Gold Miners, RIP…

This is the worst I’ve seen in 30 years.

The scene was the recent Sprott-Stansberry Natural Resource Symposium in Vancouver. The subject was mining equities. And the opinion was becoming familiar…

The price of gold is down by about 8% over the last five years. Precious metals miners, as measured by the Market Vectors Gold Miner’s ETF, are down by about 70% over the same time.

Mining execs say banks won’t return their calls. Promoters say they are thinking about taking their firms into cloud computing, video games, or Chapter 11.

What do you know about cloud computing?’ we ask.

Nothing. But I know gold mining. And I know it’s no place to make money.

Diehards and last-ditch campaigns

In the broader markets, everything was green yesterday — almost.

The Dow was up. Oil was up. Shanghai stocks were up.

But gold fell $2.50 in New York to close at $1,096 an ounce. And it’s down another $10 in overnight electronic trading.

Here at the Diary, we are champions of the down and out. We support diehards and last-ditch campaigns.

Partly, it’s a romantic and poetic attachment to the underdog. But there’s a practical reason, too: There’s often money to be made in woebegone assets.

We favour Russian and Greek stocks…provided you have a very long time horizon for your investments (and a strong constitution to boot).

The Russian and Greek economies are said to be at death’s door.

Greece is in trouble because it has lived beyond its means for too long and because it creaks under a corrupt and sclerotic bureaucracy.

Russia, meanwhile, has been hit by a double whammy.

The first came when the price of oil got cut in half from its peak of $108 in July 2014. Roughly half of Russia’s tax revenues come from oil exports. Half-price crude oil export prices mean half-full government coffers.

That’s why Putin just slashed over 100,000 government jobs.

The second came when the US and the EU came up with a provocative plan to impose economic sanctions for alleged misbehaviour in Ukraine.

Greece and Russia may be down. But they are unlikely to be out forever.

World trade slows

Unloved, but definitely not in the pet rock category: copper.

Copper is the most important metal in the sector,’ said mining mogul Robert Friedland at the Sprott-Stansberry event on Tuesday.

‘More important than gold. Because copper is in everything. Houses. Autos. Computers. Much of the Internet functions on copper. So if the price of copper goes down, it tells us that the whole world economy is soft.’

Here’s the Financial Times with more about the global slowdown:

The latest World Trade Monitor showed the volume of world trade falling in May by 1.2%. It has slid in four out of five months in 2015 and risen just 1.5% in the past 12 months — less than the growth in global output and far below the long-term average of about 7% a year.

The problem has been getting worse for some time. Trade bounced back fairly well in 2010 after the global recession. But it has disappointed ever since, growing by barely 3% in 2012 and 2013. Now it seems the world cannot manage even that.

If the global economy is slowing, as the numbers suggest, there is little reason to expect a comeback in copper any time soon.

On the other hand, there’s no way copper is going to disappear from the world economy. It’s essential. And it’s intensely cyclical. Prices go up; miners produce more. Prices go down; they cut back until supplies are tight again.

So, although the price may be down…copper is not out.

And as we said, you can count on the Fed — and other major central banks — to exaggerate the commodities cycle with more cheap credit.

We doubt gold is out for the count either.

Excess debt set off the 2008 global financial crisis. Today, according to McKinsey, there’s about $60 trillion more debt in the world than there was back then.

It is only a matter of time before today’s counterfeit stability gives way to genuine panic.

Then the ‘pet rock’ will turn out to be ‘man’s best friend.’


Bill Bonner,

For Markets and Money, Australia

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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