Silver Starts a Breakout Move Higher

Watch Silver, folks. This quiet shiny metal is starting a move that could be very foretelling of global market concerns and risks. Early on December 26, 2018, Silver broke through recent resistance, to the upside, with a relatively large 2.8%+ upside move. Why is this so important to traders? Because Silver is the “sleeper metal” that is typically the last to react to global economic concerns. Once Silver starts to move to the upside with a renewed bullish trend, we believe this move would indicate that bigger players are starting to accumulate Silver as a safe haven for future economic concerns/crisis events.

This Daily chart of Silver shows the December 26 upside breakout move. We can clearly see the breakout above $15.00 and the historical resistance just below $15.00. This move is extremely important in the context of the total risk play that has recently played out through the past two months. Take a look as how quiet the Silver market has been over the past few months. Take a look at how Silver reacted only moderately to the recent market selloff and Fed statements. There was no real “fear” exhibited in the metals markets or in Silver over the past 60+ days. Yet, today, there is some real fear that is playing out in the price of Silver.

This next Weekly Silver chart helps us to understand the total scope of this move and what we could expect to see as an immediate upside price target. Our Adaptive Fibonacci Price modeling system is suggesting that $16.00 is an immediate upside price target and is showing us the current trend is bullish and that price volatility is increasing. Overall, we could see a move well above $17.00 on an extended run in the metals.

Watch how this “sleeper metal” plays out over the next few weeks and months. This upside breakout is very important to investors for the simple reason that it indicates a renewed level of “fear” is entering the markets and we could be starting a very big upside move in the metals markets again. The last time Silver entered a massive bullish phase it shot up over 400%. If a similar move happens again in the near future, Silver could reach a price level near $60-65 per ounce.

Want to know how to position your investments to take advantage of these types of moves and learn how to capture greater opportunities in the markets? 2019 is setting up to be an incredible year for traders with the skills and insight to find and execute these types of trades. We have already been positioning our members for this move and we believe 2019 will provide incredible opportunities for all skilled traders. Take a minute to visit The Technical Traders to learn how we can help you in 2019 and join our other members in finding greater success.


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Blood in the Streets to Create the Opportunity of the Decade

By Laurynas Vegys, Research Analyst

Gold stocks staged spring and summer rallies this year, but haven’t able to sustain the momentum. Many have sold off sharply in recent weeks, along with gold. That makes this a good time to examine the book value of gold equities; are they objectively cheap now, or not?

By way of reminder, a price to book value ratio (P/BV) shows the stock price in relation to the company’s book value, which is the theoretical value of a company’s assets minus liabilities. A stock is considered cheap when it’s trading at a historically low P/BV, and undervalued when it’s trading below book value.

From the perspective of an investor, low price to book multiples imply opportunity and a margin of safety from potential declines in price.

We analyzed the book values of all publicly traded primary gold producers with a market cap of $1 billion or more. The final list comprised 32 companies. We then charted book values from January 2, 2007 through last Thursday, October 15. Here’s what we found.

At the current 1.20 times book value, gold stocks aren’t as cheap as they were when we ran the numbers in June, 2013, successfully pinpointing the all-time low of 0.91 (the turning point before the period in gray). Of course, that P/BV is hard to beat: it was one of the lowest values ever. And while the stocks not quite as cheap now, the valuation multiple still lingers close to its historical bottom. Remember, we’re talking about senior mining companies here—producers with real assets and cash flow selling for close to their book values.

In short, yes, gold stocks are objectively selling cheaply.

The juniors, of course, have been hit harder. It’s hard to put a meaningful book value on many of these “burning matches” with little more than hopes and geologists’ dreams, but valuations on many are scraping the bottom, making them even better bargains, albeit substantially riskier ones.

What does this mean for us investors?

It’s no surprise to see that every contraction in the ratio was followed by a major rally. In other words, the cure for low prices is low prices:

• The August, 2007 bottom (2.2) and the momentary downtrend that preceded it were quickly erased by a swift price rally leading to a January, 2008 peak (3.8).

• The bull also made a comeback in 2009-2010, fighting its way up out of what seemed at the time to be the deepest hole (1.04) in October, 2008.

Stocks have been on a long slide since the ratio last peaked at 3.24 in October, 2010, with the downturn in 2013 pushing multiples to previously unseen lows.

No one—us included—has a crystal ball, and so it’s impossible to tell if the bottom is behind us. We can, however, gauge with certainty when an asset is cheap—and cash-generating companies selling for little more than book value are extraordinary values for big-picture investors.

Now let’s see how these valuations look against the S&P 500.

Stocks listed in the S&P500 are currently more than twice as expensive as the gold producers. That’s not surprising given how volatile metals prices can be and how unloved mining is—but is it rational? Note that despite the downtrend in the last month, the multiple for the S&P500 remains close to a multiyear high.

In other words, yes, the S&P 500 is expensive.

This contrast points to an obvious opportunity in our sector.

So is now the time to buy gold stocks? Answer: our stocks are good values now, and, if there is a larger correction ahead, they may well become fantastic values, briefly. Either way, value is value, on sale.

As the most successful resource speculators have repeatedly said: you have to be a contrarian in this sector to be successful, buying low and selling high, and that takes courage based on solid convictions. Yes, it’s possible that valuations could fall further. However:

The difference between prices and clear-cut value argue for going long and staying that way until multiples return to lofty levels again—which they’ve done every time, as the historical record shows.

With a long term time frame in mind, whatever happens in the short term is less of a concern. Building substantial positions at good prices in great companies in advance of what must transpire sooner or later is what successful speculation is all about. This is how Doug Casey, Rick Rule, and others have made their fortunes, and it’s why they’re buying in the market now, seeing market capitulation as one of the prime opportunities of the decade.

That’s worth remembering, especially during a downturn that has even die hard gold bugs giving up.
Bottom line: “Blood in the streets” isn't pretty, but it’s a good thing for those with the liquidity and courage to act.

What to buy? That’s what we cover in BIG GOLD. Thanks to our 3 month full money back guarantee, you have nothing to lose and the potential for gains that only a true contrarian can expect.

