Saturday, February 2, 2013

A Rydex bull-bear chart

Hey, check this out.

Check out the green line.

You'd expect that low level of leveraged bull participation at a bottom, not at a top.

The bull/bear ratio is also very mild.

Who's saying we're at a top again?

Almost missed this VRIC video - Glenn Ives from Deloitte

Here's Glenn Ives from Deloitte.

Don't let the title fool you. It's a very very good talk on the state of mining and metals. He goes into China, world growth, the secular trend in commodities - everything. It's a must-watch.

Videos worth watching

Like the "Library" link, this post will be updated regularly with links to videos I find especially useful. This page won't feature stupid interviews of pundits - the videos posted here will only feature people who actually know what they're talking about, and will be educational or informative about mining.

I won't put up the actual video on this page. You'll have to follow the link - otherwise it'll take forever to load this page.

Some links are to YouTube videos that might get pulled down by their authors, so if you see a broken link, please tell me in the comments section!

State of the gold industry:

10 Jan 2013 - Brent Cook at VRIC 2013 - Current state of the mining industry - 29 min.
10 Jan 2013 - Glenn Ives from Deloitte at VRIC 2013 - on mining and metals - 30 min.
10 Sep 2012 - Pierre Lassonde's speech at the 2012 Denver Gold Forum - 22 min.


Geologic Journey - part 1 - part 2 - part 3 - part 4 - part 5

National Geographic - Colliding Continents

The Unique Continent - Geological Evolution of Australia

My hero, Clive Johnson, on Rugby

I was looking for Clive's prescient and transcendent speech from last year on how gold miners suck, when I came across this:

Who's surprised that he's a rugby boy?

In the words of Don Cherry, "he's not afraid to go into the corners!"

Now can someone please explain why a rugby promotion video is shot with off-center frames, and the background music is IDM?

Friday, February 1, 2013

Pierre Lassonde is my new hero

Mineweb - Pierre Lassonde from FNV gives all of gold exploration a good fucking hiding. "Where are the new technologies? Where is the innovation in exploration? You guys are 40 years behind the oil industry!"

Seriously, what he actually said was:

I mean give me a new technology that has really shaken our world in the last 30 years. I mean we’re still using the same stupid drill rigs that we’ve used for 100 years. Maybe they’re a little faster. The oil is better. But there’s nothing dramatically new.


We need a paradigm shift in exploration and exploration technology. Where is the equivalent of 3d geophysics that they’ve got in oil and gas? Haven’t got that in our business. Why not?


Look at oil and gas, they’ve got fracking and they’ve got horizontal drilling, 4,000, 10,000 feet down and one mile out. Where are you guys?

Oh also, Lassonde agrees with me about India and China:

He reiterated his bullish stance that the price of gold is now stuck in a mid-cycle trough in an otherwise ongoing bull run. He predicted the gold price would see-saw for the next six to nine months but eventually make “another leg up.”

His rationale for an ongoing bull run in gold was predicated largely on coming inflation, which he sees as inevitable, and demand from China and India “the two elephants in the room” where consumer spending on gold has surged over the past decade.

Indeed he fingered China and India as the prime factor in the long term for the price of gold. “These two countries will determine more than anything else the price and the direction of the price of gold over the next 10 years,” he said.

When CEOs of multi-billion-dollar companies, with fantastic growth profiles, who have pioneered an industry, agree with me, I feel much more confident.

Gold is going up from here cos Pierre Lassonde says so.

And I agree.

If anyone finds video of this tirade, let me know and I'll post it up here.

Evening news

Evening news, then I'll probably watch Skyfall.

Oh - I watched the Hobbit a few nights ago. Movie review coming later.

BI - the anti-stock market paranoia that could fuel the market for a long time. Oh speaking of which, before you call a market top, all you technical analysts (not just you Jordan), please show me the topping pattern in $NYUD, sector breadth, or $NYHGH. Yeah. Show me. No? OK, shut up.

Ritholtz - the firehose of liquidity is the simple reality on the ground. Therefore stay long. By the way, technical analysts - what happened with market sentiment before the previous inflationary commodity boom a couple years ago? If you want to make yourself useful, explain how this time is like that time. With, y'know, the China multi-trillion stimulus. The one that we don't have right now.

Bespoke - earnings and beat rates for Q4 2012. I can't see - is that trend up? Uh-huh, and which direction do markets look?

Bonddad - Europe still a mess looks like it bottomed. Uh-huh, and which direction do markets look?

Ritholtz - why you won't see a bond implosion.

FT Alphaville - on contradictory China manufacturing PMIs. Seems they're different data sets entirely. Also seems you can ignore from now on any commentator who doesn't explicitly acknowledge this.

Ritholtz - sell side consensus indicator. Here's let me shove the chart in your face!

I can't tell, is that... is it... bullish? I mean it's pretty darn near a secular-type bottom, no?

This a top in the MCSI?

BI - BofA says sell signal triggered. Apparently cos of fund flows.


Is this a blowoff for the S&P 500?

