The Flying Frisby - money, markets and more A Bull Market Flush – and a Management Red Flag
Phew. I need to write about something else apart from silver and gold. But I have to look at the price action we have seen this week, and I will say this. It was violent. Extraordinary, even. But it wasn’t necessarily bearish.
Sharp sell-offs like those we saw on Friday and Monday are characteristic of bull markets. In bear markets, corrections are grinding and protracted. Selling pressure is persistent. Value erodes slowly amid deteriorating fundamentals.
Bull markets behave differently. They flush. Explosively.
Late entrants and overleveraged speculators get shaken out. Stops are tight. Everyone is climbing the wall of worry. When a correction comes, a cascade of stop losses gets triggered all at once. Hence the violence.
BTW the latest Atlas Pulse came out on Friday, as level-headed as always. It’s the best gold and silver newsletter out there, in my view. Get your copy here - it’s free.
This is not just a precious-metals phenomenon. It’s a broader market truism. I’ve seen it in equities, other commodities, you get it all the time in tech - especially bitcoin. Indeed the action we are seeing in bitcoin at the moment is typical of a bear market. The selling is grinding and relentless, rather than sharp and explosive.
What’s more the gold and silver miners behaved well, and in a way that is consistent with a bull market flush. Yes, they saw significant selling. But gold corrected 21% and silver 41%. GDX (the large mining companies) only corrected 19% and SIL (the large silvers) 24%. Most importantly, they recovered faster. You would not have got a bounce like that in a bear market.
The relative strength is telling. If this were a reversal, the miners would have sold off by more. They didn’t.
If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I recommend is The Pure Gold Company. More here.
What’s more, theh miners only need $4,000 gold and $50 silver to be highly profitable. But if higher prices are the new normal, then a lot of previously uneconomic mines - particularly the low-grade, bulk-tonnage in Canada - are going to become economic. Heck, even STLLR Gold (TSX.STLR) might work. I should probably delete that last sentence.
How the landscape has changed from a couple of years ago.
Such huge potential, but …
In other news, I sat through the Comstock Inc (AMEX:LODE) conference call yesterday. An hour of my life I won’t get back.
The asymmetric potential of this company remains enormous. But that call was a red flag bonanza.
With the silver story what it is, and a clear path for this company to become North America’s largest silver producer, this stock should be trading above $15.