Saturday, October 5, 2013

One news item for the weekend, with commentary

Marketwatch - why Uncle Sam is hoarding gold.

The fellow has a point. If gold is little more than a barbarous relic, why does the US want to maintain a gold reserve of 8100 tons?

Now, the US can't sell all its gold to meet government debt obligations for the simple reason that even the threat of 8100 tons hitting the market would crater the price to $500 or less. Entire industries would collapse: there'd be several thousand Nevada miners out of work, not to mention several tens of thousands of jewellers in Thailand and India. You don't dump even a couple hundred tons into the market unless you have no alternative.

And yes, it's probably all been lent out to JP Morgan. I mean, why wouldn't it have been?

But the point of a gold reserve is to allow a nation to continue to conduct international trade for necessities at precisely those times when the international system of modern trade has broken down. That's why the US has a gold reserve, and why other countries want to build up gold reserves.

If they don't have any reserves at all, they become like Greece, or Egypt, or Iran: utterly broke due to collapsed internal economies with no way to be able to afford imports of wheat, or diesel, or medicine.

If their reserve is mainly one currency whose country then enters a crisis, then they essentially have no reserve at all - imagine having a massive USD reserve and hearing that Yellowstone has started erupting, for example.

If their reserve is made up of two or three currencies, there's less risk, but it's still there - euro yen and USD are all of no use to a country under international sanctions that's been cut off from SWIFT. Plus, a big enough crisis in the US would also collapse the euro and yen, no?

Gold is insurance against existential risk. The duty of a reserve bank is to protect its citizens from existential risk by holding enough reserves to ensure survival through crisis.

Of course the clowns on Wall Street don't understand that - they misconstrued it as a hedge (it's not) against portfolio risk (it's not), and figured buying GLD was the same as buying gold (it's not).

Gold isn't a currency and gold doesn't back currencies and gold never will back currencies. Economies have grown too large for the gold market.

But it still serves a purpose.

Friday, October 4, 2013

And as for Tower Hill Mines....

Just look at this chart:

So, two things to note:

1. In 2.5 Years their stock price has gone down NINETY FUCKING SEVEN PERCENT FOR THE LOVE OF CHRIST.

2. Presently their stock is at 24% of its 50DMA.

What an utterly worthless sack of shit.

Proven & probable reserves of 10 million ounces? Really? Proven and probable? Are you sure of that? Because you've collapsed down to a $30 million market cap right now. That suggests that the ten million ounces of P&P gold have no reasonable possibility of economic extraction.

Two snippets of snark from PSDave

PSDave's apparently come back refreshed from his battle with the Spanish wine industry, and put up two snippets of snark:

PSDave - Venture exchange promoters finally look into the mirror.

PSDave - Dundee buys into the CNSX.

Go ahead and read those, but I've got my own point to make.

The analogue to the exploreco business model is the shyster who hires a bunch of students to go door to door, tricking little senile old ladies into buying heavily marked up natural gas contracts.

Seriously, it's that fucking infantile, and that fucking corrupt. They're selling something that nobody with any sense would buy, the boss will lie through his teeth to convince people that $5 gas is a deal, and anything he can't legally say he'll get his door-to-door hard-sell brigade to say for him.

He's not contributing to the world. He has nothing that anyone needs. His job is to unload product (his shares) at whatever price he can get (they're free to begin with, he's got a printing press for fuck's sake) to whatever clown is dumb enough to buy them.

So I don't fucking care about the fucking whining about the cost of a Venture exchange listing from any little chickenshit "CEO" of a "junior mining company". Dude, you do not run a "junior mining company", cos you're not mining anything; and you're not a "CEO" except in the utterly meaningless sense of some guy who has incorporated to avoid individual liability. If your market cap is under $20 million you are not a "CEO" of anything, at best you're a clown with a corporation.

You could always run an unlisted company, and raise your capital by phoning up your family and friends asking for a few hundred thousand here, a few hundred thousand there. Heck, maybe you could even hire some bucket shops to sell private shares for you - they've got nothing else to do nowadays, and they're fantastic high-pressure salesmen with utterly no scruples.

If you want the privilege of raising capital from strangers on respected capital markets, then you have to fucking well play by the rules. That includes publishing quarterlies, publishing an audited yearly, running every disclosure through lawyers, and maybe a few other stupid little securities rules that they put in to make sure you're not just some fucking shyster.

Because for all we know you could just be some worthless fucking loser who hires a bunch of IR and newsletter kids to go door-to-door selling your shitty Venture-listed shares to strangers.

In fact, we're all assuming that about you, mister "CEO", because you've already been caught lying to your investors, your P.Geo has been caught lying to your investors, your outside feasibility study consultant has been caught lying to your investors, you've been running an elaborate pump-and-dump where you twin a hole to give your institutional buddies a price rise to dump into, you sell short your options before the hold period ends, you've maybe even gotten a strongly worded email or two from some joke of a Canadian securities regulator asking you to please maybe retract a couple disclosures if that's fine with you sir, and all this time you've been blowing all the shareholders' money (that capital is theirs, remember?) on your own fucking lifestyle instead of maybe doing some mineral exploration.

The Canadian exchanges aren't there for your pretend business games, dumbass. They're there for real businesses with cash flow, profit, clients, customers, a brand, or (re the "Venture") even just a research program or an identified exploitable unfilled market niche. If you want to be taken seriously as a real business, you better fucking start acting like one.

If you don't like the costs and the responsibilities of being listed on the Venture, but you still want to scam idiots, then by all means go get listed on the Nex or the Pinks. Go ahead. Go be on a joke exchange. You deserve to be on a joke exchange. You don't make money - in fact all you do is spend shareholder money as if it's yours, without any fiduciary responsibility.

I never thought I'd have sympathy for that vile disgusting sociopathic cunt Conrad Black, Baron of Crossharbour.

But my god it's so damn unfair that he got thrown in prison for stealing shareholder money while over a thousand clowns on the Venture do the exact same thing and get away with it.

