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jmack2

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  • Silver Wheaton Price Weakness Presents Long-Term Buying Opportunity [View article]
    Steve,
    It seems like the precious and non-precious metal streamers are a class unto themselves. Is there an ETF that will give you all of the best of the streamers with the diversification and coverage that would reduce the inherent risk in trying to pick any particular winner? I note the industrial demand for silver continuing to increase and that manufacturing prices are almost at parity with the all in production cost for silver. If this continues, which silver companies will benefit the most on the closing of the marginal producers and which ones offer the best of properties that would make them likely targets for the bigger fish to eat the little fish by merger or straight purchase?
    Dec 16, 2013. 12:02 PM | Likes Like |Link to Comment
  • Silver Wheaton Price Weakness Presents Long-Term Buying Opportunity [View article]
    The current issue of Barrons just made its top 10 picks for 2014 and there it was, right before my eyes, American Barrick Gold (ABX) The return of last years top 10 was pointed out to have beaten the S&P up to last week's prior issue by over 9% on the annual return. Maybe this pick confirms that once the new year starts that professionals and individuals alike will start adding precious metals to their portfolios as they truly represent one of the very few materially undervalued sectors by all metrics. I would include SLW as it will be a material beneficiary of a very good year for ABX. SLW also gives you extremely attractive valuations, diversification amongst metals and locations of properties, has available streaming monies and an abundance of deals from which to pick only the very best ones. We may see further tax loss selling this next two weeks but adding longer term ratio spreads with a defined maximum risk being the premium paid on both of these stocks going out in time offers substantial profit opportunities with a limited defined risk you don't have on the purchase of the stock itself. If Barons thinks ABX is worth at least $35 look for some of the money calls and do a longer 1:1 ratio spread of the $20/$25 or $25/$35 when available. If ABX collapses further then buy back the short call at half the price you paid to sell it and roll your spread down using the first buy and roll a lower buy into the equation. (e.g. if ABX declines $2-3 then buy back the $25 calls you are short and do a $15/$20 where you already own the original $20s and do a 1:2 on that second purchase to eliminate then any net short position and to maximize your existing long on the roll down)
    Dec 8, 2013. 09:50 PM | Likes Like |Link to Comment
  • Silver Wheaton Price Weakness Presents Long-Term Buying Opportunity [View article]
    Dear Steve,
    I could not agree with you more on the prospects for SLW. In talking to the company it was made quite clear that the marginal producers are starting to cut back or stop production at higher cost facilities. It was also made clear that equity offerings to finance development and production is not desirable when the equity price is at near record lows for these miners and they don't want to dirty the books by taking out above market rate loans for float additional debt at a lower rating in the market at higher than market interest. This leaves the streamers as a class to address all the financing needs of the sector and any patient investor should do well with SLW which still enjoys one of the highest profit margins of any company in the financing sector. I believe the sell first and review the sale later has been the case with SLW. The dividend is secure as a percent (20%) of net cash flows and the security that they receive on projects they finance all but eliminates the operational risk. The P-L project though of great importance to SLW does not cost SLW as they are fully secure on their advance with the alternative properties and the extra full year of revenues is more than adequate compensation to keep their relationship with ABX as well as to fully protect SLW shareholders. I think too many investors confuse the role of streamer with that of producer and in doing so create an opportunity to those willing to understand the nature of the streaming business. SLW realizes silver prices will not fall below average "all in" costs as the industrial/manufacturing demand coupled with the cost of production sets a floor on silver, as well as platinum and palladium. I further like the diversification of SLW into an ultimate mix of almost equal positions in gold and silver along with about 20-25% in lead, zinc and other metals. This diversification reduces risk to SLW and gives them additional avenues to expand their client list and to reduce total dependence on silver. This is a positive in the risk analysis which has never been factored into the valuation. I like SLW all the way to the $32-$35 level over the next year or two plus the yield is as good as the 5 year Treasury without interest rate risk on an early redemption. The management is excellent and I agree in head to head comparisons an argument could be made to diversify to also hold SAND if so inclined.
