Trading Update II

Bought 1 oz American Platinum Eagles @ 1,083.74 each today. Minor investment. Intend to hold many years. This is my second foray into physical precious metals. The last time was 2004. Bought gold and silver. Intended to hold long-term, but sold in 2006 as they started to go parabolic. No complaints. Was a short profitable ride.

They say that past performance is not necessarily indicative of future returns. I hope that's true of platinum. Those who bought platinum 15 years ago are not only still underwater but have clearly not kept up with inflation. I'm speculating that I do better. And if not, at least I'll have a small collection of premium paperweights to serve as reminders of my bottom-fishing folly.

This is neither investing nor speculating advice.

Mining Productivity Miracle

The following chart shows the mining industrial production index divided by the number of mining employees (thousands).

Bagger 293

Bagger 293 is 96 metres (314.9 feet) tall (Guinness World Record for highest terrestrial vehicle, shared with Bagger 288). It is 225 metres (738.2 feet) long (same as Bagger 287), weighs 14,200 tonnes (31.3 million pounds), and requires five people to operate.

At what point are these fully-automated and/or self-replicating?

How to Lose 21% in Just 9 Trading Days Gambling on Surging Silver Stocks

September 22, 2016
Yahoo Finance: 6 Surging Silver Mining Stocks to Buy as Fed Maintains Rates

Flaunting a Zacks Rank #1 or #2 and a Momentum Style Score of ‘A’ or ‘B’ the following stocks are marching ahead, and still appear to have plenty of upside potential left. Further, these companies have been seeing positive interest from analysts of late.

Silver Standard Resources Inc.

Price then: $13.39
Price now: $10.78
Net loss: 19.5%

Pan American Silver Corp.

Price then: $18.46
Price now: $15.84
Net loss: 14.2%

Endeavour Silver Corp.

Price then: $5.59
Price now: $4.48
Net loss: 19.9%

First Majestic Silver Corp.

Price then: $12.66
Price now: $9.02
Net loss: 28.8%

Tahoe Resources Inc.

Price then: $14.20
Price now: $11.24
Net loss: 20.8%

Fortuna Silver Mines Inc.

Price then: $7.99
Price now: $6.28
Net loss: 21.4%

Average net loss: 21%

A strong price increase implies robust demand for the stock, which is often triggered by either a good earnings performance or some positive news, which may further boost the stock price.

Behold the power of Yahoo Finance, Zacks, surging stocks, strong price increases, robust demand, sure things, and silver mining diversification to enhance your net worth!

Wells Fargo Fined Again

September 27, 2016
U.S. says Wells Fargo to pay $400,000 to settle charges over swaps

WASHINGTON (Reuters) - Wells Fargo Bank has settled federal charges over inaccurate large trader reports for physical commodity swaps positions...

Harsh words and a fine equaling a whopping 0.000176% of Wells Fargo's market cap ($400k / $227b) will once and for all teach senior executives that crime doesn't pay.

It's the nanoscale straw that will break the adamantium camel's back.

Heads will rofl. They always have a scapegoal in place for these types of miner emergencies.



One of my patients had a rather amusing Freudian slip: he was having dinner with his wife, and he meant to say "pass the salt", but instead he said "You've ruined my life, you blood-sucking shrew." — Niles Crane, Frasier

Exponential Trend Failure of the Day: U.S. Industrial Chemical Production

Click to enlarge.

The U.S. chemical industry, a more than $800 billion enterprise, is heavily linked to the overall condition of the nation’s economy. It has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain. - Zacks Investment Research, May 20, 2016

June 15, 2016
The Business Insider: US industrial output fell in May; auto production plummets

The Federal Reserve said Wednesday that industrial output - which includes factories, mines and utilities - dropped 0.4 percent from April. The decline reversed the 0.6 percent gain seen between April and March, an improvement that provided some evidence that the industrial economy was turning around after a period of extremely weak performance.