The article Blood in the Streets to Create the Opportunity of the Decade was originally published at casey research

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How is Doug Casey Preparing for a Crisis Worse than 2008?

By Doug Casey, Chairman

He and His Fellow Millionaires Are Getting Back to Basics

Trillions of dollars of debt, a bond bubble on the verge of bursting and economic distortions that make it difficult for investors to know what is going on behind the curtain have created what author Doug Casey calls a crisis economy. But he is not one to be beaten down. He is planning to make the most of this coming financial disaster by buying equities with real value—silver, gold, uranium, even coal. And, in this interview with The Mining Report, he shares his formula for determining which of the 1,500 "so called mining stocks" on the TSX actually have value.

The Mining Report: This year's Casey Research Summit is titled "Thriving in a Crisis Economy." What is the most pressing crisis for investors today?

Doug Casey: We are exiting the eye of the giant financial hurricane that we entered in 2007, and we're going into its trailing edge. It's going to be much more severe, different and longer lasting than what we saw in 2008 and 2009. Investors should be preparing for some really stormy weather by the end of this year, certainly in 2015.

TMR: The 2008 stock market embodied a great deal of volatility. Now, the indexes seem to be rising steadily. Why do you think we are headed for something worse again?

DC: The U.S. created trillions of dollars to fight the financial crisis of 2008 and 2009. Most of those dollars are still sitting in the banking system and aren't in the economy. Some have found their way into the stock markets and the bond markets, creating a stock bubble and a bond superbubble. The higher stocks and bonds go, the harder they're going to fall.

TMR: When Streetwise President Karen Roche interviewed you last year, you predicted a devastating crash. Are we getting closer to that crash? What are the signs that a bond bubble is about to burst?

Warning Missing the 2014 Casey Research Summit (Thriving in a Crisis Economy) could be hazardous to your portfolio. Sept. 19-21 in San Antonio, Texas. REGISTER NOW

DC: One indicator is that so-called junk bonds are yielding on average less than 5% today. That's a big difference from the bottom of the bond market in the early 1980s, when even government paper was yielding 15%.

TMR: Isn't that a function of low interest rates?

DC: Yes, it is. Central banks all around the world have attempted to revive their economies by lowering interest rates to all time lows. It's discouraging people from saving and encouraging people to borrow and consume more. The distortions that is causing in the economy are huge, and they're all going to have to be liquidated at some point, probably in the next six months to a year. The timing of these things is really quite impossible to predict. But it feels like 2007 except much worse, and it's likely to be inflationary in nature this time. The certainty is financial chaos, but the exact character of the chaos is, by its very nature, unpredictable.

TMR: Casey Research precious metals expert Jeff Clark recently wrote in Metals and Mining that he's investing in silver to protect himself from an advance of what he calls "government financial heroin addicts having to go cold turkey and shifting to precious metals." Do you agree or are you more of a buy-gold-for-financial-protection kind of guy?

DC: I certainly agree with him. Gold and silver are two totally different elements. Silver has more industrial uses. It is also quite cheap in real terms; the problem is storing a considerable quantity—the stuff is bulky. It's a poor man's gold. We mine about 800 million ounces (800 Moz)/year of silver as opposed to about 80 Moz/year of gold. Unlike gold, most of silver is consumed rather than stored. That is positive.

On the other hand, the fact that silver is mainly an industrial metal, rather than a monetary metal, is a big negative in this environment. Still, as a speculation, silver has more upside just because it's a much smaller market. If a billion dollars panics into silver and a billion dollars panics into gold, silver is going to move much more rapidly and much higher.

TMR: Are you are saying that because silver is more volatile generally, that is good news when the trend is to the upside?

DC: That's exactly correct. All the volatility from this point is going to be on the upside. It's not the giveaway it was back in 2001. In real terms, silver is trading at about the same levels that it was in the mid-1960s. So it's an excellent value again.

TMR: In another recent interview, you called shorting Japanese bonds a sure thing for speculators and said most of the mining companies on the Toronto Stock Exchange (TSX) weren't worth the paper their stocks were written on, but that some have been priced so low, they could increase 100 times. What are some examples of some sure things in the mining sector?

DC: Of the roughly 1,500 so-called mining stocks traded in Vancouver, most of them don't have any economic mineral deposits. Many that do don't have any money in the bank with which to extract them. The companies that I think are worth buying now are well-funded, underpriced—some selling for just the cash they have in the bank—and sitting on economic deposits with proven management teams. There aren't many of them; I would guess perhaps 50 worth buying. In the next year, many of them are likely to move radically.

TMR: Are there some specific geographic areas that you like to focus on?

DC: The problem is that the whole world has become harder to do business in. Governments around the world are bankrupt so they are looking for a bigger carried interest, bigger royalties and more taxes. At the same time, they have more regulations and more requirements. So the costs of mining have risen hugely. Political risks have risen hugely. There really is no ideal location to mine in the world today. It's not like 100 years ago when almost every place was quick, easy and profitable. Now, every project is a decade long maneuver. Mining has never been an easy business, but now it's a horrible business, worse than it's ever been. It's all a question of risk/reward and what you pay for the stocks. That said, right now, they're very cheap.

TMR: Let's talk about the U.S. Are we in better or worse shape as a country politically and economically than we were last year? At the Casey Research Summit last year, I interviewed you the morning after former Congressman Ron Paul's keynote, and you said that you hoped that the IRS would be shut down instead of the national parks. There's no such shutdown going on today, so does that mean the country is more functional than it was a year ago?

DC: It's in worse shape now. The direction the country is going in is more decisively negative. Perhaps what's happening in Ferguson, Missouri, with the militarized police is a shade of things to come. So, no, things are not better. They've actually deteriorated. We're that much closer to a really millennial crisis.

TMR: Your conferences are always thought provoking. I always enjoy meeting the other attendees—it's always great to talk to people from all over the world who are interested in these topics. But you also bring in interesting speakers. In addition to your Casey Research team, the speakers at the conference this year include radio personality Alex Jones and author and self-described conservative paleo-libertarian Justin Raimondo. What do you hope attendees will take away from the conference?

