I have a confession to make: There are no free markets anymore; there are
only interventions. Of course, I bow to Gold Anti-Trust Action Committee
(GATA) cofounder Chris Powell, who coined that brilliant phrase a few years
ago, because it was certainly my exposure to GATA in 2005 that changed my
perception of the insidious role of the bullion banks in controlling price
and sentiment.
That, in fact, has since been expanded to include not just gold and silver
but LIBOR, Fed funds, corporate bonds and, finally, stocks. The delivery
method used to be one of the hired mouthpieces on CNBC, like former reporters
Charlie Gasparino or Maria Bartiromo, but both have moved on and were
replaced not by reporters with a "scoop," but rather central bank
governors themselves. This has been the case for most of the pre- and
post-global financial crisis period—up until the election of the current
president, who has, along with several cabinet members such as Larry Kudlow
and Smilin' Stevie Mnuchin, discovered that sending out messages to either
roil or calm markets is best carried out via Twitter.
The Donald derailed the current stock market "melt-up" on
Sunday, May 5, when shortly after noon he sent out a tweet telling the world
that the U.S.–China trade deal was "dead" and that he intended to
raise tariffs to 25% on Friday, May 10 (which he did). The impact of the
POTUS pronouncement was a $1.3 trillion haircut in global market values, and
while it looked as though Friday was headed for a major crash I sent out a
tweet asking: "Will Smilin' Steve Mnuchin be the voice that turns the
market?" This was in response to a CNBC headline plastered in
super-large font across the TV screens where Mnuchin was quoted as saying
that trade talks today were "constructive." I also included the
time that Mnuchin made the statement via Twitter, which was shortly after 11
a.m. and within one hour—one hour—of when the S&P tacked on 35
points, at which point I tweeted out this: "Now we have the (sickening)
answer. . ."
Everywhere I turn, what was once the "invisible hand" of
government intervention and interference has lost its cloaking device and is
now in full view of any and all that were trained in the era of free markets.
To use the term "surreal" is understatement of the highest order.
You have to understand that I am not a mind reader and I am certainly
anything but a shaman (content to occupy all time and space through
connectivity with my ancestors), but if I can smell collusion and
interference and intervention and send out humorous tweets predicting a
55-point reversal in the S&P from 11 a.m. to 4 p.m., as I did on Friday,
then something is glaringly wrong with our system of price discovery and execution.
The greater failing in today's market posture is not that an acting
president is demonstrating his narcissistic tendencies while gleefully
massaging the global markets via Twitter; it is that any market unable to
withstand comments from an acting head of state is not a market that I
would classify as healthy. I submit to you all that the current environment
of tweets and tariffs and tensions is most certainly not an enviable
setup for as assault into new high S&P ground. However, it is a
wonderfully friendly setup for the precious metals, and while many out there
are bemoaning the state of the mining shares (especially the juniors), gold
is actually looking fine.
The Gold Miners are also in a state of flux right now not because the gold
price looks vulnerable, but more because the tweet storms are buffeting the
markets around like corks in the Pacific—and by that I mean specifically
common stocks. Three charts shown below all convey a message of
"bottoming" versus "topping," and nothing in the RSI or
MACD for either of the three is prompting me to liquidate the leveraged
positions. I am long JNUG from the $7.30 level and while offside, I still
have about 50% cash in the trading account, which I intend to deploy once the
broad markets settle down.
That being said, there is one indicator that cannot be placed on any chart
and that is the "investor sentiment" gauge. Right now, sentiment
for the senior miners is poor; sentiment for the junior miners is worse; and
sentiment for the micro-cap junior explorcos is dreadful.
I recently ran across a public document compiled by Kai Hoffman of Oreninc
detailing the state of the financing markets or junior resource companies,
both explorers and developers, and needless to say, if the trend for 2019
continues, it will be the worst year for raising money for the juniors dating
back to 2011. The next worse was 2015, the year that gold bottomed at $1,045,
with the HUI bottoming only a couple of weeks after 2015 ended with the 99.17
low seen on January 19, 2016. It has been my experience, which dates back to
the late '70s, that when customers/clients/colleagues are sporting the
current level of disinterest/dislike/revulsion in the junior exploration
sector, it is always—not often or frequently, but always—a formidable
bottom-spotting indicator for not just the "little guys," but for
precious metals (and other commodities) as a group.
Just as crowds were clamoring to own crypto in 2017 and weed in 2018,
manias are the psychological opposite of desperation/capitulation bottoms.
From conversations I am having daily, we are either at that
desperation/capitulation extreme now or we are very close to it.
