A Miner Case of Depression

Avert your eyes, if necessary. This is not for the faint of heart.

I figured that today would be a good day to check in on some of our favorite miners again. 2012 was a rough year for many of the companies in the sector and the charts below tell the tale. A couple of items to note:

  • I've used 2-year charts because so much of the fun in the metals began two years ago and 5-year charts contain all the shenanigans of 2008, which simply distorts total returns.
  • Note that, for most equities, a major disconnect occurred at the silver price peak of May 2011.
  • I compared the GLD and the SLV to the S&P.
  • For the miners, though, I compared them to either the GLD or the SLV, in order to gauge performance relative to the actual metal. Not that GLD or SLV are actual metal, mind you. The simply serve as a proxy for price on these charts.
  • The candlesticks are the shares themselves. The lines are the comparisons, either S&P, GLD or SLV.
  • I chose these stocks because we've mentioned/followed them before here at TFMR. Feel free to post your own charts in the comments if you feel I've left out a few.

Let's start with GLD and SLV. Since 1/1/11, gold is slightly ahead of the S&P but silver is slightly behind.

The old question is: Do you want the good news first or the bad news? In this case, do you want to see the winners first or the losers? Hmmm...I don't know. Let's start with the losers...those stocks that, for the past two years, have horribly underperformed versus physical metal. First, here's the HUI (Amex Gold Bugs Index). As you can see, the index tracked physical pretty closely through the first four months of 2011 and then it went straight to hell in a handbasket.

And look at these nasty, little devils. MrT pities the fool that be stuck owning these.

Perhaps you thought it would be "safe" to "diversify" into an ETF like the "GDXJ"? Nope.

Or maybe a nice, open-ended fund (so that your advisor cold make a commission - hey, he's gotta eat, too.) Uhhh...not so much.

So, are there any stocks that are, at least, tracking along with physical? Well, there's CDE. Sometimes it beats SLV, sometimes it doesn't but, in the end, it's been hanging in there.

And Silver Wheaton has been tracking silver pretty closely, about as you would expect.

And Randgold is fun. It tends to outperform bullion when price is rising and underperform when price is falling. For equity options players, this is a good one to follow and trade.

So that's all the bad news. How about the good news? I found two actual winners!! Two stocks that have actually outperformed physical metal over the past two years. One junior gold miner and one junior silver. Remember, though, that past performance is definitely not a predictor of future returns. Caution is always warranted.

So, what's the point of all this? Why even jack around with these damn things? Just buy physical metal, take delivery and forget about it. And don't tell me about your IRA. There are plenty of companies out there that can help you to buy bullion within that thing, too.

Stack, stack, stack and BTFD. Your only winning move.

TF

267 Comments

Turd Ferguson's picture

And these are always good

MODERATOR

Brent does a nice job.

http://play.goldmail.com/z94mlacnf0xl

Hoping to learn's picture

first maybe

maybe 2013 will be better than 2012, The one good thing about 2012 is the fact that the sideways action has allowed me to stack all year long. The year ended with me being let go from my company of ten years. I may not be able to stack for awhile, but I will continue when I secure employment.

Meanwhile I still stop at the LCS and drool a little.  He is completely out of 90% (first in 3 years) and he only has a few Morgans and one half gold eagle. That is not much. 2013 must be better but time will tell.

Istack's picture

I wait

i loved this short video.  i believe true stackers must wait at least five to ten years to see the true wisdom of stacking

Edit: I think i tore my ACL  i should have been first!

indosil's picture

first

first

indosil's picture

damn..third

damn..third...phew..that was close

Dr. Fix's picture

First off, I want to congratulate “Hoping to learn” :)

I've been trying to beat "Istack" in a fair race for a long time now, and was beginning to think it wasn't possible.

You are a fast learner.

TURD!!!

So, I get the part about stack, stack, stack!

While out there in the school of hard knocks,

I figured that one out of couple years ago.

And after that takedown  in May of 2011, there is nothing that can convince me to go back on that promise to myself.

