Saturday, January 18, 2014

OMG Josh Brown likes gold miners

Reformed Borker (Bork Bork Bork!) - Josh Brown loves the gold miners. Quote:

First, there’s this from Todd Shriber at ETF Trends: A Generational Opportunity in Gold Miners
Following a brutal year for bullion in 2013 and an even worse year for gold miners, those bullish on the yellow metal and the companies that extract it from the earth may have something to hang their hats on. Buying last year’s losers…was extolled as a good by some in late 2013. The advice is paying off as the $6.9 billion GDX, the largest gold mining ETF by assets, is up 4.5% in just the past week. That could be just the beginning for an ETF that plunged 54% last year, a drop that was nearly twice as bad as the losses incurred by the major ETFs backed by holdings of physical gold.

That's not even an investment thesis, by the way. That's just saying "oh look, they've gone up 4.5%, let's buy", which would have served you horribly in October last year.

On Thursday, Citigroup weighed in on the attractiveness of the mining stocks: Citi goes bullish on miners for the first time in three years
 “Investor sentiment has hit rock bottom. The mining sector has moved through five stages of grief, namely Denial, Anger, Bargaining, Depression, and now we think we are in Acceptance that the sector has moved into a new norm,” said lead analyst Heath Jansen, in a note out Thursday…Jansen foresees a flat commodity-price environment ahead and a reduction in volatility. An improvement in U.S. and European growth will help boost commodities, while weakening commodity currencies — the currencies of major exporters like Australia, New Zealand and South Africa — are boosting miners, he said. On top of all this, miners are cutting costs, improving balance sheets and aligning with shareholders’ interests. Because of this, earnings momentum has become positive.

That's not an investment thesis either. how do you get a flat commodity-price environment in a secular commodity bear market? How did Citigroup predict that gold has hit a bottom, and isn't going to trend down to $1000 where all these miners will lose money hand-over-fist?

More simply, how do they know they've picked the bottom?

And how much of a clown do you have to be to think that the miners are "cutting costs, improving balance sheets and aligning with shareholders' interests"? They're high-grading deposits, which turns future production into waste; and they've laid off all their exploration staff, so if they did manage to add to their cash pile in the next few years (which assumes gold going up, again wondering where they get that idea), they will still have no new deposits to bring into production. The DCF picture for senior miners looks glum, not good: they've killed their future cash flows.

And all us in the goldbug world are laughing at the naivete of an "analyst" suggesting that these buffoons are suddenly aligning themselves with shareholders' interests.

Finally, this morning I opened Barron’s to see Ben Levisohn quoting a Barclays analyst on how gold equities could work even if the metal itself stayed flat: Goldcorp, Yamana Gold Offer Less Risk, Barclays Says
“Given gold equities broadly sold off in 2013 and are broadly under owned to start 2014, we believe that when capital begins to flow back into the sector (due to less volatility in the gold price), some investors will favour gold companies that offer protection from lower gold prices or leverage to flat gold prices. In our opinion, companies with production growth, shrinking operating costs, declining capital obligations and conservative balance sheets will be best suited to offer that protection or leverage.”

The Barclay's opinion above is countered by Rod Stewart's "optionality of gold" argument, which seems to boil down to "why buy shitty miners that have been badly-managed and who are now high-grading their deposits when you can just buy GLD calls?"

Basically, I don't see any of these people putting forward a sensible thesis that is based on facts.

Really it's all just blather that boils down to "I dunno, they've gone down so far, they're probably going to go up". Count yourself lucky there are bottom-feeders.

And, at least now the ship is no longer tipped over to one side: finally some people are calling the goldies a buy, which is what you need to make the idiocy of the past year's selling stop. Cos nobody continues dumping a stock at a massive loss after he finds out someone wants to buy it from him.

Let's let Josh have the last word:

On January 3rd I debated as the bull on Newmont Mining for CNBC’s Halftime Report and explained why it was an easy stock to buy. People were shocked, “Haven’t you been trashing gold stocks for years, Josh?” And yes, I had been – not just toward the bottom last year, but close to the top, actually. Here’s me in November 2011 imploring David Einhorn not to buy into these names to express a bullish thesis, GDX was 60 at the time and would make its way straight down to 20 over the next two years.


As you can see from the chart above, the mining ETF seems to have found a bottom exactly where it did in 2008, which is really interesting and logical in a way. Tops and bottoms on charts tell us about areas where there is a shift between how badly people want to sell and how desirous they become to buy.

Josh obviously doesn't realize that the 2008 GDX is not today's GDX: one fuckton of a lot of paper has been emitted since then, for example.

Anyway, no big deal, since I'm in the gold miners now too; I'd like to have built my position on January 3rd, but whatever. But I'm sure a lot of newsletter writers out there are pissed that Josh picked the top and the bottom.

As for Newmont, though:

Well, I guess you could call Friday's action a breakout. What's your target, $28? Then why are you bothering?

But its weekly still looks like utter garbage. $28-$30 would be little more than a retest of the weekly SMA(50).

