Greece voted for continued bailouts as did France which went largely socialist while Egypt went the way of the Islamist party. Most equity markets are weak while Spanish and Italian bonds are moving into high ground as far as interest rates are concerned. Funny though, I thought Spain was just bailed out and not a problem anymore (sarcasm), I think what may soon dawn on investors is that the problems of solvency are NOT liquidity problems, cannot be solved by more liquidity AND will be with us for many many years into the future unless a full monetary reform occurs.
While the above elections were news and the sovereign debt markets the public reaction, THE big news over the weekend http://us.mg5.mail.yahoo.com/neo/launch was the Hong Kong exchange taking over the 135 year old LME London Metals exchange. Hong Kong beat out 3 other competing bids, all from the US including the CME, NYSE and ICE. This has huge ramifications as it an immediate entrance into metals (and precious metals) trading on a global platform for the Chinese. Another aspect and one that gives hope to us “conspiratorialists” is that the Chinese will (if I read them correctly) require real metal to support (either in full or as substantial ratio) the futures contracts. If this is the case, over time they will attract more trading volume as traders and investors gravitate towards an exchange with real goods behind their promises. One can only hope that this will ultimately be another nail in JP Morgan’s naked short Silver coffin!
If the news overload wasn’t already enough this past weekend, the heir to Saudi Arabia, Crown Prince Nayef died “outside of the Kingdom”. How odd that a report would be worded this way? It makes you wonder how he died, I mean really died and whether (or who did it and why) it was natural or not. Last up is the Syria situation where it does not look like President Putin will back down and is in fact sending machinery to counter U.S. support of the rebel groups, this is rapidly becoming a serious standoff and one that hopefully does not ignite.
Did anyone notice what happened last Friday in the mining shares with 3 minutes to go in trading? They were carpet bombed into the close and some were even pelted in after market trading. This happened with many many issues, I usually do not write about individual issues but I will call attention to one as an example. Aurcana (AUNFF) or AUN.V (Canadian) is a Silver mining company with an existing mine in Mexico (no 43-101) and a newly built mine here in South Texas with a 43-101 of nearly 50 million Silver ounces proven and probable reserves with good drill results since the release of the 43-101. They are well funded and can fund growth internally from mining cash flow. They were added to the GDXJ junior mining index on Friday, the news was announced last Monday. I for one was very happy because I personally own shares in Aurcana and have for some time, (living in South Texas myself, this company was a natural speculation for me). Also, please, this is not a recommendation of any sort so please do your own due diligence.
OK, so here is what happened. They traded big volume, REALLY big volume on Friday as one would expect since it was being added to an index which index funds would need to purchase the stock to mirror the new composition of the index. With 30 minutes of trading to go, they had traded maybe 5 million shares and were up 2-3 cents at about $1.05, then traded another 8-10 million shares making a new 52 week high at $1.15 with 3 minutes to go. “This is great” I’m thinking, big volume, new highs, turning the charts even more bullish and part of a well-known index…ERRRRRRR…no! By 4:00, only 3 minutes later, they traded down to .90 cents! How is this possible? On another 13 million shares? In 3 minutes? WHO could possibly have the “need” to sell a boatload of shares? Not only that, WHO would sell so many shares, so hard and fast right at the close to cause the stock to drop .24 cents? But wait, they were not done yet, this thing settled at .71 cents, yes, that’s right, .44 cents lower (that’s 40%) than it was with 3 minutes left in trading. What type of entity(s) could possibly want to sell this down this fast and “lose” this much? I don’t have the answer to this, I did send a complaint to the SEC asking these same questions because any “profit maximizing entity” would NEVER EVER sell anything so sloppily AND when volumes (after market) is so low …unless they wanted the price down for whatever reason. By the way, Aurcana normally traded 1 million shares per day prior to Friday, total volume on Friday was 28 million shares.
OK, so that said, here it is Monday morning and Aurcana is back to $1.06-1.07 so no harm done, right? …Well, not so fast, someone somewhere sold a boatload of stock at much much lower prices and now is either sitting on big losses if they are short or, they left a lot of profit on the table. One other “outcome” is that I am sure that many share investors had the crap scared out of them and did not have a very “happy Father’s Day” weekend! Which may or may not have been the “point” to the entire carpet bombing operation, to scare investors away from the sector.
This is just one example during one day, I assure you that it is only one of many “operations” numbering in the 100’s if not 1,000’s over the last 12+ years. Which leads me my final observation, some people can put up with this, others cannot. If you can, God bless you and welcome to the club. If you cannot, no problem, just own PHYSICAL metal and nothing else. Yes, the metal’s prices are manipulated constantly but it cannot go on forever. Your ounce is an ounce and will always be an ounce even after the futures contracts that are used to “price” the spot price have blown up as a valueless piece of paper. Buying the physical metal will preserve your wealth and purchasing power, it will probably make you quite wealthy. However, “if” you can weather the mental madness of manipulation in the share market, you will quite likely become very very wealthy. It is a choice you must make, the sure thing (physical) or more speculative (individual issues). I personally have a mix and recommend a mix but everyone is different and have different risk tolerances. When all is said and done, both will probably be home runs and surely better than holding the currencies of bankrupt sovereign nations! There is a “reason” for these “operations”, it is very simple, to scare anyone and everyone AWAY from the precious metals sector. If I might suggest, anything that “they” don’t want you to have? …Is probably a VERY good thing to have!