How many V-listed explorecos does John Kaiser say there are? 1800? And he thought only 500 needed to go extinct? Tell you what, buddy: by your own table, easily 1500 of those companies should be off the V and put on the joke exchanges.

None of those 116 shells needs to be on the Venture - I don't understand the fucking point of paying to put a placeholder on an exchange. If it needs to be tradeable put it on the Nex.

Easily 95% of the explorecos are jokes run by lying clowns and inept fools who will never discover anything, or if they do they'll fuck it up somehow - let's boot another 470 off the grownups exchange and put them on the Nex or the pinks.

No company that finds it hard to maintain at least enough working capital to maintain a listing without a dilutive financing should be allowed on the V. For fuck's sake, is that how they taught you to run a business back at community college? If your cash flow is negative and your bank is fast approaching zero, declare fucking bankruptcy while you still can. There's another 632 gone. I don't give a fuck where they go.

And I daresay that of the "resource feasibility stage companies with more than $200K working capital", probably at least 80% of them are joke companies that shouldn't be on a real exchange, because their "resource" is actually utterly unfeasible at anything approaching a realistic gold price. EVG, GNH, ATC, ITH, anyone, I don't care, the properties were ultimately proven fucking worthless, they don't deserve a listing once their failure is evident. You don't get to sit on the V whining for 5 years, diluting out your shareholders to maintain your crack habit, waiting for gold to go back up to $2000 so you can get another kick at the can. You can go sit on that property privately. So let's say we get rid of another 330. It's probably for the best, since otherwise all these "resource feasibility stage companies" will continue to be tempted to break NI 43-101 reporting rules or hire stock promoters to tell the lies that company officers are not allowed to.

That adds up to 1548, but let's give 3% of these listings the benefit of the doubt and say that only 1500 have to go.

How the fuck has the Venture ended up with 1500 worthless listings to begin with?

And they are worthless. The point of being listed on an exchange is that your shitty fucking stock goes up in price over time. You're supposed to be making shareholders money - either in a dividend, or a capital gain. Fuck, even RIM Blackberry has a product that they could reasonably be expected to make money on if only they fired off all the fuckhead management from Nortel and BCE and begged their laid-off competent product engineers to please come back.

One fun side-effect of the "optionality of gold" argument is that we no longer need fifteen hundred shitty fucking explorecos to invest in of we want to bet that gold goes up in price; we can just buy GLD now.

So why are these companies still around?

Feel free to forward this to any idiot "junior mining" "CEO". Tell them where you got it. I'll be happy if it inspires a few hundred of these clowns to just wrap up their shitty companies and go buy into a fucking Taco Bell franchise.

Because really, that's about the competence and scruples that these clowns have shown over the past 2-3 years.

Also, tell them to go fuck themselves.

Rio Alto and Bevan2Gold - the top three from Denver. Guy reviews three mining companies, and provides links to their Denver Gold presentations.

Here's a link to the Rio Alto presentation. Listen to Alex Black's shaky voice, and watch him perspire and fidget as he explains why the company's share price has collapsed down to $1.80.

And here's a link to the B2Gold presentation. Watch The Clive explain why he's so much better than Alex Black.

National Bank of Geese

If you pull up a chart of NBG, you'll see that the stock surges ahead on the Thursday and Friday of the first week of the month.

It spends the rest of the month basically going nowhere. So probably I should sell today.

Why should it see this sort of action?

Late noontime news post

Waiting for a phone call, so here's the news:

Calculated Risk - AAR rail traffic increased in September. Again, yet another data point in full consonance with all the other pro-growth data points.

Reuters - Italian senate begins expulsion process for Berlusconi. Italians love crooked winners. They despise crooked losers.

Mineweb - Indian jewellers hope to mobilize gold in new scheme. I guess that might work in Mumbai. Then again, do Indians want to "loan" their gold at 5%? Does that become cost-effective for jewellers? And why does this article suspiciously come out right when the gold price is trying to conclusively break down thru $1300?

Reuters - slowing economy may force Chidambaram to wield budget knife. Might be bad for gold. Then again, the government doesn't buy gold. - how India's war on gold backfired. Hi Frik! Nice to see you're a regular reader.

Friday Videos - more by the KVB

Yet another video by the KVB.

I actually get a lot of searches for them, it's weird.

It's nice to see someone is following in the late-80s Mary Chain's footsteps.

Thursday, October 3, 2013

Some evening reads

Just a few things to read tonight.

Michael Shaoul - ISM non-manufacturing. "The sector remains in a long period of expansion."

Michael Shaoul - Initial claims data. Quote:
It also brings up the question of credibility for the Non-Farm Payroll report which has remained largely static over the last 12 months, averaging around 180K a month for this period. In order to reconcile this data you would either have to believe that Initial Claims are entirely erroneous (unlikely given that they are derived from actual claims made in state offices) or that employers hired around 100K LESS employees a month in the 12 months ending in September 2013 than the year ending September 2012. Although we are prepared to believe there has been no significant acceleration of hiring, we do not believe that there has been significant less willingness to take on labor.

We must therefore be open to the possibility that the Non-Farm Payroll report and the Household Survey which drives the Unemployment Rate are significantly underestimating the strength of employment gains in recent months. Given their wide error tolerances and publicly admitted deficiencies at tracking employment at smaller and new businesses this would come as no surprise, but it does have obvious implications for the setting of monetary policy and the undertaking of economic analysis.

We remained convinced that the US economy is moving on a substantially faster track than is widely realized, and concerned that monetary policy is currently calibrated for the economic and financial conditions that were in place 5 years ago. Eventually at some point in a cycle economic reality and monetary policy (and sometimes even economic analysis) converge and given the current gap we would expect this to be a fairly explosive process whenever it finally occurs.
Mineweb - the process of selling silver. Hats off to EDR for putting edumacational videos on the internet. Maybe IR meatheads worldwide will someday look at this and see that this is the way you encourage investors back into the mining scene?

Let's have a look at fear for a sec, well not really

Here's the $VIX, which is not a fear index. It is simply an index related to the demand for risk protection through options.

Normally when it gets above +2.5SD, it will move back within its 2SD lines and eventually even retest its EMA(16).

