Dark clouds harbor some golden linings

Is there anyone anywhere who was caught by surprise by the domestic financial crunch that has recently occurred? Those of us who aren't players in world economics have watched the symptoms develop for several years. When commodities move up in lockstep, it doesn't mean their value is increasing, it simply means that the currency in which that value is expressed has dropped. When money, as a commodity is cheap, it is symptomatic of a problem with the money system. When virtually anyone can buy a house he cannot afford, you don't need to be a Nobel Laureate to foresee that the system is going to crash.

So how do we deal? As always, we bury a little gold in the garden. If you do that every season at clean-up, then when dollars devalue, you can dig a little up and settle up at the grocery store.

Mining in general and gold mining in particular took a bit of a hit over the summer. That was exacerbated by the fears of investors in January that the world was falling apart. Perhaps it is fair to say that those who play in the penny stock markets where junior gold mining companies raise money are among the most sensitive investors in the world. I've known dozens, if not hundreds of players who literally pour over the charts and theories every single day.

With rulers in hand they predict the future of market trends. They scrutinize SEC and TSX filings with a magnifying glass. They call the companies for explanations. And they leave the market like lemmings when they smell fear. Since January, it has become impossible for juniors to raise money for exploration in Alaska. Major programs were ratcheted back. Middling programs were put on hold. Minor programs were abandoned.

But now, the financial blast has hit. We all know how it has affected the large cap stock market, but what about commodities?

Well, gold for one went zooming north of $900 per ounce.

Yogi Berra allegedly once observed that "prediction is very difficult, especially about the future;" so making predictions is obviously very enticing.

I chuckle to see all the Henny Pennys running about describing the doom that awaits us if we don't promptly stop using gasoline. My reaction is that if the weatherman cannot tell us if it is going to rain tomorrow, how can the mystic modelers be ever so sure a new ice age is not about to befall us (as was believed 30 years ago).

So here are my totally unqualified predictions: I think the price of gold is going to go up. I think Alaska is a great place to explore and build mines. I think that people that invest in junior mining companies that are interested in exploring in Alaska are going to make a fortune if they are just a little bit selective among the array of tested operators. Sure there will be problems and failures and ballot initiatives and lawsuits, but for the long haul, metal mining on state land in Alaska appears to have a hugely promising future.

There are bargains galore out there waiting to be discovered and scooped up. As always, the time to buy is when prices are low. Basic industries are not going away and there is no industry more basic than mining.

But wait! A cautionary note: Last week ABC news played a story about the Federal Reserve's holdings in New York. According to the report, "[t]here are roughly 540,000 gold bars belonging to 48 foreign countries and 12 international organizations in the Federal Reserve's subterranean gold vault. That's roughly $150 billion worth, by my calculation. So, if you act on the strength of my predictions, you do it entirely at your own risk.

There's plenty of gold around; it's just buried in the garden.