I'd rather buy BVN or AUY, if I wanted to own a major miner. We'll see.

And let's catch up on some news

Here's a bit of news:

BI - wave of Chinese trust defaults coming. If Bill Bishop's not worried, then neither am I. But I can see the US markets refusing to go higher if it's because all the clowns on Wall Street are worried that there's a Chinese banking system collapse coming.

Reuters - Rahul Gandhi wants more subsidized cooking gas. An admirable goal, if it wasn't a blatant bribe for the coming election, and if India actually had another 60 billion rupees to spend on cooking gas, which I'd assume all has to be imported because Indians are useless morons who can't make anything of value in their own country.

Mineweb - gold triumphs over real estate buys in south India. Important to watch gold's relative status within the constellation of available asset classes in India. Then again, the south has been collecting the world's gold for at least 25 centuries, so I don't think relative allocation percentages are going to change that much in the next few years.

Yahoo Finacne - Deutsche Bank quits the gold fix as PM price manipulation probe widens. We all know the fix is manipulated - in fact, we saw it this week where gold got held down below $1250 til Friday afternoon.

How useful will your stock portfolio be when the ice age comes?

Daily Mail - scientists warn a mini-ice age is on the way. Er! Mah! Gerd! Just read the bullet points:

  • 2013 was due to be year of the 'solar maximum'
  • Researchers say solar activity is at a fraction of what they expect
  • Conditions 'very similar' a time in 1645 when a mini ice age hit

The solar maximum that was expected in 2013 didn't come. Instead, it looks like the sun is going to sleep.

'Whatever measure you use, solar peaks are coming down,' Richard Harrison of the Rutherford Appleton Laboratory in Oxfordshire told the BBC.

'I've been a solar physicist for 30 years, and I've never seen anything like this.'

He says the phenomenon could lead to colder winters similar to those during the Maunder Minimum.

'There were cold winters, almost a mini ice age.

'You had a period when the River Thames froze.'

Er! Mah! Gerd!

Now, you guys all know I don't like to be an alarmist about these things, especially if they don't involve killer robots. Or aliens. I just wanted to put this story out there so that y'all can think for a bit about your investment portfolios.

After all, what would happen if we suddenly entered a "little ice age"? Do you think US equities would perform well, with food prices skyrocketing and US agriculture mostly shut down for a couple years? What if most of the world's other major food-producing regions, like Canada and the Ukraine, were in the grip of winter for a full year?

Do you think your government bonds will do well?

What about cash? Will you be safe holding JPY, EUR and USD?

Wow, all of a sudden a bunch of your asset classes lose their value. All at the same time. Highly correlated-like.

Gee. If only there was some sort of - oh I dunno - a yellow metal or something that would retain its value; something to keep your port from plummeting to $0.01 as the weather threw down the world economy and smote its ruin upon the mountainside!

Friday, January 17, 2014

Questions for those Wall Street Whiteys who've suddenly decided to buy gold

Apparently even CNBC is saying gold is a buy now. Big change from a week ago, eh?

So, here's a question for Wall Street Whitey, who regularly reads my blog:

Are you buying gold because

1) real rates are going negative?
2) the US economy is about to collapse?
3) the US deficit is increasing?
4) the Federal Reserve is increasing their money-printing?
5) you fear an imminent disaster or military conflict?
6) the US dollar is about to collapse?

Because those are about the only answers you're allowed to give, unless you're willing to admit that you're fucking wrong about everything and Whitey has absolutely nothing to do with the price of gold.

Really, I would truly love to hear the lily-assed white boys on Wall Street try to explain, within their conceptual paradigm of gold, why gold would be a buy right now, and why you should be in such a fucking rush to buy good miners like BTO and RIO, as well as shitty unprofitable fraudulent miners like 90% of the GDXJ, that you're willing to push them +3SD.

The fact is, Wall Street has no fucking clue what's going on here.

Update on Rio Alto

I don't like this:

Head was $1.25. Neckline was $1.75. Thus the target was $2.25.

RSI is now 80, the price is +3SD, and volume has hit an extreme.

So WTF do I do now? Sell?

Being disgusted by the BCSC is catching

I was poking through my blog stats and saw someone linked to one of my posts.

Going over to read the blog, turns out he's also disgusted by the BCSC's attack on Alfred Little:

Glenn Chan's Random Notes on Investing - he is disgusted by the BCSC.

In particular, he makes a point about the subjective wording of a few of the allegations in the BCSC notice of hearing. I still think that this could be explained if Chinese government officials had passed on allegations that originated from Silvercorp themselves. Certainly I'd be shocked if I read that Chinese agents handed the BCSC or the RCMP a copy of the contents of the computer equipment that the Chinese police confiscated from Huang Kun.

This is a damn gimme of a story for Peter Koven, Mark MacKinnon, Cecilia Jamasmie, Derrick Penner et al.

Who knows, maybe Jon Carnes is guilty as shit? We'll have to see. I'm still open-minded. But I keep suspecting that there's something more sinister going on.

Gold's back up

Oh look, gold popped back to $1250 just now.

