South Korea's Park set to charm China, show up the North

By Ju-min Park

SEOUL (Reuters) - When the presidents of China and South Korea meet in Beijing this week, they will likely use a rapport that blossomed eight years ago to find common ground on North Korea as well as seek ways to boost already vibrant economic ties.

With her self-taught Mandarin and interest in Chinese culture, South Korea's Park Geun-hye will get a warm welcome during a four-day state visit that begins on Thursday.

"I am sure this summit will be an unprecedented honeymoon for China and South Korea," said Woo Su-keun, a South Korean professor at Donghua University in Shanghai.

The contrast between China's relationship with South Korea and its testy ties with the erratic North could not be starker.

Beijing, the closest thing North Korea has to a major ally, has grown frustrated with Pyongyang and was heavily involved in U.N. sanctions imposed for the North's third nuclear test in February. Its annual trade with North Korea is a puny $6 billion, versus $215 billion with the South.

On top of that, ordinary Chinese love South Korean fashion, pop stars and soap operas. North Korea, by contrast, is seen as a dangerous liability, and Chinese refer to leader Kim Jong-un derisively on social media as "Fatty Kim".

Helping the mood music for Park, a slightly built and elegant 61-year-old, China's relations with Japan are also in the deep freeze due to a row over disputed islands in the East China Sea.

Park's trip follows two visits by North Korean envoys to Beijing in the past month. While North Korea offered talks on its nuclear programme during those visits, experts are sceptical Pyongyang is ready to make any concessions.

North Korea will be high on the agenda when she meets Chinese President Xi Jinping, who in a telephone call in March after both leaders took office called Park "an old friend of the Chinese people and of myself", according to South Korean officials.

Both are expected to agree Pyongyang must give up its nuclear weapons. Park might also be able to use her personal chemistry with Xi - who she first met over lunch at a Chinese restaurant in Seoul in 2005 - to get China to put more pressure on Pyongyang, experts said.

"Out of frustration and scepticism over a decade of North Korea's nuclear weapons development, China is now stepping up its push for denuclearization," said Lee Soo-hyuck, a former South Korean deputy foreign minister and its chief envoy to disarmament talks between 2003 and 2005.

However, China is highly unlikely to do anything that would cause the collapse of North Korea, which it sees as a strategic land buffer against American influence in the region.

TRADE BOOMING

Park and Xi will also focus on forging a stronger economic partnership.

The South Korean leader will take a big business delegation to China, including executives from Samsung Electronics Co Ltd and Hyundai Motor although it was unclear if any deals will be signed. Park's office expects a bilateral free trade pact under negotiation to be discussed.

China is South Korea's biggest trading partner. South Korea is also one of the few developed countries that runs a surplus with China - to the tune of $53 billion in 2012 according to Seoul - thanks to exports of cars, smartphones, flat screen TVs, semiconductors and petrochemicals.

South Korean imports to China overtook Japan last September, Singapore's DBS Bank said in a recent research note.

Hyundai and its Kia Motors affiliate are now the third biggest seller of cars in China, ahead of their Japanese rivals. Volkswagen AG and General Motors are the top two.

South Korean investment has also poured into China, exceeding $40 billion since 1988.

After meetings in Beijing, Park will visit Xi'an, an industrial city in northwestern China where Samsung, the world's top technology firm by revenue, is building a $7 billion chip complex. Hyundai has just completed its third plant in Beijing.

TIES THAT BIND

When China and North Korea sealed their relationship in blood fighting side by side in the Korean War, both were poor and isolated against the West. North Korea remains poor to this day while China is the world's second largest economy and South Korea is an industrial powerhouse.

Beijing only established diplomatic relations with South Korea in 1992, but ties have flourished since.

In 2005, when Xi was Communist Party boss of the wealthy eastern coastal province of Zhejiang, he met Park for lunch.

Xi was keen to learn about the economic New Village Movement, a rural development program in the 1970s undertaken by Park's father, military ruler Park Chung-hee who is credited with building modern South Korea.

Park, according to South Korean media reports, later gave Xi two boxes of materials that included her father's speeches on the movement and a book about South Korean economic development.

She is an admirer of Chinese culture and her favourite book is a "History of Chinese Philosophy" by philosopher Feng Youlan. She has spoken fondly of her earlier trips to China.

"President Park has a soft spot for China," the official China News Service said. "This kind of friendly public diplomacy gives a good impression to Chinese people and is extremely important."

