lance sjogren

Finding the Right Junior Miners for Maximum Upside Potential

Another thing to think about right now is Uranium.

Uranium miners have been in a big slump.

Consequently, Uranium is one of the few super bargains out there right now in the commodity space.

I have been stocking up on Hathor, a little bit of Terra, and a little Denison.

Hathor has the biggest recent discovery by a junior of high grade U in the Athabasca region. Terra has a 10% carried interest in that deposit so it is another way to play that resource, although with Terra you don't get a stake in Hathor's other promising properties.

Prepare Yourself for the Inflation Invasion

The $64000 question:

When the stock market makes its coming correction, you are going to have a massive amount of cash sloshing around looking for a home.

Whoever can figure out where it is going to go will be the next George Soros.

(for conservatives who are offended, I should point out that I think George Soros' politics stink to high heaven, but the fact is he is the best example of someone who made a killing by predicting markets.)

Prepare Yourself for the Inflation Invasion

Old trader: I agree, TIPS are risky because of the way the government manipulates inflation statistics.

And it is certainly in the interest of the govt to do so. If one believes as I do that the standard of living in the US (and probably many other developed nations) got unsustainably high and will have to go down, how do we get there from here?

One way is to devalue the dollar and see that people's incomes get inflated away to lower levels that may be sustainable into the future.

If we have 10% annual inflation but the official govt statistic is 5%, then the government can lower benefits in its programs like social security in a hidden manner that won't generate public outrage.

There will not be public outrage, because those affected will be like the frog in a pot of water that is being heated up too slowly to notice)

Private companies can give their employees cost of living raises in the 5% range, and they also will thus be administering inflation-adjusted pay cuts, but again the frogs won't notice.

Prepare Yourself for the Inflation Invasion

"Those who say there's no inflation must not buy groceries, pay ever-rising property taxes, or shop for shoes, or pharmacy products."


There has been a lot of price inflation in recent years, but I don't believe there has been for the last year or so.

Unfortunately, the brief lull in inflation won't last long. And the worst of it is, the new round of inflation may be of the stagflation variety- in other words, inflation in parallel with an economy that is shrinking.

Prepare Yourself for the Inflation Invasion

Inthemoney: I agree the stock market rise the last several months is probably largely due to monetary expansion.

In my view, stocks have become severely overvalued due to too much money sloshing around looking for a home.

What I wonder is when will that stop. Stocks represent companies that operate in the REAL economy (aside from fiancials, of course). The REAL economy sucks.

Stocks are way overvalued considering the horrendous state of the real economy.

But still, the money printing goes on, and all that new money has to go somewhere.

The smart investor is one that can figure out where people are going to shift all that money once they realize that stocks are overvalued and due for a major correction.

I wish I knew.

I think at some point it will be commodities, especially precious metals, but that may still be 2-3 years down the road.

Prepare Yourself for the Inflation Invasion

Sethbru, I agree that the money supply increase the Fed has been doing up to now is largely just to fill back up the black hole of collapsed debt, and thus will not create inflation.

However, the US is running a structural deficit of at least 1 trillion per year, and I believe that is not going to be reduced in coming years, the pressures to further INCREASE the deficit are far too powerful.

And, I sincerely doubt there is going to be a market for that annual 1+ trillion in Treasury Bonds that will be issued to fund that debt. So I believe the Fed is going to print new money to buy them up.

And that will be extremely inflationary.

What's CNBC's Problem with Gold?

"I would worry if CNBC suddenly becomes wildly bullish on gold and start featuring a gold-stock IPO a day..."

If we have a precious metals bubble, which I believe is going to happen a couple years down the road, CNBC will jump on the bandwagon at some point. Yes that will be a sign that you are getting to the latter stages of the bubble.

What's CNBC's Problem with Gold?

You have to remember that CNBC is part of the financial establishment.

Just like the idiot politicians, these guys agree with JM Keynes that the way out of a recession is for the government to pay people to dig holes and then pay them a second time to fill them back up.

Finding the Right Junior Miners for Maximum Upside Potential

Hey, thanks for this forum.

