Poke the Bear featured in Goldview
Posted on June 11th, 2009 by Sara
A special thanks to the European Gold Centre this week, which featured the previous post in its Goldview newsletter. Please be sure to visit www.goldview.blogspot.com, and contact europeangoldcentre@gmail.com for a free subscription.
My Blue Haven
Posted on May 19th, 2009 by Sara
When we all keep dashing en masse from port to starboard and back again, it’s little wonder that the boat is rocking.
At least, that’s the oversimplified model of resource investment, wherein one is led to believe that investors hoard gold stocks with every Eeyore-esque headline (tangentially, the major news outlets’ copywriters should probably have been on some sort of suicide watch over the past eight months) and then dump them abruptly the minute there’s a better game in town. And I have little doubt that this model holds true for many, but frankly, no one really likes the kid who takes his ball and goes home.
One of gold’s greatest PR issues, as I see it, is its perception as an almost exclusively safe-haven sector. To be sure, the glittery umbrella is a good one to have, particularly when everyone else is getting rained on, but to be a foul-weather friend is to overlook the true nature–and true capacity–of the resource market.
As Jon Nadler, quoted by Doug Hornig this morning, put it, “People see the gains in stocks and they think, ‘Let’s take a little bit of money off the gold table and put it into where the action is’.” This characterization is telling and all too accurate, reflecting a North American investment public that is wont to run like rats from a sinking ship before remembering that they’re barreling headlong into the ocean.
Because not only is the safe-haven-vs.-risk-taking mindset inherently flawed–any portfolio worth its salt should contain both, and that means money that remains on the gold table–but it’s almost absurd to surmise, as many sometimes do, that the natural resource sector is devoid of action. Breezing past gold because Cramer popped a vein over something else is akin to waving away the dessert cart because one despises the taste of plain white flour–and life without the occasional cupcake is no life at all.
The fact is that a vibrant tangle of a sector pops and fizzes beneath the mask of each day’s metals prices. And, crucially, the metals themselves and the metals stocks are two sides of the same constantly-appreciating coin; keeping money on the gold table does not just mean taking a nap in one’s bullion bunker, nor does investing on the venture exchange mean drifting away from the sector’s safe harbor. Juniors are working like they’ve never worked before, forming partnerships that were once no more than lofty conjecture over a fifth and sixth PDAC cocktail. Majors are employing new technologies and expanding into new areas, working not just with renewed focus but with eyes trained more firmly on the future of the sector as a whole. Capital is being raised, as it was even during the high-risk mental ward that was late 2008, and wheels aren’t just turning; they are being reinvented.
What we are now seeing as a result is a sector that is at once more cohesive and more diverse. Those seeking graceful long-term arcs of steady progress can find what they’re looking for just as easily as those who would rather play fast and loose with higher-risk, shorter-term peaks. How easily we forget that today’s gold price is just that–the price of gold today. And while that price will, one might venture to say, continue to ratchet exponentially higher, what is perhaps more important is that the sector’s moving parts continue to move, with increasing efficiency and possibly, if you’ll allow the flowery rhetoric, even grace.
Inflationistas
Posted on May 15th, 2009 by Sara
Say what you will about gold bugs, but they always manage to find a silver lining. Dow collapsing after bank failures? Sit back with some single-malt and watch the gold price climb. Dismal unemployment figures? Hell, the major producers are still hiring (or at the very least, not firing much). And of course, that sweet siren song of late, “just wait until all these bailouts cause major inflation.”
All valid points, regardless of the dents they leave in one’s baseball bat from the beating of deceased equines. But despite any and all doubts about the current or former administration, I remain unconvinced that Bernanke and Obama are locked in a secret room at the Fed, taking Jager shots and daring each other to throw more money on the fire. Indeed, as per Paul Nathan’s Kitco commentary yesterday, more strategic moves are likely afoot:
“[Bernanke's] strategy, I believe, is to re-inflate enough to preserve the monetary system and prevent deflation from taking hold, but not enough to cause an institutionalized inflationary problem.”
Did anyone else just picture Bernanke in a cape and a rapelling harness? No? Ok moving on.