(Additional reporting Ben Blanchard in Beijing and Megha Rajagopalan in Kuala Lumpur; Editing by Jack Kim and Dean Yates)

Source: http://news.yahoo.com/south-koreas-park-set-charm-china-show-north-210748650.html

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Fewer abortions with hospital consolidations

Pro-Choice demonstrators gather outside Hoag Hospital in Newport Beach Thursday June 20, 2013 to protest the hospital's decision to stop all abortions. (AP Photo/Orange County Register, Rose Palmisano)

Pro-Choice demonstrators gather outside Hoag Hospital in Newport Beach Thursday June 20, 2013 to protest the hospital's decision to stop all abortions. (AP Photo/Orange County Register, Rose Palmisano)

Pro-Choice and Anti-Abortion groups faced off at a rally outside Hoag's Hospital in Newport Beach Thursday June 20, 2013. The Pro-Choice group is protesting Hoag's Hospital decision to stop all "direct" abortions. (AP Photo/Orange County Register, Rose Palmisano)

Members of Survivors of the Abortion Holocaust chanted "Extra! Extra! read all about it. We are Pro-Life and we are going to shout it," outside Hoag Hospital in Newport Beach on Thursday, June 20, 2013. Dozens of Pro-Choice demonstrators also showed up to protest Hoag's decision to stop abortions at all its hospitals. (AP Photo/Orange County Register, Rose Palmisano)

The Rev. Patrick Mahoney prays with members of the Survivors of the Abortion Holocaust outside Hoag's Hospital in Newport Beach Thursday June 20, 2013. The group prayed for an end to abortion. (AP Photo/Orange County Register, Rose Palmisano)

NEWPORT BEACH, Calif. (AP) ? By joining with a much bigger Catholic health system, a prominent Orange County hospital hopes to enhance patients' access to a host of services ? except one.

Hoag Memorial Hospital Presbyterian, based in Newport Beach, started banning elective abortions this year after reaching an agreement to affiliate with St. Joseph Health, riling some doctors and women's advocates.

The controversy has fueled a feisty debate in local editorial pages and prompted a rally outside the hospital, making the Southern California suburbs the latest scene of a culture clash occurring across the country as Catholic and non-Catholic hospitals strike deals in a wave of health care industry mergers.

Women's health advocates say affiliations between non-Catholic and Catholic hospitals have squelched abortions in a number of locations, and full-blown mergers have also affected health services such as sterilization and contraception.

Hoag has a flagship 485-bed hospital with sweeping Pacific Ocean views and another hospital in nearby Irvine. It joined with Irvine-based St. Joseph Health, which has 14 acute care hospitals in California and Texas, after winning state approval to form a regional health care system called Covenant Health Network.

The economic downturn and health care overhaul have driven many nonprofit hospitals to form partnerships or merge entirely in recent years, and cultural conflicts related to religion, teaching style or other differences often need to be hashed out for the ventures to succeed, said Lisa Goldstein, associate managing director of the not-for-profit hospital ratings team at Moody's.

Dr. Richard Afable, Hoag's former president who now heads Covenant, said Hoag took a closer look at its abortion practices because it was joining with a Catholic health system where the procedure isn't allowed.

Afable said the hospital decided to cease performing elective abortions because it does so few of them anyway ? only about 100 a year. He said Hoag will continue to perform abortions when medically indicated and that most elective abortions are done in a doctor's office or could be better performed at a center with a higher volume of the procedures.

"We looked very closely at all the things we do that are generally not supported at Catholic hospitals," he said. "We are not limiting any physician from conducting their medical practice in any way they would like. If a physician wants to do an elective abortion, there are places and locations where they can conduct that."

Obstetrician Dr. Richard Agnew said he worries Hoag may start to weed out other services over time. He also said he doesn't feel his patients who choose abortion should be shuffled off to a Planned Parenthood or different hospital, noting most are women who wanted to get pregnant but are carrying a fetus with genetic abnormalities and need a hospital level of care.

"It's not like they're doing anything illegal," Agnew said. "It's bad enough for them to have to make a decision."

Hospitals steeped in different faith traditions have had to contend with public concern over mergers and affiliations in states including Connecticut, Kentucky and Washington. The debate has most often surfaced in mergers involving Catholic hospitals due to the church's directives on issues ranging from abortion and birth control to end-of-life decisions.

In suburban Philadelphia, two hospitals, Abington and Holy Redeemer, called off a proposed partnership after community members were upset the plan would have ended abortions at Abington.

Catholic facilities account for more than one fifth of the country's hospital admissions, according to the Catholic Health Association.

Most commonly, affiliation agreements have led non-Catholic hospitals to stop providing abortions, while mergers and acquisitions have also led some institutions to stop performing other services, such as tubal ligation, said Sheila Reynertson, advocacy coordinator for New York-based Merger Watch, which tracks the effects of mergers between religious and secular hospitals on reproductive and other health services.

