Gold miners, RIP…
From Bill Bonner, Chairman, Bonner & Partners:
“This is the worst I’ve seen in 30 years.”
The scene was the recent Sprott-Stansberry Natural Resource Symposium in Vancouver. The subject was mining equities. And the opinion was becoming familiar…
The price of gold is down by about 8% over the last five years. Precious-metals miners, as measured by the Market Vectors Gold Miners Fund, are down by about 70% over the same time.
Mining execs say banks won’t return their calls. Promoters say they are thinking about taking their firms into cloud computing, video games, or Chapter 11.
“What do you know about cloud computing?” we ask.
“Nothing. But I know gold mining. And I know it’s no place to make money.”
Diehards and Last-Ditch Campaigns
In the broader markets, everything was green yesterday – almost.
The Dow was up. Oil was up. Shanghai stocks were up.
But gold fell $2.50 in New York to close at $1,096 an ounce. And it’s down another $10 in overnight electronic trading.
Here at the Diary, we are champions of the down and out. We support diehards and last-ditch campaigns.
Partly, it’s a romantic and poetic attachment to the underdog. But there’s a practical reason, too: There’s often money to be made in woebegone assets.
We favor Russian and Greek stocks… provided you have a very long time horizon for your investments (and a strong constitution to boot).
The Russian and Greek economies are said to be at death’s door.
Greece is in trouble because it has lived beyond its means for too long and because it creaks under a corrupt and sclerotic bureaucracy.
Russia, meanwhile, has been hit by a double whammy.
The first came when the price of oil got cut in half from its peak of $108 in July 2014. Roughly half of Russia’s tax revenues come from oil exports. Half-price crude-oil export prices mean half-full government coffers.
That’s why Putin just slashed more than 100,000 government jobs.
The second came when the U.S. and the E.U. came up with a provocative plan to impose economic sanctions for alleged misbehavior in Ukraine.
Greece and Russia may be down. But they are unlikely to be out forever.
An Avalanche of Bearish Sentiment
Nor is the mining industry…
Unloved. Unbought. Unwanted. Mining is the Greece of investment sectors.
Particularly unloved is mining for gold.
Market Insight editor Chris Lowe has begun to prepare a weekly internal memo highlighting particularly absurd trends in the popular financial trend.
It’s soon to be available to lifetime subscribers to The Bill Bonner Letter. But for now, it’s circulated exclusively among our analysts and researchers around the world.
This week’s memo focuses on the intense loathing in the gold market. Reports Chris:
What to make of all the negative sentiment toward gold in the mainstream press? Chris again:
World Trade Slows
Also unloved, but definitely not in the pet rock category, is copper.
“Copper is the most important metal in the sector,” said mining mogul Robert Friedland at the Sprott-Stansberry event on Tuesday.
“More important than gold. Because copper is in everything. Houses. Autos. Computers. Much of the Internet functions on copper. So if the price of copper goes down, it tells us that the whole world economy is soft.”
Here’s the Financial Times with more about the global slowdown:
If the global economy is slowing, as the numbers suggest, there is little reason to expect a comeback in copper any time soon.
On the other hand, there’s no way copper is going to disappear from the world economy. It’s essential. And it’s intensely cyclical. Prices go up; miners produce more. Prices go down; they cut back until supplies are tight again.
So, although the price may be down… copper is not out.
And as we explained in our last essay, you can count on the Fed – and other major central banks – to exaggerate the commodities cycle with more cheap credit.
We doubt gold is out for the count either.
Excess debt set off the 2008 global financial crisis. Today, according to McKinsey, there’s about $60 trillion more debt in the world than there was back then.
It is only a matter of time before today’s counterfeit stability gives way to genuine panic.
Then the “pet rock” will turn out to be “man’s best friend.”
Crux note: As Bill has been warning, right now in America, the highest levels of government and the banking system are locked in a desperate last stand against a disturbing monetary shock…
When it hits, you could suddenly be locked out of your bank account… unable to withdraw cash or use your credit card… your stocks will swing wildly out of control… your Social Security checks will pile up unopened on your kitchen table… no one will cash them… Go here now for the full story from Bill.