Loading ...Hypology and Gold Fever
Last few days have seen some wild vulcanic eruptions in the micro miner space.
Well..my take is…the hypsters and their willing followers are back and dying to get into a bidding war and drive up anything with a good story. And new suckers will be borne every day.
Its the Pied Piper Syndrome !
They will be getting these “stories” every day in their inbox and seeing these things soar every day. They will be losing in bitcoin and weed and move to micro gold miners. it will become an addiction !
This is a Precursor for a Rip roaring Gold Fever driven Bull…especially in the micro miner space.
I had my first hand experience with this sort of thing back in the Bre X days
My broker got me into some Miners…searching in what he called “Eliphant Country”
I had no clue about the Gold Sector…but I learned quick.
They went nuckin futz as many here know .
it was circa 1994 to 1996
Incredible 10 and 100 baggers and more ( not just a few…Hundreds of them )
All along there was the Bre X story in the forefront.
It went from pennies to over $250….and of course back to zero eventually after the head geologist fell or jumped out of a helicopter ….taking the whole sector down with him.
I have been waiting for another Gold fever to strike since that time .
Most of the stocks and companies back in that day have long disappeared…Swallowed up by larger fish or just became delisted.
But Human Nature repeats and we may be ripe for another run which could make 2016 look like a little tease.
Of note is that during that 1994 to 1996 frenzy in this micro miner sector…gold was basically flat !
What could happen if this sort of behaviour occurs during a strong Gold Move ?
Use your imagination.
Notice BSX spiked up 100% on the open and now only up 35%.
Buckle up !
If you wanna play !
Buy the Hype and hang on…but NOT too long…sell some on the spikes
IF this thing has legs it could be a couple of years frenzy though.
You will have sellers remorse at times.
it’s the wild wild west !
Remember literally NONE of these companies will ever develop a mine.
You dont buy them for their fundamentals or for their balance sheet or their
management….you buy them for their stories and their hype.
The classic line I attributed to Mark Twain) is TRUE in most ( not all) cases.
“A Gold Mine is A Hole in the Ground with a Liar on Top” 🙂
Please don’t get all self righteous about what you are doing here
Read all you like about these companies and do all the due dilly you like but in the end the know nothing kid who just buys the hype will do as well or better than YOU… for a little while….but the know nothing kid will ride them all the way back down…any YOU will sell him your shares near the top…because now you know 🙂
Its a ponzy scheme and you want to be early in and long gone when the gig is up.
A couple of partial disagreements:
1. Although very possibly none will start mines, a very few will have discoveries that will lead to big mines.
Friedland’s Voisey Bay had a pump with a dynamics in keeping with a pump-and-dump but had the massive nickel deposit, as a rare example.
2. I also somewhat disagree about fundamentals and balance sheets. It is true that you can ride a pure pump. As an extreme example, some people, even I think retail speculators, became wealthy with Bre-X by buying early and taking profits on the way up.
However I think it is extremely useful in general to buy these tiny companies for their managements, their balance sheets, and their fundamentals. You are less likely to get cheated. You are less likely to get hit with an unfair financing. If the market unexpectedly goes against you for a few years, and you’ve forgotten to sell, you are still likely to be holding a viable company possibly with great prospects. Even in a horrible market if you have sound management (intelligent, knowledgeable about geology and finance, respected by the seniors) and enough cash to explore and develop for a few years, and properties that have a significant chance of attracting the interest of a big company (typically huge deposits with decent metallurgy etc and in a decent jurisdiction), your company might get taken out even in a bad market. There are so many of these companies and they are so tricky that it is good to have every edge you can unless you are extremely lucky or really good with hitting the sell button exactly right.
Even if you pick and choose as well as possible most of these explorer-developers will do poorly in a down market however, really poorly. It’s just that having good ones gives some protection in a down market and does increase the chances of hitting a legitimate jackpot.
3. The general point is absolutely correct however. It is all in all a market partially filled with near-crooks or worse, and incompetents. Other investors will be telling you with great excitement about some garbage and you (if you are like me) will be all to willing to believe. It is easy for people who are intelligent, even brilliant, in other fields to get pulled in and to forget to sell. It may be far wiser to stay out unless you are gifted with great luck or are willing to put in way too much time.
A voice of reason in a cesspool of insanity.
Thanks Karl
That was a mouthful, Fully. Been there, played that game, got rich, got poor. This time around, avoiding these clowns like the plague. Why I quit Spock. What a bunch of hooey. Yeah, you can play, but better if you are on the other side selling the shares of paper to the suckers who buy them.
Why play that game where you can get wiped out far faster than you got wealthy when there are great companies making money and will make you wealthy without so much risk? The market is chock full of miners poised to explode with the price of gold and the profits they will deliver.
Fully agree, stick to good companies, buy and hold and make 100% plus on your money after some years. If you flip from deal to deal, it will be very difficult to make money. There are interesting deals, both development and exploration every day, but if you look how lots of deals are done with warrants going to insiders and giving away plenty of upside to insiders/friends, then I prefer to hold the names that I am familiar with. Good companies put all stakeholders (insiders, institutions and retail shareholders) at the same level and these insiders buy at same level as we retail investors. That’s for me the only way to make money, if everybody is treated the same way.
