A former small cap research analyst looks for value in the Canadian junior mining sector and shares his experiences, thoughts, and rants. The blog is free and for information purposes only, so should not be construed in any way as investment advice.
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Would you rather...
Receive one of the following:
$16,000 US dollars
1,000 ounces of silver
13 ounces of gold
500 pounds of cobalt
5,400 pounds of copper
Whatever your fancy, the valuations are all currently about the same.
The pullback in Bitcoin I noted a week ago, which looked substantial at that time, now looks like a minor blip on the chart. Exponential action!
Was Thursday's high on Bitcoin the top? Probably not. People don't seem to learn, so history repeats itself again and again with bubbles (lots of bubbles documented here). Below is a chart for one of the first documented bubbles, tulip mania. One thing I've learned from bubbles and market crashes is that the decline in price when a bubble pops is typically several times faster than the exponential rise up. So, when the Bitcoin/cryptocurrency bubble pops, it is likely going to be mind blowing! If 20% daily gains and losses are normal for Bitcoin, a sharp selloff is going to look like 40 or 50% in a day. You see, many of the speculators buying Bitcoin now probably acknowledge that this is a bubble and they are betting that they can get out quickly with minimal losses. Usually that is not the case. Something will trigger a gap down, servers will crash, and losses will be staggering for those who jump in too late.
Bitcoin seems to have gained some legitimacy with futures now trading on the CBOE. My view remains that Bitcoin is a bubble that will crash. The only question is when. Tulip bulb prices could not be justified at 10 guilders, yet they went to 60. Bitcoin could well go to $50,000 or even $100,000. All I know is that something unexpected will trigger a sudden and sharp collapse. We will know the top is in when we see a 50% drop. History repeats itself.
While Bitcoin had a stellar week, precious metal and base metal prices took a beating. Who wants tangible assets when you can now get cyber assets? Metals have to be mined and then stored in warehouses. Cryptocurrencies can be "mined" using computers and stored using Blockchain. So what if they are constantly being hacked, waste massive amounts of electricity, and if most of the computing power resides in China and Mongolia?
In classic fashion reminiscent of the dot com craze and marijuana mania, failed mining companies and even a failed biotech are rushing to become Blockchain or cryptocurrency companies. In many cases, all it takes is just the announcement that you intend to get into the sector that can move your stock. And, in some cases like Routemaster Capital (TSXV:RM) and Vogogo (TSXV:VGO), you don't have to mention anything publicly and you claim no material changes while your stock shoots up on volume right after you raise money at low prices. A classic case of "investors" chasing returns, which usually does not pan out.
Call me old school, but I still like metals and mining (and fundamentals). Bitcoin will likely be gone in a decade, but all of our electric, autonomous vehicles will still be using lots of copper, zinc, cobalt, lithium and nickel. I especially like zinc in the short-term, as inventories are hitting critically low levels. I think zinc prices will soon start another run up and if I had any Bitcoins I'd be selling them and buying zinc mining stocks.
Prior to being a junior mining IR consultant and blogger, I used to be in equities research and trading. Back in those days, I studied the markets intensely looking for buying opportunities. I used a variety of technical indicators, technical analysis, fundamentals, and intuition to guide my decisions. As discussed in this post, I think there is a good chance that we saw a market reversal on Friday. That sets up what could be a significant buying opportunity.
The equities market is constantly evolving and changing. This bull market is quite different from the last, as there is a lot more computer-based trading, a lot more passive investing (i.e., investors buying ETFs instead of actively managed funds), and a remarkable lack of volatility. Most investors have become accustomed to the low volatility, making the recent market pullback seem shocking when, in fact, it is quite normal (historical charts here).
My belief is that we are in the latter stages of a bull market and that t…
The annual Prospectors & Developers Association of Canada, or PDAC, convention in Toronto has ended. I was there, as were 25,000 other people. While I actually didn't attend the convention much, here are a few things I learned and observed at this PDAC:
Some people can never have enough free pens or squishy toys. I'd like to see a concerted effort by the mining industry to eliminate all the free junk that is given away at conferences like PDAC. When you feed a pigeon, you'll get more and more pigeons that suddenly show up. Ask yourself if you really want to attract pigeons pen collectors. People who covet free trinkets are not who we want to attract to an investment conference. On a side note, thanks to Lundin Mining (LUN.TO) for providing small chocolate bars that I gave to my kids so they would still love me after PDAC. Copper exploration is hot. There are a lot of big mining companies looking for large scale copper projects. Since there are not a lot of those…
Tin is a boring metal. It is used predominantly for solder (yawn!), and for applying a thin, corrosion resistant layer on metal (a.k.a. tin-plating) (double yawn!). Or, so at least I thought.
Recently, Rio Tinto Ventures hired MIT to study which metals would be most impacted by new technologies such as autonomous and electric vehicles, renewable energy, energy storage, and advanced computing and IT. Never in my wildest dreams would I have expected tin to come out at the top of that list, edging out lithium and cobalt.
We've all heard lots of hype about lithium, cobalt, nickel, and even vanadium being the hot metals associated with electric vehicles and batteries. Lithium has lost some of its luster due to Tesla's struggles as well as potential that SQM could flood the lithium market. I still like cobalt due to the supply concentration from the DRC, a hellhole of a country that, ironically, has amazing mineral endowment. But, this is the first time I've seen or heard …