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Avi weighs in on the investment environment.

Big Al
March 10, 2015

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Discussion
43 Comments
    CFS
    Mar 10, 2015 10:24 PM
      Mar 10, 2015 10:06 PM

      that was another great article…..

      Mar 10, 2015 10:29 PM

      A lot of analysts feel they are noble if they turn a blank eye on market intervention. Otherwise they will be considered one of the conspiracists. They don’t know they are doing a disservice to their audience.

      Mar 11, 2015 11:03 AM

      ARE YOU STILL OK MAN ?

    Mar 10, 2015 10:32 PM

    ANV is the first to go. The annihilation phase has probably begun and will intensify if gold gets to 1000-1050 this summer.

      Mar 10, 2015 10:19 PM

      then who supply the gold?

        Mar 10, 2015 10:20 PM

        It doesn’t grow on trees.

        Mar 11, 2015 11:35 AM

        I am waiting for them to give up.

          Mar 11, 2015 11:43 AM

          You mean cry uncle?

            Mar 11, 2015 11:31 AM

            You mean cry Uncle Sam? If more production they have and the more money they lose, there is no point of producing. If they don’t produce, there is a shortage. If you think Newmount and Barricks are going under, which I believe possible, it will be a wipe out for the industry.

            Mar 11, 2015 11:34 AM

            BTW, do you think that this high dollar will put US in a disadvantage in trade and therefore hurts US industry? Now European and Japanese manufacturing have a huge price advantage over US manufacturing.

            Mar 11, 2015 11:46 AM

            Wow, yes that would be very bad news if Newmont or Barrick went bust. I don’t see that happening but I suppose anything is possible if gold stays down and falls lower as far out as 2016. Its already my view that gold will not recover in 2015 and in fact will end the year lower. There is tremendous pressure on right now and we are finally seeing the cracks appear.

      Mar 11, 2015 11:06 AM

      Anyone have thoughts just how many miners in GDXJ are potential future ANVs?

        Mar 11, 2015 11:10 AM

        No but a few names that crop up with debt problems or high debt/equity ratios such as Tanzanian, AuRico, Banyo, Barrick, Harmony, Newmont…..the list is long. Not saying they are going the way of ANV but it is a good idea to know the debt levels companies are carrying and what their cost of production is before getting excited about them. Especially as this bear in gold has not yet ended and nobody knows for certain just how far prices will fall before a lasting bottom is reached. Meanwhile, just the fact that a major company has gone bust sent a lot of guys running back to check on the fundamentals. This has put a scare in the market and caused a loss of confidence. It is no longer going to be accepted where the bulls just point to cheap share prices and insist that is proof it is time to buy because the upside is so bright. Or so they say. On the contrary, the gold world just felt a shiver of fear and it should be clear caution is warranted because there will be cases where a company with millions of ounces in the ground can trade down to zero. Which just proves that what is in the ground ain’t worth snot if the cost of digging it up exceeds the price you sell it for. The problem for the industry is that a few events like this just scare people away and make gold mining look quite a bit riskier all of a sudden. I actually think this ANV bankruptcy and others like it will result in most miners losing value as investors try to price in that risk versus an upside that is not yet proven. Sure gold will go up one day, but you have to survive the price collapse and company defaults first.

          Mar 11, 2015 11:14 AM

          Bird, that is a top comment.

            Mar 11, 2015 11:35 AM

            Thanks Dave. Debt and debt equity ratios are just two ways to measure a company of course and cannot be the final word on whether you might buy and own them. What I look at are the d/e charts going back a few years to see the direction the ratio is heading for a company. Some of them you might otherwise like would give you pause when you see how the financials have deteriorated since the 2011 gold price peak.

            Mar 11, 2015 11:15 AM

            Great points Birdman. Many investors in the miners have been snookered into buying the garbage because of promises “to da moon” so that it won’t matter what one buys. Sadly, I was a victim to this but I sure learned my lesson when I started doing my own due diligence.

            Mar 11, 2015 11:36 AM

            I sure agree, Mark. The homework really pays off. We have to challenge the Uber bulls assertions all the time because they just never relent. You know who is really thorough and has a disciplined approach is Doc. Even if the technicals are good he won’t necessarily buy until he has a handle on the companies financial position and outlook. It just takes time that’s all and not everyone wants to go the extra steps.