Source Data:
St. Louis Fed: Industrial Production: Nondurable Manufacturing: Chemical

China Is a Victim

January 12, 2016
Jim Rogers Says China Is a Victim, Not Cause of Problems

Yes, the victim. We used our vast military might to force China to make goods for us in exchange for useless paper dollars, completely against their will. Then, we sent over our "Hot Commodities" billionaire to convince them how wonderful both they are and commodities, in general. Next, we crashed that commodity bubble single-handedly thereby forcing them back into US dollars. And finally, knowing with 100% certainty that cash was trash, we started talking about the wonders of commodities yet again.

Poor China. Apparently, promised the world by a foreign power, and believed in every story we sent them with great naivety. We are clearly the masters of deceit, to trick a country that's been around pretty much since the invention of dirt.

May 12, 2016
China's commodities meltdown could rock the markets

One truly astonishing feature of this bout of speculation is that the average holding period of a commodity futures contract was just three hours in April, according to a Bloomberg article. That makes other speculative trading episodes look like long-term investing.

Even if one is wrongly imprisoned, a victim of our system so to speak, then this still might not be the best time to bend over and reach for that bar of soap. We have a long history of #%^*ing China up the asset classes, or so I'm told.

Just a few questions. How on earth did we ever convince them to send us so many actual goods for cash that we can easily print? Is it because they were desperate for our jobs? Why won't they spend their dollars on our goods and services instead of hoarding them? What are they waiting for? Yet another commodity meltdown and a new entry point for even more speculation?

My heart goes out to the victims of the ELEMENTS Rogers International Commodity ETN, down roughly 50% since its inception just before the Great Recession. Half the soap is gone. But don't you worry, Jim Rogers is teaching his daughters Chinese. You should too. When a billion Chinese victims apply for your soon-to-be-automated job, you don't want to be left behind.

In all seriousness, can't we all just get along? There is no reason that we can't all be victims, together. Let us look forward to the day that all factories are automated, all Amazon fulfillment centers are automated, automated drones deliver all the goods directly to our homes, and all profits and wages go directly to the top 1 percent. It's utopia, assuming we cut the taxes of the richest to somehow magically pay for all of it, or at the very least simply borrow the money ad infinitum. What could possibly go wrong?

"Considerable Margins of Safety"

December 29, 2014
Why I'm Backing A Brilliant 2015 For BHP Billiton plc, Glencore plc And Rio Tinto plc

However, it is mostly as a result of the considerable margins of safety that are currently on offer through BHP, Rio Tinto and Glencore that I’m bullish on their share price prospects for 2015. It could be a stunning year for investors in all three companies.

Glencore? Brilliant 2015? Stunning year? Got TASER?

Of course, finding the most appealing stocks for next year is not an easy task. That's especially the case if, like most private investors, you lack the time to trawl through the FTSE looking for the best opportunities.

All that time spent trawling and all he's got to show for it is an old tire, a washcloth, a waterlogged sneaker, and a selfie with his "best opportunities" treasure, lol. Sigh.

September 28, 2015
Glencore craters 29% as analysts fear debt will ‘evaporate’ stock’s value

Glencore GLEN, -29.42% GLCNF, -27.70% shares have now lost 76% in value year-to-date, as the miner and trader struggles with weak results, slumping metals prices and broader concerns about its balance sheet.

Excessive debt and leverage. Whatcha gonna do?

Quote of the Day

July 31, 2015
A $600 million coal mine just sold for less than $1

As seen in the comments:

Well done Obama this is one promise you kept jobs and tax dollars gone. - JAMES

Quote of the day? Not exactly.

Wait, so a Brazilian company and a Japanese company sell their Australian joint venture to an Australian miner and somehow Obama is tied in to it? - Gamer

Bingo! As a fellow gamer and firm believer that Obama cannot possibly be responsible for every bad thing that has ever happened, is happening, and will happen, I might be a tad biased though. Your call.

Savvy Chinese Investors Strike Again

July 28, 2015
Chinese farmer invested life savings in stocks, lost it all

But after sinking his entire life savings—$164,000—and his relatives' money into shares of a local mining company, he lost everything. Not only that, but Yang's brokerage convinced him to borrow more than $1 million to buy stocks on margin. He now owes roughly what he originally invested after liquidating his portfolio.

