No Faith In Higher Yields and The FAANG Stocks

June 22, 2018

Rick is back with some bearish comments for the markets and long term yields. He points to the weak housing and auto sector as well as a more hawkish Federal Reserve.

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    Jun 22, 2018 22:07 AM

    (ZNX) ZincX Announces Positive Preliminary Economic Assessment for the Cardiac Creek (Akie Property) Zinc-Lead-Silver Deposit

    Estimated pre-tax NPV7% of $649M ($401M after-tax)

    Estimated pre-tax 35% IRR (27% after-tax)

    Estimated pre-tax 2.6 year payback (3.2 year payback after-tax)

    PEA contemplates a 4,000 tonne per day underground mine and 3,000 tonne per day concentrator with an 18-year mine life

    Total mine production of 25.8 million tonnes of which 19.7 million tonnes are processed

    Initial CAPEX (excluding contingency) estimated at $256.7M; total of $302.3M including $45.7M in contingency

    Payable metal production over life-of-mine is 3,268M lbs of zinc & 362M lbs of lead

    Average annual production of 178M lbs of payable zinc and 20M lbs of payable lead at an all-in operating cost of $102.38/tonne milled

    Total payable metal LOM is $3,960M; or $201/tonne milled

    Saleable zinc and lead concentrates with no penalty elements (clean concentrate)

    There are no net smelter royalties owed (0% NSR)

    Jun 22, 2018 22:06 AM

    Humanity ‘living on borrowed time’ as ‘cheap metals’ disappear, says Ross Beaty
    BY: Colin Desmond June 21, 2018

    The following is an edited transcript of remarks made by mining entrepreneur Ross Beaty during a panel session at the Resources for Future Generations conference in Vancouver in mid-June.

    “All global governments remain obsessed with GDP growth. This is a recipe for disaster — growth of anything in a finite system is impossible, and always ends in collapse. Always.

    If we extrapolate from the average growth rate since 1950, the world economy in 2050 will be four times larger than it is today. If world population grows to 9 billion, as is the forecast, and everybody were to have the same per capita consumption of Canada, the world economy would have to be 15 times bigger than it is today.

    These numbers are just ridiculous. This is the very definition of unsustainable. We have neither the soil, groundwater, mineral resources, land, ocean or any other resource to support these kind of numbers. It’s time to recognize that we cannot grow like we have to date. We need to build a new economy based on permanence.

    The world is changing quickly. We simply cannot assume that the future will be like the past. Barriers to growth are everywhere. Cheap oil is probably gone. Cheap copper, aluminum, zinc and other metals are probably gone as well. Debt cannot continue to outpace economic growth.”

      Jun 22, 2018 22:29 AM

      Technology is changing the resource industry far faster than most analyst’s can see. They have new ways of capturing oil from existing and abandoned fields, new finds one in Guyana, the world is awash in oil. The future will see a declining use of this resource. As for metals there are many breakthroughs happening with insitu leaching, discoveries of huge fields of rare earths around the seas of Japan, and space mining is on the horizon. Most experts are just that,good at reading the past in a rear view mirror. DT

    Jun 22, 2018 22:28 AM

    Nobody says it better than Gary Tanishian. Likely more of the same until some Macro trends change:

    Jun 22, 2018 22:28 AM


    Jun 22, 2018 22:30 AM

    Nobody says it better than Gary Tanishian. Likely continuation of present trends:

      Jun 22, 2018 22:35 AM

      He’s better than many and his macro stuff is interesting but I don’t think he’d do it for me when it comes to the junior miners.

      Jun 22, 2018 22:38 AM

      He missed a lot of upside with his, not yet, timing is everything stance on 1/29/16 and was still not appropriately aggressive two weeks later…

        Jun 22, 2018 22:26 AM

        Have only read the guy for a bit over a year. I don’t subscribe but macro wise, I believe he’s on the money as well as any. Don’t really know any perfect timers. That’s a trait one has to almost develop for himself. We all should know how much we want to risk and at what juncture. Analysts can ruin their careers by making a short term call and missing it……….although many try. Question is how many act on those calls. Anyway…………thanks for the comments.