Why does nobody want to buy downside protection?

Why did the US dollar break horizontal support, and what's supposed to turn it around now?

Why do people hate 10-year US treasuries so much?

Where's all that money from corporates going?

I'm open to the idea that things are frothy now, I'm just noting that this could go on for a while. Personally I'd be happy to buy some double-long $VIX, except I suspect HVU.TO will be consolidating soon and I don't want to get stuck in a leveraged volatility ETF that I'm unable to trade for a week.

On the GDXJ

$HUI looks like crap, but that's cos we know the senior miners suck. Especially in South Africa, but also with all the other pol risk popping up in Mongolia, Central America, and so on.

Oh and there's also the massive writedowns that every single major miner has shtupped the market with.

So here's the GDXJ, made of companies that usually suck slightly less than the majors:

Those last 3 candles? That's a Japanese candlestick pattern called A Confluence of Dreidels. It's probably bullish or something.

Oh look, MACD might turn up if god doesn't still hate us.

And the S&P?

Well look at that! An engulfing white candle on a Friday!

Tell me... does this look like a good chart?

Newsblobs for the Friday

Big noise being made about yesterday's poor US Q4 GDP number. Seems people have no memory - Q4 GDP was quite obviously bad, because that was the quarter where everyone felt the US was going to fall back into recession, and where European numbers went from worse to Wagnerian. So no wonder. We expected a bad number.

If you're basing your argument for a top on backward-looking indicators, your argument is not even wrong. Best to look at coincident or leading indicators - especially when it turns out they contradict last quarter's data - and that's why you should be getting your info from Calculated Risk, and even Bonddad Blog, because they've clued in to the perspective problem.

Now, here's the news:

Bonddad - two warnings from the last GDP report. OK, exports and imports dropped QoQ in Q4. The drop in exports is obvious - Europe and China. The drop in imports? I really wish Bonddad would drill down in that a bit, because we know that US oil imports have been steadily going down. I'd also expect imports for business collapsing in Q4, considering all the fear and trepidation that surrounded the fiscal cliff (remember that?).

BI - Michigan consumer confidence prints a happy number. That's a beat, though maybe a noisy data set?

BI - we've started the year with a ton of positive economic data. Look, it's not where we were that drives prices. It's where we're going. Okay?

WSJ no paywall - on the Chinese demographic problem. And also...

FT Alphaville - more on the Chinese demographic problem. Please also read the academic paper referenced (you can just ignore the math bits); don't just read the headlines. I'll link to it on the reading list at right, too. Now, what annoys me about all this is the over-concentration on China; there are other countries in the world that are only 5-10 years behind China in development, and this globalization-led development drive doesn't seem to be stopping any time soon. (Read that Wikipedia article on globalization that I linked to, by the way.) Still, perception is everything, and so we might see a negative long-term expectation for future commodity prices just because of this new wave of sudden interest in Chinese demographics.

Project Syndicate - China's narrowing policy horizons. Read for some background.

FT no paywall - Chinese cities asking steel mills to pay taxes in advance. Yeah, this is the scary bit. I couldn't care less about Chinese steel mills, since they're flooding the market with crap; and we know local Chinese officials are ignorant clowns who have already robbed their towns dry. But if the cities are so bankrupt they want their taxes two years in advance, what happens two years from now? Scary. It's almost like the China crash is right around the corner.

Daniel Drezner - on declining American supremacy. It's an important read; if Kaiser's theory is correct, a permanent decline in US supremacy should provide a long-term support for gold. Speaking of which, if you haven't yet, download the 160-page report called Global Trends 2030. The link is on the library page at right. - Polyus putting 4 deposits up for sale. Oh, this is hilarious! Wanna buy a gold mine from a Russian? OK, how 'bout four? Oh god, whichever sucker falls for this crap deserves what he gets. I especially like how two are in Yakutia (dunno where, doesn't matter) and one's way up in Magadan. How do you get the gold out? By riding a canoe down the Lena? They don't have roads. And those -60°C temperatures that are cold enough to shatter steel and solidify jet fuel? But worst of all - you want to do business with Russians?!?

Friday videos - Freezepop

Ha! Just found these guys at YouTube. Heard them 10 years ago, didn't know they ever had any videos.

So here's Freezepop:

This makes me want to go look for some videos by Alice & the Serial Numbers.

Thursday, January 31, 2013

Three things this evening.

FT Alphaville - China's two paths to urbanization. Brings up the scary balancing-act side to the China demographic rollover problem.

Bespoke - bullish sentiment back below 50%. That's good, or bad. I dunno. In any case, looking at that chart, it still means you can get another 100 points.

Mineweb - is the gold consolidation over? Y'know, I like Lawrence Williams, and he's apparently worked for a living in the past. But he does sow a bit of paranoia and doom with this one. Comex takedowns, German gold hypothecated by the Fed, and so on. But then again, how do you get a final blowoff top in gold without what he says coming to pass? And if there's no blowoff top, how does it go down from here?

So does it go up or down from here?

