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XMFSinchiruna (26.55)

Feeling Solid About the Juniors

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May 21, 2010 – Comments (11) | RELATED TICKERS: SIL , GDXJ

This has been some kind of pin action on the junior mining and exploration shares over recent days!

I was able to repurchase one stock that I sold at $0.42 a few weeks ago at $0.22. Another that I was recently adding to at $1 dropped down mercifully for me to $0.70.

I'm not here to call a bottom, although the depth of this morning's drop in shares followed by a huge snap-back is certainly a bullish development on the short-term charts. Whether the juniors hold these levels or not in the coming days, I know these are values on top of incredible values. The micro-cap juniors remained ridiculously undervalued relative to bullion prices even at recent highs, so this massive dip is nothing but a gift for the precious metals investor.

I wish I could discuss individual trades, but Fools eager to get involved in these shares that I'm focused upon will find many of them contained within the holdings of a certain ETF that I've made a very bullish call on recently. :P SILver is tops!

11 Comments – Post Your Own

#1) On May 21, 2010 at 11:02 AM, mcornice1 (29.00) wrote:

I just picked up some EXK this morning to get in below 3.20. That was my target price point that I picked out last week. Some times patience pays off.

I also did some research on GDXJ. Count me in as a fan. Lots of upside in that with a lower risk profile than holding any one junior. 

As always, great work Sinch. Your blog post about short term gold and silver price really helped and I wouldn't mind seeing that every now and again if/when we get little dips like this. Keep up the great work.

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#2) On May 21, 2010 at 11:21 AM, XMFSinchiruna (26.55) wrote:

mcornice1

Nice ... that one holds potential to be a consolidator in the junior silver space and grow into a powerful mid-tier operator.

I will do my best to offer my thoughts on price expectations whenever we have a major shift in direction.

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#3) On May 21, 2010 at 12:25 PM, Bays (29.18) wrote:

Sinch,

Not sure what your appetite for risk is, but SXL.v has a fairly diversified list of properties which they will be drilling this summer.

Results look to be promising. 

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#4) On May 21, 2010 at 12:27 PM, Bays (29.18) wrote:

Oh ya.... I like NOX.v as well!

They snapped back 15% today!

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#5) On May 22, 2010 at 9:27 AM, 100ozRound (28.51) wrote:

Sinch - are you planning on doing a write up on Great Panther anytime soon?   It's a bit difficult to find info on them other than on their website.

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#6) On May 22, 2010 at 9:47 AM, XMFSinchiruna (26.55) wrote:

100ozRound

If I did, it would have to be for the blog only. There's not much more than needs to be known than what is available on their website. I believe their growth targets are 100% obtainable. I can't say much right now, for reasons alluded to above.

Maybe someone else here would like to do a write-up? I'm sure Mr. Archer would make himself available for questions to a Fool conducting research on behalf of the community.

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#7) On May 22, 2010 at 11:19 AM, 100ozRound (28.51) wrote:

Thanks Sinch! I guess that's the downfall of being a microcap junior - nobody covers them.  I might compile some information and do a write up myself; although don't look for it to be near the caliber of the great Sinchiruna!!

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#8) On May 22, 2010 at 11:38 AM, MoneyWorksforMe (< 20) wrote:

TMFSinchiruna, I am very curious as to how you would respond to Prechter's view on gold in this video. He raises some very good points, that make me very hesitant to be bullish on gold.

 

 http://finance.yahoo.com/tech-ticker/article/493259/Even-$1-Trillion-Cant-Save-the-Euro,-But-Gold-Is-No-Haven,-Prechter-Says?comment_start=21

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#9) On May 23, 2010 at 8:01 AM, XMFSinchiruna (26.55) wrote:

MoneyWorksforMe

"Meanwhile, the most popular alternative to currencies, gold, isn’t such a good buy either, according to the veteran market watcher. “It’s losing upside momentum at the same time more people are getting more enamored with it,” he notes."

"Contrary to popular belief, “gold tends to rise when the economy is expanding not when it’s in recession,” according to Prechter’s research.  And, as we’ll discuss in more detail in another clip, Prechter thinks deflation and economic depression are a foregone conclusion."

I'm still searching for some 'very good points'. I've rarely seen a helpful word about gold from this guy, but I'll be happy to jot down my thoughts.

If breaking to fresh new nominal highs in every major fiat currency over recent months following an 18-month correction represents losing upside momentum, then clearly he was anticipating some sort of rocket launch that even this bullish Fool was not. We still have a 100:1 leveraged paper market for gold controlled by a select few bullion banks, which grants them enormous power in reducing the scale of upward moves by maintaining massive naked shorts that have no basis in physical metal. Before long, paper and physical gold will diverge in price, and that is when we will see real acceleration in "upside momentum". 

