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Jeff Nielson is the writer/editor of Bullion Bulls Canada. He came to the precious metals sector as an investor in the middle of last decade, and quickly decided this was where he wanted to focus his career. Jeff's background includes four years of Economics at the University of British Columbia, before he went on to earn his law degree from that same institution.

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The Big Lies Regarding Precious Metals Miners

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Originally appeared at http://www.bullionbullscanada.com/gold-commentary/25480-the-big-lies-regarding-precious-metals-miners

The talking-heads in the mainstream media spend so much of their time talking out of both sides of their mouths that they have clearly become oblivious to the extent of that double-talk. This is the only rational explanation as to the insistence of the mainstream media in repeating the same self-contradictions.

In this case I’m referring to media double-talk regarding their reporting on the precious metals sector, and most particularly their totally perverse coverage of the precious metals miners. The contradictions should be obvious to any/all investors who watch this sector closely.

On the one hand we have the media endlessly bashing these miners as “under-performers”. Despite the (supposedly) “high” bullion prices we’ve seen in recent years just look at the charts, shriek these bashers. Yes, when we look at the results from our (totally manipulated) markets, it is clear that (mysteriously) these miners are in the midst of their second Depression in five years – in the middle of one of the longest, strongest bull markets in history. Of course the myopic media notices nothing unusual about that.

However, the propagandists couldn’t be content to leave their sabotage of the miners at that level. Out of the other side of their mouths we hear voices like Bloomberg. Inserting the stiletto, it proclaims in its headline:

Barrick Leads Miners Spending Faster Than Earnings Rising

Ouch! The message from that stab-in-the-back is clear: these miners are money-losers…but hold on a second. Weren’t these same propagandists telling us (again and again and again) that these miners should all be drowning in profits from the “high” bullion prices they crow about (as they warn us repeatedly about a “bubble”)?

Methinks I see a contradiction here. Either these miners are reaping “high” prices for their gold (and silver) and thus raking in windfall profits; or, they are struggling in just attempting to stay afloat – as low bullion prices mean they are unable to offset spending with revenues. Both of these things cannot be true at the same time.

The Depression being experienced by these miners is real. As a shareholder in these companies I can vouch for that personally. Thus if we accept the market evidence at face value (and ignore overwhelming evidence of rampant manipulation), the message the market is sending is unequivocal: bullion prices must rise substantially merely to make this sector sustainable over the long term (let alone ever reaching the lofty status of a bubble). This brings us back to the reporting of the media propaganda machine, and their incessant fear-mongering that the precious metals sector (gold and silver) represent asset bubbles which investors ignore at their peril.

How can the precious metals sector be in a “bubble” when prices aren’t high enough to even sustain the sector over the long-term? How can the precious metals sector be in a bubble when investors are holding (on average) only about 1% gold/silver in their portfolios, versus the historical average of 5% to 10%? How can the precious metals sector be in a bubble when gold stockpiles are declining and silver stockpiles are nearly exhausted? As a matter of arithmetic every commodities bubble must be characterized by an upward explosion in inventories.

In short, we have this market demonstrating all the surface indications of a sector in a Depression, yet we have the mainstream media incessantly referring to the depression-conditions in this sector as a “bubble”. It is one thing to be merely mistaken. That can be dismissed as incompetence.

The consistent, perverse manner in which the media reports on this sector in referring to a Depression as a “bubble” cannot possibly be explained as mere incompetence. Reporting the exact opposite of the truth on even a single occasion implies dishonesty rather than innocent mistake. Incessantly reporting the precise opposite of the truth can only be regarded as a campaign of lies.


Those of us who observe and report on these companies on a regular basis will insist that the “reason” for the Depression among these mining companies is simple. There has been an all-out assault by the banking cabal on these miners to sabotage their share prices. As with any companies and any sector, doing so destroys the ability of these companies to raise capital, as in our modern markets the primary means of raising capital is via leveraging equity.

Note, however, that this analysis still leads to the identical conclusion: the only thing which can shake these miners free of their current Depression would be much higher bullion prices. Thus there is no other “angle” by which the actions of the mainstream can be viewed, where their analysis could possibly be justified as legitimate or even honest.

How “high” is high? Obviously any sector market/where the prices are not sufficient to sustain operations over the long term is characterized by low prices not high prices, indeed prices which are too low to be sustained over the long term. This is a tautology of economics.

