"You're only as good as your last shift." —NHL legend Gordie Howe
In the business of writing a weekly letter, my expressed intention is to communicate a raft of opinions on the precious metals, junior and senior mining issues, and opportunities deemed as "special situations," where obscurity reigns and uncertainty rules. In this unruly sector of the investment landscape, strewn with volatility and risk, I have learned over the years is that there is really only one character attribute that counts—humility.
The reason for this lies in a story told to me by a former university teammate who went on to try out for the Houston Aeros of the old WHA back in 1976. He was in an exhibition game with the Aeros in Indianapolis, along with the Howe Family (Mark, Marty, and Papa Gordie), when a certain rookie, playing left wing on a line with Gordie, learned a valuable (and painful) lesson. The night before, the rookie enjoyed a particularly good night, scoring a hat trick (all assisted by Gordie), after which he went out on the town and celebrated heartily, which resulted his having a particularly bad time of it the following night. Dragging his hungover backside up and down the ice in a miserable display of offensive ineffectiveness and defensive dilapidation, upon returning to the bench, a perturbed Gordie began counseling the youngster as to his lack of effort, to which came back a flurry of excuses, with the final one being, "I scored three last night, so I think I deserve a night off!"
Now, anyone that has ever shaken hands with Gordie Howe will tell you that he had the largest, most powerful hands in the history of sports. Not only would they crush your grip; his fingers would actually engulf your entire hand, palm, knuckles, and all. After hearing the final retort of the gasping, whining young rookie, Mr. Hockey put his left hand around the back of the neck of the kid and ever-so-slowly began to squeeze. The rookie's face went from red to blue to white and just before he let out an ungodly wail, Gordie uttered the immortal lesson for the ages: "Son, you're only as good as your last shift."
If you are immediately filled with questions surrounding the relevance of that story to market "karma," you will recall that I put out a "buy" on gold at US$1,680/ounce on March 8, after which it rallied over $70, during which I took profits on a few GLD call options and sat back in hopes of a retest. Last Tuesday, I re-issued the "buy" on gold, as it did indeed get a retest of the US$1,680 level, after which I found myself once again owning a pile of GLD call options and sitting on a very nice profit, with the weekly and monthly close above US$1,730.
Accordingly, and in full sympathy with the story of "Gordie and the Rookie," I did not and do not go out on the town to celebrate my trading prowess, because I know full well that the moment you think you have it all mastered, you are directly in the crosshairs of the market gods who, wearing Detroit Redwings sweaters with number 9s on the backs, are an inch away from inflicting severe neck pain upon you. Nowhere is the phrase "you're only as good as your last shift" more relevant than the world of trading and investing.
Alas, for those of you that have listened to my boring diatribes over the years, you know that when I get the sense that gold has bottomed, I tend to proceed tentatively until I feel that prices have moved "out of the woods," meaning into an uptrend unlikely to be thwarted by subliminal technical weakness and "lurking" non-confirmations. I offer as evidence the above chart, which shows the Fibonacci retracement levels dating back to December 2015, when gold bottomed at $1,045 after four years of root canal surgery "sans novocaine." The March 9 low of $1,673 and the March 30 low at $1,678 were at a hair's breadth below the 38.2% retracement level at US$1,685.32, so given the amplitude and rapidity of the reversal, I feel sufficiently confident in the arrival of a tradable bottom. This translates, at least for me, into a "Buy the dip" versus "Sell the Rip" tactical agenda with which to proceed.
Also encouraging is the performance of the gold mining stocks, where the HUI index had a higher low in late March than the early March low (248 versus 258).
By contrast, the same Fibonacci study for silver leaves me considerably less confident that the "silver superior" performance requirement for positive confirmation of the near-term trend is in place. I will simply say that for me to proceed with reckless abandon and Howe-like ferocity, I want to see a close above US$28, at which point I will breathe a great deal easier.
As I wrote about last week, the month of March is a particularly malevolent period for the junior gold and silver miners, developers and explorers, with aggravating pullbacks serving to both undermine hubris and enhance humility. However, the uranium space is absolutely on fire with GGM Advisory favorite Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) (CA$2.10/US$1.66) closing at a multiyear high and ahead 89.90% year to date.
