Category Archives: Financial Markets

What’s In Store For The Precious Metals Sector in 2019?

The Newmont/Goldcorp merger is the second mega-deal in the industry after Barrick acquired RandGold in September. Without question, the two deals reflect the growing need for large gold and silver mining companies to replace reserves, which are being depleted at these two companies more quickly than they are being replenished. The deal will give Newmont access to Goldcorp’s portfolio of developing and exploration projects acquired by Goldcorp over the last several years.

While this deal and the Barrick/Randgold deal will help cover-up the managerial, operational and financial warts on Barrick and Newmont, it will also likely stimulate an increase in M&A activity in the industry. I believe that the other largest gold mining companies – Kinross, Yamana, AngloGold Ashanti, Gold Fields, Eldorado, and Agnico-Eagle – will look closely at each other and at mid-cap gold producers to see if they can create “synergistic” merger deals

The same “impulse” holds true for silver companies, the largest of which are diversifying into gold or acquiring competitors (Pan American acquires Tahoe Resources and SRM Mining buys 9.9% of Silvercrest Metals, which will likely block First Majestic from going after Silvercrest, and Americas Silver buys Pershing Gold). Similarly, we could see mid-cap producers merging with each other or acquiring the junior producers.

Phil Kennedy – Kennedy Financial – invited me along with Craig Hempke – TF Metals Report – to discuss the implications of the two gold mega-deals, our outlook for the precious metals sector and a some other timely topics affecting the financial markets:

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In my latest issue of the Mining Stock Journal, I provided a list of gold and silver stocks that I believe could become acquisition targets this year, as well as an in-depth update on one of my top gold exploration stock ideas. You can learn more about this newsletter here: Mining Stock Journal

Unprecedented Manipulation And Trading The Precious Metals Ratios

Anyone who denies that Governments and Central Banks manipulate the gold and silver markets using paper derivatives and deceptive physical metal custodial operations is ignorant of history and facts.  Currently the gold and silver price capping is as oppressive as I’ve witnessed in 18 years.

As of Tuesday, January 15th, the open interest in gold had soared by 89,120 contracts to  501,605. 89,120 contracts is 8.9 million ozs of paper gold, or 278.5 tons – about 30 tons  more than the amount of gold produced by mines in the U.S. in one year.

But artificial market intervention creates information inefficiencies. This in turn generates exploitable profit opportunities for traders who know how to identify the set-ups from official manipulation.

With unprecedented manipulation continuing to occur in the precious metals market, some tradeable anomalies have appeared in the gold /silver and platinum / palladium ratios. My friend and colleague, Chris Marcus (former options trader at Susquehanna International), got together with Andy Schectman and Mickey Fulp to discuss strategies you can use to take advantage of the market anomalies which have been created by official intervention in these markets in the video below. You can see more of Chris’ at his website, Arcadia Economics:

Stock Market Volatility Reflects Systemic Instability

The post-Christmas stock rally extended through Wednesday as the small-cap and tech stocks led the way, with the Russell 2000 up 14.3% and the Nasdaq up 12.5%. The SPX and Dow are up 10.4% and 10.1% respectively. During the stretch between December 26th and January 17th, the Russell 2000 index experienced only two down days.

Make no mistake, this is primarily a vicious short-covering and hedge fund algo momentum-chasing rally. It’s a classic bear market move with the most risky and most heavily shorted stocks experiencing the greatest percentage gains. But the rally has also been accompanied by declining volume. When abrupt rallies or sell-offs occur with declining volume, it’s a trait the conveys lack of buyer/seller-conviction. It also indicates a high probability that the move will soon reverse direction.

As you can see in the chart of the Nasdaq above, volume has been declining while the index has been going nearly vertical since January 3rd. This is not a healthy, sustainable move. The Nasdaq appears to have stalled at the 50 dma (yellow line). The three previous bounces all halted and reverse at key moving averages.

The global economy – this includes the U.S. economy – is slipping into what will turn out to be a worse economic contraction than the one that occurred between 2008-2011. As it turns out, during the past few weeks Central Banks  globally have increased the size their balance sheet collectively. This is the primary reason the U.S. stock market is pushing higher.

Official actions belie official propaganda – If the economy is doing well, the labor market is at “full employment” and the inflation rate is low, how come the Treasury Secretary convened the Plunge Protection team during the Christmas break plus Jerome Powell and other Fed officials have been softening their stance on monetary policy? Despite assurances that all is well, the behavior of policy-makers at the Fed and the White House reflects the onset of fear. Without question, the timing of the PPT meeting, the Powell speech and the highly rigged employment report was orchestrated with precision and with the intent to halt the sell-off and jawbone the market higher.

