Tag Archives: mining stocks

As The Fed Goes “Weimar,” Gold, Silver, Miners Will Go Parabolic

The chart above speaks for itself. You could not find a more bullish chart set-up in the stock market. Note that the HUI/Dow ration bottomed out in late 2019 at the same level where it bottomed in late 2000. Most investors in this sector were not around for the beginning of the precious metals bull market in late 2000. But you can see the big move that started in 2008 – for which many of you were around – actually began 8 years early at a much lower level. I believe there’s a good possibility, because of the amount of money that has been printed by Central Banks globally, but especially by the Fed, that the scale of the next bull move in this sector will be larger than the 2000-2011 move.

The precious metals sector continues to be glaringly ignored by the mainstream financial media and most “alternative” forms of media. This is a “loud” indicator that the fattest part of the bull move is yet to come. YTD gold is up 15.4%, GDX is up 25% while the SPX is down 6.5%. If the SPX were up 25% YTD, they’d be doing naked cartwheels on CNBC.

M&A activity kicked up again in the mining stocks over the past two weeks. But the deal that caught my attention was the acquisition of TMAC Resources by China’s Shandong Gold Mining Co. for C$207.4 million. TMAC operates the Doris gold mine in Hope Bay. Shandong is 47% owned by the Chinese Government.

China has been aggressively buying gold mines in Africa and South America. It was just a matter of time before it turned its sights on North American mining companies. I will be interested to see if Chinese mining companies ramp up their M&A activities in Canada, Mexico and the U.S. Most of these junior mining companies that have highly prospective projects, transitioning into production or currently produce, especially the smaller ones, are extraordinarily cheap relative to the price of gold/silver and especially relative to where gold/silver are going. It’s also another way for China to convert US dollars into gold.

A new subscriber wanted to know if he should start buying mining stocks now or wait a few weeks for a possible pullback. Here’s my response: “Regarding market timing, it’s impossible to time peaks, valleys, ebbs and flows. The key is to find ideas you like and start building positions. Always always always leave plenty of cash to take advantage of sell-offs, pullbacks, corrections. And it’s usually a good idea to sell part of your position if/when the stock runs up sharply in a short period.

If you are not invested in the sector yet, start wading in with maybe 10%-15% of what you plan to allocate to mining stocks. Yes they’ve had a big run up since mid-March but they could work off the “overbought” technical condition by going sideways for a bit and then head higher again. A lot of cash is starting to flow into the sector and you don’t want to be left standing at the station when the train pulls away. It’s not a good feeling chasing stocks which I had hoped would pullback – been there, done that.

The above commentary is from the latest issue of the Mining Stock Journal.  I focus on lesser followed “venture capital” junior exploration companies but include ideas for my favorite large cap stocks, along with options ideas for those. Several of my junior mining stock picks have doubled or tripled since mid-March.  You can learn more about this mining stock newsletter here:   Mining Stock Journal information

Infinite QE, Bear Market Rallies, Gold, Silver And Mining Stocks

The precious metals sector continues to be glaringly ignored by the mainstream financial media and most “alternative” forms of media. This is a “loud” indicator that the fattest part of the bull move is yet to come. YTD gold is up 11.8%, GDX is up 16.4% while the SPX is down 12.6%. If the SPX were up 16% YTD, they’d be doing naked cartwheels on CNBC.Mining Stock Journal – May 14, 2020

The stock market is reflecting the expectation of a “V” recovery in the economy. The Trump Government, specifically Treasury Secretary, Steve Mnuchin, believes economic activity will be largely restored by the end of August. It’s nothing but propagandist fantasy.  I’d be stunned if he really believes that.  This bear market rally is a just that – a bear market rally. The same pattern occurred after the tech bubble popped in 2000. The Naz plunged 40% followed by a 42% rebound rally. When the bear rally ran out of steam, the Naz declined 42% over the next four months.

A lot of money is flowing into mining stocks, especially junior exploration companies. More investors are aware that the cat is out of the bag w/regard to the physical vs. paper situation in London and NYC. The money flowing into mining stocks – especially speculative juniors – is starting to go from a trickle to a heavy current.  A lot of stock deals that have been announced in the last couple of weeks have been up-sized by a considerable amount. This is highly bullish indicator for the precious metals sector.

Silver Doctors / SD Bullion invited me back to discuss the insanely overvalued stock market and the precious metals market:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

“I’ve always thought your newsletter is the best value in the junior mining world. It’s great to get your insight as things get moving here. Some of your suggestions are among my best performers.” – subscriber, “James,” to the Mining Stock Journal

A Hopelessly Corrupt Financial System Plus Historic Bubbles – Got Gold?

“At the parabolic top of every financial bubble, thrilled investors lose their tether to
reality, and as the price of the speculative instrument rallies ever higher, investors’
expectations for additional price appreciation inflate ever more. Whether its Cisco Systems at a trillion-dollar market value, Qualcomm at $1000 a share, Oil at $200 a barrel, Bitcoin at a million dollar a piece, or Tesla at $7000 a share, these far fetched price fantasies are the fuel with which bubbles, and their beneficiaries, attempt to sustain themselves.

