Saturday, December 8, 2012

The internet is one big IQ test

Here's proof the internet is one big IQ test:

And more:

I see things like these and I realize that, in some contexts at least, the cold heartless scalpel of social Darwinism is a good thing.

It'd mean less stupid commenters on Gawker, for example.

Merry Xmas! The IncaKola News interview!

I dunno who came up with the idea, but Otto Rock & I ended up conducting an on-again off-again interview by mail for the past few months. Eventually we called it quits around 3000 words; as I told him, "you're not Michel Foucault expounding on power/knowledge structures under late capitalism."

I find introductory writeups to be a waste of time, and you all are more interested in reading the interview anyway, so here you go:


ME - Both on your blog and in your newsletter, you get quite wound up about honesty, integrity and social responsibility in the mining and exploreco scene. It seems you're not just being pragmatic about your own investments, you're taking this stuff personal. Why do you give a shit, really?

OTTO - I've asked myself the same question infinite times and there's no real answer, man. The closest it gets is that I want the good guys to win occasionally. I'd like the greenhorn investment community to get smart more quickly and recognize the sharks they're up against. I want to shine a light on the way in which trusting souls are parted from their money by sociopaths, or people aiding and abetting sociopaths for their own ends.  

ME - So are you an outright communist, or just someone who reads the Guardian? Seriously, I'm sure some of your critics want to know....

OTTO - I admit I read The Guardian (aka The Graun, for those who have memory as to why) but I only started reading it a couple of years ago when that fucker Murdoch put my favourite newspaper, The Times, behind a paywall. Since then I've kinda grown fond of some of the reporting at Graun, but there's still a lefty handwringing voice in some of its stuff that drives me up the wall. So no, I'm no Commie (sorry to disappoint some of you on that and feel free to disbelieve, I don't give a toss). What I am is a person who sees the potential for good in capitalism (and specifically capital markets) that's often overrun by an obscene amount of greed. When that greed is sourced to stupid people, it raises my basic red flag. 

ME - so really, down deep, you are a nice person?

OTTO - That's not something up to me to decide. I'm a person that's developed his own set of values and they're probably similar to one section of society but different from another. I really don't know how to answer that question, because 'really deep down' goes way beyond my professional life and is about the way I interact with the people closest to me, wife/kids/friends/family and all that jazz. Care to rephrase?

ME - okay, professionally speaking, you're a nice person?

OTTO - Professionally speaking I have a set of values and I stick with them. But that means I can be an asshole, openly and without quarter, to people who are in my opinion assholes. It's all subjective, y'see? Why not ask the scumbags I've written about on the blog whether they think I'm a "nice person".

ME - I guess, if I'm an IKN subscriber, I don't want you to be nice. I want you to make me money. If I were to see you get suckered by something like Liberty Silver, or purposefully fuck me over with bad analysis, that would be enough to make me dump the sub in a heartbeat.

OTTO - I don't think I really understand what nice means in these circumstances. Isn't "nice" some personal quality, something that's more important to my wife than to professionally contracted clients? I mean, it's probably not important to know whether I go to church on Sundays, either. Aside that, I'd agree that the way to judge any market analysis service, IKN or other, junior mining or any other sector, is what it does to help the reader. That boils down to getting the calls right, which in practical terms is likely about calling buy on a stock that subsequently rises but can also mean something like getting a macro/political risk call right and then letting the reader base their own portfolio decision around the correct big picture call. But yeah, get the calls wrong and go out of business. Quite right too.

ME - Recently you've started recommending shorts in your newsletter. I find it surprising you haven't been doing this for years, given how easily you seem to see through bullshit.

OTTO - Good question. One thing is that my target audience is a retail investor who plays the Canadian market (sidebar: verb "play" chosen deliberately). It's not easy to short juniors in Canada and the two recent short calls are both listed in the USA, which makes it easier. The Weekly tries to be actionable in its calls, therefore a short call on a stock has to be useful, else it's only theoretically fun. Or put another way, I much prefer to call "avoid" on a Canadian listed junior and not enter the arena of the big insto players with the oomph to move thinly traded, sub-loonie stocks on a whim. Another thing is that I'm chickenshit and shorting takes more balls than going long. Another is that I'm naturally optimistic and prefer highlighting potential "ups" as investments instead of potential "downs". On that score (and on the chickenshit score) I admire people like Doug Kass more than I could possibly say in a few words.

ME - You certainly could have made a heck of a lot of money shorting nearly the entire junior scene for the past 18 months....

OTTO - True, it's been nasty and particularly the six months of March to August 2012.

ME - I've asked another newsletter writer why he doesn't broaden his own newsletter to bigger macro plays - after all, he seems to make some good macro calls. But he feels he'd lose a large part of the goldbug crowd if he started e.g. calling a buy on a Thailand ETF. You're in Latin America, and so you have a boots-on-the-ground insight that you use in your mining analysis. Have you ever thought of spreading out to covering, say, US-listed LatAm stocks? Cellphones, beer, retail, construction, that sort of thing?

OTTO - There aren't enough hours in the day. For me at least, unless you're blessed with a superhuman memory and superhuman analytical skills (I have neither), if you want to get deeper into a sector and understand the bits that aren't as apparent, you need to spend time, focus evermore sharply and your time gets sucked away. If those extra layers of understanding then come that's a good thing, but then it's unsatisfactory to transfer to another sector, perhaps write a report on a bank or an O&G and not be able to put the same amount of insight into the report as in your specialized subject. Well, it is for me anyway. There's a lot to be said for the 80/20 type of skillset that can easily be transferred from one sector to another and catch the main points of any company then make a decent, well-rounded call on its future (after all, a balance sheet is a balance sheet no matter what sector the company works). That I suppose I could do, but frankly I'd get bored because I like delving into the mysteries and uncovering the layers of a single sector, it's how I keep myself intellectually stimulated.

