Next Saturday is Christmas Day, so I will only be posting a brief update next week. So, for your Christmas fix, let me share three stories of good cheer with you, all with a common theme. (The common theme is that bad experiences can turn in to good ones, so stay with me on this).
Story #1 – The Great Sarnia Snowstorm of 2010
Our first story was picked up by CNN this week, and it involves a freak snowstorm that stranded 350 motorists on a highway outside of Sarnia, Ontario for over 24 hours. For those of you who missed the story, a freak snowstorm hit on Monday morning in the area around Sarnia, Ontario. Within a short time a large quantity of blowing snow accumulated, and traffic on Highway 402, linking London to Sarnia, came to a stop. The 350 or so cars and trucks on the road assumed the snowplows would arrive soon, but the conditions were so dangerous that they were pulled off the road. Motorists ended up spending over 24 hours in their cars, before being rescued by snowmobilers and taken to a truck stop, where they remained for a few more hours, before being taken to the local Fairgrounds. It wasn’t until Wednesday that they returned to their cars, and continued home. You can read a first hand account of how someone survived the 2010 Sarnia snowstorm here. Monday was a bad day for him; being re-united with his family on Wednesday was the best day of his life.
Story #2 – The Royal Group Technologies Debacle
The Sarnia snowstorm only lasted for two days. The Royal Group battle lasted for years. Here’s the story:
Vic De Zen arrived as a penniless immigrant to Canada from Italy in 1962. He worked non-stop, and ten years later founded Royal Group Technologies, that grew to a $2 billion per year company by the time it went public in 1994. Many employees, including the janitor who invested a few dollars in start up capital, became wealthy, which is great; that’s what taking entrepreneurial risks is all about.
But then the all intrusive Canadian government, encouraged by successful prosecutions in cases like Enron in the U.S., decided that Canada needed to show the corporate world that we are “all growed up” just like our U.S. cousins, so they launched a massive witch hunt against Mr. De Zen, and five of his employees. Most of the employees were accountants.
Yup, that’s what we do in Canada; we go after the accountants.
The result was a protracted, expensive, six year legal battle, with the government attempting to prove that Mr. De Zen profited from a land deal, and other financial transactions.
The defendants in this saga were very seriously harmed. Think about it: would you hire someone who had been charged with fraud? As a result Mr. De Zen was forced out of the company he founded, and his lieutenants were forced to start over, at lower paying, less glamorous jobs.
Fortunately justice has prevailed. Finally, on December 10, Ontario Court Justice Richard Blouin, not wanting to further delay the proceedings by preparing a written ruling, delivered his oral conclusion:
There will be a written judgment before the end of this year, which will be supplied to everybody involved. This case has been going on for quite some time. I think it’s important to everybody involved here that, with a case that’s been hanging over people’s heads for a number of years now, that I make a ruling on it, and I’m prepared to do that today.
I’ve had a chance throughout this whole trial to listen to the evidence, read the transcripts the next day. I’ve done that fairly religiously.
I need some time to put together my ideas in writing, but my decision is one that is firm and fixed and will be given today.
I find in this case the evidence to be overwhelming that there was no attempt to conceal anything. There was no dishonesty. There was no deceit and there were no fraudulent acts. Overwhelming evidence.
Wow. Overwhelming evidence. Not guilty on all counts. It has been a long journey for the wrongfully accused, so congratulations to all of them. Everyone loves a Christmas miracle.
Terrence Corcoran of the Financial Post has long reported that this prosecution was based on flimsy evidence, so he had fun blasting the government’s epic official injustice.
What’s Mr. De Zen up to? He keeps on working, and he’s already started a new company, that already has 1,000 employees, with $400 million in revenue, and he has no doubt that in five years the revenue will be over $1 billion. Good for him.
This is a classic example of why the government should simply get out of the way. Governments around the world have spent trillions on “stimulus” to try to create jobs, while at the same time prosecuting one of the great job-creating entrepreneurs in Canadian history. Hey, government morons, you want to create jobs? Stay the hell out of the way of guys like Mr. De Zen; let him, and people like him, create jobs and save the world.