Lori Vandermeir, president of the National Organization for Women's Orange County chapter, said she worries the spate of hospital mergers will affect women's access to abortion even when no laws have changed.

"They have the ability to reset abortion-access behind the scenes, without the legislature being involved," she said.

In St. Joseph's statement of common values, the health system states that "direct abortion and physician assisted suicide are not part of St. Joseph Health services."

Afable said there have been no other changes to procedures offered at either hospital, noting Hoag will continue to perform sterilizations and provide contraception. He said no changes would be made to women's health services at Hoag for at least a decade under the agreement.

Pro-abortion rights groups staged a rally outside the hospital Thursday, while anti-abortion advocates who welcomed Hoag's decision held a counterdemonstration. The controversy has also sparked a spirited debate in the editorial pages of local newspapers.

Tom Johnson, a local businessman, wrote in the Orange County Register that while he supports abortion rights he doesn't see a problem with hospitals limiting their offerings. He recalled that he had to travel to Los Angeles for a kidney transplant eight years ago because Hoag did not perform the procedure.

"I'm 100 percent in favor of a woman's right to choose. Not 50 percent, not 75 percent - 100 percent," Johnson wrote in a guest column in the newspaper. "But I also, at the same time, respect the right of Hoag Hospital to choose what services it will provide and what services it will not."

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/386c25518f464186bf7a2ac026580ce7/Article_2013-06-21-Hospital%20Abortion%20Ban/id-022d3691d37b48b181001d787207fbf0

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NSA leaker charged with espionage, theft

WASHINGTON (AP) ? The Justice Department has charged former National Security Agency contractor Edward Snowden with espionage and theft of government property in the NSA surveillance case.

Snowden, believed to be holed up in Hong Kong, has admitted providing information to the news media about two highly classified NSA surveillance programs.

A one-page criminal complaint unsealed Friday in federal court in Alexandria, Va., says Snowden engaged in unauthorized communication of national defense information and willful communication of classified communications intelligence information. Both are charges under the Espionage Act. Snowden also is charged with theft of government property. All three crimes carry a maximum 10-year prison penalty.

The federal court in the Eastern District of Virginia where the complaint was filed is headquarters for Snowden's former employer, government contractor Booz Allen Hamilton.

The complaint is dated June 14, five days after Snowden's name first surfaced as the leaker of information about the two programs in which the NSA gathered telephone and Internet records to ferret out terror plots.

The complaint could become an integral part of a U.S. government effort to have Snowden extradited from Hong Kong, a process that could turn into a prolonged legal battle. Snowden could contest extradition on grounds of political persecution. In general, the extradition agreement between the U.S. and Hong Kong excepts political offenses from the obligation to turn over a person.

It was unclear late Friday whether the U.S. had made an extradition request. Hong Kong had no immediate reaction to word of the charges against Snowden.

The Espionage Act arguably is a political offense. The Obama administration has now used the act in eight criminal cases in an unprecedented effort to stem leaks. In one of them, Army Pfc. Bradley Manning acknowledged he sent more than 700,000 battlefield reports, diplomatic cables and other materials to the anti-secrecy website WikiLeaks. His military trial is underway.

Sen. Bill Nelson, D-Fla., a member of the Senate Armed Services Committee, welcomed the charges against Snowden. "I've always thought this was a treasonous act," he said in a statement. "I hope Hong Kong's government will take him into custody and extradite him to the U.S."

Michael di Pretoro, a retired 30-year veteran with the FBI who served from 1990 to 1994 as the legal liaison officer at the American consulate in Hong Kong, said "relations between U.S. and Hong Kong law enforcement personnel are historically quite good."

"In my time, I felt the degree of cooperation was outstanding to the extent that I almost felt I was in an FBI field office," said di Pretoro.

The U.S. and Hong Kong have a standing agreement on the surrender of fugitives. However, Snowden's appeal rights could drag out any extradition proceeding.

The success or failure of any extradition proceeding depends on what the suspect is charged with under U.S. law and how it corresponds to Hong Kong law under the treaty. In order for Hong Kong officials to honor the extradition request, they have to have some applicable statute under their law that corresponds with a violation of U.S. law.

In Iceland, a business executive said Friday that a private plane was on standby to transport Snowden from Hong Kong to Iceland, although Iceland's government says it has not received an asylum request from Snowden.

Business executive Olafur Vignir Sigurvinsson said he has been in contact with someone representing Snowden and has not spoken to the American himself. Private donations are being collected to pay for the flight, he said.

"There are a number of people that are interested in freedom of speech and recognize the importance of knowing who is spying on us," Sigurvinsson said. "We are people that care about privacy."

