in copper at about 146, which, uh, by the way is just above where copper is trading right now. If the dollar weren't such junk, it might be time to look for a coppertop.) Of course, he followed his demurral by suggesting that this cycle would be extra long due to the robust economic growth in China and India. So, perhaps this cycle would be ten to twenty years peak to peak. Our notes reflect a claim that Lumina Copper provides two thousand pounds copper and an ounce of gold per share, which is certainly impressive at a recent share price. (Their conference program advert says 2028 pounds copper and 1.06 ounces gold per share.) Lumina is LCC on TSX and Amex.

Bob Quartermain's presentation was just as exciting. Bob is in charge at Silver Standard, and indicates the company provides twenty ounces of silver per share for around $17 per share. (Their program book advert says 8.7 oz per share "measured and indicated" and 9.2 oz/share "inferred" resources. A chart we picked up at the conference showed a share price of $14, certainly a good value for measured and indicated silver.) The company has reserves, according to our notes, of some billion ounces of silver. Overall the world market consumes 860 million ounces of silver per year while producing 500 million ounces.

Mike Richings of VistaGold made a competent presentation on which we took no notes. We did note that Jock McGregor was supposed to be here in his place, but we gather passed away a short time ago. The company's ad in the program book claims 0.8 ounces gold per share.

Rick wrapped up the presentation with a crowd-pleasing list of touts. He made the bold point, which he would reiterate several times during the conference, that political risk in mining companies was preferable to technical risk. Unfortunately, his stock pick listing was at blinding speed. We heard Anatolian, Almaden, Cornerstone, Eagle Plains, Esperanza, Radius (RDU), Mena (MEA), Sanus Resources (SNU), and Western Prospector, but there were certainly others and you should simply engage Rick's firm if you want his best advice. Naturally, if you use a few of his pix to raise the $200K qualifying funds, so much the better.

Wednesday evening included a very pleasant reception in the exhibit hall where 9 of 10 exhibitors could be found. This early opportunity was the best time to gather tickets to the free catered luncheons presented by various companies throughout the show. The evening concluded with presentations by Brien Lundin, Lawrence Roulston, and Peter Bennett in the exhibit hall. Unlike last year's event, there were so many exhibitors and attendees this year that these would be the only main program events in the exhibit hall. None of them were memorable.

Of course, the real joy of these conferences is the conversations and gatherings of like-minded professionals. We enjoyed many hours throughout the conference knocking around the exhibit hall, visiting our friends at GATA, GoldMoney, Casey Research, and Kitco, as well as meeting old friends at Global Strategic Management, Global Resources, the Oxford Club, FreeGold, Jefferson Coin & Bullion, Universal Coin & Bullion, Stanford Coins & Bullion, and the Sovereign Society. It is a real pleasure to be among people who understand such basic economic truths as "gold and silver are money" and "the dollar is declining to its intrinsic value."

Thursday 11 November

Thursday 11 November was Veteran's Day. Presentations ran from 0715 to 2015, and included triple tracks during various parts of the day. Rick Rule was kind enough to provide attendees with a detailed "exhibitor stock charts" brochure for November 2003 to November 2004. Not only was it a powerful document for verifying the stock price claims made by various parties at the show.

There were many pleasant presentations throughout the day. One speaker pointed out that Dubai has more construction cranes right now than Shanghai. Another, Larry Abraham, misspoke when he referred to Russia as "the Soviet Union." Another quoted Howard Ruff, "When the wind blows, even the turkeys fly" as a way to suggest that rising commodity prices would make even poor resource companies seem like good investment opportunities.

Our lunch on Thursday was provided by the kind folks at Rubicon Minerals Corporation, Candente Resource Corp., and DRC Resources Corporation. The meal was uneventful and of no particular merit, but it is somewhat clever to see companies banding together to conserve funds by making investor presentations in a group this way.

DRC's corporate presenter isn't named in the program book. We didn't get a business card, but the corporate flyer names Chris Bradbrook as president.

With a name like DRC you'd think they were in the Democratic Republic of Congo, but their mining interests are two projects near Kamloops in "British" Columbia, Canada. (It really never was British nor Canadian by treaty, so "Coast Salish Columbia" would be more accurate.) One of the projects is the Afton mine which has already produced (1978 to 1987) 512 million pounds copper, 480 thousand ounces gold, and 2.8 million ounces silver. For those of you following the supply trap thesis, note the dates. The mine starts production just as metal prices start to get interesting, stops production as commodity prices reach some very low values, and, according to the DRC presentation, the mine's owner "Teck" dropped their claims in 1999. DRC acquired the mine by staking.

Their drilling results suggest "measured and indicated" copper of 1.6 billion pounds and gold of 1.9 million ounces. The copper at $1.45 would be worth $2.32 billion and the gold at $444/oz would be worth $844 million. Apparently DRC is one of those Canadian companies with established tax losses, so they cite a cash cost for producing the gold of negative US$15 per ounce in their scoping study. Their estimated total cost per pound for the copper is forty cents (US).

The other DRC property, "Ajax" is an exploration project with what seem to be marginal results at 0.23% Cu and 0.16 grams/tonne Au. DRC is, happily, listed as DRC on the TSX.

Rubicon's presenter was Dr. David Adamson, Ph.D., formerly of Lac Minerals. Just to make the presentation more surreal, Rubicon Minerals Corporation described their 27% interest in the Kalukundi Copper/Cobalt resource in the Democratic Republic of Congo. So, DRC Resources is in Coast Salish Columbia; Rubicon is in the DRC. You need a program book to track the players, and DRC isn't listed in the program! The Rubicon presentation suggested the inferred resource was 16.9 million tonnes grading 3.03% Cu and 0.66% Cobalt (Co). A full-scale feasibility study would be completed second quarter 2005.

Otherwise, Rubicon has gold projects in Ontario at the Red Lake district, Newfoundland, and in Nevada. The presentation mentioned joint ventures with Goldcorp at Red Lake North, Placer Dome at Golden Promise in Newfoundland, IAMGold at Avalon in Newfoundland, and Meridian Gold at Huxter Lane, Newfoundland. Their Nevada exploration consists of sixty percent ownership of Toquima Minerals with 9 gold projects in Nevada.

A close reading of their annual reports and other documentation reveals Rubicon to be a money losing venture with C$11.3 million cash at year end 2003. Goldcorp appears to be a shareholder. For an exploration company, their only quoted gold discovery was "H-Pond" in Newfoundland "with drill intercepts up to 16.23 grams per tonne gold over 2.4 metres." The stock symbols are RMX on the TSX and RBY on the Amex.

