Saturday, December 10, 2011

Rick Rule interview

Here's some guy Chris Martenson, interviewing Rick Rule, the guy who gave Brent Cook his first job. Or something. Whatever. Anyway, Rick Rule talks about gold stocks. Or something. Which is funny cos he just recently pointed out to the world that gold miners are chickenshit screwups who are so horrible at managing costs that their CEOs could never get hired to sweep floors at a fucking auto parts company, and that's why gold miners have perennially underperformed relative to the appreciation in the price of gold.

Unfortunately I heard about the interview through ZeroHedge. So I'll be listening to it drunk while cleaning my Heckler & Koch MP5s in the lead-shielded darkened storage room where I keep my MREs and 500 cans of ammo.

BTW, it's funny how ZeroHedge feels the stock market is going to supposedly collapse. Um... except for gold miners. Strange disconnect there. You'd have to wonder if maybe Ron Paul is sending ZH some money to promote the mining sector so he can unload all his chickenshit Mag Silver and Kinross shares.

UPDATE: So, I've since listened to it and it's actually sort of a decent interview. Rick Rule goes into non-miners subject matter, like natgas and oil. He seems to know his stuff broadly. He and Martenson actually do have a laugh at how Rule's criticized the miners for the past ten years... but, y'know, this time is different, because the producers are going to be throwing off so much cash that people will all of a sudden want to own mining shares.

Of course, you have to wonder why people would want to own shares of a company producing from a declining and limited resource whose price is overly subject to macro shocks (i.e. every single miner) when they don't even bother to hand out dividends. Why would anyone want to own some garbage like ABX or Newmont with their shitty 1-2% dividends when they can own Bank of Nova Scotia or Bank of Montreal and get 5%, while remaining shielded from a commodity-crash downside? Why would I dump JNJ's defensive value and constant 3.5% for a miner who can't give me more than 1% and who exposes me to a possible 50-80% haircut when fear of the next "Lehman moment" comes?

Is share appreciation the answer? Will people want to own miners for the share appreciation? OK fine... so show me share appreciation. Then maybe I'd expect people to start piling in. Hint: it hasn't been happening generally. That's why people won't pile into gold miners generally.

Of course your odd analyst might be able to pick out specific producers that are going to outperform the herd, and so those stocks are worth owning in the hope that their prices go up. Sometimes they do. All I'm saying is that I don't see any macro/sector reason for owning gold stocks in general.

hide the children

nobody expects.... a comedy Venn diagram

From failblog.

Friday, December 9, 2011

Friday video

I find the following to be eerily similar to conversations with Conservatives:

Especially the part with "I came in here for a good argument." "No you didn't; you came in here for an argument."

And the descent into self-referential surrealism at the end.

Very much like arguing with conservatives.

But less funny.

status update

Whoops! So busy that I never even posted a Friday video. I doubt you'll mind.

I'm done my busy crap at work, so now I can comment on things.

$HUI: it's hanging below its EMA(8). That technically is bearish, by the criteria I've been using all year. But, still, SIL is above its EMA(8), and some of the stocks I follow are moving strongly upwards. So, I think this is a time to take on a bit of risk and buy in, if you've got something you've been thinking of buying.

My stocks: obviously I don't have REG anymore, as it was an utter disappointment. Big loss there. Again, I bought too much of an exploreco. On a whim. On a hope. Bad stupid idea. That'll be the final time I make that mistake.

I think I'll limit my exploreco purchases to very small numbers - or even ignore them altogether from now on, since the amount of work needed to follow them makes it not worth my while if the position sizes are going to be tiny. I have a decent list of producers and near-producers/buyout properties to follow, so I should stick with those. With the smoking ruin of my capital that's left from the REG fiasco, I spent some time yesterday picking up some more GOZ, some BTO (after dumping it at a profit the day before), some USA and AQM and GUY. Plus I bought back some little bit of the RIO that I dumped a few weeks ago. Good time to shop, when stocks are down. I'd still like to pick up some SBB and AR, and FR and SLW look attractive... but too much silver might still be a bad thing. I'll be happy to keep a big cash cushion in case we still have a couple scary days ahead.

I'm also curious as to what to make of YRI's chart: it's a lot healthier-looking than the other miners. Any move upwards would send it into blue sky. Why would a chartist like AR, yet not YRI?

PMs: you think silver can drop below $30? You think gold can drop below $1700? Seriously, I have no idea. But I'm thinking they won't.

Risk indicators: $VIX is moving down strongly on the Europe "solution". UUP isn't looking as promising, nor is GLD:SLV; but JNK:LQD looks okay. I'm thinking that maybe the Euro summit "solution" was finally enough to make the market roll its eyes and say "well, whatever; we're tired of that shit, it's never going to end, it's Europe, we shouldn't be surprised". I'd be very happy to see the super-correllation between EURUSD and $SPX to end. Shut the fuck up about Europe already and let's move on.

$SPX: very tightly rangebound, so it seems. The volatility still seems to be there, just shrunken into a very narrow band. Again, I think all the symmetrical triangles you're seeing in the Tanashian Indicators are a representation of how interest is being lost in the goings-on in Europe. There's still the volatility, but it's tightening up.

With all the cash that's supposedly either on the sidelines or in USTs, maybe the sym-tries will all resolve upwards? After all, as Gary T says, the USTs are a reservoir which, when the bull signal is given, spews its suckers back into the equities. I say, they must be getting bored, sitting on the sidelines waiting for 2008 to happen. Uh... again.