Status at present: gold stocks getting hammered, S&P 500 fighting it out at 1500 and within 4% of its pre-crash high.

If it's one thing that's obvious, it's that there's one hell of a lot of opinion going around out there as to which way those two markets go from here.

But it seems to me that every goldbug I read, as well as their fellow-travelers the Doomers, all agree that the S&P goes down from here.

That is enough to make me think they're wrong. Because the S&P hitting an all-time high invalidates the theoretical basis for goldbuggery, doesn't it?

It doesn't invalidate my thesis, but it invalidates theirs. They have an interest in ensuring their dream of catastrophic dystopia comes to pass. And so they'll hold tightly to the narrative, even more so when they're wrestling at the brink against a world where a black guy in the White House is a good thing.

No wonder the goldbuggers are always fondling their dicks over the latest doomy pronouncements by Faber, Cashin, El-Arian, (checking ZeroHedge for the latest hagiographies) Schiff, Casey, Singer, Rogoff, and Santelli (who?).

So from now on I'm going to ignore any and all goldbugger assertions about the S&P 500 and the broad US market.

As for the charts:

Yeah, everyone sees the triple top in the S&P500. (Though the S&P Equal Weight is at an all time high.) Everyone also sees the higher low triple-bottom in the GDX, can draw a line, and can see it within a hair of failing.

Guyana Goldfields files positive technical report for Aurora - or does it?

Here's the headline: Guyana Goldfields files positive technical report for Aurora.

Here's the key sentence:

The report had found the project to hold an estimated after-tax-and-royalties net present value of $800-million at a 5% discount when using a gold price of $1 300/oz. 

Here's the chart:

Shareholders don't get a lot of bang with this report, do they? BMO certainly gets more with their $100M financing.

"Mining the market, not ore" indeed.

Tell me again, why should people want to own junior miner stocks?

Morning news

Calculated Risk - comments on Q4 GDP. As he says, the data suggests no recession thru 2014. So anyone still harping on about an imminent US recession is just playing the old game of "I can't believe a black man in the White House isn't destroying the economy!" Like, for example, Art Cashin, who supposedly thinks the US is about to slip into a recession. When will people finally realize they have to ignore this twit?

Bonddad - Time to be bullish part III - bonds rolling over. Corporates leading the drop. Beginning of a move into equities? Or just an acceptance that interest rates will be going up sometime?

Beyond Brics - China rebalancing - good for the neighbours. As long as they don't all become too dependent on China, what with their shaky financial system and all.

JC Parets - stocks or commodities? That is an interesting chart! Let me show you:

If it breaks out above that resistance area, you get economic growth without inflation. If it falls back down, you get inflation choking off growth I guess. Read his post for more interpretation. Then again, btw, the last time this ratio dropped hard was right before a major crash. So maybe it just falls back slowly to an upward trendline? - global outlook is positive for mining. Yeah, well, I hope so. I'd suggest that it's not a good idea to be bullish on coal when Beijing is suffering from 500-ft visibility due to extreme smog. - mining investment in Argentina grows 72% despite it being Argentina. Though maybe if you drill down into the numbers, this turns out not to be true? And by the way, the UK Trade and Investment Office seems like a neat place to pick up basic info on risk in various countries.

Tiny bit of a selloff in gold at 8AM. We'll see what the day brings.

Wednesday, January 30, 2013

Some midday charts

US dollar looks like it wants to move lower. That should be good for commodities, no?

US ten-year bond is moving lower. That should be positive for stocks and risk-on, no?

While the miners don't yet look healthy, silver really looks nice - a higher low, an upward trend, and a strong move upward from the longer-term SMA.

Should we feel hopeful? Was this our great chance to buy (the more well-run) junior miners?

As an aside - Spanish oranges in Canada

The grocery store has a special on navel oranges, so I went and stocked up because I try and eat a lot of fruit.

Interestingly, they're from Spain. I don't recall having seen any Spanish producer in my store before, ever.

These oranges are larger than grapefruit, very fresh and ripe, and even have a thin skin - so when you pay 99c/lb you actually get some orange with your rind.

They seem to rot faster, which possibly means the Europeans use less chemicals on their fruit than the Americans do; or maybe they simply are a more natural variety, instead of one bred specifically to be picked early and stored forever like American ones.

Anyway, this is just a heads-up for people in Ontario. Look for good cheap Spanish navel oranges in your grocery store. Buy as much as you can, and together we can help Spain defeat the Nazis!

Many newsbits for the day

Looks like there was a rush this morning to buy silver and gold, and now the miners are moving up. They're still below the short EMA, but even still, it's hopeful, no?

Anyway, here's the news.

Beyond Brics - It sucks to try to mine in Brazil. That's good, I guess we won't be seeing a huge buildout of new mines then.

IKN - sucks to mine in Argentina too. Great! Bullish for metals!

Metals Economic Group - pipeline report for Nov-Dec 2012. Interesting... seems exploration has been grinding to a halt. Wonder why? Maybe cos all the explorecos are being wiped out? Good for the long-term price of gold, you think?