I am constantly questioning my own investment decisions.

By motivating me to come up with a pitch for my top two holdings, I found that I was able to make what appears to me a pretty compelling case.

So, I am happy with my two main holdings.

I know there are a lot of opportunities out there that I will probably regret not having, but that is life. I like Silvercorp and have had it off and on, but since it's more liquid than my larger holdings it is a tempting one to trade in and out of to try to take advantage of the volatility in silver prices.

I also like First Majestic and Endeavor, and I recently noticed another one that looked interesting, Alexco I believe it is called (I really should remember the name since I bought a few shares)

But, what I like best is exploration-only plays (nothing can go wrong with your gold and silver when it is just sitting in the ground, except for things like being confiscated by Kleptocrats like Hugo Chavez or killed by enviro obstacles.

(Environmental obstacles are one reason I think the big blockbuster deposits of low grade such as those of Novagold, Seabridge, etc., are pretty risky. First of all if the price of oil goes sky high then they are liable to not be economic even if PM prices are strong. Secondly, mining hundreds of millions of tons of ore in pristine areas like the mountains of BC seems like something highly vulnerable to being killed by regulatory obstacles. Case in point, Northgate Minerals' Kemess North deposit.

Finding the Right Junior Miners for Maximum Upside Potential

By the way:

Anyone in the US who wants to invest in junior mineral companies should get used to buying pink sheet.

The vast majority of juniors listed on the Canadian exchanges have a US version but only in pink sheet form.

I have traded these for a number of years and by trial and error I found how to trade them with very little penalty for the fact that I am not trading the native Canadian version of the stock.

First of all, I found the best vehicle for trading them to be TD Ameritrade. I have long had a hunch that because of TD being Canadian, when I buy pink sheet I suspect that it is actually the Canadian stock they are trading and that somehow in their administrative system they are able to convert it into pink sheet.

However that works, it seems to work fairly well. I used to have an international account with another broker to check the real time price of the Canadian stock, but nowadays I just check the time delayed price on Yahoo, then I translate to USD, then put in a limit order on TD Ameritrade. Sometimes I'll just order a fraction of what I want to buy and if it doesn't trade I will jack up the price a half cent at a time until I get an execute, that way I get "price discovery" and then decide whether I want to buy more.

Most of the time I seem to be able to buy at the ask price or sell at the bid price or very close to it.

Some investing guides I read a couple years ago advised against these because of the propensity to wind up having to pay large penalties due to the illiquidity. I found this is not the case, with one caveat.

The one caveat being that the bid-ask spreads are often substantial. That is not a symptom of buying pink sheet but simply an inherent characteristic of many small companies that trade on the Canadian exchanges. So I often find I have to wait to trade a particular stock until it happens to be trading a little more than usual and its bid ask spread shrinks to a reasonable level.

Finding the Right Junior Miners for Maximum Upside Potential

My favorite is Sabina Silver. Market cap about $100 million US, they have something like $30 million in cash for exploration, and their resources are:

Back River: 2.3 million ounces gold at 10 gpt

Hackett River: 230 million ounces silver at 4 opt + base metals with in-situ value about equal to the silver. Most of the deposit is open-pittable.

Aggressive drilling programs are in the works.

If you convert everything into gold equivalent (assume a 60:1 gold to silver ratio) these guys have about 10 million ounces of good grade gold equivalent, and you are getting it for about $10 per ounce. In terms of silver equivalent it is about 600 million ounces or $0.16 per ounce of silver. And these are GOOD deposits too.

Main drawback is that their deposits are in a remote area in Nunavut, to develop a port needs to be built at Bathurst Inlet, estimated cost $100 million, plus a road to the deposits. Since they recently acquired the Back River deposit they have a bigger resource base to spread the capital costs over. Other players in the area may help spread the costs as well- e.g. the Chinese recentlly acquired the Izok Lake and High Lake base metals deposits from Oz Minerals. I would think there is also a possibility that Canada govt might chip in some for a port as part of their goal of solidifying their claims to the far north in competition with Russia, but that is pure speculation on my part.

