Monday, August 18, 2014

Gold Miners Are Trying To Go Their Own Way

Firstly I would like to remind you one of the charts illustrating the gold miners' relative strength against gold:

Despite a long term up trend in gold, recently the precious metals miners have been dramatically undervalued against gold. But presently the situation is very interesting. Let us look at the chart below:

As in August 2013 and in February 2014, PM miners are trying to set free from gold. Despite gold going nowhere, the prices of PM miners are going higher. Please, study these markets carefully. If we can see the breakdown in the relative strength of PM miners against gold, the big bull run in PM miners stocks could start.
In the end, just a look at things from a different perspective....

Saturday, August 9, 2014

Gold Inflows Into GLD Replicate The Gold Prices

Nothing special in gold. When we have the gold bull run the we should see gold inflows into GLD (sort of a fund acccumulating the physical gold). And the opposite. Let us look at the chart below:

Since March 2014 we observe the similar action concerning the gold price and gold inflows into GLD. Well, the consolidation phase in gold is still intact.

Thursday, August 7, 2014

Lake Shore Gold - In My Opinion This Is One Of The Best Gold Miners

Lake Shore Gold is a Canadian gold miner operating three gold complexes in the Timmins Gold Camp (Canada).
The company (ticker NYSEMKT:LSG) has made a huge progress most recently. The stock price action mirrors the company management's work. Let us look at the chart below:

To illustrate what happened in the company's fundamentals, please, look at these charts and numbers below.

Some of the numbers were adjusted to make them comparable - the quaterly ebitda, cash flow from operations and gold ounces produced were multiplied by a factor of 4 to compare them to the yearly numbers.

As you see, LSG extracts gold from higher grade deposits - for those not familiar with gold, grades etc. it means that LSG is digging in the rock with higher quantity of gold. Which is good.

LSG is ramping up its production- in the second quarter of 2014 it extracted 52,300 ounces of gold which, adjusting it to the whole year, makes around 200,000 ounces a year (actually, the company plans to extract around 160,000 ouces of gold, which is more than in 2013).

And the most important thing - cash flow from operations. LSG is not digging gold - it is digging cash. And it is a lot of cash. Taking into account that presntly the LSG enterprise value stands at $565 million it means that the investment in LSG shares should pay back in 3.6 years. Not bad.

Monday, August 4, 2014

U.S. equities - a Topping process

Bears had their time most recently. At last. But in my opinion this is not the beginning of the major decline or a bear market in stocks. Let us look at the charts below:

Only Russell 2000 is in its consolidation phase; the other indices are trending up and the last decline has been just a usual correction.
So the bull market is still intact; no matter how big the accompanying divergencies are. And there are many of them (just look at some of my previous posts).
But there is something which is really different this time...or it could be. The main divergency I will be closely watching from now on is NYSE Advnace-Decline Issues. Look at the chart below:

To spot what is going now I had to present the last chart in a much shorter time span:

As you can spot, the market's picture has just started to look very awful for the bulls.

Saturday, June 28, 2014

Bonds and Stocks - Interesting Relationships

Somebody once told that the truth is in the bond market. Well, let me look at some of these markets to find whether there is any relationship.

I will look at the corporate bonds and junk bonds. As everyone knows, junk bonds are associated with a high risk while corporate bonds vice versa. When investors feel that something wrong is in the making they escape into safe instruments. It means that if such is a case, they should prefer to own less risky corporate bonds to junk bonds.

Let us look at the chart below:


The charts show three markets: stocks (S&P 500), junk bonds and corporate bonds. Below the charts of these instruments you will find the chart showing the relative strength of junk bonds against corporate bonds. As you can easily spot, before any major correction in stocks the corporate bonds were stronger than their junk friends. The most interesting thing is the last junk bonds' relative weakness lasting from September 2013. It has been the longest weakness since 2007. Prudent investors are escaping into less risky instruments and they have been doing that for quite a long time .

Wednesday, June 11, 2014

The Trade In PM Exploration Companies

In my May 16 article I presented a simple strategy for playing gold miners stocks. Today a quick update of that trade plus one relevant modification:

As you see, the trade is still active and buying GDXJ on May 16 would have bring a profit of $2.5 per share till now (7.1%).
But, for those risk averse players, this deal could be a little bit different. Because this is a play between big PM miners (GDX) and junior PM exploration companies (GDXJ) it could be less risky to go LONG GDXJ and go SHORT GDX - smaller profit but smaller risk as well As you like.

But generally the trade is still on...