    Nov 13, 2013. 10:33 AM | 2 Likes Like |Link to Comment
  • Gold- Barrick Gold Has Problems, Leader May Leave [View article]
    THANKS, as I really see some tremendous opportunities in the other precious metals based on supply/demand considerations on the industrial/manufacturing side and the number of marginal facilities that are being shuttered or temporarily closed based on prices falling below the "all in" costs. It would seem to me that this would be a great time to look at the streamers particularly those that have significant available funds to join into the most favorable of agreements as financing on the commercial side or through equity are not available and balance sheet considerations would warrant too high a payment and further skew the cash flow situation for a host of the producers. The streamers are the only game in town and as such they can call the tune on the terms of the deal. There are very few sectors available with the valuations at or near record low levels of price/ earnings and book values which still have safety of dividends as well such as SLW. I don't see why SLW isn't worth at least $32-35. If you look at the option premiums and the value of the out of the money calls you see that someone else believes this also. I am looking at a purchase of additional at or near $19 and then on a bounce doing a 1:2 spread ratio going out 3-4 months on a $20/$25 spread and then on a rally looking at the puts at about $5 out of the money and doing a put spread on the $15/$10 or $18/13 to have a straddle spread in place while I wait.
    Nov 12, 2013. 09:52 PM | Likes Like |Link to Comment
  • Gold- Barrick Gold Has Problems, Leader May Leave [View article]
    Dear Don,
    When I was taking my economics classes I learned that global, wholesale weakening of currencies in a race to the bottom to foster growth of exports would always end badly as the money supply growth without productivity gains would lead to pent up inflation. The difference between gold and the other precious metals such as silver, plat., and pall. which all have strong and compelling industrial uses not easily substituted should lead to a disconnect with gold. The metals streaming companies like SLW, RGLD, FNV, SAND, and others should do phenomenally well over the next two years as SLW has just demonstrated that they are highly profitable even with a $21 silver price. You reach a point where the inability to cover the true "all in" cost will materially cut production and drive prices of those metals with the supporting and growing industrial/manufacturing use strongly higher. The streamers are being brushed with the same machete that has been applied to the miners. The streamers who are well capitalized should actually be more profitable in the future as they will see better agreements, on more favorable terms, for a longer time frame, all of which should insure steady profits to this sector. I would not let a view of gold miners deter consideration of alternatives within the precious metals sector. SLW has now formulated a mix of almost equal parts silver, gold, and (zinc & lead) to about 25% of their future mix. This diversification by SLW is positive and opens up substantial new opportunities at a time where companies with depressed equities do not want to go to the equity markets and further dilute their share price at a near bottom. The streamers therefore have access to even more deals with better terms and a reasonable floor at the "all in" cost will serve as a floor and guaranty profitability based on the formula used to credit in kind payments of the metals. Your thoughts please?
    Nov 12, 2013. 05:55 PM | Likes Like |Link to Comment
  • Silver Wheaton sinks on Pascua-Lama suspension [View news story]
    j.mack
    Thanks all for your comments. I have spoken to the second in the Communications Dept. for SLW and he confirmed that SLW barring a total collapse from ABX actually receives an extra year of material flow from the 3 alternative producers and then any shortfall will in fact be paid by ABX. Now, where is the risk other than a bankruptcy by ABX and if so, the security interest provided on the other 3 properties would still be able to cover any SLW exposure still remaining. Since the P-L project was expected to produce up to 5-6% of annual worldwide silver production, one would logically conclude that this amount of silver coming off the market will further support the silver price and put a floor under the price with the capacity reductions we are witnessing not just at P-L but also with the closure of the marginal mines and cutbacks in non-profitable operations. If the industrial demand continues to grow through solar, circuits, batteries, etc, then silver should continue to do well with margins increased as prices rise and production reduced. I urge everyone to also consider the ETF's on palladium and platinum to obtain some necessary risk diversification amongst the metals. (I like and hold some interests in PALL for palladium, and PTM for platinum, both of which are ranked by Zacks as top #1 rated holdings.) Best of luck to everyone who has been hurt in the metals sector which being universally hated at this time has little room to fall. It is hard to hurt yourself rolling off a mat, 1" off the floor.
    Nov 3, 2013. 01:40 PM | Likes Like |Link to Comment
  • Silver Wheaton sinks on Pascua-Lama suspension [View news story]
    Why should SLW being fully securitized on any Pas-L production loss with a substituted stream from 3 other successfully operating properties be down at all, let alone greater than ABX? SLW, assuming rising prices for silver which is logical as the "all in costs" should serve as a floor and the industrial demands insures a market, is fully secured and will be reimbursed in 2018 for any of its initial approx 650M advance reduced by the silver it is delivered in the interim at approx. $4.14 an ounce. SLW has nothing to lose and much to gain based on this arrangement unless there is the belief that ABX will default on its silver deliveries or on the balance of cash due in 2018. The extension of 1 yr in July 2013 granted to ABX by SLW came with an extra year of favorable deliveries from 3 highly successful producing mines and now the extension to 2017 secures an additional year of delivery at prices only a fraction of current silver on the market. SLW has the highest margins and is secured without risk of rising "all in costs" or political risk. They have arrangements presently I believe on some 28 properties, all of which are secured. Unless one would believe that silver and gold prices will collapse over the next 3 years to only a fraction of the cost of production then SLW is the best steal out there at this time to be in the sector without the risk of strikes, rising labor costs, etc. This Pas-L situation hurts ABX certainly in the short term but does not impact SLW adversely at all as they have virtual total assurance duly secured that they will sustain no loss and realize the profit making this streaming agreement positive in return.
