Expert Says Tide Has Gone Out


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Michael Ballanger

Skilled Michael Ballanger opinions the present market cycle, Elon Musk’s impression on the inventory market, and divulges the inventory he says has a optimistic outlook amidst the chaotic backdrop of summer season 2022.

As a sexagenarian market thinker quickly to turn into a septuagenarian market thinker, I’m discovering myself considerably embarrassed when youthful folks (apart from household) ask me my opinion on one thing. I often attempt to reply to their inquiry within the method by which my father (RCAF WWII navigator William Roland Ballanger) used to advise me within the very early days of my hockey profession when some teen would come up for an autograph or a easy “Hello Mike” to which I might all the time cease, bend all the way down to his peak, prolong my hand, and say, “Whats up to you, and what would your identify be?” at which level he (or she) would look as much as their dad or mum(s) for steerage after which (virtually all the time) inform me.

At this level within the encounter, I might provide the beaming teen my hand and as we shook, I might say, “It’s a nice pleasure to satisfy you, and thanks for saying hey.”

That habits got here from RCAF Navigator W.R. Ballanger who recounted the story from his life that dwelled within the realm of geopolitical nonsense within the days after the Nazi’s threw a traditionally profitable and affluent German society into complete smash and hunger.

Lieutenant Ballanger airlifted a number of tons of foodstuffs from London (Canadian wheat, corn, and flour) into Berlin and into the ravenous mouths of folks that had actually no agenda as to world domination nor even neighborhood recognition. He instructed of tales of youngsters begging him for extra rations as he tossed bag after bag of flour and powdered milk into the throngs of individuals devoid of something for weeks upon finish.

The story grows right into a sleek crescendo as he pertains to how the females (all the time single widowed moms due to the calls for of “patriotism”) would worship the Allied airmen standing on the down-ramps of their plane as they loved the adulation from the crowds. He understood the distinction between “obligation” and “entitlement” and each time a German girl tried to thank him in ways in which solely wartimes can evoke, the Canadian troopers merely provided their arms. It was a lesson that I realized properly and shall always remember.

Elon Musk is, to me, the Millennial model of the only biggest inventory promoter of the previous 30 years, Robert Friedland. Most individuals within the securities business know Robert as a buy-side analyst; in different phrases, they listened to his masterful pitches which, again within the day, had been nothing wanting mindboggling.

He might increase more cash by a 60-second rip than might a battery of geologists in 20 minutes. It didn’t matter whether or not they had the following coming of Voisey’s Bay; should you didn’t have Friedland to pitch it, you had been cooked.

This brings me to the subject of the present market cycle.

Elon Musk was educated at Queen’s College in Kingston, Ontario, Canada which is pure as a result of South Africa could be very shut in DNA to Canada because of British Colonial ancestry and because of the truth that lots of the Canadian inventory promoters which have risen to fame (and infamy) had been Queen’s grads, names, after all, redacted.

I’ve by no means met Elon Musk and one in all my guidelines is that except somebody has both cheated you or defamed you, you don’t have the fitting to assault them in both the general public (or extra importantly) personal area.

Nonetheless, with regards to the matter of compliance with generally-accepted securities guidelines, one has each proper to take folks like Elon Musk to process and ideally, to jail. The one cause that I say this lies within the chart proven beneath.

Within the British society from which my DNA originates, the phrase “cheek” refers back to the tendency for an individual to display complete vanity within the face of adversity. It additionally doesn’t require “hostile situations;” it would solely require a light quantity of sanguinity. The extent to which Elon Musk brings “cheek” to the monetary battlefield escapes all doable explanations and interpretations of rationality.

Evaluating the “cheek” of an Elon Musk to the same attributes of a sure Robert Friedland, there may be merely no foundation for comparability. From the side of financial success, adjusted for foreign money debasement, Musk wins.

Adjusted for the supply of shareholder worth, Musk wins. Permitting for the integrity of markets and the sanctity of shareholder rights, Musk loses after which Friedland rides off with the entire winnings. Friedland received with out the assistance of Wall Avenue shills, Musk has been successful due solely to Wall Avenue shills.

When it comes to their defining occasions, Friedland took everybody over the rainbow by promoting his Voisey’s Bay nickel-copper-cobalt deposit to Inco Ltd. for $4.3 billion in 1997 whereas Elon Musk merely reported an intention to promote his personal place for $16.4 billion at costs roughly 40% above the place they reside right now.

Friedland right now runs a really profitable firm Ivanhoe Mines Ltd. (IVN:TSX; IVPAF:OTCQX) whose market capitalization stands at round $6 billion whereas Musk has Tesla and SpaceX.

As a last methodology of punctuating the time period “cheek,” Musk went out and purchased a pile of Twitter paper; then introduced a takeover taking the inventory (and plenty of different traders) to $54 in a surge of pleasure and greed. He then rescinded his provide; inflicting the share worth to crash and now holds a 9% place in an organization that trades 17.6% off the post-Musk-deal highs.

He’s now being scrutinized by the regulators in addition to a battery of sophistication motion attorneys representing traders misled by the antics of the billionaire “genius.”

That is precisely what occurs when the tide rolls out; you discover out who’s a bonafide operator and who will not be. It additionally hammers dwelling an funding rule hammered dwelling by my older mentors throughout the varied bull markets by which I’ve participated: “By no means confuse bull markets with brains.”

The secular bull market which ended within the late levels of 2021 was remodeled right into a grandaddy bear within the first month of 2022 with the vanquished bull remembered because the “EVERYTHING” bubble that swept any shell firm lucky to garner an inventory on the NASDAQ right into a floor swell of recognition wanted with gargantuan gusto by wave after wave of highly-skilled pitchmen whose coaching by the Goldman’s and the Morgan’s of the world was second-to-none.

I known as the arrival of the present bear market in January of this yr and constructed a mannequin portfolio that factored in the potential of an 80% drop in my junior miner positions hedged by a 15% holding within the double leverage volatility ETF (UVXY:US) designed to defray the drawdowns within the junior miners by mirroring its March 2020 efficiency.

Effectively, as they are saying, the best-laid plans of mice and males had been all for naught because the automobile that labored fantastically in 2020 towards the pandemic drawdown has been an ineffectual hedge. Whereas I exited the place at $18.75 again in March, I’ve been awaiting a re-entry level with the endurance of an ADHD-afflicted schoolboy after consuming a field of purple Smarties.

What we now have right now is a drawdown of roughly 50% within the junior miners however with my prime holding (Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) sitting at an 89% acquire since inception versus a destructive 37% for all the Canadian junior market flotilla, the outlook stays comparatively optimistic, given the drilling success at Getchell’s Nevada-based Fondaway Canyon mission.

In 45 years of participation within the commodities sector, I’ve by no means seen a extra speedy shift in sentiment than what we now have seen within the second quarter of 2022. I pounded the desk for months in regards to the Fed’s resolve in getting a grip on costs and whereas everybody was speaking “pivot” and holding onto positions, it was as if a pistol went off signaling the tip of the commodities bull and the arrival of a disinflationary tsunami.

With the algobots operating completely wild in a liquidity-starved buying and selling setting, costs are being whipped round as if headless chickens had been in management. My stance stays bullish on copper, uranium, gold, and silver for causes associated to electrification (copper, uranium) and profligate authorities spending, and unbridled credit score creation (gold, silver).

My colleagues within the advisory enterprise all appear to be piling on to the “Fed pivot” narrative which all of them appear to “know” will arrive on this present quarter however I keep that with the tide now properly out to sea, the one bathers left are these with trunks and by that, I imply actually stable firms both producing money stream or, within the case of the junior miners, well-funded builders with higher tier initiatives underneath development.

As a senior citizen of the junior mining area, I might welcome a return to markets that rewarded administration that demonstrated the power to advance worth by discoveries, acquisitions, and superlative advertising and marketing. Within the meantime, I’ve to undergo together with many others as we watch spectacular drill outcomes get trashed by shareholders too inexperienced to grasp how a lot worth they’re leaving on the desk.

Within the COVID crash of 2020, firms that I owned from 2019 at underneath a dime fell from half a greenback again to underneath a dime because the Johnny-Come-Currently crowd determined to capsulize losses by promoting. I purchased the Getchell Gold personal placement at 10 cents with a full two-year warrant at 14 cents in what was an unbearably troublesome funding to shut.

Why?

It was as a result of everybody thought that the world was coming to a screeching halt and that promoting a high quality junior was the “prudent transfer.” What number of instances in my four-and-a-half-decade profession have I made that very important mistake?

The reply is “usually early however by no means now” as a result of managing a portfolio of junior miners throughout a market collapse is price 15 years on the Harvard Enterprise Faculty.

This week I tweeted out the next: “Tough markets however nearer to a backside than a prime…for Copper, uranium, gold, and silver…and most essential are GB sunsets!”

The operative portion of that tweet was the half about equities being “nearer to a backside than a prime” however it’s important to be very cautious the way you method something resembling a backside. Do not count on a V-shaped, Fed-triggered backside as in 2009 and 2020 however fairly the cyclical rallies within the context of a secular bear market.

Make no mistake; I’ve made a number of cash buying and selling out and in of secular bear market rallies (or “mini-bulls”) and that is precisely the place we had been again within the post-Volcker interval when no person knew a) what a “Federal Reserve Board” was and b) who the chairman was. In my beloved mining sector, there was little motion in commodities from 1982 to 2002 as paper belongings grabbed the baton from the onerous belongings gang and ran with it like Usain Bolt on a mission, and but, the largest wealth-creating offers weren’t linked to the underlying worth of commodities however fairly to the invention of recent sources of gold, silver, copper, nickel, and diamonds all throughout a interval of sustained disinflation and paper asset dominance.

Contemplate this. Because the very early Eighties, the month of August has all the time supplied optimum entry factors for the junior useful resource sector. The outdated maxim held that back-to-school money necessities resembling tuitions would trigger portfolio reductions throughout the illiquid summer season market backdrop, rendering costs decrease.

With that in thoughts, it’s important that each junior I personal right now has not solely ample working capital but additionally a singular narrative pertaining to upside potential. These poor souls unfamiliar with my work (certainly he jests) will roll their eyes and switch the web page however people who have adopted me know that I’m not all the time a table-pounder. I used to be a rabid bull in mid-March 2020 however a really vocal vendor in August of the identical yr so it’s with a measured ferocity that I urge everybody to maneuver to the well-funded, junior builders which have both promising discoveries or increasing assets and BUY them.

Please excuse the comingling of metaphors however when blood is operating and the tide has gone out, the danger of a catastrophic drawdown has not solely diminished, however with sentiment this horrid, that danger is dissipating quickly as we method Labor Day. I do know that it feels just like the summer season solely simply started however there are solely 5 weeks left till September arrives so should you divide your liquid capital into 5 equal elements and commit 20% per week, it’s best to arrive at an acceptable mix of costs by the point this bear decides to hibernate.

Three of the businesses I personal have assays pending however the one which instructions a 46% allocation is Getchell Gold Corp. and this presentation explains why it’s nonetheless buying and selling up and inside earshot of an all-time excessive. The fantastic thing about proudly owning these firms after a market massacre is that they’re “event-driven” and, just like the 1982-2002 interval, will be revalued sharply larger as exploration success materializes.

Initially skilled throughout the inflationary Seventies, Michael Ballanger is a graduate of Saint Louis College the place he earned a Bachelor of Science in finance and a Bachelor of Artwork in advertising and marketing earlier than finishing post-graduate work on the Wharton Faculty of Finance. With greater than 30 years of expertise as a junior mining and exploration specialist, in addition to a stable background in company finance, Ballanger’s adherence to the idea of “Exhausting Property” permits him to focus the follow on choosing alternatives within the international useful resource sector with emphasis on the dear metals exploration and growth sector. Ballanger takes nice pleasure in visiting mineral properties across the globe within the unending hunt for early-stage alternatives.


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Michael Ballanger Disclaimer

This letter makes no assure or guarantee on the accuracy or completeness of the info supplied. Nothing contained herein is meant or shall be deemed to be funding recommendation, implied or in any other case. This letter represents my views and replicates trades that I’m making however nothing greater than that. All the time seek the advice of your registered advisor to help you along with your investments. I settle for no legal responsibility for any loss arising from the usage of the info contained on this letter. Choices and junior mining shares comprise a excessive stage of danger that will outcome within the lack of half or all invested capital and subsequently are appropriate for knowledgeable {and professional} traders and merchants solely. One must be acquainted with the dangers concerned in junior mining and choices buying and selling and we advocate consulting a monetary adviser should you really feel you don’t perceive the dangers concerned.

Disclosures

1) 1) Michael J. Ballanger: I, or members of my instant family or household, personal securities of the next firms talked about on this article: None. I personally am, or members of my instant family or household are, paid by the next firms talked about on this article: None.

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As of the date of this text, officers and/or staff of Streetwise Stories LLC (together with members of their family) personal securities of  Getchell Gold Corp., an organization talked about on this article.

Charts are supplied by the writer.

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