Dave Kranzler | Junior Mining Stocks Will Have Their Day in the Sun

Dave Kranzler, editor of the Mining Stock Journal, provides his perspective on the current junior gold mining sector.  He discusses three specific mining stock picks that he has featured in the Mining Stock Journal and explains why he likes them.  Dave also shares his outlook on gold, the economy and the general equities markets.  And he explains why he holds a bearish outlook for copper.

Dave holds an MBA from the University of Chicago with a concentration in accounting and finance.  Over the years he has worked in various analytic and trading jobs on Wall Street.  For nine years of those years he traded junk bonds for a large bank.  For the past 16 years, Dave has been an avid student of the precious metals markets and steadfast proponent of holding physical gold and silver in one’s portfolio.  Currently, he co-manages a precious metals and mining stock investment fund in Denver.  Dave’s stated goal is to help people understand and analyze what is really going on in our financial system and economy.

0:05 Introduction

2:10 Commentary on junior mining sector

4:27 Commentary on Federal Reserve policy, gold & the economy

9:09 Further commentary on junior mining sector

12:10 Dave discusses three mining stock picks

29:42 Bearish argument for copper

PARTIAL TRANSCRIPT:

Bill:  It seemed like you weren’t commenting as much in the last six months on junior mining, at least publicly. What’s behind that, if anything?

Dave: Nothing really. I mean, part of it is I try to separate myself from the people that are always out there trying to promote and hype the precious metals and the mining stocks. I mean, I’ve stubbed my toe enough times over the last 18 years trying to time the next upturn or tell people, “Get ready. Here it comes,” and then it doesn’t come that now I’m kind of more of like sit back patiently, look for ideas that I think are ignored by the market or seriously undervalued, and start accumulating those, and just wait patiently. I’ve written a couple of blog posts recently where I said I think we are potentially setting up for a big move. I think you can support that assertion with both technicals and fundamentals.

I’ve been, for the last 10 years at least, I’ve primarily focused on the junior mining stocks. The large cap mining stocks kind of woke up in, I guess, September. Gold started waking up again in mid-August. The juniors have been going sideways, continued sideways to down, which in some ways I think is a positive for the mix of ingredients required for sustainable upward moves. I guess I’m kind of more just patiently waiting for more indication that we’re going to eventually … we’re about ready to embark on a move that will take us through the nefarious $1,360 to $1,380/oz gold area, and hopefully above $1,400 and higher from there. Right now, what’s going on, the dislocation between the macro economics, both in the U.S. and globally, and what the stock markets are doing, that dislocation there to me is more interesting right now than the precious metal sector, so I’m been writing about that more. But precious metals are always my first love.

Bill: Yeah, you’ve been writing on … and I should have said that … a lot on the macro economic issues, fed policy. When you’re looking at fed policy and some of the recent statements by fed chairs, and the fed minutes, how do you think that that is going to affect gold in the next six months, and of course, how is that going to impact the miners over the next six months?

I hate to use these adages or sayings, history repeats … no, it doesn’t repeat, it rhymes. In many ways … it’s not exact … in many ways the system is set up exactly … well, not exactly … but it’s set up very similarly to the way it was set up in 2007 and 2008. That’s kind of what the last couple of years since we had that big push in the first half of 2016 in the sector, I mean, the GDXJ was up 300% in six months. We had that big push, and then a sell-off, and then kind of grinding lower up until last August and September in the sector. I think, certainly, from a financial standpoint, the problem this time around is worse than it was in 2008. You’ve got record levels of debt at every level of the system, government, corporate, and household. It may not be as blatantly subprime as it was back then, but I guarantee you that part of why it doesn’t look like it did back then is because they changed the way that they rate prime versus subprime.

I was just reading an article about it yesterday, about how FICO scores have been exaggerated, or they’re very high now relative to what they would have been if the FICO scores were calculated the way they calculated them back in 2006-2007. What we’ve got beneath the surface is a massive subprime debt bubble, especially with credit cards and auto debt. I mean, subprime auto debt, the default and delinquency rates are as high as they were in 2009 right now. Most people aren’t aware of that. You’re talking about a 9 to 10% delinquency and default rate in subprime auto debt, and it’s getting worse.

We also have a massive stock bubble, which was just reinflated by Powell and Trump. In many ways, we had a housing bubble. This time around, it’s not a volume bubble like it was in the mid-2000s, a volume and price bubble, this has been an extreme price bubble. In many ways, the system is set up the way it was set up right before what’s called the Great Financial Crisis. It was really a de-facto financial collapse that was bailed out by the taxpayers and money printing. Just like last time around, I think they’ve been trying to keep a lid on the price of gold to prevent gold from signaling to the public that something’s not right. It was the same thing back then, from March 2008 to the end of October 2008, the price of gold was taken from 1200 down to 700. It was done, and that was while Bear Stearns and Lehman were going bankrupt. That was done to suppress the signal that gold sends. Let the miners stay in the coal mine, just get the canary out of there so they can’t see the canary’s dead. That’s what has been going on with gold and silver these last couple of years.

Well, I think it’s become kind of obvious that the Fed is going to, at some point, whether they would do it anyway or whether Trump’s going to pressure them into it, they’re going to start taking rates lower, probably sometime this year. I wouldn’t be surprised to see money printing starting again, if not this year, then early next year. That will ignite the price of gold like it did back in late 2008.