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I'm busy today with getting laid off from work, so let's see if I can quickly slap together a list of the various newsblobs that have cought my eye:
Seeking Alpha - Basel III and gold. Originally noted by (I think) Gary Tanashian, a very interesting idea: gold could now become Tier I instead of Tier III. Is it true? I dunno, it could just be yet more of the fucking stupid misinformation spread by idiot goldbugs; I'll wait til I see confirmation in a real news outlet. And will Basel III even get implemented? If so, Deutsche Bank is immediately bankrupted; that's why there's been talk in Europe about delaying Basel III implementation, like, indefinitely. But if it is true it's an interesting new factor in the gold supply/demand dynamic.
der Spargel - a story on the Greek 1%, who are nothing but parasites and thieving robber barons.
A Dash of Insight - weighing the week ahead. I've dumped several people off my reading list and am thinking of adding this guy back to it.
Ritholtz - meta questions. This is essentially a response to the conspiracy theory that the Fed "sends Janet Yellen to the mic" whenever the market needs a boost. To wit:
Why does it always seem that when markets become deeply oversold, politicians and the Fed seem to react? Are they closet technicians or is it something else?Correlation does not prove causation, Gary.
Its something else: The most likely answer is that similar factors drive all these events simultaneously. Politicos note when markets are in a distressed phase; that shows up in all sorts of other psychological measures from Consumer Sentiment to Capex Spending and broad hiring trends. When markets go into freefall, politicians sit up and take notice. Even a milder correction of < 10% such as we have had recently adds pressure to public officials’ decision-making behavior.
No, Bernanke is not watching his Bloomberg concerned about the 200 day moving average, nor is he watching the DeMark indicators nor doing MACD studies. But the same sort of pain that leads investors to capitulate and puke up stocks is also at work on decision makers. We saw that at work in March 2009, when both groups overreacted to the market collapse. And we are seeing shades of that now, with the reaction (and over reaction) to this pullback.
NY Times - investors rush to beat threat of higher taxes. As noted in previous news updates. In fact, they all rush out the door in 2 fucking days. Then they buy everything back next week when Obama sells out Main street for Wall Street and maintains the low tax rates for dividends.
Bespoke - weekly BIG reader poll shows bullishness spiking. Maybe cos I'm just an average intellect, and every fucktard in the market can see that all the selling was silly? Question is, does this last for one day only, or is it the mark of the broad market bottom?
BI - The Homebuilder Confidence Jump Is Foreshadowing A Huge Boost To GDP. Maybe that's the answer to the question!
Anyway, I'm sure this blog will soon turn into a load of screaming about the lunacy of the Canadian employment insurance system over the next few weeks, so enjoy the sanity while you can.
hey look who picked up Moneta:
ReplyDeletehttp://www.321gold.com/editorials/moriarty/moriarty111912.html
Well, he sat on LSL for 3 months before opening up about it, so I have less than optimal trust in Bob.
DeleteAlso, I do still accept IKN's take on the situation - loads of companies out there have a beautiful resource that can certainly be mined at a profit, and yet they're valued at pennies on the dollar, because the only way they ever get mined is if a major buys them out and spends the huge capex. Which the majors ain't doing.
So here's the deal: figure out a price target for ME by starting at today's price, assuming good mining profit, and then diluting the share structure with a 50/50 debt/equity deal to pay for the capex.
Then do the calc varying ME's starting share price from 5 cents to $1. Plot that curve. With ME below a certain price, your upside after dilution gets swamped out by the potential downside of continued price stagnation and opportunity cost loss.
Once any junior falls down into that hole, you probably will need a sectorwide hype to bring it back up to where a subsequent dilution for capex leaves any upside.
Thus, for example, AQM trades at 7 cents.
You can go ahead and buy stock in one of these guys and hope the price comes back. I did that with BCM, but fact is that Corani is going to be the fifth-largest silver mine to come into production this decade; so it really has to get bought out someday. Even with that on its side you need balls of steel and a real confidence to believe that your once beaten-down resource gets bought before the other hundred beaten-down resouces trading at pennies on the dollar right now.
It's really one of those "straw that broke the camel's back" times that we saw in the defined-resource explorecos these past two years; a lot of them have been destroyed as possible investments, some cos of bad numbers (GUY or XG), but many just cos the selling drove the price down to where the required capex is a death sentence that never lets the price back up.
And if nobody's buying these beaten down resource properties, why own them?
All great points, but this is chicken-and-egg. Your argument boils down to "it's too cheap so they can't raise money". exactly. it's too cheap. if people want to speculate they will "buy ounces in the ground" they same way they would "buy cash flow", except those cash flowing cold hard cash are subject to random 40-60% swings (due to changes in valuation multiples) rather than 90% swings.
ReplyDeleteTrying to apply fundamental analysis to these companies ($40M explorcos) is a complete waste of time---we saw that over the past 2 yrs...stocks fell 80-90% for essentially no reason...the gold is still there, but nobody cares. Now the idea is the momentum swings the other way---they run 500-1000% again *for no apparent reason* other than people getting greedy and wanting to pay $100-200/ounce for gold in the ground.
There's also the whole "call option on gold" thing.
a) what are the chances gold goes to $2000-2500+
b) what does that do to the value of the deposit
c) what does that do to people's perceptions of value (ie. multiples, $/ounce etc.)
maybe people will want to pay $300/ounce for these types of companies if/when gold gets into the $2000 range.
And then there's the whole M&A angle.
Recent events would indicate that particularly in this region, buy-outs *are* happening:
TRR, PDG, QMI
not bad for the last few months.