DC: This is a chance for me and the attendees to sit down and have a drink with people like Justin Raimondo and author Paul Rosenberg. I'm looking forward to it because it is always an education.
Another highlight is that instead of staging hundreds of booths of desperate companies that ought to be put out of their misery, we limit the presenting mining companies in the map room to the best in the business with the most upside potential. That makes this a rare opportunity to talk to these selected companies about their projects.

TMR: We recently interviewed Marin Katusa, who was also excited about the companies that are going to be at the conference. He was bullish on European oil and gas and U.S. uranium. What's your favorite way to play energy right now?

DC: Uranium is about as cheap now in real terms as it was back in 2000, when a huge boom started in uranium and billions of speculative dollars were made. So, once again, cyclically, the clock on the wall says buy uranium with both hands. I think you can make the same argument for coal at this point.

TMR: You recently released a series of videos called the "Upturn Millionaires." It featured you, Rick Rule, Frank Giustra and others talking about how you're playing the turning tides of a precious metals market. What are some common moves you are all making right now?

DC: All of us are moving into precious metals stocks and precious metals themselves because in the years to come, gold and silver are money in its most basic form and the only financial assets that aren't simultaneously somebody else's liability.

TMR: Thanks for your time and insights.

You can see Doug LIVE September 19-21 in San Antonio, TX during the Casey Research Summit, Thriving in a Crisis Economy. He'll be joined on stage by Jim Rickards, Grant Williams, Charles Biderman, Stephen Moore, Mark Yusko, Justin Raimondo, and many, many more of the world's brightest minds and smartest investors. To RSVP and get all the details, click here.

The article How is Doug Casey Preparing for a Crisis Worse than 2008? was originally published at Casey Research

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Gold Option Trade – Will Gold Continue to Consolidate?

Until recently, the world has forgotten about gold and gold futures prices it would seem. A few years ago, all we heard about was gold and silver futures making new highs on the back of the Federal Reserve’s constant money printing schemes.

However, after a dramatic sell off the world of precious metals it became very quiet.


Gold prices have been in a giant basing or consolidation pattern for more than one year. As can clearly be seen below, gold futures prices have traded in a range between roughly 1,175 and 1,430 since June of 2013.





The past few weeks we have heard more about gold prices as we have seen a five week rally since late May. I would also draw your attention to the fact that gold futures also made a slightly higher low which is typically a bullish signal.


At this point in time, it appears quite likely that a possible test of the upper end of the channel is possible in the next few weeks / months. If price can push above 1,430 on the spot gold futures price a breakout could transpire that could see $150 or more added to the spot gold price.


Clearly there are a variety of ways that a trader could consider higher prices in gold futures. However, a basic option strategy can pay handsome rewards that will profit from a continued consolidation. The trade strategy is profitable as long as price stays within a range for a specified period of time. Ultimately this type of trade strategy involves the use of options and capitalizes on the passage of time.


The strategy is called an Iron Condor Strategy, however in order to make this trade worth while we would consider widening out the strikes to increase our profitability while simultaneously increasing our overall risk per spread. Consider the chart of GLD below which has highlighted the price range that would be profitable to the August monthly option expiration on August 15th.





As long as price stays in the range shown above, the GLD August Iron Condor Spread would be profitable. Clearly this strategy involves patience and the expectation that gold prices will continue to consolidate. This trade has the profit potential of $37 per spread, or a total potential return based on maximum possible risk of 13.62%. The probability based on today's implied volatility in GLD options for this spread to be profitable at expiration (August 15) is roughly 80%.


Our new option service specializes in identifying these types of consolidation setups and helps investors capitalize on consolidating chart patterns, volatility collapse, and profiting from the passage of time. And if you Advanced options trades are not your thing, we also provide Simple options where we buy either a call or put option based on the SP500 and VIX. The nice thing about buying calls and puts is that you can trade with an account as little as $2,500.


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The Only PGM Stock You Should Buy

By Jeff Clark, Senior Precious Metals Analyst

It’s quite the dilemma.

One of the major reasons my colleagues and I are so bullish on platinum group metals (PGM)—palladium, in particular—is because of the intractable problems with supply. But most of the producers are backed into corners, with few options for improving their outlook. There’s simply no way for these metals to avoid a long-term production deficit due to the deep seated problems with the companies that produce them.

So, how to invest?

Since we’re talking about profiting from a metals bull market, we could just buy bullion—and we have indeed recommended doing so to our readers. But to really maximize your leverage to the upside (and avoid more risky futures and options), a stock in a company that produces the metal is normally the way to go. Unfortunately, as above, the pickings are slim.

For us to invest in a PGM producer, the company would have to be:

• Outside of South Africa and Russia. The problems with miners in both countries are numerous and difficult.

• Making money. Many producers are not profitable at current prices because production costs are so high. And they won’t come down just because the strikes ended—they’ll go up, due to higher wages.

• Have a strong growth profile. We want a company that can capitalize on burgeoning demand, which would add further leverage to our investment.

• Have strong management (of course!). The last thing we want is a team with no experience navigating a volatile market such as this.

Does such a stock exist?

It’s a tall order, but the answer is yes. The company we recommend in this area meets all the criteria above—and is the safest speculation in this space. We consider it so safe, in fact, that we just “graduated” it from the International Speculator to BIG GOLD.

How’s This for Leverage?

 

This profitable mid-tier producer is perfectly positioned: it’s not so small that we’re purely speculating on some uncertain game changing event, and yet it’s small enough to generate much larger share price gains than would be possible for one of the major mining companies. On the other hand, it’s big enough to catch the attention of mainstream investors.

Here are seven reasons why we’re excited about this company and the leverage we think we’ll get by owning shares…...

#1: Large, High-Grade Assets

The company has two distinct but closely related mine sites. These alone will support the company’s growth for many years. However, only nine miles of an estimated 28 miles of known mineralization has been developed between them—essentially one third of one giant mineralized structure. Management thinks it has an additional 102 million tonnes of undeveloped resources waiting to be dug up.