Disclosure of the criminal complaint came as President Barack Obama held his first meeting with a privacy and civil liberties board as his intelligence chief sought ways to help Americans understand more about sweeping government surveillance efforts exposed by Snowden.

The five members of the little-known Privacy and Civil Liberties Oversight Board met with Obama for an hour in the White House Situation Room, questioning the president on the two NSA programs that have stoked controversy.

One program collects billions of U.S. phone records. The second gathers audio, video, email, photographic and Internet search usage of foreign nationals overseas, and probably some Americans in the process, who use major providers such as Microsoft, Google, Apple, and Yahoo.

___

Associated Press writer Jenna Gottlieb in Reykjavik, Iceland, contributed to this report.

Source: http://news.yahoo.com/nsa-leaker-charged-espionage-theft-001952096.html

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Lavrov: Syria peace conference could be derailed

ST. PETERSBURG, Russia (AP) ? Russia's foreign minister said Friday that Washington is sending contradictory signals on Syria that could derail an international conference intended to end that country's civil war, warning that U.S. talk about a possible no-fly zone would only encourage the rebels to keep fighting.

Sergey Lavrov also criticized demands that Syrian President Bashar Assad step down.

"Not because we like the regime, not because we want the regime to stay, but because it's for the Syrians to decide," Lavrov said in an interview. "And to say you must capitulate and deliver the power to us is just not realistic."

In addition, he dismissed allegations by the U.S., Britain and France that Assad's regime has used chemical weapons.

Russia has been the key ally of Assad's regime throughout the Syrian conflict, which has killed more than 93,000 people, shielding it from U.N. Security Council sanctions and continuing to provide it with weapons.

Russian President Vladimir Putin has confirmed that his country signed a contract for the delivery of S-300 state-of-the art air defense missile systems to Syria, but said it hasn't been fulfilled yet.

Lavrov defended the S-300 deal, pointing to the deployment of U.S. Patriot air defense missiles and fighter jets to neighboring Jordan.

"The contract on S-300s is absolutely legal, it's transparent and it's fully in line with the international norms and with the Russian export control legislation," he told The Associated Press and the Bloomberg news agency.

"Second, the contract hasn't been yet finalized. Third, the Americans are leaving Patriots after this exercise in Jordan, together with F-16 planes, and no one is asking them not to do this. The region is really full of weapons, including offensive weapons which have been supplied in the past to the countries of the region, and some of these weapons are infiltrating into Syria."

He said supplies of weapons to the Syrian opposition, which have been promised by Washington and are being considered by the European Union, would be a "very big mistake."

Lavrov was asked if Russia is warning the West in particular against providing the rebels with shoulder-fired air defense missiles that could challenge Assad's air dominance. He replied: "We believe this is absolutely illegitimate, and we aren't going to legitimize it by starting discussing some conditions on which these supplies could be justified."

Putin, speaking to reporters after meeting with German Chancellor Angela Merkel at a business forum in St. Petersburg, argued that Western weapons, if they are supplied to the opposition, could fall into the hands of al-Qaida-linked militants who form part of the rebel force and eventually be used against the West.

Putin also warned that if Assad steps down, that could lead to the vacuum of power that would be quickly filled by al-Qaida-connected rebels. "How can we avoid it? There are well-armed, and very aggressive," he said.

Lavrov said during Friday's interview that while the U.S. says it favors sponsoring a Syria peace conference in Geneva, it has made statements that have sent a conflicting signal to the rebels. Lavrov said that the U.S. talk about a possible no-fly zone in particular has encouraged the opposition to step up fighting instead of sitting down for talks.

"The message the opposition is getting: Guys, don't go to Geneva, don't say you are going to negotiate with the regime, soon things will change in your favor," Lavrov said. "It's either the conference or the instigation of the opposition not to be flexible. I don't think it's possible to do both at the same time."

The date and location of the international conference on Syria haven't been announced yet, but it's already being dubbed "Geneva 2" because a similar event was held there a year ago.

"If our goal is the conference, then we must avoid any discussions and, of course, any action designed to establish a no-fly zone. We must avoid confrontational debates and one-sided resolutions in the (United Nations) General Assembly and in the Human Rights Council because all this isn't helping to create the atmosphere necessary to convene a conference," Lavrov said.

He shrugged off the U.S., British and French statements about the use of chemical weapons by the Syrian regime as ungrounded, saying they "smack of politics and speculation."

"We have been told by the Americans, by the French, by the British that they have proofs," he said. "What they showed to us is absolutely unconvincing. It's not based on facts, and it can't be taken as a proof."

He said that a new international probe must determine the truth and added that after the conflict is over, Syria could be encouraged to destroy its chemical weapons stockpiles.