Friday video: Still Corners live

Here's Still Corners, playing "I Wrote in Blood" live:

Thursday, January 16, 2014

An illustration of TA's inexactness

Here's the chart for B2Gold.

Notice we're coming up to a minor looking pivot at $2.40. But the Bollinger bands are still rather narrow and MACD looks rather sedate. So this isn't a concern, right?

Compare that with the chart for B2Gold, below:

Wait, what happened? We already blew through that November pivot? And man, it's getting a bit extended, no? This is the farthest it's been above the SMA(50) since August.

So what happened? The first chart is in USD, the second in CAD. These currencies have been drifting apart recently.

Which is why I actually don't pay too much attention to the TA, despite what my constant posting of charts might suggest. It's really just raw material for my internal narrative.

Zerohedge reports [...] that aliens control America!

Hold the presses!

Zerohedge reports that al-Arabiyya reports that Fars News reports that reports that Edward Snowden asserts that the Russian FSB has proof that there is a secret alien government that controls America!

Let's quote some!

Of the many explosive revelations in this FSB report, the one most concerning to Russian authorities are the Snowden’s documents “confirming” that the “Tall Whites” (further revealed by Defense Minister Hellyer as noted above) are the same extraterrestrial alien race behind the stunning rise of Nazi Germany during the 1930’s.

In just one example of the many outlined in this FSB report, it shows that with this “alien assistance,” at the end of the 1930’s, when Nazi Germany possessed just 57 submarines, over the four years of World War II it built 1,163 modern technologically advanced submarines at its dockyards and even put them into operation.

Snowden’s documents further confirm, this report says, the “Tall Whites” (Nordic) meetings in 1954 with US President Dwight D. Eisenhower where the “secret regime” currently ruling over America was established.

Most disturbingly, this FSB report warns, is that the “Tall White” agenda being implemented by the “secret regime” ruling the United States calls for the creation of a global electronic surveillance system meant to hide all true information about their presence here on earth as they enter into what one of Snowden’s documents calls the “final phase” of their end plan for total assimilation and world rule.

Unbeknownst to the FSB, this report confirms, are those still in the US government backing Snowden, but whose presence Russian intelligence experts note is “unmistakable” and shows a cataclysmic power struggle is currently underway against this “secret regime” now headed by Obama by “forces unknown.”

Most to be feared by Russian policy makers and authorities, this report concludes, is if those opposing the “Tall White” “secret regime” ruled over by Obama have themselves aligned with another alien-extraterrestrial power themselves.

Most stunning is the revelation that the Germans needed aliens to help them build submarines.

I guess German manufacturing isn't all it's cracked up to be, eh?

And the only way to protect yourself? You know it!

Buy the yellow metal! Gold!

Thursday news, and a surprise exhibitor at VRIC

Here's some stuff to waste time fretting about:

Pragmatic Capitalism - when will corporate profit margins contract? The answer is, don't hold your breath waiting. It may take a while.

Bonddad - the last time rates got this low it wasn't "different this time". He disagrees with me, and thinks even mildly rising rates might kill the US recovery. OK, he's smart so I'll keep his warning in mind. Still, what about the coming capex explosion?

FT beyond brics - three ways that the upcoming Indian elections don't matter. I guess all three are positive for gold, though I don't hold out much hope for any of them. Aadhar, in particular, takes money from the bandit-class Indians who have been stealing people's social welfare payments to the tune of 10% of India's GDP: I doubt that'll be allowed to happen!

The Money Illusion - the problem in China is easy credit, not easy money. For all your China dooooom needs.

FT Alphaville - a trust product test case in China. Again, China dooooom.

Chronicles of Brodrick - 10 reads on gold. Various factoids that will mostly serve to confuse you and take your eye off the ball. For example, you shouldn't care at all about US gold coin sales; American demand is a rounding error in the grand scheme of things.

Yahoo Finacne - Naturally Splendid to attend VRIC. That sure is a nice name for a junior miner, no? "Our latest drill results were, as you'd expect, naturally splendid! A-hahaha!" Um, but it's not a junior miner:
Naturally Splendid markets its "NATERA™" line of hemp-based superfood products to a retail network of stores across Canada including major national retailers and specialty stores. Naturally Splendid's recently rebranded "NATERA™" line of products includes plain and flavored shelled hemp seeds and plain and flavored hemp protein powders.
And they'll be attending VRIC.

Frankly, I know there's snark material here, but I'm suffering writer's block. I probably should have left this story for Permashave Dave. Possible angles include "you'd have to smoke pot to go to VRIC" and "maybe starving retail investors can hit them up for a free meal"*.

And FYI, the Cookie Monster will be at VRIC:
Brent will be speaking at the Vancouver Resource Investment Conference: Sunday morning panel at 9:30; a workshop Sunday at 2pm; and a keynote, Monday at 4pm.
Betcha I know whose booth he's going to visit first!

* - I had hemp scones in Amsterdam. Very tasty, and incredibly filling. No they don't get you high.

