$TSX:$GOLD Monthly

TSX vs. Gold monthly is showing an important development, that equity prices are outperforming gold. What this means is that equity indeces such as the TSX or the DOW will probably remain range bound for the indefinite future, and that alpha is probably not in the cards for equities.

But returns for investors will be in yields. Equities with a yield better than bonds will retain value, so the challenge will be to obtain a yield from a stock that is not yet paying dividends or issuing bonds.

Bonds for gold mining stocks are yielding in the 6% - 8% range, meaning that if you finance growth for a gold mining company and are an investor, the expected return will be in this range. Sprott famously destroyed his resource lending business by demanding ponzi, usurious lending rates, far above market.

A total failure.

If he had the intelligence to offer investment paper with returns confined in this range, he would have had much more success. But he is as greedy as politicians when they hear the words: 'gold mine.'

Equity prices aught to be confined in a range where they provide a return in this range. So the major gold miners will see price deterioration until their dividends or bonds provide a stable return, and junior miners should look forward to this scenario, where their equity prices experience a re-rating until their stock prices reflect market rates for yields.

Netolitzky has shot himself in the foot, expecting to celebrated as a great explorer and cutting off every investment avenue except this exclusive scenario. This is not a strategic vision, but simple megalomania.

http://scharts.co/1e3BuEB

-F6