Its just a matter of time for the PM sector, to reach “normal” valuations, relative to the price of the underlying metals. Even though the SpockM portfolio is up over 200% in 6 months, we are nowhere near “normal” valuations, especially in the smaller cap rocks. Having patience is the key and letting the market do its thing, without worrying about the intra-day volatility.

I have addressed this aspect before. Please do not ask me why XYZ stock has dropped 10% today. Is there something wrong with the company? Most probably nothing has materially changed. Its human psychology in action. Fear, as the crowd is puking. This is normal and comes with the turf. If everything was going up everyday in a straight line, I would be most concerned! As that is not normal.

In a world where everything is instantaneous and folks expect results “now”, not tomorrow, we have the edge, by being focused on the big picture and the ultimate prize. We invest extra-day and can see the forest, whilst the crowd is looking at the grass, day trading and stressed out, focusing on every word from the financial media, every move by the crowd, like a rabbit in the headlights.

For example, here is big picture stuff. This is the producer price index (PPI), or a measure of “inflation” in China. China is enroute to turn PPI positive by the end of this year.

‘Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair’ – Sam Ewing


About Spock

Passive aggressive market trader and mining analyst, with 30 plus years experience in the global markets, across all sectors, with a focus on mining and precious metals resource stocks.


Inflation — 35 Comments

  1. Hi Spock,

    Are you any worried about the alarming COT report on silver.It seems as the COT reports for silver have moved into dangereous terrotory. Your response would be appreciated. Novy

    • Novy, you have not been paying attention to what Spock has said, forget reading about this and that and the COT reports, as the market is going to do whatever its going to do.
      So in the meantime sit tight and be right and I believe he will do his best to alert us as and when necessary as he has done up to now.
      If you really want to know what the tea leaves might suggest, get yourself a subscription to Rambos Chartology like myself, which will assist you far more than anything you read.

    • gives the crowd another “reason” to go short PM stocks or stay out of the sector. more blue lights for us.

      the crowd are oblivious. PM stocks relative to the metals are coming out of a 20 year brutal bear market. 20 years with valuations dropping +95% in many cases. think about it.

      metals COTs are just a distraction from the main game.

  2. the crowd has been convinced by the central bankers to think deflation is here to stay. interest rates to stay low for longer. well guess what. its going to flip, with or without them. the implications are profound.

    gold is smelling it, well in advance.

  3. Interesting China chart Spock. Do u have a formula that determines valuation based on metal price ranges, and, that includes shares outstanding and market cap factored in?

    Seems many promoters are basing valuation based on how far we have come compared to the 08-11 run. TIA.

  4. For Japan, deflation is probably there to stay. Demographically and technologically, it’s locked in. The BOJ and government are probably trying to fix what isn’t broken, though. Japan is a “red dwarf” star. It can burn quietly and steadily for a long time and keep its planets cozy just like some of the smaller, advanced European economies. Trying to throw more monetary mass onto the surface to generate inflation and the aura of illusive growth only risks turning a stable star into a debt supernova. At some point, they’ll realize they’re pissing into the wind and learn to love mild deflation. They’d better do it soon, though. I can’t imagine a 200-1 yen/dollar is what they really want.

  5. BRIEF-Anfield Gold Corp announces start of drilling at Coringa
    Aug 15 (Reuters) – Anfield Gold Corp Says Drilling Program
    Will Involve 7 Core And 3 Reverse
    * Anfield gold corp. Announces start of drilling at coringa
    * Anfield gold corp says beginning of a 20,000 meter infill
    drilling program on its 100% owned coringa gold project in para
    state, brazil
    * Circulation drills and is anticipated to last 3 months

  6. Homer on ‘Mast Strapping’…
    “‘So far so good,’ said she, when I had ended my story, ‘and now pay attention to what I am about to tell you – heaven itself, indeed, will recall it to your recollection. First you will come to the Sirens who enchant all who come near them. If any one unwarily draws in too close and hears the singing of the Sirens, his wife and children will never welcome him home again, for they sit in a green field and warble him to death with the sweetness of their song. There is a great heap of dead men’s bones lying all around, with the flesh still rotting off them. Therefore pass these Sirens by, and stop your men’s ears with wax that none of them may hear; but if you like you can listen yourself, for you may get the men to bind you as you stand upright on a cross-piece half way up the mast, and they must lash the rope’s ends to the mast itself, that you may have the pleasure of listening. If you beg and pray the men to unloose you, then they must bind you faster.”
    The Odyssey, Book XII

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