Navachab mine strike

New Era Newspaper (Namibia) - Navachab strike stirs fears over negotiations for mine sale.

FWIW, I don't think The Clive would have a problem paying their bonuses. Nor do I see how this should affect the sale of the mine.

Still, I'm not Namibian, so what do I know?

Brent Cook seems to think people might start investing in juniors again - Cookie Monster's rules of thumb for junior mining speculators. He wouldn't be putting out articles like this unless he thinks people are going to start putting money into explorecos again.

It's basically Cookie's old "intro to the Moss Isley Exchange", just updated for this year. Still, if you haven't been following him for the past few years, it's worth a read.

In fact, since Cookie's article sets out an investment thesis that I'm having a hard time poking holes in, and which Wall Street still seems to have no clue about, I'm going to reprint that whole section here:

As we all know, for most speculators and investors the past few years in the mining and exploration sector have been disastrous. However, there are a number of fundamental trends that have been set in motion over the past few years that follow upon the previous decade long bull market that point to an improving investment climate for the junior miners. We will deal with that below and lay out some useful rules of thumb for interested investors; but first, let’s briefly consider where we are today.

With inflation expectations low and metal prices apparently contained, I don’t see a pending catalyst to pop metal prices or entice the crowd into our antiquated sector. Further, given the mining sector’s very poor returns to investors who bought into the commodity boom and currency debasement story, it is difficult to see them stepping back in again. Where the next big slug of new money for mining and exploration will come from is not apparent.

You don't think of Cookie as a market supply/demand analyst, but he's the guy who predicted the top in the miners simply by looking at supply & demand for their paper, so I find the underlined to be an important point.

Certainly I don't see anyone with an image to maintain ever touching these juniors again. I bet even Ritholtz wouldn't buy a junior miner, and he'd buy anything that was a good buy.

Still, if you like the "Nasdaq 2000 equals GDX 2012" analogy, the best stocks should come back up quickly. It's just that it might take 10 years for the index to come back up, because the index was made up of utter garbage.

Barring a significant rise in metal prices, the larger mining companies will continue to cut wherever they can. This means: people, projects, exploration, and development. Most will also be forced to lower production costs via high grading—a process that ultimately guts a deposit, rendering rock previously classified as ore, as waste.

It also means we are unlikely to see a buying binge by the miners because they are in the unenviable position of proving that mining their current deposits is a viable business. Good luck on that one!

Um... one problem I have with this is that cash-flowing companies will still need somewhere to invest their cash. Buying binge? No, but there will still be a lot of buying. It might just be that they decide they're in no rush because the targets they want to buy have been kneecapped by low share prices, and so their stocks aren't going to go anywhere.

But I'd still have to think The Clive will use B2Gold's massive cash flows to grow his company accretively. Til someone puts a stop to it.

Money will remain tight for development projects, extremely limited for exploration, and virtually non-existent for conceptual ideas. Mediocre junior miners, and explorers without sufficient funds to survive the year, will be decimated. Therefore, I expect 2014 will also be another tough year for most explorers.

By "money", does Cookie mean investment capital? I wonder if banks will continue to avoid this sector, or at least make renting their capital prohibitively expensive because of the past few years' demonstrated downside. After all, who wants to lend to the next Colossus?

Cookie's been through a down cycle before so I guess he knows what he's talking about.

However (and I need to point out that this is the most positive I have been for some time) 2014 should be a good year for investors to begin positioning themselves in the better metal deposits, mining companies, and the most competent explorers. The reason is quite simple: the industry is not finding enough economicdeposits to replace mine production.

The drastic cost saving measures being implemented by most miners, combined with the increasing difficulty and cost of exploring, plus the length of time to permit these activities, is compounding the already low odds of discovery success. Throw in the pervading political, social, environmental, and financial uncertainties of exploration and mining, and we are virtually guaranteed the industry will be devoting less time and money to finding the fewer and fewer deposits that might be viable. This dearth of exploration comes despite strong global metal consumption and the fact that a deposit found today would take between 4 and 20 years to begin producing. We are not replacing the 2013 global gold production of ~86 million ounces, ~7.4 million ounces of platinum, or ~18 million tonnes of copper, etc.

There is a pinch point coming sometime in the future that will coincide with the “investing” crowd waking up to the fact that mined Bitcoins actually don’t go into refrigerators or cars, nor factor into a central banker’s view of the world. We have covered this topic many times in past EI issues—this very simple idea is the one “macro-view” that seems most likely to be proven right, eventually. Quality metal deposits and the people capable of finding them will become increasingly valuable the longer this bear market lasts.

He knows there are caveats, of course. Any new innovation that turns waste back into ore (like leaching did) will bring in tons of new supply. Financial modernization of Indian society could kill a lot of future demand (for gold, anyway). A secular EM collapse would also kill demand, while paradoxically creating new supply (if the collapsed EMs decide to subsidize their mining industries to stabilize employment).

Gold's only worth what people will pay for it. Though okay, that price has remained pretty steady for the past 5000 years.

Anyway, go read the whole article.