In truth, the economy is headed toward a severe recession and I’m certain the key officials at the Fed and White House are aware of this (perhaps not Trump but some of his advisors). I suspect that the Fed’s monetary policy will be reversed in 2019. Ultimately the market will figure out that it’s highly negative that the only “impulse” holding up the stock market is the Fed. For now the perma-bulls keep their head in the sand and pretend “to see” truth in the narrative that “the economy is booming.”

Both the economy and the stock market are in big trouble if the Fed has to do its best to “talk” the stock market higher. The extreme daily swings are symptomatic of a completely dysfunctional stock market. It’s a stock market struggling to find two-way price discovery in the face of constant attempts by those implementing monetary and fiscal policy to prevent the stock market from reflecting the truth.

The Fed and Trump are playing a dangerous game that is seducing investors, especially unsophisticated retail investors, to make tragic investing decisions. As an example, investors funneled nearly $2 billion into IEF, the iShares 7-10 year Treasury bond ETF, between Christmas and January 3rd. This was a “flight to safety” movement of capital triggered by the drop in stocks during December. Over the next three days, the ETF lost 1.3% of its value as January 4th was the largest 1-day percentage price decline in the ETF since November 2016 (when investors moved billions from bond funds to stock funds after Trump was elected).

No one knows for sure when the stock market will roll-over and head south again. But rest assured that it will. Cramer was on CNBC declaring that the “bear market” ended on Christmas Eve. It was not clear to me that anyone had declared a “bear market” in the stock market in the first place. But anyone who allocates their investment funds based on Cramer recommendations deserves the huge losses they suffer over time. Don’t forget – although the truth gets blurred in the smoke blown over time – those of us who were around back in the early 2000’s know the truth: Cramer blew up his hedge fund when the tech bubble popped. That’s how he ended up on CNBC. So consider the source…

The “bears” may be in brief hibernation, but will soon emerge from their den – While the market is still perversely infused with perma-bullishness, this latest rally is setting up an epic short-sell opportunity. I have my favorite names, which I share with my Short Seller’s Journal subscribers, and I try to dig up new ideas as often as possible. My latest home run was Vail Resorts (MTN), on which I bought puts and recommended shorting (including put ideas) in the December 2nd issue of my newsletter. MTN closed yesterday at $185, down 33.6% from my short-sell recommendation. To learn more about this newsletter, please click here:  Short Seller’s Journal information.

Barkerville Gold: Quickly De-Risking And Undervalued

Barkerville Gold (BGMZF, BGM.V) is advancing it Cariboo Gold Project in British Columbia.  The Cariboo Project is a district-scale, massive land package loaded with gold mineralization (over 110 gold-bearing streams on the property).  Osisko Mining took operational control of the Project, with the transition beginning in mid-2015.  Chairman, Sean Roosen, took the old Osisko Mining’s Canadian Malarctic Project purchased for about $90,000 and developed it into what is now one of the largest gold mines in the world, selling it to Yamana/Agnico-Eagle in deal worth nearly US$3 billion.

BGM currently has a resource consisting of a little more than 3 million ozs of measured, indicated and inferred gold averaging 6 grams/tonne.  It also has an operating mine at the Bonanza Ledge/BC deposits which has been successfully tested recovering over 20,000 ozs of gold at a 91% recovery rate.  This is important for two reasons:  1) the mine will used to generate cash flow to help fund the massive exploration program in progress; 2) it confirms that the ore can be extracted economically at the current price of gold.

The current market cap of BGM using the 555.6 million fully-diluted share-count is US$194 million. It would be a mistake to dismiss this investment opportunity because of the high share-count.  The resource could easily end up at least 3-4x larger than the current 3 million ozs. with a production profile of 400-500,000 ozs of production  per year.  With a higher price of gold, this company has $1 billion market-cap potential. Even if there’s 1 billion fully-diluted shares outstanding at the time, that’s a triple from the current price.  That said, I can guarantee that Sean Roosen did not just invest another $1mm of his own money for only  a triple.

