Financial Markets Narrative Nonsense
Stock-Markets / Financial Crisis 2024 Feb 07, 2024 - 07:49 PM GMTBy: The_Gold_Report
The term "narrative" is defined as "a story that you write or tell to someone, usually in great detail. A narrative can be a work of poetry or prose, or even song, theater, or dance. Often, a narrative is meant to include the "whole story." A summary will give a few key details, and then the narrative will delve into the details."
This perfectly describes the manner in which financial assets are deified by the MSM and fed on a silver platter to unsuspecting buyers of "all things Wall Street," especially the shares of companies that have no earnings and very few assets but a mountain of narrative content that tells a wonderful little "story" about what might happen if all goes right. Visions of net worth sugar plums dance in millions of heads around the planet every time they hear the cheerleaders on CNBC prattle on about the "strong economy" being driven forward by a "resilient consumer" who have oodles and oodles of "cash on the sidelines" with which to drive stock prices endlessly higher.
This morning, I listened to no fewer than five economists dismiss the report from the U.S. government's Bureau of Labor Statistics called the "Non-Farms Payroll" report that saw gasps of astonishment as the number came in at 353,000 new jobs taking away any and all vestige of hope that the Fed Funds rate would be coming down in March. However, when you drilled down into the number, you saw that arbitrary "revisions" from past reports and doctoring by those that would modify the reported number with "seasonal adjustments" had massaged it to a 4-sigma "beat" from what would have been an unadjusted 2.635 million loss — meaning — that there was a 3 million job swing all thanks to the adjustments.
That is how the politico-banco cartel molds the narrative into a pro-incumbent campaign chant. Once reported, they can now tell everyone that the Biden Administration has done an admirable job in creating jobs for the American people, and that is the narrative that will run all weekend. Face the Nation will laud the Democrats for protecting the American worker, while Trump-hating CNN will be launching a "Celebration of Free Market Capitalism" party thanking the White House for giving the average American voter something to cheer about. To refer to this fraudulent presentation of domestic economic performance as anything other than "bogus" would be disingenuous.
Many years ago, when I was in my first few years as a stock salesman (as opposed to "wealth advisor" or "portfolio manager" or "financial consultant"), I had a mentor who had spent his formative years being tutored at private boarding schools and had butlers and nannies and chauffeurs to make his life perfectly elitist.
He was also a very wise investor, and one of the drills he made me practice was keeping a point-and-figure chart of the banking index. He explained to me that no rally in markets could be trusted without the accompaniment of the banks. In an absolutely brilliant piece written by Grant Williams entitled "Commercial Break," a few weeks back, he describes in detail the problems facing the commercial real estate market not just in the U.S. but across the globe.
Overdevelopment in many regions across Canada and the U.S. combined with the "work-from-home" trend, has forced employers to downsize their offices, leaving many high-rise office towers over 70% vacant. With leasing income falling along with occupancy rates, cash flow shortfalls are creating huge disparities in values to the extent that many owners are simply mailing in their keys to the lenders because the value of the building is less than the debt to which it is attached.
Most of the stress is surfacing at the regional bank level as most of their loan portfolios are of the commercial variety. Back in September, it was reported that a Manhattan office tower that had been developed by the Churchill Group for USD $90 million was foreclosed upon with the property selling for a paltry USD $16.5 million. Now that is a haircut.
Similar stories litter the financial pages of regional newspapers in Chicago, Houston, and San Francisco. In fact, the owner of the venerable Hilton San Francisco Union Square that takes up an entire downtown city block, along with boutique Parc 55, walked away from a $725 million loan, handing back the keys to the two properties. This is not the kind of economy that can support new all-time highs day after day and week after week.
Nevertheless, stocks continue their unbridled romp into new high ground driven by the "strong economy" narrative, but once one lifts up the hood and shines a flashlight into the working parts, you see a growth engine on the verge of catastrophic failure. As my old mentor used to say: "If the banks are having sniffles, the markets are soon to cough."
KBW Regional Banking Index
One glance at the KBW Regional Banking Index (KRX:US) and one sees a steady three-year decline, not without rallies, but one which was accelerated last week when one of the smaller New York-based banks, New York Community Bank, slashed its dividend while announcing a $560 million loan-loss provision due to some 65% of its loan portfolio residing in commercial real estate.
