Friday, June 24, 2011

Last Post For Two Weeks

I'm taking a much-needed two-week hiatus from the markets.  I'll have a laptop with me and will be checking in with the markets/news, but I probably won't post anything unless I see something that really irritates me and I need to vent lol.

Many of you have by now read about the merger deal between Golden Minerals and ECU Silver.  It has the potential to yield some brilliant synergies, as Golden Minerals has two potentially prolific silver properties plus $100 million in cash and ECU needs cash in order to get the Valerdena blockbuster over the "finish line."  I've met the new CEO of the combined entity, Jeff Clevenger, and he is a very accomplished  mining company operator.  You can read about the details of the transaction and the expected synergies HERE

Whoever is selling shares in ECU today has no clue whatsoever how to analyze mining companies.  This deal will instantly give ECU the managerial, operational and financial "bulk" to help it fully achieve the untapped value of its massive silver deposit.  I also know that ECU's geologists were "blown away" by the potential of Golden Mineral's Argentina silver deposit.  For the record, I added some ECU to the fund today after it sold off.  The combined entity will have some large investor support, including Sprott and Sentient Group, a private equity investment group which specializes in global resources and owns 19% of Golden Minerals.

Market-wise, I think we will drift sideways for awhile, until the conundrum of how the U.S. Government will fund the extra $2 trillion in debt that Congress will enable it to issue before the end of the summer.  Of course, we all know that the white elephant in the room that no one wants to acknowledge is called "more money printing."   Until the Fed blinks, I think the risk of a big accident in the stock market grows each day.  In case you missed it, the FT Blog ran this article - LINK - about the massive flight of capital out of the high yield market.  When I was a high yield trader, typically the direction of the big flows of capital into or out of the high yield market were a precursor to the next directional move in the general equity markets.  It's not a perfect barometer but it's worth paying attention to.  Please note that near-negative yield in 1 month Treasuries is always a signal of a big liquidity problem in the markets, as big money pays up to insure the return OF their capital vs. the return ON their capital.

I do believe, however, that if the equity markets take a big tumble, we will see a surprise rally in the metals, as capital begins to truly appreciate the historical flight-to-quality characteristics of gold and silver.  Take a look at your intra-day charts on gold/silver/mining stocks on May 6, 2010 when the Dow had an intra-day drop of 1000 points.  Gold actually traded up sharply as that was occurring, until the Fed stepped in to prop up the markets.  I believe we'll see that again.

See ya all in two weeks!


  1. Where are you off to?

  2. I own both of these companies already so this is awesome news as I already was aware about the value of both of these companies. My question is since my ECU shares are ECUXF on the pink sheets am I going to receive the shares or just proceeds from the sale of the shares.

  3. (Dave)

    Going to Italy. Rome, Amalfi Coast, Tuscany, Cinque Terre.

    JD, I think your shares will be exchanged for AUMN shares plus a small amount of cash.

  4. Have a great trip Davey. Let me know if you get near my family home of Cremona. I have a good friend there who is very kind, enlightened, etc. I will link you on fbook Monday when I get back from FL. johnrandi

  5. Don't you think you should run a poll on this one.

    Mark Zandi: Jamie Dimon Would Be “Fabulous” Replacement for Tim Geithner