The Great Chinese Famine Corporation

Mining "fa" since 1959! Proven track record! Can't lose! Every investor loves a famine! Publicly owned, locally operated.

The Sarcasm Report v.226

A third sarcasm report in a row? What can it mean?

July 24, 2015
Mish: Hedge Funds Net-Short Gold First Time in History; Contrarian Views

First time in history? First time in geological history? First time in human history? First time in recorded human history? Does this predate the bible? Inquiring minds want to know!

Hedge funds are holding the first ever bet on a decline in gold prices since the U.S. government started collecting the data in 2006.

Ah, the extensive history that goes all the way back to 2006. That's the year I sold gold for a 50% profit. That must mean that "history" also shows that I never bought gold, since my purchase was in 2004, long before "history" began. Put another way, "history" shows that I only sell gold.

I remember 2006 well, which is odd given how long ago it was. I was just a 42 year-old retired kid when the desire to sell gold entered my thoughts, barely old enough to feed myself or start a blog. In fact, it wasn't until the Great Recession appeared imminent in 2007 that the blogging thing became a reality.

Good times. I will always look back with fond memories at that distant era of my life.

Sorry Mish. Everything is fair game to a sarcastic heckler. Guilty as charged. ;)

Disclosure: I have little opinion regarding the current price of gold. I have claimed in the past, when gold first breached $1000, that hoarded toilet paper would be a better (safer) long-term store of value. I stand by that but it's just an opinion. I would not dare to predict what others will ultimately pay for gold, any more than I would dare to predict what investors in other assets prone to bubbles would ultimately be willing to pay.

Doctor Copper Steamrollered by Crazed Deflationist

July 12, 2015
Copper Bears Rewarded as Economic Threats Spur Metal Rout

This morning's announcement that Doctor Copper would be running for the office of president of the United States took an unexpected turn. No sooner did the latest candidate, in a long string of candidates, point out that something was not quite right with the world, a crazed deflationist driving a semi-automatic paving machine crossed over the center line to avoid a speeding hyperinflationist riding a tricycle. He then proceeded to "accidentally" crush the good doctor and his podium too. 

Shadowstats, a major contributor to Doctor Copper's campaign, and rumored to be affiliated with the growing hyperinflationary tricycle market, was not immediately available for comment.

Okay, I admit it. In an effort to capture the essence of the article, I may have allowed myself too much journalistic latitude by excessively paraphrasing the quote. Crossing the winning of the Pulitzer Prize off of my bucket list will apparently just have to wait. ;)

Reverse Mundell-Tobin Effect Epiphany!

Four years ago I wrote about the Mundell-Tobin effect. Time to revisit it.

January 20, 2011
Mundell-Tobin Effect Epiphany!

From Wikipedia:

The Mundell–Tobin effect suggests that nominal interest rates would rise less than one-for-one with inflation because in response to inflation the public would hold less in money balances and more in other assets, which would drive interest rates down.

This is what its reverse would look like.

A reverse Mundell–Tobin effect would suggest that nominal interest rates would fall less than one-for-one with inflation because in response to less inflation the public would hold more in money balances and less in other assets, which would drive interest rates up (relative to the low level one might expect).

That was certainly true of the hard asset known as silver. As seen below, I was definitely not bullish on the metal in 2011. This is just one more reason that silver investors couldn't keep the parabolic move to the upside going.

And as for interest rates being driven up, well, the Fed wasn't going to let that happen if they could plug the hole, which they did. They were in no mood to come to silver's defense though. Go figure.

Silver. Rug. Pulled. Out from under.

February 24, 2011
Silver Bubble Construction Set

If these charts have any merit, then silver is either in a bubble or silver has priced in a great deal of future pain for savers. Perhaps hindsight will show that it was a bit of both? It's just one more reason I've been willing to buy 30-year TIPS.

In hindsight, it was more than a bit of both. Silver investors were crushed, short-term savers got more of the same (ZIRP), but investors in the 30-year TIPS have been well rewarded.