The stock fell over 50% on the news, dragging the KRX:US down over 2.3% on the week. Tape action like this is not the trademark of a healthy economy and certainly not a "sound financial system," as Fed Chairman Jerome Powell loves to protect.
Alas, I am a lonely voice sitting on the porch with ice water and aspirin as this stock market party rages on inside. I am reminded of a podcast recently where the guest commentator said that most parties that get raided are the loudest and wildest just before the paddy wagon arrives. Well, with the "MAG SIX" (Tesla has been booted.) hitting another record weekly high, this party is deafening and out of control and I hear sirens in the distance.
Uranium
Another narrative that is making the rounds is one concerning uranium. I have been a patient bull on uranium since 2017 and, in doing so, have incurred multiple lacerations and neck sprains, both psychological and physical, due to the false starts, also referred to as "whipsaws," that had we uranium bulls reaching for the brass ring only to have it snatched away at the last minute.
Twice, I was sitting with a nice capital gain on Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX)that hit CA$3.32 in 2018 and then CA$4.09 in 2021 with U3O8 under $30/lb. only to watch those two rallies fail miserably and the stock sinking back to sub-$1.00 levels.
Ten days ago, WUC/WSTRF hit $2.60 per share as
Cameco Corp. (CCO:TSX; CCJ:NYSE) hit an all-time high of $51.33 as the price of U3O8 hit $106/lb. So I decided to put out a Sell on my CCJ:NYSE call options at a double and a Sell on my sub-$1.00 shares in WUC/WSTRF.
Within literally seconds of my Sell, I had three dozen emails listing the reasons I was "WRONG!" or "DEAD WRONG" or "GOING TO LIVE THE REST OF <MY> LIFE IN REGRET!
What the narrative (there's that word again) tries to convey to all of these newbies to the resource sector is that one must take on a stock position and treat it as if it were a religious conviction. To even breathe the word "sell" is analogous to taking the Lord's Name in Vain, which is a sin in many of the world's Christian religions, but to this new wave of narrative nonsense, it is typical of market tops. When the last of the stock market entrants finally decide that "this time is different" and start buying Nevada scorpion plots forty miles from anything remotely radioactive, you know that some form of top is about to arrive.
The bull case for nuclear energy is anything but dead; in fact, it is stronger than ever. However, the point where "fundamentals don't matter" is the exact moment at which I press my bearish bets. As a natural resource investor since 1979, I cannot remember how many brilliant moves I made, but I can tell you how many mistakes I have made. One mistake I continue to make is assuming that I am smarter than Mr. Market, and while that is an "ego thing" with a guy whose career in sports demanded a well-fortified ego, it is not an asset when managing portfolio assets.
Here is my final thoughts on uranium: We are in the final innings of the uranium trade. Whether this is the seventh inning or the bottom of the ninth is beyond my grasp. You all recall the nonsense narrative one year ago when the lithium bulls were tweeting out pump after pump after pump, all gang-attacking the battery of lithium bears with non-stop messages that lithium prices had "nowhere to go but UP!"
Today, we all now know how that worked out. Today, the uranium bulls are all in full assault of the uranium bears with the same ferocity as happened one year ago in lithium. The more things change.
Thoughts on Gold
How does one trade a corrupted, compromised market?
It was over 40 years ago that I was discussing gold with one of the Shearson floor traders in the COMEX gold pit, going on and on about the perfectly executed "technical breakout" that gold had just completed that day when my trader friend said to me with his heavy Midwestern accent: "Fuh-get technical analysis.
It doesn't work." I asked him why. He said three words I have never forgotten. "Because it's RIGGED."
BECAUSE IT'S RIGGED.
To all newcomers to the world of gold and silver (especially silver), the only way to succeed in the ownership of these two monetary metals is to understand that they are considered toxic waste to the behemoths that control the world's monetary system.
Since the world's monetary system is dominated by the country whose currency holds the throne and wears the crown as the world's "reserve currency," America's "national security" is dependent upon controlling the dollar-denominated prices for gold and, to a lesser degree, silver. Ex-Fed-Chairman Paul Volcker admitted in his memoirs that the one mistake he regretted making in the late Seventies was "failing to control the price of gold," and since then, no central banker or Treasury Secretary has ever forgotten those words.
