Masochism and the Average Gold Investor


Sector skilled Michael Ballanger discusses generational attitudes towards investing and the way they’re affecting the dear metals markets.

Masochism: “gratified by ache, degradation, deprivation, and many others., inflicted on oneself both by one’s personal actions or the actions of others.”

On Friday afternoon, I accomplished my weekly missive, which was composed of an in depth evaluation of simply how magnificently Barrick Gold Corp. (GOLD:US) had been utilized by the interventionalists to control the ARCA NYSE Gold Bugs Index (HUI:US), all the large ETFs (GDX, GDXJ, NUGT, JNUG) and finally, the costs for gold and silver. Then immediately, with little warning, I had an epiphany. Not solely was the 9 hours of labor an entire and complete waste of time, it immediately occurred to me forty-year profession spent nurturing a perception system anchored within the bygone days of Bretton Woods would possibly simply have been an train in redundancy and cognitive dissonance.

As if pushed to disclose a hidden secret for all of the world to see, I’ve carried an unalterable obsession with the notion that sound cash rules would, in the long run, return to prominence and actually turn into critically entrenched within the practices of governments world wide with gold and, to a lesser diploma, silver performing as key elements of a fiscal and financial renaissance. Alas, because the Child Increase era fades away into previous age and irrelevancy, it’s directly each unhappy and apparent that the brand new wave of Gen-Xers and Millennials and Echoboomers have decided that there’s little or no validity to the idea of sound cash and have subsequently rendered gold and silver, as financial and financial canaries within the Fashionable Financial Principle coal mine, as irrelevant and from an funding standpoint, ineffective.

I’ve on common about 200 conversations per week with traders from all around the spectrum by way of age, wealth, nationality and pursuits. I usually make notes of the discussions, a fallback to my days as a monetary advisor, lengthy earlier than electronic mail changed notes because the proof-bearer of motion and intent. What I discovered astounding is that each one discussions pertaining to hashish, social media, expertise, or the longer term route of the S&P500 lasted larger than fifteen minutes. Metals and mining conversations, together with gold and silver, tended to be lower than seven minutes and chats associated to junior mining and exploration had been lower than three minutes with many cases of “topic modified” or “I gotta go.”

Now, as a fervent addict to the fun of recent mineral discoveries (“There ain’t no fever like gold fever!”), I’ve not too long ago begun to really feel just like the heroin addict looking by life for that rush of euphoria that arrived way back with that first hypodermic injection however the actuality is that the brand new era of traders discovered their hypodermic adrenalin within the type of expertise shares, then crypto, and eventually and extra not too long ago, weed.

My good friend James West was a gold and mining publication author again in 2010 with the primary promotional piece for Tinka Sources Ltd. however has since developed into the foremost authority on hashish and is having fun with a thriving if not booming profession renaissance (and it could not occur to a nicer man). The remaining advocates for funding in valuable metals and the associated mining and exploration shares are in impact residing a life “gratified by ache, degradation, deprivation, and many others., inflicted on oneself both by one’s personal actions or the actions of others.” In different phrases, they’re training a type of masochism.

Take the final two corporations that I’ve referenced on this missive, Getchell Gold Corp. (GTCH:CSE) and Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX). GTCH is presently elevating cash and whereas it’s going surprisingly effectively, it has not been a simple elevate, what with the dismal motion in steel costs since mid-February. WUC, nevertheless, started its US$2 million elevate three weeks in the past and Tuesday introduced that it was considerably oversubscribed and actually got here in just below the total exercising of the 50% over-allotment possibility. This was a terrific improvement for the corporate however what shocked me vastly was the investor response to uranium and vanadium that was so diametrically totally different than the response to exploration for gold and silver in essentially the most prolific valuable metals surroundings in North America. The typical investor “will get it” while you discuss in regards to the uranium (and vanadium) outlook however they stare at you with glazed-over eyes while you attempt to describe how Barrick Gold went from $1.80 to $three,300 per share from its actions in Nevada within the 1982–2010 interval.

Right here is one more instance of life within the remoted world of sound cash advocacy. I used to be not too long ago launched to a personal start-up firm (that shall stay anonymous, a minimum of for now) and suffice it to say, the perfect description is that it’s a kind of “Fb for Hashish customers.” I had the pleasure of assembly over lunch with the 30-year-old Millennial feminine, exceedingly effectively skilled and really effectively spoken, with a Grasp Grower’s License and an MBA from the Ivey Faculty, a few weeks in the past after which I used to be requested to supply consulting recommendation within the space of capital markets associated to financing. She requested me if I might help the corporate to find a couple of traders to take part in its seed spherical and whereas I will not point out the quantity, I proceeded to name an accountant good friend that makes use of me for suggestions on mining investments. This very profitable fellow has over the previous ten years had his fingers in main actual property offers and crypto offers but in addition within the early-stage hashish offers equivalent to Cover, so with that information, I made a decision to ask him to evaluate this new non-mining enterprise as extra of an “acid check” than the rest.