            Mar 11, 2015 11:10 AM

            I have no complaints against Doc’s work at all. It’s exceptionally good. But I like to do my own technicals because I live as a day-trader, so my analysis and detail needs to be “fine tuned”. I’ve gained back everything I’ve lost and then some, thanks in part to the “school of hard knocks”. Ain’t gonna blame anyone or point fingers except at the person in the mirror. Relying on “gurus” and “subscription” services can be a disaster for many.

            Funny thing though: we are supposed to go to school to receive a higher education, yet no one teaches us the reality of money, how it works, and how to make it.

            Mar 11, 2015 11:42 AM

            Ain’t that the truth Mark. Unless your parents or other family members had insights they passed on to you early in life it would have been self education all the way. Mostly by hard knocks unfortunately. In this business though it seems too many are just silver tongue liars. I have learned you need to question everything. And when they ask accusingly “don’t you trust me” I just tell them no, I don’t trust anyone anymore.

          Mar 12, 2015 12:10 PM

          Harmony does not have debt problems, at list according to their the balance sheet. debt/equity ratio is 30%.

    Mar 10, 2015 10:34 PM

    Very good interview guys. I tend to agree with Avi most of the time, and do believe the general stock indexes have further to rise this year, but then I also expect a 20-25% correction in the Sept/Oct range. I also concur on the lower metal prices (likely in summer doldrums of “Sell in May and go away” into June.

    Lastly I think some of miners will start their journey up ahead of the underlying metals and lead the sector up. It will likely be when the mid-tiers and majors start reporting Q1 earnings in late April into mid May. The low fuel & currency exchange rate should positively effect earnings in Canadian/Australian/Asian based companies in particular. This will likely lead to an initial de-coupling of the miners from the metals. When the PMs bottom with the commodity complex over the next 2 months, and the Mid-Tiers and Majors take off due to better earnings, then I think when Gold/Silver do start heading up that the Jr. Miners will be explosive to the upside.

    As stated many times, I truly believe the “Streaming” companies like Franco-Nevada, Silver Wheaton, Royal gold, and Sandstorm Gold will absolutely continue to grow their acquisitions of royalty streams and NSRs, and this will grow shareholder value faster than the average miner. However, finding project generators, explorers, and small producers that will get taken over in M&A activity (by Majors looking to buy ounces in the ground down the road) will be the most leverage of course.

      Mar 10, 2015 10:46 PM

      The Sprott Gold Miners ETF (SGDM) has a nice weighting of Franco-Nevada, Silver Wheaton, and Royal Gold along with some other quality Major and Mid-Tier miners for a nice ETF exposure of that space.

        Mar 11, 2015 11:28 AM

        BUBBLE DYNAMICS

        I think the royalty and streaming companies have been big beneficiaries of the metals mining bubble. They helped to finance the actual miners so the miners could make really stupid ‘investments’ in new low grade projects and overpriced acquisitions in the boom. So the royalty companies succeeded as a result of the metals mining bubble. The miners were so greedy for vapital that they were selling silver for 4 or 5 bucks to a straming cmpnay when the market price was $30 bucks. How insane is that? It just shows the miners had already exhausted all sources for sensible ways of raising funds and were selling their future down just to expand. That is trash bubble mentality in the most extreme.

        Now on the way down, the royalty and streming companies may be beneficiaries again at the moment, as the real miners are really hurting with low metals prices and are having to throw away their best gold and silver at knock down prices into the market and also sell it forward to the streaming companies for next to nothing just to stay afloat.

        I cannot reconcile the claims from the clowns about $100 silver in the future with the fact that miners have been willing to sell it for $4-5 to streaming companies all through the bull market. It just does not add up. One would wonder if silver is actually worth even $10.

        It may be an indication that the gold and silver bull market was a great or even greater a bubble tha the one that ended in 1980. In that case, it would be a very long wait for new highs, maybe another 20 years in gold and silver, in order to clear out all the malinvestment in the sector, at which point the whole industry will in the next bull market sell its metal directly at market prices and not play financial silly buggers with it.

          Mar 11, 2015 11:00 AM

          Very interesting thoughts and points on how the streaming companies have capitalized on the boom and bust cycles with the PMs for the last 6-7 years. Yes, I agree that many mining companies made poor judgement calls, and financed projects that they shouldn’t have giving the streaming companies huge margins in their desires to raise cash. Then when things went down into the bear market, many of them doubled-down and went back for financing with the streaming companies again, when they couldn’t get funding elsewhere.