Here's XIV, an ETF which as far as I know shorts the short vix. Or something. It goes up when the S&P goes up, let's put it that way.

Big move down. So I guess there's real fear out there, though it certainly hasn't shown up yet in the SPY. In fact, I'm thinking maybe this means people are buying downside puts more than they're selling stocks.

Here's the $VIX term structure:

It's starting to get rather flat on the short end, no? Apparently a flat or inverted short end is a great time to buy XIV; supposedly you make great money when it starts to steepen back into normalcy.

I'm not buying XIV right now, but it's certainly in the back of my mind.

I try to ignore fruitcakes, but they keep dragging me back in

Izabella Kaminska's gotten more and more rabid in her hatred of gold these past few weeks - I guess not only did the goldbugs steal her tricycle when she was a toddler, they also must have spray-painted rude comments about her on the outside of her highschool when she was a teenager.

Here's one particularly stupid article of hers.

FT Alphaville - pawned out

It starts off as a passable explanatory article, I guess, for someone who actually cares about the market action of publicly traded British pawnshop stocks. Story is that the gold price went down, and shops were thus encumbered by gold stock that's not properly hedged.

Except that's not even it, because it turns out that increased competition from fly-by-nights has also been a factor in Albemarle & Bond's losses.

IK accuses A&B of insufficiently hedging their book. If so, the company is run by morons. Some clown with a back-street shop might run unhedged; but an exchange-listed corporation?

But later she really ventures off the fucking derp end:

A reduction in gold jewellery in circulation for pledging purposes shows that the economy is probably improving — there is less need to borrow against gold. Or, alternatively, that most of the gold which was owned by distressed hands has also, by now, been encumbered.

If the loans can’t be paid back — and the Albemarle share price reaction suggests there is a lot of concern that this is the case — there will instead be ever greater pressure to liquidate collateral so as to meet liabilities in dollar sums. A negative feedback loop which only puts further pressure on gold prices could be the result of that.

"Further pressure on gold prices"? Really?

Not just I, but other sensible people who FT tricks into reading this buffoon, called her on this idiotic assertion.

Approximately how many hundred tons of gold does the British pawn industry have to liquidate, do you think?

Approximately zero, perhaps? I mean, 0.01 hundred tons of gold is approximately zero. 0.03 hundred tons is also approximately zero. Compared with 2013 Chinese gold demand, the amount of British pawnshop inventory in danger of liquidation is approximately zero.

And I sincerely doubt they'd "liquidate" this gold into the commodity market. "Liquidating" pawnshop gold would mean disassembling crafted jewelry that sells for a massive premium to melt, and then sending the 14-carat garbage off to a refinery to get purified. I don't know the pawnshop industry, but I would assume that they'd simply try to auction the jewelry and gold goods. Might even make sense to sell in bulk to a Chinese importer.

The hard times of the British pawnshop industry single-handedly putting "further pressure on gold prices"?

This is not the level of article that should be written by someone with access to an FT blog.

Dear lizard people:

Dear lizard people:

China went on vacation this week. If you wanted to slam gold, you could have had an easy time of it.

If Tuesday's action was the best you could do to cave the gold price, you really are looking fucking weak.


Fiat Weimar Zimbabwe Wharrgarbl

on Brodrick

Sean, quit simplifying things as if you were trying to get a job with the lamestream media.
So, these are some of the forces pushing gold lower in the short-term (the Indian government's suppression of gold sales is also having an effect).
#1, as that article itself notes, the jewelry industry estimates 40 tons of gold were smuggled into the country the same month. 
A jeweller said on the condition of anonymity, “We were still getting gold entering the country through unofficial channels.” The industry estimates that during the quarter over 40 tonnes of gold entered the country through unofficial channels as the 10 per cent import duty made the risk worthwhile for smugglers and carriers who bring the metal on someone else’s behalf.
So, Indian gold imports have not actually changed - they've just moved off the official books.

Which, by the way, won't alter their current account situation at all. But at least it's getting papered over, which is the most you could ever expect from your average Indian politician.

#2, India is actually interested in increasing gold sales. The Gujarati jewerly industry is one bright spot in a Wagnerian maelstrom of economic incompetence, and India will be moving to help the industry create more exports. As official gold imports have now been made a function of gold exports, that's sort of positive-ish for gold going forward (especially if Modi wins the election in early 2014, since he's forged strong ties with the Gujarati jewellers).

#3, it's important to get news from Indian sources, sure, but generally you should remember that Indian news reporting is generally quite low quality - about at a level with Seeking Alpha or CNBC. Indians are perpetual whiners, Indians always see the bad side, and Indians tend to obey unquestioningly the orders of their bosses when it comes to misleadingly phrasing article headlines. Tread carefully.

With all that in mind, I agree whole-heartedly that US gold eagle sales are an utterly inconsequential, almost stupid data point that can be ignored forever.

And this quote was useful:
On Monday, Salvatore Rossi, Chief of the Central Bank of Italy, let the cat out of the bag. He told the press: "Gold is unique among assets, in that it is not issued by any government or central bank, which means that its value is not influenced by political decisions or the solvency of one institution or another."
My my... a central banker who understands the value of gold. Was this statement covered by those lamestream US media sources who threatened France would sell their gold reserve? Y'think?

And finally, I really really love how you've noticed, unlike most of the lamestream media, that there are other countries in the world besides the US, with more people, different asset allocation strategies, and different domestic inflation concerns.

We'll turn you from the dark side yet, Sean.

Guy at Seeking Alpha does a DCF analysis on SLW and SAND

Seeking Alpha - DCF fundie calcs on SLW and SAND.

I know it's just some guy at Seeking Alpha, and he has the username Hyperinflation, and he apparently works for that silverbug David Morgan, and OMG there must be no other news out there.

Still, this author counters all the possible knocks against him by:

1. explicitly stating all his assumptions
2. including his Excels of the cash flows (i.e. showing his work)
3. using a discount rate
4. using in fact several discount rates
5. presenting a sensitivity analysis chart with variables for gold price and discount rate.