Story #3 – The Gold and Silver Market
Speaking of the government, in our third story we discuss the manipulated gold and silver markets. This was a bad week for gold, on the surface. Here’s the chart for AEM.TO – Agnico-Eagle Mines Ltd.:
It would appear that the uptrend line has been broken; does that mean a crash is imminent? Perhaps, but I doubt it. I don’t see the fundamentals for precious metals changing any time soon. So, here’s what I did:
First, back on December 14, I sold the December 86 calls against my Agnico-Eagle stock. I took in a small premium. Obviously the market tanked thereafter, so those options expired worthless, so I keep the premium. That helps cushion my losses.
Then, on Wednesday, I placed my stink bids, which, as you know, are below market bids for stocks I want to own. Instead of purchasing them “at market” today, I put in bids to buy them at a lower price, so if the market drops, I get in at a better price. Two of my purchases were filled: I bought Silvercorp Metals Inc., and I bought Fortuna Silver Mines Inc. I have a few more stink bids in on a few more stocks; we’ll see if there is further weakness and I get filled.
If I don’t get filled, fine, that means my existing holdings will do well. If there is weakness, I get stocks on sale, and that’s great too.
Finally, I also took a flyer. I had a choice this week: my stocks are down: do I buy more, or stay on the sidelines? It’s a difficult choice, because you don’t want to buy if there will be a further correction, but if the correction is over now is the perfect time to buy. So, I decided to hedge my bets.
I bought some call options. I bought the January 78 AEM.TO – Agnico-Eagle Mines Ltd. calls, and I bought the January 38 SLW.TO – Silver Wheaton Corp. calls. I didn’t spend much; if I’m wrong and I lose the money, fine. My thinking is that it’s better to spend $2,000 on options to control 1,000 shares, than it is to spend $78,000 for 1,000 shares.
If Agnico-Eagle gets back to the $85 range in the next month, my options are worth $7, and since I paid less than $3 for them, I easily double my money. Obviously owning the shares you don’t double on a move from $78 to $85. And, if they crash, it’s a minimal loss, so no worries.
That’s the week that was, and those are my stories. Enjoy the holiday season, take advantage of bargains, and see you, briefly, next week.
Tagged as:
Christmas,
Gold,
Silver
Three Stories of Christmas Cheer
by JDH on December 18, 2010
Next Saturday is Christmas Day, so I will only be posting a brief update next week. So, for your Christmas fix, let me share three stories of good cheer with you, all with a common theme. (The common theme is that bad experiences can turn in to good ones, so stay with me on this).
Story #1 – The Great Sarnia Snowstorm of 2010
Our first story was picked up by CNN this week, and it involves a freak snowstorm that stranded 350 motorists on a highway outside of Sarnia, Ontario for over 24 hours. For those of you who missed the story, a freak snowstorm hit on Monday morning in the area around Sarnia, Ontario. Within a short time a large quantity of blowing snow accumulated, and traffic on Highway 402, linking London to Sarnia, came to a stop. The 350 or so cars and trucks on the road assumed the snowplows would arrive soon, but the conditions were so dangerous that they were pulled off the road. Motorists ended up spending over 24 hours in their cars, before being rescued by snowmobilers and taken to a truck stop, where they remained for a few more hours, before being taken to the local Fairgrounds. It wasn’t until Wednesday that they returned to their cars, and continued home. You can read a first hand account of how someone survived the 2010 Sarnia snowstorm here. Monday was a bad day for him; being re-united with his family on Wednesday was the best day of his life.
Story #2 – The Royal Group Technologies Debacle
The Sarnia snowstorm only lasted for two days. The Royal Group battle lasted for years. Here’s the story:
Vic De Zen arrived as a penniless immigrant to Canada from Italy in 1962. He worked non-stop, and ten years later founded Royal Group Technologies, that grew to a $2 billion per year company by the time it went public in 1994. Many employees, including the janitor who invested a few dollars in start up capital, became wealthy, which is great; that’s what taking entrepreneurial risks is all about.
