I don't mind doing this kind of post, as long as it's only occasionally. It's a bit too self-centred to do this all the time even for my egomaniac world.So today A. Reader wrote on the subject of this post about that Jim Willie guy and his (lack of) forecasting ability. After a couple of rounds, the conversation had moved on a little and the question came up as to whether we were experiencing a secular or cyclical bear market in junior mining companies. Underneath is what I wrote as my dos centavos' worth on the subject, and I'd like to share it here (just brushed the spelling up a bit and added a word here and there to help comprehension). Hopefully some others will feel like chiming in and opinionating, too. Comments welcome either below the post here or to my mailbox, otto.rock1(AT)gmail(DOT)com
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Cyclical or secular, inflation or deflation, bulls or bears, mayo or ketchup?
Although I have an issue with Don Coxe's immediate commentaries, his long term macro worldview is unbeatable. This junior bear market only a cyclical in timescale terms, as the underlying bull market for the end product, those shiny metals, is still absolutely intact.
Bull market demand and bear market pricings...that's where we are now. Obvious stock bear, obvious metal bull. So as Coxe has rightly pointed out in previous newsletters*, this is the lull period when the US banks sort their shit out and some fail and some survive. But there ain't no end of the world happening while China grows 9% per annum and RIO and BHP can ask for and get 13% more for their iron pellet.
As Ernest Borgnine said in The Longest Day "they teach you to fight, they teach you to kill, but they don't teach you how to wait."** In the longview, it's obvious that the 11.3Bn lb Cu at Los Azules Argentina will not stay in the ground much longer. Cañariaco, Magistral, Marcona Mirador...you pick your fave and add a few of your own to the list...you know the score, man. Supply lag will force these things into production eventually. We....just....wait.
I'm reminded of the classic bear market caller's attitude (once again). Nouriel Roubini was calling the housing bear from early 2005 onwards and non-stop, but it only started to unwind in early 2007 and then the real caca only started to hit the ventilador late '07. Roubini was right, but a visionary bear will ALWAYS call too early. The mindset is "I know it's going to happen, I just can't see why you guys around me can't see it too." The best intellects see the furthest, but the best intellects also lack good old plain-spun common sense and can't see they have to wait for "the herd" to catch up with them.
So...we....just...wait. We don't moan and groan and shake our fists at the world Jim Willie-like. We just wait.
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*Basic Points, The Music of the Metal Market, published Feb 19th 2008, probably the best Don Coxe monthly ever and available on request from Otto.
**Probably a false quote and source, but I'm sticking with it anyway