To all you other junior gold blogger types out there: this is how it is done. As an informed reader, I can look at your data and see if you're fudging something. I can go through your assumptions and see if you're being rosy or honest.

This author may be right or wrong (I haven't looked in detail yet, I've only just now found the article); but he's presented his argument in a way that allows it to remain useful to me even if I were to find that I disagree with most of what he says. Heck, one point in his favour is he's left Oyu Tolgoi out of the equation entirely.

Go read the article, and tell me yourself what you think of this chart:

And what do I think?

Right now, SAND is trading at $1200 gold, 12% discount. So either the market is saying his assumptions are bullshit and SAND won't be seeing the revenues he thinks it will, or the market thinks gold is dropping below $1200 long-term.

A few morning newsbits

Four newsbits, all on gold and the junior scene, with many nice quotes.

IBN Live - high expectations for monsoon impact on economy. 17% of India's economic output comes from agriculture. Here, let me quote some of the article for you:
Last year's monsoon season was considered a "drought," which means rainfall was at least 25 per cent less than the long-term average, but historically, India's droughts lead to a bumper season in the following year, said Robert Prior-Wandesforde, head of regional economics at Credit Suisse, in a note.

Forecasters are likely under-estimating the size of the anticipated agricultural output bounce, Prior-Wandesforde said. India's farmers plant most of their summer crops during the critical June-September monsoon rains.

On average, the year following a drought year, output has risen more than 11 per cent, likely reflecting not just higher-than-normal rainfall, but also additional government support, which can include fertilizer, he said.

He estimates an around 8 per cent rise in output this season would add 1.1 percentage points to gross domestic product growth.

"This is unlikely to represent the total effect," he said, noting agriculture still accounts for more than 50 per cent of India's total employment.

"One would expect the associated rise in incomes and profits to feed through to stronger consumer and investment spending (for example, motor bikes and farm machinery). Also, a sharp increase in the food supply should help bring down inflation, boosting real purchasing power and influencing the central bank."

Sectors likely to benefit from a positive monsoon season are utility vehicles and fast-moving consumer goods. Mahindra & Mahindra is among India's largest utility vehicle makers, while Hindustan Unilever is a major personal-care product maker.
Now, go read the entire Wikipedia article on the economy of India; that is, unless you already know more about the Indian economy than what's in this article. Which you don't.

So let's see. Adding 1.1% to India's GDP would mean an extra $20 billion in wealth generation. India puts about 9% of its total wealth into gold (no really); that means an extra $1.8 billion in gold demand, or something like 55 tons of surplus demand at today's prices.

Oh wait - Indians aren't going to buy gold. That's right. Apparently no gold is going into India anymore. So the rural farmer who ends up with a large cash surplus after selling his bumper crop is going to take his extra $100 in paper rupees and - what? Put them in the nearest bank, which 100 miles away from his village? Stick them in a hole in his hut to get eaten by insects or washed away in the next rain? Or take a train ride 1000 miles to a brokerage that doesn't even allow his caste in the front door, and use the money to buy a fractional share of Apple on a foreign stock exchange?

No, he's going to be buying gold.

Yahoo Finacne - Fire Steve Letwin, CEO of, committed to low grade gold. OK fine, let's go easy on the guy and just quote the article:
He wrote a research paper about his strategy last December, called "Condemned to Excellence." Drawing parallels between the development of low-grade gold and the oil sands, he argued that miners would have to focus on controlling operating costs to run low-grade mines throughout the business cycle.

The conventional wisdom is that average grades fall during good times, because high prices make marginal deposits profitable, and then rise again in weaker markets, as lower-quality mines are idled.

Some deposits with low grades can be reinvented as higher-grade assets, with mines designed to exploit richer areas and treat the rest as waste. But Letwin says he is among those who believe grades are falling in part because the number of untouched high-grade deposits has dwindled.

He said grades may rise briefly in the tough market but that over the long run they will fall.

Letwin's paper cites data from Metals Economics Group showing that there were 69 "significant" - more than 2 million ounce - gold discoveries between 2000 and 2011, down from 120 in the previous decade.
He has a point, after all - though he's pretty much just cribbing it wholesale from Brent Cook's PDAC presentations of the past 2-3 years. - $100 billion in private equity stalking mining assets. Pretty dumb of them to buy mines when Goldman is calling for $1000 gold and the end of the commodity cycle, eh? And what precisely are they looking for?
[...] private equity firms like Apollo Global Management which has raised $1.3 billion for resource-focused investment, TPG Capital which put up half of X2's funding and the large funds that are looking at deals such as KKR and Blackstone all want the same thing: Companies that are late stage, low cost, low risk, producing or close to production and with all permitting in place.

"There aren't too many of these around and everyone wants to do their first deal right and be highly regarded for it. Down the line, once good quality, stable cash producing assets are acquired, private equity investors may look at higher growth, earlier stage companies to diversify their portfolios."


Apollo's head of mining and metals recently told PwC that the sweet spot for deals are in the $150 million to $500 million range.
Well, yet another faint hope to help the goldbugs stay in their losing positions.

Yahoo Finacne - Bellhaven rapped on knuckles by BCSC. They admit they were misleading, failed to include cautionary language, and made disclosures contrary to NI 43-101. Which leads to the question: when exactly do these Venture pennycrapper people plan to start acting in a way that would make wise capital ever want to come back into this market? Cos nobody with half a brain is going to want to touch this scene if it keeps acting like this. And the people with less than half a brain have already been wiped out.

Wednesday, October 2, 2013

Four evening newsbits

Just a few things left in the queue then I'm off to beer.

Michael Shaoul - September ISM. Quote:
Travel commitments meant that we were unable to comment on yesterday's ISM Manufacturing survey in real time but we do want to stress that this is another excellent set of data that supports our notion that the US economy has enjoyed a substantial re-acceleration in recent months.