Being a permabear is never easy. One must always try to figure out just what kind of bear to be. I am not even close to being a "Shadowstats Hyperinflationary" bear, but rather a "Slowly Declining Roman Empire" bear. There's a huge difference, to say the least.

Merry Craftiness! (Musical Tribute)

Happy amusement to you and yours! :)

Proof That ZIRP Leads to "Sure Thing" Hyperinflation

In unsustainable mining output! What did you think I meant? Dollars? Does this site look like ShadowStats to you? You can't be serious! I may be a permabear, but I'm not entirely crazy! Mwuhahaha!

The following chart shows the 12-month moving average of mining industrial output.


Click to enlarge.

Holy cow? What are we building ourselves? I sure hope it involves full scale copper replicas of the Great Pyramids! How cool would that be?

Note that before ZIRP, mining output was heading down, chaotic, and full of mystery.

No longer! We're permanently free of anything bad happening! This new exponential trend in red is as smooth and tender as a fine steak in an upscale restaurant! It will never fail to please! Tasty to the last delicious bite!

This Week on Mine Your Manners

If you have to ask how much a New York "stake" is going to cost you over the long run, then perhaps you can't afford it. For example, Silver Standard Resources lost another 15% today.

What Rich People Do: Finding your way around the steakhouse

You can ask for A1 in a high-class steakhouse, but it’s tantamount to saying “I hate America. And I’m in favor of incestuous gay marriage between Communists … at Disneyland.”

That's what I love about monetary policy! ZIRP isn't just a blunt tool. Its sauce makes a great surgical condiment! A1! Top notch! Targets only the mining industry! Any potential misallocation of capital only ends up there! That leaves the rest of our economy to thrive for all eternity!



In all seriousness, it is very difficult to solve deflationary debt and production overcapacity problems by borrowing extra money to increase production capacity. I know. More crazy talk.

See Also:
Poll: Is There a Sarcasm Bubble?
Parabolic Hyperinflation Theories Thwarted by Twisted Maize of Cornucopia Puns

Source Data:
St. Louis Fed: Industrial Production: Mining

Mining Exploration, Shafts, and Wells

The following chart shows the 10-year moving average of fixed private investment in mining exploration, shafts, and wells as a percentage of all fixed private investment.


Click to enlarge.

December 2, 2014
Oil tycoon T. Boone Pickens predicts return to $100 a barrel

Pickens: ‘You can’t imagine how many of these cycles I have seen and endured’

As seen in the chart, I can imagine two. For what it is worth, I believe the current one will soon end in a deflationary parabolic trend failure.

The Lurking Fear by H.P. Lovecraft

In a short time I realised that I must tell my story to someone or break down completely. I had already decided not to abandon the quest for the lurking fear, for in my rash ignorance it seemed to me that uncertainty was worse than enlightenment, however terrible the latter might prove to be.

Source Data:
St. Louis Fed: Custom Chart

Burn, Baby, Burn

Click to enlarge.

To put this in perspective, each Btu can heat one pound of water by one degree Fahrenheit. There are approximately 632 billion pounds of people on this planet composed mostly of water. If we were to burn all of that energy at once each year, then we could heat every person on the planet by roughly 823 degrees Fahrenheit.

I suggest that we do not do this though, but instead continue to act responsibly when it comes to energy usage. You know, much like locusts act responsibly as they feed.



For what it is worth, I am no better than any other locust. I'm burning energy to create this post. I burn energy to heat my home. My car often has only one person in it, as does my girlfriend's car.

I doubt any of us truly believe that there won't be long-term consequences, if not necessarily for us then for those who come after us. And yet, we do it anyway. The desire to swarm remains high.

Speaking of the desire to swarm, Black Friday is only a few days away. Enjoy the plague!

December 6, 2010
Black Friday's plague

The problem with Black Friday, and all the black days to follow until the Christmas buying spree has run its course, is that it confirms the notion that our economic health depends on a continuously extracting materials from the Earth's diminishing supply. Planetary sustainability is threatened when we shop. Yet retailers depend on it.

Source Data:
EIA: International Energy Statistics

The Real Commodity Super Cycle Killer

The following chart shows the 12 month moving average of the industrial production index for mining.