The third presenter was Joanne Freeze of Candente Resource Corp. Her company is exploring for copper and gold in Peru on three properties and in Newfoundland exploring for gold on one property. In Peru the properties are Cañariaco, Alto Dorado, and Las Sorpresas. The property in Newfoundland is Staghorn.

Cañariaco is 100% owned by Candente. Candente's VP of Exploration is Ing. Fredy Huanqui, a native of Peru, his CV blurb says he was "instrumental in discovery of Pierina gold mine sold to Barrick for US$700 million." The Cañariaco property is in systematic diamond drilling. It is a leachable copper mineralization in outcrop and previous drill holes over one kilometer by 600 meters. The leachable copper is estimated at 0.6 to 1.25%.

Alto Dorado is gold and copper in porphyry style alteration and mineralization over 189 meters. The results seem a bit lackluster at 0.1 to 1.2 grams per tonne. The copper is 0.1% to 0.76%. Las Sopresas is an option with Orex Ventures spending US$5 million over 3.5 years. It happens to be adjacent to the Yanacocha gold mine.

Up in Newfoundland, the company's materials state "Goldcorp has the right to earn a 70% interest in two Newfoundland gold properties by assuming all of Candente's expenditure obligations and completing bankable feasibility studies by January 2010." The Staghorn deposit is described as gold mineralization in three locations over 2.5 kilometers, with numbers from 0.4 to 4.8 grams per tonne.

In responding to our question on political risk in Peru, there was no mention of the strikes against majors and the attempts to close access to at least one mine site by perhaps thousands of locals laying in the road. Rather, the question seemed to produce a defensive response to the effect that if the majors aren't leaving Peru, it must be okay. There didn't seem to be any point in asking whether Candente had the budget to exert political influence comparable to any of the majors.

During an afternoon workshop Rick Rule made the point that small mines and mining companies with small proven resources may be value traps. The risks associated with a small mine are about the same as those with a large mine, but the rewards are very limited. "Outsize rewards are the only reason to take these risks," he said. He also described resource exploration as a business with three major components: people, process, and money. The people often determine success. The process should involve the company's acumen and other people's money, especially joint venture money. The money is the third P, "phinancing" as Doug Casey sometimes says. Rick said that in a capital intensive business, no money means no business.

The highlight Thursday evening was Bill Murphy's general session on GATA. Bill is the founder of LeMetropoleCafe.com and chairman of the Gold Anti-Trust Action Committee. He was introduced by master of ceremonies Gary Alexander as having an extensive background with well-known Wall Street firms, some of which his works suggests may be implicated in a scheme to manipulate the price of gold. As usual, Bill was forthright and interesting.

We did hear a bit from Larry Abraham, but he seemed to be so wrapped in the American flag his speech was muffled. David Tice, Martin Truax, and Brien Lundin made speeches of which we made no note.

Friday 12 November

Friday morning we arrived at the show shortly after the web cast by Bill Bonner and just in time for the one by Marc Faber. Mr. Faber presented from London, England Friday afternoon there. His charts ran to 48 pages and included many interesting very long term commodities charts, ranging back through time to 1780. His chart on China identified the commodities play since both China and India shall import enormous amounts of oil, food, and industrial commodities. He also noted tourism as Asia's most promising growth industry, with twenty four million Chinese travellers joining about a billion worldwide who travel for pleasure. He concluded that China and India's economic rise are "perturbing the old economic order." As well, "volatility is likely to increase in a world where the treasury departments of multinational corporations, financial institutions, and central banks have also become hedge funds!"

The morning break at 0925 was a bit of a mess. Competing for attention in the exhibit hall were round tables by James Powell, Adrian Day, and Jefferson Coin; presentations by Gammon Lake and Heartland Resources; and speaker table sessions by Pamela and Mary Anne Aden, Peter Bennett, Bob Bishop, Doug Casey, Frank Holmes, Ian McAvity, Tim Wood, and Martin Truax. It was chaos.

Naturally we gravitated to Doug Casey's table, which effectively crowded Bob Bishop out into the hall since twenty people were surrounding Doug before Bob arrived. There simply wasn't enough room to accommodate those who wanted to touch base with these speakers. As Doug proved willing to chat for some time, we didn't bother with Mark Skousen's book signing.

Friday's lunch was provided by the very enthusiastic people of Bellhaven Resources. If Larry Abraham's flag waving as a speaker wasn't to our taste Thursday evening, his presentation at lunch was right on target.

Bellhaven is focused on Panama. Panama's currency, the balboa, is pegged to the USA dollar, and the dollar is the main currency in circulation. Since gold and copper presently trade in USA dollars, this feature of the Panama economy provides currency stability for cost and profit projections. (Yes, it seems odd to write of the dollar and currency stability in the same sentence these days.) Panama has excellent year-round weather, modern infrastructure, long coastlines near the entire country, and is elephant country.

Larry's point about elephants is much like Rick Rule's discussion of the small mine value trap. Exploration companies need to explore in elephant country where very large mines may be discovered. Outsize rewards are the reason to take the large risks associated with mineral exploration.

The Rio Liri project is one of Bellhaven's most advanced. A thirteen hole drill program has identified a near surface gold oxide resource. Peter Folk's qualifying report of 20 July 2004 reads, "a potentially economic inferred mineral resource consisting of 1,664,900 tonnes grading 1.35 grams per tonne Au," which suggests to us a street value of about $34 million at $15/gram. The deposit is open to the South, north, and east, suggesting prospects for growth.

Bellhaven is the largest landholder in the Veraguas gold belt with 151 square kilometers straddling the area between the Santa Rosa and Remance gold deposits. At Los Hatillos Aguacatal, the company data shows surface samples collected in the early 1990s with strongly anomalous gold up to 82.6 grams per tonne. Nine holes drilled there in 1994 show 4.6 meters of 4.26 grams per tonne Au and 10.7 meters of 17.06 grams per tonne Au.

Bellhaven's projects on the Azuero peninsula include the Pitaloza property twenty kilometers West of the Cerro Quema gold deposit. Cerro Quema held ten million tonnes at 1.23 grams/tonne. Diamond drilling at Pitaloza came up with 26.52 meters of 0.7 grams/tonne in one 50 meter hole and 15.25 meters of 1.8 grams/tonne in another. Surface channel samples revealed up to 40 meters of 2.24 grams/tonne Au.