The overall PMI index rose to 56.2, beating expectations of 55 and last month's strong reading of 55.7. Again we would stress that readings in the mid-50's coming 4 years into a period of expansion really are quite significant, as is the fact that clear signs of strength were seen in the New Order (red) sub-index which came in at 60.5. Although this is slightly less than August's torrid 63.5 reading it still represents a significant improvement in New Order's on a month-over-month basis. Given this it is unsurprising that Production (blue) remained strong at 62.6 (62.5 last month) and it is encouraging that this finally seems to be affecting the Employment index (pink) which rose to 55.4, its highest reading since June 2012.

It would appear that the focus of the government shutdown ameliorated its impact on the bond market, but we cannot stress clearly enough that much of the US economic data that has been released in recent weeks is utterly incompatible with the current level of yields offered in the bond market. Sooner or later something will have to give and we doubt that it will be the data which collapses.
He's a bit of a bond bear, you see. Not an idiot one, but a "I certainly think the United States economy can easily survive a 4% yield on the 10-year" in a sarcastic English accent type.

Bespoke - price of gasoline drops for 30th straight day. This is bullish for the US, since gasoline prices are a drag on their economy.

Michael Shaoul - Spain September unemployment data. Quote:
The Spanish unemployment cycle would appear to have finally peaked this summer - a key turning point for economic activity - since from this point on the odds of those currently employed keeping their jobs should be better than even. This concept is largely lost in conventional economic analysis which focuses on the level of unemployment (which is always dauntingly high at its peak) rather than considering the fact that once it has peaked re-employment becomes an additive force for economic activity. Moreover, for those currently employed a steady rise in confidence that they will remain employed should now become apparent, which in turn should start to show up in an increased willingness to consume at a normal rate. This certainly has been the pattern in the US since late 2009 and in the UK and Ireland (whose September data we will comment on later) in more recent quarters.

Spain's September data showed an increase in unemployment of 25.6K, but since this data is not seasonally adjusted and September marks the wind-down of the peak tourist season this is a fairly strong report that comfortably beat expectations of 35K and last year's reading of 79.6K. This takes the trailing 12 month ma down to 1.59K, meaning that a total of only 19.07K was added to Spain's unemployed over the last 12 months, the smallest increase since July 2007.
He seems to know how countries pull out of recessions. I wish I'd been following this guy since 2009, and maybe then I'd not have swallowed the idiot line from Americans that their economy was forever doooooomed.

Bonddad - an important announcement from Bonddad. Great - he's going to generate content for a bigger website. He was the best-kept secret on the internet, and now every clown on the internet is going to get to read him.

Automatic translation app for the smartphone

This is fucking freaky and it exists.

They also now translate into French and Italian.

OMG NO!!!!!

BBC - prices of sacrificial animals skyrocketing in Pakistan.

A picture is always worth a thousand words, even if most of them are "herp de derp de derp"

No further comment needed.

Today gold is right back to where it was last Tuesday morning.

I said a couple days ago that I think "random walk" theory is stupid.

However, I have more and more appreciation every day for the theory of "random stupid purposeless trades".

Some morning reading

Here's some stuff for wasting your time while waiting for gold to go back up again:

BI - Soros says Europe's nightmare is getting WORSE!! Except not really. Again, it's just Soros exhorting to Germans to stop being cunts. He understands he's wasting his time, but he needed speech material and this was an easy play.

Black China Blog - on the November plenum. A doubting opinion.

Yahoo Finacne - Andy Home on copper. IKN says it's an important read, but it doesn't seem to say anything other than "the copper surplus has nothing to do with the price, and warehouse stocks have nothing to do with the price, so god knows what's going to happen, unless it doesn't." But he thought it was important, so let's link to it and confuse the fuck out of everyone, no?

Stonekettle Station - welcome to the revolution. In case you've been living under a rock and so haven't clued in that the US right wing hates Obama just because he's black.

TA to give goldbugs the most faintest and feeblest of hopes

Here's a GDXJ chart with lines scrawled on it in crayon:

Those last three dips are interesting. Looking at those lines (which are only partially arbitrary, since they each do join up several daily closes in the last 3 GDXJ collapses), you can see the slope is getting shallower with each collapse.

Almost as if there's less force pushing down each time. Really does look like GDXJ is in a longer-term uptrend from the June bottom.

I'm sure it'll all still end in tears, and who the hell cares about GDXJ if they really believe Goldman's $1000 gold call*. But still, ever faint hope for the faint-minded.

* - do Goldman, or any gold-bearish anal yst, use any supply & demand mathematics for their bearish gold calls? Cos it should be rather fucking easy to do the math. Or are they instead basing their call on fallacious ideas like gold being real money, or gold having an inverse relationship to USTs?

plug for Junior Canadian Resource blog

After spending so many months with only six loonies following my blog, I've now apparently gained a seventh.

And he has his own blog too, and since it seems pretty much about as useful to anyone as mine or PS Dave's (except without the ads), we may as well give it a plug:

Junior Canadian Resource blog

In his favour: he's another guy making fun of Barkerville, Liberty Silver, and the rest of the wretched hive of scum and villainy known as the Moss Isley exchange. He also seems to believe in supply and demand as determining gold price.

In his condemnation: he still owns shares in a certain trenching-crazy narrow-and-low-grade epi vein exploreco.

Tuesday, October 1, 2013

A few more newsbits

Some more news to finish the day:

Reformed Borker (Bork Bork Bork!) - 361 Capital weekly research briefing. Maersk calls bottom of the global trade cycle, US gasoline prices are collapsing, and risk-on cyclicals are outperforming defensives.

Reuters - Italian PM rejects resignations of Berlusconi ministers. God, he is getting more isolated by the day, no? His party now officially backs Letta no matter what the whining old crook tells them.

Reuters - Indian jewellers face long road to export growth. So let me get this straight: legal Indian gold imports are now limited to 400% of jewelry exports. Smuggling therefore will make up the rest of Indian gold demand. Now if the Indian jewelry industry, which has flourished under Modi in Gujarat, manages to increase jewelry exports, then legal Indian gold imports can rise 4x the rate that exports rise. Plus smuggling will remain the same. That it? Sounds good.

