Last week provided a glimpse into the future of the stock market. Only a glimpse. It is going to get a whole lot worse.
On January 1, I said in an article I titled Beware the Stock Market, "As the Everything Bubble pops, the financial system will destroy most investors because they are unprepared." Lest my readers misconstrue what I meant, I followed that up with another article on January 27 where I repeated, "Now would be a great time to be prepared for a disaster bigger than any in history."
The two biggest measures of metals stocks would be the XAU and HUI. Both peaked on the 24th of February and began to tumble. I wrote another piece a couple of days later and said, "The Greatest Depression is going to have negative effects on everyone. No one will escape entirely no matter how well prepared you are."
When the metals shares fell out of bed I got fifty emails essentially asking why I hadn't warned my readers.
Sigh!!
One of the smartest people I follow thinks the stock market is going to drop by 50%. I like David Collum a lot but this time he's dead wrong. Another very bright financial investor named John Hussman believes not only that the Fed is powerless, he says the stock market is going to collapse by 67%. Both predictions are interesting but basically absurd.
Those guys are way too optimistic.
The Dow topped on September 3rd, 1929, at 381.17 before starting to tumble. The decline continued until July 8, 1932, when the Dow measured at 41.22. That's in excess of an 89% decline. On January 21st, 1980 silver touched $50.25 an ounce on the Comex. By early February of 1993 the price of the metal touched $3.53, a fall of 93% in thirteen years.
Do I believe the stock market will drop by 50% or 67%?
Yes.
On the way down to the bottom that will be far lower.
Readers should remember back to 2008 when gold was up $100 one day after being down $150 the day before. These are the most dangerous markets I have ever seen and most investors are going to screw it up by listening to the people who tell them what they want to hear.
I've written two books and hundreds of articles about what I see in progress. And I'll say I get it right a lot more often than I get it wrong. If you haven't spent the $12 or so each costs, you are being penny-wise and pound-foolish. Would you spend a few cents to make dollars?
They are great books filled with important advice. We are in totally uncharted waters. The Fed is clueless. Their chance of fixing the problem is zero; they caused the greatest bubble in world history. The Chinese just nuked the Everything Bubble and if you believe it's because of the coronavirus, you are missing what is right in front of you.
In the best case, a bad flu season might last 4-6 months into the summer when they usually die off naturally. If we are exceptionally lucky, this virus will do the same. That's a giant IF. While it continues, the Just in Time manufacturing just stopped for the 4-6 months minimum to get over the virus. Everything in China just stopped. We in the West are but a month behind China. Auto manufacturing is stopping. The cruise industry just died. Airline crews are refusing to fly. Shortages of medicines using 90% of their ingredients from China are happening already. The world's economy is dying.
China is going to lose more people to starvation than to the virus and the world's economy just came to a screeching halt. I don't know how many other people than me see that so far. They will in another month or so.
There are some safe havens. Or relatively safe havens.
While so far the baby has been tossed out with the bathwater as margin clerks sharpened their quills, mining and resource stocks will lead the way out at the end of the carnage. The safest now and most resilient will be the producers.
I wrote of a young company that picked up two gold mines from B2 in November. That would be Calibre Mining Corp. (CXB:TSX.V; CXBMF:OTC.MKTS). Read what I wrote then. It was a brilliant move on the part of B2 to hand the mines over and it was brilliant of Calibre to pick them up.
But Calibre just announced another giant step forward. It's no secret that the majors have been consuming their young and each year have less in reserve. And it's not secret that they have stopped exploration almost entirely.
Well, Rio Tinto sees the potential in Nicaragua as well as in Calibre. On the 24th of February the two announced a partnership in the country to the benefit of both. Rio entered into a deal with Calibre where Rio will invest as much as $45 million to partner with Calibre in their Borosi gold project in the Northeast of Nicaragua. The venture will also include a strategic exploration alliance where the two companies will work together to identify and acquire concessions in the country.
I see this as the near term future for mining. Newmont is doing something similar with Irving in Japan. Barrick is partnering with Japan Gold as well.
The investing horizon is the most dangerous I have seen in my lifetime. Banks are at risk; the entire financial structure may well come tumbling down. Resources are a form of safe haven but investors must learn to buy cheap and sell dear. The prices of rhodium and palladium went supernova in the past month as gold open interest blew past all the records yet most investors refused to take profits while they could. I can write all the good advice in the world, if investors have no sense, they will have no cents.
Gold production stories offer safe haven and Calibre has both excellent management and projects. I bought shares in the private placement (the one with zero warrants) and they are an advertiser. Please take responsibility for your own investment decisions, it's your money, after all.
Calibre Mining Corp.
CXB-T $0.83 (Feb 28, 2020)
CXBMF-OTCBB 310.3 million shares
Calibre Mining website.
Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Calibre Mining and Irving Resources. My company has a financial relationship with the following companies mentioned in this article: Calibre Mining and Irving Resources are advertisers on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
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