So I stack, stack, stack, but if Main Street is solely dedicated to talking about our precious metals,

stack, stack, stack, is becoming a little redundant.

I was hoping that you would consider a little bit more material focused on

“the end of the great Keynesian experiment” which is upon us now.

It is such fertile ground for discussion, and yet all the good stuff gets lost in the forums.

What are your thoughts on that?

Topics like the trillion dollar coin, or the massive amounts of new regulations, are great topics for discussion,

if you were to pick out one or two of them every day, and let us have at them, many of us would find that more interesting.

I know there is a forum on "what are you doing to prepare?"

But it most definitely does not get much traffic.

If this is  a topic that does not concern everyone, it probably should be.

Just thinking out loud,

thank you for all you do, and have a nice day.smiley

StevenBHorse's picture

Why mess around with these ?

Returns of Producers in 1979-1980 Mania

Company

Price on
12/29/1978

Sept. 1980
Peak

Return

Campbell Lake Mines

$28.25

$94.75

235.4%

Dome Mines

$78.25

$154.00

96.8%

Hecla Mining

$5.12

$53.00

935.2%

Homestake Mining

$30.00

$107.50

258.3%

Newmont Mining

$21.50

$60.62

182.0%

Dickinson Mines

$6.88

$27.50

299.7%

Sigma Mines

$36.00

$57.00

58.3%

Giant Yellowknife Mines

$11.13

$39.00

250.4%

AVERAGE

289.5%

Returns of Juniors in 1979-1980 Mania

Company

Price on
12/29/1978

Price
Peak

Date
of Peak

Return

Carolin Mines

$3.10

$57.00

Oct. 80

1,738.7%

Mosquito Creek Gold

$0.70

$7.50

Oct. 80

971.4%

Northair Mines

$3.00

$10.00

Oct. 80

233.3%

Silver Standard

$0.58

$2.51

Mar. 80

332.8%

Lincoln Resources

$0.78

$20.00

Oct. 80

2,464.1%

Lornex

$15.00

$85.00

Oct. 80

466.7%

Imperial Metals

$0.36

$1.95

Mar. 80

441.7%

Anglo-Bomarc Mines

$1.80

$6.85

Oct. 80

280.6%

Avino Mines

0.33

5.5

Dec. 80

1,566.7%

Copper Lake

$0.08

$10.50

Sep. 80

13,025.0%

David Minerals

$1.15

$21.00

Oct. 80

1,726.1%

Eagle River Mines

$0.19

$6.80

Dec. 80

3,478.9%

Meston Lake Resources

$0.80

$10.50

Oct. 80

1,212.5%

Silverado Mines

$0.26

$10.63

Oct. 80

3,988.5%

Wharf Resources

$0.33

$9.50

Nov. 80

2,778.8%

AVERAGE

2,313.7%

I got stacks too......hidden in the confines of my personal stable of solitude.
 
indosil's picture

Repost From Last Thread

Fed Now Pre-Monetizing: Bernanke Buys $300 Million Of Treasury To Be Auctioned Off Tomorrow

 
Tyler Durden's picture

Frankenstein Government's picture

Time For the MinersTo Form Their Own Cartel

I really think forming a cartel is viable and probably necessary for miners. In fact, if they don't, I think the bankers will simply steal their product.

Eric Sprott sparked a thought in me. http://thecivillibertarian.blogspot.com/2013/01/why-forming-gold-or-silver-cartel-makes.html

Strawboss's picture

The return on the juniors is

The return on the juniors is the reason why I always keep a core position in Pinetree Capital - a closed end fund that invests in hundreds of these small gold/silver explorers.

PNP.TO in Canada

PNPFF in the US.

www.pinetreecapital.com

Bill of Rights's picture

Just a little info on Executive Order

Executive Order

In Article I Section I of the Constitution it is clear that all legislative powers reside in Congress. The Executive Branch has the responsibility to execute the laws passed by Congess. An Executive Order is not legislation it is a order issued by the President to enforce laws passed by the Congress. While Executive Orders are not mentioned in the Constitution it has been a precedent for a President to issue Executive Orders that he deems to be necessary and proper.