          Jun 22, 2018 22:37 AM

          One way to look like a good timer is to sell when we’re at our greediest and buy when we doubt what we thought we knew.
          It’s not quite that simple, but close — and it’s never easy.

            Jun 22, 2018 22:13 PM

            I agree with your statement Matthew. I find it easier to buy when there is blood in the streets, but harder to sell when everything is rosy. Sometimes the rational accountant gets the best of me. I’ve learned to take partial profits along the way which has helped. Do you have any technical rules for when you fully exit a position? My guess is you don’t have any one particular technical indicator, but I had to ask!

            Jun 22, 2018 22:37 PM

            I look for the usual signs of exhaustion from the candlesticks to volume to negative divergences in price and momentum.
            Of course, I also look for overbought rsi readings and the height of price extension above longer term moving averages. In the mining sector, always keep your dominant eye on the health of the metals charts.

            Jun 22, 2018 22:53 PM

            Pretty much what I expected. I just get to darned greedy I guess! Of course I have been wrong on the buy side some which is half the battle.

            Jun 22, 2018 22:36 PM

            Same here but you don’t have to get it perfect. I sold a lot IPT above a dollar in 2016, but even though I had the exact target, I sold very little in the 1.20s. I let myself become convinced that it was on its way to a higher target – around 1.40, I think.

            The point is, I felt bad about that for awhile but not when I was buying into the plunge last fall.

    Jun 22, 2018 22:42 AM

    Guess; PentaNova warrants will be in the money by end of July.
    22 million injection by panacol. 10 cents shares. 10;1 reverse split. 1.05 share price coming this summer.

    Jun 22, 2018 22:44 AM

    You Auryn holders just might finally be in for some relief:

    Jun 22, 2018 22:10 AM

    Following the 2016 peak, the XAU has corrected all the way back to just +113% — which is equal to the peak of the move that kicked-off the last bull market.

    The very bullish consolidation has not allowed those who missed 2016 to climb on at a price that they might like. Of course, those people wouldn’t buy anyway if they were offered the prices they have in mind.

      Jun 22, 2018 22:56 AM

      But it hasn’t been an entirely bullish consolidation. A truly bullish consoldiation would have been a “high” consolidation. The effect of consolidating far below the 2016 peak has been that you have a lot of longterm MAs making negative crosses. This has created a mess on the monthly and weekly charts IMO. And stongly suggests range bound trade for possibly a year or more.

      Take a look at INTC from the mid 1980s to the bubble top in 2000. It’s 50, 100 and 200 WMAs remained perfectly aligned more or less for that entire run.

      Then look what it did post 2001. Yes, you had big rallies, but the weekly MAs were a mess and price more or less was range bound for a decade.

      Could I be wrong? Sure, I suppose anything is possible. But look at the weekly chart for something like EXK. It’s 50, 100 and 200 WMAs are a mess. Does it mean it’s going to tank? Not necessarily, but to me it looks like it has more work to do for months yet. It’s not going to be trending any time soon. I would love to be wrong about this, but I doubt it.

        Jun 22, 2018 22:32 PM

        It absolutely has been a bullish “high” consolidation. As I pointed out the other day, the last bull market pulled back just as much (about 37% for the XAU) despite have risen less than half as much. Look at a 30 year chart and tell me it’s not the best looking start to a bull market of the last several decades.

          Jun 22, 2018 22:35 PM

          Wrong. When the XAU pulled back, it immediately ran back up and nearly made a higher high. It did this repeatedly over a long period of time and formed a much prettier consolidation and more or less kept the major moving averages trending upwards or at worst, flat.

          After the 2016 peak, the rebound was pathetic and has remained pathetic.

            Jun 22, 2018 22:45 PM

            No, not wrong. The XAU dropped almost 39% from its peak just like I said above.
            Yes, it made a new high “just” 15 months later, but that is to expected since it had previously risen a wimpy 115% (not 200%) in 19 months (not 6). That’s just over a double in THREE TIMES the time it took for a TRIPLE in 2016.
            Does any of this make sense to you?

            Jun 22, 2018 22:49 PM

            Look at how absolutely beautifully the XAU mainained its weekly MAs, namely the 50, 100 and 200 WMAs back from 2000-2008.

            Those MAs ore a mess for the XAU right now. For stocks like EXK and AG, they are even worse.