And get this: the average grade of their proven and probable reserves is 0.45 ounces per tonne, the world’s highest grade PGM deposit. Of these, 78% is palladium, a very attractive figure since we’re even more bullish on it than platinum. At the right metals prices, this company could double or triple production and still maintain a very long mine life.

#2: Growing Production and Low Costs

The company grew 2013 production by 10,000 ounces, but has yet to use all its milling capacity. It currently uses about 3,600 tonnes per day (tpd) of its 6,000 tpd total capacity. The company is working to increase ore production this year, which is good timing for us.

With a much cleaner balance sheet and a forecast of $800-$850 per ounce for all-in sustaining costs (AISC) in 2014, the company looks poised to make money in the current price environment—and a lot of money in the supply squeeze we anticipate.

#3: Recycling Business

In addition to mining, this company recycles depleted catalyst materials to recover palladium, platinum, and rhodium at its smelter and base metal refinery. It’s been doing this since 1997, and business is booming. Pre-tax earnings last year rose a whopping 233% over 2012. And management says it will expand this end of their business over the next few years.

#4: Strong Financial Performance

This company reported over a billion dollars of revenue last year, up nearly 30% from 2012. It finished the year with a very strong working capital position of almost a half billion dollars.

#5: Unique North American Operations

The company is one of only a few PGM producers in North America. Nearly all other PGM mines operate in South Africa (Impala, Amplats, Lonmin, etc.) or Russia (Norilsk). Therefore, this company is more stable than most that mine in other jurisdictions.

#6: Upgraded Management

A prior management team made a poor investment in Argentina a few years back, which led to major changes in the board of directors and top management last year. The new president and CEO is a 21-year industry veteran and has experience in both M&A and mine optimization. He’s already corrected past mistakes, and we’re happy with the direction he’s taken the company. The technical people on the ground seem competent and are getting admirable results.

And finally…...

#7: We’ve Been There!

Our Chief Metals Investment Strategist Louis James, who conducted a due diligence trip to the company’s operations last year, says:

I liked the story when I visited and considered it to be the company to buy in a safe mining jurisdiction. But I didn’t want to bet on the team in place at the time. Flash forward and now it’s under new management, which is very focused on cutting costs and expanding the core business. The company’s results for 2013 were quite impressive, and I expect them to get better going forward. I’m convinced this company is uniquely positioned to benefit from potential supply shortages. Coupled with a likely rise in demand from the global auto industry in the years ahead, this stock is a very attractive play.

Here’s a picture from his visit.

Pay dirt: this is what the company’s palladium-platinum mineralization looks like before blasting. You can see the closely spaced holes that will be blasted a fraction of a second before the surrounding ones—in successive waves—so the ore is blasted inward. This high-grade resource in a safe and stable jurisdiction is the heart of our speculation.

 

The Only Stock to Buy, in a Market Backed into a Corner

 

Johnson Matthey, the world’s leading authority on PGMs, estimates the platinum market will register a deficit of at least 1.2 million ounces this year. This would be the largest shortfall since it first compiled data in 1975.

While it will take an enormous amount of time and expense to recover from the strikes in South Africa, that’s only the first layer of problems for the industry:

• According to consultancy GFMS, 300,000 ounces of platinum and 165,000 ounces of palladium could be lost after the strikes end, as it will take time and money to ramp up to full capacity—if that’s even possible since some mines have been damaged. The Implats CEO said it will take his company at least three months to return to full production, and they’ve already put the development of three new replacement shafts in the Rustenburg area on hold. Anglo American announced just last week that it plans to sell its platinum operations.

• Holdings of physically backed palladium ETFs continue to hit record highs. In less than two months, a half million ounces were added to ETFs. Fund holdings will likely continue to climb and push the palladium market further into deficit.

• The Russian government has been reportedly buying palladium from local producers, since it appears its stockpiles are near exhaustion. Exports ticked higher last month, but that was likely in anticipation of potential sanctions.

• Some recyclers announced they are holding back on sales, as they believe prices will move higher.

• Platinum demand in India is expected to grow 35% this year.

• Reports have surfaced that tout replacements to platinum and/or palladium. However, these are mostly research projects and are at least two to three years away from commercial viability (some will never make it).

• Auto sales in the US, China, and Europe, the three biggest regions by consumption, were up 12% through May over 2013.

• Existing stockpiles of these metals have dwindled. Based on prior estimates from Citigroup, only nine weeks of palladium and 22 weeks of platinum supplies remain—and half of those are in Russia. Standard Bank projects that stockpiled material from South African producers will run out in a month or less.

The key point is that platinum and palladium supply is in a structural deficit. Prices will pull back now that the strikes have ended—and that is your opportunity. The bull market in these metals is really just getting underway.

And we have the primo pick in the space. The shares of this stock would have to climb 50% just to match its 2011 highs—and that’s without the platinum/palladium supply crunch we’re speculating on. As you’ve surmised by now, I can’t give away the name of this stock in fairness to paid subscribers. But you can get it by giving BIG GOLD a risk free try. You’ll receive our full analysis and specific buy guidance, along with an exclusive discount on a popular gold coin in the June issue. And, if you want the absolute safest way to invest in PGMs, check out the options recommended in the May issue.

If you’re not 100% satisfied with the newsletter, simply cancel during the 3-month trial period for a full refund—no questions asked. Whatever you do, though, don’t miss out on the best stock pick in the PGM bull market. Click Here to learn more about BIG GOLD or Click Here to go straight to the order form.

The article The Only PGM Stock You Should Buy was originally published at Casey Research

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World Money Analyst: Europe....Cliff Ahead?

By Dirk Steinhoff
When Kevin Brekke, managing editor [of World Money Analyst], contacted me last week, I knew it was time again to survey the investment landscape. This month, I will focus on Europe and its decoupled financial and real economy markets.

Globally, the last two years were marked by booming stock exchanges of developed markets, disappointing bond markets, and devastation across the precious metals markets.

