Sooner or Later, You'll Invest Abroad

Many conventional U.S. brokers are relatively clueless when it comes to gold stocks for 2011. If you asked them to name one, chances are it would be a domestic producer, one with assets located primarily in North America. But that's not where the big money will be made over the next decade.
 
To start, here's something that will make you better informed than the typical traditional broker: take a look at where gold is currently being dug up around the world. 

Tally it up, and North America accounts for only 16.3% of total global gold production. In other words, 83.7% of all the new gold every year comes from outside our continent.

Further, of the 15 largest gold deposits in the world, only five are in the U.S., Canada, or Mexico. Meaning, two-thirds are in regions where you don't get cell phone coverage and the natives don't speak your language.

The picture gets even sharper when you see the regions where production is increasing, vs. areas where it's declining. 

Several countries where gold has been traditionally mined, such as South Africa, Australia, and the U.S., are suffering production declines, while other areas, like China and South America, are just now starting to rev up.

In other words, not only is more gold being dug up outside our borders, more is being found there, too.

This has obvious implications for the gold stock investor who recognizes that the momentum is clearly behind the emerging countries. One geologist told me that some of these prospects are like Nevada was 100 years ago; wide open and full of gold deposits just waiting to be discovered.

Yes, there is risk, but the political winds are shifting in a more pro-mining direction here as well. In the U.S., for example, some members of Congress continue to promote a bill that could dramatically harm mining in the states, while China and many parts of South America are opening their doors to foreign companies. What would you rather invest in – a country trying to woo your investment dollars or one that is scheming to find new ways to take more of them away from you?

Gaia the Earth Goddess didn't ask where we wanted our gold and silver deposited. And it is the underexplored – and in some cases the unexplored – regions that offer the most potential for new discoveries, greater production, and thus, higher investment returns.

Will the Great "Pink Sheets Makeover" Work?

I doubt the average person has any idea what the Pinks Sheets are, much less anything about its reputation. But the average investor probably has very few positive things to say about this over-the-counter stalwart.

It's the "Wild West" of investing...

You can't find anything on the Pinks that isn't a sub-penny or shell company...

Stock promoters and scam artists - and their helpless victims - are the only forms of life inhabiting the Pink Sheets...

However, the Pink Sheets landscape is changing dramatically. And these changes could mean a more investor-friendly environment is finally making its way to the once-murky waters of bulletin boards. In fact, you might already be relying on the Pink Sheets for all of your over- the-counter trades - even if you've never put your money in a Pink Sheets stock before.

I'll explain how it all works in a minute. First, it's important to see how the Pinks have evolved into a major player in the listing game.

The Pink Sheets put its plan into motion back in 2007 when it began to differentiate between transparent, reporting companies and the shell companies that make up the Pink's notorious grey market. Most of these newly listed OTCQX stocks were larger, foreign firms looking for a foothold in the US markets. Even multi-billion dollar firms such as Adidas and Wall Mart of Mexico count themselves as members of the OTCQX.

The Pink Sheets boasts that the OTCQX is the "premier tier of the US over-the-counter market... Investor-focused companies use the quality controlled OTCQX listing platform to offer investors transparent trading, superior information and easy access through their regulated US broker-dealers."

And it's not just foreign firms that are populating the Pink's transparent listings. Since its 2007 inception, the program has expanded to include multiple market tiers designed to help traders and investors know exactly what they're getting into when they throw their money at a Pink's listing.

The OTCQB was the next step. This is the latest market tier for transparent, reporting, fully up-to-date listings. A public relations push has accompanied the OTCQB launch. The Pink's domain has changed to "otcmarkets.com." Front-and-center on the page is a link to the market tiers, along with clear designations and descriptions for even the speculative and grey market securities.

It would appear the PR blitz and OTCQB launch are part of the Pink's plan for OTC listing dominance. That's the important part: the Pink Sheets is not an exchange - it's a listing service, competing with the OTCBB, which is run by the Financial Industry Regulatory Authority (FINRA).

Despite its less-than-stellar reputation, the Pink's are winning the technology race. Market makers have turned to the Pink's quotation system in droves. In fact, more than 80% of all market maker quotes in OTC stocks are now published on the Pink's platform, with just 20% on the OTCBB. So if you're buying an OTC stock, chances are the Pink's system is the one pulling the lever.

I can't say how quickly the Pink Sheet's reputation will change, if at all. But the listing service is positioning itself to turn the OTCBB into a thing of the past. That in itself is reason enough to pay close attention...

 

How One Local Government Cut its Expenses and Actually Gained Public Support

 

People are bicycling. The sun is shining...sparkling off the water and the glass towers. Snow capped mountains are in the background.

Welcome to Vancouver...

But after 20 hours of travel, we're too tired to write...

Besides... Nothing happened yesterday. The Dow rose 75 points. Gold went up $9.

Oh... Here's something interesting. Local government says it can't cut expenses? The New York Times:

A City Outsources Everything. Sky Doesn't Fall.