Mineweb - gold imports soar in India ahead of the duty hikes. Two important data points: 75 tons of gold bought in January, and two thirds of Indian gold demand is for weddings and other auspicious occasions. Now go read the World Gold Council's report on gold demand. Now tell me why anyone would expect Indians to stop getting married. - a loonie from Sprott says a secret force is battling teh eebil silver manipulators. Um... hooray, or... something.

FT no paywall - China's successfully rolled over unpayable local debts. Dunno how big a deal this is. It plays into the "China will collapse in a debt crisis" story, but then again China's an autocratic communist state; it should be easier to make those debts disappear and deal with the consequences than in, say, Europe or the US, no?

Ritholtz - return of empiricism to America. It'd be nice if it happens; the US can't become a global superpower again if they continue to act like mud-hut barbarians. And, sure, business can't make money being stupid... well, unless they're a big bank, of course.

Kiron Sarkar - his world market commentary for yesterday. I'm still thinking he is completely wrong about Europe. Though I have to admit, France's 10 year yield has been moving up since January. But it's still only 2.3%, so the market doesn't seem to agree with him.

Bespoke - EU yield spreads near 52-week lows. Sort of goes against Kiron's assertions about Europe. Then again, whenever I hear "52-week lows", for some reason I always suspect things are about to turn around. I guess it depends on whether or not Europe has dug itself out of the "cycle of fear" it's been riding on for the past few years.

Bonddad - time to get bullish? part 2. Here he looks at the bond side of the market. And by the way - when rates were hiked in the mid-90s, know what you wanted to own? Financials. Man, while everything else sat there and did nothing in H2 95, WFG and C and BAC and friends went on a nice tear. Cos a rising rates environment (which we don't have yet) gives banks the license to print money. Of course, you still made way more money on MSFT, INTC, IBM and DELL - like a hundred percent more. Cos rates rising from zero is a good thing.

Daniel Drezner - has the Emergency Committee for Israel gone soft on Iran? Three things: one, look in the history books and you'll see Iran's been "on the cusp of building a nuclear weapon" every few years for the past thirty years now, til Israel changed their minds. This seems a regular twice-a-decade Israeli ploy to stoke up fears and build support. Two, whatever else will Grandich have to frighten us about now? And three, Drezner's now my favourite world affairs columnist after Gwynne Dyer.

Tuesday, January 29, 2013

So back to this gold thing....

I had a valuable discussion with someone recently that helped me figure out a little more about gold.

As I've said often enough by now, I've been falling in love with the theory that non-state gold demand is basically a function of wealth generation in Asia. Basically, since Indians avoid banks and buy gold, then if Indians get more wealth, they buy more gold. Same strikingly for Vietnam as I saw in that article earlier today; and apparently the same to some small extent in China, to some vague extent, not sure how much though. And Asia is a large part of world gold demand. Read the reports from the World Gold Council if you don't believe me.

So if you have EM growth, gold demand should go up. Brent Cook points out all the problems with gold on the supply side, so it should all be great, right?

Well, there's still the problem of central banks. Why do they buy gold? Or not buy it? I had no answer to this, and I didn't like that.

Anyway, John Kaiser's got this theory he's voiced at the PDACs a couple times, where he feels gold demand is a function of geopolitical uncertainty. I was chatting with someone about this theory of Kaiser's and realized something. A bunch of things, actually, which I'll break up for you.


Imagine you're a central bank. What do you want for your reserves? Well, there's US dollars, Euros, Sterling... what else? Maybe you still want some Yen, god forbid. You don't really have much interest in owning Yuan, the CAD and AUD are somewhat meaningless on the global stage, Swissy and that thingie in Sweden doesn't mean much in the grand scheme of things either.

But some central banks also own gold, and I realized if you take gold as another form of "currency", then maybe central bank gold demand could be a function of geopolitical uncertainty.

After all, if the US economy is a dominant and unquestioned global force, like in the 1990s with the amazing technology age and the fall of communism, then your average non-American country's central bank should want to own US dollars, right? There's no need to own anything else - the US has won the global ideological war, after all. It even makes sense for Gordon Brown to sell the UK's gold at firesale prices - he doesn't need it, he needs dollars.

But if American power is trending downward, all of a sudden your central banker starts to ask himself difficult soul-searching questions. Is it still wise to hold so many American dollars? They're no longer the only game in town, and we've seen global reserve currencies fall by the wayside before. So do we want to diversify into Euros? What about British Pounds? We're obviously avoiding Yen. Rupee and Rubles are jokes, China still has to prove they're still going to be around 5 years from now, and you can't buy much of importance with Won or Francs or Kroner.

With the ascendancy of China, new questions get asked about what reserve currencies it's proper to own. So, if you've got no better idea right now, you may as well diversify into gold. Gold demand increases as US dollar demand decreases, basically. Like they're competing goods or something.