Click to enlarge.

Mining production certainly seems to love ZIRP and high commodity prices these days. I doubt very much that "sure thing" 6.1% growth rate is sustainable for much longer though. Exponential trends of that magnitude rarely are. If I am right (might not be of course), then we're setting ourselves up for a seriously disinflationary environment (at best). Hello Japan?

And on that note:

58 of 70 people found the following 1 star review of "Gold Bubble: Profiting From Gold's Impending Collapse (Hardcover)" helpful. The book was published on April 24, 2012 (the same day as the review). For what it is worth, gold's price on that day was $1638.75.

The world's central banks, the smartest people in the world when it comes to money, are the big buyers. This would be the first bubble in history that the dumb money was selling into and the smartest money on the planet was buying. Do you really think that the people with the least knowledge about money are getting this right?

Emphasis added.

Sale of UK gold reserves, 1999–2002

The sale of UK gold reserves was a policy pursued by HM Treasury over the period between 1999 and 2002, when gold prices were at their lowest in 20 years, following an extended bear market. The period itself has been dubbed by some commentators as the Brown Bottom or Brown's Bottom.

Smartest people in the world? Seriously?

February 21, 2014
Mish: Hilarious Transcripts of Fed Minutes from 2008 Reveal Completely Clueless Fed

January 29–30, 2008: Meeting of the Federal Open Market Committee

Vice Chairman Geithner: The world still seems likely to be a source of strength.

Mr. Mishkin: My view on the economy is that we are going to have quite a weak first part of 2008 , in which we’re going to skirt recession.

Chairman Bernanke: Certainly by this point there must be some pent-up demand for housing.

Smartest people in the world? Seriously?

Keep in mind that we were already in the Great Recession. It started back in December of 2007. The "smartest people in the world" just didn't realize it yet, nor did they have any idea of its magnitude.

They say never fight the Fed ("smartest people in the world"). I say hogwash. Stick them in a wet paper bag with a butter knife and 67.3% of the time they will fail to find a way out. I can't prove it of course. It's just a theory!

"Can't we just go out the bag's opening?"
"Maybe, but why have we been given a butter knife?"
"It must be here for a reason!"
"Yes, we should definitely use all tools at our disposal."
"It's the only way to rescue ourselves from this conundrum!"
"When should we use the knife?"
"Before or after we go out the bag's opening?"
"Let's plan multiple meetings before deciding."
"Agreed. None of us is as smart as all of us!"

I am not endorsing the gold bubble book by the way. I have not read it. I have little desire to read it. I will more than likely never read it. I just find the reviews of it fascinating. Here's a bonus 1 star review that 16 of 27 found helpful.

You don't lose money on physical gold until you sell it

You don't lose until you sell it? WTF! I think "Spazz" needs a few lessons from David Lereah on the proper wording of motivational commentary, but hey, what do I know?

"You Don't Lose Money on Real Estate Until You Sell It!"

Think how that book would have sold, lol. Sigh.

I don't mean to pick on those who own gold for the long-term. I just have a really bad feeling about commodities and China in general right now (and to me, gold is a commodity, not money). I think ZIRP has misallocated capital in ways that will soon be painfully counterintuitive to most. I could be wrong to think this way. Your opinions may vary.

This is definitely not investment advice.

Source Data:
St. Louis Fed: Industrial Production: Mining

Great Depressionary Quote of the 21st Century: "Massive Industrial Overcapacity"

The following chart shows industrial capacity per capita (industrial production index adjusted for capacity utilization and population).


Click to enlarge.

That's a 0.998 correlation over 27 years of data (Jan 1967 to Jan 1994). And then... Boom! Trend broken big time. That has to be one of the most impressive trend failures I've ever posted on this blog. It was so incredibly consistent and predictable right up until it wasn't.

It's not where we've been but where we are headed that concerns me most. Now that we have all this extra capacity, what's the worst that could happen from here?


File:Abandoned Packard Automobile Factory Detroit 200.jpg (Albert duce)

It's not just us.