Reformed Borker (Bork Bork Bork!) - gold is a textbook head and shoulders pattern. Um, Josh? No, it's not. H&S patterns are not continuation patterns. Also, there is insufficient volume on the right-hand side - that's where you're supposed to see the most volume.

So you're wrong, Josh. However, I will gladly accept the idea that other clowns looking at the gold chart will see exactly what you saw - in the same way they've been seeing H&S patterns everywhere for the last 3-4 years. And with China closed for the week, the logical thing to expect is for gold to get driven down into annihilation.

The problem is, once Whitey's gold is all sold, there'll be no more gold for them to sell - it's going to vanish into the black hole of Asia like it's been doing for the past two thousand years.

a few newsbits

Strangely, the US government shutdown seems to have been extended to the lamestream media; hardly anybody's actually writing anything today.

But we're hiding out in Canada where the tentacles of Golman Sachs can't reach. So, here's some news:

BI - Berlusconi's allies rebel. Toldyaso. They liked Berlusconi once, as criminal as he was, cos he always got away with everything. Now he's a loser, so they're cutting him loose.

Bonddad - Abe's policies starting to have an impact. Though the market got to this point a few months ago already. Still, this post has data.

FT beyond brics - Indonesia trade surplus surprise. But what's the larger trend?

Liberty Street Economics - the great re-coinage of 1696. Hey, isn't it neat that England, running a bi-metallic currency system, saw the prices of gold and silver drift apart from their government-assigned values? That must mean that gold and silver aren't money! I mean, how can they be if the GSR can vary so much?

And Tommy Humphreys interviews The Clive - interview with The Clive. From a couple weeks ago.

He's a rugby player, he survived Pinochet's Chile, and he does business with Russians and wins.

Another interview with The Sandstorm Kid

Emerging Frontiers - interview with The Sandstorm Kid. Here's a hilarious quote:

Emerging Frontiers: So it seems that this downtrend will be much healthier that the one in 2008, one to truly cleanse the system of uneconomic projects.

Nolan: The industry has been spending money on projects that did not deserve to have money spent on them for quite some time and the tighter reins on capital means that money is no longer being allocated to such projects which is a good thing for the industry, for investors and for the world.

Emerging Frontiers: With debt and equity financing for miners having effectively dried up, is Sandstorm receiving increased deal flow from juniors seeking a less dilutive form of financing? If so, have the terms on these agreements become more attractive?

Nolan: Yes and yes. However, when the equity capital markets in the mining industry are not functioning well, as they are not right now, it becomes riskier for us to do deals. We are still looking for deals and are still working on deals, but we are being much more selective than we have been in the past, recognizing that the risk is higher. I would describe this environment as higher risk, higher reward.

Emerging Frontiers: When miners come to Sandstorm seeking financing in a streaming contract what is the most common mistake they make when pitching their company?

Nolan: They lie. Most management teams significantly exaggerate the truth in nearly all aspects of their deposit and their capabilities when they pitch their mine and their company. Because it happens so frequently, we have become very, very good at reading between the lines and understanding when people are not being candid with us. The more they exaggerate, the lower the probability that we will do a deal with them so they are shooting themselves in the foot by doing so.

And here's The Kid agreeing with me:

Emerging Frontiers: Continuing in Asia, we’ve seen a very interesting phenomenon in the gold industry here. When owners of physical gold in the west were panic selling, Asians were lining up to buy more. Traditionally long-term owners of gold, Asians have more discretionary income than any time in history. How have the dynamics of this new middle class altered the demand fundamentals of the industry?

Nolan: Historically, over the last 50 years or so, the demand for gold was largely driven based on what the Americans were doing. Obviously other countries in Europe and elsewhere mattered, but gold was largely driven by American sentiment and American savers and Americans buying gold.

The more recent run-up in the price of gold was partially driven by various institutional investors and ETFs in North America buying gold as well, but quietly over the last 10 years there has been an ever increasing demand for physical gold coming out of Asia and the Middle East and that demand has continued to increase, while the Americans interest in gold has decreased.

A significant amount of selling from the gold that has been stockpiled in ETFs and by other institutional investors and hedge funds has caused the price of gold to come down, but all of it is being bought by Asian and Middle Eastern investors and they continue to buy it.

I think there will come a day when a lot of the Americans have liquidated their gold and the buying will not abate out of Asia and the Middle East. I think the fundamentals for the price of gold are beginning to detach from the U.S. economy to a certain extent and you are going to see higher gold prices in the future, irrespective of what the American economy is doing.

I like when smart successful kids with half-a-billion-dollar companies agree with me. It makes me feel more sure that I've read the situation correctly.

Now all he has to do is stop his company's share price from sucking.

Monday, September 30, 2013

Don Coxe at the Gold Report

The Gold Report - Don Coxe.

On the one hand, he comes across in this interview as a very sensible fellow who I should listen to because he knows significantly more than me about economics. For example, as far as I can follow on a quick read he suggests inflation will eventually come from the inventory cycle, as bond traders move to the short end of the curve, making long-term debt hard for corporations to sell exactly when they need to spend capex to expand. So, old-fashioned demand-driven inflation.

I guess. It actually doesn't seem that impressive, on a second reading; this comes across as "demand will improve because the economy gets better, so prices will go up because corporations aren't spending enough for growth."

I'm not sure I followed it, I'll read it again later.

And he similarly notes that 1970s inflation isn't in the cards - the US has no unions, so there's no COLAs to drive labour prices up, while oil can't go up cos if it does the world economy is strangled.

So he's sensible.

But then, unfortunately, we find out that he's at the Casey Fall Summit. And you can purchase audio recordings of the presentations in advance for the low, low price of $295.

Oh and he doesn't mention India's and China's role in the gold price.

Evening news

So the Republican Taliban is about to kill all the hostages unless Balrog HUSSEIN Taxbongo agrees to kill all the hostages. Or something.

Meanwhile, back in reality:

Bespoke - the 1995 government shutdown. Very similar chart. Here it is:

By the way: ask yourself what the US market did over the next four years.