I described the deal as greatest I might, which was completely lame given my complete ignorance of something associated to social media or weed. His reply after maybe three minutes on the cellphone was “How a lot as you making an attempt to boost once more?” and after I instructed him (it was north of six figures), he stated “I will take all of it,” at which I choked on the cellphone and I stated would get again to him shortly. I then proceeded to name a really profitable realtor I do know and I acquired exactly the identical outcome. “I will take all of it. Ship me the varieties.” I then proceeded to make seven extra calls and acquired seven extra “I will take all of it.” responses. The purpose right here is that I might work for a month to arrange the perfect mining deal on the earth and it could take one other month or two to finance it however whether it is something associated to the Millennial guidelines of “appropriate investments” (which embody social media, hashish, synthetic intelligence and blockchain) 4 cellphone calls and it’s finished. Now, the contrarians would inform me that it’s a signal of a “traditional prime” however the actuality is that for the previous decade, traders have been rewarded by shopping for extra of “what’s working” and promoting “what is not.” Pot offers have been working however extra importantly, mining offers, by and huge, haven’t.

So, after I use the time period “masochism” to explain the behavioral quirks of the common gold investor, the time period “glutton for punishment” comes leaping into the forefront. To be continually looking for that drill gap within the sky or the last word ascendancy of gold to $10,00zero per ounce as all politicians, regulators and bankers disappear right into a vaporous gap of failure and shame is just not solely unwise, it verges on Einstein’s description of insanity: repeating the identical habits time and again for a similar unfavourable end result.

Through the years, I’ve been requested lots of if not hundreds of occasions “What would take gold to $10,00zero per ounce?” and I all the time reply with the identical conclusion: “When the usNimitz pulls into Gibraltar for a re-fit they usually refuse the bank card.” The American Empire dominates the world; the American “dream” is power fed across the globe; and the American financial experiment has been duplicated by central banks all over the place to the extent that the Financial institution of Japan will quickly personal over 50% of the Nikkei and the Swiss Nationwide Financial institution owns $87.5 billion price of U.S. shares purchased with cash it printed out of skinny air. Again within the days earlier than the web, the mere considered a central financial institution dabbling in shares evoked shrieks of horror; shares had been for gamblers and bonds and payments had been for critical, prudent traders. Again within the day, counterfeiting was thought of a criminal offense and neither residents OR central banks had been allowed to do it. How occasions have modified…

Whereas the common American sees little profit to proudly owning gold, home costs in Australia, Turkey, Russia and India have not too long ago approached or surpassed their one-year highs. Solely the U.S. and China (pegged the USD) have stayed at or close to the degrees of 2011. From the quite a few charts posted under, it clearly demonstrates gold’s utility as a protector of buying energy, significantly in international locations equivalent to Turkey which have skilled sever foreign money crises. The purpose right here is that gold really has fulfilled its function as a secure haven in all international locations throughout the globe besides two: the U.S. and China. The U.S. vigorously defends its foreign money versus gold and China has a USD peg on the yuan and but, the 2 international locations are diametrically reverse of their actions. China has been a voracious purchaser of gold and vendor of U.S. treasuries whereas the U.S. has finished the alternative.

Canada gold value

Australia gold value

Russia gold value

Turkey gold value

India gold value

China gold value

U.S. gold value

The identify of my publication was modified final yr from “Gold and Gold Miners” to GGM Advisory for one quite simple cause: relevancy. If actuarial tables conclude that the Child Increase inhabitants is a quickly shrinking demographic, if research of funding demand affirm that the brand new generations of traders are decidedly ambivalent (if not hostile) to gold and silver funding, and if regulators and alternate officers proceed to condone and certainly endorse continued value suppression, then ready for the usNimitz to turn into a disabled, unpowered relic resulting in a moon rocket in metals and miners might turn into a really, very lengthy train. Most of us which might be in or are approaching retirement do not have the luxurious of time on our sides to await the arrival of that one singular occasion that justifies twenty or thirty years of holding on to the dear metals whereas the S&P 500, the NASDAQ, cryptocurrencies and weed make millionaires out of 30-something messiahs too younger to recollect the bursting of the dotcom bubble and in some circumstances, the 2008 subprime meltdown.

Since 2009, we’ve had quite a few occasions that ought to have been the second the place gold and silver emerged because the “Go-To” asset class with the newest being final Christmas Eve when the S&P closed in bear market territory whereas gold was screaming increased. With the flick of a change, Treasury Secretary Smilin’ Stevie Mnuchin stepped up and known as upon the Working Group on Capital Markets to place a cease to the crash in shares and since February 20th, each gold rally has been stomped out with intervention after intervention whereas each dip within the NASDAQ has been magically supported.