February 17, 2014
China Crackdown Drives Business Off the Books

The accuracy of China's economic estimates faces growing doubts as the government tries to cut industrial overcapacity, recent reports suggest.

February 10, 2014
Guest post: dealing with 500m tonnes of global steel overcapacity

Business models that have emphasised capacity expansion above all other considerations are now very exposed to changing patterns of demand.

January 27, 2014
China’s Aluminum Overcapacity Seen by Fitch Holding Down Prices

Rising capacity at aluminum plants in China, which account for almost half of world output, will weigh down prices this year in a market that’s already over-supplied, according to Fitch Ratings Ltd.

January 23, 2014
PetroChina delays operation of refineries on overcapacity

BEIJING: PetroChina has put off starting up two new refineries and delayed expansion of another to counter the threat of overcapacity as oil demand growth slows in the world's second largest oil consumer, a company official said on Thursday.

China's oil consumption last year grew at its slowest in more than 20 years, calculations on government data showed on Monday, as soft economic growth sliced demand for transportation and industrial fuels such as diesel.

December 11, 2013
Overcapacity Threatens China Growth

The biggest obstacle facing China’s economy? Massive industrial overcapacity is near the top of the list as the country prepares to launch major reforms but seems intent on keeping gross domestic product growth from falling off too quickly.

I have never been more permabearish.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Industrial Mining Production vs. Real Gold Price (Musical Tribute)

Click to enlarge.

The black line shows the annual average of the industrial mining production index (left scale). Note that it recently set a new record.

The blue line shows the annual average gold price adjusted by the consumer price index (right scale, December 2013 dollars). It grew exponentially starting in 2000 and very nearly set a new record. It has recently backed off though.

Let's zoom in a bit.


Click to enlarge.

Satellite of love, we're gonna fly

September 23, 2007
Productivity Miracle

If I'm wrong to be a stagflationist, this is the sort of thing that would do me in. It is also something one needs to factor in when hoarding hard assets in general.

May 22, 2013
20 Insane Bitcoin Mining Rigs

If you still had any doubt about their commitment to the mining career, the next pictures will show you that they’re here to stay. These next 20 mining rigs are totally insane!

Mining rocks to hoard? Mining bitcoins to hoard? It's all good if it adds to GDP! Right?

This is not investment advice. As always, just opinions.

And on that note, here are a few bonus opinions. I find it insane that we needlessly waste any of the world's resources to mine bitcoins. Is the world really going to be a better place because of it? Is this the kind of productivity miracle that will lead to future prosperity? It's shameful that bitcoins require any energy at all to create. Good grief. At the very least, they could have made a computer game out of it that's fun to play. But no, it's just automated computers (in ever greater numbers) mining virtual bitcoins (in dwindling numbers). Put another way, it requires ever increasing streams of energy to generate fewer and fewer bitcoins. What a frickin' long-term plan of wasted effort that is (not necessarily from a miner's perspective, but for society in general).

At least gold gives you something shiny to fondle once the mining's complete. I say this as one who owned gold from 2004 to 2006. It treated me very well over that period. No complaints. No desire to buy it again though (at these prices anyway). Your opinions may vary of course.

Source Data:
St. Louis Fed: Custom Chart (Long-Term)
St. Louis Fed: Custom Chart (Short-Term)

Industrial Production: Mining

Click to enlarge.

1. Totally sustainable!
2. No malinvestment here!
3. Hyperinflation soon to follow!

It's a sarcastic triple play!

Malinvestment

Austrian economists such as Nobel laureate F. A. Hayek advocate the idea that malinvestment occurs due to the combination of fractional reserve banking and artificially low interest rates misleading relative price signals which eventually necessitate a corrective contraction—a boom followed by a bust.

September 23, 2007
Productivity Miracle

If I'm wrong to be a stagflationist, this is the sort of thing that would do me in. It is also something one needs to factor in when hoarding hard assets in general.

Topic: Large mining equipment

I find it all quite humbling. Don't you?

See Also:
Hyperinflation Theories Poned Again

Source Data:
St. Louis Fed: Industrial Production: Mining