Source: http://news.yahoo.com/lavrov-syria-peace-conference-could-derailed-131227642.html

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Obama's nuke-reduction goal is just the start of a slow process

President Barack Obama announces efforts to reduce the number of nuclear weapons in the U.S. and the world while speaking in Berlin, Germany, Wednesday.

By Tracy Connor, Staff Writer, NBC News

President Barack Obama says he wants to reduce the number of deployed U.S. nuclear weapons by a third, but even if the Russians agree to do the same, it could be a decade or longer before the 500 or so U.S. warheads under discussion are actually destroyed.

A massive backlog at the Texas Pantex plant where nukes are dismantled means warheads removed from submarines and land-based missiles as a result of Obama's announcement Wednesday at the Brandenburg Gate in Berlin are likely to wind up in storage, instead of disposal, for years to come, experts said.

Reuters file

A Minuteman intercontinental ballistic missile launches in this undated file photo.

And most of the U.S. arsenal ? roughly 1,000 deployed warheads and more than 3,000 that are stockpiled, according to estimates by analysts ? isn't even on the chopping block.

"This is a good new development," Hans Kristensen, director of the nuclear information project for the Federation of American Scientists, said of Obama's recommended cuts.?

"It's not something that fundamentally rocks the boat."

After decades of arms-control pacts, the number of warheads the U.S. has now is a fraction of the more than 22,000 that existed at the end of the Cold War.

Two years ago, there were more than 5,000 deployed, meaning they were ready to be launched on a few minutes' notice. The 2011 New START (Strategic Arms Reduction) treaty dictates that the U.S. and Russia cap the number at 1,550 by 2018, and Obama has been pushing for talks aimed at even deeper reductions.

"So far, the U.S. and Russia, in true diplomatic style, have been negotiating about negotiating," said James Acton, an expert on proliferation with the Carnegie Endowment for International Peace.

What Obama did in his Berlin speech was set a numerical goal for Moscow to chew over, Acton said.

If the Russians concur ? which analysts say probably won't become clear until the fall ? the U.S. would then begin taking the weapons out of deployment.

The Navy has 14 nuke-launching submarines, Kristensen said. Each of the so-called Boomers can carry 24 Trident II D5 ballistic missiles equipped with multiple warheads. They operate out of bases in Kings Bay, Ga., and Bangor, Wash., but spend two-and-a-half months at a time hidden at sea.

Land-based intercontinental ballistic missiles, known as ICBMs, are housed in silos around three Air Force Bases ? Warren in Wyoming, Minot in North Dakota and Malmstrom in Montana.

Warheads are also kept on Air Force bases such as Barksdale in Louisiana and Whiteman in Missouri to be used on long-range bombers, analysts said, but Obama's target is less likely to affect them.

Undeployed warheads are found at storage facilities including Nellis Air Force Base in Nevada and Kirtland Air Force Base in New Mexico, and there are six bases in Europe where the Air Force stores a much smaller number of tactical nukes, Kristensen said.

Physically removing the warheads is a painstaking process, but dismantling them could take far longer.

'Any change is always resisted'
The National Nuclear Security Administration said it expects to finish eliminating weapons that were retired before 2009 in 2022, even though it exceeded its dismantlement goal last year. Then, presumably, come the weapons retired since 2009, followed by any that the U.S. deep-sixes going forward.

Ray Narimatsu / Reuters

The Ohio-class ballistic submarine USS Alabama returns to Naval Base Kitsap in Bangor, Wash., in 2010.

The Pantex facility near Amarillo is responsible for deconstructing warheads, removing highly enriched uranium and plutonium and disposing of the material onsite before sending non-nuclear parts to other plants. Secondary systems go to the Y-12 complex in Oak Ridge, Tenn., where uranium and plutonium are removed, some of them recycled as fuel for the Navy's at-sea reactors.

The missiles themselves can be trashed or repurposed as missile-defense interceptors or space launch vehicles, Acton said. Submarines would go out with fewer warheads, but the number of nuclear-armed boats in the fleet would likely stay the same, he said.

Steven Pifer, director of the Brookings Institution's Arms Control Initiative, said the backlog at Pantex -- which also builds, rehabs and recertifies warheads -- is understandable considering the nature of the work.

"When you take a nuclear weapon apart, you want to do it in a very careful way," he said.

The New START treaty doesn't require that warheads be destroyed. Theoretically, some could be set aside for possible use as replacements or redeployment in a crisis, though it would take days, if not longer, to install them again, the analysts said.

Given the overall size of the U.S. nuclear arsenal, will getting rid of 500 weapons make a dent? Kristensen said that given the opposition to disarmament from some on Capitol Hill, a move by the administration to cut even 10 percent is "a big deal."

"Any change is always resisted," he said.

