Welcome To The Golden Band Resources HUB On AGORACOM
Saskatchewan's SECRET Gold Mining Development.
Message: Charts & Comments
Where Is The Bull Market?
In the coming weeks, I suspect that most people inclined to believe in 'the bull market in something, anything' are going to be fed a coprophagic breakfast on a styrofoam tray under cellophane wrap.
We are in a generational bear market the likes of which are probably not to be repeated for decades to come. While the business channel will always be upbeat on infinitesimal market gains, no matter how far behind inflation they have finally fallen, it should come as no surprise that equity stock gains will be very restricted.
Very probably people will see the crash as happening now, rather than in 2008,(or 2000 for that matter) because people will only just begin to realize what their returns mean looking down the road. If they haven't made any returns now, after years of climbing a wall of worry downwards, the facts will soon be made real.
This will give great advantage to the sell-side brokers piling on shorts in every sector. They would have made sure gains if they were selling shares into the market without buying any. And if they had any forward looking planning or sophistication, they would be adjusting for inflation.
source: http://www.nowandfutures.com/forecast.html#bear_markets
Adjusting Against Gold
So to prove our bear market exists, gold has been adjusting for inflation since 2000, but also has been adjusting against liquidity in the years prior to 2000. So for stock market indeces, and gold miners the price of gold is the surest indicator of whether you are in a bull market or bear market. And especially should gold miners be measured against gold.
TSX Monthly Vs. Gold
That the TSX looks very different in an inflation-adjusted sense using gold as the measurement says that we are about to have our sense of value change radically, since your returns on investment are always measured against inflation. Gold is probably the best way to represent this change.
Speculative blowouts are bound to happen in this fall, and with it, equity values. The major decline is in since many years now, but people will only just begin to fathom what those losses entail, and trace back over the years.
This is one chart you're unlikely to see in any media, because for a long time such considerations were labelled as an anachronistic measure of value. But now, its making much more sense than it has for many years.
supersize: http://www.flickr.com/photos/11747277@N07/4934214699/sizes/l/in/photostream/
Copper Vs. Gold
Technically speaking, copper has made no headway against inflation. Measured against gold, of course, as our indicator. Some would argue that there is a permanent secular bull in the copper, but it would have had to either advance against gold, or keep its value. The ratio demonstrates that copper, though valued higher this year, has made little progress against inflation.
supersize: http://www.flickr.com/photos/11747277@N07/4934824028/sizes/l/in/photostream/
Where's The Bull Market?
So the most astringent measure of gold companies should be gauging their value against gold. It must be noted that the largest gold companies had taken on very large copper/gold porphyry deposits and have become copper producers with a gold by-product.
The only stock which is considered to 'index' with the gold price is Goldcorp. But in reality, GG has been declining against the gold price since 2006, thus falling behind inflation.
The larger players in the gold sector are heavily exposed to either copper, or have engaged in acquisitions and mergers which are also speculative in nature. Even those which have taken out copper hedges have not adjusted their hedges for inflation, so hedges may be temporarily under water. The larger gold companies seem to have had their heyday in the late 1990's. But by looking at their nominal prices, you are led to believe that they are offering you advances. At some point, the advance in the gold price will greatly exceed inflation, so the comparison will no longer be valid.
Conclusion: We may be in a bull market for bullion prices, but definitely in a bear market for equities, even more so when adjusted for inflation.
The effect this has had on gold exploration companies has been very mixed results. Some have had entered into speculative manias, while others have had great difficulty advancing.
This has led to difficulties in the junior sector:
Augen moves the goalposts
Augen Gold is a company that normally doesn't attract much attention. And with good reason: It's an exploration company (with a property in Northern Ontario) and it's small (with a market cap of $13-million.)
But the company has moved to front and centre because of corporate governance concerns and because management is fighting to keep the company from falling into the hands of a group of shareholders who believe in a different strategy.
Augen Gold -- whose three large shareholders are Libra Fund (15%), Augen Capital (15%) and Sprott Asset Management (5%) -- has been creative in its efforts to avoid the wrath of its owners. For instance, it has cancelled/postponed its annual meeting on two occasions, with the courts intervening the second time to ensure the meeting was put off until Sept. 30.
more: http://www.financialpost.com/opinion/columnists/Augen+moves+goalposts/3416187/story.html#ixzz0xuYvDqo8
Strategies For A Return On Investment
One way of providing a return is a yield that means to provide returns against the ravages of inflation, and in the case of a gold company would provide you with the necessary returns in terms of yield against increases in the average gold price. Certainly gaming the equity markets may provide you with an ROI that might last a year, but should your speculative bubble now crash, then your equity value will necessarily fall behind inflation, or even tumble below deflation or contractions in money supply.
But gaming the equity market has been in vogue for some fifty years, not a single person would consider the importance of yield in an inflationary recession of the kind we are experiencing:
source: http://www.safehaven.com/article/17982/the-rare-buy-stocks-signal-that-aint
Conclusion: providing a return on investment will require a yield commensurate with inflation.(or if you're a gold company a yield commensurate with advances in the gold price.) Since QE2 is about to occur, this means money supply will go to astronomical heights, while equities not providing a return will continue to lag, providing no return on investment.
GBN.V is in a unique position to provide a very robust yield, since it will be cash-rich. But the principals want very much to flip the asset with an undervalued price to a bigger company in the hopes that gaming the equity market will provide the necessary returns.
-F6
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