To the chagrin of the bubble chasers, history is categorical in this regard, the combination of a parabolic price move, a hype narrative, and the proliferation of wild price projections, is highly indicative of a topping bubble and an impending price collapse. Of course, Tesla shareholders will dismiss this article as irrelevant since history count little in the eyes of those who believe their company to be at the forefront of a new transportation and business paradigm.” – Nawar Alsaadi, “Is The Tesla Bubble About To Burst?”“Is The Tesla Bubble About To Burst?”

The Fed has re-inflated the biggest stock and asset bubble in history after the previously biggest stock bubble was punctured in March. Today the Fed will begin buying junk bond/leveraged loan ETFs using Blackrock as its front. There’s two obvious problems with this. First, how does this help the economy?  The money printed and used to purchase the ETF securities will never flow to the companies issuing junk bonds. Ask United Airlines, which had to abandon plans to raise a couple billion in the junk bond market after the market rejected its attempt to issue 11% coupon bonds.  Why didn’t the Fed just buy up that issue? It’s an odd-lot compared to what it’s printed and thrown at the big banks up to this point.

The second problem is Jay Powell’s conflict of interest. Powell has an $11 million equity stake in Blackrock. For its riskless efforts in buying ETFs for the Fed, Blackrock will be paid $15 million.  And guess what? The taxpayers are on the hook for the money the Fed prints and transfers to ETFs and to Blackrock when the trade goes bad – which it will.

“A recurring feature of a bursting investment bubble is the culmination of absurd statements and assertions by an otherwise seemingly reasonable individuals right around the parabolic top of such phenomena.” (ibid)

Shopify (SHOP) closed at an all-time high yesterday. SHOP now sports the largest market cap on the Toronto Stock Exchange.  SHOP didn’t start filing SEC financials until 2015. But going back to at least 2013, SHOP has yet to produce an operating profit.

The clowns on Wall Street and the financial media gushed over SHOP’s Q1 “blow-out earnings.” There’s just one glaring problem with that assertion.  SHOP didn’t even come close to anything that resembles “earnings.”  SHOP’s net loss before taxes more than doubled to $60 million from $24 million in Q1/19.  It’s operating loss also more than doubled to $73 million from $24 million in Q1/19.

EVEN IF you add back the non-cash expense from stock compensation, SHOP’s “adjusted” operating loss increased over 400% to -$20mm from -$4.6mm.  SHOP’s operating expense margin jumped 300 basis points to 70.2% from 67.5%. A lot of that is probably the extension to new customers of the free platform access beyond 90 days. This horrible financial performance is reinforced by the fact that insiders are dumping massive quantities of shares. The time from vest to sale happens so quickly one might think the share certs are infected with coronavirus. In fact, two days after SHOP reported, insiders unloaded another flood of shares.

SHOP now trades at 52x trailing sales and 28x book. Its trailing P/E is infinite (i.e. no earnings to use in the denominator). Wall St./ Bay St. shills are projecting a small net income for 2020. There’s just one problem with this – even the Company has withdrawn guidance. In other words, the “analysts” are merely making shit up.

Eventually the gap between SHOP’s valuation and reality will converge. Those who rented the shares to sell at a higher level will be burned badly. Those holding SHOP shares because “it’s a new economy and it’s different this time” will watch the value of their shares sink well below their cost. Want an “expert’s” view on this?  Ask Bill Miller (@B3_MillerValue) how quickly he ended up losing money for the investors in his Legg Mason Value fund in 2008. His fund, after 15 years in a row of beating the SPX fell below its value at the start of the 15-yr run.

“It’s all so openly corrupt but once again a smashing of gold couldn’t last more than a day.” – Chris Powell, GATA Treasurer

There’s a way to protect yourself from the interminable corruption at the Fed, Wall St and Capitol Hill. Move a large percentage of your investible cash into physical gold (and silver) – not GLD, not a gold investment account – that you safekeep yourself.  Gold has run up 16% since March 19th and 41% since May 22nd.  If the SPX put in a performance like that, they would be doing on naked cartwheels on CNBC, Fox Business and BloombergTV.

The LBMA Is Just As Rigged As The Comex

Gold is going a lot higher, especially once India  – which has been absent from the gold market since the virus crisis started  – re-opens its economy . Silver is starting to wake-up and should outperform gold by a substantial margin going forward.

Chris Marcus (Arcadia EconomicsArcadia Economics) and I discuss the dubious credibility of the LBMA and evidence that it’s just as rigged as the Comex now:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

“I’ve always thought your newsletter is the best value in the junior mining world. It’s great to get your insight as things get moving here. Some of your suggestions are among my best performers.” – subscriber, “James,” to the Mining Stock Journal

Why Did The CME Secure A $10 Billion Credit Facility?

The credit facility was put in place in November 2017. It was brought to the public’s attention when Marketwatch picked up on an SEC filing which renewed the credit facility.  I don’t know if there’s any correlation per se, but the credit facility was established after it was clear that the price of gold and silver had started their next big bull market move with several Comex clearing member banks potentially catastrophically short gold and silver futures contracts.