The “Necessary and Proper” clause in the Constitution found in Article I Section 8 was not intended to give Congress and the authority to do whatever they felt was a good idea. This clause meant that they had the authority to pass any legislation that was necessary and proper to implement the powers delegated to the United States in Article I Section 8.
The President is the Chief Administrative Officer of the Executive Branch of Government and has the authority to implement policies and procedures that are neccesary for the administration of the duties and responsibilities that have been assigned to him by the Constitution. Policies and procedures passed by Congress are called laws and effect all of the people. An Executive Order is a policy or procedure issued by the President that is a regulation that applies only to employess of the Executive Branch of government.
Any Executive Order that has any effect on individuals that are not government employees in a violation of Article I Section I. Whenever the President issues and Executive Order that extends to all of the people. Congress has a responsibility to the people to veto any Executive Order that has any effect on non governmental employees.
When a President issues an unconstitutional Executive Order and Congress allows the order to stand they are violating their oath to preserve, protect and defend the Constitution.

Article 1, sec. 6 of Constitution requires Congress to set its own pay (not the President).  The 27h Amendment , applied 1992, requires that all such pay raises do not take effect until after the next congress is sworn in.  Article 2, sec. 3 states the the President shall take care that the laws be faithfully executed (and Congress passed no such law)..  Also no part of any executive order may direct agencies (such as treasury) to conduct illegal or unconstitutional activities by paying for these pay raises.

President Obama violated his oath of office on Thursday, Jan 3, 2013 when under his executive order, he gave to returning members of Congress, the Vice-President, and all federal workers  1/2 to 1 % raise in pay taking effect on March 27, 2013

Recall this when they try an issue an Executive Order on You're 2A rights.

Be well

Teach's picture

And lest we forget...

what the price of gold should, would, could and hopefully will one day be: http://dailyresourcehunter.com/the-path-to-20000-gold/

ancientmoney's picture

@StevenB Horse . . off topic, but . . .

Do you know if an old Homestake Mines stock cert is worth anything beyond its intrinsic value of zero?  Is it collectible?  Thanks.

Horst's picture

Got a recommendation for

Got a recommendation for Dorato Resources 1, 2 years ago. Am down ~95% since :).

I know a lot less about miners than about the metal itself, so thank god I only put about 10, 20% of everything in miners so far. I bought 1, 2 years ago, and then about half a year ago, when the HUI was very low, even lower than now I believe. So overall I am only down slightly, by 20% or so.

Golden Star Resources and Guyana both are actually up pretty exactly 50% since I bought! Who'd a thunk it?

Oh yeah and right now I am putting some capital into the miners again. Doesn't seem like a bad time, does it?

Road_Scholar's picture

Be careful with buying miners

We all should know not to buy the ETFs (GLD, SLV) because they don't have anything but "paper" claims.  If you need to be in equity markets, then Sprott's ETFs (PHYS and PSLV) are backed with physical so they should survive a COMEX default or currency reset.  However, mining company shares are equities and a true reset that is needed to forgive the mountains of debt will probably wipe out "paper" assets like stocks along with the "paper" liabilities.

If you're a serious gambler and need to play, I'd wait for some strength before jumping in.   Beware of trying to catch a falling knife!

smallfallingknife.gif

Nana's picture

RE: Bill Of Rights

You nailed it exactly, quote:

"An Executive Order is a policy or procedure issued by the President that is a regulation that applies only to employess of the Executive Branch of government."

Here is more.

Income taxes are only for federal employees, state employees and contractor employees of either. They are the "privileged ones" that the whole tax system was set up for.

The IRS can only audit THEMSELVES, no one else.

I wish people would take the time to read the constitution, bill of rights and the federalist papers to name a few things.

TPTB have absolutely brainwashed most people into believing all their lies.

 

ancientmoney's picture

@Hoping to Learn . . .

Here's hoping you find a new job or career even better than the last.

You now have an opportunity . . . if you had a 401-k plan, you can elect to take the cash, pay the taxes, and stack some more at prices you'll be unlikely to get when you are of retirement age, if you are 55 or younger (IMHO). 