At least there's M&A offers for gold miners coming from make-believe Chinese companies

If you'll remember, late last year a make-believe Chinese company called LionGold pretended to offer to take over Minera IRL.

The big story of this week is the pretend $750M takeover of Allied Nevada by China Gold Stone. - M&A heats up with China Gold Stone tender for Allied Nevada.

Don't bother reading, cos within hours the supposed takeover collapsed in a cacophony of derision.

Yahoo Finacne - Allied Nevada responds to offer with uproarious laughter. Quoting most of the press release:
Allied Nevada received a letter from China Gold Stone yesterday which included such a proposal (the "Proposal"), however, for a number of reasons, the Company seriously questions the credibility of the Proposal and advises shareholders to review announcements from China Gold Stone with caution. The Company identified the following concerns with China Gold Stone's announcement and the Proposal:

Concerns with China Gold Stone

•Together with its advisors, Allied Nevada has not been able to find any substantive published information on China Gold Stone and cannot substantiate the credibility of the Proposal.
•There is no public information available to indicate that China Gold Stone has the financial resources to complete the proposed transaction.

Concerns with the Alleged Proposal

•Contrary to the Announcement, No Tender Offer has Been Commenced.
•Pursuant to US federal securities laws, a tender offer commences upon the filing of a Schedule 14D-1 with the Securities and Exchange Commission ("SEC") and no such filing has been made.
•The Announcement indicates an expiry date of January 24, 2014, which is contrary to U.S. and Canadian securities law.
•The Proposal is non-binding, and does not provide any certainty or commitment to proceed with a transaction.
•The Proposal is subject to due diligence and is conditioned upon execution of definitive agreements.

Allied Nevada has contacted the SEC and the Ontario Securities Commission with its concerns about the validity and legality of the announcement and alleged proposal.
Translation? ANV has no clue who these guys are and doesn't even know if they actually have any money.

Peter Koven at FP smelled a story and decided to weigh in:

Financial Post - Mining industry confused by Chinese company.

However, I won't quote from the article because the Financial Post seem to demand that a blogger obtain a license for fair comment quoting. In fact, the FP will no longer be quoted on this blog whatsoever, nor will I ever again link to their articles or otherwise mention them or their writers in any way.

Gee, demanding that I "license" your article sure worked out well, didn't it guys?

Let's check in again on B2Clive and Rio Alto

Let's look at the only two gold miners worth worrying about: B2Gold and Rio Alto Mining.

If you call that big December consolidation a pennant, then B2 maintaining its price over $2.30 must count as a breakout, and I guess it targets $2.65 or so?

Rio Alto is still +2SD, but I assume that it might stay overbought given the last several days' buying volume. So its overextension from the SMA(50) doesn't concern me so much. Ultimate target $2.20?

I'd expect both of these targets can get hit by end of January, so it's not like I'm in this long term or anything. We'll make up some new plan when this one is over one way or the other.

Disclosure: yeah I own lots of both. It was either these or the Nasdaq 100, and I thought these might move faster.

Wednesday, January 15, 2014

Two more newsbits: Josh Brown and Jim O'Neill

A couple more things worth reading today:

Reformed Borker (Bork Bork Bork!) - new all-time highs. It could be summed up quicker: you buy all-time highs, you don't sell them. An all-time high usually is followed by several more years of new highs.

Jim O'Neill - what 5 days of trading tell us about 2014. He feels not particularly confident about 2014.

Eppur si muove, Rio Alto edition

It's a lacklustre day for junior miners, with gold pinned below $1250, and yet:

Rio Alto is still going up.

At this point I don't give a crap if they're in the business of making spam out of little old ladies. It's a horizontal resistance break on volume, and it's up when everything else sucks. The chart is the chart.

There's a couple pivots at $1.95 and another spot at $2.09 or so. Til then, it's free money, I guess.

Let's check up on the PMs and the miner ETFs

Things have come down a bit, so let's see if anyone's been violated yet.

GDX is still above the SMA(50) and EMA(20), above its uptrend line. Not broken yet!

GDXJ is still above the SMA(50) and EMA(20), backed off from being overbought at +2SD, above its uptrend line, and buy volume has swamped sell volume so far this year. Not broken yet!

Both the miner ETF charts are also slowly uptrending, which makes me think that maybe people aren't acting over-excited. Which is actually a nice thing.

GLD is still above the SMA(50) and EMA(20), above its uptrend line. Not broken yet. But the EMA(20) and Bollinger mean are both nearly horizontal, and MACD looks like it wants to roll over, so that makes me worry a bit.

SLV is supposed to be the metal with the weaker supply/demand fundamentals. And the chart's not really all that promising. Not just yet.

So this isn't a set-and-forget situation right now; I want to keep my finger on the trigger.

Noontime news

So I have a dentist's appointment for Friday, so that might be the last you ever hear from me. Gotta finally get out a broken tooth.

Here's some news:

Bespoke - Empire manufacturing stronger than expected. Yet gold is unchanged. Then again, the regional manufacturing surveys have been pretty useless for years.