    jmack2
    Oct 31, 2013. 12:44 PM | 6 Likes Like |Link to Comment
  • The week's ETF movers - Gainers / Losers [View news story]
    It would seem that if the TVIX and VXX move on the negative correlation with the market and as premium on the near dated options moves in relationship to anticipated volatility that one would always be better putting one-third the money into the 3x leveraged TVIX in times of major uncertainty and possible identifiable periods of high volatility as opposed to buying the VXX. Since any long term purchase of either product will eventually prove to be a losing position because of rising costs on futures, then it would seem that these products should only be bought for the 1-2 months ahead in which a major correction could reasonably be anticipated. Since we are facing what may be disappointing earnings for the 3rd quarter and downward revisions for the 4th, and since the deficit and debt ceiling stalemate seems likely to cause a short term gov't shutdown that this is the ideal time to put some money into TVIX. The purchase of the VXX and sale of covered calls does not seem worth the risk and limited premium available with the corresponding loss of protection for all but a minor correction. Are there products available to play for a correction which are not totally dependent on futures contracts being repurchased to render the investment a guaranteed loser if held for more than 30-90 days max.? Do any of these products give you 3x leverage to allow for more protection at a substantially lesser cost more analogous to buying term insurance rather than whole life or cash value policies of life insurance? Why do people willingly insure their lives, their homes, their cars, disability coverage, and buy umbrella coverage as a major protective hedge and then fail to insure what may be their biggest asset which is their total portfolio both individually owned and owned within a retirement account. What is available at the least cost to protect against more than a 5% correction or a 10% decline while still not trying to time the market with ins and outs especially in taxable accounts? We know interest rates will work materially higher over time but before then we may see a 10 yr. return to 2.2% on continued weaker news and further reductions in FED growth estimates and grossly understated inflation rates. Products like TBT should be in any one's port. if holding longer dated bonds but is there a better way to accomplish this protection?
    jmack2
    Sep 28, 2013. 01:00 PM | Likes Like |Link to Comment
  • Gold prices rise but miners plunge [View news story]
    I would not worry about the IAG as it has shown up on many under valued lists of buy-out candidates. The strong rally in gold and silver with strong declines in virtually all mining stocks makes the streaming companies that are not impacted by rising energy costs an even better buy. In this regard, SLW with a revised mix of 75%silver/25% gold with the VALE agreement gives them a very favorable bargaining position as financing becomes even more difficult within the mining sector. SLW was very badly hurt by ABX problems with the P-L facility on the border of Argentina and Chile increasing costs and causing substantial write-downs by ABX. SLW has at least 3 other ABX facilities that have been pledged to secure their repayment and the repayment appears to be likely at higher prices such that the delay may actually be beneficial to SLW. The financing difficulties within the mining sector means that SLW will be able to select even better deals at better terms and higher net profit margins. People erroneously place the streaming companies with the miners while the streamers actually enjoy secured in-kind payment of metals or percentage of mine yield in exchange for financing. They are extremely liquid and now have the pick of silver or gold projects and can be even more selective. It is still down substantially from its 52 week high and should be a buy on the continued rising prices even if the miners fail to rally. Look to buy SLW here (around $26/$27) and then put on a 1:2 ratio call spread for Jan. on the Jan $30/Jan$35's to leverage out your position by 100% with little new capital commitment.
