With great apology, I am late with this week's missive largely due to the
arrival of boating season and the fierce need to secure a new vehicle, which
should have taken (only) two days but didn't. Having arrived at the marina on
Friday evening, I expected a rather smooth transition as it was the first
year in four that I asked our local service fellow to do all of the end-of-year
maintenance, instead of me draining the lines and winterizing the water tank
and changing the engine oil and all of those things I loved to do in my 40s
but that have become a royal pain in the ass twenty years later. Call it
"geezer-itus" or "baby-boomer angst," I agreed to let the
local marina service group do all those debilitating tasks and simply threw
them the keys while shouting "See ya next spring!"
I fully expecting a boat functioning this past weekend in exactly
the condition in which it was functioning last October. Well, with great
deference to Mr. Murphy and that obnoxious law named after him, my lovely
little Freshwater Pearl was a mess of the highest and most irritating order,
floors most foul, upholstery seams ripped, and obvious dings and dots from
the reentry-to-the-water exercise. However, what really set me off was
that my most-excellent winch-powered dinghy caddy was nonfunctional, and
after five hours with limited workspace, I removed what I thought was the
faulty part.
By this time, the Fido-beast has leapt off the boat and off the slip and,
in an visceral reaction to my multitudinal "expletive deleteds,"
bounded off into the woods in search, I am sure, of a somewhat saner
master—one who might never opt for such an horrific linguistic diatribe.
To be truthful, there is another reason I am late with the weekly missive.
Alas, I am finding it increasingly difficult to come up with anything
different, witty or interesting to write about. I feel like a CD player
caught in a repetitive loop where a Robbie-the-Robot voice keeps saying:
"Warning! Warning! Buy gold! Buy gold!" I almost want to
throw myself, instead of the quote monitor, out of the ninth-floor
window.
Here is the drill I have to go through to maintain my sanity as the average
subscriber/investor peppers me with questions:
Investor: "Gold is trading really weird these days."
MJB: "It's rigged. Get over it."
Investor: "Silver looks cheap relative to gold. The ratio of silver to
gold is just shy of 90!"
MJB: "Yeah, and until JP Morgan is prohibited from trading it, the ratio
could see 120."
Investor: "Stocks should be correcting as the trade war has got
to hurt earnings."
MJB: "What do earnings have to do with stock prices? You have 50 traders
at the NY Fed under orders to support them so just buy the dips because the
Fed has our backs."
Investor: "Gold mining stocks with new discoveries don't seem to attract
the attention that they did back in the 2000–2011 period."
MJB: "Why should they? The Millennials could care less. If they drilled
90 meters of THC, they would care."
These types of conversations actually both frighten and disturb me because
they are rife with a subtle dose of cynicism and a hefty dose of resignation.
To wit, I am growing increasingly more cynical of our institutions and I have
nearly resigned myself to a never-ending world of aberrant behaviors, all the
product of this generational acceptance of government interventions and
interference. The problem is that I can never accept these
interventions. But the newer generations readily accept and, in fact, expect
them, as if an entitlement bestowed upon them at birth. As we Baby Boomers
age and lose power and relevance, adherence to the belief in the return of
sound money and fiscal sanity is sadly a losing proposition.
On the weekend, I watched all three episodes of Grant Williams' brilliant
interview ( https://www.realvision.com/) with the co-author of The
Fourth Turning, Neil Howe, during which they discuss where we are in the
generational cycle of the four "turnings"—high, awakening,
unraveling and crisis. It came as no surprise that here in
2019, we are in the late stages of the "unraveling," where
institutions are the increasing focus of distrust and where career and
behavioral individualism is revered. These are all periods of cynicism and
bad manners, when civic authority feels weak, social disorder feels
pervasive, and the culture feels exhausted. An example of a Third Turning (unraveling)
would be the Roaring Twenties, which led to the Stock Market Crash of '29 and
the 1930s Great Depression.
There are at least ten terrific interchanges between Grant and Neil but
the one that got me was where it is pointed out that we, as a race of humans,
are in the transition between the Third and Fourth Turnings. It is, according
to the theory advanced in the book, a period where if you are a late Boomer
or early Gen Xer, you are having the most difficult time of your investing
lives because you were trained/socialized/educated in a post-crisis
period—the high. For us, this was the post-WWII rebirth, and for the
next sixty years we have been applying skills and mindsets applicable to that
period and to the Second Turning (awakening), both periods of
prosperity and growth.
However, I would peg the beginning of the Third Turning (unraveling)
at around 2000. Since then we have watched the Baby Boomers try to fight the
inevitable arrival of the Third Turning—despite the dot.com crash in 2001,
9/11, the subprime meltdown in 2008, and more recently, the stock market
bailout in late 2018, all classic examples of a generation trying desperately
to preserve the status quo by way of increasingly desperate interventions.
In other words, Millennials and Echo Boomers are navigating with ease
these days while the older generation, having resisted the arrival of a new
generation of attitudes and changes, is watching old, tried-and-true methods
of investing get dashed on the rocks of algobots, social media and government
interference.