ME – So what happens when the great commodity supercycle ends? Do you terminate your newsletter?

OTTO - I have enough problems thinking two weeks into the future, never mind ten years. And ending the newsletter means that my wife would get very bored with me very quickly as I hang round the house and bug her about stupid stuff, so for the sake of my marriage it's better that I'm writing something.

ME - While we're on the topic, I've been thinking for a while now about EM growth. While China's going to hit a demographic cliff that constrains growth, and while maybe the rest of Southeast Asia will become the big growth story over the next decade, I can't help but think that maybe Latin America could end up being the big success story of the 21st century. Mexico's apparently becoming a manufacturing superpower, and countries like Chile and Peru have a lot of free money they can dig out of the ground to fuel growth. What do you think of Latin America's chances? Is it all down to how many of their politicians screw things up? Or is there something else that could hold them back?

OTTO - The greatest and most positive development I've witnessed in my time in South America (and I arrived in late 1997) is the way the region as a whole has risen up and stopped taking shit from the industrialized North. Part of that has been luck, what with just about every country in LatAm being net exporters of commodities that have become more valuable since the start of the 21st century (Argentina agro, Chile copper, Venezuela oil etc etc) and the respect that comes from having more money in the collective regional back pockets shouldn't be underestimated. But that's just one of the means to the end, not the end itself. It doesn't matter what side of the political spectrum you look at either, because from Uribe's Colombia to Morales' Bolivia there's a new self respect in the countries. If foreigners want to deal with any country in LatAm you won't get any more kowtowing, you either treat them as a 50/50 partner or you don't get your deal. That's true on a national governmental level and all the way down.

The biggest single threat to LatAm's continued emergence is the level of institutionalized corruption. It's a tough one to tackle, because on a political level (which after all is merely a microcosm of any country's society) you might have a new, unblemished and vigorous leader coming in on some kind of "corruption zero tolerance" message, but without a party apparatus she or he will be left twisting in the wind after a while. And the party apparatus is chock full of the people who have been immersed in corruption and how to make it in LatAm politics all their professional lives; they all have skeletons in their closets, and due to that it's very difficult to get these people to blow the whistle on one another. In that way it's a bit like the Canadian junior mining scene! On a practical level, corruption and the way vast sums of money have been (and still are) siphoned off from the general population in order to maintain the lifestyles of the few holds back the region. The sums of money involved really are vast too, they're the difference between building new hospitals or not, between training teachers to educate well or keeping with the current mediocrity. Companies that want to do business in LatAm know that a $10m bung to this-or-that person means they will be able to remit $50m more per year once their business is up and running, money that would otherwise go into state coffers.

ME - You said after my 2012 PDAC newsletter writers review that one reason the post got a lot of hits from writers themselves is that deep down they think that they're idiots and nobody believes a word they're saying. It seems strange that there would be so much self-doubt in the analyst industry: when you work in investment, isn't massive self-confidence one of the job requirements?

OTTO - Fuck self-confidence. There's a lack of humility in company analysis and it drives me mental. A third party cannot possibly look at a company and "know" anything about it that isn't known by those inside the company. The third party can bring a different perspective, can see events in better or worse lights, can applaud or criticize happenings. But the amount of "absoluteness" (is that a word?) in the analysis biz, especially the sellside, is a sure sign of intellectual dullards behind the keyboard. The more you read smart analysts (and although there are others I'd point a finger at Ron Stewart of Dundee as an example off the top of my head) the more you read humility, talk of probabilities rather than certainties, examination of risks rather than ignoring potential problems, comments that suggest future unknowns.

ME - I guess one of the reasons you see certainly in the insto analysts is because, down deep, they're certain they want you to buy the stock that they plan to unload in 4 months' time.

OTTO - It's called "sell side" for a reason, dude. This is part, just one part, of that thing I mentioned before about wanting to make the retail investor just a little bit less naive about the sharks with which they've decided to swim. There is money to be made in the sector and it's perfectly possible for the individual retail investor to make money from investing in junior mining. In fact there are some aspects that give the individual a distinct advantage over the instos, funds and bigger money players. But far too often I see an overly trusting attitude displayed by Mr or Mrs Retail towards the people they interact with on a regular basis; they can go as far as to think their broker is their friend, for crying out loud! There are good and honest and trustworthy people in the junior world, but even then there has to be a difference between the way I unconditionally trust my brother and my considered opinion after time and evidence that Mr X is a trustworthy person....and that's at the good end.

A human trait is to be trusting and it's from that basic instinct that the pondscum of the market feed. You, the retail investor with a pocketful of money and dreams to make it rich in the stock market, cannot afford to trust anyone from the getgo. Start everyone at zero trust and if they're worthy, they can move up the scale. Don't start them at 100% trust and feel disappointed when they rip you off, because they will and they'll do it again and again. Simply because they can.

ME - but as for newsletter writers, frankly why should any of them care what a joker like me says about their PDAC talk?

OTTO - Honesty scares scumbags. Newsletter writers are either a) scumbags or b) honest but scared of being lumped in with the scumbags. That's a nice recipe for neurosis, no?