            More work needs to be done. Maybe a lot more.

          Jun 22, 2018 22:40 PM

          Look at the what the 50, 100, 200 WMAs did on the XAU’s run from 2000. It was beautiful. The 50 WMA never crossed below the 100 WMA until 2008.

          It did kiss the 100 WMA in 2005, but it never even went into a downslope.

          Can’t even come close to saying that about today’s weekly chart!

      Jun 22, 2018 22:07 PM

      There is a reason IPT tanked like it did post-2016. It ran way too far too fast off of a major bear market low. But that alone isn’t enough. If it was in a strongly trending bull, it would have held the major weekly MAs, and you would have never ever had the 50 cross back below the 200 WMA. That is a pretty darn good indicator of a prolonged (multi year) messy rangebound trade

      It could rally back up to the 100 WMA in the very short run here, but I think it is going to stay toward the lower end of its range until the 100 WMA crosses back below the 200 WMA. At that point, who knows what will happen but there is a chance, as I have said, that it retests its 2016 low.

        Jun 22, 2018 22:11 PM

        EXK and AG would have never tanked like they did after the 2016 peak if silver was about to start a major bull run imminently. Certainly buyers would have come in way before the 50 WMA was in danger of crossing below the 200 WMA. The 100 WMA would have never started sloping downward as it is now–that is never ever a good sign for a bull market.

        Jun 22, 2018 22:52 PM

        IPT “tanked” because of its very well established leverage to silver and fund (Resolute) liquidation. There was no cause for alarm whatsoever.

          Jun 22, 2018 22:56 PM

          EXK and AG have almost identical beats on the weekly charts as IPT. Did they all get sold by one fund??? c’mon.

          They are telling us something and that something is more work needs to be done.

            Jun 22, 2018 22:07 PM

            So a fund dumping millions of shares has no effect? Okay, let’s say that’s the case. It still doesn’t tell you what you think it does. In fact, considering that silver bottomed last year at just 5% above its 2015 bear market low while IPT bottomed at 130% above its bear market low, I’d say the message is a bullish one, if anything. The writing is on the wall so smart investors didn’t allow it to come close to the bear market low. Knowing that the silver pullback would be brief, they bought and I did too.

    Jun 22, 2018 22:24 AM

    Medium to long term, silver looks a lot better than gold.
    SLV:GLD weekly:

    Jun 22, 2018 22:50 AM

    Hey Bonzo, alternative medicine works! 😉

      Jun 22, 2018 22:13 PM

      Thanks, Matthew. Must be the probiotics I take have given me a healthy gut, and my gut told me to buy BTI@48.5 last Mon. Listen to your gut! But will Doc be right about BTI falling to 35? Maybe if we have a market crash like 2008.

    Jun 22, 2018 22:13 PM

    Silver is up 15 cents and AXU is flat. Tells you everything you need to know about action in the coming weeks if it closes like this or worse.

      Jun 22, 2018 22:49 PM

      No, that tells you precisely nothing. You don’t think the $9M financing and acquisition of Contango Strategies has any impact on the short term price action?

        Jun 22, 2018 22:51 PM

        USAS is down too. In fact, its daily chart looks almost identical to AXU’s since the start of the year.

        Why is that?

          Jun 22, 2018 22:58 PM

          You don’t suppose the glorified zinc company is moved by what’s going on with zinc, do you?
          It did outperform most pure silver plays last year because of it, so why wouldn’t it now lag now that zinc has run into some resistance?

            Jun 22, 2018 22:06 PM

            Well, I’m pretty sure if silver was going to imminently explode upwards, they would have been up on a day silver was up almost 1%.

            I think AXU closed with a black candle this week too. It hasn’t left a black candle behind since the start of the new “bull.” So AXU either closes below 1.33 next week, or price is coming back down below 1.33 at some point in the weeks ahead. I suppose a slightly down week next week wouldnt be too bad, but I have a bad feeling, especially with EXK bumping up against its 100 WMA. We’ll see.

            Jun 22, 2018 22:12 PM

            No one is sure that the metals don’t have a little more downside. As soon as they are, you’ll see huge leverage return overall, but don’t expect every company to act the way you expect every single day. IPT has trounced the sector this year and it also didn’t do much today.
            SIL and SILJ delivered an unimpressive 2x leverage today. I’d say that’s neither bearish nor bullish.