Since June 2012, the EURO STOXX 50 Index, Europe’s leading blue chip index for the Eurozone, has advanced by approximately 50% and outperformed even the S&P 500 and the MSCI World indices.

Over the last six months, European stock exchanges have seen a surprising change of leadership: The major stock market indices of the “weaker” countries, like Portugal, Spain, and Italy, have outperformed those considered stronger, like Germany. One of the top performers was a country that was and still remains in “bankruptcy” mode: Greece.

The question at this point is: Can these outstanding European stock market performances continue?

In our search for an answer, let’s start with a closer look at the economic conditions within the European Union (EU), where approximately 2/3 of total “exports” (internal and external) of the EU-28 are traded. And then let’s have a look at the economic setting of some major trading partners, such as the US and BRIC countries, which account for roughly 17% and 21%, respectively, of the external exports of the EU-28.
Although the EURO STOXX 50 Index has soared since June 2012, certain key measures of the underlying real economies paint a different picture.

To start, the GDP of the EU-28 is not really growing. In 2012, it contracted by 0.4% and grew by the smallest fraction of 0.1% in 2013. The GDP growth numbers for the countries in the euro area are even worse: -0.7% in 2012 and -0.4% in 2013. Whereas Germany’s GDP was up in 2013 by 0.5%, economic growth was down in Spain, Italy, and Greece by -1.2%, -1.8%, and -3.6%, respectively.

Real GDP Growth Rates 2002-2012
	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012
EU	1.3	1.5	2.6	2.2	3.4	3.2	0.4	-4.5	2.0	1.6	-0.4
Germany	0.0	-0.4	1.2	0.7	3.7	3.3	1.1	-5.1	4.0	3.3	0.7
Spain	2.7	3.1	3.3	3.6	4.1	3.5	0.9	-3.8	-0.2	0.1	-1.6
France	0.9	0.9	2.5	1.8	2.5	2.3	-0.1	-3.1	1.7	2.0	0.0
Italy	0.5	0.0	1.7	0.9	2.2	1.7	-1.2	-5.5	1.7	0.5	-2.5
Portugal	0.8	-0.9	1.6	0.8	1.4	2.4	0.0	-2.9	1.9	-1.3	-3.2

The EU unemployment rate stood at 10.2% at the beginning of 2012 and stands at 12.1% today. That the European Union is anything but a homogenous body that moves in unison can be seen in the following chart:

Where Germany has a current unemployment rate of 5.2% and a youth (under 25) unemployment rate of 7.5%, the numbers for other countries are worrisome: Current unemployment in Spain is 26.7%, and 12.7% in Italy, with youth unemployment in Spain at an incredible 57.7%, and 41.6% in Italy. And don’t forget Greece, which is mired in a historically unparalleled economic depression where unemployment is 28% and youth unemployment is a shocking 61.4%. Keep in mind that all of these numbers are those officially released by bureaucratic agencies. The real numbers, as we know, would likely be even worse.

Recent EU industrial production numbers have shown some slight improvement. Nevertheless, industrial production has only managed to recover to its 2004 level, and remains way below its 2007 heights (see next graph).

Source: Eurostat

So let’s see: a shrinking GDP, high and rising unemployment, and stagnant production significantly below 2007 levels. Those are not the rosy ingredients of a booming economy (as indicated by the stock exchanges) but of one that is struggling.

Europe is not in growth mode.

This verdict is further supported by the export numbers for trade between EU countries, known as internal trade. In 2001, internal trade accounted for 67.9% of EU exports. Today, this share is down to 62.7%. In an attempt to compensate for sluggish European growth, EU companies had to develop other export markets, such as the US or the emerging markets.

Will these markets help rescue European companies?

Time to Taper Expectations

With regards to the U.S., two important developments are worth mentioning. The first key development, which will have severe consequences for the global economy, was brought to my attention by my friend Felix Zulauf, an internationally well-known investor and regular member of the Barron’s Roundtable for more than 20 years. Running ever-increasing deficits in its trade and current accounts for almost 30 years, the US thus provided an enormous amount of stimulus for foreign exporters. Since 2006, however, the US trade deficit has shrunk, with deteriorating trade data for many nations as a consequence.

The second key development is that the newly appointed head of the US Federal Reserve system, Janet Yellen, seems determined to continue the taper of its bond buying program. This fundamental shift in monetary policy could be questioned if the economic numbers for the US begin to show significant weakness. But in the meantime, the reduction of economic stimulus in the US should lead to a reduced appetite for European export goods.

The emerging markets had been seen, not too long ago, as the investment opportunity and alternative to the fiscal and debt crisis-stricken countries of the developed world. Today, on a nearly daily basis, you hear bad news about the situation and developments in the emerging countries: swaying stock markets, plunging currencies, company bankruptcies, corruption scandals, and even riots.

The emerging markets are dealing with the unintended consequences of the Quantitative Easing (including liquidity easing and credit easing) programs in the West. The increased liquidity spilled over into the emerging markets in the hunt for yield. This flow of capital into the emerging markets lowered capital costs, inflated asset prices like stocks and real estate, and boosted commodity prices. All that, and more, sparked the emerging markets boom.

Now, this process has reversed. The natural conclusion to exaggerated credit-driven growth, the tapering of QE programs, the shrinking US trade deficit, and lower commodity prices has been an outflow of capital from emerging markets, triggering lower asset prices and exchange rates. The attempt of some countries to defend their currencies by raising interest rates will only exert further pressure on their economies.

With weaker emerging market economies and currencies, there will be no big added demand for European exports. Revenues and profits for EU companies (measured in euros) will fall.

When Trends Collide

So, over the last two years we had opposing trends—booming European stock markets and weak underlying real economies. This conflicting mix was mainly fostered by easy money that drove down interest rates to historic low levels. Plowing money into stocks, despite the poor fundamentals, was the only solution for most investors.