Pifer said junking 500-odd warheads when there are still a thousand more at the ready might not change the nuclear landscape but still constitutes "a pretty good cut." The real question, he said, is whether Russia and President Vladimir Putin will go for it.

"The Russians have not shown a great deal of public enthusiasm for further reductions so far," he said.

However, because Russia's arsenal is aging, if they balk at new caps they may be forced to start building new submarines and ICBMs to stay at current levels. So accepting Obama's initiative would be a money-saver, Pifer said.

A summit has been set for September, and the two nuclear powers could begin hashing out the math then.

"The question will be: Is Putin ready to deal?" Pifer said.

Related stories:

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Get Ready For Stupid Cheap Silver Prices: David H. Smith - Seeking ...

It's a jungle out in the silver markets. Investors are holding on for their lives as the price of metals swings to higher highs and lower lows and junior equities bounce along the bottom. In this interview with The Gold Report, David H. Smith, senior analyst at silver-investor.com's The Morgan Report, navigates the jungle by advising which explorers, mid-tiers, stalwarts and royalties to consider buying in tranches on the way down and selling on the inevitable way up.

The Gold Report: David, Silver Investor analyzes the long-term macro trends and specific stock catalysts in the silver market. What do you see as the risk/reward profile over the next 12 to 36 months in the space?

David Smith: A lot of people, including myself, are looking for a bottom. It may be in-or it may not be in. The secret is to focus on the upside, which could be 10 or 15 times higher, rather than asking if it could be two or three dollars lower. That makes it easier to buy at these prices.

TGR: How long could this slump last?

DS: Mining stocks have been disconnected from the metals prices for almost two years. We had major tops in gold and silver, but the mining stocks, almost across the board, regardless of quality, have gone down, down, down. The disconnect is greater than two standard deviations away from the norm. That sort of thing can last a while, but it doesn't happen very often. In fact, there's a 97% probability that it wouldn't happen or that it wouldn't stay there if it did. I think that we are nearing the end. We could see this weakness go into the late summer/early fall, but I think we are building an important base even if we go lower. The stronger that base gets and the broader it becomes, the more likely it will move violently on the upside. If you have no position waiting for this, you will be left behind.

TGR: How do investors survive the horrendous swings going on in the meantime?

DS: Volatility can be a good thing if you are prepared for it. The secret is to not wait for those swings to occur and try to predict them because you'll be jumping on what Jsmineset's Jim Sinclair calls a rhino horn and you'll get speared. If you're able to do the opposite of what most people do, to buy weakness and then sell a little bit into strength, you can smooth out the big swings. I believe that we'll see swings of $100-200/ounce [$100-200/oz] a day in gold when this thing finally moves into the public mania phase. It would not surprise me to see $5-10/oz swings in the price of silver in one day. We saw this during the bull market that ended in 1980 and I think the price increases are going to be much greater this time around. If you have layered your positions, your mining stocks, your exchange-traded funds [ETFs], your physical purchases into weakness, when the swings happen you won't be affected as much as most of the public.

TGR: Would you like to make any predictions about the silver prices over the next 10 years?

DS: This is always very difficult. Economic conditions are a major variable because, as you know, about 70% of the supply of silver comes from byproduct production of copper, lead and zinc. The global economy will affect how much of that is dug out of the ground. Relatively few silver miners receive most of their income from silver as opposed to base metal credits.

Additionally, some of the really large projects now in planning may be delayed or may not come on at all. This includes the Navidad project, which I visited in Argentina before it was purchased by Pan American Silver Corp. (PAAS). It was estimated as a 700 million ounce [700 Moz] to 1 billion ounce [1 Boz] deposit, but due to regulatory problems, that project has been shelved. It may be quite a while before it gets going or it may not go at all.

The Pascua Lama deposit that Barrick Gold Corp. (ABX) is working on, on the Chile/Argentina border, has also encountered serious legal issues. It could be delayed for a year or two or shelved for good. We don't know. Barrick has already put a reported $6 billion [$6B] into this deposit. That could mean 20-30 Moz of silver annually that doesn't go into the stream in the next 10 years. That is a significant impact on supply/demand calculations.

Also let me add that we have an exclusive interview that David Morgan conducted regarding the ownership of Pascua Lama. Right now we are reserving this for our members only.

TGR: We often hear how silver is like gold's little brother. Other than silver having an industrial demand profile, how are these metals different as investments?

DS: Almost all of the gold that has ever been produced is still out there in some form: in central banks, in private holdings, or in jewelry. A certain amount is used in medical or industrial applications, but not on the scale of silver. When silver is used in radio frequency identification [RFID] chips or electronics, it is gone and must be replaced.