            Jun 22, 2018 22:29 PM

            Well, I have noticed that AXU seems much more closely correlated with GCC than other miners I watch. So I think it implies that GCC is not done going down quite yet. The weekly stochastics aren’t yet oversold for GCC and even when they do reach oversold they can stay there for a long long time (as 2014-2016 showed us–although not expecting anything remotely that extreme again in my lifetime).

    Jun 22, 2018 22:47 PM

    Why are USAS and AXU down today? What do they know that the others don’t?

    Oh yeah, silver isn’t going anywhere for a while.

      Jun 22, 2018 22:28 PM

      Both were essentially flat today (USAS) up less then 1%.

      You’re reading too much into trivial moves in both the metals and miners.

      SIL up 1.67% today

      SILJ up 1.82% today.

      Things are fine with the Silver miners spanky.

        Jun 22, 2018 22:34 PM

        Well, I personally think they will lead the way when silver is ready to move up. I don’t think todays lacklustere action spells doom or anything. I think it suggests silver hasn’t bottomed yet, or that next week will be a down week. Or if silver does rally, I think these stock are suggesting that silver is going to be severely range bound for quite a while.

          Jun 22, 2018 22:27 PM

          Even if Silver stays somewhat range-bound between $16-$18 some of the stocks can still move up on their own merits in better Production rates, lower costs, moving Development projects forward, and continuing to do well with Exploration.

          Obviously for the Silver miners things get much more interesting in the $18-$20 range or higher.

    Jun 22, 2018 22:13 PM

    USAS and AXU ended flat for the day. I guess that means they rallied at the end of the day/week and uas up from the previous weekly close. They also closed in the upper half of the weekly bar. I don’t see that as overly negative. Also note that AXU bounced this week close to but slightly above the mid-February low.

      Jun 22, 2018 22:23 PM

      AXU closed with a black candle on the weekly chart. Every black candle on its daily and weekly chart since the beginning of the new bull has produces a close below the closing price of the black candle. AXU is either going to close below 1.33 next week, or if it rallies, it is coming back down to close below 1.33 at some point in the weeks and maybe even months ahead. Could this be the one time in 2.5 years is leaves a black candle behind and heads to the moon? Sure I guess, but I sure as hell wouldn’t bet on it.

    Jun 22, 2018 22:49 PM

    Just as I suspected, silver CoTs barely budged despite the huge drop into Tuesday!
    Down we go. Where she stops, nobody knows.

    Jun 22, 2018 22:52 PM

    The dumba$$ small specs haven’t budged. Basically still have their record net long position. Buy buy? No, bye-bye.

    Jun 22, 2018 22:06 PM

    Despite being a buck lower than at the peak price in January, the net commercial short position is currently significantly higher than it was at that *peak* in price. That is frankly alarming.

    Jun 22, 2018 22:11 PM

    Gold CoTs look ok, although they can still improve. Silver though. Wow. The commercials are treating it like trash

    Jun 22, 2018 22:55 PM

    What does Rick mean when he says he was recently “stuck” in Houston getting medical treatment? Heavenly Houston has the friendliest people and the prettiest women you’ve ever seen. And the best baseball team too!

      Jun 22, 2018 22:38 PM

      Houston is a cool city and very interesting to explore the different clumps of buildings.

      Jun 26, 2018 26:40 AM

      My apologies, Bonzo, You’re right: Houston is a great city. The people there are exceptionally friendly, Altuve & Co. — even for a Rockies fan — are amazing, and there were always gorgeous women jogging around the paths of Rice University, near where I stayed. By being stuck there, I meant that the city’s oppressive late-spring/summer heat made it very difficult for me to get exercise by walking. Soe locals say there are just two seasons: indoor and outdoor. I was there just in time for the transition to indoor.

        Jun 28, 2018 28:52 AM

        Thanks, Rick. There are a lot more gorgeous women jogging in Memorial Park than at Rice.
        It is hot here in the summer, but I walk in the park at 5:30am when it is not so bad.
        Hope the doctors fixed you up.