Gold has hovered between $1,645 and $1,658 so far today…as of 6:00 am Pacific, the yellow metal is unchanged at $1,653…Silver is 16 cents higher at $31.69…Crude Oil has gained $1.07 a barrel to $104.00…Copper is flat at $3.66 while the U.S. Dollar Index is off slightly at 79.50…
U.S. Housing Data
Groundbreaking on U.S. homes fell unexpectedly in March, but permits for future construction rose to their highest level in 3 1/2 years according to data released within the last half hour by the Commerce Department…
Bank of Canada Boosts Growth Forecast, Hints of Rate Increase
The Bank of Canada left its main interest rate untouched at 1% this morning while painting a brighter economic outlook and hinting for the first time since last summer that it is beginning to look for an opportunity to raise borrowing costs…today’s statement was vague about timing, saying only that it may become necessary to increase rates, but that this would depend on “domestic and global economic developments”…Mark Carney has boosted his 2012 growth forecast for Canada by four-tenths of a percentage point to 2.4% though he cut his 2013 forecast by the same amount to 2.4%…”The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated,” Carney stated…
India Cuts Rates To Boost Growth
Central banks around the world have introduced well over 100 stimulus measures since December with India being the latest example this morning…key lending rates there were cut for the first time in three years today in an aggressive effort to boost growth and investment at a time when the gloss is rapidly coming off Asia’s third largest economy….the Reserve Bank of India cut the repo rate – the rate at which the central bank lends to commercial banks – by 50 basis points to 8%…the more than expected reduction was widely welcomed by business…having increased rates 13 times since March, 2010, the RBI’s move reflects a shift in the bank’s policy from focusing exclusively on reining in inflation, which at 7% remains high, to reviving the country’s slowing economy…growth in the last quarter of 2011 in India was the slowest in almost three years, rising 6.1%, compared with more than 8% a year earlier…meanwhile, inflation has eased persistently over the past year…China, Brazil and Indonesia are also relaxing monetary policies in order to boost growth – all of this is positive for Gold and commodities in general…
Troubles In Spain
Another round of heavy bond-buying by the ECB, which would be bullish for Gold, is quite possible given the situation in Spain at the moment as Spanish 10-year bond yields moved above 6% yesterday while credit default swaps rose to record highs…the need for international investment in Spain’s government debt – not just buying by its domestic banks – has now become more pressing…the Financial Times reported this morning that strategists believe Spanish banks have used up much of the extra money for buying sovereign debt that was borrowed at low rates from the European Central Bank under its longer-term refinancing operations…
CRB Index and Copper
There is a close correlation between the TSX Venture Exchange and the CRB Index and the Copper market, so two charts by John this morning provide us with some valuable insight…below is a 10-year weekly chart of the CRB Index which at 301 is in a zone of very strong historical support – similar in that respect to the Venture…RSI and Slow Stochastics are each in a position to support a move up – perhaps not immediately but as the second quarter continues…
Copper
Below is a 6-month daily chart for Copper which shows a very oversold market trading at a strong support area…it’s hard to imagine Copper declining much more given the state of this chart…
Today’s Markets
European markets are up significantly this morning, around 1%, while stock index futures in New York are pointing toward a positive open on Wall Street…the Venture Exchange fell 27 points yesterday to 1432 – the first sign of a turnaround will come when the Index can get above its declining 10-day moving average (SMA) which has served as resistance since the breakdown in early March…
Armistice Resources (AZ, TSX-V)
Below is an update on Armistice Resources (AZ, TSX-V) which has managed to hold support and may have turned the corner – exactly what we want the see the Venture do…
Note: John, Jon and Terry do not hold positions in AZ.
From Peter Grandich
‘Frustration from the Juniors’
To say the junior resource market has been “acting like a pig” is an understatement. To say simply I’ve been wrong about them being undervalued only irritates those already wishing they hadn’t purchased… (just ask my wife—I would, but she stopped speaking to me after looking at our last brokerage statement).
It’s about 25 years since I first started speculating (gambling) in the junior resource market, and I can’t recall a stronger sense of dislike, disgust and hopelessness (maybe some Canucks fans feel close to this) in this sector than I am seeing and feeling now.
