Owners of companies such as Barrick Gold, Goldcorp, Thompson Creek Metals, Newmont Mining, IAMGold, Toma Gold, Be2Gold, and other great gold producers, are stressed out reading how the golden sky is falling. Every financial writer and stock market web site says so..Did you not read the headlines?
Reading the headlines, one might think that every author was Nostradamus and he has the envelope right to his forehead while writing the latest gold bashing report. The writers all know Gold is doomed...It is not going up in the years to come...heck, it's a wonder gold has been around as long as human beings have engaged in commerce. As in 2009, when the same financial columnists and reporters boldly predicted $600/oz gold and the fall of gold bugs everywhere, there are few who can actually see the developing, soon to be historical and life-changing opportunity before them! Here is my attempt to be one such prescient author who can see around the next corner...and I like what I see!
Assuming everything happens in a nice, easy to follow the bouncing ball, predictable manner. Um..Okay....I know that will not happen. What happens the next time the Chinese stock market tanks 30% in a week and this time the government doesn't play "hand of god" and save the markets by DICTATING to free enterprises like funds, institutions, brokerage firms etc that they MUST NOT SELL and MUST BUY. Where do the bullets come from aside from the guns in the hands of a Government that screams jump to a populace that can't get off the ground any more. This is just one unpredictable (yet predictable) event that may (2-1 odds) or may not (50-1 odds) happen.
What about all the others. Greece, Italy, Spain, Venezuela, Puerto Rico? The Entire US Shale industry with maturing debt that can't be paid? the Chinese and USA housing bubbles that keep inflating in the face of potential interest rate hikes that will put people behind the 8 ball? How about the "regulators" telling the major US banks they MUST re-capitalize and hold more assets to offset their MASSIVE derivatives which, should one of them start the dominoes, could implode the world markets.
What is more likely, in my opinion based on near and long term historical reference, is that the dirty little black swan swimming into the picture at dusk, who no one can see yet even though the little black swan is right under our noses and yet we either choose not to see it or we really are wearing happy bull market glasses (Made in China of course). I mentioned a ton of potential highly visible market busting events above...but what about the ones we don't see. The "To Big To Fail" bank that is failing and just sitting out there waiting to be pushed into bankruptcy? The mega-city that suddenly doesn't pay anyone because they are broke? What about the Central Bank that issues more currency that no one wants- and you get an instant banana republic. What if, What if, What if??
My thought is that by 2017 the last thing TC will be worrying about is it's debt because I predict that the unpredictable black swan swimming into the picture is going to cause the kind of havoc that pushed gold to $2000 an ounce last crisis. This time the crisis will be much more fun -- it will include China, The EU, international Banks collapsing, and entire countries going under. Woo hoo...How many ounces will TC pull out that year?? 300,000 / year? X $5000 / oz when the paper contracts are called for delivery on the COMEX and the Shanghai gold market (another dirty swan you probably missed) and when people realize there are 10 paper ounces for every 1 ounce of real gold...The smiling bullion merchant will gladly say to Mr. Short Gold Forever, "Oh you shorted how much? Ouch! You say you need how much physical gold? Well....let me ring that up for you sir..Today? ah, yes...here it is...the rate today is $3540.00 per ounce USD. It's a steal! It was over $3800 a few days ago!"
See folks, were are not in bad shape..Just in a lucky, once in a lifetime position to be able to buy ABX, TC, GG, BTG, IAM, ETC ETC ETC at prices not seen for 25 years! I predict that there will be millions of investors saying "I was crazy not to buy gold and gold stocks in 2015...I could have made millions!." Look at this Barrick Gold chart that shows since inception, the number of times investors could buy at these levels. The last time I could have bought Barrick at $7 per share..Approximately 1991. This will be the greatest miss, fail, kick in the shorts etc. many investors will ever give themselves.Mark my words.
What this once in a lifetime reset of the gold mining stocks and industry has done is actually the greatest of services to we the investing public. First, the weak have been shaken out of the market, acquired, bankrupted, or forced to shut down the unproductive, unattractive, underperforming, and economically "challenged" projects. Second, in this environment of artificially low interest rates and Fed policy to keep rates near zero, the miners have been able to build new mines, upgrade equipment, buy new machines, and get their operational house in order.All with other people's money at interest rates that are laughable. Third off, the most important aspect of this correction has been that the Companies themselves, the ones still plugging along while being laughed at, heckled mercilessly, and bullied by short sellers and institutions who bailed a long time ago, have emerged in a position of STRENGTH. Not one of weakness.
Take my most recent purchase, Barrick Gold (ABX-TSX) (ABX-N
YSE). As almost the entire investment community laughs at people like me...I am more than happy to say I bought a nice position at $7USD/share and I hold October Call Options at prices of $9, $11, and $15 per share (I won't say how many but lets say if what I think will happen actually happens....I will almost be able to buy Barrick!).
Barrick Gold has already met $2.7 or its $3.0 Billion debt retirement commitment in 2015. That is correct...while the share price has tumbled. Barrick has sold non-core assets, a gold stream to Royal Gold, and brought its AISC to $800 per ounce.
All of a sudden the largest gold producer in the world has little debt, no fat around the edges, a lower cost of production that still leaves room for profit, dividends, M&A activities, and free cash flow.
What is there not to love about this deal now. So when the rest of the world catches up to my forward thinking approach to investing, and when the rest of the world sees the black swan that I see approaching like a menacing little Daffy Duck on the horizon...I will be able to sit back and laugh as I capitalize on this once in a lifetime economic reset.
My last prediction is that I, and other no fear, long term, rational investors that can see the obvious will actually make millions from this opportunity. I look forward to adding to my Goldcorp, Barrick Gold, Be2Gold, IAMGOLD, Toma Gold, and other holdings and capitalizing on the massive gains when this little black swan I see swims out into the middle of the lake at high noon for all to see.
Disclosure: I am/we are long GG,ABX, TC, TOGOF, BTG, GG.