While I had a theory to explain the retail side of gold demand, I didn't have one for central bank demand, and that was scary. After all, if Germany (say) dumped all their gold at $1600 tomorrow, well... gold wouldn't be at $1600 for long after that, now, would it? The central bank variable was too large to ignore in even a first approximation theory.

But now I sort of get it. Took a while for me to finally figure it out, but I did.


Now, here's something neat.

Jim Rogers has this Big Theory That Made Him Money, which I'm not going to argue with cos despite whatever else I'd say about Rogers, he's still made his name with several decades of nailing the supercycles. And Rogers' theory says that you have two main cycles in the world economy:

1) a secular commodity bull, EM bull, US bear, or
2) a secular US bull, commodity bear, EM bear.

You'd think a US secular equity bull would indicate American ascendancy, and a bear would indicate the opposite. Certainly an EM secular bull is bad for US supremacy, if it means China and India and Russia suddenly gaining a voice in world affairs. And (at least until the globalization of manufacturing) EMs have leveraged their economy off of exploiting commodities, so a commodity bull should correspond to an EM bull.

I like Rogers' theory because it seems to make intuitive sense.

In this case, a US secular bear matches up with an EM bull, so Indians and Chinese have more wealth and buy more gold; but also, it scares central banks that the US is no longer the only power in the world, so they also buy gold.

Meanwhile, in a US secular bull? EMs are falling apart, EM gold demand drops and supply increases as a load of scrap comes into the market, and central banks also have a reason to sell gold and buy dollars. Your supply-demand equation is shot all to hell and gold has no choice but to go down.

So, assuming China's a big part of EM ascendancy (which they seem to be, given the geo-economic importance everyone seems to be ascribing to them), you nutty goldbugs really don't want to see anything bad happen to China.


Okay, I left you with a nasty cliffhanger there. This is where it gets hopeful.

China's a lot bigger this time than they were during their last EM bull. Same for Latin America and southeast Asia - they're no longer as full of peasants earning under $1 a day in subsistence agriculture, with no economic effect on the greater world beyond the next village.

So if this "American hegemony is bad for gold" argument holds, then it's not as important to predict when the EM bull ends, right? What's more important is how utterly the EMs can collapse when it does end. Because it really looks like the Emerging World has staked a much bigger share of the world economy than it had back in the 1980s. (I should really look for some data to back that up....)

A big collapse in China should probably crater demand for commodities, or at least burn off all the speculative premium; that could definitely kill the rest of the EMs, or at least the miners like Latin America. I don't exactly see how it could kill the agricultural EMs, since people will still need to eat. Manufacturing-heavy EMs like Thailand might avoid problems entirely, since they will still supply the ascendant developed world.

But how much would China have to collapse for the US to reestablish hegemony?

Does a China collapse suddenly force the rest of the EMs to turn their back on political independence and cuddle back up to the US? Well, that's a possibility.

Now, I've been predicating an expectation of a China collapse on the dependency ratio rollover coming in 2015-2017. The problem is, from the little I remember, dependency ratio rollovers are supposed to cause trouble via the real estate market; that's what's been given as a possible cause for the US collapse. And China has a similarly over-leveraged, heavily Ponzied financial system right now.

But apparently, according to the people I've been reading, the average Chinese person doesn't usually carry a large mortgage. The culture is supposedly more interested in paying cash for property. It might still be that China nevertheless has a major hypothecation mess leveraged off the few mortgages they do have; I'm unsure, and should probably pay closer attention to the Sinocism blog for the next while to see if he has anything to say about it.

But it's been sounding more like their Ponzi is instead built on hypothecation of business debt. I'll have to ponder what that means, and if it's easier for the Chinese government to fix; maybe they can just bankrupt a crapton of businesses, since they have a gross overcapacity anyway; re-capitalizing the failed banks is easy when you're an authoritarian dictatorship. And if the rich lose their life savings in a bunch of collapsed Ponzies? This is Communist China, man! You think they're going to make the rich whole the way the Americans did in 2008?

As well, China's dependency ratio rollover is a bit misleading, because apparently the men over there retire at 60 and the women at 55. If that's so, then it seems the Chinese government has an easy out - extend retirement age. If they do that while also easing off on the one-child policy, maybe they can instead simply navigate a bad swerve with a several-year growth slowdown?

And the one-child policy itself is a bit misleading - apparently it only applies to the richer Chinese, while the poor peasants in the countryside have a less restrictive policy. Now, the dependency ratio rollover can cause an economic slowdown, but if you can increase the per-capita productivity of the working population at a fast enough rate to compensate for this, maybe you can still get out ahead. And I'd suspect (though I'd really have to look at a demographic report on China) that the poor countryside cohort doesn't have the same demographic rollover as the urban rich.

Now maybe you can't improve the per-capita productivity of the poor in China right now, because the hukou system is too restrictive - it essentially discriminates against the poor. But if China manages to reform hukou, maybe that takes a bit of the sting out of the demographic crisis?