While I didn’t need a metal detector at the door, I just had many readers at a local seminar and from them sensed a high level of frustration and a wanting to throw in the towel. (It was my wife who was giving me the really dirty looks). The common theme among their questions and comments was, “Why are the mining and exploration stocks doing so poorly despite metal prices still much closer to their decade highs versus lows?:
Because I never felt they could be selling where they are at today (my own personal portfolio of juniors is down seven figures in the last couple of months), I no longer deserve to be the one to answer their questions. However, I will tell you what I told my wife and hope you hold off seeking a divorce attorney as she has (at least, I hope she has).
Despite metals prices up anywhere from 100% to 500% or more from where they were a decade ago, the vast majority of producers and exploration stocks have not remotely come close to reflecting those appreciations in their share prices. The thought used to be that mining shares were actually better to own than the physical metal as they were to offer better leverage to metal prices going up. Nothing has seemingly been further from the truth.
Here are my “crying towel” reasons for why I think we are where we are:
* The audience for mining and especially exploration shares has shrunk despite the dramatic increases in metals prices themselves. A clear example of that is the dramatic drop in the primary “end users” that used to be a key part of the demand side – brokers.
Years back, hundreds if not thousands of brokers built part or much of their book of business around the buying and selling of mining and exploration stocks. They each had 100 or even 500 clients and many of them ended up buyers of these shares. Unfortunately, these folks are now asset gathers and commission-driven buying and selling is ancient history. They no longer are active in the mining and exploration sector. This is also unfolding in the Canadian financial industry.
* While the 43-101 rule truly reformed what used to be like the wild, wild west in the junior sector, it also removed any sizzle from the promotional side of things. While not a bad thing when one recalls what used to go on in this area, the downside to it is companies who are mostly sizzle and not yet steak can’t even light a match when speaking of their potential, let alone stroke the fire. That may be a good thing, too, but it wasn’t the case when these shares did much better as a group a decade or more ago (and a reason one must consider now whether they like it or not).
* Regulatory and/or compliance factors have made it much tougher for juniors to attract attention. Again, this may or may not be a good thing, but it’s a fact of life as far as I’m concerned. In the States, most brokerage firms no longer allow solicitation of companies not trading on the NYSE or major NASDAQ markets. Some even don’t allow unsolicited orders anymore. Many compliance departments have made it difficult or impossible for their advisers to buy juniors-period.
* Canadian investors may be surprised to find most Americans don’t find natural resources as “second nature” to them. Americans’ biggest concerns about natural resources are availability of gas to drive their cars and oil to heat their homes. They’re not keen on natural resource stocks and still think for the most part a gold mine is a hole in the ground with a liar standing next to it.
* The junior sector is a “pimple” of an industry, yet 1,000 to 1,500 juniors are trying to find a few dozen so-called experts who can appreciate and talk about them in a mostly what’s-in-it-for-me mindset. The ability to get their story known is perhaps the biggest challenge and drag for a junior these days.
* Reducing the hold period on private placements to just four months has hampered the juniors. Companies just can’t advance themselves up the corporate ladder in such short periods to warrant enough new interest to gobble up all these new free trading shares that come to market.
* Investment bankers now play the “warrant” game in order to keep deal flow going. They turn to their institutional buyer and suggest selling the shares that are coming free trading for either side of breakeven and hold the warrant as their leverage. Meanwhile, they take the freed up capital and buy their next deal.
* Discount brokerage has also greatly added to what seems like an endless supply of shares. Years back, one held juniors at times simply because they couldn’t profit from selling them after just a few cents rise. Now, thanks to deep discount commissions, one can profit from the sale even if the share price is barely up.
I’m certain there are other reasons, but I believe the above is a good part of why we’re where we are today. The question now is does this mean the mining and exploration stocks are no longer worthy?
I’ve had discussions with many different players in the junior sector of late and they’re all either sitting on their hands, in a state of disbelief, and/or feeling life as they knew it has ended. Like I said at the beginning, in 25 years I have not seen such a dire state relative to when gold was well below $300 and it seemed like “last one out of juniors turn out the lights.”
So, the end result of all this appears to be only three possibilities:
* It is indeed the end of juniors as we know it and we die off as former buggy whip players did at the turn of last century;
* Like it did a decade ago, the juniors become mostly non-existent price-wise and they rally simply because they really can’t go any lower;
* Something not imaginable (good or bad) occurs and we go from there.
On the basis it’s like a decade ago and we’re at or close to a major bottom, there are a host of juniors at which one could almost toss a dart at this juncture
Comment by Paul — April 17, 2012 @ 7:14 am
Thanks for sharing Paul, good to see even the pros are feeling despair also!