ME - There's the time, after I facetiously posted something about most analysts not having a clue what they're doing, you basically agreed with me. But it's not so hard, is it? You have no problem reading financials, I taught myself DCF analysis for my job. Shouldn't these guys have learned this stuff in school?

OTTO - Numbers are numbers. What the brain does with the numbers afterwards is the key. To expand a little, I think that TA is mumbo jumbo but I recognize that away from the 99% of stupidity the "science" collects, there are people like Gary Tanashian ( who can look at a chart and make an intelligent, reasoned and analytical interpretation of what they see. Analysis, be it FA or TA, isn't an absolute science but an applied science. Numbers are not a finishing line, they're the starting point. School allows you the advantage of education, but intelligence is another matter.

ME - I know I've had some "teaching moments" that I've learned my lesson from in the past year - e.g., don't expect a mine with 1 year's worth of reserves to ever trade at more than 2x-3x cashflow. Or an even better one, stay the fuck out of the market when the sellers are desperate. What have some of your own recent "teaching moments" been?

OTTO - It's never-ending, but the biggest one I've taken away from 2012 is that I have a weakness facing up to value traps. I can't even say I've learned the lesson from that one yet either, but what I can say is that 2012 has forced me to recognize my weak points. The basic problem with the fundies guys like me is that we base our analyses and forecasts on value, for example "Stock XYZ is priced at 1 and I think that's a fair value, so I'm not going to buy it. But Stock ABC is priced at 1 and I think that's cheap, considering all the things it has and what it's likely to do in the future, so I'm going to buy that one." So if the broad market stays roughly the same, you get to test your thesis, but if things start to get rough and stocks start to go down, I the weak brainless dumbass fundies guy think one of two things: a) "Gosh, 20% cheaper now! Good value becomes GREAT value! I'll buy some more!" b) "Huh, this is stupid! This stock is worth tons more than this, no way do I sell!". Then if things become worse and the sector drops even more, those thoughts become their own private vicious circle.

ME – well, it’s now the beginning of December, and it looks like what we’re seeing is the “Mass Extinction” of the explorecos, as John Kaiser’s calling it. Long term I don’t get where the fuck they’re going to get all the new gold deposits if all the explorecos disappear; and outside of a collapse of Asia I don’t see gold demand disappearing. You still bullish on the PMs, and the base metals, long-term?

OTTO - Long-term we're all dead (tish-boom! I'm here all week, try the veal). I'd frame the next 12 months as a more useful time window and say yes, I am bullish the sector. Not blanket bullish over the sector and all who sail in her, but bullish enough to be net long junior miners in the stocks I prefer.

Friday, December 7, 2012

Yemen proves Keynesian economics correct

From this weekend's QI:

Yemen has a 50th of the average water supply of the world. Despite this 40% of all the water in Yemen is used to cultivate khat, a herb which they chew on which gives them a buzz. Khat accounts for about a third of Yemen's economic activity.

And they say a Keynesian society based entirely around digging holes and filling them up again is stupid!

The Cookie Monster drives a stake through the heart of the explorecos, dooming them forever

IKN already posted a link, so I'll do it too.

Here's a writeup by Brent Cook where he dooms the entirety of the exploreco sector to ignominy and delisting.

The fun follow-up question to ask is "so, if demand doesn't collapse, what do you think will happen to the price of gold with no more supply?"

Yeah... so I'm off to buy more bullion now.

Friday videos - yet more Chromatics

More Chromatics, who I've become totally fucking hooked on.

Thursday, December 6, 2012

So here's some Kaiser video (and a Cookie too)

So let's add Kaiser to the people we religiously follow at YouTube.

Here's Korelin with Kaiser on Hallowe'en.

Here's Kaiser with some guy from Cambridge House:

And completely off-topic, here's the Cookie Monster showing that he's no old fogey and knows how to set up a Skype link:

On Bull Market Run, and on John Kaiser

One of the things I've been enjoying recently is the comments section at Bull Market Run.

Now, by way of reminding y'all, I do like Bull Market Run's chart analysis for what it's worth. Whether or not they're as good as Tanashian, or Jojo, or All Star Charts, I haven't determined yet; but at least it flags other things in other charts for me to watch, and as far as I'm concerned it's nice to have yet another source of speculation for "what could happen in the next few days". Cos really, predictive TA is nothing more than speculation about probabilities, right?

And sure, at least some proprietors of the site also apparently have a fundamentalist Christian background, and yes, despite my own personal opinions about religion, I can still confidently assert that just because someone's a fundie doesn't make them a bad person; so I'm not particularly concerned about that. Korelin seems to be a fundie, and yet he comes across as nice. BMR have not made me think they're odious hateful types like Grandich. At least, not yet.*

But they also make individual stock reccies, and - guess what? - a few have been in the exploreco field, and - guess what? - they've therefore had their asses handed to them a few times.

As a result, their comments section reads a lot like the Korelin site from a few months back; my posts on that topic (see: DOOOOOOM!) went pretty much viral, as a few readers took the illustration of all-pervasive dismal gloom in the retail crowd to mean we had hit a bottom in the juniors. (Ha ha! if only....)

Well, you can go read the comments in the past few Bull Market Run posts, and see for yourself how pretty darn dismal their readers are feeling right now.