In fact, at some point you may not be able to stack at all, as physical will be essentially off the market.

Turd Ferguson's picture

Looking ahead

MODERATOR

For the CoT reporting week...

Gold was down $14 but total OI grew by over 13,000.

Silver the complete opposite. Price was up 24¢ but OI fell by over 4,000.

Hmmmm.

On a side note, total gold OI continued to climb yesterday as price advanced by nearly $16. This is a very healthy sign and another signal that the maximum drop for the December selloff has been achieved. At 441,304, the total OI grew by over 7,000 contracts yesterday alone. That level is also the highest gold OI we have seen since 441,062 on 12/3/12.

FYI...price closed at $1721 on 12/3/12. Last night, price closed at $1662.

s2man's picture

Confirmed

Thanks, Turd.  Good timing.  You've confirmed the miners are beaten down, as I keep hearing from various sources. 

I've spent the morning looking at miners as a speculation.  A long shot at riding the mania wave when PMs break loose (as enumerated above by StevenBHorse).  Looks like this may be a good time to buy in.

Don't tell you about my IRA?  How about my 401(k)?  I've already withdrawn all I can, per company rules, and turn it into phyz and other hard assets.  Since I figure the gov will take what is left in the 401k when the bond bubble bursts (for my own good, no doubt), I don't count on ever seeing a penny of what remains.  So I figured, why not have fun trading and speculating?

Disclaimer - My portfolio is currently balanced; 50% PHYS and 50% PSLV, lol. 

Urban Roman's picture

This simply reminds me

...of what SRSRocco said about mining -- to paraphrase: 

With oil prices going up, and ore grades declining, and throw in a little price suppression of the end product, there is no guarantee, and indeed it may not be possible, for a mine to make a profit. 

And that is what we see in these charts. 

ancientmoney's picture

@Mr. Fix re: end of the Great Keynesian Experiment . . .

I agree that the Main street should be open to more than just PM discussion.  Of course, Turd tolerates quite a bit, as we get off-topic quite often, and it sometimes goes 13-14 pages!

However, that extreme abuse of Main st. is not what Turd intended, and so we have the back alleys to play in.

I get the feeling that Turd allows us (or turns a blind eye?) to inject items that tangentially apply to EOTGKE as just about everything we see in the news has some effect on PMs.

Turd, I hope I'm not out of turn on my interpretation.

billwilson's picture

Miners

No one wants them.

Have a couple of medium size juniors (producers or near producers) with excellent results out lately and all they do is face walls of selling. The same for almost all miners and pity the one that comes out with higher cost estimates.

However ... when everyone hates the sector (and really who likes miners now) we may be starting to see the makings of a bottom. Yesterday's action was telling in GG. It has been getting flogged of late, came out with higher costs estimates and got creamed, for about an hour or so, then reversed. Today retesting, but if it can hold above yesterday's levels we may have seen the bottom .. especially as GG is such a heavy weight in the miner indexes and so drives the indexes with its moves. Of course after I post this I fully expect GG to get hit for another $1 down into the close. That much is a given.

goodwill's picture

PHYSICAL PRECIOUS METAL POSSESSION IN AN IRA ???

DOES ANYBODY OUT THERE KNOW IF THERE ARE ANY IRA'S OUT THERE THAT ALLOW YOU  BOTH TO PURCHASE PRECIOUS METALS, AND TAKE PHYSICAL POSSESSION  OF SUCH METALS ,WITHIN THE IRA LAWS.  IF SO, WHICH ONES ? AND IF SO ,DO STATE LAWS HAVE ANY BEARING ON IT, OR IS IT JUST GOVERNED FEDERALLY?

pbfurn's picture

@ Horst/Miners

So overall I am only down slightly, by 20% or so.

_________________________________________

Nobody likes a bragger! I won't see a -20% on my miners for years.

Congratulations!

ancientmoney's picture

@Urban Roman re: PM stocks

Agreed.  Miners must be able to sell their gold/silver at a profit.  If they are not allowed to do so, via manipulation of the markets, or whatever, they go bankrupt, even if they have oodles of proven reserves. 