Wise words.
Fully – amazing post ! From your lips to G-Ds ears.
Also you’re right about people being stuck in various sectors and watching their capital dissipate- they will soon jump into the gold train but not right now – it will take a while and it should because we want an orderly climb before a mania runn
Unfortunately gold usually doesn’t seem to be orderly. I hate it. I got interested in the wrong sector. I wish I hadn’t. I’m afraid it will run fast pretty soon. Small but real chance of a scary down first just for fun. I think the order was last summer to earlier this year.
A problem is that problems are elsewhere too. Like many I lost a lot of money in Allied Nevada, thinking it was a solidly run producer. It abruptly went bankrupt. Many of its insiders seemed to have associations with major institutions in the mining industry and also with significant financial institutions, some of which did not do so poorly. At least on the surface it was something like a blue chip albeit a tiny-ish blue chip.
I can easily think of a fairly large producer that I believe may be run exceptionally badly now. Not too many decades ago HL and CDE had nice high prices per share–2-3 decades ago I think CDE was US$150/share. Same or worse could happen with other apparently respectable companies now.
Even some of the better seniors may have entrenched managements and bloated bureaucracies which feed themselves well with salaries and options in good times and bad. Think the analogy to a government bureaucracy. I don’t think the industry overall is particularly well run.
How certain can we be that one or more seniors aren’t going to be abruptly bankrupted by derivatives deals gone sour (Allied Nevada on a grander scale)? Even without such problems, their share prices don’t do well at all in downturns–even if they don’t necessarily do as poorly as many tiny companies. Occasionally on the other hand you will have a tiny company like KL (albeit a producer) flourishing in a bad market or an exploreco getting taken out in an acquisition.
In a total financial mess are the ETFs and indexes really going to remain whole? and liquid?
I just don’t know. It is possible that in a strange financial crisis you have a minority of diverse entities from different categories prospering and others showing themselves to have been rotten inside. It may not be easy.
Absolutely true!
I also have lost lots of money in Allied Nevada , as well as in many other companies that seemed to be in good shape.
Even recently Golden Star went from about $6 to 3,5 in a couple of weeks with no apparent reason,and now I don’t know if to hold it or sell it.I’m so tired of losing money in this sector that I would like to use some miner etf’s but unfortunately they are not approved yet whrere I live so I have to risk with individual gold/silver stocks.
Anyway IF (A BIG IF) another crazy bull market in miners like that that happened in the 90’s will develop I’m sure that in the end even the worst of the worst will fly ,even if their flight will be short lived.
Let’s hope that we will all be able to get out before being sucked into the collapse that will come after the parabolic phase.
I personally feel almost lost.
“Otto” at IKN is of some limited value. He likes to tell us how “stupid” we are for not being able to read financial statements. However I don’t have time to learn the basics well. Even if I did, the 2008 financial crisis, for example, shows that there is gimmickry in large companies in many sectors that can confuse pros.
I am inclined to trust Otto’s work on fundamentals, but he has his limitations. As for his recommendations, subscribers will note that he will perversely make recommendations that go against his rules–for example, sporadically he’ll make temporary recommendations where he thinks he may be able to outsmart some of the sleazy operators rather than simply staying clear of them. So I use his newsletters for education and have to be selective with his recommendations.
As for his financial analysis he goes through the financial statements of only a limited number of companies since he’s only 1 person. These will include the approximately 15-20 companies he recommends. These will typically be small producers and explorers and developers. I think I can rely on him for to pick out fraudulent accounting, likelihood of running out of cash and need for financings, and the like. His giving a price target based on fundamentals is useful for confirming TA analyses. He sporadically analyzes balance sheets of companies he doesn’t formally follow, often touted intermediate producers. His analyses of some of these other companies can make me queasy. I think there may be a lot of sleaze out there. Unfortunately he only rarely goes into detailed analyses of the huge producers. How do I know that big company X isn’t about to blow up because of some weird off-balance item? It’s certainly too big to for a single person to follow easily even if it weren’t for such concerns–how do I know there isn’t hidden problem with it’s #1 mine? Where can I find cynical analyses of the big or even intermediate companies finances that, like Otto’s, I don’t think can be bought?
I remain scared of some of the big companies, whose execs are rather like government bureaucrats except that they can get rich on huge salaries and options even before leaving. Some may be astute, but some may be remarkably incompetent. I do not trust the integrity of the ETFs and ETNs in a crisis. I may be safer with, as an example, a competently run unknown exploreco with cash in safe banks and decent government securities and a coveted property or two, generally sane shareholders who haven’t learned about it from too many wildly promotional subscription services, even though the market may not recognize its value for a few years.
As you note, we have to figure out when to get out. Even RGLD lost its half its value in recent years (though buy and hold did work).
Karl
IMHO
None of that really matters
Just follow the TA and have a varied Portfolio.
There will be some surprises both up and down which TA will not predict
But generally …ITs all in the charts
I’m at chartered accountant and work at the big 4 and let me tell you – you don’t need to know the financials to a major degree – that said I wouldn’t touch a company that is majority over leveraged- it’s all
About TA and sentiment – KIsS
BUY ASA fund: see my recent posting