You can view a webcast presentation of Barkerville by BGM’s President/COO, Chris Loder, with intermittent comments from Sean Roosen by clicking on the link below.  The webcast is hosted by O&M Partners, which produces live management presentations of mining stocks for retail/high net worth/small institutional investors.  I have found these webcasts to be invaluable. I was invited to give brief opening remarks on gold and junior mining stocks  (note: you will need to fill out form with your name and email information – this will only be used by O&M to invite you future webcasts):

BARKERVILLE GOLD MINES Management Presentation

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You can learn more about Vista Gold and other highly undervalued junior mining stock in the Mining Stock Journal:   Mining Stock Journal information

Vista Gold: Overlooked And Undervalued

Vista Gold (VGZ) has a storied history as a junior gold miner.  In 2012 new management, led by CEO, Fred Earnest, took control of the operations and has been advancing the Mt. Todd gold project, which is the largest undeveloped gold project in Australia.

Mt. Todd contains nearly 6 million ounces of gold reserve (proven/probable).  A Preliminary Feasibility Study updated in 2018 shows a project with 381,000 ozs of annual production over a 13-yr mine life (479,000 ozs/yr for first 5 years), an after-tax IRR of 20% and after-tax NPV of $679 million.  The current market cap of the stock is $57 million (100 million shares outstanding).  As an operating mine, it would be the fourth largest gold mine in Australia and one of the largest new gold mines in the world over the last several years.

I’m not sure why VGZ trades at a huge discount to its peers and to its “intrinsic value.”  To be sure, the Mt. Todd Project has a checkered history.  But this is primarily attributable to inept management by previous owners.  On the surface the resource grade may appear low (.82 grams per tonne). But VGZ has successfully tested and implemented high-tech ore sorting technology which has improved the throughput grade by as much as 50% (1.2 grams per tonne) and has taken heap leach recovery rates north of 90%.

The Mt Todd Project will be converted eventually to a mine.  I suspect that, as the price of gold rises, a large mining company will either invest in the Project and take over operational control or acquire Vista outright.  The Company has signed recent non-disclosure agreements with mining companies interested in the Project. Until an “exit strategy” event unfolds, this stock is an easy double from its current price.

The Mining Stock Daily’s Trevor Hall interviewed Vista’s CEO to discuss the Mt. Todd Project (click on the graphic below to stream the interview or stream it on your favorite app here – Mining Stock Daily):

The Mining Stock Daily is produced by Clear Creek Digital and the Mining Stock Journal. MSD is now sponsored by Mineral Alamos, which has a portfolio of high quality gold and gold-silver-copper polymetallic assets in Mexico.

You can learn more about Vista Gold and other highly undervalued junior mining stock in the Mining Stock Journal: Mining Stock Journal information.

In the latest issue, I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options.

The Powell Helium Pump

The stock market has gone “Roman Candle” since Fed Chairman, Jerome Powell, gave a speech that was interpreted as a precursor to the Fed softening its stance on monetary policy.  Not that intermittent quarter-point Fed Funds rate nudges higher or a barely negligible decline in the Fed’s balance sheet should be considered “tight” money policy.

Credible measures of price inflation, like the John Williams Shadowstats.com Alternative measure, which shows the rate of inflation using the methodology in place in 1990, show inflation at 6%.  The Chapwood Index measures inflation using the cost of  500 items on which most Americans spend their after-tax income.  The index is calculated for major metro areas and has inflation averaging 10% (The John Williams measure which uses 1980 Government methodology also shows the current inflation at 10%).

Using the most lenient measure above – 6% current inflation – real interest rates are negative 3.5% (real rate of interest = Fed Funds – real inflation).  The “neutral” interest rate would reset the Fed Funds rate to 6%.  In other words, the Fed should be targeting a much higher Fed Funds rate.

So, if the economy is booming, as Trump exclaims daily while beating his chest  – and as echoed by the hand-puppets in the mainstream media – why is the Fed relaxing its stance on monetary policy?  The huge jump in employment, per the December jobs report, should have triggered an inter- FOMC meeting rate hike to prevent the economy from “over-heating.”

In truth, the economy is not “booming” and the employment report was outright fraudulent. The BLS revised lower several prior periods’ employment gains and shifted the gains into December. The revisions are not published until the annual benchmark revision, on which no one reports (other than John Williams). Not only will you never hear or read this fact from the mainstream financial media and Wall Street analysts, most if not all of them are likely unaware of the BLS recalculations.

The housing market is deteriorating quickly. Housing and all the related economic activity connected to homebuilding and home resales represents at least 20% of GDP. And the housing market is not going to improve anytime soon.  According to a survey by Fannie Mae, most Americans think it’s a bad time to buy a home even with the large decline in interest rates recently.