2). Eastmain Resources. 1.2 million ounces high grade gold in northern Quebec. The primary deposit, Clearwater, is close to Goldcorp's Eleonore deposit. Goldcorp owns about 10% of Eastmain. If you just count their main deposit, Clearwater, they have 1 million ounces. At a fully diluted market cap of about $100 million US, you are paying about $100 per ounce of gold, which is not cheap, however, this deposit should be able to leverage Goldcorp's infrastructure at Eleonore, so it is almost equivalent to gold at at an active mine where all infrastructure is already in place. Furthermore, there is a widespread view that drill results in the last couple years could well lead to a substantial expansion of the resource when the new 43-101 comes out.

Those are my primary 2 holdings in the PMs. A couple of others I have a much lesser amount of are Golden Goose Resources (Quebec gold deposit) and Terra (10% carried interest in Hathor's high grade Uranium deposit in Athabaska)


Note: Note that I count all resource ounces whether they are measured, indicated, or inferred.

Invest in Gold to Hedge Against Hyperinflation

Inflation:


The thing about inflation, you have to figure that in many key sectors of the economy, price inflation is going to take quite a while to kick in.

The government will be printing money like crazy, but it is hard to see wages go up for at least 2-3 years. People are losing their jobs, and those who are working are getting pay cuts.

So if you look at price inflation from a supply and demand perspective, it is hard for example to see how there is going to be price inflation in housing anytime soon. Who is going to be able to afford higher prices on homes? People will be LESS able to afford homes.

Now, sooner or later I do believe monetary inflation will start affecting the labor market and we will start seeing wage increases to help mitigate the devaluation of the dollar caused by our deficit spending binge. But I think that will occur over time.


The toughest question in my mind is: If we are going to be printing trillions of dollars of new currency, where is it going to go?

Well, the deflationists say, it will simply start filling up the black hole of debt that is dematerializing.

And I think it is true that is the first effect. But in my mind it is clear that the government/Fed will not be inclined to slam on the brakes once the black hole is filled back up, because the real economy is still going to be in a shambles.

So at some point the black hole gets filled up with US dollars and they start spilling out.

What will they spill into? My hunch is the first thing will be commodities, especially precious metals. To some degree maybe also stocks, but I can't see stocks going up much any time soon because they are pretty high priced compared to anticipated earnings.

Eventually, I would think stocks will go up, then wages, and then real estate.

Sooner or later all prices are going to go up, but I believe different sectors of the economy will see price inflation at different points in the new inflationary bubble period we are entering.

Invest in Gold to Hedge Against Hyperinflation

"Better two years too early than 20 minutes too late. "


I like that.

California's Troubles Are America's

The federal government is headed on the same path as California but can go a little further before it hits the wall because it can print money out of thin air.

The one possible difference is: As the federal government prints money it creates (with some time lag) inflation. In the economic downturn, wages are not going up. Even if we adopt banana republic style union elections (card check) I doubt wages will go up, and certainly unemployment will go up.

So, the standard of living will go down due to Fed-generated inflation.

Note that this is a sort of corrective feedback loop: Our economy, especially government, has been living beyond its means, and inflation will be reducing the standard of living, i.e. reducing our unsustainable overconsumption.

This contrasts with California where there is no self-corrective mechanism since the state cannot create inflation, thus the only solution to California's woes is to wield the budget meatax.


Now, here's a cheery one for Californians: Not only will you be seeing massive budget cuts, but the federal government will be creating inflation which causes those state and local tax dollars to lose a substantial fraction of their value.


Thus, reckless states like California are going to see a double whammy.

Predicting the Next Great Bubble

Those predicting inflation point to the massive expansion of money and credit.

Those skeptical about inflation point to the fact that in assets like real estate, demand far outstrips supply and will for the forseeable future.

So who's right? Both, I believe. Money supply growth will fuel inflation in some assets. For other asset types, a glut of supply relative to demand will preclude price increases.

Precious metals will go way up, same with other commodities like oil and agricultural products. On the other hand, real estate is going nowhere for at least the next 3-5 years.