MAYWOOD, Calif. - Not once, not twice, but three times in the last two weeks, Andrew Quezada says, he was stopped and questioned by the authorities here.

Mr. Quezada, a high school student who does volunteer work for the city, pronounced himself delighted.

"I'm walking along at night carrying an overstuffed bag," he said, describing two of the incidents. "I look suspicious. This shows the sheriff's department is doing its job."

Chalk up another Maywood resident who approves of this city's unusual experience in municipal governing. City officials last month fired all of Maywood's employees and outsourced their jobs.

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

The school crossing guards were let go. Parking enforcement was contracted out, City Hall workers dismissed, street maintenance workers made redundant. The public safety duties of the Police Department were handed over to the Los Angeles County Sheriff's Department.

At first, people in this poor, long-troubled and heavily Hispanic city southeast of Los Angeles braced for anarchy.

Senior citizens were afraid they would be assaulted as they walked down the street. Parents worried the parks would be shut and their children would have nowhere to safely play. Landlords said their tenants had begun suggesting that without city-run services they would no longer feel obliged to pay rent.

The apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing - so far, at least - is being viewed as an act of municipal genius.

"We don't want to be the model for other cities to lay off their employees," said Magdalena Prado, a spokeswoman for the city who works on contract. "But our residents have been somewhat pleased."

That includes Mayor Ana Rosa Rizo, who was gratified to see her husband get a parking ticket on July 1, hours after the Police Department had been disbanded. The ticket was issued by enforcement clerks for the neighboring city of Bell, which is being paid about $50,000 a month by Maywood to perform various services.

The reaction is all the more remarkable because this is not a feel-good city. City Council hearings run hot, council members face repeated recall efforts and city officials fight in public. "You single-handedly destroyed the city," the city treasurer told the City Council at its most recent meeting.

Four years ago, in what was probably the high-water mark of acrimony in Maywood, a deputy city clerk was arrested and accused of soliciting a hit man to kill a city councilman. The deputy clerk, Hector Duarte, was concerned that his salary might be reduced or his job eliminated during a previous round of bad fiscal times; he was sentenced to a year in jail and six months of anger management counseling.

This time, the councilman, Felipe Aguirre, has received no threats and has seen remarkably little anger. "This is a very bad economy," said Mr. Aguirre, who like the mayor and fellow council members receives a stipend from the city of $347 every two weeks. Even if city employees lose their benefits, he said, "very good workers are still going to hang around."

Jose B. Garcia, an assistant city planner, will now be working on contract. "I still have a job," he said. "In that sense, I can't complain too much."

Maywood, which covers slightly more than one square mile, is one of the most densely populated cities in the country. The official population of 30,000 is believed to considerably understate the actual total of about 50,000.

It has some of the ills that plague other cities. Property taxes, a primary source of revenue, have declined to $900,000 from $1.2 million in 2007. Sales taxes have also dropped. But Maywood's biggest problem by far has been its police department.

A report by the state attorney general last year concluded the culture of the department "is one permeated with sexual innuendo, harassment, vulgarity, discourtesy to members of the public as well as among officers, and a lack of cultural, racial and ethnic sensitivity and respect."

The budget for the Police Department last year was nearly $8 million, more than half of Maywood's revenues. The contract with the Los Angeles County Sheriff's Department will cost about half of that. Insurance premiums for the city have fallen to $200,000 from $1 million.

The deputies have already engendered good will, Councilman Aguirre said, by cracking down on a local hotel that was a haven for prostitution.

And others said they have seen an increased police presence in the last few weeks. "The deputies are there right away," said Maria Mendez, who has lived in Maywood for most of her 73 years. "Before you used to wait and wait for the police."

One reason for the general enthusiasm might lie in the fact that many of the nonpolice workers have been rehired on contract, so in some cases the faces encountered by the public remain the same. In other words, no one has noticed much going wrong because there was not much to notice in the first place.

The five crossing guards, for instance, are doing the same work but are paid by a security company.

And it is possible the bad news is just slow in arriving. Maywood has dabbled in contracting before, and it has run awry in some instances. Skeptics cited the example of two handball courts in a Maywood park. City officials said it cost an outsized sum - hundreds of thousands of dollars - for a contractor to build three concrete walls.

A few people, extrapolating from personal experience, are convinced that the city is still on a downward path.

Jerald Bennett was on his way to the $2 seniors' lunch at the bustling Maywood recreational center when another car made an illegal turn and almost rammed him. "It seems like that sort of thing is happening more and more," he said. "They're not patrolling the streets."

For others, however, the celebration here is practically palpable. Freed from its employees, Maywood has nowhere to go but up, they say.

"Remember the Soviet Union?" said Hector Alvarado, who heads a civic advocacy group. "They had a lot of bureaucracy, and they lost. Maywood was like that. Now people know if they don't work, they will be laid off. Much better this way."