This isn't meant to rub BMR's faces in it; I'm pretty sure they're grown-up enough to understand that when you make a stock pick that goes bad and your readers lose money, they'll respond unfavourably, right? You'll get a lot of grief. It's the way it is. Don't make reccies to people unless you've got the guts to take a mountain of abuse when they lose their life savings. Especially when you're reccying explorecos during the "Great Mass Extinction." You want less criticism? Keep your reccies to Dow dividend plays.

Which brings me to the important part of this post....

I still haven't yet subscribed to John Kaiser. As I said, I really fucking hate drill plays (except Calibre mining! To da moon Alice!), so while Kaiser seems to more broadly speaking be just the type of person I would like to follow (with some super clever ideas that put him way above the typical newsletter writer), I'm not particularly interested in his stock picks.

But someone in the BMR comments section posted a link to this Kaiser writeup from December 2:

Bracing for the extinction of 500 juniors or an entire institution?

which references his earlier, more famous work:

Staving off Mass Extinction with the Big Anomaly

and the two are both worth a read. Partially because Kaiser's the guy who predicted (or not - he seems to refuse to take responsibility) the present Mass Extinction of the juniors.

Now, I don't know if these reports are meant to be free to everyone, or if they're subscriber-only and Kaiser just has a badly set-up website where you can access subscriber-only articles without supplying a password.

I would hope that they're both meant to be free, because since the popularization of Kaiser's thesis is arguably a major factor to blame for the extinction of the juniors that we've all so lovingly lost our life savings on, if he were a mensch he'd give us something free in return for all this brutalization we've suffered.

In any case, I'm going to assume he knows how to set up a pay system.

Go read these two articles by Kaiser, and get yo'self some edumacation.

* - Of course, exhibiting fundamentalist religious beliefs might also indicate that a person is prone to accept beliefs on faith and hope, instead of on empirical evidence; that should be a massive red flag for anyone going to them for investment advice. But not everyone finds it hard to keep their metaphysics separate from their view of reality; I don't expect all fundies to be so cognitively mature, but some certainly are.

Reposting out of the comments

Significant enough exchange that I figured I'd repost the whole thing in a post.

This started with the post: Today's goldbug crucifixion

Comet52 replied:

The genesis of this idea was probably this article

later refined here

These forecasts actually see the current gold price as below where it should be and the real interest rate model says it ought to be as high as $4000, depending on who you believe.

So this concept isn't necessarily about predicting falling gold prices although that's what GS says. They must think real rates are going to rise somehow. 

My response is:

Yeah, I remembered that after you posted the link. IIRC, CWS was trying to refine a model that people had already said existed.

Problem is, even if US real rates and gold are correlated, what's the causation? Cos the US doesn't fucking buy gold, amirite? And this nifty little correlation they found means nothing if you can't resolve it into a supply-demand formula, and predict supply-demand changes on the ground.

So if real rates go up, will that make gold go down cos gold miners can now finance new mines, increasing supply? Or if real rates go up, does that tank the Chinese and Indian economies, destroying demand?

As far as GS - okay, real rates in the US will rise... because... more deflation? Cos the Fed's already got nominal rates pinned for the foreseeable future. Or is it that real rates will rise worldwide because we're entering a new era of economic growth?

See, here's the thing, dude: if US/EU economies turn the corner and grow great-guns, then sure real rates will rise. But doesn't that stimulate growth in India and China too? And those two countries buy just over 50% of all gold produced. So if someone wants to use this "real rates" model for the gold price they still have to explain what the fuck kills all demand in Asia.

PM charts

I dunno, is that a W-bottom? Still doesn't particularly excite me. Gold's just recovering right now from being more than 2SD down.

Silver definitely looks a lot better, almost as if its upwards November trend tried to fall through the Bollinger mean, but failed to. So now it'll try to go back up?

I dunno... when silver's outperforming gold like this, using my own theoretical model, is that because people expect the high-tech western industry to outperform the Asian emerging markets?

Everything looks good this morning, eh?

Oh wow, lotsa green on the charts, eh?

Yeah, I'm not impressed with GDX just yet. It's still 2SD down.

GDXJ looks a little better, like it's about to negate yesterday's puke with an engulfing white candle... but I'd still notwant to buy into this thing at least until it can get back to the Bollinger mean and hold it.

Though I'll admit it's funny that GDX is showing a positive divergence in MACD and RSI(14), and GDXJ isn't, yet GDXJ has moved farther this morning. But positive divergences are only important after the trend changes... or doesn't.

Silver and gold are both still far below their Monday prices, so maybe this is just a temporary bounceback before things dive some more.

Just 2 newsbits for you

Just 2 bits of news I found last night that I thought were worth sharing:

Bloomberg - muni rally approaches limit with 47-year low. I dunno, ask Gary Tanashian what this means. To me, it suggests the age of credit is done and we should move to an age of equity... but it's happening too fast, China needs to crash first!

Bloomberg - Chinese stock accounts empty before rally. Well, is that a contrarian signal for the bottom in the $SSEC? I don't think so, because corruption hasn't yet been fixed in China. But it might say that the bubble era of China is over, and they now have to actually work for their money from now on.

Who knows?

Wednesday, December 5, 2012

Here's some up-to-date reading

Yeah, I really gotta go do some stuff today.

But in the meantime:

Bonddad - those who implement austerity are stupid. With the UK as the prime example. As he tries to comprehend:

1.) England is implementing austerity
2.) They are doing this to "clean up their government finances" in the hopes that this "cleaning up" would restore confidence in the UK economy.
3.) The "cleaning up" is leading to contracting growth, which is lowering confidence in the UK economy -- the exact opposite of what was intended from the first place
4.) So, the best plan forward is ... more austerity.