    Aug 27, 2013. 07:28 PM | Likes Like |Link to Comment
  • Ignore The Doom And Gloom And Buy Gold [View article]
    Gold can continue to decline for much longer than the "intelligent contrarian" can remain solvent. We need to see a catalyst for gold as it lacks the industrial demand and the artificial shortages that can be created by the ETF hoarding of platinum, palladium, and silver. Central bank buying and global easing should operate as a floor for gold and we are reaching or have reached in current price the "all in" cost for producing an ounce of gold. As long as real interest rates remain negative (nominal interest of the FED at .25% reduced by inflation as reported of 1.5% (though in actuality considerably higher and probably closer to 4%) then the opportunity cost of holding precious metals, particularly gold, is favorable. A balanced approach dictates holding palladium, platinum, even the most beaten silver and perhaps some uranium plays like CCJ, NLR, URZ, UEC in realization of the significant demand/supply imbalance and the low current price for uranium at less than development cost plus the costs of production, processing, etc. A well diversified portfolio could be comprised of options as stock substitutes to limit total dollars at risk and afford the investor a nice return on the use of 1:2 ratio spreads while the option premiums and the VIX are still reasonably low. This would limit risk exposure, allow a more diversified approach to the market, and provide a longer time frame in which to be proven correct. Always invest with a view to be able to fight another day. Over confidence and eagerness can be punished with your being out of the market when the market proves you ultimately to be correct.
    Jul 7, 2013. 02:47 AM | Likes Like |Link to Comment
  • Precious metals miners prepare for another beating after June non-farm payrolls topped estimates, sending the dollar higher and gold prices tumbling. GDX -2.7%, ABX -2.8%, AU -5.3%, NEM -1.9%, GG -2.9%, AUY -4.2%, SLW -2%, KGC -3.7%, GOLD -2.9%, EGO -3.4%, AEM -3.1% premarket. [View news story]
    In lieu of holding the miners through this most difficult period of decline, I would suggest looking at holding the under priced call options or using the 1:2 ratio approach in the use of a call spread with a Jan/Feb expiration. In this respect, you can continue to profit if the stocks decline materially by rewriting the spread at a lower level by purchasing back the long end of the spread and then write the new spread. (e.g. if you owned AUY Jan $14 calls over the Jan $20 calls then assuming you bought 10 of the $14 and sold 20 of the $20 with further significant declines you could buy back the Jan $20's and then do the Jan $9 over the Jan $14 taking advantage of already owning 10 of the Jan 14's to do a Jan $9, buy 10, and sell 20 of the Jan $14 (10 to open and 10 to close) This approach is one of the few ways in which you can use the options as stock substitutes and significantly limiting the amount of money in the market at risk. This works particularly well when the VIX is in its lower range reducing premiums if you want to hold the calls outside of the spread as stock substitutes. Options of this nature in the above described trade is one of the few investments that can still be profitable even if the net movement in the stock may be as much as a 30-50% decline and then receive a year end rally raising the price back up by 10-30% in the options. Remember, limiting loss exposure and diversifying over a number of the miners in a number of precious metals areas makes for a good nite sleep. Realize that there is a maintenance requirement that varies by the industry in which cash or valuation requirements are imposed for the use of the spread in the event you are not doing a simple one to one spread. (always obtain and learn the cash requirements as it varies as well on the use of leveraged products as the investment vehicle)
    Jul 5, 2013. 11:21 AM | Likes Like |Link to Comment
  • The carnage in gold mining stocks is not over, Jefferies says as it cuts ratings for Barrick Gold (ABX), Goldcorp (GG), Kinross Gold (KGC) and Newmont Mining (NEM) by one notch each: "With short reserve lives, rising costs, rising political risks and a stagnant commodity price... an argument could be made that gold equities should trade at valuation discounts to other resource equities. Instead, they continue to garner valuation premiums." [View news story]
    Gold has controlled the trading in plat, palladium, and silver even though with substantial industrial demand you have platinum selling slightly above gold vs. the up to 50% premium it historically commands over gold. Add into the equation the expansion of demand with mine closures in S.Africa accounting for up to 70-80% of production and there is no basis to take platinum down any further. Buy the funds or ETFs with the physical plat. and pall. for substantial gains in 7-12 months from now
    Jul 2, 2013. 10:00 PM | Likes Like |Link to Comment
  • The carnage in gold mining stocks is not over, Jefferies says as it cuts ratings for Barrick Gold (ABX), Goldcorp (GG), Kinross Gold (KGC) and Newmont Mining (NEM) by one notch each: "With short reserve lives, rising costs, rising political risks and a stagnant commodity price... an argument could be made that gold equities should trade at valuation discounts to other resource equities. Instead, they continue to garner valuation premiums." [View news story]
    have studied markets for years and you must be fully aware of how in the short term and strength in the dollar will pull all metals down as gold controls the price on all precious metals even if there is significant industrial demand outside of gold that serves as a floor. You may see substantial production go off line until prices become more favorable along with a host of mergers and acquisitions as the cost of acquiring known deposits has never been cheaper as a percent of sales price. It is cheaper to buy supply than to create it at these levels.
    Jul 2, 2013. 09:59 PM | Likes Like |Link to Comment
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