It’s the identical narrative whether or not 2001 or 2008 or 2018: rigging inventory markets are basically this decade’s model of Roosevelt’s “New Deal” again within the 1930s. As a substitute of constructing roads and dams, the policy-makers at present construct nothing besides ethical hazard and a era of the “Entitled.” It’s a harmful precedent and one which can not final however the issue for us is that’s HAS lasted an excellent deal longer than we’d ever have imagined and there’s nothing near-term to recommend that the Nice American Ponzi Scheme can not proceed.

All proper, now that I’ve concluded my rant on the insanity being inflicted upon us, I’ve a few observations to make about gold. Earlier final week, I used to be taking a look at GLD questioning whether or not my GLD Could $124 places would possibly hit $5.00 earlier than the top of the week after which it occurred to me that my “Line within the Sand” on the prior lows of $1,282 and the next “breakDOWN” was no totally different in its blatancy than the “breakOUT” in Barrick. So, I pulled up the GLD chart and lo and behold, whereas the sub-30 stage for RSI sported two tremendous shopping for alternatives in 2018, it has not been a lot underneath 35 in all of 2019 so far.

Now, however that the inventory markets are getting considerably stretched, I’ve to respect two issues: 1) the dotted purple line within the RSI window within the chart under and a couple of) that solely within the perverse world of valuable metals are technical “breakdowns” to be BOUGHT whereas technical “breakouts to be SOLD. Subsequently, I’ve coated all of my shorts in each gold and the mining shares and initiated 50% lengthy positions in JNUG, NUGT and the GLD June $120 calls. The chart under just about says all that’s wanted: we’re at an inflection level that represented tradeable bottoms in mid-November and early March.

As a remaining remark (which may be seen as a “confession” of kinds), I take advantage of my very own habits as a market barometer and with the good thing about time and age, I all the time return and re-read my missives as a result of they offer me a way of perspective on markets in the identical approach Anne Frank’s diary supplied perspective of a distinct time and place. Each diaries are extraordinarily private however each give the reader a beautiful window into the mindset of an period.

My entries from the week of October 19, 1987, revealed a comparatively younger monetary advisor (34) dealing with the entire destruction of shopper belongings, and to return and re-visit the feelings contained within the phrases and syntax remains to be to today painful. Anybody studying the diary of a younger lady making an attempt to keep away from extermination is emotionally impacted far larger than by the musings of a burdened stockbroker however each messages enable reflection. I carry the utmost of conviction that sound cash rules will prevail and I promise that I will not go right into a seventeen-paragraph repetitive blather as to “WHY?” but when individuals are going to take heed to what I’ve to say, I’ve to supply “actionable concepts” that carry logic, pleasure, and weight.

My dad died in 2013 on the ripe previous age of 89 and one of many issues he drilled into me was that one of many issues he realized as a WWII navigator within the RCAF was that many occasions, individuals are likely to “assume an excessive amount of” versus merely “reacting. For instance, as a 15 year-old hockey-playing “sniper” (goal-scorer), I used to be going by a very painful droop the place every part I fired on the web was getting blocked, saved, or veering extensive. On the drive residence from the venerable St. Michael’s Area, after hitting 4 aim posts and increasing the dry spell to 6 video games, I lastly requested my dad (who by no means performed the sport besides shinny on Grenadier Pond) what I used to be doing flawed, to which he responded “You are considering an excessive amount of—simply hearth the biscuit.” The subsequent sport, on my first possession, I did not even take a look at the online or the aim—I simply ripped it from exterior the blue line and, as if it had eyes, it pinged in off the far proper put up and into the aim.

As merchants and traders, all of us are likely to “assume an excessive amount of” so after I launch one in every of my invectives upon all of you, attempt to do not forget that within the large image, 5,00zero years of fiscal historical past would validate the logic of proudly owning gold however inside that window, quite a few generations have perished in poverty whereas bequeathing tonnes of it to their heirs, who offered it, purchased (and smoked) hashish, traded Bitcoin, and lived fortunately ever after.

Meals for thought…

Initially skilled throughout the inflationary 1970s, 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 Belongings” permits him to focus the follow on deciding on alternatives within the international useful resource sector with emphasis on the dear metals exploration and improvement sector. Ballanger takes nice pleasure in visiting mineral properties across the globe within the endless hunt for early-stage alternatives.


1) Michael J. Ballanger: I, or members of my quick family or household, personal securities of the next corporations talked about on this article: Getchell Gold Corp. and Western Uranium & Vanadium Corp. My firm has a monetary relationship with the next corporations referred to on this article: Getchell Gold Corp. and Western Uranium & Vanadium Corp. I decided which corporations could be included on this article based mostly on my analysis and understanding of the sector. Extra disclosures are under.
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Charts courtesy of Michael Ballanger.

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. At all times 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 threat that will outcome within the lack of half or all invested capital and subsequently are appropriate for skilled traders and merchants solely. One must be aware of the dangers concerned in junior mining and choices buying and selling and we suggest consulting a monetary adviser if you happen to really feel you don’t perceive the dangers concerned.

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