Monday, November 11, 2013

A philosophical inquiry into the bullshit of the miners' charts

Look at these charts, please. There is a quiz later on, and you can win a shiny silver coin if you get the answer right.

It looks like people aren't worried about BHP Billiton going out of business, no? Wonder why?

Freeport Mac seems to have ridden a wave of optimism the past few months, no?

Hm. Rio Tinto looks to be getting a bit of love from the capital markets, eh?

Vale seems to be printing an optimistic chart, eh?

Now here's a lesson in chart analysis for you. Here's a chart of GDX versus base metals miners since October 2012:

Which seems to have done best over the past twelve months? The base metals miners or the gold miners?

Now, why do you suppose the base metal miners have had such radically different performance? Pick the answer that seems to make the most sense:

1. gold is sold in dollars, while base metals are sold in some weird other currency we haven't heard of, like the Triganic Pu or Federation of Planets credits.
2. gold has gone down because the fear of inflation has abated, while base metal prices are never affected by inflation at all.
3. gold has gone down because US "money-printing" is about to end, while the effect of money supply on base metals is much less than the effect of rainbows coming out of my ass or something.
4. gold has gone down because there's a supply glut, with massive new gold projects in the pipeline, while the world is manifestly running out of stuff like copper and iron and therefore nobody can mine base metals at a profit.
5. because fuck you is why.
6. none of the above.

Hard to pick the right answer, eh?

Here, let me give you a hint. Here's a chart of base metals miners versus FXI, a worthless ETF of crappy state-owned Chinese companies that is little more than a sentiment indicator for American hedge funds' perception of the Chinese economy, showing price movements from the China dooooom fear selloff of end June to the present:

I say, that looks like tight correlation to me!

Now, back to my question, but rephrased slightly.

In what way is gold not like copper and iron?


  1. 7: Gold is nothing more than something you sew into the lining of your clothes
    8:Meme on the street is "hate gold and hate gold miners".
    9: Rio, Franco, BHP and Vale actually five something back to their shareholders, it is called a dividend. All I get from my miners is a tax loss carry forward.

  2. 10. Because when the zombie-apocalypse comes, do you really think the grocery store is going to take ZINC coins when you need to buy a goat? Or IRON?
    11. All of the above. Especially number 5.