The question here is not whether this cunning superhero plan, with one Wonder Woman boot in recovery and the other in devolution, will wholly prevent inflation–we have been ordering up at least progressive inflation for months now, and the bill is coming due–but whether measures to control it will staunch the inflation-driven commodities rally that we’ve all been salivating over. Nathan continues apace:
“But, once the new money has worked its way through the economy, the market adjusts to the new set of conditions and the affects stop there. A tax has been levied, distortions occurred, but as long as this is a one time only injection, the economy tends to adjust and return to normal. The effects run their course and prices become stable again.”
Holy commas, Batman. The point is, though, that after the initial for-our-own-good spanking, the healing is supposed to begin. And I have little doubt that this will prove true. But I also have little doubt that the commodities market in general, and the precious metals market in particular, will not give a flying bullion bar about said healing one way or another. Because the wheels that keep ratcheting gold steadily upward were turning long before Joe the Plumber knew what a Lehman Brother was, and will continue turning long after.
The fact is this: three years ago we were all atwitter about $500 gold. Today we’re flirting with $1000 and whining when we don’t hit it. Squint your eyes and look closer–there are bumps in the road, but the road still winds uphill. We could see absurd jumps on inflation speculation, or we could see depressing dips on–horrors!–tangible recovery, but an upward-trending commodities market doesn’t roll over and die just because the doomsday prophets (profits?) are stocking their inflation bunkers.
Time to go to the mattresses, I’d say, rather than just lining them with cash.
Prodigal Summer
Posted on May 14th, 2009 by Sara
“Just because I liked it, just because I wanted it.”
These words are not, despite their appearance, justification for Jon Nadler’s much-needed prescription for anti-anxiety meds (three commentaries in a row with the word “stress” in the title might mean you have a problem), but the reasoning Vogue contributor Lynn Yaeger recently gave for buying a diamond-and-sapphire ring after losing her job. And lest anyone think that a flightly fashionista has nothing in common with a resource company, allow me to direct your attention to the surrounding areas of any given vaguely successful mine site. For countless years now, junior exploration companies have snatched claims up like trophy wives tearing through a designer sample sale–just because they liked them, just because they wanted them.
And the absurd thing is, that’s how we measured success in the junior resource sector–and in life, for that matter–for quite some time. If the metals prices are climbing and Tiny Company, Inc. is buying up land, things must be fantastic. But how many of Tiny Company’s claims ever saw Page 1 of a NI 43-101 report, or approached anything resembling feasibility? More often they were bought and sold as if the land itself were the actual commodity, stock prices fluctuating on single assay results and investors blissfully blinded by the twinkle of upward slopes and green numbers.
So when the economy suddenly became a sullen teenager deprived of its allowance, and companies found themselves in possession of far too many proverbial diamond-and-sapphire rings, it is little surprise that sales, partnerships, and restructuring were seen as symptoms of failure. In reality, however, it is quite possible that the opposite is true. Overblown, unfocused companies with a flag in every corner of the continent sunk like Ophelia with their jewels still in hand, but the others–the unsung, one might venture to say–are surprising us.
The timeless Audrey Hepburns to the overaccessorized Lynn Yaegers of the sector, these companies, often juniors, are proving the lasting value of editing and focus. Flagship properties are the new inches-thick resource portfolios, and concrete goals are the new lofty ambition. Acquisition as a positioning tool for young or resurgent companies still lives, and for good reason, but acquisition without ample followup is dying.
This is novel, remarkable, even thrilling, because when one sets tangible goals–the completion of a pre-feasibility study, the steadfast commitment to a single high-grade deposit–one is challenging oneself not to fail. Warm fuzzy mission statments and pockmarked acquisition maps do little to move a property or a sector forward. It is better, perhaps, to trade in the trade-show high heels for a pair of dirty boots.
And so I, for one, hope that we see a season of more measured exploration and less haphazard acquisition, more strategy and less sparkle, more real conversations and fewer sales jingles. After all, we took the kid’s allowance, and frankly, I don’t mind dealing with the stomping and the slammed doors.
They all grow up eventually.