But then the all intrusive Canadian government, encouraged by successful prosecutions in cases like Enron in the U.S., decided that Canada needed to show the corporate world that we are “all growed up” just like our U.S. cousins, so they launched a massive witch hunt against Mr. De Zen, and five of his employees. Most of the employees were accountants.
Yup, that’s what we do in Canada; we go after the accountants.
The result was a protracted, expensive, six year legal battle, with the government attempting to prove that Mr. De Zen profited from a land deal, and other financial transactions.
The defendants in this saga were very seriously harmed. Think about it: would you hire someone who had been charged with fraud? As a result Mr. De Zen was forced out of the company he founded, and his lieutenants were forced to start over, at lower paying, less glamorous jobs.
Fortunately justice has prevailed. Finally, on December 10, Ontario Court Justice Richard Blouin, not wanting to further delay the proceedings by preparing a written ruling, delivered his oral conclusion:
Wow. Overwhelming evidence. Not guilty on all counts. It has been a long journey for the wrongfully accused, so congratulations to all of them. Everyone loves a Christmas miracle.
Terrence Corcoran of the Financial Post has long reported that this prosecution was based on flimsy evidence, so he had fun blasting the government’s epic official injustice.
What’s Mr. De Zen up to? He keeps on working, and he’s already started a new company, that already has 1,000 employees, with $400 million in revenue, and he has no doubt that in five years the revenue will be over $1 billion. Good for him.
This is a classic example of why the government should simply get out of the way. Governments around the world have spent trillions on “stimulus” to try to create jobs, while at the same time prosecuting one of the great job-creating entrepreneurs in Canadian history. Hey, government morons, you want to create jobs? Stay the hell out of the way of guys like Mr. De Zen; let him, and people like him, create jobs and save the world.
Story #3 – The Gold and Silver Market
Speaking of the government, in our third story we discuss the manipulated gold and silver markets. This was a bad week for gold, on the surface. Here’s the chart for AEM.TO – Agnico-Eagle Mines Ltd.:
It would appear that the uptrend line has been broken; does that mean a crash is imminent? Perhaps, but I doubt it. I don’t see the fundamentals for precious metals changing any time soon. So, here’s what I did:
First, back on December 14, I sold the December 86 calls against my Agnico-Eagle stock. I took in a small premium. Obviously the market tanked thereafter, so those options expired worthless, so I keep the premium. That helps cushion my losses.
Then, on Wednesday, I placed my stink bids, which, as you know, are below market bids for stocks I want to own. Instead of purchasing them “at market” today, I put in bids to buy them at a lower price, so if the market drops, I get in at a better price. Two of my purchases were filled: I bought Silvercorp Metals Inc., and I bought Fortuna Silver Mines Inc. I have a few more stink bids in on a few more stocks; we’ll see if there is further weakness and I get filled.
If I don’t get filled, fine, that means my existing holdings will do well. If there is weakness, I get stocks on sale, and that’s great too.
Finally, I also took a flyer. I had a choice this week: my stocks are down: do I buy more, or stay on the sidelines? It’s a difficult choice, because you don’t want to buy if there will be a further correction, but if the correction is over now is the perfect time to buy. So, I decided to hedge my bets.
I bought some call options. I bought the January 78 AEM.TO – Agnico-Eagle Mines Ltd. calls, and I bought the January 38 SLW.TO – Silver Wheaton Corp. calls. I didn’t spend much; if I’m wrong and I lose the money, fine. My thinking is that it’s better to spend $2,000 on options to control 1,000 shares, than it is to spend $78,000 for 1,000 shares.
If Agnico-Eagle gets back to the $85 range in the next month, my options are worth $7, and since I paid less than $3 for them, I easily double my money. Obviously owning the shares you don’t double on a move from $78 to $85. And, if they crash, it’s a minimal loss, so no worries.
That’s the week that was, and those are my stories. Enjoy the holiday season, take advantage of bargains, and see you, briefly, next week.
Tagged as: Christmas, Gold, Silver