After lunch we attended the precious metals panel discussion with Pamela and Mary Anne Aden, Bill Murphy, Jim Turk, Frank Veneroso, and Ian McAvity with Adrian Day as moderator. The usual suspects had their typical enthusiasm for precious metals. Several speakers identified the dollar bear aspect of the current gold bull, though suggestions of a broader gold bull across many currencies in the next few years were made. Jim expects stocks to meander while metals move up. Mary Anne Aden mentioned her expectation that the USA dollar would drop a further twenty percent in coming months. Frank estimated some ten thousand tonnes of speculative long derivative positions by speculators. Ian suggested that technical trading speculators are "traders with the attention span of a gnat." Bill pointed out that at $500/oz Au, the Barrick hedge book is three billion out of the money. The Aden sisters, Jim Turk (and for some reason our notes show Doug Casey) seem to feel that there is going to be some correction for gold mining stocks in December, perhaps as tax loss selling. Only Frank was willing to suggest a coming correction in bullion prices.

James Dines made a delightful presentation identifying himself as the original gold bug, one of the first to embrace technical analysis almost five decades ago, and the original uranium bug. He seems to feel that stocks and commodities are both in bull markets at the moment, along with bonds and real estate. (Whether this coordinated bull he sees should be expected to last very long is another matter.) His table in the exhibit hall was one of the best attended, thanks to his incredible taste in eye candy.

Jim Turk made an afternoon "investor briefing" presentation on the exchange traded funds (ETF) proposed by the World Gold Council and others. Apparently the SEC's main problem, and certainly a concern, was the lack of any assurance that the resource behind the ETF was actual gold in a vault somewhere. A close review of the World Gold Council ETF prospectus seems to suggest that the gold is not audited, may be lent out, and overall the product seems to be more paper than gold. Similar problems may affect the "iTrade" ETF from Barclays which we gathered somehow involved Scotia which in turn excluded gold stored at the Bank of England since no audit nor inspection of gold stored there is allowed by the Bank of England.

We also heard from Peter Grandich on Friday afternoon in the exhibit hall. He pointed out that "the government has been robbing Peter to pay Paul, and Peter is tapped out."

The evening general sessions began at 1650 with Paul van Eeden giving a detailed analysis of the history of gold prices. He opened his presentation by holding up a $20 gold piece from the 1920s, about an ounce of gold. Then he held up a $20 Federal Reserve Note. He pointed out that the $20 bill won't buy the one ounce gold coin any longer. He also showed us a Z$20,000 Zimbabwe dollar note, which he pointed out was more ethical than the American money because it indicated an expiration date at the end of next month.

Paul's speech was one of the most powerful cases for a dollar bear, no gold bull position. Among other charts, he showed a chart comparing the track of dollar supply increases and gold supply increases against the dollar price of gold. Naturally, during the 1944 to 1971 period, the dollar price of gold was artificially fixed at $35/oz and modeled the relative dollar and gold supplies poorly. After 1971, gold moved to very closely model the supply curve. The gold rally from late 1979 to 1981 was a short-term excess, after which the gold price again modeled the supply curve for a period of years, ending in 1996 when the supply curve shows substantial increases in the supply of dollars not matched by an increase in the price of gold. Paul estimates that currently the price of gold would be $720/oz. Paul mentioned several favorite stocks including Miranda, Virginia, and Radius.

As the time for his speech approached, we're told Doug Casey became very quiet in the green room. He then commented, "I'm not going to make many friends, now."

Gary Alexander introduced Doug's speech as "Making Crises Your Friend," but Doug immediately corrected him by saying the speech was entitled, "How to Profit from the End of Western Civilization."

Doug proposed to discuss how to anticipate the end of Western Civilization from economic, political, religious, and sociological factors. Boorish hecklers in the crowd made the transition from political to religious impossible, and Doug's concluding points were nearly drowned out.

In the area of economics Doug named himself a "perma-bear" but offered both rosy and gloomy scenarios. In the rosy outlook column, he pointed out that the period from 1914 to 1946 saw the rise of central banks, two world wars, a great depression, and still produced an average of 1.8% per year growth. He offered to battle James Dines for the title "original nanotech bug" and said the future "will be better than you can imagine," perhaps not realizing we were in the audience.

In the gloomy outlook column he suggested we anticipate an even Greater Depression, markedly lower standards of living, the liquidation of numerous distortions in the economy, a collapse of the business cycle, and tremendous trouble for the dollar. He ran out his usual "the dollar is an IOU nothing" and pointed out that with trillions of dollars outside the USA, its fate is not in American hands. He also held up a sample ten thousand Iraqi dinar note, featuring Saddam Hussein's cheerful face, pointing out that these were now officially worthless.

Turning to politics he got some chortles and strangled gasps when he said that the best thing about George W. Bush was that he wasn't John Kerry. The crowd began to turn hostile when he said the best thing about Kerry was that he wasn't Bush. On the bright side, Bush makes many enemies for the USA. On the gloomy side, weapons of mass destruction are now fair to all countries and sought by all countries. He suggested that al Qaeda has metastasized into hundreds of groups and that at least 50 dictators around the world were as "bad as Saddam."

By this point the neo-cons in the audience were stirring in fury. Doug made the point that Iraq was not one country but three, which Bush would not be able to hold together. He also asserted that with a billion muslims worldwide, winning the war against terror would not be possible. He then turned to the hecklers and asked if it were really a war against Islam which seemed to excite their agreement. Pointing out that many muslims see it that way did not convert them to friendship.

In the sociological discussion Doug made a few brief points with the nationalist jingo crowd by saying that demonizing veterans in the Vietnam era was a mistake, but lost them all when he noted that deifying Iraqi vets was no more clever. He then quoted Gibbon's comment that the military are the enemies of freedom - "any order of men inured to slavery and violence make for very poor guardians of a civil constitution" - and that caused the boors to about drown out the rest of his talk.

Later, in a calmer moment, we suggested Doug simply publish his comments in one of his newsletters. That way the book burning conservatives could stay warm with a nice bonfire during the coming depression.

Doug's speech was followed immediately by a bullet briefing or teaser by Jim Currie of Luzon Minerals. Many of these teasers were sprinkled throughout the conference program, but this one happened to be especially well timed. Luzon is exploring for, and has found gold on its property in Bolivia. So it was timely to hear about this opportunity just before Jim Rogers stood up and said that Bolivia, Western Brazil, northern Chile, and Southern Peru were much like Colorado in 1875, a place of tremendous opportunity for anyone seeking a great fortune.

