Sector expert Michael Ballanger discusses the recent week in the precious metals markets.
I was sitting with my partner on the porch this evening watching the squirrels and chipmunks and cardinals and blue jays all feasting upon a smorgasbord of sunflower and other assorted seeds amid a conflagration of floral colors exploding in our front garden. As I was trying desperately to nail down a topic for this week’s missive (with great difficulty), I must have counted no fewer than fifteen different creatures; at least five different breeds of birds, three different rodent types and even a couple of reptiles, all gathering furtively around two feeding stations while insects of every imaginable shape and size blanketed the grass and patio tiles in an effort to expunge any remnants of seed left unattended by the other creatures.
Watching this beehive of activity, each creature setting out to fulfill a mission—forage, feed, return to the nest—I was suddenly slammed with yet another 2020 epiphany. To the flora and fauna of our planet, there is no “pandemic;” life for them consists of waking up, foraging, reproducing, and do their damnedest to stay out of the path of humans, who invariably contribute to either threats to their survival or the extinction of their species.
The small town in which I currently reside is 90 minutes northeast of the city of Toronto, located on an island largely the property of the Mississauga First Nation. It is a farming region and to no one’s surprise, the corn and soybeans are having a good season because nobody told them to “Stay Home and Stay Safe,” as wearing a mask might block the sunlight. We fill up my big Dodge Ram (457 Hemi under the hood) at the Fill-up Fuels station owned and operated by the First Nation people. As a full-service operation, I must tell you that the good people manning the station are the most polite and helpful people on the planet.
The small town of Port Perry basically opened all the bars and restaurants about a month ago and commerce is slowly returning. While it can’t really be deemed as “normal,” it is still greatly-improved,” and while masks are being worn and man-hugs are a no-no, there have been zero new cases of COVID-19 since June.
So, I see all life surrounding the human population going about their business in a manner not terribly different than any prior August since (probably) 1841, and all I can envision are we pathetic humans socially distancing and donning “designer masks” in order to please our governors, the majority of whom have never taken a course in either first aid, preventative medicine or emergency response training.
I have refrained from calling “bull ” on this government-promoted reflation effort, all in the name of “saving jobs,” but I am no longer able to even whimper out as much as a squeak of sympathy for these banco-politico waifs, whose “call to action” consists of standing in front of TV cameras feigning “decisiveness.” All I see are clueless politicians “winging it” while masked henchmen (and henchwomen) stand at attention in the background in a feeble attempt to convey the “command and control” state of readiness.
Meanwhile, the red squirrel in the front yard has just landed on the bird feeder after a six-foot leap from a tree branch, and rather than chase him off, I applaud his acrobatic skill and watch him devour the sunflower seeds. These non-human denizens of the North care not about pandemics; they simply adhere to rituals of survival that have kept their species around for thousands of years. It is a shame that we humans are unable (or unwilling) to let our immune systems do the job they designed for, which have kept us around for thousands of years, instead of dutifully saluting the local politicians, standing in long, overheated queues like kindergarten children waiting for the juice box to be handed out. It is revolting.
I will refrain from waxing eloquently any further on the last six months of monetary and fiscal insanity, which has exploded both deficits and central bank balance sheets across the globe in an upward reflationary spiral the likes of which have never before been seen. There is today a clear perversity in seeing all-time highs in global stock markets despite record unemployment and the crumbling small business sector. You have all heard the gold bug narrative that holds that we are about to see “the greatest wealth transfer in history,” the inference being that the paper merchants (stock and bond investors) are going to the slaughter while the fine and noble patriots in precious metals flourish. Sadly, they are absolutely correct in the “transfer of wealth” idea but it is from the small business sector to the mega-corporations.
You see, the megalodon corporations like Walmart and Costco can access bank credit because it is backstopped by the Fed, whereas the local shoe manufacturer whose plant has been shuttered and whose employees have ordered to “stay at home” do not have the same access to these credit lifelines. When all this phony “GDP” (gross domestic product) is spent and the punchbowl drained, there is going to be a “Wile E. Coyote moment” where we look down and see nothing beneath us except air. That V-shaped recovery is lauded and extolled and promoted by the behavioral pitchmen like Larry Kudlow, who should go back and read up in the French Revolution and google search the word “guillotine” to learn the true definition of “unexpected outcomes.”