The reasons for the advance are varied, but the most obvious was the late month inclusion of the company into the North Shore Global Uranium Index. With a paltry 30,000,000 shares issued, any increase in the on-balance-volume numbers is bound to have a positive impact on such a tiny float and the ensuing share price performance, but having a 55,000,000-pound uranium resource in the Sunday Mine Complex in Colorado cannot be discounted, especially with the U308 closing above US$30/pound for the month of March. (CFO Rob Klein has been a very reliable and highly professional member of that team, and is more than eager to speak with shareholders.)
The other major driver for uranium juniors is the virulence of the Biden Administration in its infrastructure rebuilding plan and its commitment to the carbon-free energy environment. If "electric" is the way the world is moving (and it certainly appears to be the case), planet Earth is going to need a lot more electricity. Since the cleanest electrical energy provider with the largest capacity is nuclear, uranium as an energy source is going to be front and center. Those two drivers also dovetail wonderfully into the "bullish copper" scenario.
Speaking of copper, I am currently working on a story that is going to be out as one of my featured "Special Situation" ideas shortly. Earlier this morning, I tweeted out a link, thanks to subscriber "Jordan," that I am now forwarding on to all subscribers (click here). Global copper trading giant Travigura Group PFE Ltd. is calling for a US$15,000 per tonne (US$6.80 per pound) price tag for the red metal within the next ten years. Unlike gold and silver, which have limited industrial demand, copper is used literally everywhere, and whereas gold and silver debates are always polarized with extremist views, copper is completely mainstream and responds to global supply and demand without the controversies created (and promoted) by central banking and the bullion bank cartel.
Owning a commodity whose price performance is actually appreciated by the global central banking cartel is somewhat of a departure to which I have grown accustomed in recent decades, as they look at rising copper prices as corroboration of their expertise in managing the world economy. What these "champagne socialists" fail to acknowledge is the deleterious effects that rising copper prices will have on living standards, which will contribute to rising generational and demographic disparities. The Millennial stock trader relying on his or her iPhone will reject the price increase in the new model that arrives as a classic case of "cost-push" inflation, due primarily to the copper component of the iPhone. Alas, the rising price of copper will be much more with which to boast than a rising price of the iPhone, with the result that policymakers exalt rising copper prices while ignoring rising iPhone prices. Typical …
As a card-carrying member of the Precious Metals Fan Club, it is not a violation of the Oath of Gold and Silver Allegiance to put on positions in either uranium or copper, just as it is no sin to own Bitcoin or any other non-fiat asset that turns one's crank. After all, the U.S. government turned the crosshairs on gold and silver over fifty years ago, when French President Charles De Gaulle decided to take gold in lieu of U.S. dollars every time a U.S. Treasury bond matured. That consistent drain on the U.S. gold reserve in Fort Knox prompted Richard Nixon's termination of the Bretton Woods agreement, after which they instituted the Bernie Madoff Maneuver, which still exists to this day—a gargantuan Ponzi scheme of unfathomable scale and dimension.
To repeat a theme that I have used over the past few years, but with greater frequency since our illustrious political leaders decided to micromanage the human immune system by flooding humanity with alchemist cash and ill-conceived rules, the most reliable trade one can make in all countries around the world is this: "Go short cash." Sell savings accounts, money market funds, and all retirement annuities invested in negative-yielding securities. If you come across a mattress stuffed with $100 bills, drag it out to the street next to your garbage bins and sell it for wampum, too.
Back in the days when markets were organic chessboards, as opposed to preprogrammed algorithms, the phrase "cash is king" was especially useful. This was when risk management reigned supreme and tools like "the Buffett Indicator" mattered. Today, however, the only phrase that matters is the one that stares at me from above my quote monitor that reads "Cash is trash," as a constant reminder of what our central planners think of my pool of retirement funds, which provides sufficient purchasing power to own a tarpaper shack north of the Arctic Circle. Thank you so much.
Originally published April 3, 2021.
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.[NLINSERT]
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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.
Charts and graphics provided by the author.