At their current elevated levels European stock markets appear vulnerable, and it seems reasonable to doubt that we will see a continuation of booming stock markets. Of course, such a decoupling can continue for some time, but the longer it continues, the closer we will get to a correction of this anomaly. Either the real economy catches up to meet runaway stock prices, or stock prices come down to meet the poor economic reality. Or some combination of the two.

Because of the economic facts that I discussed above, in my view, we may be seeing just the beginning of a stronger correction in stock prices.

Dirk Steinhoff is chief investment officer of portfolio management (international clients) at the BFI Capital Group. Prior to joining BFI in 2007, Mr Steinhoff acted as an independent asset manager for over 15 years. He successfully founded and built two companies in the realm of infrastructure and real estate management. Mr Steinhoff holds a bachelor’s and master’s degree in civil engineering and business administration, magna cum laude, from the University of Technology in Berlin, Germany. 

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The article World Money Analyst: Europe: Cliff Ahead? was originally published at Mauldin Economics

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Why Junior Gold Mining Stocks Are Our Favorite Speculations

By Laurynas Vegys, Research Analyst

Despite last week’s pullback, the precious metals market is off to an impressive start in 2014. Gold is up 10.6%, silver 4.3%, and the PHLX Gold/Silver (XAU) 17.1%. Gold, in particular, had a great February, rising above $1,300 for the first time since November 7, 2013. This has led to some very handsome gains in our Casey International Speculator portfolio, with a few of our recommendations already logging triple digit gains from their recent bottoms.

Why Junior Gold Mining Stocks Are Our Favorite Speculations

One of Doug Casey’s mantras is that one should buy gold for prudence, and gold stocks for profit. These are very different kinds of asset deployment. In other words, don’t think of gold as an investment, but as wealth protection. It’s the only highly liquid financial asset that is not simultaneously someone else’s obligation; it’s value you can liquidate and use to secure your needs. Possessing it is prudent.

Gold stocks are for speculation because they offer leverage to gold. This is actually true of all mining stocks, but the phenomenon is especially strong in the highly volatile precious metals. Most typical “be happy you beat inflation” returns simply can’t hold a candle to stocks that achieved 10 bagger status (1,000% gains). In previous bubbles—some even generated 100 fold returns. And we may see such returns again.

It’s Not Too Late to Make a Fortune

Here’s a look at our top three year to date gainers.

What’s especially remarkable is that all three of these stocks shot up much more than gold itself, on essentially no company specific news. This is dramatic proof of just how much leverage the right mining stocks can offer to movements in the underlying commodity—gold, in this case. Two of the stocks above are on our list of potential 10 baggers, by the way.

So have you missed the boat? Is it too late to buy?

Looking at the chart, two bullish factors jump out immediately:

• Gold stocks have just now started to move up from a similar level in 2008.

• Gold stocks remain severely undervalued compared to the gold price. A simple reversion to the mean implies a tremendous upside move.

Now consider the following data that point to a positive shift in the gold market.

1. After 13 consecutive months of decline, GLD holdings were up over 10.5 tonnes last month. The trend is similar to other ETFs.

2. Hedge funds and other large speculators more than doubled their bets on higher gold prices this year.

3. Increase in M&A—for example, hostile bids from Osisko and HudBay Minerals to buy big assets.

4. Apollo, KKR, and other large private equity groups have emerged as a new class of participants in the sector.

5. Gold companies’ hedging of future production—usually a sign of insecurity among the miners—shrunk to the lowest level in 11 years.

6. China continues to consume record amounts of gold and officially overtook India as the world’s largest buyer of gold in 2013.

7. Large players in the gold futures market that were short have switched to being long.

8. Central banks continue to be net buyers.

To top it off, there’s been no fallout (yet) from the unprecedented currency dilution undertaken since 2008—and we don’t believe in free lunches. The gold mania train has not yet left the station, but the engine is running and the conductor has the whistle in his mouth. This means…..

Any correction ahead is a potential last-chance buying opportunity before the final mania phase of this bull cycle takes our stock to new highs, well above previous interim peaks.

In spite of the good start to 2014, most of our 10 bagger gold stocks are still on the deep discount rack. And you can get all of them with a risk free, 3 month trial subscription to our monthly advisory focused on junior mining stocks, the Casey International Speculator.

If you sign up today, you can still get instant access to two special reports detailing which stocks are most likely to gain big this year: Louis James’ 10 Bagger List for 2014 and 7 Must Own Stocks for 2014.
Test drive the International Speculator for 3 months with a full money back guarantee, and if it’s not everything you expected, just cancel for a prompt, courteous refund of every penny you paid.

Click Here to Get Started Now

I hope you will take advantage of this opportunity in front of us—while shares are still relatively cheap.

The article Junior Mining Stocks to Beat Previous Highs was originally published at Casey Research

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Is this a turning point for the Junior Gold Stocks?

By Doug Hornig, Senior Editor

 

It's not exactly news that gold mining stocks have been in a slump for more than two years. Many investors who owned them have thrown in the towel by now, or are holding simply because a paper loss isn't a realized loss until you sell.


For contrarian speculators like Doug Casey and Rick Rule, though, it's the best of all scenarios. "Buy when blood is in the streets," investor Nathan Rothschild allegedly said. And buy they do, with both hands—because, they assert, there are definitive signs that things may be turning around.

So what's the deal with junior mining stocks, and who should invest in them? I'll give you several good reasons not to touch them with a 10 foot pole… and one why you maybe should.

First, you need to understand that junior gold miners are not buy-and-forget stocks. They are the most volatile securities in the world—"burning matches," as Doug calls them. To speculate in those stocks requires nerves of steel.

Let's take a look at the performance of the juniors since 2011. The ETF that tracks a basket of such stocks—Market Vectors Junior Gold Miners (GDXJ)—took a savage beating. In early April of 2011, a share would have cost you $170. Today, you can pick one up for about $36… that's a decline of nearly 80%.

There are something like 3,000 small mining companies in the world today, and the vast majority of them are worthless, sitting on a few hundred acres of moose pasture and a pipe dream.