Speaking of books, for any of you too young to have had the pain/pleasure of reading Ayn Rand’s 1,000-page epic 1957 novel “Atlas Shrugged,” I strongly urge it. In fact, if you are a sexagenarian and were forced to read as a school project fifty years ago, pick it up and read it again. The favoritism behind government interference being displayed for large corporations over entrepreneurial endeavour is a major theme in the book, and it is exactly what is happening here in the summer of 2020. Read it.
As for the precious metals, I am now up to fifteen hate-mail messages per day from the gold and silver bugs, with particularly acidic vehemence from those that have only just recently joined the precious metals parade. One e-mail from someone I have never met gave me a stern lecture on my current “cautious” (as opposed to “bearish”) “short-term stance” (as opposed to “long-term conviction”), citing a myriad of pro-gold biases and ending with the line, “We are in a new paradigm of investment parameters,” which was another way of saying “it’s different this time.” Never since the invention of the Internet and e-mail messaging have I ever relished hitting the “delete” button more eagerly and with such satisfaction.
I sent out an Email Alert to subscribers on Tuesday of this week, with gold trading at $2,020, repeating my message of “caution required,” and explained in detail that such guidance is not a message of “sell everything.” This is a snippet of what I wrote, with gold and silver screaming northward and the Twitterverse pumping newsletters like umbrellas in April:
“I am not a ‘bear’ on either gold or silver, which is why I continue to own and add to the junior developers, but I am not trying to re-establish long positions in any of the Gold Miner ETFs (GDX/GDXJ; exchange-traded funds), nor am I trying to get back into SLV or GLD calls. We need a real good cleansing—one that chases the Johnny-come-latelies from the PM (precious metals) space—before I will even think about jumping back in.”
Gold chart sent Tuesday to subscribers
Friday morning gold showed a quote at US$1,920 per ounce—a US$100 drop from Tuesday’s euphoria—and the way it is trading (this has “Freaky Friday” written all over it), a $100 crash would not surprise me in the slightest. After all, we are now in the final countdown to “Four More Years!” for Donald Trump, or a new regime of leftist mouth-breathers, and if Trump is listening to Kudlow, orders to Mnuchin will involve, shall we say, the “mobilization” of some of the sovereign gold holdings in order to maintain the illusion that the U.S. economy is being handled in a highly presidential manner.
Silver has been a spectacular performer since the March lows, and through our holdings in , we have treated quite well. However, that in no small way changes the near-term outlook for silver, as it was emitting multiple warning signs, the most severe of which was the plethora of “Silver to $100!!!” e-mail blasts sitting every morning in my inbox. (AAG:TSX.V)
Silver chart sent Tuesday to subscribers
If the correction in the precious metals is orderly and without the usual shenanigans that have accompanied prior selloffs, then the market will be primed for a big year-end rally to all-time highs, well beyond Au $2,100/ounce and Ag $30/ounce. I hate making predictions, but I think that as soon as the late longs are flushed, gold will take out the 2020 highs and get a $2,350 print. Silver will get a $33.57 print at a GSR (gold-to-silver ratio) of 70:1. These are merely guesses and not a great deal different than tossing a coin. What is important is that I rate the likelihood of a year-end advance as “high,” but only if we get the flush. Otherwise, I see sideways, back-and-forth churning with bulls and bears growing more frustrated as it wears on.
This is now the precise time of the calendar year where I am in full accumulation mode of those junior developers (and a few explorers) that have been languishing. I have written about this before, so everyone knows that the voyages into the northern bays and inlets are rapidly coming to a close and the time to focus on the undervalued developers is now. I will be putting out Special Situation reports on several juniors in coming weeks that could mirror the performance of Aftermath Silver, first mentioned in July 2019 at CA$0.10/share. The chart below says it all:
To obtain copies of the Special Situation reports, you can e-mail me at [email protected] and I will send you instructions. Expanding on the category of “broken records,” it is the junior developers that will carry the biggest bang for your rapidly depreciating bucks, so going into the end of the year overweight a basket of gold and silver developers should prove rewarding.
Now the chipmunks are all lined up on the porch railing, so I guess the bird feeders need replenishing.
Originally published Aug. 21, 2020.
Follow Michael Ballanger on Twitter @MiningJunkie.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Aftermath Silver. My company has a financial relationship with the following companies referred to in this article: Aftermath Silver. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Aftermath Silver, a company mentioned in this article.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.
( Companies Mentioned: AAG:TSX.V,
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