Owning juniors right now is like having anal polyps!
Comment by Hugh — April 17, 2012 @ 7:22 am
todays smile .A COUPLE took a car ride in to the country they saw a old donkey in the field they stopped to take a picture and the old donkey came over to them. The husband said to his wife is this a relative of yours and she said yes through marriage
Comment by gil — April 17, 2012 @ 8:50 am
rgx still rocketing higher
Comment by gil — April 17, 2012 @ 8:53 am
Huge… sorry I did not respond yesterday. GBB long term forecast – we need to see the volume…. not half of a million shares.. turnover. Current situation, I am not optimistic about it…. the 12 cents level may further drop and more people will leave the show if no real players there. Me and you cannot change the fate of GBB. There is a great chance that it may drop below 10 cents …. if you bought some at a low price, I will recommend to sell it when there is a boost… the boost will not be long …. a 30% boost in one day and it will come down…. you need to sell it. If we do not see the volume, the price continue to slide …. I am not trying to be negative but we cannot be blindly positive. Previous track records were in history, the placement shares will be dumped periodically … so many shares in the line up ….
Comment by Theodore — April 17, 2012 @ 9:39 am
“rgx still rocketing higher”, yes Gil and I’m still holding and smiling… i don’t think it will go straight up, however I do believe there is a lot more upside to come … with the “M” project, scalability soon to be known, and our agreement with PPG + i believe the mutual funds will get involved, now that we broke thru the $1 barrier!!!!
Comment by Don — April 17, 2012 @ 2:50 pm
careful Don…. with the 200 so low.. and the high volume and low cmf… means that people are bailing with this rally… 75-80 might be a minimum retrace…. if not back to the 200 at 50….
been a good ride for those who bought at 34 on Jan 1… and I know nothing of the story…. stories get me trouble… aka… cui, sidon, gbb, egm, gnh, not, uc, caj, hao, bkt, cjc, tj, vgd, vgn, sff….. etc…. man…
anyone got a spare room???
Comment by Jeremy — April 17, 2012 @ 6:27 pm
Jeremy, sounds like you need a lucky hit at Vegas – Geesh
Comment by dave — April 17, 2012 @ 7:39 pm
Jeremy
I can feel your pain, stories have gotten me nothing but trouble too..
Comment by Greg — April 17, 2012 @ 9:37 pm
Reality check, Greg and Jeremy…EVERY Venture company is a story…some are obviously better than others…a select few will become best-sellers and real money-makers, which keeps investors interested, but many will ultimately just gather dust on the shelves and some will disappear completely…that’s the reality of it…that’s the way it has been for years and will continue to be…as an investor, you need to have a strategy to deal with that…
Comment by Jon - BMR — April 18, 2012 @ 2:38 am
Don’t listen to the stories – just play the numbers.
Comment by Andrew — April 18, 2012 @ 3:17 am
You’re missing my point, Andrew….numbers or no numbers, drill results or no drill results, 43-101 or no 43-101, it’s ALWAYS a story. RGX has a story. FMS has a story. CEV has a story. RBW has a story. They all have a story. If a company has good numbers but can’t communicate its story, you have little chance as an investor.
Comment by Jon - BMR — April 18, 2012 @ 3:20 am
Jon – I don’t think Greg, Jeremy or any of us need a reality check; we’ve experienced it the past 2 – 3 years. Appears that its a different game and changing all the time. Opportunities to take advantage of O/S stocks in March just resulted in 30% losses for many. Some O/B stocks are still going (e.g. RGX). The charts have even less value these days. Stocks with potential seem to be outside the Gold and Silver sector and many investors will steer clear of the Venture – its a new generation.
Comment by Andrew — April 18, 2012 @ 3:30 am
wow…. who knew:) thx Jon.. and agreed… but somewhere it HAS to be more than straight ‘gambling’ when a company has an asset in the ground like GBB… and/or is it simply a question that it just doesnt matter… thuoght the wild west vancouver xchange was gone as such.. guess the stories come from guys like Basa, and Tony R… isnt it closer to fraud???
CJC for instance…. the story died.. oh but we have another one…. the ‘crooks’ at HAO/BKT/CAJ/TJ (all the same people) have nothing but a story… GBB, GNH are different tho … arent they???????? guess thats my story:) and it IS all about the happy ending yes?
Comment by Jeremy — April 18, 2012 @ 5:37 am