Tuesday, March 24, 2015


Mining.com - my uranium call sucked is postponed. If you're so smart, Rick, my didn't you see the collapse in LNG that forestalls an improvement in your anium demand?

Sounds like yet another call where you skated to where the puck was instead of where it's going to be.

Y'ain't no Gretzky, Rick. At best you're an Alexandre Daigle.

As for the rest of his chat:

With regards to a gradual lessening of faith in the dollar, I believe it would not be event-related but arithmetic-related. There are trillions in sovereign bonds worldwide that trade at negative real yields. For instance $1.7 trillion of European debt maturing in more than a year paying a negative yield.2 There are also many US bonds trading for a negative yield, after you adjust for inflation. You lose money, guaranteed, by investing in these bonds. This is important for gold investors.

First of all, your cost of holding gold is the lost yield from not owning bonds. When you could make 5.5% or 6% in bonds in a supposedly riskless fashion that was the cost of owning gold. But that cost is now gone. Your holding costs for owning gold are nil.

Yet - despite the negative real rates environment that Summers, Krugman and Piketty have identified as a secular condition - whitey still says, every day, that there's an "opportunity cost" to holding gold.

I think the rates/opportunity cost argument is bullshit, of course, because nobody in the real world holds physical gold instead of USTs. But it's still hewed to by the lamestream media because they were taught it by some old dude who last traded gold during Nixon, or maybe Carter. Here are some of Whitey's conceptual errors:

1. The futures market doesn't hold physical gold. They hold contracts that over time have to net back to 0.
2. The GLD ETF doesn't really have an opportunity cost: carrying cost of GLD is nonzero but tiny.
3. Central banks can't dump gold holdings for USTs because it breaks their risk rules.
4. Indian peasants won't dump gold for USTs because what the fuck about the word "peasant" don't you understand, cracker?
5. Indian temples won't dump their gold for USTs because USTs are not the physical incarnation of the goddess Lakshmi.

But sure, you can still talk about the "rates/gold" narrative because although it's wrong and stupid, people still believe it.


I have felt extremely frustrated by the lack of issuer capitulation.

By that, I mean that Sprott’s ability to invest money on behalf of investors in projects that are suitable has been constrained. The mining industry wails and moans about the lack of capital and their inability to go forward. Those same people in the mining industry aren’t willing to offer equity or debt at market-clearing prices.

The last time we saw capitulation was in the summer of 2000. That was concurrent with issuer capitulation. The very best issuers decided that they had to raise capital at almost any terms that they could. The attractiveness of the returns they could get from deploying capital at a market bottom overcame the near-term pain that they suffered to their egos for issuing at prices below previous issuance prices.

In the issuer market today, you see these really luminary financiers, like Robert Friedland, willing to issue full warrants in order to attract capital. Financiers and promoters with, let’s say, less established reputations than Mr. Friedland’s, aren’t willing to do that.

Here we get to Rule's "capitulation" argument.

In reality, he's not looking for "market capitulation", which has been happening for the past two years anyway: and in any case, look at the 2000-2003 Nasdaq chart for an example of complete capitulation over time instead of over price. There was no final puke in the QQQ, nor in most of its stocks - rather, there was a marginal lower low in the survivors, with an eventual collapse in volume (so if you wanted to load up on an appreciable quantity of Nasdaq stocks at the "bottom", you had to do it on the downmove because the upmove started with miniscule volume).

V-bottom capitulative pukefests don't happen in bubble pops: they happen in panic crises.

But it doesn't matter anyway cos what Rule really wanted to see was "issuer capitulation". And he didn't see it cos nobody's offered him full warrants, good for them.

But issuer capitulation should also have involved 500 stocks leaving the V for the NEX (which Canadians can still trade through discount brokerage accounts), and nobody's seen that happen either.

Boo hoo, Rick. No free lunch for you. You're going to have to work for your money, bitch.

In all seriousness, I can imagine him having held some capital back in the hope of a final capitulation. I'd want to.

But if he did hold some back, so did a lot of other people. Listening to Cookie, it seems there are more financiers left than there are viable gold projects.

So I'm suspecting that the odds of Rick being left on the dock as the boat leaves him behind might be significantly nonzero.

Which I guess he doesn't mind: if he feels certain he's missed the bottom he's still got a long time to pile in after the rest of the market has made the first 20%.

But him and everyone else, acting together, are a market that determines how the gold miners stocks will behave. Remember that.

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