Several other mainstream measures of economic activity are showing rapid deterioration:  factor orders, industrial production, manufacturing, real retail sales, freight rates etc. Moreover, the average household is loaded up its eyeballs with debt of all flavors and is sitting on a near-record  low savings rate.  Corporate debt levels are at all-time highs.  In truth the economy is on the precipice of going into a tailspin.

The stock market is the only “evidence” to which Trump and the Fed can point as evidence that the economy is “strong.”  Unfortunately, over the last decade, the stock market has become an insidious propaganda tool, used and manipulated for political expediency.  The stock market can be loosely controlled by the Fed using monetary policy.

The stock market can be directly controlled by the Working Group on Financial Markets – a subsidiary of the Treasury mandated by a Reagan Executive Order in 1988 – using the Exchange Stabilization Fund. Note:  anyone who believes the Exchange Stabilization fund and the Working Group are conspiracy theories lacks knowledge of history and is ignorant of easily verifiable facts.

Trump referred to the stock market as a “big fat ugly bubble” in 2016 when he was running for President with the Dow at 17,000.  If it was a visually unaesthetic sight back then, what should it labelled now when it almost hit 27,000 in 2018?  Trump blamed the recent decline in stock prices on the Fed.  Worse, Trump has put inexorable political pressure on the Fed to loosen monetary policy and stop nudging rates higher.  Note that this debate never covers the topic of “relative valuation…”

The weekend before Christmas, after a gut-wrenching sell-off in the stock market, the Secretary of Treasury graciously interrupted his vacation in Mexico to place a call to a group of Wall Street bank CEOs to lobby for help with the stock market.  The Treasury Secretary is part of the Working Group on Financial Markets.  The call to the bank CEOs was choreographically followed-up by the stock market-friendly speech from Powell, who is also a member of the Working Group.

The PPT combo-punch jolted the hedge fund algos like a sonic boom.  The S&P 500 has shot up 10.8% in the ten trading days since Christmas.  It has clawed back 56% of the amount its decline between early September and Christmas Eve.

In reality, the speech was not a “put” because a “put” implies the installation of a safety net beneath the stock market to stop the descent. Rather, the speech should be called, “Powell’s Helium Pump.”  This is because the actions by Mnuchin and Powell were specifically crafted with the intent to drive the stock market higher.  It’s worked for a week, but will it work long term?  History resoundingly says, “no.”

Make no mistake, this nothing more than a temporary respite from what is going to be a brutal bear market.  The vertical move in stocks was triggered by official intervention. It has stimulated manic short-covering by the hedge fund computer algorithms and panic buying by obtuse retail investors.

Investors are not used to two-way price discovery in the stock market, which was removed by the Federal Reserve and the Government in late 2008.  Many money managers and retail investors were not around for the 2007-2009 bear market. Most were not around for the 2000 tech crash and very few were part of the 1987 stock crash.

The market’s Pied Pipers have already declared the resumption of the bull market, Dennis Gartman being among the most prominent.  More likely, at some point when it’s least expected, the bottom will once again fall away from the stock market and the various indices will head toward lower lows.

In the context of well-heeled Wall Street veterans, like Leon Cooperman, crying like babies about the hedge fund algos when the stock market was spiraling lower, I’m having difficulty finding anyone whining about the behavior of the computerized buy-programs with the stock market reaching for the moon.

Welcome To 2019: Declining Stocks, A Falling Dollar And Rising Gold / Silver Prices

The stock market has become the United States’ “sacred cow.” For some reason stock prices have become synonymous with economic growth and prosperity. In truth, the stock market is nothing more than a reflection of the inflation/currency devaluation caused by the Fed’s money printing and lascivious enablement of rampant credit creation. 99% of all households have not experienced the rising prosperity and wealth of the upper 1%. The Fed’s own wealth distribution statistics support this assertion.

It’s been amusing to watch Trump transition from tagging the previous Administration with creating a “big fat ugly stock bubble” – with the Dow at 17,000 – to threats of firing the Fed Chairman for “allowing” the stock market to decline, with the Dow falling from 26,000 to 23,000. If the stock market was big fat ugly bubble in 2016, what is it now?