The second paragraph is ridiculous. We have exactly one major upward move in gold prices to during the post-Bretton Woods era to refer to, and he throws around terminology like "tends to" rise only during expansion. Hogwash! Gold holds no relationship whatsoever to GDP, and one pet historical case does not a correlation make. He may be alluding to the 'velocity of money' fixation that many have with respect to inflation, which I have pointed out fails to account for the inflationary impact of currency devaluation that does not in fact rely upon said velocity. The USD is a currency that competes in a marketplace of global currencies, and gold is winning out against all of them. The trillions of dollars tossed around in seemingly casual desperation impact the relative valuation of fiat currencies to gold with or without their movement through the system. He is correct that deflation and economic depression are a foregone conclusion, but what he fails to take into account is that the line has been drawn in the sand whereby no limits will be set regarding the money printing utilized to combat that force. Combatting deflation with unlimited rounds of quantitative easing is the surest recipe for stagflation, and stagflation yields higher gold prices. This won't be just any stagflationary period, but the mother of all stagflationary implosions. The resulting demand will break apart the bullion banks stranglehold on prices, and that's when he'll see the upside momentum that he fails to project.

I would point out that gold skeptics often express doubt that gold can rise in a rising interest rate environment, neglecting to point out that gold rose to its 1980 despite a Fed rate that launched skyward to above 18%.

Prechter, Nadler, Gartman ... some of the folks most routinely approached for their thoughts on the gold market seem to deliver only wildly fluctuating positions presented with little supporting substance behind them. That same fluctuation should come as a red flag, since the fundamental drivers for higher gold prices have only accumulated as this multi-year bull market has marched on. Ever the sponge for information, I have tried not to tune them out completely, but still I've never gleaned a single piece of valuable insight into the gold market that I can attribute to these folks. 

 

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#10) On May 23, 2010 at 2:55 PM, MoneyWorksforMe (< 20) wrote:

TMFSinchiruna, 

Firstly, I would like to thank you for your very detailed and comprehensive response.  

"He is correct that deflation and economic depression are a foregone conclusion..." 

I agree with this as well, however, my thinking was that people perhaps would flock to the USD as a deflationary environment ensued. All economic indicators continue to indicate that inflation is NOT an immediate concern, despite all the money being injected into the system. As a result of our modest growth coupled with the immense stimulus and quantitive easing, it seems likely, as you say, that the U.S. enters a significant period of stagflation, rather than deflation. The lack of economic growth in the EU, and declines in China further justifies this reasoning. Gold does perform better in a stagflation environment.

I suppose another one of my fears, is buying into a bubble by joining this party too late. Gold has recently attained a new record high, and it seems it's gaining more attention with each passing day. However, it appears that many may be doing A LOT more talking than action, i.e. discussing it's potential, but not necessarily putting their money where their mouth is. Silver on the other hand is undoubtedly undervalued and primed for a serious upward move.

Prior to the issues that have been evolving in the EU, I had been more bullish on US equities, thinking that despite all the debt the U.S. had been taking on, global economic growth would be enough to eventually allow our economy to grow organically at a consistent rate of 3% or so.  I think the problems abroad will significantly hinder our already modest GDP going forward, making currency issues all the more likely. Admittedly, up until about the last month or so, I could care less for gold and silver. But my view on the US economy has changed rather dramatically for the worse.

"Ever the sponge for information, I have tried not to tune them out completely, but still I've never gleaned a single piece of valuable insight into the gold market that I can attribute to these folks."

I, much like yourself, choose to listen to all credible voices to obtain a solid aggregate of information, from which I may draw my own conclusions.  You are significantly more versed in gold and silver investing than myself, as I had previously stated. Up until a month or so ago I had virtually ignored their importance. So I suppose Prechter's view seemed more plausible to me--a relative amateur--as opposed to you--a seasoned silver and gold investor.

Nevertheless, thanks again for your response. I will most likely start positions in some silver/gold miners and perhaps some bullion very shortly. I have been doing a lot of research on PHYS, SLW and TGB. I'm not so thrilled about the premium I'm paying for PHYS and SLW, but perhaps this recent dip will serve as a great opportunity...

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#11) On May 23, 2010 at 5:15 PM, XMFSinchiruna (26.55) wrote:

MoneyWorksforMe

There is a premium for PHYS. That premium correlates directly with demand. It is best to time purchases when the premium is lower, but between paying too much and not having any exposure, paying too much is the lesser of two evils.

There is no premium in SLW shares. It may look that way relative to Nov. 2008 values, but these shares remain significantly undervalued. Fair value is somewhere north of 1.5X the prevailing spot price of silver.

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