In any case, there are ways for the Chinese government to intervene. I think their leadership is going to be able to figure out how to do the right thing. As long as they crack down on corruption like they're intending to, it's a hopeful sign for me - but if China becomes as corrupt as the US, with the kleptocrats passing laws to confiscate wealth for themselves, then all hope is lost, I'd think.

And if China can avoid an utter collapse, and simply enter a few years of stagnation or slow growth while they work through a demographic crisis? Well, maybe you still get an EM/commodity bear, but not as bad of one. And maybe other countries than China manage to still grow, by exchanging the teat of China for the teat of the USA.

Thing is, how much of an EM collapse do you need to see a reassertion of American supremacy? Really, you'd need to convince the central bankers of the world that they might as well simply write off China, India, Russia and the Islamic world. How likely is that?

That's it for now. I'm tired. But I think there's some neat ideas there, and I'm going to keep puzzling over them and doing some homework.

Reminder re Brent Cook's Vancouver presentation

I'd like to suggest again that if you're interested in gold at all, you really must go watch Brent Cook's Vancouver presentation on YouTube. It combines the best of his educational presentations from the past.

Important takeaways for me:

1) Discovered ounces per year are dwindling toward zero while mined ounces per year remain constant.
2) Cash costs are still going up - Brent uses the all-in figure of $1500/oz this time around.
3) He notes several major new mines are simply failing to happen due to capex escalation.

If anyone else were saying this, I'd suspect them of being a bullshit pumper. But this is Brent Cook, so I take these trends very seriously, and they seem quite bullish for the gold price.

I mean, failing a complete collapse of demand, or a giant flood of scrap (or central bank bullion - more on that later), how will the price of gold ever drop below $1500/oz?

So again, watch the entire half hour of Brent Cook.

Your morning miner charts.

Comment first.

Everything is simply moving back to within 2SD, and out of oversold territory, so I guess it's not that significant, and I'm just being a typical goldbug happy for a one-day respite from the typical Wagnerian tragedy of the mining scene.

Still, the move we saw over the past few days really does smell like an utter bullshit puke by a hedge fund into pulled bids.

Or maybe the artefact of a lot of clever-ass American traders going long metals short miners.

If it's either of those two things, I'd half expect a massive face-ripping snapback.

Then again, maybe the pukers are just going on hold cos they're scared of the upcoming FOMC blather.

OK, here's three self-explanatory 10AM charts:

Eight newsbits

BI - analyst warns Vietnamese citizens to "get out of gold before it's too late". Not for the reason you'd expect, though - you have to read it to understand. But I link to it because it carries the amazing statistic that 31% of Viets own gold.

Times of India - diesel subsidy being phased out. India's trade deficit is caused by diesel and gold imports. Diesel is very heavily subsidized in India, and thus (basic economics here) they use a fuckton more than they need to. I think this is vaguely bullish for gold, as it reduces future government pressure on gold imports. Also bullish in a roundabout way because it vaguely suggests the remote possibility of Indian economic liberalization, which improves the outlook for Indian wealth creation and thus gold demand. Don't hold your breath on it though - this is India.

Bonddad - the bullish case for equities. Dear bull doubter: if we're topping in the S&P 500, why are transports confirming this move? Hm? Some pretty little chart with a line drawn at 1560 is more theoretically valid than bloody Dow Theory? You sure?

Bespoke - S&P 500 at all time highs. That is, if you look at the equal-weight S&P 500. Again, where is that pretty line at 1560 again?

BI - a freaky chart that suggests the crushing of the bonds. Gary Tanashian needs to see this chart: Apparently, the 5s30s correlates mighty well with the S&P 500. Except right now, where there's a massive gap formed; it means either the S&P has to drop back to 1440 or so, or the bond spread needs to widen. When I look at that chart, though, it seems to me that overshoot tends to get corrected in the equities and not in the bonds; so maybe the S&P is due for a 8-10% correction. Which has nothing to do with that pretty line at 1560; but the coincidentality of it will be enough to put TA doomers on the wrong foot, and that's exactly how the market likes to operate, no?

Bonddad - UK continues to prove austerity doesn't work. Though when they finally clue in and take their jackboot off the throat of the working class, that would be a positive for the world economy. Dude, the ducks are lining up for a bullish year.

Mineweb - Don Coxe is bullish gold. In his first few paragraphs, he demonstrates that he understands the importance of Asian gold demand. But then he embarrasses himself by prattling the stupid story of inflation, and then really puts his foot in it by suggesting a coming inflationary phase would be good for miners. Y'know, cos capex inflation and cash cost inflation are good. Personally I never had any respect for Coxe and don't think the world is missing out on the end of his newsletter.

Metal Augmentor - On Northland's Wagnerian equity offering. And as Zurbochen points out, this is a perfect illustration of why any deposit, even a gigantic $4B NPV one, is worthless to the existing stockholder if the company's stock has insufficient support. Basically, it's the new financiers who will make all the money on Northland - their existing shareholders are wiped out with this dilution. And guess what? I betcha the investment houses have figured this out over the past year, and in future we'll see a lot of companies with viable deposits collapse toward $0.00 as the banksters blackmail them for complete control.

