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David Vengerov

 
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  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    Whitehawk, usually the best time to get in for a long-term trade is when a sector seems dead, when the sentiment is most negative, but the price is showing a clear bottoming pattern (which is the case now in the precious metals sector).
    Jul 19 05:05 PM | 4 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    Bruce Krasting made an interesting analysis today of what the Fed can do during the August meeting:

    http://bit.ly/O49i8l

    His conclusion is that a cut in the deposit rate from a 1/4% to a 1/8% is the most likely outcome of the meeting, and while it seems like a small change, it would provide a significant boost for commodities, he argues. That could just be the event that lights the fire under gold and silver, if they don't take off until then.

    Incidentally, the fact that both gold and silver are up today despite a large jump in $USD shows the internal strength accumulated in these sectors.
    Jul 20 07:16 PM | 3 Likes Like |Link to Comment
  • The Settlement Delay Of MBS Purchases Under QE3 And The Price Of Risk Assets [View article]
    Great info, Venerability -- thanks! I will keep watching the open interest in silver as Clive Maund suggests.

    If the price of silver breaks out above $37 soon, then the greatest moves, in percentage terms, will be made by the junior silver miners whose production volume is still small enough to keep the cost per oz just above the current market price. A 10% increase in the price of silver will turn those juniors from cashflow negative to cashflow positive, and possibly turn their EPS from negative to positive, which will right away attract a lot of conservative capital to them, which was previously ignoring such miners on the principle of not investing into companies with a negative cashflow and negative EPS.

    So I would suggest to everyone to make a list of the miners who are steadily expanding their production and have almost reached a breakeven point already. One company that I found and that meets this criterion is AUMN. They mentioned in their most recent 10Q form (quarterly report) that at $1500/oz gold price and $30/oz silver price they expect to generate a negative gross margin, which the Company defines as revenue from the sale of metals less costs applicable to the sale of metals (exclusive of depreciation), of approximately $1.0 million during 4Q/12. AUMN produced 120K oz of silver and 1.9K oz of gold in 3Q/12 (215K oz of AgEq at 50:1 gold:silver price ratio), which was a 27% increase over their production in 2Q/12. Since they have done a lot of mine development in 3Q which allowed them to access many new stops, their production will likely increase by at least 30% in 4Q, to something close to 300K oz of AgEq. If the price of silver moves a little higher in December and averages $34/oz during 4Q, then AUMN will have extra $1.2M in revenue relative to their conservative forecast, and they will thus turn cashflow positive in 4Q/12! Assuming the annualized production rate of 1.2M oz of AgEq in 4Q/12, the company plans to increase its production to around 2M oz of AgEq annualized rate in 4Q/2013 at the cost of under $15/oz, and then to around 4M oz of AgEq by 4Q/2014 at the cost of under $7/oz. So even if gold/silver prices stay flat for 2 years at their current levels, the company will be operating with a cash margin of more than $100M by the end of 4Q/2014. Now compare that cash margin with their current market cap of $183M, and think how many times higher the stock price should be one year from now, when all analysts will be looking forward to 2014 and will be pricing in the 2014 profits into the stock price during 4Q/2013. If, as Clive Maund suggests, silver moves to $80/oz by the end of 2013, then multiply the previous estimate of AUMN stock price by some integer K>1. :)
    Dec 2 01:44 AM | 2 Likes Like |Link to Comment
  • The Settlement Delay Of MBS Purchases Under QE3 And The Price Of Risk Assets [View article]
    Don't forget, folks -- US banks are not the only buyers of gold out there. Other central banks have been steadily buying gold in the last few years, after they realized a few years ago that they don't want to keep all their currency reserves in US Treasuries. Here is a great article that describes why the reserve currency status of $USD implies that US must have a constant trade deficit (so as to supply the world with US dollars), and how the other governments, very reasonably, are using those dollars to buy some tangible assets so as to protect themselves against the inevitable collapse of $USD when the US debt burden becomes unsustainable:

    http://bit.ly/TrNNi6

    Here is a good video that shows how China and other nations are starting to bypass $USD in their trade agreements, thus steadily undermining the reserve currency status of the $USD:

    http://bit.ly/YgGph4

    As this realization steadily sinks in, the demand for $USD abroad will become less and less, those $USD will start coming back to the US more and more via other nations using $USD to buy US assets and commodities such as gold. Interestingly, as Triffin explained, this is an INEVITABLE outcome, and we seem to be getting close to the End Game.
    Nov 30 08:14 PM | 2 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    In case you think the recent rally in gold/silver is just a head fake, take a look at the 10-year expected inflation chart:

    http://bloom.bg/S0Jfhc

    The jump since the end of July is larger than any of the previous "head fakes"...
    Aug 25 07:46 PM | 2 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    In case you are wondering why the $1500/oz support for gold has held up over the entire 1-year correction/consolidation in gold, here is a possible answer: China has been buying gold in MASSIVE amounts recently:

    http://bit.ly/PpeING

    The Chinese are good value buyers, and they won't allow this opportunity to buy cheap gold (i.e., gold at around $1500 or less) to slip through their fingers...
    Aug 16 02:21 PM | 2 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    The Commitment of Traders (COT) reports that came out today showed that the net long speculative positions in silver and gold futures are still smaller than they were during the low in December 2011! The longer such pessimism persists in this sector, the larger the inevitable rally is going to be.
    Jul 20 06:07 PM | 2 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    Here is what Ray Dalio, a guru from Bridgewater Associates, wrote on gold in his Q2 letter:

    "Gold is also being supported by secularly increasing demand. Prior to the financial crisis, gold was substantially under-owned relative to financial assets, and despite stepped-up purchases of gold by central banks and sovereign wealth funds, the shift toward greater holdings of the precious metal is still in its early stages…speculative gold positions had been significantly reduced [by the end of the quarter] and as a result are less likely to be a bearish short-term driver going forward."

    Here is another titbit:

    "Soros Fund Management LLC, founded by the 81-year-old billionaire, more than tripled its investment in the SPDR Gold Trust in the first quarter to 319,550 shares now valued at $50.2 million, an SEC filing May 15 showed. It held as few as 42,800 shares last year."

    The "strong hands" are accumulating gold prior to its next leg up. I think it is wise to be in their company...
    Jul 19 06:51 PM | 2 Likes Like |Link to Comment
  • An Explosive Rally In Gold And Silver Is About To Begin [View article]
    Folks, history is about to be made in the gold/silver sector. The latest COT report showed that the net long position in silver futures in the nonreportable category (the "crowd of speculators") dropped from 2040 last week to 700, making yet another all-time low. The net long position in gold futures in the nonreportable category dropped from -1500 last week to -1700, making yet another all-time low. At the same time, the net short position in gold futures in the Producer/Merchant category has dropped from 43K to 38K contracts, making yet another all-time low (in 2008 this net short position never dropped below 70K contracts, contrary to what some sentiment articles have recently claimed). So commercial traders, who are closest to the action, feel the least need right now to hedge their future production against the falling gold price...If we do not see a MAJOR rally in gold/silver in the next couple of months, that would be REALLY weird...
    May 10 04:34 PM | 1 Like Like |Link to Comment
  • The Settlement Delay Of MBS Purchases Under QE3 And The Price Of Risk Assets [View article]
    I am now going on vacation out of the country until December 15, and may not have internet access there. Good luck, folks, with your investments/trading, and let's hope Bernanke does not disappoint us on December 12 by announcing unsterilized continuation to Operation Twist!
    Dec 2 07:45 PM | 1 Like Like |Link to Comment
  • The Settlement Delay Of MBS Purchases Under QE3 And The Price Of Risk Assets [View article]
    Well, the previous episode of Fed balance sheet expansion showed that commodity prices explode during such an expansion: silver went up 50% during QE1, then stayed flat until QE2 was announced, then went up another 50% to the January 2011 bottom, then went sideways during OperationTwist (when the Fed balance sheet was not expanding and no new cash was injected into the system, and the silver price had re-tested the January 2011 level several times), then ran up 20% in August/September 2012 in expectation of QE3. There is no reason to expect the previous pattern to break, and hence we should expect precious metals to go up much higher during QE3.