If the Fed pulls back from its interest rate “nudges” and liquidity tightening policy, the dollar will sell-off, gold will elevate in price rapidly and the Trump Government will find it significantly more difficult to finance its massive deficit-spending fiscal policy. Welcome to 2019…

SBTV, produced by Silver Bullion in Singapore, invited me onto their podcast to discuss the Fed, the economy and, of course, gold and silver:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:   Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

A Quiet Bull Move In Gold, Silver And Mining Stocks

Silver is up 12.4% since November 11th, gold is up 9.3% since August 15th.  But the GDX mining stock ETF is up 21.4 % since September 11th.  GDX is actually up 71% since mid- January 2016.  By comparison, the SPX is up just 34% over the same time period (Jan 19th, 2016).

There’s a quiet bull market unfolding in the precious metals sector.  But don’t expect to hear about it on CNBC, Bloomberg TV or Fox Business – or the NY Times, Wall Street Journal and Barron’s, for that matter.

My colleague Trevor Hall interviewed precious metals analyst and newsletter purveyor,  David Erfle to get his take on what to expect in 2019 for the sector and  a couple of his favorite stocks (download this on your favorite app here: Mining Stock Daily):

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I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal, released to subscribers last night. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options. You can learn more about the Mining Stock Journal here:   Mining Stock Journal information.

Mining Stock Daily’s 2019 Outlook For Precious Metals

A quiet bull market in mining stocks is underway. The GDX ETF closed trading on New Year’s Eve up 2.37%. Through Monday, the GDX has risen 20% since hitting a 52-week low close of $17.57 on September 11, 2018. In popular parlance, GDX is now in a “bull market.”

We expect that a significant bull move will occur and a significant amount of capital will pull out of “risk assets” and move into physical gold and silver for wealth preservation/flight-to-safety.

Click on the image below to hear the short and sweet 2019 inaugural Mining Stock Daily Podcast:

Mining Stock Daily is produced by Clear Creek Digital and the Mining Stock Journal.

“The Establishment Will Never Say No to a War”

It’s time to end the absurd “war on terror.”  What exactly is the U.S. Government fighting? Hillary Clinton asserted that pulling out of Syria would “put our national security as grave risk.” Huh? I see the U.S. military terrorizing the citizens of the countries occupied by U.S. forces all over the world. I have yet to see a Syrian military jet fly beyond the Middle East airspace looking to drop bombs on anything deemed “a threat to national security interests.”

“…Washington never learns this lesson, cannot relinquish the imperial temptation, even as it has bankrupted us, killed and maimed thousands of young Americans, and turned us into a country that commits war crimes. If you want to understand why we have a resurgence of populism and why a patently unfit person like Trump became president, it’s because most Americans know when their government refuses to do what its people want.” (Andrew Sullivan, New York Magazine)

“War is peace. Freedom is slavery. Ignorance is strength.” (George Orwell, 1984). There’s a lot of concepts embodied in that Orwell quote. If Orwell had titled his novel, “2018” instead of “1984,” the timing of his prophetic narrative would have been perfect.

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist.”

That quote by President Eisenhower never gets old with me. Unfortunately, the U.S. military industrial complex has become Eisenhower’s nightmarish warning incarnate. We are living and breathing the business of war to the extent that its trappings now adorn even professional and collegiate sporting events. I never thought I would see it, but Fox News and CNN now are on the same page with respect to the use of militarism and U.S. imperialism.

This commentary written by Andrew Sullivan for the New Yorg Magazine’s Intelligencer is a must-read for putting the U.S. “war on terror” in proper perspective. The Afghanistan and Middle East imperialistic campaigns are Viet Nam on steroids. When George W took office, the Defense budget was $380 billion. By Q3 2018 it hit $785 billion. Most of this spending has been a gross transfer of wealth from the public to the companies that supply weapons and services to the Department of Defense. Just ask Jeff Bezos and Eric Schmidt, who both sit on a little-known, defense technology advisory board. Both CEO’s companies rake in $100 of millions in revenues from supplying services to the Deep State.

“Neoconservatism, it seems, never dies. It just mutates constantly to find new ways to intervene, to perpetuate forever wars, to send more young Americans to die in countries that don’t want them amid populations that try to kill them. If you want the most recent proof of that, look at Yemen, where the Saudi policy of mass civilian deaths in a Sunni war on Shiites is backed by American arms and U.S. It’s also backed by American troops on the ground — in a secret war conducted by Green Berets that was concealed from Congress…”

PLEASE CLICK HERE TO READ THE REST OF “The Establishment Will Never Say No to a War”