Yes, Hale, it's not the drugs doing this to you. The UK really is run by underpants gnomes*. In fact, most right-wing economics is a case of underpants gnomes. You just figure this out now?

JC Parets - Mexican stocks surge to historic highs. Again, did you know that Mexico is fast supplanting China as the USA's source for low-cost manufacturing? If not, then you haven't been paying attention.

Bespoke - European spreads remain contained. Translation: no need to watch Europe right now. Unless you like rolling your eyes at the fucking idiocy of stupid fucking German populists. And yeah, you probably should be getting tired of that too.

FT Alphaville - Why did the Shanghai market go up today? They fade the ignorant mass-media commentary well. Basically, they think there's no particularly good reason.

Oh look! Silver puked some more. Maybe I'll buy some silver rounds this afternoon. To increase my silverbug cred. Which is probably in tatters....

* - If you don't get it, watch this:

Now you know everything you need to know about right-wing economics.

This is why you shouldn't mix right-wing wackaloon politics with investing

BI - French yields fall to record lows, making tons of people look like fools. Wiesenthal himself provides an apt summation:

The bond market is mocking everyone who has freaked out about Hollande, higher taxes, socialism, and the downgrade.

The chart is the chart. It is what it is. Higher taxes on the rich and "socialism" (meaning not giving in to the demands of the kleptocratic oligarchs) get rewarded by the bond market. Which must mean it's the right way out of the European mess.

How long before the fucking pig-headed Germans finally clue in?

Hint: when the capitalists who own the German government start to suffer. As I've been saying.

Today's goldbug crucifixion

Hey, I'd be remiss if I didn't send you to read these articles:

BI - Goldman calls the end of the "gold bubble". Their theory is that gold performance is dependent on real interest rates. Not reserve depletion, nor Chinese and Indian wealth growth, not the constantly increasing cash costs. Because... real interest rates... buy gold? I... guess?

Oh, and

BI - a stupid article on that reality TV show "gold rush". Some nobody named Rob Wile says "its ratings are proof that the gold bubble will collapse". Yeah? Shouldn't it be proof that the bubble in Alaskan gold exploration will collapse? Oh, wait....

GDX, GDXJ, volume by price

Let's look at volume by price. I assume its importance is that it identifies more likely support areas - since the theory about support/resistance is, it happens because of the volume of people who bought/sold at that price before.

So here's VBP for GDX and GDXJ:

In both cases, it seems like we've already collapsed through major support bands. For GDX it was $46-$47, for GDXJ it was $21-$22. So, next support for GDX is $42, and for GDXJ it's $19.50.

Do you think those will be the bottoms?

Oh look, someone's just started puking silver.

Some morning reading

BTW, one reason I'm concentrating on China and India right now is that we know the US is recovering, and the strength of that recovery depends mainly on the rest of the world. And another reason is that we know Europe has turned a corner with the Draghi Put, the Greek Debt Buyback Put, and Germans not acting like assholes right now. So we ignore what's obviously getting better, and concentrate on the marginal contributors to world economic growth. So the question is, what will happen in the slowed-down developing economies?

Beyond Brics - on the difference between ETF-owned China shares and the domestic equity market. Valentina Romei obviously reads my blog and decided she'd explain things for me. Thanks Valentina!

Dragonfly Capital - more about China share performance divergence. As above, Greg Harmon must also read my blog. Basic takeaway from him - the outperforming stocks you find in the China 25 are state-owned enterprises, while the $SSEC is more independent domestic stocks. So basically, one takeaway is that SOEs are taking more and more of the economy. Which you'd expect in a corrupt kleptocracy. Hey, Chinese markets are rational too?

Beyond Brics - crackdown in Macau. Is this part of the Chinese government move to end corruption?

NYT Dealbook - Billy Bishop from Sinocism on China data and news.

Beyond Brics - recovery hopes send Indian stocks soaring. Yet there's no recovery, you say? Well, you could call the Indian stock market participants stupid; or you admit the chart is the chart, the administration is a leaky sieve, and just maybe something is coming to fix India. Oh and by the way, let's remember that when Indians get rich they buy gold.

Ritholtz - the austerity dictionary. Typical Irish response - when you can't do anything else, resort to humour.

Well actually, the true Irish response, when you can't do anything else, is to kick someone's fucking face in. But obviously the ECU plutocrats don't set foot in Ireland, and I guess Ryanair doesn't have a direct connection to Brussels or Luxembourg. Sad, that.

Tuesday, December 4, 2012

Dumbest question in charting - is this thing like the other thing?

I really feel this is a dumb question to ask.

As in, there's no reason to expect this thing to be like the last thing.

It's so dumb I'll ask it in crayon:

Personally I think the answer's no, cos GT says the COT for PMs is still fucking hideous, so the PMs have further to fall, so the miners have further to fall. But tellingly they haven't actually done any falling yet today. And the volume in GDX and GDXJ is stunning.

We'll see, probably before the end of the week, eh?

Want a good reason for the gold and silver puke?

Here, I'll tell you why gold and silver went down:

As you can see, fear is driving massive strength in the US doll... wait, what? It's not?

Well, quite obviously the fear and angst are showing up in the junk bon... wait, what?

And the S&P is collap... wait, what?

So... what's left? Can anyone explain? Anyone? ZeroHedge?