Another example of shredded sentiment is found in the example of my
current favorite junior explorer, Getchell Gold Corp. (GTCH:CSE) (CA$0.195),
whose Hot Springs Peaks project in gold-rich Nevada carries all of the
attributes that have, in the past, attracted thousands of new investors both
young and old. Without getting into a four-paragraph promotion of this
project, it has location (Nevada), geology (abundant gold-friendly indicator
minerals), scale (1X1X1-kilometer resistivity anomaly), and personnel (Tim
Master delivered a major gold discovery for GSV.V in 2015).
The company is in the midst of a financing that is still open (for reasons
mentioned above) but is still drilling two to four diamond drill holes into
an anomaly that, if mineralized, could yield a 2 billion tonne ore body. Now,
until they assay it, it is not an ore body; it is still just a target. But
the upside potential is unlike most others because they are hunting in
elephant country, with the two major game wardens being Newmont Goldcorp
Corp. (NEM:NYSE) and Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) (who basically
own the state). One sniff of a major gold discovery and GTCH is in play.
With a story like this one, in past times, (back when people actually
enjoyed speculating on something other than a 100-acre weed field with zero
earnings and no business plan, or a software program that mines digital coins
and assigns a value of U.S.$19,891 per coin because the Geek Squad "says
it is so"), markets would have assigned values of anywhere between $25
million ($25M) and $100M (GTCH is currently CA$5.1M). That is because any
kind of drill hole of economic grade and width would automatically and
immediately launch the company into play, with takeover premiums many times
in the billions of dollars. By example, when Inco took out Diamondfields in
1997, there was no preliminary economic assessment or preliminary feasibility
study assigned to the Voisey's Bay deposit; there was only drill hole data,
and when Inco joined the (Friedland-orchestrated) dots, before you knew it,
they were spending $4.3 billion to acquire a $20 billion ore body—not a mine,
an ore body.
So when I get rejections from people who agree with my optimism, and agree
with the potential, and like the personnel, and love the location, and still
tell me that they are going to "pass," I just bang my forehead on
my desk and ask myself why I even bother to try, as I have done for most of
my years in business, to help incubate these highly promising fledgling
companies. It is an exercise in masochism, and I truly long for the moment
when Tim Master delivers a major economic intercept for GTCH and its
long-suffering shareholders. I have been here many, many times before, and
when the pessimism is the thickest, the risk is always the thinnest. Think
about it.
The COT Report
Nothing new in the zoo here, with marginal changes and nothing to shift the
needle in terms of urgency to buy.
I have been exploring the universe of finance since the mid-'70s and I
liken my trade to a comment made by Hall of Fame golfing legend Sam Snead
who, while seen sitting in the club house after a rousing 18-hole loss with a
smile on his face, was asked why he was smiling. He replied, "I just
learned a new shot." Sam was 85.
There is a life lesson in that remark and one that gold and silver
believers should heed. Since it is a known truism that "money moves to
where it is best treated," it is no wonder that with central banks
supporting stocks and suppressing gold, money has been treated best in areas
away from the metals,
Or has it? Investors in Venezuela would not agree despite the fact that
their Zimbabwe-esque stock market has been a stellar, inflation-fueled rocket
ship, just as was happened in Argentina, Turkey, and of course, the 1920s
Weimar Republic. The degree to which both elected (government) and
non-elected officials (central bankers) are now allowed to tweet, wink,
nudge, whisper, and drum-bang market-moving messages to the world is
immorality verging upon surrealism. And the cartoon depicted below is a
graphic interpretation of the bedlam we are experiencing. I repeat what I
have been saying (and tweeting): Markets that soar or swoon from tweets by
politicians are not healthy markets.
Time for us all to learn a "new shot." Thank you, Sam.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University
where he earned a Bachelor of Science in finance and a Bachelor of Art in
marketing before completing post-graduate work at the Wharton School of
Finance. With more than 30 years of experience as a junior mining and
exploration specialist, as well as a solid background in corporate finance,
Ballanger's adherence to the concept of "Hard Assets" allows him to
focus the practice on selecting opportunities in the global resource sector
with emphasis on the precious metals exploration and development sector.
Ballanger takes great pleasure in visiting mineral properties around the
globe in the never-ending hunt for early-stage opportunities.
[NLINSERT]
Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family,
own securities of the following companies mentioned in this article: Getchell
Gold Corp. My company has a financial relationship with the following
companies referred to in this article: Getchell Gold Corp. I determined which
companies would be included in this article based on my research and
understanding of the sector. Additional disclosures are below.
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5) From time to time, Streetwise Reports LLC and its directors, officers,
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Charts courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options
trading and we recommend consulting a financial adviser if you feel you do
not understand the risks involved.
