George Soros has joined fellow billionaire investors Stan Druckenmiller and Ray Dalios on investing big in gold. Precious metals expert Michael Ballanger explains what is behind these moves.
This week George Soros once again came out with his very large directional "bets" for the SP 500 and for gold and, needless to say, Mr. Soros is once again shorting the SP and buying gold and gold miners, joining Ray Dalio, Stanley Druckenmiller and Michael Ballanger (just kidding) in a decidedly unpopular stance. Carl Icahn came out in agreement during a CNBC interview this week that left the interviewer near-speechless and groveling in the mud of anti-Wall Street rhetoric.
In the meantime, some of the smartest investors I know are SOOOO bullish on gold that they are buying huge baskets of penny explorers under a nickel because of the leverage contained when the public finally decides to re-allocate to include gold (and mining stocks). A fund manager I know said to me, "Must be the top!" in reference to this, but it really can't be the top after a five-month rally representing the largest recorded quarterly advance in mining shares since recordkeeping began.
Look at the chart above and think what would happen if we were to get a shift from bonds to gold; 49% of global asset allocations reside in bonds while 1% reside in gold. Now, consider these two facts:
1. Since the 2008 financial crisis, governments have issued $57 TRILLION in new, fresh-off-the-press, paper in order to keep the system afloat.
2. Most of the global banking cartel has made a move toward negative interest rates, which means that there is tremendous risk in carrying a 49% allocation to bonds.
Now imagine the impact given that the total dollar value of all above ground gold reserves plus the value of every major gold producer on the planet is a mere fraction of the value of the global bond market. The panic-driven rush to the gold sector seen in the first quarter will pale by comparison if, as and when the larger pension funds decide that maybejust maybea reduction in bond exposure in favor of gold exposure might be considered "prudent."
As far as the indiscriminate inhaling of penny mining issues with little or no regard for quality or valuation, I commented on the TSX Venture Exchange on May 23rd with the TSXV at around 680, and in a few short weeks it has broken to 715 on big volume. Whether or not it is well-advised to buy penny mining issues up nearly 60% in a few months is NOT the issue; it is losing one's position when one has been a buyer all through 2014 and 2015 and is now finally up money and in some cases, HUGE money. You take all of the risk in 2015 and then sell at a breakeven or small profit in 2016? I don't think so. . .
On May 31, I posted a chart with the following comment: "I am tiptoeing back into the world of 'Long Volatility' with a one-fifth position in the UVXY (ProShares Ultra VIX Short-Term Futures) July $10s for $2.40," after which the VIX (Volatility SP 500) cratered for a week, taking the UVXY down from $10.45 to $9.35 and the calls down into the $1.80 range. Today (June 10), the VIX has exploded out of the gate with a 17.3% move to above $17 with the triple-leverage, public-screwing ETF (UVXY) gaining a similar 17% move to over $12.00. I added a few more of these calls on Tuesday at $1.95 and am now sitting on a 40% position and might add more this afternoon. I will be selling 50% at $5.50 and riding the balance to what I think could be $1525 if we get the storm that I see on the horizon.
COT Report
More of the same shenanigans we have been forced to live with since Day One.
There are very large and very ominous storm clouds way off on the horizon and the reason I know they are coming our way is that there is a lot of pacing, panting and scratching going on with strange snarling and growling noises emanating throughout the room. That's always an omen of volatility coming down the road because that type of behavior is consistent with trouble.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
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All charts courtesy of Michael Ballanger
Adam, since you post such an aggressive article on gold and even the cheapest of the miners and UVXY please include this in your next video update. Brexit seems to be the catalyst for UVXY for an extreme rally this week. And gold miners silver an rally (with pull back/retracments) opps for the year and into 2017.
Good article. on the basis of various concerned factors, like Bond proportion, possibility of negative interest rates, comparative lower allocation of funds for Gold, or over weight Equities, some big fat players may having bullish views for Gold, and they may focus on either Gold or Mining stocks however, at this stage, nobody can "Calculation Based" claim about, up to which extend, Big Player's assumptions or judgement is appropriate?
when we check such prediction or probability from Pure Logical Point of view, we can very easily notice that most of such "so called" "Smartest Investors" totally failed to identify past Bull Run, initiated around or between Year 1999 to 2001, not only that but even at that bottom levels, some Central Bankers were busy with their Gold offloading tasks. They also just failed to assumed thereafter free flow Fall of Gold from $ 1925 up to $ 1050, or even predicting any probability thereof
On the other hand, if we admit any such Gold Bull run, mind well, that will not be a sign of strength or value of Gold, but that will be a signal of the weakness of Currencies, Not just will be of Dollar only, but will be uniformly applicable for any or all currencies, so at that future movement, when we will analyse Gold appreciation in terms of appreciated growth numbers, perhaps they may higher, however, against or compare to real Value or intrinsic strength or purchasing power of any concerned currency, we will shocked to find such rise just as a "Number game of "More Dollars or euro or yen with far depreciated or Lower Value" therefor, it is quite early to predict Bullish phase again for Gold or real impact or end outcome of such Bull run, irrespective of numerical terms like "New High" or "Historical High"
Finally, if such big big bull run taken place, being having largest un-official Gold holder, India, as a country itself and Gold Holding people thereof, will be a great beneficiary.