FT Alphaville - the Chinese shadow war over Chinese shadow banking. I'll bet money that the Chinese leadership wins this war. But it explains the rate strangulation. - gold rally fizzles as ETF selling continues. Quote:
Holdings of the world’s largest gold ETF – SPDR Gold Shares (NYSEARCA:GLD) – dropped more than 3 tonnes on Tuesday
Yes, and it was sold at 11:30 to push gold back below $1250 because OpEx. - Colossus tries to stay afloat with creditor protection. I wonder if Ana Komnenic is trying to be funny here by saying "afloat", considering one of their big problems is dewatering? Anyway, since IKN is incommunicado while he interfaces with his communist handlers in Venezuela, I'll take care of the snark on his behalf, viz:
In an interview with the Gold Report last month, James West of The Midas Letter called the Serra Pelada mine "one of the highest-grade platinum/palladium/gold deposits ever discovered."

"Even if gold went down to $800/oz, this is a project that would still be very economically viable," West said.
Well, if it is economically viable, it's not exactly translating into a win for shareholders, is it?

Tuesday, January 14, 2014

Educational and hilarious

Here's an entertaining video about sea cucumbers and sea pigs.

Quote: "If you get confused, check to see if your cucumber is breathing through its anus."

It would only be more hilarious if it were the real Morgan Freeman narrating.

GLD made me laugh

Boy, someone really wanted GLD at $120 today, eh?

We now return you to your regularly scheduled programming.

HGU high volume day

This here is funny.

I like how HGU (the TSX double long gold miners ETF) saw this big spike in volume.

This day looks to be the biggest volume day you're going to see in this ETF since August, minimum.

The problem for the shorts is that people seem to be getting the idea that they can go long and double-long the miners. And hey, why not? Who's left to sell? So this looks like it should still skew to the long side for a while, methinks.

Maybe it all fucks up in a couple weeks, or maybe it all dies at PDAC again. But right now, it's eat drink and be merry, for tomorrow we may die.

Monday, January 13, 2014

A bit of evening news

Here's a bit more reading:

FT Alphaville - Worse than the Great Depression? More on the silliness of CAPE. The blogger at Philosophical Economics who started this skewering of CAPE is even more devastating:
Does it make sense that earnings would have contracted more in the 2008 recession than in the Great Depression (highlighted in green), a downturn that was 6 times as severe in real terms, 10 times as severe in nominal terms? In the Great Depression, NIPA profits actually went negative. They fell by more than 100%. We can only imagine the earnings calamity that would have ensued if current accounting regulations had been in existence at the time: every intangible asset in the entire economy would have had to have been written down.
Read the entire FT article, then the Philosophical Economics article. When you're done, you'll want to quit reading anyone who's still blathering on about CAPE as an indicator of a market top.

Reuters - AAP shelves foreign supermarket entry into Delhi. Uh-oh... is this a bad sign for India's economy? I'm also concerned about the BJP being similarly economically nationalist.

World Complex - a bunch of squiggly lines in phase space pertaining to gold or something. I guess the quick pop from the 1100 isoquant to the 1400 was evidence of a bubble, if you could stipulate that gold isn't supposed to jump that fast. (Please, let me know whether I'm the only person in the world who [thinks he] understands this stuff.) I would only suggest to Mickeyman that if gold really had that much to do with the US dollar, it shouldn't have gone even from 600 to 1100, should it? I mean, either it's the antidollar or it's not, right?

Chronicles of Brodrick - 5 big stories about gold. Seems he reads my blog. And agrees with me. Hopefully this doesn't become popular.

And as an aside, looking at an old Vancouver Venture post, I wonder how much of the junior gold miner buying right now is being driven by people who took their tax loss in early December and now want to buy back? And how pissed off are going to be the people who took their loss later in December and now can't buy back as these stocks climb back up?

Market wants to fuck people over as much as possible. Gold and the miners going up right now will accomplish that.

Looks like the US is going to correct for a bit

Two more charts and then I'm done for the day:

Both made a lower high, then punched through the short-term EMA.

So I guess we're going to get another "OMG we're scared of earnings" correction this month.

Probably won't be a big deal, but maybe we even punch through the SMA(50) and discount all the gains made since November.

A bet has been made on the price of gold.

I've just bet someone a shiny ounce of silver that gold will be above $1280 on the Jan 27 London PM fix.

I'm just posting this here to jinx myself.

Between now and then there's the Jan gold opex, apparently. And it's possible the US market comes out of its doldrums before then and goes back to encouraging Wall Street Whitey to sell gold buy SPY.

But it seemed like a good idea at the time.

Josh Brown's stunning final and utter rebuke of CAPE is stunning, final and utter

The Reformed Borker (Bork Bork Bork!) - in detail, why CAPE is CRAP. It's a great article that goes into a lot of detail as to why CAPE is a meaningless measure.