Another increasingly important factor is the emerging popularity of ETFs. Like gold, silver has been real money for people going back thousands of years. It has outlasted every paper system ever developed by humankind. It's going to outlast the current ones as well, because it preserves purchasing power as paper money loses it.

TGR: Does owning silver equities, particularly small-cap equities, still make sense in this market?

DS: Equities make sense more than ever before because of the disconnect between the price of metals and what the companies can dig out of the ground. The entire mining sector, whether it's a large producer or an explorer, is high risk. But after buying the physical metal, it makes sense to pick up the equities at all stages. Buy a few of the majors, then go into the mid-tier section and finally the explorers, which are the highest risk because they may or may not ever go into production. Put a small amount of capital in and allocate it roughly proportionately so that if one choice blows up, the others will make enough that you will still make a profit. Owning equities is very important, but be selective. Scale down any purchases into this historic decline.

TGR: Before we started our interview, you talked about the concept of keeping some money back for what you called stupid cheap prices. Tell us more about that strategy.

DS: I think Doug Casey used this term first, but it was certainly correct. Prices are now lower than what most people thought they would ever sink. I learned something very important in the 2008-2009 meltdown. I started out with about 30% cash at the top. Prices kept dropping as part of what nearly became global financial destruction. I bought quality mining companies down, down, down. Then I ran out of money before the end. I had good quality companies I had bought at pretty low prices, but I didn't keep back a little bit for what Doug Casey calls stupid cheap prices.

That was when I learned to buy larger price differences. In other words, instead of buying every dollar on a company, I might buy every $4 down and keep a little bit back just in case the price went even lower. It was likely to be temporary because it was similar to a rubber band being stretched almost to the breaking point. If you had the courage, the money and the foresight to buy at that point, when that rubber band snapped back, you could make a great deal of money with very little commitment.

Those concepts are as important today as they were in 2008. We may or may not be at the bottom now. There are indications that the mining stocks are bottoming. Some of them may have already, but if we get one more washout, which is possible this summer, and if you have a little bit of money left, you may be able to pick up a company that today is selling for $2/share, for $0.75 or $0.50/share. You will already have your core position, but you will be buying down into that lower level.

Dollar cost averaging is one of the most powerful tools an investor can use. If you're buying in tranches on the way down, you're almost rooting for lower prices because you're going to lower your cost of having that position. There is a saying that when the price goes up you never have enough shares and when it goes down you never have few enough shares. The reality is that you get your initial position in and then you can be calm and watch for lower prices.

TGR: Some of David Morgan's recent presentations have included royalty equities. What are some royalty equities you're telling your subscribers about?

DS: David likes stocks that pay dividends. We're seeing more and I think this is a trend that will continue. Newmont Mining Corp. (NEM) has a history of paying good dividends. A lot of times the dividend can be more reflective of the company's viability than the current share price.

TGR: Agnico-Eagle Mines Ltd. (AEM) has recently begun taking bite-sized pieces of a number of smaller companies in an effort to get an inside view perhaps of what's going on in these companies. What do you make of that strategy?

DS: That's a very viable strategy. A number of companies are doing this right now. Taking a 19% position of an exploration company with an exciting project could give exposure to some big upsides. For example, Hecla Mining Co. (HL), which David Morgan followed some 12 years ago, was the highest gaining company percentage-wise on the New York Stock Exchange. It went up 500%. David recommended this when it was around $0.50/share and it went to $5/share. Like Agnico-Eagle, Hecla has taken a position in several of these exploration projects. If they hit well that will be nice for Hecla. If they don't, they're not going to be out a lot of money. It also gives a lifeline to these exploration companies that might otherwise not make it because of the tremendously difficult financing environment.

Large companies like Agnico-Eagle are realizing that they have a responsibility to help good exploration companies keep the doors open. If all these companies blow away, the feeder stream that nourishes the large mining companies is going to dry up. It's like the food chain. If all the baitfish in the Atlantic were gone, the big fish would die because they are dependent on that food chain. Eventually it would be a disaster.

TGR: Are there any other royalty plays you want to talk about?

DS: We were early on the scene with Sandstorm Gold Ltd. (SAND) before it did a reverse split and then formed, in addition, Sandstorm Metals & Energy Ltd. (STTYF.PK). The spin-off is struggling a bit now, but has a lot of potential down the line. It's going to take longer to develop. The royalty companies really have a lot less risk than an outright mining company.

We followed Silver Wheaton Corp. (SLW) for a number of years. Everybody knows that one now. It is the premier silver streaming company with about 1 Boz under stream. It is a pretty incredible success story.

TGR: Are there some smaller silver names with near-term catalysts that could see a bump on news, whether it's a study or drill results?