Stockholders get bupkis in a bankruptcy, but the lenders get access to the assets--reserves.  So, you may be better off owning JPM (God forbid!) or GS, as they would be the ones picking up the pieces in a miner bankruptcy.

Turd Ferguson's picture

Here's another chart that

MODERATOR

Here's another chart that disconnected from gold and silver and turned higher right at the end of 2012. Had silver followed it would be at least $32, maybe $33. Smell a reconnecting rally coming soon??

Here's a closer look with hourly charts:

Bugzy's picture

Another thing about stacking

for every 100K you buy, you are taking over 1 $million out of their nasty little hands. They do not own you any more. You are making a stand as a free man.

You buy stocks you are still playing in their casino.

Agree with your hypothesis Turd. One could win big with juniors etc, but way too risky imo. The odds are "stacked" against.

I shake my head when folk bring out historical charts etc and attempt to extrapolate gains in this day. Things have changed since then. The Corzines of this world roam free now. Property law in no longer respected nor are founding rules such as constitutions. Tyranny is here, you can feel it seeping into your thoughts. No, we are in end game times; not 1972!

Just my opinion.

Bugzy

ancientmoney's picture

@Goodwill re: PM IRAs

I had PMs in an IRA.  You cannot have the IRA tax benefits and also have access to the physical.  The physical must be held for your benefit by a custodian.  My custodian at the time was HSBC.  This is federal (IRS) law.  States fall in line for their income tax rules, where they apply.

However, you can have your IRA distribute the PMs to you.  You pay the taxes on the dollar amount of the PM value at time of distribution.  That is what I did several years ago.

cavalier's picture

SLW as a proxy for Silver

Turd's charts shows that SLW has been a pretty good paper proxy for silver.

While physical is always better than paper, SLW remains a convenient way to play silver. You can pick up the phone or use your computer to buy or sell it quickly with very little premium, substantially less premium than you would encounter with physical.  It has tax advantages over buying and selling physical. It does have mine risk, but given the large number of miners who SLW streams, that risk is not as large as it is with most miners. It is subject to stock market risk, and if the market crashes it tends to go with the market.  If silver has a reset, SLW should benefit from that. If the reset is too large there will be increased risks of expropriation. And if you really want to roll the dice, there are options.

ancientmoney's picture

@goodwill re: IRA

You may want to read/think about this (from an article posted at Silverdoctors):

"The greatest issue facing us in the short pull is the very real potential of our Federal government having a failed bond auction. They may have to buy up large amounts of existing Federal debt when rates are climbing.   If the Federal deficit spending continues upward at $1.7 to $2.0 trillion a year,  we chance losing another rating notch or two.  The equity markets and  pension funds, both national and foreign, are mandated to accept only AAA bonds. They will not only be unable to buy our debt they may ultimately be forced to divest as the near-junk bond status of our debt violates their investment charter.

If this happens the Fed and Treasury are very likely to pull out the nuclear option. They will raid our private pension funds, just like Spain They may even take foreign pensions invested in domestic funds.  That’s also on the table.
 
This $6-8 trillion pool of private IRAs and 401Ks is the only large source of funds left outside the MMAs multi trillion dollar pools.  The removal of pension funds is now established policy in Europe.  This Spanish ‘theft’ of funds,  done with little to no chance of repayment,  is not going unnoticed in the top levels of our government and the Federal Reserve Bank.   These people know that sooner than later there will be a failed bond auction or rating drop that forces their hand- and that hand will move into the pockets of the American tax payer and their private pensions.  It’s big money; it’s the only money and these people know itCall it the Failsafe option if you want. Bernanke knows this well.   The vast majority of the American population is completely unaware."
-------------------------------------------------------------------------------------
As discussed here before, the takeover of IRAs/401-k's has been thoroughly researched by the IRS.  I am 100% certain they have a plan ready to roll.  Won't matter if PMs are in them or not . . . if not in your personal possession, YOU DO NOT OWN IT!
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