Gold is the kryptonite of the USD Superman, and since the greenback holds all of the funding power for U.S. military, to allow gold to replace the dollar as the haven of choice for savings in all but a few countries around the world would be a "clear and present danger to the national security of the United States."
It was on the Ides of April 2013 that I came to the realization that gold was far more important "to the powers that be" than I could ever have imagined before. Ask any mining investor with grey hair in his beard if they can recall the famous "Sunday Night Massacre" when, in the wee hours of the Western morning, the bullion bank behemoths went to work, crushing the prices for gold and silver at a time of the global day and night that most of the major gold traders were sound asleep.
Carload after carload of gold and silver futures contracts were sold indiscriminately with no intention to receive the "best price possible" and with full intention to drive prices down and through all technical support levels. The battery of traders and terminals from London to Tokyo to New York did a masterful job in annihilating the great bull market that began in 1999 when British Chancellor of the Exchequer Gordon Brown completed the last of the selling of the Bank of England's 395 metric tonnes of gold averaging $275 per ounce. With the crushing ambush that Sunday evening in April 2013, they sent the precious metals into a bear market that continued right up until early December of 2015 at $1,045 per ounce.
There have since been no fewer than four assaults since 2019 on the $2,100 level with only one very briefly succeeding in early December of last year. That assault was met with the same opposition as gold encountered in April 2013 as prices briefly touched $2,150 but were savagely repelled in the wee hours of the following Monday morning, beaten back to under $2,100 and further on to a low of $1,987 one week later.
With gold at $2,053, newcomers to this world of international intrigue, espionage, and financial sorcery must grasp the notion in its entirety that gold is a rigged market. The irony is that those who would rig it as a means of defending the U.S. dollar are missing an obvious opportunity that is as plain as the protruding noses on their vein-filled faces: the Achilles Heel of the dollar is not found in gold; it lies in its debt.
Treasury auctions are becoming increasingly more difficult because the size of the auctions is correlated to the size of the deficit. If international and domestic sentiment is creating a reluctance to participate in funding the U.S. government, they could fortify their treasuries by underpinning the debt with 8,311 metric tonnes representing over 285,000,000 ounces of gold. With $34 trillion of debt, that works out to over $118,000/ounce as a price required to collateralize 100% of the American national debt.
From where I sit, this is not going to be an elective for the U.S.; it is going to be a solution. It is the point where "the powers that be" decide to reprice gold — as Roosevelt did in the 1930s — that gold undergoes a transformation from foe to friend and morphs into the collateral required to maintain the reserve currency status of the dollar.
Once accomplished, gold mines around the world will be rebranded from "a hole in the ground with a liar at the top" (Mark Twain) to "doing God's work" (Ex-CEO Goldman Sachs Lloyd Blankfein) as gold investors finally find the reward for which they have patiently waited for over forty-three years.
My largest gold position in a Nevada-based junior that just made the last installment on the purchase of the Foldaway Canyon gold property, which contains an indicated and inferred resource of 2,059,900 ounces Au at an average grade of between 1.23 g/t and 1.56 g/t.
Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) has a resource worth over USD $4 billion at today's gold price yet carries a market cap of only $12 million and represents an outstanding proxy for higher gold prices in the most ideal jurisdiction in North America for operating a gold mine.
Followers of my work know what a difficult time most juniors are having with literally no funding available for the developers and an actual hatred for the explorers.
Uranium investors were punished mercilessly until the world decided that nuclear power was a solution and not a foe; gold investors will experience the same Nirvana when gold is finally treated as a friend and not a foe. Make no mistake; that day is coming, and you don't want to be waiting for the sound of the starter's pistol before owning the metal.
Buy gold now.
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.
Disclosure: 1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Aftermath Silver Ltd., Great Bear Resources, Western Uranium, Stakeholder Gold, Getchell Gold. My company has a financial relationship with the following companies referred to in this article: Getchell Gold Corp. and Western Uranium & Vanadium Corp. My firm no longer does consulting work for Stakeholder Gold.. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below. 2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Great Bear Resources. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Western Uranium and Vanadium and Aftermath. Please click here for more information. 3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy. 4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports (including members of their household) own securities of Getchell Gold, Western Uranium and Stakeholder Gold and Aftermath, companies mentioned in this article.
Charts courtesy of Michael Ballanger.
Michael Ballanger Disclaimer: This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.
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