So, if any of you are wondering why I have trouble these days find ideas I
think will interest you, there, in a nutshell, is the reason. I feel like
many times I am talking to room full of ghosts, as in James Cameron's
"Titanic," where at the end they were wandering through the halls
of the sunken ship with flashbacks to pre-disaster moments of glory and
grandeur. And talking to ghosts is anything but a healthy pastime.
The two charts shown above are a vintage illustration of the apathy,
desolation, abandonment and lethargy surrounding the gold and silver space.
The other day I read one of those old e-mail blasts, in which we are offered
"35 Reason to Own Gold NOW!" After reason #11, I threw it in the
bin. It is all the same dialogue of "too much debt" and
"fiscal insanity" and "Chinese demand" or “Indian
demand," but I don't care whether it was Martian demand or Ballchinian
("Men in Black," 1997) supply, you (and I) have read it or heard it
all before.
It is true that silver is cheap relative to the S&P, and it is also
true that gold and silver mining shares are cheap relative to bullion, but
that does not constitute causation in terms of a trading idea. In 2019,
everyone is a trader operating in the Greater Fool Theory of causation. You
buy something at any price because you just know there is some moron
out there willing to buy it off you at a higher price. Earnings, trade
wars, price/earnings ratios, etc. all mean absolutely squat today, and that
is why in a Utopian world of "The Fed's Got Our Backs," gold and
silver offer little in the way of utility. This is especially true in the
"unraveling" stage, because the younger generations willing
to take all the risk see little need for safe havens in a world of cannabis
30-baggers and the raging FANG stocks.
As I wrote about a few weeks back, there really is nothing dire about the
technical picture for gold, but in saying that, I refer to the optics of the
chart pattern only; the predictive nature of the chart pattern is nonexistent
at best, and counterintuitive at its malevolent worst. Based upon the
dramatic drop in open interest in the past few sessions, and since the end of
the latest COT week last Tuesday, this upcoming COT report should have the
Commercials rapidly covering the shorts they put on during that brief pop last
week to above $1,300. Worst case scenario: a quick flush to the 200-daily
moving average, at $1,258, at which point we back up the truck (but I doubt
that happens). . .
The COT from last Friday simply confirmed what the open interest spike
implied: The Commercial Cretins, in full view of regulators and justice
departments, were allowed to offer several thousand contracts of phony gold
to cap any hope of an advance at around $1,300—which are now being covered
$30 lower. Generations of younger investors join the price management party
and sell the rip, where by contrast, over in the S&P pit, they do the
reverse because they have been trained to place wagers "with the
house," where the odds of winning are undisputedly higher. Not to beat
upon a deceased nag, but these constant and malodorous takedowns are again
the reason why I find it sometimes difficult to write any words of
encouragement. But at the same time, gold got pounded on Tuesday down under
$1,270, yet the HUI managed to eke out a small gain despite gold's weakness,
always a good sign in the near term.
I am now 100% long the JNUG at an average price of just under $7
(offside), and I own a 50% position in NUGT June $15 calls (also offside).
But where I have been adding quite aggressively is through the unduly
depressed shares of Getchell Gold Corp. (GTCH:CSE) (on-side), by way of the
$0.15 unit, which is certainly preferable to paying $0.25, where it traded
over 70,000 shares on Tuesday.
I have always held that full disclosure is a policy most appreciated by
readers and subscribers so let it be known that I am a (paid) consultant to
the company. And yes, I would like to generate some interest in this highly
prospective exploration program, because resource delineation will be
exciting but costly, in the event there is an initial discovery on this phase
two program. As we all know, you must use the excitement of discovery
momentum to finance at progressively higher prices. The problem with so many
juniors these days is that they have all had to finance in the $0.05–$0.25
range, so when the discovery arrives, the excitement gets muted by the
torrent of cheap paper hitting the bids. If any of you know a way to convince
these privileged shareholders the wisdom of holding onto the cheap stock and,
rather than selling it, buy more because you are simply "averaging
up" into a value-add discovery, you should contact a ghost writer, then
a publisher and wait for the book-signing events. Half the population of
Vancouver would be lined up, from Granville and Howe to somewhere in the B.C.
Interior.
So there you have it. I was actually able to assemble eleven paragraphs of
quasi-literate, pseudo-intelligible commentary on the topic of
"markets." I admire my fellow scribes, who are able to hyperbolize
on the merits of gold and silver ownership without losing sleep and getting
winded.
I also worship those who jumped ship and defected to the "Dark
Side" of cannabis and artificial intelligence and crypto,
notwithstanding the fact they are front-running momentum junkies with zero
knowledge of the history of money. I am sick and tired of making excuses for
my trading ideas, which are based on the tried-and-true moments in history
when markets were free. They are today not free. They are corrupt.
The layers of dysfunction you feel every time you look at your
month-end statement are synonymous with the layers of betrayal you feel when
you look at the transition we are seeing in the leadership demographic. The
old regime of the "First Turning" are now gone, and all that are
left are people like me, who are astute analysts of the history of markets as
I recall them. Pity those who are ignorant of the sands of the hourglass and
the significance of history. They dwell in the House of Modern Glory, which
shall soon be a fleeting memory.
We will have our day. Make no mistake.
[NLINSERT]
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.