DS: A lot of companies are really undervalued right now. For example, we have followed Endeavour Silver Corp. (EXK) for a number of years. Management constantly follows through and solves problems when they arise. First Majestic Silver Corp. (AG) is also best of breed and deserves a place in my portfolio because of its high-quality properties and relatively low country risk.

TGR: Endeavour recently bought the El Cubo project from AuRico Gold Inc. (AUQ) and seems to have turned that asset around. What could El Cubo add to Endeavour's balance sheet?

DS: El Cubo is an interesting situation because Endeavour Silver has done this before. It has taken a relatively high cost property that others spent a lot of money trying to run and introduced efficiencies of scale and production to bring the cost down. I have not visited El Cubo, but I have been to Endeavour Silver's properties in Mexico twice over the last few years. I have no doubt prices will fall even further. Endeavour is always ahead of the curve in seeing where efficiencies can be made while treating the workforce fairly. This is a company that really knows what it is doing.

TGR: Any other companies you like?

DS: A company we followed a number of years ago and now we are keeping an eye on is Silvercorp Metals Inc. (SVM) in China. The price is around $3/share right now. It was a $22/share stock at one time. It has a less favorable tax status than it did a few years ago. Some people don't want to buy a Chinese company, but all the silver production is sold in-country. It has base metal credits that are so significant that it takes the cost of production to a minus level when figuring the dollar price for silver. The company is ramping up production. Some it is expensive right now and there have been social issues, but that will be one to watch. It has a lot of money in the bank and it has been successful in the past.

TGR: How about one more company you like?

DS: Everyone in the industry respects Rob McEwen. I had the honor of being on a tour with him in Argentina seven years ago and have followed him ever since. He's really someone who does both good and well in the market. He received Canada's highest civilian honor for service to the society a few years ago. His McEwen Mining Inc. (MUX) is looking for an elephant in Nevada. We're not directly following McEwen Mining right now as a formal recommendation, but you should never cancel out someone like that.

TGR: One of McEwen Mining's key projects is El Gallo in Mexico. What do you think about that project?

DS: McEwen is building a pretty good asset down there. I have a small position in McEwen Mining and given the state of the market now, if things keep declining, I would personally buy more. He also has a 49% share in the San Jose silver-gold project in Argentina and if things improve in-country, it could be a real exciting place to be an investor again.

TGR: You have written about ETFs lately. Do you think that they've killed mutual funds or trusts?

DS: I think ETFs can be an important part of a portfolio depending on the investor. They can be used as a management tool. Obviously you can't redeem them for the metal and some people don't like it because of that, but the iShares Silver Trust Fund (SLV), which is the one best known for silver, tends to mimic the price of the metal. David Morgan has suggested the use of ETFs as a way to hedge at times in his videos to members, as a way to trade. The ETFs based on baskets of mining stocks can also lower equity risk by diversifying the portfolio.

Not all ETFs are well run. Some of them don't perform as advertised. But they give investors more flexibility than mutual funds. You can only buy and sell mutual funds at the end of the market day but you can buy or sell an ETF just like a regular stock at any time. Some ETFs don't have a lot of volume, but most of them do. It wouldn't surprise me if the time comes when the mutual fund industry is just a shell of what it is today because the ETFs are providing a tremendous alternative for large and small investors.

TGR: The tag line on silver-investor.com is "Buy Real. Get Real. Be Real." How are you staying real?

DS: I love that quote. You buy real by buying the physical metal. You start with that. You get real by looking at yourself in the mirror and understanding that the market doesn't know you, it doesn't have anything against you, but you need to know the rules if you're going to persevere and survive. You stay real by keeping things in perspective. It isn't just about making money. It's about doing the right thing, treating people properly, being straightforward and being a lifetime learner.

TGR: Thanks for your insights, David.

This interview was conducted by Brian Sylvester of The Gold Report.

David H. Smith is senior analyst for The Morgan Report, as well as a professional writer and communications consultant through his business, The Write Doctor Inc. He is a regular on HoweStreet.com. Smith has visited and written about properties in Argentina, Chile, Mexico, China, Canada and the U.S. He is an investment conference/workshop presenter at gatherings in Canada and the U.S. His work for subscribers can be found on Silver-Investor and for the general public at Silver Guru.

DISCLOSURE:

1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: None. and Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) David Smith: I or my family own shares of the following companies mentioned in this interview: Endeavour Silver Corp., First Majestic Silver Corp., McEwen Mining Inc., Sandstorm Gold Ltd., Sandstorm Metals & Energy Ltd. and Silvercorp Metals Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: http://seekingalpha.com/article/1513382-get-ready-for-stupid-cheap-silver-prices-david-h-smith?source=feed

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