Krugman - default notes. Hey, here's a neat chart:

Isn't that just plain interesting? How the red line is moving toward the blue line? How does your doomster $250/yr newsletter writer explain this? Hm? Or does he instead completely ignore the fact that these increases in revenue are reducing the US deficit year over year? If so, why are you paying him money to purposefully mislead you?

Reformed Borker (Bork Bork Bork!) - ten reasons to buy industrials. As long as they're not EM-facing, like Unilever.

BI - the global sea-change in markets. He agrees that "money-printing" is something the EMs are doing right now - fat chance you can ever get an American to comprehend this though. Go head, read it and weep.

Live Mint - being a shit-hauler in India. This is your glorious emerging market? They've finally wiped the humanitarian programs of Mohandas Gandhi from their memory and it only took them 65 years.

FT beyond brics - on the China PMI. Was probably weaker than the flash because in the final week they started getting hammered by that supertyphoon.

Mineweb - GLD outflows resume. But only at very weak rates. That's fine though - it only means more gold that Whitey won't be able to buy 5 years from now cos you'll have to pry it from the cold, dead hands of India and China.

Apparently France isn't going to sell its silver reserve

So apparently, France isn't going to sell its gold. Which kinda makes sense, given their experience in WWII.

Though I hadn't heard that they were thinking of selling their gold in the first place - which makes me happy because it means I'm not getting exposed to idiotic disinformation from the lamestream media.

Anyway, France announcing they're not going to sell their gold is the reason given for gold's pop at 10:45 this morning.

Which is funny cos silver started popping 15 minutes earlier.

Then silver also popped further at 10:45 on news that France wasn't selling its gold reserve, which also meant it wasn't going to sell its silver reserwhat the fuck did I just write here?

copper, silver and gold charts

Copper is apparently an industrial metal whose demand is dependent on continued capital formation in China, and less so the rest of the EMs, and less so the DMs.

Looks pretty good, eh? The price gets interesting at around $3.37 or so, doesn't it?

And what is silver? It's an industrial metal, whose demand is dependent on continued high-tech capital formation in areas like electronics, photovoltaics, ethylene oxide, solder, and some jewelry and stuff.

I wonder if a pop of copper thru $3.37 will make silver rush to catch up? If that were to happen it'd be one hell of a face-ripper, no?

And then there's gold. It's either being bought in huge amounts by Indians and Chinese as a counterparty-free asset class as insurance against existential risk, or it's blah blah USTs blah blah money supply blah blah America.

I mean, the physical demand comes from India, China, and EM central banks. There's a lot of traders, of course, who buy those funny little contracts that they then cancel out before delivery date, and I can't for the life of me understand how a contract that cancels itself out should affect the fundamental supply-demand price.

Still, people seem to think gold has anything to do with the USA, and not with the physical demand in Asia.

I'm wondering if a copper advance thru $3.37 would also generate a face-ripper in gold.

I guess if it does, then all you Wall Street clowns reading this blog will quit that babble about America having anything to do with gold, right? No?

I mean, if copper somehow advanced towards $3.50, and then gold started following it upward, what would be the old-fashioned America-centric Wall Street explanation for that move? Inflation expectations increasing? Is that it? Buy gold cos inflation's going up, cos hey look at copper?

Who'd be buying that gold? Indians and Chinese, and EM central banks, who are making more money because world GDP is increasing as evidenced by the copper price going up. No?

Would the World Gold Council publish figures showing that some strange sinister cabal of Americans is buying more physical gold?

I'm only asking questions here. It's your job to supply the answers.

Kevin Spencer, a great old Canadian TV show

All this Chopper Read and Trailer Park Boys stuff reminded my of my favourite animated TV show, Kevin Spencer.

Its artwork was worse than South Park, it characters were worse, and its subject matter often made South Park look like Sesame Street. I loved it.

You can find it all on Youtube. The people who did the show probably put it up for free after the series was ended. Here's an entire episode from season one to whet your appetite:

Is today an important day for gold and silver markets?

Didn't I read something last week that today (Monday) is an important one for gold and silver contracts? Somehow?

Cos I don't think people are going to like these wild instantaneous 2% price swings.

On silver as a tell for gold

I've been watching silver as a "tell" for what should be happening with gold.

Just now, I saw silver spike back up to yesterday's closing price while gold is still dwelling 0.5% below, and thought of something:

The egotistical American-centric neocon hard-money viewpoint is that both silver and gold are "real money", no? So why should silver move differently to gold?

Is this physical silver market much larger than the physical gold market, meaning that it's harder for speculator positioning to drive the metal way from its fundamental price? Well, the first stats I came across mention 30kt/y for primary silver production; is that correct? That's less than primary gold production on a dollar basis. So if that number is right, that can't be it.

Maybe, instead, silver gets less speculative froth than gold because it's so obviously an industrial metal that a speculator can have his ass handed to him by the cold reality of industrial demand? Whereas gold is purchased an asset class, so demand is less price-sensitive and much more elastic, so it's safer for a speculator to drive the market price further away from fundamental price?

Or maybe the "silver is hard money" narrative is accepted as much more stupid and unrealistic than the equivalent gold narrative, and the market is happy to accept that silver is an industrial metal?

Just something for you to ponder. Silver is a tell for gold.

Wikipedia article on the yield curve for those of you who have it wrong

Wikipedia - yield curve.

When the yield curve is steepening, that actually indicates positive forward expectations for economic growth, manifesting in in expectation of future increases in inflation. You want to see this if you're bullish the USA.

A flattening or inverting yield curve is the one that means market risk is rising.

Rio Alto's hideous weekly chart

God this looks horrible.

A 3-month cliff-dive from $4.50 to under $2?

Then again, first production was May 2011; we're now back at the share price we saw when the mine was still in doubt.

Of course since then gold is 15% lower and per-ton mining costs are probably higher, and the Peruvian stock market is down something like 30%. But even still, for a producing mine it looks a bit silly to be right back at the commissioning's price.

Sucks to be the guy long at $5, but I don't see why today's price should be thought of as expensive for someone who doesn't own it yet.

