Re: Stocks Underperforming -
in response to
by
posted on
Mar 02, 2008 09:59AM
NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)
The economic analysis on the forum has been poor. I think this has to do with a preponderance of people who are bullish on the global economy. Thus, there is a starry-eyed belief that base metals are going to go up for the foreseeable future.
The only thing I am bullish on after 2010 is precious metals and here's why.
The US economy is crashing. It will slowly implode over the next few years, and it will not come back. Let met list a few issues we face in the US:
US Federal Debt is over $9 trillion and increasing more than $1 billion per day. This is being financed by foreigners and is reaching a breaking point. This is why the dollar is crumbling. Bankruptcy by the US is not out of the question. Consider this, the US has to raise approximately $100 billion every quarter using auctions. If one auction fails, the US will default on its debt.
The near insolvency of the major financial institutions. Their exposure is close to a $1 trillion in losses that will have to be written off. This is already seizing up credit and creating a liquidity crisis.
The housing crisis is at epidemic levels and is not close to being over. Foreclosures are running at 150,000 per month and the median price still needs to drop 40% to get back to the historical mean. As housing prices drop, this creates more problems as millions of people are left with negative equity. Already people (who can afford their mortgage) are walking instead of holding negative equity.
The housing crisis is slowly choking consumer spending. This started in December/January and will intensify. This will lead to mass layoffs and a big jump in the unemployment rate. The US is screwed. Once unemployment rises there will be no industry to drive growth. To make matters worse (and this is probably the worst issue we face), local, county and state governments are going to begin layoffs because of deficits. If you want a perfect storm, you couldn’t write it any better than what we face.
If those issues weren't big enough, peak oil is the killer. My forecast is for peak oil to be 88mbd (million barrels per day). Thus, it will be this year. This is the last year (in my opinion) that oil is affordable in the US. Next year, many commuters won't be able to afford to drive to work. Why? Because gas will be $4.50 per gallon. We commute on average 23 minutes to work. No one uses mass transit and everyone drives alone.
The energy crisis hits next year and then it just gets worse. This crisis will hit right when the US is experiencing the worst economic crisis since the depression.
Now, this is why junior gold stocks are underperforming. There is a nervousness that a) they will have trouble get financing, and b) the economy may not support demand in the long term.
The HUI has been zooming. Thus, large caps have been doing well. It is only the juniors that are in the dumper. However, I am optimistic that once gold and silver reach new highs that the juniors will zoom. As for nickel, I just hope Noront explodes before 2010. I think it will.
Newager