          I really believe when another 1-2 years go by that you’ll see an even larger portfolio growth of 50% + in all the royalty companies regardless of spot price. If the metal prices rebound, then their margins will be just that much better. Regardless, they have diversified their risk among many projects from producers down to exploration, and most have a few other credits like from some of the deals where they picked up PGMs, base metal credits, and even coal/oil from some of the deals with their partners to further diversify. Owning a streaming company is almost like owning an ETF because there are so many companies and assets in one basket.

    LPG
    Mar 10, 2015 10:22 PM

    Interesting comments from Avi. As always.

    Thank you Al & Cory for the interview.

    Best to you both, and GL to all investing/trading.

    LPG

    Mar 10, 2015 10:34 PM

    50 to 70 YEAR BULL MARKET………………I’LL TAKE THAT………

      Mar 11, 2015 11:31 AM

      Seriously, I was looking at a 60 to 80 year bull market.

      That way when I am 130 yrs old, I can retire (currently 50 yrs old)

    Mar 11, 2015 11:01 AM

    Metals May Have an Evil Intent, March 10 Kitco — by Avi Gilburt
    http://www.kitco.com/ind/Gilburt/2015-03-10-Metals-May-Have-an-Evil-Intent.html

    Mar 11, 2015 11:13 AM

    Yikes….the Euro. What more needs to be said. But holy Mackerel is it in a death spiral now or what?

      Mar 11, 2015 11:31 AM

      Or is this about to become the dreaded waterfall event?

        Mar 11, 2015 11:38 AM

        INSANITY YOU WILL SEE ! Suddenly the blind will see ! And think’s will exsplode ! BUY BUY GOLD Day will FOOL YOU ALL !

          Mar 11, 2015 11:01 AM

          Could be right Franky. But at the moment the dollar is taking gold down. I am a little surprised it has held up so well considering the size of the dollar move.

            Mar 11, 2015 11:42 AM

            Bird, if you were in the Eurozone, gold is up in Euros today and you would be happy!! In fact it is probably up in Euros every day recently! 😉 It’s actually above its late Aug/early Sept 2013 high in Euros, up nearly 12% year over year against minus 14% in US Dollar terms.

            Looking at the Dow priced in Euros shows the relative flight of capital from the EU to the USA. It’s looking like 1999 Nasdaq all over again but on a larger scale.

            http://stockcharts.com/freecharts/gallery.html?s=%24INDU:$XEU

            The extent of the depression in Europe in general has to be illustrated by the fact that with this huge currency depreciation they still have zero CPI inflation. Welcome to the Third World.

            Mar 11, 2015 11:24 AM

            Not in the Zone Dave…thank God for that. Over here in East Africa you would not even know the rest of the world is having so many difficulties. Its business as usual and while it feels a little slower these past few months there is not much contagion apparent from Asia or Europe yet.

    Mar 11, 2015 11:29 AM

    The US dollar index is now 99.3. It could easily reach 100 by the end of this week.

      Mar 11, 2015 11:41 AM

      Futures hit 100 already this morning.

    Mar 11, 2015 11:36 AM

    please turn up yr audio…

    Mar 11, 2015 11:21 AM

    Just had a retest on silvers November lows (excluding the spike down which does not count in my books). That cannot bode well for gold although its still toughing it out. I have little doubt we hit that too and break below before any kind of reversal is likely. A retest was my target once 1200 was breached.

      Mar 11, 2015 11:49 AM

      Hell, it looks like gold could retest support this very day just as silver had been telegraphing earlier in the morning. And sure enough silver continued lower and has now hit new lows of 15.30

    Mar 11, 2015 11:46 AM

    Well I don’t understand why anyone can doubt Venezuela is still going all defaulty on the world especially after this mornings news they sold off tonnes of their gold for the bargain basement price of 1070 an ounce. Can’t say this was unexpected though.

    Venezuela Begins Liquidating Its Gold
    http://www.zerohedge.com/news/2015-03-11/venezuela-begins-liquidating-its-gold

    Mar 11, 2015 11:30 AM

    Avi is a top trader and should be a regular guest on a daily basis!!!

    Mar 11, 2015 11:52 PM

    50-70 yr bull market in gold? If the government keeps running inflation at >= 2%, I predict no end to the bull market in gold 🙂