I guess the market figures Alex Black has forgotten how to put a profitable mine into production on time and under budget. Or maybe that gold is going to $1000 because blah blah taper blah blah America. Or maybe nobody wants to own gold mines at all anymore.

Who knows?

As far as Santa Barbara Resources is concerned....

Don't want to jinx it, but I may as well make it a matter of record that I've got over 300k SBL at about 5.5 cents.

Far as I'm concerned, RIO must think Sancos has more than it's showing right now; and at a <$1.5M market cap at price of purchase, in a JV with Rio Alto, there didn't seem to be much downside.

I also like how doesn't even carry their ticker.

We'll see how it goes.

Don't ever buy explorecos, by the way.

Monday morning news

For some strange reason, Blogger now allows me to post normally from Firefox. So let's get back to it, shall we?

Reformed Borker (Bork Bork Bork!) - into the wild of October. It's not always a down month, but it's often a volatile month.

Bonddad - weekly economic indicators. Read it for the hard data.

Calculated Risk - chemical activity barometer suggests economic activity increasing. Another leading indicator. Please forward this article to any anal yst you read who says the US economy is collapsing.

Reuters - blah blah Italian crisis. PS Dave mumbled something about this yesterday. Yeah, apparently Berlusconi's throwing his last and final hissy fit. I dunno how many of his party are going to want to follow him now that he's a proven loser, though. In any case, as of late last night Italian 10Y was still yielding under 4.5%, so I don't think anyone with real money really cares.

Oh and by the way? French yields are still below Swedish. Tell that to the next neo-Nazi Chicago School asswipe from the US who predicts France's collapse - such as that idiot Mauldin that Ritholtz keeps linking to. The guy is proven wrong, he's wrong due to politics, he insists on remaining wrong; so cut the clown loose and quit wasting your valuable time.

Bonddad - Europe catching a bid. Nice to see he's following EWP and EWI. But maybe we see a retest of August resistance due to the Republican Taliban's suicide attack on the government.

Reuters - EZ current account surplus puts Germany in the dock. Again, Germany breaks the EZ fiscal regulations - this time with an excessive current account surplus. Merkel and Schäuble have all sorts of room available to boost the EZ economy through stimulus; the problem is that they don't want to make anyone else's lives better.

Reuters - India's temples guard their gold from the government. Some rare factual, data-centred reporting from Reuters here. Factual? For example, this article estimates (per the WGC) only 2000 tons of gold in Hindu temples, while other yellow journalist paid liars in the mass media have "estimated" it at 30,000 tons. Now, maybe they do have 30,000 tons - after all, they've been storing gold for over two thousand years - but that "OMG India will sell 30,000 tons of temple gold!" statement of a couple weeks ago was quite obviously a plant by someone short gold in an attempt to cave the price, similar to the bullshit disinformation they pumped out during the Cyprus crisis.

Hey, speaking of which. I was reading the Wikipedia articles on the British and Dutch East India companies, and read something neat. Apparently, the English/Dutch (I forget which one) found out that they didn't have anything that the East wanted, except gold. They obviously didn't want to give up the West's gold for these spices and silks and so on - it kinda screws your economy up when you have a gold-backed currency and are throwing away all your gold for consumables. So you know what they did? They switched to simply trading from one port to another within Asia.

Something to keep in mind.

Yahoo Finance - class period updated for Liberty Silver suit. They moved the ownership period back to Feb 2010; it's interesting to ponder what this suggests. Well, not really.

Mineweb - Kip Keen's dark existential nihilism on the junior mining crisis. Get a load of this:
Late 2013 has not brought the salvation some might have hoped for, not yet at least. Often the North American fall comes with a market rise as interest picks up after a slow summer as analysts and management return from retreats in Ontario's lake country and BC's Gulf Islands. If this – a Venture on par with itself after gold's April rout – is all it has got, well, flaccid is one way to describe it.

Or starved.

We limp along, ever weakening, like a drooping line of Roman slaves in a Hollywood drama from the 1950s, our brutal masters picking the strongest among us and letting the weakest fall from the chain gang.

The strong may revel in that. The weak were lazy when all were free and thereafter, captives to the lowest bidder, they stole some of their food.
This guy writes for Mineweb? What is this, a tryout for Emo Wrist-Slasher's Weekly?

Hey Kipper, Chopper's got some advice for you:

Sunday, September 29, 2013

SMBC on the topic of the gold vs money supply graph

Remember that retarded gold vs. money supply graph, that's no more than two things going up at the same time?

Here's SMBC:

Watch The Watchmen

Stood in firelight, sweltering. Bloodstain on chest like map of violent new continent. Felt cleansed. Felt dark planet turn under my feet and knew what cats know that makes them scream like babies in night.

Looked at sky through smoke heavy with human fat and God was not there. The cold, suffocating dark goes on forever and we are alone. Live our lives, lacking anything better to do. Devise reason later. Born from oblivion; bear children, hell-bound as ourselves, go into oblivion. There is nothing else.

Existence is random. Has no pattern save what we imagine after staring at it for too long. No meaning save what we choose to impose. This rudderless world is not shaped by vague metaphysical forces. It is not God who kills the children. Not fate that butchers them or destiny that feeds them to the dogs. It’s us. Only us.

Streets stank of fire. The void breathed hard on my heart, turning its illusions to ice, shattering them. Was reborn then, free to scrawl own design on this morally blank world.

That's a quote from The Watchmen.

I was just thinking about this movie for the past few days, how much I love it. I don't watch it often because the director's cut is something like 3 hours long, and I just can't peel myself away from it once I start watching.

It wasn't even in the listings last night, but just out of sheer luck I came across it on TV at 9PM (the shorter TV version unfortunately).

If you haven't seen The Watchmen, watch it as soon as you can. (Watch the Director's Cut.) It's not a superhero movie; it's ten times better than The Avengers, which was good in its own right but still was just another dumb action flick.

The Watchmen simultaneously deconstructs the idea of the comic book superhero and indicts the amorality of the human condition. I'm telling you that 20 years from now people will be hailing this as one of the great films of all time, when all the other shit coming out of Hollywood will have been forgotten.

Some scenes after the break: