"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, August 8, 2011

Late Session Selling derails mining shares

Throughout most of the day, the mining shares were very strong moving higher in conjunction with gold bullion, and to a certain extent,  silver. AS the session moved into the afternoon hours however, the breach of 1150 in the S&P 500 was apparently too much too keep the money flows coming into the mining sector which then surrendered all of its gains and dipped slightly into negative territory.

It might be a good time to note that with crude oil moving in a totally different direction than gold, one of the major costs of mining companies, energy, is falling off while the price of their product, gold, is moving higher. That looks to me like an ingredient for even better profits moving forward.

Note the ratio chart below showing the extreme level to which the undervaluation of the mining sector is reaching.


  1. my take exactly....miners are the deal here.
    or SPXU....i think this has more to run...obozo was worth -200pts.

  2. I don't even know what to say anymore about these shares. I have a very stubborn personality, which has kept me in them, but frankly I'm sick with it all. These shares went down more than the stock market last week, so I'm not quite sure if I actually own any gold...or just some business that may or may not be able to ever make money.

  3. I hear you man. I've been in the likes of HL, CDE, SLW, GG, AUY, EGO, ABX, and a few other steaming turds since 2006. Had I only invested the money half in gold bullion and half in silver coins-- well then I wouldn't be here typing this but in my villa on the Med. Instead, I'm waiting for HL to announce shitty earnings again and for its stock to lose another 5-10%. HL is 7 bucks. Give or take a dollar, that's the same price as 2006. How's that for a crappy investment? Same with CDE, AUY, EGO and NG. All crap. GG, ABX and NEM-- not much better. Total disappointment. It is only testament to my pigheadedness that I still own them. Like a dipshit. This is the most godforsaken slice of the stock market, the miners.

  4. Thanks for this update, Dan! It is most appreciated!

    Crusso and SSK... I've been with you, in this sector, for the last several years. Imagine a rubber band, being stretched between what seems immovable (gold shares) and an object moving steadily in one direction (gold). None of us can pinpoint when, but based on Gold:HUI, Gold:Input Cost, and gold miner PE ratios, that the HUI itself is on the verge of a 100-200% move higher within 12 months of breaking its former high. There is precedent for this type of underperformance for 3-4 years, and then this type of catch up. Study the time periods between 2002-2005, and 2006-2008 with the price of gold versus the HUI.

    I believe there is an "inverse bubble" forming within the gold community, which itself still represents less than 1% of all investors out there. This "inverse bubble" has nearly everyone convinced that gold will continue to move higher, and the miners will not. We must now be contrarians amongst contrarians, because trust me, it is when you have sold your final gold shares in disgust that you, the last seller, will have sold, and there being no one left to sell, this market will slingshot higher leaving you twice bitten.

    NEM, AEM, AUY all increasing dividends... lowest P/E in this bull market... horrible market psychology... HUI consolidating ABOVE its 2008 highs... I can feel the rubber band tightening as I type. Hang on, fellas.

  5. I'm with you Hysteria, you would think that smart management of current gold producers would sell some future production and lock in future energy costs which IMO would be a recipe for hugh profits.

  6. Hysteria - I expect that the mining shares, when they do finally begin their move, will indeed "slingshot" higher very quickly at a breakneck pace.

    Silverwood - the problem with much of the management of the gold shares is that they are good only at digging gold out of the ground and that is about it. They do not know how to read markets nor how to properly hedge.

  7. Interesting turn of events. Seems like we spent a decade or more begging our miners to stop hedging. Now we've got folks saying they should hedge. I'm not arguing one way or the other, I just think it's interesting.

    On another front, agreed that if we will have high gold and low oil for a while, then if miners can't perform in that envirionment, then they can't perform...ever.


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