Simon Trinh

Long only, long-term horizon, activist investor, investment advisor
Simon Trinh
Long only, long-term horizon, activist investor, investment advisor
Contributor since: 2013
Company: Jordan Capital Markets
Welcome back Sean--looking forward to the next one!
Thank you apberus for that very clear and concise answer. Couldn't have said it better myself.
I agree with fishfryer. Thanks for taking time to comment on my article and I would love to hear more about your experiences in the market.
India's economy is looking very gloomy these days, and the resulting drop in the value of its currency is making it expensive for locals to indulge their taste for metals. Higher metals prices usually leads to a fall in demand so the danger here is exactly what you pointed out: will Chinese buying make up for this lack of demand? Honestly I don't think so. Chinese buyers tend to buy in high volumes when prices fall not when they rise. But as long as supply falls by more than the demand--which I think will happen--prices should rise which is favorable for both gold investors and producers.
Great article, you're young so keep up the good work and you'll have many hiring managers asking for your application shortly!
Thank you Dave,
Appreciate the compliment, it keeps me writing in a 'crappy' resource market!
I agree with you, I think the true devastating effects of the QE program won't be realized until it ends. By that time we'll see some unprecedented market reactions which may include spikes in inflation.
Thanks for catching that typo.
Oh, it should be decrease SUPPLY, sorry, I don't think it can be changed now
Sorry I should clarify what I meant by the ambiguous comment "the demand for metals just isn't there".
What I meant was the demand for physical metal is not enough to turn around the weak gold sentiment, and clearly we're seeing that today--the price of gold, as I'm writing now, is $1,234/oz
Hi Jason,
I'm curious which of these developing countries you're talking about. I'm asking because there are many other factors in these developing countries such as the government, the economy, and just having a history of starvation.
With regards to all your facts and figures on the all-in cost of gold, do you really believe costs in the mining sector increased by 300% in just over 8 years when global inflation has averaged just shy of 4% annually?
What do you think will happen to the price of gold then?
Prices are already reaching the $1200 level, so should we be expecting fear from miners and alot of M&A activity within the next several weeks if this downwards trend continue?
Hi Rob Carter,
I might be concern if prices fall to $600 because the margins will be too thin for my liking. Having said that, your view of $1010 gold price is highly possible. We'll take a look back at these comments in a little bit.
Hi glaserdx,
Thank you for your comment. I think the possibilities of increased M&A activity in the mining sector is very likely in 2013-2015. If you take a look at the mining sector, you see two things across the board for smaller mines:
1) lack of M&A activity
2) difficulty in obtaining equity funding
These smaller mines are hanging on to their lives with very little left in the treasury. Some senior mining companies might take advantage of this and acquire these distressed mines since it won't be long before the smaller mines go out of business.
Hi MacKay,
Thanks for your support, and I agree SLW is an awesome company--they'll be around for a while.
Hi Qwertex,
Why not SLW? Falling silver prices will be good for the company. Let's not forget the only way SLW was able to lock down an average cost of silver at $4/oz was because silver prices were down below the $10 levels prior to 2006, and below $6 back in 2004. SLW will still be around at 10-13, I guarantee it, there average cost of silver is just so incredibly low.
Hi Coins,
Totally agree with you there, let's not rule out anything in the short term.
Hi Old Guy,
In China, a lot of the demand are coming from old "grannies" who are looking to pass down their gold to their grandchildren. However, I read somewhere that these grannies are starting to lose appetite for gold because their average cost of gold is becoming too high. In just over a decade, the price of gold has increased 600%. Gold prices are so high now that people might be better off holding onto their extremely devalued currency since gold prices will fall during times of war anyways. Especially if you're buying gold at these levels, you'll be losing over 600% of your invested amount.
Hi WB007,
That's an interesting take on gold. What is your rationale behind people selling rather than buying gold in a crisis?
Sean,
Thank you for reading, appreciate the comment. Of course there are other things to watch for as well. If Bernanke ends QE that will also play a huge role across all sectors. I just don't think Bernanke (and the US) can afford to end the QE program now. They might reduce the amount of bonds being purchased. If this happens, the amount of the decline will be watched very closely.
Hi IT,
Thanks for your comment. I'd like to add that the sell-off on Thursday was also based on fear. Fear that inflation isn't happening any time soon. And let's not forget the major reason for the rise in gold prices in the past decade have been driven primarily by China and India. Global demand for metals are in decline and no US bond buying program can help that (both on a technical basis and on a fundamental basis).