Sadly, the talk Jim Rogers gave was nearly identical to the slide show and overview he had given a year earlier at this same conference. He spoke of his round-the-world travel by Mercedes motorcar and trailer with his new wife Paige Parker. He spoke of five-star hotels with food that made his wife ill and "five-roach" hotels which had better service and much better cuisine. Then again, the man finds grilled tequila worms, termites, and camel milk to be tasty.

His answers to audience questions were a bit more interesting. He indicated enthusiasm for sugar, cotton, and frozen concentrated orange juice as commodities plays. He seems to like Angola, Tanzania, and Ethiopia, or those parts he visited on his tour. He indicated delight for Madrid and made the above cited comment about Bolivia and its environs.

Perhaps the most endearing part of his talk was his comments about his new baby girl, now about a year old. He would often comment, "My baby girl has a bank account in Switzerland," or "my baby girl owns gold coins" or the like. Clearly, he is a proud father and has made arrangements to preserve his wealth and the wealth of his new daughter using the best of his business acumen. In this context, his most chilling comment was to the effect that the USA dollar could still drop 30%, 40%, or even 50% and still not make the USA competitive in the world market. He made the important comparison to the British pound sterling which dropped about 80% after the First World War.

The Rogers speech was followed by a panel discussion with Doug Casey, Jim Rogers, Eric Roseman, Frank Trotter, and Adrian Day as master of ceremonies. Adrian asked many interesting questions of various panelists, and managed to keep the crowd from rushing the stage to tear Doug apart, so that went very well. Among other things, Doug was asked about his comment that the dollar was going to become worth less, and he replied that it was approaching its intrinsic value. We were a bit distracted during this presentation, having decided that sitting all day was getting old; parts of the Sheraton Grand Ballroom wall we were leaning against started to come off, and a quick examination showed significant water damage in rather poor repair. After the panel, we asked Jim Rogers when he wanted to go to Somalia and his terse response was an accusation that we were trying to clutter his agenda.

Having decided to see what the early morning excitement might be at Rick Rule's "early morning workshop" we made an early night of it and skipped the evening workshops in the meeting rooms.

Saturday 13 November

We were up before dawn to make the trip downtown. Fortunately the rains had let up and pre-dawn traffic was light. So, we arrived at Rick's early morning workshop in a timely fashion, rested and well fed.

Rick was very entertaining as usual. One concept he discussed in detail was having "tight trailing stops." These are intended to keep your gain from getting away. He recommended tight trailing stops on several stocks which he felt had made their anticipated gains and were now near the top. He didn't recommend selling, but suggested that tight trailing stops would preserve the gains earned.

We made note of Rick's failure in finding an oil and gas drilling partnership with a lofty return in fourteen years. He also admitted his tax advice was "worth what you pay for it."

The bullet briefing from Gammon Lake Resources was cancelled and master of ceremonies Gary Alexander referred us to the full page ad in the front of the program book which bears the limited information that Gammon Lake has discovered gold and the prayerful comment, "now the world's discovering Gammon Lake."

That non-event was followed by a very pleasant speech from Martin Weiss. Martin is editor of the Safe Money Report. His speech was on "The Great Bipartisan Deception." He pointed out that the dollar falling against the yen, gold, the pound, and other currencies constituted a national emergency that would not only affect the economy but would ultimately lmiit the country's ability to fight the war on terrorism. He said that the strong dollar policy was not only a lie but a bipartisan deception. Martin said this matter should be viewed by everyone in the room as a personal emergency, and he indicated that his speech was a declaration of war.

The Federal Reserve had declared war long ago, of course. Martin gave some very interesting family history, pointing out that forty-five years ago his father, J. Irving Weiss, had founded the Sound Dollar Committee with advice and support from Bernard Baruch and Herbert Hoover. He noted that Eisenhower's decision to "avoid extremes of waste and inflation" by submitting a balanced budget was the right action at that time, and that the Democrats of that era called it "defeat, deception, and denial". After Irving placed a Wall Street Journal advertisement, many others followed suit with ads in various magazines and papers. The result was a national mailing campaign that sent an avalanche of mail to the USA Congress, consisting of some 12 million items. He attributed his father's work as having made William Proxmire into one of the leading budget cutters of the Democratic party (whose "Golden Fleece" awards were very memorable).

Martin quoted Bernard Baruch of 16 April 1959, "inflation flows from the selfish motive for special advantage with little regard for the national interest." He then declared himself for a sound dollar and indicated his willingness to re-create the Sound Dollar Committee. As he strode from the stage, we had a momentary illusion of him calling for Sancho Panza and his armor.

The next significant event was a speech by Robert Prechter. Bob's speech was also much like the speech he made last year at this event. He had called for gold to drop back to $200/oz at last year's show, so we queried him in the hallway and found him persisting in that view. But he didn't start this speech there.

Instead, he spoke at length about the current bear market rally in the broader stock market. He said it was clearly a bear rally since dividend yield is in market top territory at 2% rather than in bottom territory at 6% or more. He pointed out that price to earnings ratios had been greater than 48 and even infinite at the top, were now in the twenty times earnings range, and should be expected to reach lows of six or seven. He explained that earnings had not yet undergone a major contraction, and indicated that this situation would change soon.

He discussed his overall market timing strategy as psychological patterns revealed in waves. Given that ninety percent of investor decisions seem to have to do with sentiment, he suggested that now was a good time to stay out of the broader stock market. He also indicated that the real estate bubble typically bursts two years after the stock market top, and this real estate bubble was now four years past the stock market top, thus "not the place to hide." (We wondered as we sat watching him whether the perception of the USA as a safe haven far from the Middle East conflict and higher taxes elsewhere might be sustaining this bubble, with possible nuclear terror strikes, the dismal dollar, and much higher taxes to fix the fiscal deficit as the combination of factors bursting this bubble.)

Bob said he bought his first gold stock in 1972, and that the current price of gold at about $440 was not very impressive, since it had first reached that point twenty-five years ago, in 1979. He quoted a February 2001 Barron's article saying "nobody expects gold to turn up soon" as an indication of his most recent foray into buying gold, and he pointed out that 95% of traders are now bullish on gold. He again cited various reasons why he expects gold to drop to $200/ounce "within five years." He also indicated that gold now was an anti-dollar bet. We found nothing in his presentation to suggest the dollar would strengthen so greatly.

At some point, either during Bob's speech or during a later Global Resource Investments roundtable, we noted that uranium is 20% of the energy production of the USA and 80% of energy production in France. This note stands out as one of the many facts about uranium we had not known prior to the show, and further emphasizes our lack of skill at making picks or plays in energy.