It's a very tough business. Small-cap exploration companies (the "juniors") are working year round looking for viable deposits. The question is not just if the gold is there, but if it can be extracted economically, and the probability is low. Even the ones that manage to find the goods and build a mine aren't in the clear yet: before they can pour the first bar, there are regulatory hurdles, rising costs of labor and machinery, and often vehement opposition from natives to deal with.

As the performance of junior mining stocks is closely correlated to that of gold, when the physical metal goes into a tailspin, gold mining shares follow suit. Only they tend to drop off faster and more deeply than physical gold.

Then why invest in them at all?

Because, as Casey Chief Metals & Mining Strategist Louis James likes to say, the downside is limited—all you can lose is 100% of your investment. The upside, on the other hand, is infinite.
In the rebound periods after downturns such as the one we're in, literal fortunes can be made; gains of 400-1,000% (and sometimes more) are not a rarity. It's a speculator's dream.

When speculating in junior miners, timing is crucial. Bear runs in the gold sector can last a long time—some of them will go on until the last faint hearted investor has been flushed away and there's no one left to sell.
At that point they come roaring back. It happened in the late '70s, it happened several times in the '80s when gold itself pretty much went to sleep, and again in 2002 after a four year retreat.

The most recent rally of 2009-'10 was breathtaking: Louis' International Speculator stocks, which had gotten hammered with the rest of the market, handed subscribers average gains of 401.8%—a level of return Joe the Investor never gets to see in his lifetime.

So where are we now in the cycle?

The present downturn, as noted, kicked off in the spring of 2011, and despite several "mini rallies", the overall trend has been down. Recently, though, the natural resource experts here at Casey Research and elsewhere have seen clear signs of an imminent turnaround.

For one thing, the price of gold itself has stabilized. After hitting its peak of $1,921.50 in September of 2011, it fell back below $1,190 twice last December. Since then, it hasn't tested those lows again and is trading about 6.5% higher today.

The demand for physical gold, especially from China, has been insatiable. The Austrian mint had to hire more employees and add a third eight-hour shift to the day in an attempt to keep up in its production of Philharmonic coins. "The market is very busy," a mint spokesperson said. "We can't meet the demand, even if we work overtime." Sales jumped 36% in 2013, compared to the year before.

Finally, the junior mining stocks have perked up again. In fact, for the first month of 2014, they turned in the best performance of any asset, as you can see here:

(Source: Zero Hedge)

The writing's on the wall, say the pros, that the downturn won't last much longer—and when the junior miners start taking off again, there's no telling how high they could go.

To present the evidence and to discuss how to play the turning tides in the precious metals market, Casey Research is hosting a timely online video event titled Upturn Millionaires next Wednesday, February 5, at 2:00 p.m. Eastern.



Register here for FREE

Gold Stocks Are About to Create a Whole New Class of Millionaires

By Jeff Clark, Senior Precious Metals Analyst

Bear markets always end. Has this one?


Evidence is mounting that the bottom for gold may be in. While there's still risk, there's a new air of bullishness in the industry, something we haven't seen in over two years.

An ever growing number of industry insiders and investment analysts believe the downturn has come to a close. If that's true, it has immediate and critical implications for investors.

Doug Casey told me last week: "In my lifetime, the best time to have bought gold was 1971, at $35; it ran to over $800 by 1980. In 2001, gold was $250: in real terms even cheaper than in 1971. It ran to over $1,900 in 2011.

"It's now at $1,250. Not as cheap, in real terms, as in 1971 or 2001, but the world's financial and economic state is far more shaky.

"Gold is, once again, not just a prudent holding, but an excellent, high-potential, low-risk speculation. And gold stocks are about to create a whole new class of millionaires."

Just a couple of months ago, you would have had a hard time finding even one analyst saying something positive about gold and gold stocks—even some of the most bullish investment pros had gone silent.

But that's changing. Case in point: When Chief Metals & Mining Strategist Louis James and I attended last week's Resource Investment Conference in Vancouver, we witnessed quite a few very optimistic speakers.

Take Frank Giustra, for example, a self-made billionaire and philanthropist who made his fortune both in the mining sector and the entertainment industry. He's the founder of Lionsgate Entertainment, which is responsible for blockbuster movies like The Hunger Games, but he was just as heavily involved with mining blockbusters such as Iamgold, Wheaton River Minerals, Silver Wheaton, and others.

More Upturn Advocates Here's a quick scan of the growing number of voices that think the decline is over, some of which are outright bullish: "The worst is over with gold. It's time to call your broker." —Frank Holmes, US Global Investors "Sentiment is as black as night on gold, so I’m actually long on some gold miners." —Jeffrey Gundlach, bond guru and DoubleLine Capital founder "We'll see a gradual recovering throughout the year, because all the negative factors are already in the price." —Eugen Weinberg, head of commodities research at Commerzbank "Looking ahead, the downside risks seem to be diminishing, and overall we feel that the big shocks we've seen over the last two or three years are done..." —Marc Elliott, Investec "The mainstream narrative on gold is changing, indicating a possible bottom." —Bron Suchecki, Perth Mint "Orthodox investments are working on a cyclical peak, as precious metals are working on a cyclical bottom. The big pattern could be fully reversed by February-March, with gold becoming one of the best-performing sectors through the rest of 2014. The advice is to seriously reduce exposure in stocks and bonds and get fully invested in the precious metals sector. This should be completed in the first quarter." —Bob Hoye, Institutional Advisors

"I'm telling you, you've seen the bottom of the gold market," he told the rapt audience at the conference, offering a bet to the Goldman Sachs analyst who claimed gold is going to $1,000.

The stakes: Whoever loses has to stand on a popular street in downtown Vancouver dressed in women's underwear.

Tom McClellan, editor of the McClellan Market Report, stated in a recent interview on CNBC: "The commercial traders are at their most bullish stance since the 2001 low, and they usually get proven right. It's a hugely bullish condition for gold, and I'm expecting a really large rebound.

"The moment we see a major gold producer announce that it's curtailing production or it's going out of business," McClellan continued, "that'll be the moment we mark the low in gold. I expect to have one of those announcements any minute. We're getting down to the production price of gold right now, and they won't continue producing gold at that level for very long."