    Interestingly, OperationTwist was also, conceptually, very bullish for precious metals, since the Fed was buying 10-year Treasuries that were yielding less than 2%, and there is no way we will have a smaller than 2% cumulative inflation over the next 10 years. So the Fed will have to sell these treasuries at a loss, thus permanently printing money. However, the market ignored this fact and focused simply on the fact that no new cash was flowing into the system, thus not bidding up precious metals.
    Dec 2 12:54 PM | 1 Like Like |Link to Comment
  • Is The Recent Destruction Of Golden Minerals' Share Price Justified? [View article]
    What goes down (for no reason) must come up. :)

    Technically, AUMN formed a classic cup-and-handle pattern since November 14, and at the close today broke decisively above that pattern. To be sure, I would like AUMN to also rise above the highs of 11/13, at 3.93. If that happens, the next step would be to retest the highs from 11/6 at $4.2. Given the fact that SLV closed today at a 1-month high, even above the local peak of October 17, I don't think AUMN will be able to stay below $4 for much longer. After all, if SLV/GLD stay at least this high for the rest of the year, there is a definite possibility for the company to obtain a positive cash margin for Q4 2012, which should really excite the market and get them out of the woods, since positive cashflow companies do not need to raise cash anymore and can internally finance their future production expansion.
    Nov 21 04:41 PM | 1 Like Like |Link to Comment
  • Is The Recent Destruction Of Golden Minerals' Share Price Justified? [View article]
    Even if the owners did "drink" through those $37M, then as a result of extending the total share count by 20%, the price of each share should have dropped by at most 20%, from $7 to $5.75!

    I think BillySundance was onto something when he suggested that many hedge funds (even those who did not like AUMN at all) might have rushed to get the units in this offering at $5.75/unit, so as to then sell the shares in the open market at $5.75 and just keep the warrants for free. If the warrants are trading now at $2, then they could have sold their warrants at that price and then kept unloading their shares from $5.75 down to $3.75 and still come out with a gain.

    Whatever the reason was for this drop in the share price, if you think that AUMN is going to be below $3.50 one year from now, then you shouldn't buy it now. But if you think that one year from now, when all analysts will be estimating the EPS for AUMN based on the expected production in 2014 (the company said that by the end of 2014 they plan to increase their production to 4M oz of AgEq at the cost of $7/oz), they will assign to it a price above $4, then why not buy some AUMN now and just not look at it for a year?

    The current market cap of AUMN is $160M, and they had $54M in cash at the end of 3Q. This means that the market is currently valuing their current Velardena mine and all the gold/silver they have in the ground at Velardena and El Quevar at $106M. When the company starts producing 4M oz of AgEq at the average cost of $7, and the silver price will be, say, $47, they will have a gross annual margin of $160M. What market cap do you think the analysts will assign to a company like that? Could it be something like $800M, a 5X increase from the current market cap? So maybe one year from now the share price is going to be $15 rather than $4? If that is the case, then it won't really matter whether you had purchased your shares at $3.50 or you were lucky enough to time this stock and buy your shares at THE bottom of this pullback (say at $3.25)...
    Nov 17 03:37 AM | 1 Like Like |Link to Comment
  • Is The Recent Destruction Of Golden Minerals' Share Price Justified? [View article]
    AUMN is outperforming both GDXJ and SIL for a third day in a row. Just as I wrote three days ago: the worst-performing mining stock over the past two months will most likely be the best-performing stock for the next two months (because its poor performance was not due to deteriorating fundamentals but due to some technical factors *in spite* of greatly improved fundamentals).
    Nov 15 02:45 PM | 1 Like Like |Link to Comment
  • Is The Recent Destruction Of Golden Minerals' Share Price Justified? [View article]
    Billy, that's a good point you made about the warrants -- some people could have indeed decided to quickly sell the shares at a small loss and just keep the warrants. If that was the case, then the artificial selling is probably over by now, which means that a bounce back to $5.75 is potentially "in the cards." Of course, this bounce might be met by more selling from those who got the warrants during the offering, until they run out of shares to sell. At that point, the buy/sell balance will heavily tilt toward the upside, since no artificial sellers will remain (and all the "weak hands" will also be out of this stock).
    Nov 14 03:37 AM | 1 Like Like |Link to Comment
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