Excellent essay. For those of us who have invested in miners, however, the PMs are a mystery. Miners today are as hated as they have ever been. Share prices of many of these companies are at multiyear lows; in some cases as low as they were during the great gold bear market of 2015 - 2016. This is beyond curious. The law of supply and demand would suggest just the opposite. It makes no sense that the market value of the products should increase while the value of the producers should spiral downward. Some analysts have speculated that this disconnect is due to inflation of miner input costs, such as diesel and labor. But I would suggest that the price of gold (but perhaps not of silver) has more than kept up with inflation, obviating such analysis. Miner cash flow is good, and miners seem to be prudent with their debt, which has not always been the case. So, what is the problem - and how long can this condition last?
We might speculate that one or more of the following factors are at work to depress the mining industry. After 15 years of Fed QE, PM miners have become embedded in investors and traders minds as the epitome of 'Anti-Tech'. Mining (next to agriculture) is probably the most traditional of all industries. It's dangerous, dirty, difficult, politically incorrect, susceptible to nationalization, and its profits are a long-term play at best. Totally the opposite of the financialized, globalized, hot money-driven, 'clean' Tech industries that are the darlings of Wall Street, touted by governments and whisper promises of endless future benefits for mankind (not to mention shareholders) - at least as long as interest rate repression and government subsidies keep on rolling. Thus, the condition of Tech 'up', almost inevitably means PM mining 'down'. And even if Tech should suddenly fall, as will be inevitable, there will be a lag before the investing/trading community begins to lose faith in the ability of the Fed-driven QE engine to reignite Tech. It will also take time for decades of anti-mining sentiment to dissipate. Perhaps if the price of PMs continue to rise despite the best efforts of bullion banks, COMEX and Western governments to derail this trend, the increasing margins of the miners might ultimately prove so attractive to the investing community as to overcome anti-tech lethargy/sentiment. We can only hope, but I submit to you that we have no idea when this might occur. A depressed mining industry will only help drive up the price of the PMs. I do worry, however, that PM-savvy BRICS governments may be cheer-leading Western government efforts to degrade sentiment and over-regulate Western miners while doing just the opposite for their own extraction industries. Thus, when the day arrives that gold and silver are generally and eagerly sourced by the Western public, BRICS governments may be sitting in the catbird seat, while Western miners demonstrably suffer from decades of under-investment and neglect.
I have to admit that I’ve been speculating by holding and adding to Bitcoin miners for the last two+ years. The volatility is head spinning, but I’m hoping to get out with large gains and plow it all into physical PMs before the shit hits the fan. I learned of FSM & AG from Rafi Farber and have been doing the same holding and accumulating them. Timing is the always the fly in the ointment.
I confess that I am very leery of Bitcoin; mostly due to the fact that I've had a 30 year (final) career in Tech and have learned the ephemeral nature of the business. Technical innovations are routinely supplanted by new or improved technology every few years. This is particularly true of anything based in software, like Bitcoin. It you made money speculating in it, that's great! But be very careful. Encryption technology may evolve threats to the system. Bitcoin miner ownership is completely unknown, and it could be that the miners are owned by one or more whales operating as a cartel (e.g. owning > 50% stake in the system, and thus being a threat to system integrity). Finally, governments have generally ignored Bitcoin up to now, but if the dollar-based value of the Bitcoin ecosystem grows to become a competitive threat to sovereign control over currency, governments could act either individually or in concert (e.g. in an international convention) to regulate or tax Bitcoin out of existence. I feel very sorry for the poor folks who have, as a group, invested materially and psychologically in Bitcoin as an alternative currency. The wise ones are hoping to make some coin and get out, but the others that are hoping that they have invested in an anonymous, sound money substitute for the dollar are likely to be sorely disappointed. If only that latter group had invested in gold and silver with the same fervor.
Excellent essay. For those of us who have invested in miners, however, the PMs are a mystery. Miners today are as hated as they have ever been. Share prices of many of these companies are at multiyear lows; in some cases as low as they were during the great gold bear market of 2015 - 2016. This is beyond curious. The law of supply and demand would suggest just the opposite. It makes no sense that the market value of the products should increase while the value of the producers should spiral downward. Some analysts have speculated that this disconnect is due to inflation of miner input costs, such as diesel and labor. But I would suggest that the price of gold (but perhaps not of silver) has more than kept up with inflation, obviating such analysis. Miner cash flow is good, and miners seem to be prudent with their debt, which has not always been the case. So, what is the problem - and how long can this condition last?
We might speculate that one or more of the following factors are at work to depress the mining industry. After 15 years of Fed QE, PM miners have become embedded in investors and traders minds as the epitome of 'Anti-Tech'. Mining (next to agriculture) is probably the most traditional of all industries. It's dangerous, dirty, difficult, politically incorrect, susceptible to nationalization, and its profits are a long-term play at best. Totally the opposite of the financialized, globalized, hot money-driven, 'clean' Tech industries that are the darlings of Wall Street, touted by governments and whisper promises of endless future benefits for mankind (not to mention shareholders) - at least as long as interest rate repression and government subsidies keep on rolling. Thus, the condition of Tech 'up', almost inevitably means PM mining 'down'. And even if Tech should suddenly fall, as will be inevitable, there will be a lag before the investing/trading community begins to lose faith in the ability of the Fed-driven QE engine to reignite Tech. It will also take time for decades of anti-mining sentiment to dissipate. Perhaps if the price of PMs continue to rise despite the best efforts of bullion banks, COMEX and Western governments to derail this trend, the increasing margins of the miners might ultimately prove so attractive to the investing community as to overcome anti-tech lethargy/sentiment. We can only hope, but I submit to you that we have no idea when this might occur. A depressed mining industry will only help drive up the price of the PMs. I do worry, however, that PM-savvy BRICS governments may be cheer-leading Western government efforts to degrade sentiment and over-regulate Western miners while doing just the opposite for their own extraction industries. Thus, when the day arrives that gold and silver are generally and eagerly sourced by the Western public, BRICS governments may be sitting in the catbird seat, while Western miners demonstrably suffer from decades of under-investment and neglect.
I have to admit that I’ve been speculating by holding and adding to Bitcoin miners for the last two+ years. The volatility is head spinning, but I’m hoping to get out with large gains and plow it all into physical PMs before the shit hits the fan. I learned of FSM & AG from Rafi Farber and have been doing the same holding and accumulating them. Timing is the always the fly in the ointment.
I confess that I am very leery of Bitcoin; mostly due to the fact that I've had a 30 year (final) career in Tech and have learned the ephemeral nature of the business. Technical innovations are routinely supplanted by new or improved technology every few years. This is particularly true of anything based in software, like Bitcoin. It you made money speculating in it, that's great! But be very careful. Encryption technology may evolve threats to the system. Bitcoin miner ownership is completely unknown, and it could be that the miners are owned by one or more whales operating as a cartel (e.g. owning > 50% stake in the system, and thus being a threat to system integrity). Finally, governments have generally ignored Bitcoin up to now, but if the dollar-based value of the Bitcoin ecosystem grows to become a competitive threat to sovereign control over currency, governments could act either individually or in concert (e.g. in an international convention) to regulate or tax Bitcoin out of existence. I feel very sorry for the poor folks who have, as a group, invested materially and psychologically in Bitcoin as an alternative currency. The wise ones are hoping to make some coin and get out, but the others that are hoping that they have invested in an anonymous, sound money substitute for the dollar are likely to be sorely disappointed. If only that latter group had invested in gold and silver with the same fervor.