Saturday's lunch was provided by Pinnacle Mines. Pinnacle is exploring for gold in Yunnan, China, and in Coast Salish Columbia. We took an immediate shine to Pinnacle presenter Andrew Bowering from his publicity photo in the conference book which, though artfully cropped, appears to show him in a black T-shirt rather than the typical business attire. His presentation on the Yunnan region showed a solid grasp of the historical peculiarities of the province.

One can certainly sympathize with companies seeking to insulate themselves from the seasonality of the Canadian exploration sector, as Pinnacle claims to be doing. Yunnan's largely tropical latitude seems likely to be helpful in this regard.

As far as actual gold goes, the company's brochure indicates "the most significant drill hole to date returned 1.63 grams/tonne Au over 89 meters." Pinnacle Mines has acquired the right to purchase 100% of the Yang Wen Chong property from its owner, Yunnan Geology and Mineral Resource for a total of C$4.3 million by November 2005. Chip sampling on traverses has revealed up to 3 meters of 4.42 grams/tonne Au, and up to 40 meters of 1.86 g/t Au.

Just over the border from the USA, Pinnacle Mines has 28% of the Indi claims and is to earn 51% of the Silver Coin claim from Mountain Boy Minerals (TSXV: MTB) by spending $1.75 million on exploration over three years, and 9% more if any producing mines result. Tenajon Reources has an agreement which allows Pinnacle to earn up to 70% of an property enclosed by the Indi and Silver Coin claims called "the Kansas Property." A 1995 report on this latter property calculated the uncut gold reserves there to be 1.774 million tonnes grading 2.2 g/t, or 124,889 ounces of gold, or nearly $56 million of gold at a recent $446.40/oz, of which 70% is just over $39 million. Various weasel words accompanied this data to the effect that the report is historic in nature and may be relevant.

On 3 November 2004, the company annunced drill results yielding 11.35 g/t Au over 17.8 meters, which their press release kindly converted into Imperial units as 0.3 ounces per ton over 58.3 feet. The announcement indicates that the drill results indicate the zone widening with depth.

Various early afternoon distractions, mostly in the exhibit hall, led us to miss Dick Armey's comments. His program CV notes that he has a Ph.D. in economics, claims that the "Contract with America" was 60% upheld (which functions as breach of contract where we come from) and indicates the usual fluff and puffery of a career politician.

Having heard about a conversation in an elevator between Doug Casey and another conference speaker to the effect that George Tenet was a sort of professional criminal, lifetime bureau-rat, corrupt, and disgusting, and having heard that this speech was overheard by one of the Marines providing guard duty for Mr. Tenet (in the unlikely event that the New Orleans crowd would spirit him away and make him leak national security secrets, we suppose), we simply couldn't miss his speech. After all, the conference paid him a reported $50,000 to appear at the show.

His security detail was awesome. We counted at least five security guards covering the crowd from the front of the room and the main entrances. His presentation on USA Security was trite, boring, and jingoistic. At one point we were hopeful that the point he had made about drug policy using resources that would otherwise have gone to fighting against terror would lead to some thoughtful comment about the war on drugs being counterproductive, but our hopes were dashed as he re-affirmed the need to fight that aspect of the war on freedom as well.

Following his speech, Tenet was joined by Mark Skousen as master of ceremonies, Dick Armey, Doug Brinkley, and Larry Reed for a panel on economy and policy. All during the Tenet speech, we had been trading notes with Doug Casey and Doug's wife Ancha van Eeden trying to work up a question for Tenet that Skousen had solicited from Doug. As Gary Alexander announced the panel Doug was just finishing his question, and expressed disappointment that he would never get it to Skousen in time. We agreed to run it forward, which brought delightful levels of scrutiny from first one and then five of Tenet's security guards. Seeing each of them "go orange" we doffed our hat as we approached the panelist table and thus had both hands raised, one with the paper holding Doug's question and the other holding our hat up. As another attendee later commented, we weren't opposed to blood in the streets, provided it wasn't our own.

Doug's question was dutifully read by Skousen, who identified the author of the question. The question was whether Mr. Tenet felt that muslim resistance fighters hated the United States because they were evil, or whether there could be another reason. Mr. Tenet chose not to answer that question, and instead addressed the unasked question of whether the United States is evil.

The only question which created an interesting reply was asked of all panelists. We ascertained that Doug Brinkley was pro-tyranny when he responded to the "who is your favorite president" question by naming Abraham Lincoln. Possibly wanting to refute that answer, or for other reasons of his own, the interesting reply came from Dick Armey who said that Jefferson Davis was his favorite American president. There were considerable cheers and at least one rebel yell from the audience.

There was a pleasant exhibit hall break, although coffee is only served at the morning breaks, it seems. We pulled a shift at Doug's exhibit hall table, picking up three or four sales from people who seemed to have great enthusiasm for his speech. Oddly, the one place we never saw Doug was at his table. The executive editor of his newsletters and managing director of Casey Research spent quite a bit of time at the table, though, passing out 10,000-dinar Saddam notes to all and sundry. These were very popular with the crowd. Apparently, Doug had sent a mercenary to the Baghdad market to get a hundred million dinar worth of these notes, and paid the tiny premium for authentic, hologram-marked, serial numbered Saddam money.

We tried to hit both the presentation by Northgate Minerals and the one by Pacific Northwest Capital Corporation, but ended up spending too little time at either. The presenter for Northgate was Ken Stowe, president and CEO for Northgate. The presenter for Pacific Northwest Capital was Harry Barr, president and founder of Pac NW. We also saw our old friend Spiros Cacos, one of the Pac NW team and our main point of contact for Freegold.

Northgate is a gold and copper mining company which mainly operates the Kemess Mine in north-central Coast Salish Columbia. Each year the mine produces 300,000 ounces of Au and 75 million pounds Cu. It is an open pit mine. The company recently acquired the Sustut Copper deposit, 40 kilometers south of their Kemess camp, which has 4.6 million tonnes of 2% copper and 6 grams/tonne Ag. In third quarter 2004 the company produced US$10 million net income on production of 79,311 ounces Au at a cash cost of US$129/oz. The listed reserves of Kemess are "proven" 2.1 million ounces of gold and 459 million pounds of copper.

Yes, obviously, that gives a mine life of 7 years for gold and 6 for copper at current productin rates. Fortunately, the company has plans to bring Kemess North into production in 2006 bringing a further 414 million tonnes of proven and probable reserve containing an estimated 2.6 million ounces of gold and 1.3 billion pounds copper. If those figures prove out, that would add another 8 years of gold production and another 17 years of copper production, perhaps more. The company also has exploration joint ventures with Rimfire Minerals in the Eskay Creek region of Coast Salish Columbia, with Stratgold in the Southern Yukon, and the Sustut Copper project, detailed above.