Speaking of Europe, cutting deficits and social spending in Europe won't solve anything, as Ezra Klein notes; in fact, for much of the aughts Germany had huge deficits, and they're also big on that ol' socialism bogeyman. In fact, what destroyed Europe's finances was (guess what?) bailing out the banks, as you can see by Ireland's dismal spiral into the toilet drain.

Again, to beat a dead horse, to recapitalize banks what you should do is force them to issue a load of new shares - just like explorecos do all the time. After all, by capitalism, it's the shareholders' own fucking fault that the banks go bankrupt despite being allowed to use funny accounting practices that wouldn't even fly on the Venture exchange. So punish the shareholders with massive dilution. If that's not enough to float the bank, punish the bondholders by making them take haircuts on bank debt. Don't force governments to take on the bank's debt, because all that does is destroy the governments' balance sheets. Then everyone suffers as you get a run on sovereign debt. We're seeing that now.

But oh no, you can't punish the shareholders: because the banks' shares are owned by the elite billionaire ruling class, and they wouldn't allow that. Fucking fascist scum.

Tuesday, December 6, 2011

market comment - the good, the bad, and the ugly

Well, GLD:SLV has gone down, JNK:LQD has gone up, $HUI went up, S&P 500 is up. Those are good.

$VIX is starting to threaten, and UUP still shows US dollar strength. That's bad.

I read a few articles today that suggested that the German central bank is running out of collateral, or something - as in, it has nearly none. That's the ugly.

I'm really inclined to wait here, and not do very much. While other people are hoping for an amazing solution out of the Friday Merkozy summit, I'm starting to think Europe is unrepairable all of a sudden. Unless, y'know, money-printing... which is a pretty hollow hope.

PS I'm pretty damn busy at work, bailing out someone else who was completely unable to get his own work done on time. So posting will be light until morale improves.

Monday, December 5, 2011

strange day

Even though $SPX is up, UUP looks weak, JNK:LQD is copacetic, and $VIX is calming down, we're still seeing major selling of silver, gold, and the miners.

Very very strange.

Oh well. Sabina Silver is starting to act with strength today, so I'm happy.

Sunday, December 4, 2011

clean Sunday Christian hilarity

Sometimes it's just too good to not repost.

See more at Very Demotivational.

Technical analysis

Bad things.

1) Friday was a bearish double outside day.

2) The last 3 days look a little bit like a "bearish abandoned baby", which is a really bad candlestick pattern.

3) Nothing else was crashing on Friday, so it's very ominous that the $HUI did so badly. Although: the US dollar crept up fairly strongly yesterday. No, $VIX and GLD:SLV still look okay, but UUP creeping up kinda worried me.

4) $HUI could easily gap-fill down to 550 now.

5) But that would make MACD fail a crossover, which would scare people and make them cry.

Was this just profit-taking? People being too shit-scared to hold their Yamana shares over the weekend? People doubting that gold can stay at $1745? Could be. gold-miner investors probably have itchy trigger fingers right now, and are happy to dump into strength.

The only thing in this chart that gives me hope is that Friday is still being supported by the EMA(8) - the short-term trend supportline - and the mid-term EMA as well.

Some things to consider

Here's some things I've read over the past 2 weeks that have begun to coalesce in my head, forming the narrative that I'm going to stand by:

1) I've read, from people who actually know what they're talking about (i.e. not pundits), that it's legally impossible for Greece to leave the Eurozone. It requires a redraft of the Euro treaty, which would then require ratification in all countries, including referenda in some. This ratification will not happen in countries like Spain or Portugal, because they'll realize they're next to go. It would also cause an utter collapse of the Greek sovereigns, the Greek banking system, the other banks in the Eurozone, and the Greek economy, while it plays out - and there's no way to get it to play out in a short timescale. It would take months. Again, the other weak countries would also see a collapse, as everyone would be betting on who's next in line to leave after Greece.

2) If a magic wand existed that could magically kick out Greece, chaos would hit: the Greek sovereign debt would collapse, which would take out the Euro banking system. Other sovereigns would collapse, as the bond market would start taking bets on who's next. Businesses in threatened countries would no longer be able to conduct business, as the inter-business counterparty risk would be existential in its severity. I've read estimates of an immediate periphery economic contraction of 50%, and a core contraction of about 25%. I'm going to assume that's a decent estimate.

3) Given the above, nobody is going to want to leave the Eurozone. The economic ruling class will do anything to avoid deflationary depression.

4) Given the above, fiscal union and Eurobonds is the only solution that eliminates the Greek "free rider" problem. The technocrats screwed up by creating a currency union with national sovereignty over fiscal matters. Now the screw-up gets solved.

5) European politicians aren't so utterly fucking stupid that they can't see this. (We're used to American politicians exhibiting a much higher level of stupidity: that primal, Theocratic level of stupid doesn't exist in the Eurozone. It does in the Russian bloc, but not the Eurozone.)

6) Complicating everything is that the Euro banking system is heavily deleveraging to meet the next round of Basel requirements (due June 2012). I've read $2 trillion as the estimate of deleveraging required. So the ECB can print $2T with zero inflationary impact, because that's the size of the M3 hole left by the bank deleveraging requirements. Again, someone forgot to tell the technocrats that nowadays it's the banks that print money, not governments. (Blame it on the Chicago School economists - they tend not to see inflation except when it's caused by government.)

7) That money printing won't be inflationary. But people will expect it to be. Say hello to a speculation-fueled reflation of the commodity market. For a bit. Cos....

8) The next true doom will come from China (and India maybe?). But that will still take a year or two before it hits the market. Note to Otto: I would really hate to be Peru and Chile when that happens.