Consider that the US stock market has spent more than 95% of the last quarter of a century above the level that CAPE would say is expensive relative to long-term historical valuations. In that time, the S&P has increased by more than 450%, from 330 in 1990 to over 1840 today. To say that a total market increase of this magnitude, and over this length of time, all occurred within the context of what one would term a historically “overvalued” condition simply means that this tool’s definition of “overvalued” is, in and of itself, incorrect.

That's the central point, and so I'd ask: can you make money trading on CAPE? Seems you can make more money ignoring it. If this is true, then the right thing to do is ignore it.

I have trouble with the idea that someone using 100 years of stock market data is somehow doing science or physics. Markets are not mechanistic systems, rather they are biological, comprised as they are of millions of human beings, not nuts and bolts or electrons and neutrons. We’ve only got three examples of a secular bear market and possibly we’re at the end of a fourth. Go show a sample size of four to an actual scientist. And then explain how, when the data was first collected, the entire public market was made up of railroad stocks, see what the response is.

This is so true that it's trivial, and therefore the best kind of true. Seriously: if your chart isn't even charting the same thing over time, you need to throw out that chart. We learned this in first-year physics at university.

And so my argument is not that the CAPE Ratio is useless – in fact, quite the opposite; it is among the best measures of long-term valuation mankind has yet devised for the complex adaptive system that is the stock market. Unfortunately, it is just that – a long-term and laggard measure of valuation, one of many, that doesn’t even come close to explaining what might come next.

I'd add that long-term averages don't tell you what to do this month; and lagging indicators only tell you where you've been. If you're discounting your leading indicators in order to worship a lagging indicator, you're purposefully sticking your head up your own ass.

changes in GAAP accounting have meant drastic differences in the way stock options are expensed and in the way that earnings losses are accounted for when acquisitions fail or assets become impaired. There are also cash-on-the-balance-sheet issues to be aware of, as well as the effects of dividend and stock repurchase plans. There are distinct changes in the way that profits are reported and that earnings are generated that come about as a result of legislation. These variables completely change the profitability regime from one decade to another.


There are also societal changes that impact the level of stock ownership across the nation, things like the advent of the 401(k) and the mass-proliferation of stock-based compensation. Today, some 30% of household net worth is invested in stocks, stock funds or other such vehicles. This is double the levels of forty years ago, in 1974 it was more like 15%. Today, 60% of US households currently participate in the stock market in some way, shape of form – a significantly higher percentage than in generations past.  Given this fact, is it any wonder that valuations have trended higher thanks to a larger pool of participants? Or should we ignore that entirely?

Again, this addresses the problem of the long-term chart not even measuring the same thing over time. Accounting has changed, and the supply/demand profile of the market has changed.

By the way, before you suggest that US households need to cut their stock allocation back down to 15% before we're at a bottom, you should think about what the fuck kind of idiocy you're suggesting. Ask your dad (or grand-dad) how much net wealth he had in 1974. My dad had zero; he had a mortgage and his pay was miniscule (this was before the great Canada Post Labour War of the 1970s). If you want to go back to the peasant world of the 1970s, maybe you should move to some third-world country where the masses are still dirt-poor.

Households are never going back to the pre-1970s asset mix. Unless the Republicans totally destroy America and impoverish everyone.

But wait! There's more:

Then there are structural changes like the mix of companies contained in a given index. There are very few companies in the S&P 500 that comprised the original index when it was created in 1957. And there are entirely new industries that have sprung up that hadn’t existed years ago – software, semiconductors, mobile telephony and the like. These new industries carry with them inherently higher profit margins that, to the unionized industrial behemoths of the 20th century, would’ve seemed impossible. My friend Justin Golden notes that Facebook has 5,000 employees generating $7 billion in revenues and it’s got a market value of $140 billion – triple that of General Motors, which employs 200,000 people. In the late 1970′s heyday of GM, it employed 600,000 workers and generated $63 billion in sales. Why anyone believes that measures of profitability from one era to another are in any way comparable – or that mean reversion will automatically kick in at some point to smash them back together – is inconceivable.

The Technology sector is almost twenty percent of the S&P 500, one fifth, and the stocks it’s comprised of are exponentially more profitable than former leadership groups in the index. Software companies in the S&P carry net margins north of 20% while consumer staples (food, tobacco, beverages) companies sport margins of under 3%! For energy stocks it’s closer to 10% and for industrial goods manufacturers it’s 7%. And people are surprised that corporate profit margins have been high and trending higher since the advent of the web in the mid-1990′s. Where is the mystery?

Did your buddy the CAPE-worshipper tell you this? Of course not. Because he's talking out his ass. He's never bothered to look under the hood, so he has no clue what CAPE is.

I'll stop here before I quote the entirety of Josh's article. It's a stunning, utter, absolute, total, final rebuke of everyone who throws CAPE in your face.

Josh looked under the hood and learned what the word "CAPE" means. He understands that a chart has to measure the same object over time. These are two skills an analyst needs to demonstrate before I even start to pay attention to them.

GDXJ - two white bars on volume.

And here is another chart:

Two white bars, on high volume, breaking through the SMA(50).

To me that's like a starter's gun going off.