Pac NW, CanAlaska, and Freegold share common management. Harry Barr is chairman or CEO of all three companies. Presumably, various costs of a general and administrative nature are economized by this approach. Pac NW is a platinum and palladium exploration company with projects at Union Bay, Alaska; River Valley and Agnew Lake near Sudbury, Ontario; and early stage projects at Lac Manitou and Glitter Lake Nickel in Quebec. The star of their show seems to be the River Valley property near Sudbury, which is showing 798,300 measured and indicated ounces of palladium, another 88,900 ounces inferred; 273,200 ounces measured and indicated platinum, with 32,500 oz inferred; 49,700 ounces measured and indicated gold, 5,700 oz inferred. Some impressive figures for Cr and Pt were shown from the Union Bay project, as well.

The discussion on Freegold included an overview of the companies projects at Golden Summit, near Fairbanks, Alaska; at Union Bay, near Ketchikan, Alaska; at Almaden near Weiser, Idaho; at Grew Greek in the Yukon; at Eskay Rift in Coast Salish Columbia; and at Rob Gold also in Alaska. Golden Summit is at the top of several streams from which about 6.75 million ounces of placer gold have been removed since 1902. It is within five miles of the Kinross "Fort Knox" mine, Alaska's largest gold producer. Freegold is joint venturing the Golden Summit project with Meridian. Union Bay is a Freegold and Pac NW project with Lonmin and recent results indicate strong showings of Pt and Cr; these results have inspired another US$600K for the exploration budget from Lonmin.

Freegold's Almaden project has a 1997 feasibility study indicating a mineable resource of 500,000 ounces gold recoverable through open pit and heap leaching. The deposit is open to north, South, and at depth. Freegold is negotiating with potential production partners. (No doubt permitting on this one is going to take time.) Grew Creek is an exploration project showing up to 17.77 grams per tonne Au over 7.55 feet and other interesting results (2.25 g/t Au over 297 feet).

Eskay Rift is a new region "favourable for Eskay Creek Style VMS mineralization" per a British Columbia Geological Survey map published in early 2004. Freegold has 400 claim units in this area. Some 1,000 samples have been taken and assay reports are expected soon. The Rob Gold project is twenty miles from a newly permitted Pogo Gold deposit of some 5.6 million ounces and appears to have similar style mineralization. Nearby is the Rainbow Hill project, Freegold's newest, which may be prospective of host intrusive related gold mineralization.

CanAlaska is involved in exploration for gold, diamonds, platinum group metals, and uranium. They have projects in New Zealand, in the Raglan area of Quebec, at Glitter Lake in Quebec, at Smoke Lake in the Hemlo-Schreiber gold belt, in the Athasbasca Basin of Saskatchewan, and at Rainbow Hill in Alaska. The presentation was focused on uranium when we walked out to get to the Northgate presentation room.

At the bar we found several friends talking about the impending Saturday night gala. One friend commented that there would be all kinds of gaudy jewels in evidence. We replied that the event reminded us of the Country Music Awards with "jewels on trailer trash." Another friend was all over the Cristalex venture which we gather is in Venezuela. There was discussion of placer mining being abandoned owing to lead in the water and other reasons. The reported two million dollars sent by Chavez to Fidel Castro was also discussed, along with the fact that many voters may have been intimidated into voting for Chavez. This overview strengthened our resolve not to recommend any ventures with holdings in Venezuela.

The dinner dance gala was fun. It is the most interesting aspect of this conference every year. We found a nice table up front and were surprised it had no "reserved" note, but were almost immediately chased off by someone claiming to represent the Blanchard and Skousen interests in the table. So, we sat at another table up front, and were joined by a nice veterinarian whose retirement was funded with investments in gold mining companies. Later we learned that the table we had first scouted held three empty chairs through the meal.

Part of the Saturday evening festivities is a "closing panel" which, oddly, never actually closes the conference. This year's panelists were Larry Abraham, Doug Casey, James Dines, Ian McAvity, and master of ceremonies Mark Skousen. They were introduced by Brien Lundin who said that anyone with complaints about Doug Casey's speech should contact Doug directly, and anyone with any other complaints about the conference should also contact Doug directly.

Lundin had a serious look on his face, but his words held at least a sample of charm. Skousen, on the other hand, proved to be far more vindictive. He fetched forth a jester's hat which he asserted was a dunce cap, and had Doug wear it for a few minutes. Then Skousen organized a joust. He called forward a Marine who introduced himself as something like "Bill from the trailer park" who was then called upon by Skousen to "Indian Wrestle" with Doug. Getting up from his seat at the panel, Doug, playing the good sport put the jester's hat on Skousen and went down to face off against the Marine. Five minutes later, it was clear that neither man was going to best the other, though significant wrestling was involved. The two shook hands, and the Marine flounced off to his seat still in high dudgeon. Later, Skousen indicated that he felt Doug had to pay a price for offending members of the audience on Friday. We immediately withdrew our proposal to speak at any of Skousen's upcoming events.

The most memorable comment from the panel was from James Dines who discussed the Iraq war and asked why we can't all get along. After the speeches, we thanked him for this comment saying, "blessed are the peacemakers." A little later the open bar had inspired quite a bit of dancing. We joined in long enough to demonstrate elements of the Charleston which were evidently known but not understood by some of the young ladies in Mr. Dines's entourage.

Sunday 14 November

Our last evening at the Sheraton Four Points included several encounters with odd looking people on various floors. One of the staff had told us on Friday evening that the hotel front desk staff were running a weekend theft ring, so we checked out without further ado, finding the Sheraton on Canal Street had plenty of rooms for Sunday night.

We arrived downtown in time for Rick Rule's morning workshop. This time he was speaking on Boswell, which he seems to think will eventually realize the four billion dollar water resource under the Tulare lake bed which they own may have a higher and better use than producing a few millions in agricultural products, given the Los Angeles basin's thirst for fresh water.

Rick then pointed out that one in three thousand mineralized anomalies ever becomes a mine, from being staked to actually producing. He pointed out that many mineral exploration speculators seem quite willing to accept technical risk. In his view, they should resist and, instead, investigate technical risk while being more willing to accept poiltical risk. If the political risk factor is 50:50 and the technical risk is 1:3000, then the point is well taken.