Monday, January 28, 2013

Last videos for the evening - Brent and Mickey

Either you can watch the previous John Kaiser and Adrian Day interviews, followed by this interview of Brent Cook:

followed by a video of Brent Cook's presentation:

And I dunno, maybe a Mickey Fulp interview too:

Or you can go to Cambridge House's YouTube uploads page and you can watch all the interviews and presentations you want from Jeff Berwick, Thom Calandra, Marin Katusa, Bill Murphy, Rick Rule, and whatever other wastes of time you feel are appropriate.

And let's follow two clear-headed analysts with an ignorant cunt

So I just posted an Adrian Day interview. He gave an educated, clear-headed, rational analysis of China growth. I think he's partially wrong, but he is still intelligent and grounded.

Before that, I posted two interviews with John Kaiser. He is also well-educated, very rational, unemotional, learned, and even cleverly inventive sometimes.

I'll assume you already watched those interviews.

Now compare those two with this interview of Doug Casey. He has a new book out and he considers it very important.

Takeaway points:

1) He insists you should read his book, because he's a master savant and everyone else is a moron.
2) Blah blah Ayn Rand blah blah Ludwig von Mises.
3) He has debunked everything! He is such a fucking genius! Watch him debunk things for you now!
4) Blah blah John Galt blah blah Libertarianism.
5) In all seriousness: how much of a willingly blind, sycophantic, self-hating, ignorant, completely uneducated, naive idiot does a person have to be to follow a vacuous self-aggrandizing buffoon like this?

2000 years from now people may still be reading the Socratic Dialogues.

I don't expect the same of a book of conversations Doug Casey has with Marin Katusa or Louis James or Jeff Berwick or whoever.

And meanwhile, Adrian Day still likes the demographic commodity play

And here's Adrian Day getting interviewed.

He makes sense in ways the mass media doesn't - e.g., 7.9% growth in China is still very good growth.

I still think there's a demographic cliff (2015-2017) problem in China that he's ignoring.

Now, you can argue that as long as China improves per capita productivity faster than the dependency ratio rises, it can still grow. That math does work.

However, the fact still remains that the German industrialization coincided with a massive population explosion (one of the reasons my German ancestors moved to Canada in the 1860s). The UK apparently also had a population explosion during its period of industrialization. The US did too for theirs, though the US also saw massive immigration.

Population explosions can extend the benefit of economic growth beyond the initial spurt of industrialization. It's a self-reinforcing cycle, til you get to full modernization and population growth levels off.

China can't profit from a population boom. Babies negatively affect the dependency ratio. China's in sort of a trap.

However, the rest of east Asia is demographically advantaged, and Lat Am is too, and when it's Africa's and the Islamic world's turn to industrialize they'll be able to benefit as well.

But I still think Day is partially wrong on China, and that's the worst kind of wrong.

Links to reports

It's apparently a pain in the butt for people to actually download the reports I reference, because they don't care to keep up to date with my blog or something.

So here's a reference post that has all the reports linked, and you'll see it over at the right below "My Daily Reading". I'll update it whenever a new report comes along that I think is worth reading.

Links will often die or get changed, which is why I'm also going to link to the page where the report is found.

If you ever find anything of value, say on Mediafire, and want to suggest it be added to the pile, leave a comment to this post.

May 2013 - World Gold Council - gold demand trends 1Q13 - link to pdf

Mar 2013 - Australia BREE - March 2013 resources and energy quarterly - link to pdf
Mar 2013 - Barclay's - China beyond the miracle. Scribd link only.

Feb 2013 - USGS - Mineral Commodity Summaries 2013 - link to pdf
Feb 2013 - Ernst & Young - trends in mining and metals 2013 - link to pdf

Jan 2013 - OMFIF - Gold, the renminbi and the multi-currency reserve system - link to pdf
Jan 2013 - Pricewater Housepoopers - 2013 Global Gold Price Report - link to pdf
Jan 2013 - IMF - Working paper - has China reached the Lewis turning point? - link to pdf
Jan 2013 - MEG - pipeline activity index for Nov-Dec 2012 - link to pdf
Jan 2013 - Deloitte - Tracking the Trends 2013 - link to pdf
Jan 2013 - Macquarie Private Wealth - market outlook 2013 - link to pdf
Jan 2013 - GMO - Feeding the Dragon: Why China's Credit System Looks Vulnerable - link to pdf

Dec 2012 - National Intelligence Council - Global Trends 2030: Alternative Worlds - link to pdf
Dec 2012 - GFMS - Gold survey 2012 - pdf

Apr 2011 - World Gold Council - liquidity in the gold market - pdf

reference - McIntosh Engineering - Hard Rock Miner's Handbook - pdf

Two interviews with John Kaiser, destroyer of junior miners

Here's Investing News with a really painful-to-watch interview with John Kaiser.

The wipes don't work, guys. You need a better way to cut between cameras. And you need an interviewer with more public speaking and interview experience - might I suggest Daniela Cambone?

