Jason Burack's  Instablog

I interviewed Sandstorm Gold CEO Nolan Watson about the gold market, production costs for miners, how many producers and juniors will survive if metals prices go lower, the amount and quality of deals Sandstorm Gold is being offered now and updates on Sandstorm Gold and Sandstorm Metals and Energy.

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This is a podcast we did calling out Wall St robots and Keynesians who think the Austrian School of Economics is for higher taxes. For free markets to work and for prices to clear, taxes on the private sector have to be drastically cut. Keynesians think Austrian School Economists or free market economists favor high tax austerity on the private sector, which could not be further from the truth. If government spending is drastically cut, taxes on the private sector have to be drastically cut for investors, entrepreneurs and small business to start growing the private sector again. Higher taxes on the private sector are not a good incentive for economic growth.

The US economy is not recovering, except for certain sectors. However, without the aid of free money from Congress, the Fed, and other central banks many of these sectors like healthcare, banks, real estate, homebuilders, etc would not be "recovering."

Asset bubbles in nearly every asset class but commodities are developing rapidly.

Keynesians and the mainstream media keep repeating:

1) there's no inflation (most of the inflation is in asset prices creating or re-inflating bubbles right now) and a lot of the inflation has been exported outside the G7 by countries running currency pegs

2) the US economy is recovering (certain sectors are recovering and there is new technology sectors rapidly growing, but most of the sectors recovering are getting LOTS of free money still).

3) the Fed can exit its entire balance sheet in 3-5 years. Who would buy the "assets" the fed is selling?

I expect stocks to keep going higher although small and mid caps are not moving higher. Valuations on small caps are extremely low even the profitable ones with good growth potential. Market is not pricing in a lot of revenue growth for many companies despite the fact that revenue growth for many companies is very likely in the near future.

Commodities market is the only asset class not in a bubble right now.

Resource stock valuations are absurdly low and zero revenue growth is being priced in.

youtu.be/fwWX-pdC8Do

Here is a study from Royal Bank of Canada.

Their mining analysts did a stress test of sorts on North American gold producers, finding "significant pain" should bullion plunge further to $1,300 an ounce.

Here's what Stephen Walker, the head of the bank's global mining research, and analysts Dan Rollins and Sam Crittenden found:

Gold at $1,500 an ounce: "We estimate a low probability that our selected gold producers would trigger a single-notch credit ratings downgrade. We would expect producers to draw down existing credit facilities, consider cash-saving measures and, where necessary, seek debt financing in order to complete the existing capital spending programs."

At $1,400: A "moderate probability" of a one-notch downgrade to Barrick Gold Corp., while all producers cut expenses and delay spending plans.

At $1,300: A "moderate probability" of a one-notch hit to Newmont and Allied Nevada Gold, and a "conceivable" hit to non-investment grade debt ratings of Barrick and Kinross Gold Corp., while all producers would cut spending sharply, put off new programs and, for some, cut dividends.

At $1,200: A "high probability" of non-investment grade hits to Barrick, Newmont Mining Corp. and Kinross. "We would expect all the gold producers to consider care and maintenance for high-cost mines, cut all discretionary expenses, cut capital spending programs, defer new development projects and consider cutting dividends."