Morning reads

Silver and gold got a double-tap last night, so I'm sure you're all wondering why. Are too many people reading Gary Tanashian? Has he become a self-fulfilling prophecy?

I dunno. Maybe the Lizard People have given us the answer, secretly buried in the newsflow?

Let's check:

BI - in the long run, the expiration of the Bush tax cuts should be a non-event for the market. Yabut in the short run, the rabid anti-Obama movement is puking their dividend stocks and capital gains.

Beyond Brics - China and India PMIs didn't really impress anyone. Y'know, I keep thinking it's funny that there's such a fixation on how China is doing. Shouldn't we care about the US economy growing due to construction, and the EU having turned a corner in their "crisis"?

Telegraph - is the world's commodity supercycle over? Depends how China does from here. Oops! Answered my own question above.... And by the way, the article is by Ambrose Evans-Pritchard, which makes me wonder if I should discount it due to Euroskeptics being one step removed from goldbugs.

Beyond Brics - Indonesia trade deficit says be worried about China. Aargh! Shut up about China! I'm officially bored of China now.

All-Star Charts - JC Parets says don't forget Taiwan. Interesting! #1, Yes, that would be a good way to watch China by proxy, and Taiwan's ETF seems to be acting strongly; #2, if JC Parets is so interested in getting a tell on China, that means people are still fixated on China.

Beyond Brics - the SEC has made their first move against Chinese opacity. I was waiting for this; now let's see how it turns out. I mean, if the Chinese companies can't meet SEC rules for openness, they shouldn't be listed in the US, right? Right?

And here's that video that Fredrik says is so creepy:

And here's my response to Fredrik:

Monday, December 3, 2012

Daniela Daniela Daniela! and Jojo gets called up to the major leagues

Jojo dropped a line to tell me he got interviewed by Daniela at the San Francisco Hard Ass Conference.

Quit looking at the camera Jojo!

Oh, and Jordan, what do you think could drive gold down to the marginal cost of production? How about a China collapse? You think that could give you $1200 gold?

(Yes, like I said, it's not happening right now, but someday it will.)

World Gold Council on India and China

Here's a Reuters article on the World Gold Council's outlook for India and China.

Problem is, I think both countries are too much in flux for us to be certain of anything.

Then again maybe everyone else thinks that way too.

Yet more companies wot suck™: the defined deposit purported buyout candidate edition

I can see why purveyors of moose pasture should see their shares collapse to residual value. But what about the big development plays, with defined deposits?

ATC's date with gravity seems to be going swimmingly.

ITH also has picked out what it feels is a very nice drain to circle.

KAM seems to have put out good news in September... which since has been sold down by 50%.

Hey, Augusta Resources doesn't look that bad!


In which your hero reveals that he really can't be arsed to go to PDAC 2013

I've been getting reminder emails about PDAC 2013.

My previous PDAC "newsletter writers presentation" reviews have been smash hits that (usually only temporarily) earned me increased readership.

As you know, I really don't fucking care about my readership: this blog is for Otto, GT, Michael Lupaka, Fredrik Lundqvist, The Chronicles of Brodrick, the other half-dozen commenters who I haven't yet made up pet-names for, the half-dozen shy-boys working at the major financial institutions who enjoy the guilty pleasure of reading but refuse to leave comments, the few major econ & gold writers who steal my thoughts, and my own twisted self.

But it has been fun to write PDAC reviews, even though actually being in the bowels of MTCC South is a horrible experience - three stories underground, surrounded (on the Saturday at least) by a crush of goldbugs, Canadian banking retards, and nutty geologists. I always come down with the flu, and it's a half-hour production just to get outside for a fucking smoke.

But here's the thing.

I'm looking at the exploreco market right now and thinking there aren't going to be many companies at PDAC 2013. As in, if you've got a $3M market cap, a 3-cent stock price, and no fucking prospects ever, why would you bother to go to all the trouble of getting yourself a booth?

Now, I don't really like to go to the booths anyway - in person I'm too much of a sucker for a good salesman, as I realized with my interaction last year with Candente ("oh yeah, it's going to be a mine! Slam dunk! $1 is a great price to get in! No, no, there's no arsenical ore!"). Usually all I do is go visit the few companies that made me money in the past and congratulate them on executing well & wish them a good future (like RVM or SVL).

What reason do I have to go to PDAC 2013?

Most of these newsletter writers who present at these things are a waste of time.

And yes, that's even the good ones.

The best 2 I've come across recently were Adrian Day and Ian Graham, who both were quite convincing with their demographic-based argument for a long-term secular demand increase in commodities. Quite convincing, as in for the first time I thought I'd found people in the goldbug world who have the slightest clue about economics.

And yet, with my new opinions about China, I really have to discount a lot of what they say. I don't think either of them has even addressed the Middle Income Trap, which puts up a red flag for me.

Do I want to see Brent Cook or Mickey Fulp? Frankly I'm satisfied just catching their PDAC interviews on BNN. Why go to PDAC just to hear Mickey talk even more about Flanders Resources?

The only reason I'd go to PDAC 2013 is to participate in the gloom. To see it all around me, to remember how it was in the glory days of 2011 and to be able to say "wow, not many people here. Maybe next year they move PDAC to the Bovine Sex Club".