Are they just guessing? To answer that, first consider the historical context of this bear market—it's getting very long in the tooth:

• The current correction in gold stocks is the fourth longest since 1879. The decline of 66% ranks in the top 10 of recorded history.

• In silver, only two corrections have lasted longer—the ones that ended in 1936 and 1983.

Some technical analysts have pointed to positive chart formations, most notably the powerful "double bottom" that can portend a strong upward move. Based on intraday prices…

• Gold formed a double bottom last year, hitting $1,180.64 on June 28 and $1,182.60 on December 31, a convincing six-month span.

• Silver formed a higher low: $18.20 on June 28 vs. $18.72 on December 31, a bullish development.

• Gold stocks (XAU) formed a slightly lower low: $82.29 on June 26 vs. $79.73 December 19, 2103, a difference of 3.2%. However, as our friend Dominick Graziano, who successfully helped us earn doubles on three GLD puts last year, recently pointed out…

• The TSX Venture Index, where most junior mining stocks trade, has stayed above its June low. In fact, it recently soared above both the 50 day and 40 week moving averages for the first time since 2011.

Meanwhile, Goldcorp (GG) sent a huge bullish signal to the market earlier this month. It decided to pounce on the opportunities available right now, launching a takeover bid of Osisko Mining for $2.6 billion. The company wouldn't be buying now if it thought gold was headed to $1,000.

As Dennis Gartman, editor and publisher of The Gartman Letter, says, "It's time to be quietly bullish."

The smart money, like resource billionaire Rick Rule, is not just quietly bullish, though—they are actively buying top-quality junior mining stocks at bargain-basement prices to make a killing when prices rise.
To make sure that you can invest right alongside them, we decided to host a sequel to our 2013 Downturn Millionaires event, titled Upturn Millionaires—How to Play the Turning Tides in the Precious Metals Market.

Back then, we made a strong case for this once-in-a-generation opportunity—but it was still undetermined when the bottom would be in. It looks like that time is now very near, and we believe it's time to act.

On Wednesday, February 5, at 2 p.m. EST, resource legends Frank Giustra, Doug Casey, Rick Rule, and Ross Beaty, investment gurus John Mauldin and Porter Stansberry, and Casey Research resource experts Louis James and Marin Katusa will present the evidence and discuss the possibilities for life changing gains for investors with the cash and courage to grab this bull by the horns.

How do we know the absolute bottom is in? I'll answer that with a quote from a recent Mineweb interview with mining giant Rob McEwen, former chairman and CEO of Goldcorp:

"I'd say we're either at or extremely close to the bottom, and as an investor I'm not prepared to wait to see if the bottom's there because it's very hard to pick it. Because … if you're not taking advantage of it right now, you're going to miss a big part of the move. And when you look at the distance these stocks have to travel to get to their old highs, there's some wonderful numbers in terms of performance that I think we're going to see."

Granted, these voices are still in the minority—but that's what makes this opportunity wonderfully contrarian.

After all, once "Buy gold stocks" is investor consensus, we'll be approaching the time to sell.
Our Upturn Millionaires experts believe that our patience is about to be rewarded. And when that happens, gold stocks will be easy doubles—and the best juniors potential ten baggers.

Don't miss the free Upturn Millionaires video event—register here to save your seat. 

Even if you don't have time to watch the premiere, register anyway to receive a video recording of the event.)

Gold, Silver & Precious Metal Miners Signals

It has been a very long couple of years for the precious metal bugs. The price of gold, silver and their related mining stocks have bucked the broad market up trend and instead have been sinking to the bottom in terms of performance.

Earlier this week I posted a detailed report on the broad stock market and how it looks as though it‘s uptrend will be coming to an end sooner than later. The good news is that precious metals have the exact flip side of that outlook. They appear to be bottoming as they churn at support zones.

While metals and miners remain in a down trend it is important to recognize and prepare for a reversal in the coming weeks or months. Let’s take a look at the charts for a visual of where price is currently trading along with my analysis overlaid.

Weekly Price of Gold Futures

Gold has been under heavy selling pressure this year and it still may not be over. The technical patterns on the chart show continued weakness down to the $1300USD per once which would cleanse the market of remaining long positions before price rockets towards $1600+ per ounce.

There is a second major support zone drawn on the chart which is a worst case scenario. But this would likely on happen if US equities start another major leg higher and rally through the summer.

Weekly Price of Silver Futures

Silver is a little different than gold in terms of where it stands from a technical analysis point of view. The recent 10% dip in price which shows on the chart as a long lower candle stick wick took place on very light volume. This to me shows the majority of weak positions have been shaken out of silver. Gold has not done this yet and it typically happens before a bottom is put in.

While I figure gold will make one more minor new low, silver I feel will drift sideways to lower during until gold works the bugs out of the chart.

Silver Mining Stock ETF – Weekly Chart

Silver miners are oversold and trading at both horizontal support and its down support trendline. Volume remains light meaning traders and investors are not that interested in them down where and it should just be a matter of time (weeks/months) before they build a basing pattern and start to rally.

Gold Mining Stock ETF – Weekly Chart

Gold mining stocks continue to be sold by investors with volume rising and price falls. Fear remains in control but that may not last much longer.

Gold Junior Mining Stock ETF – Weekly Chart

Gold junior miners are in the same boat with the big boys. Overall gold and gold miners are still being sold while silver and silver stocks are firming up.

Precious Metals Trading Conclusion

In the coming weeks we should see the broad stock market top out and for gold miners along with precious metals bottom. There are some decent gains to be had in this sector for the second half of the year but it will remain very dicey at best.

If selling in the broad market becomes intense and triggers a full blown bear market money will be pulled out of most investments as cash is king. Gold is likely to hold up the best in terms of percentage points but mining stocks will get sucked down along with all other stocks for a period of time. This scenario is not likely to be of any issue for a few months yet but it’s something to remember.

HFU staffer Chris Vermeulen


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