So, in terms of political risk, Rick indicated that he likes Bolivia, Indonesia, Myanmar, what he calls the Hunan trench, and the Central Asian collision belt countries such as Turkey, Iran, Iraq, what his friend Rick Maybury calls "Chaostan," and Afghanistan. Rick mentioned NevSun (NSU) and suggested that there would be December tax loss selling, reiterating a point made earlier in the show. So, if you aren't currently invested in gold mining stocks, late December may be the timing you are looking for. Rick also quoted Mencken on elections being "advanced auctions on stolen property."

Our friend from Eris 2002, Michael Checkan was invited to make a presentation. His company, Asset Strategies, he described as a boutique specializing in asset protection and wealth management. He mentioned that the dollar is down 50% now (against, say, the EU euro when it first came out) and should be expected to decline another 30% soon. He suggested a portfolio consisting of 20% precious metals, 30% foreign currencies, 30% bonds, and 20% stocks. In precious metals he likes gold and silver, and recommended that assets be non-leveraged. In currencies he mentioned the EU euro, the Swiss franc, the Canadian dollar, Australia dollar, New Zealand dollar, and South Africa rand. In bonds he mentioned foreign currency bonds and pointed out that we may be headed for another episode of what was called "stagflation" in the 1970s. In stocks he likes Real Estate Investment Trusts (REITs), mining stocks, and overseas stocks. He mentioned an overall strategy of getting outside the USA, getting out of the USA dollar, get diversified into many investments, and look for a double-play with securities in foreign currencies.

Michael was followed by Arthur Lipper. Art gave out his e-mail as arthur@pobox.com and his Skype as artlipper. He's the chairman of British Far East Holdings, and formerly played various roles on Wall Street. Art was very concerned about the coming pension fund crisis. He suggested that shortfalls in private pensions will be coming, and these will be paid by shareholders, while shortfalls in public pensions are going to be paid by taxpayers. He also discussed the disconnect between the client and the investment manager and suggested a "Lipper minimum relative performance contract" as a solution. For example, if the investment manager does as well as gold for the client, then the investment manager would get half the surplus generated.

Bob Bishop has long been a favorite at the New Orleans show. When G. Gordon Liddy was a featured speaker, Bob and Jack Pugsley appeared on stage with toy submachine guns while Skousen failed the push-up competition against Liddy. We found ourselves somewhat reluctant when he touted Cristalex and Venezuela, somewhat more agreeable when he mentioned Aurizon and Strathmore.

The morning general sessions over, we went to listen to Jim Currie on Luzon Minerals. You'll recall from our discussion of Friday evening's presentation by Jim Rogers that Luzon is exploring in Bolivia. Several drill holes at their Liphichi property look quite promising, including one showing 120.5 meters of 0.87 g/t Au, 15 meters of 3.74 g/t Au, and 6 meters of 7.43 g/t Au. Another hole showed 133 meters of 1.76 g/t Au, 44 meters of 3.93 g/t Au, and 7 meters of 16.03 g/t Au. As well, the company has good relations with the local "campesinos" and miners.

We then dropped by Adrian Day's workshop. Adrian is the president and founder of Global Strategic Management, graduated from the London School of Economics, and discussed the benefits of a private money manager for investors with $500K or more investable assets. He suggested that he and his company could benefit investors with tax advantages, personalized portfolios meeting investor objectives, and cost effective fees and discounts. He pointed out the benefits from global diversification and discussed some income account allocation strategies.

Everyone returned to the general session room for presentations by the Aden sisters and Frank Veneroso. The Adens showed a number of interesting charts and suggested that since 1998, stocks have been trending down and bonds up, whereas these used to be linked. There was also some discussion of this "new economy" having gold up alongside bonds. They mentioned a key breakout figure of EU euro 350 and expect gold to go to US$500/oz within weeks to months. They focused their discussion of the USA dollar on the increasing trade deficit and increasing fiscal deficit.

Frank discussed his view that gold is way below its commodity equilibrium, where it would be without government activity. He expects gold higher in the long term and says junior gold stocks are cheap at current prices. He notes a worldwide increase in debt that he suggests must abate soon. He sees the global economy slowing, and non-food, non-energy inflation also slowing.

And that was a very productive conference, we thought. Gary Alexander made similar comments and invited us all back for next year.

To close out the show, we attended a very enjoyable GATA luncheon. John Embry and Andrew Hepburn were both present, and were agreeable to signing our copy of the Sprott Asset Management special report "Not Free, Not Fair; The Long-term Manipulation of the Gold Price." Bill Murphy, Jim Turk, and Chris Powell each made rousing speeches, and we heard from other members of the GATA boards of directors and advisers including Catherine Austin Fitts and, as well recall, Frank Veneroso. Much standing around and occasional forays to the cash bar followed, and the conversations were free form and varied.

Final Thoughts

So, you may be interested in attending the New Orleans Conference next year. If so, the best way to get in touch with them is by visiting their web site. You can pay for your registration by credit card, company check, or GoldMoney. Perhaps if you wish to exhibit or speak at the show, you can make some particular arrangement with the conference organizers.

If you found our report intriguing, but you want to get the real thing, consider ordering the Audio CDs from the conference. You can contact them by phone at 800-648-8411 or +1-504-837-3033 from outside the USA and Canada. By fax 504-837-4885. We understand that the CDs of every presentation made from the General Session stage is $199 for some 44 presentations. We aren't clear whether the "Top Picks" report is included at this point, though the flyer we picked up indicated it would be. "Top Picks" is a report summarizing every presentation and listing every recommended stock pick. There is a $15/set fee for shipping the tapes in the USA or Canada, $30 per set for overseas. Louisiana residents to add 8.75% sales tax. Credit cards and checks are accepted, but their paper forms do not mention GoldMoney.

Being Sovereign

    "The sovereignty of one's self over one's self is called Liberty."
    - Albert Pike

This week we were more engaged in being at a conference and then writing about it than being sovereign. More next week.

Free Market Money

    "It's the best paper in the world."
    - USA Treasury Secretary Snow
    on USA Treasury securities,
    9 October 2004

Treasury Secretary Snow has gone on to say that federal pension money would be used to keep the government running, and "repaid later with no effect on the fund or retirees."

In case you feel that neither the Treasury securities nor the dollar are very good paper, we're reminded by a good friend that the text of Andrew Dickson White's Fiat Money Inflation in France is online at Gutenberg.

Gold Mining

Later this month we hope to review all the data we brought back from New Orleans and make a few more suggestions.

Here's how the two stocks we still suggest in this area look right now:

Company Symbol C$ US$
s
Free Gold ITF 0.37 0.31
+C$0.09
Newmont Mining NEM N/A 47.00
+3.70

We recommend tight trailing stops on both companies, especially Freegold in anticipation of December tax loss selling.