If I wanted to get kicked out, I could just go through the exhibitors list, print out a bunch of 6-month stock charts ahead of time, then go to each booth with a video camera running and say "oh, hi, you're Zincore?... wait, wait, let me look you up... okay, at PDAC 2011 you were 90 cents, at PDAC 2012 you were 23 cents, and on Friday you closed at 8 cents. Hm. You guys even going to be in business next year?"

I know that'd be fun for you guys to watch, but it'd also get me tossed pretty darn quick I think. And (believe it or not) I really don't like being that much of an asshole.

Is that enough reason for me to bust my ass going all the way up to Toronto?

Three more reads

Kiron Sarkar - this Sunday's economic update. Mind you I never consider him right about everything; as I've said, his opinions about the Euro periphery threaten to lump him in with the more odious populist elements in the Euro core. Nevertheless, he covers the world economy like saran wrap, and you should follow his updates.

BI - why are Chinese a-shares so weak? Like I was asking this weekend: why are Chinese ETFs showing bullish charts while the $SSEC looks like it's about to puke its spleen out through a nostril?

BofA's Ting Lu says:

Very often the sentiment-driven A-share market is a barometer for Chinese investors’ mass psychology instead of the real economy. More specifically, domestic investors might get increasingly disappointed about prospects of future financial reforms, especially reforms on stock markets. Availability of other investment channels such as wealth management products and housing also divert demand.

It's all down to psychology, basically. And per my previous post, maybe this is a tell not of Chinese poor expectations for the economy, but of increasing Chinese disbelief in the validity of the system in general?

Economist - QE through the looking glass. It is entirely possible that this article was written specifically as a secret message to Gary Tanashian in an attempt to explain to him what qualitative easing really does. If you know more about bond markets than me, you might be able to understand what the hell this guy's talking about. Basically, I can figure out that Jeremy Stein is attempting to explain how QE works:

The above example may be true of a company with diverse financing options, but it’s less likely to be true of a household. Faced with a big drop in the mortgage rate, a consumer is unlikely to borrow $200,000 and plough it into a money market fund. He may pay off some short-term debt, or refinance an existing mortgage. But there’s a good chance he will buy a house (assuming he qualifies for the  loan) irrespective of his expectations of short-term rates. This strengthens the case for QE to be conducted through purchases of mortgage-backed securities rather than Treasuries.
If Mr Stein’s story is right, we should expect to see corporations exploiting the drop in long-term rates to refinance short-term debt and repurchase stock but not boost capital spending, and individuals exploiting the drop in mortgage rates to refinance and to buy houses. That, of course, is precisely what is happening.
Mr Stein also argues that even if QE only induces businesses to fiddle with the composition of their balance sheets, that has some benefit. When businesses reduce their reliance on short-term debt, they are less vulnerable to a surge in financial system stress that cuts off their access to credit, making financial crises less likely. 

But then he goes into the idea of public money (currency) versus "private money" (e.g. money market, term deposits - investments that "act like money"), and he loses me. I think the idea he's putting forward is:
  •  that most "crashes" are essentially a run on "money",
  •  that runs on public money were eliminated by the creation of a Federal Reserve, which has the ability to stop any run by printing money to meet demand,
  •  that the more recent crashes we've seen have essentially been runs on private money,
  •  and he's cautioning that we might see more runs on private money in the future?
I dunno. Some smart guy out there can explain it to me. 

Three morning charts - I've seen this before methinks

I've been in junior minin bear markets long enough (ahem) tobe able to recognize patterns like the past 2 weeks:

All three charts have been given 2 whole fucking weeks to get over the EMA(16), go RSI(14)>50, and print a MACD crossover.

All three have failed to do so.

Draw a little pennant, draw a rising wedge, or just accept that when you're above a short-term EMA you're in a rising market and when you're below the short-term EMA you should go hide under a rock til it's passed.

Gary Tanashian's $HUI 460 theory seems to have really hit one out of the park.

If you wanna use me as a contrary indicator, I'll give you some choice meat right here: this should be the time when people begin to completely lose patience in the juniors.

I wouldn't buy this market in a million fucking years.

Except of course for Calibre Mining which is absolutely awesome.

Some morning news, all via the Sinocism newsletter

Two articles from the Sinocism newsletter that were so important that, if you're not reading the blog already, I'd strongly suggest you read these right now:

Apple Insider - some new iMacs marked as being "assembled in USA". What was I just saying? About the end of Chinese manufacturing and the resurgence of US manufacturing, sometime later this decade? (PS apparently, Mexican manufacturing is going great guns already.)

The Atlantic - Mr. China comes to America. A very long article, but also very useful for anyone who wants to understand how exactly manufacturing can quit China and go back to the USA. Though the end of the article is a bit weak - the resurgence of US manufacturing isn't going to center around making fucking novelty cases for iPads.

And here's two more via Sinocism, that reflect more on the rampant corruption throughout all of Chinese society:

Bloomie - For Chinese students, bring-your-own-desk-to-school day. Basic takeaway is that minor school board officials are stealing money meant for school funding, so the schools don't even have enough desks for the students.

NBC News - School lunch scandal sparks outrage in China. Again, minor functionaries are stealing money meant for school lunch programs.

Now, I can understand stealing $500M from a large capital works project like highway construction. There's good money there, reward outweighs risk, and really it's darn easy to do (even here in Canada). But stealing 10 cents a day from kids' school lunches? Really? Is the entire Chinese nation a pack of base thieves? Do they really need a Cultural Revolution every 30 years to whip the people back in line?

