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22 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 5 s p e c u l a t i o n s L e o n a r d M e l m a n J ust as one cannot expect a doctor to diagnose properly without accurate and reliable information, investors must have trustworthy and reliable infor- mation upon which to base their decisions. However, many potential investors and analysts have noted that much of the infor- mation available can be both unreliable and frequently contradictory. With uncomfortable frequency, we find one group of notable experts declaring that the precious metals markets are headed higher while at the same time others with equally credible histories advise staying out of the metals – or even shorting them. Given that they both cannot be right at the same time, how is an investor to proceed? Contrariness is also found in the gen- eral securities markets. While one group of experts is declaring that all major eco- nomic problems have now been resolved and the markets are headed higher, a dif- fering group of gloomsters and doomsters are advising investors to get out of the markets because a crash is imminent. There are even differing messages depending on the type of analysis. If one examines fundamental information which has historically pointed in the direction of higher metals prices, then a prediction of higher metals prices seems a virtual cer- tainty since we are seeing astonishing rises in major nations' levels of debt and money creation; potential military confrontations; political instability in many areas or even open religious confrontations leading to massacres and other horrors. Yet, from a technical chart-reading point of view, despite the array of seem- ingly positive fundamental information, gold and silver have both been falling to periodic new multi-year lows and their charts have been clearly trading beneath technically valid downtrend lines. One of the techniques I have often used is to search for a "grain of truth among the chaff", as suggested by William S. Gilbert of Gilbert & Sullivan. This means to sepa- rate that information which can be regarded as purely objective from that information where an indication of self-interest of the person or organization providing the infor- mation can be identified. There is a very famous quote from Shakespeare which reads, "Harry, thy wish is father to thy thought." Many interpret this saying to mean that we fre- quently allow what we want to take place to influence our own perceptions of what is actually taking place. I have read com- ments from psychologists which would suggest, as an example, that fans of one baseball team will see matters differently from fans of another. In baseball, if a batter hits a ball to deep short and then speeds to first base while the shortstop chases the ball down and hurls it to the same place, partisans of the fielding team will see the ball arriving just before the runner's foot hits the bag, while partisans of the run- ner's team will see the exact opposite – yet both are observing precisely the same information. There are several instances of this principal which might be considered. For example, one may truly infer that a politician or a political party in power will always attempt to demonstrate that they are capable of resolving problems. Therefore, the commentary and information provided by government bureaucracies and econo- mists might be suspected of containing, primarily that information which would indicate that the economy was improving, that the standard of living was rising and that people were becoming more content under their leadership. Another example, particularly appli- cable during periods of relatively normal economic circumstances, is related to an understanding that banks and other major lenders normally make their great- est profit by borrowing at low rates and then lending those funds out to competent borrowers at higher rates. However, few quality organizations will attempt to bor- row if they believe business conditions are about to deteriorate. Therefore, I believe that many bank economists, in their own self-interest, will attempt to stimulate bor- rowing by indicating the general economy is entering or likely to enter a period of expansion. In the same manner, many analysts in the mining or investment sector are quite often dependent upon rising metals prices for both their personal prestige as well as much of their income and, therefore, I believe because they want prices of the metals to rise sharply, they allow this desire to influence the objectivity of how they might otherwise interpret ongoing information. The phrase 'due diligence' suggests that any economic analysis be based on thorough, objective information. Perhaps within that phrase lies the most prudent and valuable course for any investor, namely to seek out truly objectively accu- rate information and avoid, where possible, information which might be influenced by subjective forces. Perhaps a realistic analysis of current market events and possible future sce- narios may be found in the comments of analysts that have a solid track record with their past remarks. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relating to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@ shaw.ca Contradictory information – What should you believe?