Free Market Money

At the beginning of November we wrote, "Gold appears to be building a base at $425-427. Its next assault on $432 ought to triumph." It did. Gold closed above $432 on 5 November and approached $435 on the morning of the 8th. Having closed above that key level, the next major overhead resistance should be about $480. There does seem time before the end of the year to build to that level.

We also wrote, "We see similar activity in silver around $7.25." Silver has also closed higher. Much of this activity reflects the dollar working its way lower and a flight to value.

The two stocks we've suggested in this sector are PVH and MCG. No change for either, last we checked.

Space Frontier

Of course, by 2010, the USA dollar won't be worth nearly as much as it is now, but we imagine fifty million dollars will still be impressive to many contenders.

By that year, Bigelow plans to orbit several inflatable space habitat experiments, culminating in an orbiting hotel. As we've mentioned before, Richard Branson has established that there is at least a $1.47 billion space tourism industry at hand.

Here's how things stand for the stock we suggested in this sector:

SpaceDev is at $1.57. You'll recall our early November discussion of trailing stops. Loose or tight, you should already have sold on your trailing stop to preserve your gain. For all that SpaceDev is propulsion contractor for the Mojave Aerospace Team and their winning SpaceShip One entry, for all that Virgin Galactic's seven thousand customers imply about 1400 rocket motors for SpaceDev to build, the latest results on their finances are discouraging. They seem to be better equipped to pay returns to their debt holders than to their shareholders. This factor makes sense when you consider that some officers of the company are debt holders. On the other hand, Motley Fool seems to like them.

Launch Technology

    "However, with the launch today of China's first human spaceflight mission, Shenzhou 5, China's space program has jumped onto the national headlines."
    - Futron Corporation White Paper, 15 October 2003

Much of the story of China's launch technology is the story of Tsien Hsueshen. Born in China in 1911, he attended university in the USA on a scholarship, and was a follower of Theodor von Karman at CalTech from roughly 1935 until 1949. He applied to become an American citizen, but was accused of being a communist sympathizer (oh, good move, immigration authorities), placed under house arrest, and then deported in 1955.

About 1956, Tsien helped the Chinese government negotiate an agreement with the Sovies for nuclear and rocket technologies. After the 1960 break with the Soviets, Tsien worked on developing China's own launch technologies. This effort culminated in 1970 with the successful launch of DFH-1, China's first satellite atop the Long March 1.

In 1985, China decided to enter the international market for commercial satellite launches. China's "Great Wall Industries" was organized to market the Long March series of launch vehicles, with launches from Jiuquan, Xichang, and Taiyuan. Since 1985, China has conducted more than 18 commercial launches. In 1990, their price competitiveness was the subject of a fit pitched by the National Space Society involving a 1974 Trade Act dumping charge. At the time, we were dumbfounded that the Society would object to lower cost access to space, and resigned our position on their board.

In 1995, Russia agreed to sell China certain Soyuz space capsule technology and provided training to several Chinese cosmonauts. New facilities were built at Jiuquan, Inner Mongolia and in 1998 a series of tests were begun, culminating in four test launches between 1999 and 2002. Ultimately, their first cosmonaut flew in October 2003.

We anticipate a Chinese space station, perhaps along the lines of Skylab, to be launched by the new Long March 5 vehicle sometime in 2010 or so. There are also evidently plans for an Apollo 8 style circumnavigation of the Moon by a Chinese cosmonaut perhaps as early as 2006.

China seems poised to capture a solid share of the commercial satellite launch market with their low cost vehicles and high reliability. We look forward to a strong Chinese space program as an impetus to private space efforts elsewhere.

New Country Developments

    "We want recognition of our sovereign status, and our primary concern is taxes."
    - Meaghan Champion-Williams, 2003

There's nothing quite like taxing people who have been told they would always be tax exempt to get them fired up about secession. So far, several dozen have signed the petition calling for the Somena Nation to secede from the Cowichan "band council." The group has asked for its own seat at the table for negotiating a treaty with the Canada and provincial governments.

The Somena Nation has land on Vancouver island and on the mainland. Their land on the island is around what is called "Cowichan Bay." Some within the Somena Nation are interested in forming a free trade zone and developing the port facilities at Cowichan Bay. Stay tuned for more developments.

Longevity

    "An independent board of drug safety may be necessary to ensure the safety of medications after FDA approval."
    - Sen. Charles Grassley, November 2004

So, get these facts: Vioxx was approved by the FDA. Dr. David Graham determined Vioxx was a danger but was unable to get the FDA to act. FDA management were still defending Vioxx when the manufacturer, Merck, voluntarily pulled Vioxx from the market on 30 September 2004 following release of a study which indicated that Vioxx doubled the risk of heart attacks and stroke when taken for more than 18 months.

So, let's get this straight, Senator. The FDA is incompetent at approving drugs, about 100 years after it was established. The free market, such as it is in the pharmaceutical industry, handled the Vioxx problem through independent testing an analysis, the threat of lawsuits from every ambulance chasing attorney in the country, and the manufacturer of Vioxx voluntarily pulled the product from the market while the FDA was still fussing about how Vioxx was okay. Even this past week, FDA Center for Drug Evaluation acting director Steven Galson said, "All the drugs that are on the market hvae risks," as if to reassure the public that the FDA is in permanent recto-cranial inversion mode.

So, the free market worked out the Vioxx problem. The FDA is not only incompetent, not only denies Americans access to useful drugs, not only seeks to destroy the market for food supplements and vitamins, not only approves drugs which kill thousands of Americans every year while failing to approve drugs which would save thousands more, but also fails to acknowledge the work of its own mid-level functionaries in a timely way. So, Senator Grassley, in response to these facts, proposes to put in place yet another level of government bureaucracy.

The FDA hasn't worked at all. So, how can the solution to a non-functioning government bureaucracy be another layer of bureaucracy? Wouldn't the evidence and the presumption be for the free market to be left alone? It seems clear that the free market is far better able to establish what medicines are worth having and marketing than the government. Doesn't the government have enough to do destroying the value of the dollar and fighting against freedom all over the world?


Publication note: We made a funky math error in our report of 21 October 2004 on the Gold Casino. We reported a price to dividends ratio of 12.55 and then noted that if the earnings were twice the dividends, the P/E would be about 25. In fact, with earnings twice, the ratio would be 6.28. We've changed the item in the archive. This week's issue took extra long to assemble owing to our lengthy notes on the New Orleans show.


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