Ultimately, the CME has 2 or 3 “safety nets” to guard against a default from any one CME clearing member from disrupting the entire CME house of cards. The fact the CME was compelled to establish another $7-10 billion “cushion” tells me that the central counterparties should be held responsible for their trading decisions by putting up a much bigger performance bond. Chris Marcus of Arcadia Economics and I discuss what’s going with the CME, Comex and precious metals market:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Is The Comex On The Cusp Of Defaulting?

“How did you go bankrupt?” Bill asked
“Two Ways,” Mike said. “Gradually then suddenly”
– Ernest Hemingway, “The Sun Also Rises”

And this could usher in the “suddenly” moment:  “The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally.” – Reuters, April 28, 2020

Chris Marcus of Arcadia Economics and I discuss the potential of a Comex default:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

A Run On Comex/LBMA Gold Bars Is Inevitable

As uncovered by Ronan Manly in a must read article, at least 50% of the “eligible” gold reported in Comex vaults actually will never be made available for delivery. On Friday the Comex vault report showed 14 million ozs in the “eligible” category. At least 7 million of this belongs to owners who the CME has determined likely have no interest in re-selling the bars.

As of Friday’s vault report, the Comex shows 18.6 million ozs of gold. Of that, 14 million was “eligible.” Roughly 4.7 million of the “eligible” gold is LBMA bars that have been supposedly allocated to Comex-approved vaults in London and made available for fake delivery under the 4GC “enhanced gold” contract.

Subtracting 4.7 million ozs from the eligible gold designation and using a 50% haircut on the remaining 9.3 million eligible ozs gives us 4.65 million eligible ozs plus 4.6 million “registered” ozs. The 9.2 million ozs of gold that is potentially available for delivery can disappear quickly if just 28.4% of the June gold contract longs decide to stand for delivery.

At some point large buyers looking for delivery of physical gold that can be removed from custodial vaults and moved to private safekeeping away from NYC or London are going to make a run on the vaults in London in NYC. The run on the LBMA vaults has been going on since well before the virus crisis. Chris Marcus of Arcadia Economics and I discuss this likelihood in our latest weekly conversation:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

The Paper Gold Market Is Imploding

The CME/LBMA latest paper derivative product – the Accumulated Certificate of Exchange aka “4GC” – is failing. Badly.  After its introduction last week there has been zero trade activity in the contract:  4GC Settlement data.  The contract fabricates a paper claim on 25% of an LBMA 400 oz bar for Comex participants seeking delivery of the 100 oz Comex bar. It’s an attempt to transfer LBMA gold in fractional derivative form to the Comex.   The contract is an absolute farce, a fact confirmed by complete lack of interest in it from the market.

The effort by the western Central Banks in conjunction with the bullion banks to keep a lid on the price of gold is failing. It’s not the first time (see The London Gold Pool collapse).  This failure is reflected in the historic spread between the spot price of gold as determined twice a day on the LBMA and the Comex gold futures curve.

Chris Marcus and I discuss the causes and implications of this market signal in our weekly conversation:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

The Comex And LBMA: Paper Gold On Steroids

I truly thought I had seen all that was possible in the creation of paper gold when the Comex rolled out its “pledged gold” category which enabled technically insolvent banks like HSBC and JP Morgan – the only two Comex banks to have taken advantage of this new gold derivative product – to use paper gold to satisfy the performance bond requirement of CME clearing members.

But now the LBMA and CME operators have rolled yet another paper gold derivative productive in the hopes that the two entities can stave off defaulting on futures and forward contractual delivery requirements.  The Accumulated Certificates of Exchange (“ACE”) facilitates the “fractional” delivery of a 400 oz gold bar.

There’s just one minor problem with this set-up.  According to the Cambridge Dictionary, the word “delivery” is defined as:  “the act of taking goods, letters, packages, etc. to people’s houses or places of work.” To me this means if I want delivery of the 100 oz bar of gold for which I contracted, I would like to have the 100 ozs deposited in the location of my choice so that I can possess the gold bar for which I paid upfront.  In effect, the Comex has technically defaulted on the contractual terms of the 100 oz Comex futures contract.

Ronan Manly of Bullionstar.com has written an excellent analysis of this new paper gold derivative scheme:

And just like that, when you thought bullion bankers and their frontmen, the CME and LBMA, could not create even more paper gold, they just went ahead and did. And it gets better, since according to the CME:

“Once issued, ACEs can be held as long as necessary. A client can use ACEs to comply with short delivery requirements (1 ACEs reflecting one futures contract of 100 oz) or it can be swapped back against a 400 oz bar by exchanging 4 ACEs. A customer can comply with delivery requirements with ACEs or regular bars, or a combination of both.”

Here’s his entire article:   Comex delivery problems.

It’s only a matter of time before the markets wake to this reality. At that moment we will see the $100-$200 or more daily moves in gold that many have discussed as an eventuality.