Of course, it could also all end in tears.

GLD and GDX break above the SMA(50) while Felix Sweatervest and Barry Ritholtz chatter amongst themselves

Here are two charts:

See that?

Gold just peeked its little head up over the SMA(50). Isn't that cute!

See that?

The senior miners just peeked over their own SMA(50).

Of course this has all happened before and ended in tears.

But this time, every single "analyst" is calling for lower gold prices, even every goldbug is hedging their bets and trying to sound realistic, and even Felix Sweatervest has begun to care about gold; meanwhile, India's about to cut import restrictions, Modi's about to put up a good fight in the spring elections, and China's supposedly added 622 tons of gold to their reserve.

So let's just wait and see if it all gets sold back down. Cuz it should right now. If nothing else, there's supposed overhead resistance and stuff.

The news at noon

OK, bitches! I'm the only guy on the internet who says the bottom is already in for gold, and I'm telling you that this stuff here is the news:

Calculated Risk - corporate investment could break out. This is what convinced Rosie to be bullish US. Though I suspect Bill's "When demand picks up, companies invest" is wrong; it's when they realize rates are about to rise off the zero bound that they start investing.

Bonddad - weekly indicators summary. He still says the long leading indicators are negative. I say you should expect rates to rise, nobody is going to buy housing in a frickin' cold snap, and just wait til corporate capex spending pops; still, he's earned enough respect that I'll heed his warnings.

Mineweb - Bloomberg says China may have added 622 tons of gold to its reserves last year. I don't care so much what Bloomberg says, nor what the Chinese government is doing. But I do care that Wall Street Whitey loves to polish China's knob, and I do care that Wall Street Whitey's worship of China might make him might start to worry that maybe he's got his pants down on gold. - Goldcorp wants to buy Osisko. Who'd realistically make a counter-offer? And why would anyone be buying Osisko right now? And wouldn't you rather be buying B2Gold right now?

See, this is why I find junior miners interesting

Here's 3 charts:

Dundee, the unsexy rag-trade beer bottle collector that we love to hate, has built a nice solid uptrend that successfully retested EMA(16) support and now challenges the SMA(50).

Flying Spaghetti Monster Mines, the silver producer with the civil war going on in Oaxaca, has built a nice solid uptrend that successfully retested EMA(16) support and now challenges the SMA(50).

Rio Alto has already broken above their SMA(50).

A stock crossing above its SMA(50) means you generally want to own it.

I'd be scared of either of these positions if I was worried gold would drop. But when Felix Salmon and Barry Ritholtz of all people are providing the internet's chatter on how much gold sucks? When every single investment company has lower price targets on gold?

When Modi's about to form the next Indian government, China's failing to collapse, Goldcorp's buying Osisko, and we might soon see deadly terrorist attacks in Sochi*?

I'm no longer concerned about gold.

I only wonder why B2Clive's chart continues to suck.

* - Sure, I'm expecting terrorist attacks in Sochi. I expect large numbers of people will be injured and killed. And then I expect Russia to respond with overwhelming force.

Rio Alto continues to not suck all of a sudden

Here's Rio's chart:

I've kinda given up drawing lines on charts, as you probably noticed.

But this looks to me like an inverted head & shoulders, with a small right shoulder (beginning of January) that's been built on high volume. So I guess it's a lock that this would go to target, which is somewhere around $2.20 or so.

That would be about a 20% win, which is exciting enough for me to already have a position in Rio and for me to want to even buy more.

I mean, why own a Europe ETF (which I do) or a US banking ETF (which I do) over the next month or two when I can make 20% on a miner?

Unless I think gold could drop from here. Which I don't. But if I did, I'd be more cautious about buying Rio.

Sunday, January 12, 2014

Felix Salmon and Barry Ritholtz both have gold wrong, but I can't be arsed to write anything

IKN - Felix Salmon versus Barry Ritholtz. Y'all know my own opinion about gold (unless you're one of the many "analysts" coming here reading everything with blinkers on because some time in the past I insulted your fluffy little feelings about gold), so I can't be arsed to weigh in with my own two cents here, despite the fact I could probably make a few bucks in traffic, which is really my only motivation for doing anything on this blerg any more.

Anyway, as an incoherent retort to both, let me say that gold is insurance against existential risk, gold is an asset class outside the financial system, Indians and Chinese are still buying it, gold is not gold miners, gold is not money, 99% of gold stocks are frauds, Republicans are morons, there's no hyperinflation, Whitey is delusional if he thinks he has anything to do with gold anymore, forward contracts are not gold, Brent Cook is generally right, we must respect the threat of alien invasion, yadda yadda.

I won't go into more than that because I see that Felix Salmon's Twitter status page uses artwork from Lady Gaga & Beyonce's "Telephone" video. That alone ends all arguments.

Oh... and gold is attempting to break $1250 as we speak, bitchez.

Do you know anyone who's expecting this right now?

Even the hardcore goldbug newsletter writers are calling for a retest of the low, maybe even a lower low to $1150. Everyone is hedging their targets downward.