Of course the fact that the Chinese people are expressing outrage is good; it means there is some sort of understanding among the masses that this is entirely immoral. And the fact that the omnipotent State lets them express outrage in social media is also positive; it maybe means that the top authorities are against this corruption, and/or that they understand the wisdom and efficiency of allowing the masses the power to root out and expose corruption.

But nevertheless, if corruption is this epidemic in China, then you can see why people living there don't want to put money in the stock market. The systematic distrust encouraged by this sort of bullshit would translate into shunning of participation in every asymmetric power structure - and that would include participation in the stock market. After all, who wants to buy stocks in a country that is chock-full of thieves? We've already been there with Russia.

So some questions arise from this:

1) Why would you want to open a business in a country that steals food from children?
2) Why would you expect to be able to make money investing in that country?
3) As Sinocism regularly points out, how does the Communist Party fix this problem (assuming they really want to) without it resulting in full-scale destabilization? I mean, the more stories that come out, the less the people will have any trust in the power structure.

Sunday, December 2, 2012


OK, so....

Here's Jojo, who's not Daniela, with a 20 minute audio interview with Mickey:

Here's Mickey being interviewed by someone else who's not Daniela:

There's also an interview with Mickey Fulp at Metals News.

And he even gave a keynote address at the Missouri Limestone Producers Association... and I'll let you go hunt for that last one yourself.

Three newsbits

BI - Jan Hatzius says the US doldrums end after 2013. Because he reads my blog is why. No, seriously, I'll put up the stats capture sometime.

BI - some analyst says shale production will bring US oil prices down to $50. I really doubt it, unless cost pressures have collapsed. Here in Canada, it was accepted years ago that you needed $70-$80/bbl for tar sands oil production to just break even (the Wikipedia article seems to have only old data, and also probably suffers from the Junior Mining disease of using site costs instead of all-in costs); the energy return on investment was low, which also meant that the natural gas used for the extraction process skyrocketed in price. Shale is supposed to be worse than tar sands. Basically, there are limiting factors in play and I doubt a BofA analyst bothers to run this shit through her little Excel spreadsheet.

Nevertheless, the other important point to make is that cheap energy will be incredibly bullish for the US economy.

Or, possibly, for the Mexican economy....

WaPo - muslim fundie scum in Mali are attacking musicians. Here's the money shot:
“Music is against Islam,” said Oumar Ould Hamaha, the military leader of the Movement for Oneness and Jihad in West Africa, one of the three extremist groups controlling the north. “Instead of singing, why don’t they read the Koran? Why don’t they subject themselves to God and pray? We are not only against the musicians in Mali. We are in a struggle against all the musicians of the world.”
well, as a former musician myself, that means you consider me an enemy as well. In which case, you should probably stay the fuck out of Canada if you want to avoid my steeltoes punching a fucking hole through your face.

When you declare yourself an enemy of mine, I accept it and act accordingly.

Corporate profits just hit an all time high and Americans don't get why cos they don't read Mill and Marx

BI - corporate profits just hit an all-time high. I'll steal the chart since BI steals content too:

Several things to note here:

1) Notice the bottom happens in 1984 during the age of Ronald Reagan. You might argue that once profit margins fall enough, the Plutocrats engage in a quiet revolution to take over the government; that's not so much a Marxist assertion as it is a Historical Wave (e.g. Kondratiev, Elliott) assertion. I've never doubted that there are long waves of societal change that are driven by socio-economic realities; I just mock 90% of Elliot- and Kondratiev-worshippers.

2) Margins shouldn't be so high as they are now if you have a truly competitive free-market economy; after all, if you're an entrepreneur, the obvious place to set up a new tent is some industry where margins are high due to lack of competition, right? As long as the moat to entry isn't too large. (That's been something I realized after looking at the high profitability of PM streamers - the moat to entry is gigantic.) Innovation and free markets naturally combine to limit profit margins. So does that mean the period since Reagan has seen the market become more unfree? Through, for example, regulatory capture?

3) Maybe the problem (at least since 2000, where we get the big breakout from the previous 50-year range) is that during the recent secular bear, the US economy has been based not on productive endeavour, but instead on speculation. Normally, capital should be assigned to productive endeavour - that's how you fund the new startups that move on to increase competition and reduce margins. But instead, since 2000 much US capital has been assigned to speculative and unproductive endeavour - commodity speculation, investment in synthetics, and so on; as a result, insufficient capital has been assigned to new businesses that actually make things, and as a result profit margins increase beyond the range that would inspire competition.

This all eventually changes, the question is when. I'm suggesting (as part of my overall long-term view of the market) that at some point American capital gets out of speculation and back to productive endeavour, and at that point you see the US economy take off. The problem is, in a free market economy it's not the lazy rich who make money, it's the few lucky hard-working entrepreneurs; but the lazy rich are in control of the US political-economic system right now.

Hey, speaking of which... who was the guy I read sometime in the past year who was complaining that nobody studies "political economics" anymore? The idea was, the study of "economics" has been divorced from consideration of political action, and it might have been this author's suggestion (or maybe it was just in my own head) that the cause of this was the rise to supremacy of Austrian/Chicago economics.

After all, if your theory is that politics only ever destroys economies, then your theoretical system naturally will try to create a model without any politics, right? As a consequence, neoliberal economics is not a study of reality as much as it is a propaganda movement meant to depict a "libertarian" neoliberal utopia.

Meanwhile, in reality, it's not "Socialist" for someone to accept Marx's assertion that politics and economics are intertwined; it's simply pragmatic and empirical.