Hi Warren,
Thank you for reading and, more importantly, thank you for that quote. At this point in time, it is very difficult for many investors to imagine the price of gold falling so low because it's such a "precious" metal.
Let's not forget the major reason for the rise in gold prices in the past decade have been driven primarily by China and India. We have to ask ourselves "what's happening there right now" and realize that global demand for metals just isn't there right now.
Hi Roger,
Thank you for your insight, I agree with you: even if prices fall to low levels it won't stay there for long. The point of this article is to not write off the possibility of gold prices falling to lower than imaginable levels.
Hi gwaterloo,
It's not the "reason" for a change to all-in costs. In fact, you're spot on, the reason why companies are reporting all-in cash costs is to give more transparency to investors an governments. Or at least make it appear that way.
My point is, I don't think anyone can argue that the incentive to report higher costs does exist in order to ensure higher prices. Whether companies are actually doing this is another question. I just can't imagine production costs increasing 3 times in just 8 years when annual inflation has been averaging in the range of 3-4 percent globally.
OAG,
Very interesting that you think Gold prices will fall to such low levels. I heard from various sources that based on inflation and the buying power of money, gold prices should sell at roughly $700 on the base case. Clearly, your case is much more bearish compared to others. Only time will tell what gold prices will be within the next 1-3 years but consensus is that gold prices are headed lower.
Hi Rick,
I'm not a fan of IAG either although they have one of the largest mines in Africa. I began following IAG earlier in 2012 but have since lost interest in the company. I think there are much better mining companies on the market right now that we should take a look at.
Hi Gwaterloo,
Thanks for your comment. I think the all-in cost of producing gold is much lower than what companies are reporting. Think about it, if companies report a higher cost of producing metals, the market will be more willing to purchase gold at higher prices in order to keep the sector alive. So companies have an incentive to report higher costs to increase sales margins.
As it stands, I believe the price of gold is as likely to fall to $1,000 as it is to rise up towards the $1,500 level. And I agree with you that the leverage to higher gold prices may actually become apparent when we can see mining companies survive in conditions of very low spot prices.
Mr Fisher,
Thanks for your comment.
We've been calling the bottom of gold and silver prices since back in September when Gold hit a high of $1790 per ounce. However, the momentum right now is on the downside and it seems Bernanke is taking actions to continue bringing it down.
QE or no QE, the demand for metals just isn't there. If the markets are "rallying" why is global consumption falling across all sectors? Like I said to Jason in the comment above, there are far too many mining companies and a fall in spot rates might be a good thing for the mining sector and for the economy as a whole. It won't "ruin" the economy as you call it.
Everybody seems to have a different opinion on where the future of gold and silver is headed, but investors are playing the markets as if the metals sector is headed down in the short run. $1,000 is equally as likely as $1,500 at this point, but again, it might not be a bad thing.
Pirquitas' production costs are high currently but bare in mind most of the company's production comes from the Pitarilla mine. Silver Standard's Pitarilla mine has an average cash cost of $11 per ounce of silver. That's pretty low by many standards. And keep in mind that this cost is achieved even with high inflation costs and production problems in the past year and a half.
At $1,000/oz Gold 50 % of gold miners will go bankrupt--I totally agree. But don't you think that's good for the mining sector? We have too many poorly managed mining companies taking money from investors and doing nothing for them. Let the better companies take control of the mining space and get the valuation they deserve.
Digital,
That was my concern as well. I think people sometimes forget how low Netflix's margins are because everyone talks about how quickly the "subscription base" is growing.
In the end, Netflix will have to raise prices in order to continually purchase more content agreements. The question is will users stay with Netflix when prices increase or will they use YouTube, a free online video service?
I think the latter, which is why I think Netflix is way overvalued.
Roger,
Thanks for your insight, what you said is very valid. Here's what I think though. The User Interface is good--compared to others--but is not the main reason why people use Netflix. People use Netflix for the selection of movies and the low cost (however the selection of movies available in Canada and UK is horrendous). As for the recommendations system. It definitely complements the whole Netflix experience, but let's not forget Youtube (Google) pioneered the recommendations system. If Google wanted to, they could eat Netflix alive. Amazon instant video is another big player in this space that should not be forgotten.
From what I know, "Boris and Natasha" was based on "Rocky and Bullwinkle". Not the other way around. But honestly I haven't seen a single episode of either show.
Thank you Ipgongas,
I think DreamWorks will make it work with those shows but they won't be as successful as the Shrek series, or Kung Fu Panda.
It might be another "Bee Movie" or "Chicken Run" at best which grossed only about a quarter of each Shrek movie (on average).