And here's a different interview with Kaiser Soze:

So how's that Rye Patch Gold position looking, guys?

Dear guys at the September conference in Toronto who were really positive that Rye Patch Gold was definitely really a good buy:

I offer you three pictures.

The first picture is a chart of RPM.

Next, a photo of an uncannily expressive owl.

And finally, famous American lunatic conspiracy theorist and Silly Party candidate, Orly Taitz.

Do you see what I did there?

State of the gold scene

Four charts:

$HUI:$GOLD weekly is at -2SD, RSI=31. So I guess you'd call that oversold? Then again, in March last year it managed to get to RSI=22. So things can suck even more.

Boy that chart sucks.

$HUI:$GOLD daily is -3SD down, RSI=29. I guess that's really oversold, eh?

Nominal $HUI is around -2.5SD and RSI=29.

GDXJ also sucks.

Is all this supposed to be oversold?

Is the whole GDXJ-GDX selloff a big Paulson puke or something? Has some big-headed fund loser decided to puke his miners? Is he embarrassed at the multitude of ways they've sucked over the past two years? Did he fail to explain to his boss why he thinks he can make money off serial writedowns, capex inflation, project delays, loss of reserves to resource nationalization, declining grades, declining reserves, war, investor fraud, outright criminal intent, country-wide strikes, engineering incompetence, geologist incompetence, lawsuits, pump & dumps, and massive shareholder dilution?

I mean, I don't even work in the biz and yet I could make a list of, say, 100 different instances in the past 2 years where shareholder wealth has been destroyed. I'd start at Meadowbank, end with last week's BCSC fun with Golden Predator, and the list would include Tasiast, Mallku Khota, Barkerville, Canaco, Santa Ana, Avion, Liberty Silver, Hope Bay, Century Mining, South Africa,  and... pft, don't wanna spend too much time thinking, but you get the drift.

Anyway, the good companies have better charts than this. So don't put too much stock into the GDX & GDXJ: open up their constituent list and see how much real crap is in these ETFs.

I wouldn't sell BTO or RIO here, but the broader mining world looks like the last fool is leaving the building.

Two newsbits, lightly garnished with spicy commentary - Rick Rule says we're in the middle of a commodity supercycle.

Unfortunately, he says it on King World News, and repeats the idiotic blather of "fiat Weimar Zimbabwe" and "JP Morgan and the Joos are conspiring against gold", and's article starts off with a sentence which can basically be translated as "despite all the data, which currently proves his theory utterly wrong".

So let's just file this interview away and hold Rick Rule to his predictions, okay?

Frankly, the more I look at him, the more I see another Casey-style looney.

Mineweb - The sad saga of Northland Resources. Their capex costs have skyrocketed beyond what was in their supposedly "bankable" feasibility study, and they tried to cover it up til they could establish funding; but then the info leaked and they finally had to publicly confirm. Now the stock price has collapsed so badly that in order to raise money to cover the overrun, they'll have to dilute existing shareholders by 200%.

The funny thing is, this is iron and not gold.

So maybe the problem isn't so much idiot management on the part of miners, but rather incompetent engineering on the part of consultants who write the feasibility studies? After all, Northland asserts it's not a "cost overrun" situation, but rather a "someone forgot to include $425 million in costs that we would have had to pay anyway" situation.

Then again, you'd think someone in management would have sat down and actually read the feasibility study and questioned the complete lack of whatever it was that was missing - earth-moving equipment, labour, power generation, pre-strip, a mill, whatever it was that the engineers decided in their wisdom to leave out because really it's not all that important is it.

So I'll go with the opinion that both management at Northland Resources and their consultants are morons, and they should all immediately lose their jobs - from the CEO down to whatever engineering crew they pretend to have - and all these people should spend the rest of their lives working at whatever passes for Burger King in Sweden.

A surströmming cannery perhaps.

But I'd also advise the entire rest of the mining industry to blacklist any engineering consultant who is responsible for this kind of idiocy. This is worse than that Barkerville silliness - this is during mine construction, when money actually means something.

Sunday, January 27, 2013

XLF and rising interest rates

So if interest rates are gonna rise, they say oh fuck the market's gonna collapse.

Just like 1995.

Well I was looking at 1995, and know what? Tech (which was all the thing back then) did sputter on and off. But know who did well when the dreaded interest rate rises came?

Banks. Holy crap, while everything else went down, banks went up.

So here's XLF weekly.

XLF's broken above resistance.

Now the funny thing is, SPY is close to its pre-crash high. But XLF's pre-crash high was $37.

With interest rates unsticking from the zero bound, maybe banks will make money again?

I wonder if anyone else is looking at this yet.

Let's all learn about Money Supply.

Here's the Wikipedia article on money supply.

Just browsing through it, it seems to me that a growth in M2 does not mean a growth in "government money-printing". It seems to instead mean a growth in credit, therefore a desire of banks to start lending again.

So if M2 is "money", then it seems "money" isn't "printed" by the Federal Reserve. It's "printed" by banks.