Prepare for a Gold Miner Collapse

Gold mining stocks are imploding. There are three main reasons. One, bad stocks. Nothing can be done for them. Second is they didn't raise enough cash in the prior bull cycle. One of my former favorites, Maritime (MAE) is out of cash as the bear market hits full stride. Third are companies that are finally raising at horrible prices. LIO is an example of this. Both stocks are below March 2020 lows.

Benchmark hasn't been managed as poorly, yet it has also reversed everything.

Some silver and gold stocks:

It looks like a low could be put in, except I believe the bear market is about to kick off. I believe gold and silver stocks will implode. The time for stink bids is now.

Wrecked Miners

Deflation is coming and gold miners will probably be smashed in the first leg of it, unless investors have learned their lessons and accumulate gold in anticipation of an eventual central bank reversal. I'm still holding some of these, and haven't initiated positions in others yet such as AMX and BNCH, both of which are breaking down too after losing support.

SMI has been one of my few winners, but it has pulled back quite a bit, as I expected following that run.

Off the Beaten Path: Based Miners

SMI has already broken out, posting simply as an update. Not an area I'd be chasing.

I still like Maritime Resources. I believe the stock is caught in a "doom loop" where investors are selling because they expect dilution. As the price drops, the dilution becomes larger, more investors sell and so on. I pray they do not fund the mine down at these levels, but instead wait for either strong drill results or a rebound in the gold price. If either of those situations unfold, then it will flip into a virtuous cycle where the value of the mine rises, the stock price rises, the needed dilution falls. I also expect there will be a "goldilocks" window opening for all gold mining stocks, similar to spring 2020, where energy prices are down, labor and material supplies for mine construction will be available and the gold price will be high. Navigating this opportunity will separate many winners from losers.

I'm Technically Flat Now

I have been buying gold mining and energy shares, many listed below. These are small starter positions. Part of the reason for this is segregating my profits from options trading. I'm long energy as a hedge in case I'm wrong about it going down. I think stocks are done going down for a bit and look for IWM to rebound towards $209 per share as one example. The island top in Google is something I will be watching closely though...if that is a signal, it tells me the market might top out by Wednesday. I have short positions on a bunch of bond funds, TLT being the largest. Some of my positions are offsetting and the junior mining stocks are equity, not options. My VAR has collapsed after closing most options today.

Gold Fakeout or Breakdown?

A lot of gold miners are near support or have broken support. Below are a list of stocks that are worth putting on a buy list. I still think there could be one more flush lower when the Federal Reserve announces its taper. As I understand Powell's convoluted language, they will announce that they will later announce a taper, followed by announcing the actual taper date, followed by the start of the taper. Maybe the first two of those will be combined, but I don't expect that. What I do expect is a repeat of the taper tantrum. Last time, rates increase from the tantrum in May 2013 until the start in January 2014. China almost immediately hit a slowdown that would culminate in yuan depreciation and a final bottom for commodities in Januray 2016, led by gold bottom in December 2015. I'm not sure the economy can handle a 2-year slowdown at this time though. The question for a gold investor is whether the Federal Reserve reverses course sooner rather than later. There's still a long way to the bottom if the Fed unleashes another deflationary wave, but how long will it last? Have a buy list ready for whatever assets you would buy in a panic drop or a short, brutal correction similar to October to December drop in 2018.

Commander Down

Commander broke its downtrend, but fell back on Wednesday. Maritime bought back a royalty on the Hammerdown mine for $750,000. Commander now has about 5.5 cents per share in cash and marketable securities. At 11.5 cents as I'm typing this, the rest of its portfolio of assets comes at a valuation of 6 cents, or $3 million fully diluted. I like this as a value play, but a breakout will have to wait.