However, look through the Bloomberg hatchet-job and you will never see the words “low prices” and certainly no suggestion that prices are too low. Indeed we see nothing but the exact opposite – droning on and on about the rapid increases in price:

gold prices climbed 156%…

the gold and silver price has gone up quite dramatically…

the price has risen for 11 consecutive years and reached a record $1923.70…

Would anything in Bloomberg’s reporting lead investors to the inevitable conclusion from their own facts: that prices are too low to sustain the sector over the long term? Of course not.

Instead Bloomberg opted for a “blame the victims” strategy: these reckless miners were engaged in a “growth at any cost” strategy, it claimed. And once again we see the propagandists talking out of both sides of their mouths.

It is this same mainstream media which accuses these miners again and again and again of being under-achievers: “under-performing” the price of bullion despite recording record profits. When (for the first time in history) we have investors mysteriously shunning companies reporting record profits (at the urging of the mainstream media); what choice are these miners being given? Grow or perish.

Much like our lying central bankers rape savers with their near-zero interest rates and then lecture them for over-spending, we have the same blame-the-victim orgy taking place with media reporting on the precious metals miners. First you drive investors away from these companies with intentionally malicious lies that the sector is “in a bubble”, then you lecture the miners for “over-spending” in trying to woo those investors back. Clearly this rape template is being over-used by our Overlords.

Being in regular contact with investors in these miners, I am well aware of their sense of outrage and frustration as their own prudent, honest, investing is being sabotaged by the combination of media lies and bankster manipulation. “When will it end?” is the inevitable question.

Unfortunately I can’t answer that question. Manipulation is an arbitrary act, and thus can never be predicted – with the exception of the patterns which emerge in the manipulation itself. Lies remain effective until they are disbelieved. Again that is a development which no one can precisely predict.

Thus what is a more productive exercise is to look at how this current Depression with the gold and silver miners will end. While we could undoubtedly construct more complex and detailed permutations, there are only a few basic paths forward:

1) Western bond markets collapse and gold and silver prices explode higher. All major Western economies are currently on this path, only the timetable for implosion varies. Clearly once this Ponzi-scheme collapses and $10’s of trillions in banker paper goes to zero (like we already saw with Greece) there will be many paper-holders suddenly obsessed with climbing aboard the shiny gold and silver Lifeboats. There will only be “seats” for about 1% of that money.

2) Paper currencies are driven to zero via hyperinflation. This scenario is obviously much, much worse than (1), since all of the bankers’ paper instruments are denominated in these worthless currencies – and thus all banker paper becomes totally worthless. Even more people (many more) will want to climb aboard the gold and silver Lifeboats – and even fewer will find “seats”.

Unfortunately Scenario Two is not only worse than Scenario One it is also more probable. All the Western debt-sinners are now past the point of no return. It is impossible for any of them to ever balance their budgets. As we have seen now already for four years, this leaves the banksters with only one option: to attempt to continue to prop-up their fiat currency Ponzi-schemes by printing even more paper – much, much more than at any time in history.

We know this is true because we now have the empirical evidence to prove it. As we have seen first with Greece, then with the UK, and now with Spain; even attempting to balance the budget (via sadistic Friedman Austerity) only causes these economies to disintegrate even more rapidly. Thus our cowardly political leaders have the choice of succumbing to debt-default – and be visibly “holding the bag” when voters look for a culprit to blame – or they can let the bankers engage in even more reckless money-printing to (briefly) delay an even worse collapse.  When we watch U.S. politicians continuing to “party like it’s 1999”, we don’t have to speculate as to which choice has been selected.

However, for the sake of argument let’s put aside the fact that our lemming-economies are charging toward one of two cliffs. Let’s assume that the lemmings grow wings, or have parachutes strapped to their backs, and somehow after they stampede off the cliff ahead of them they do not end up going “splat”. This brings us to the third potential path forward, even if it is totally hypothetical.

3) The bankers and media are totally successful in their campaign against the miners and “win”. This Tag-Team of Deceit continues to hold down the price of gold and silver, while also continuing to successfully attack and depress the gold and silver miners.

What happens then? Actions carry consequences. This is the part that these “Wile E. Coyote” bankers simply cannot comprehend. Holding down the price of bullion will stimulate high levels of consumption by both investors and industrial users (eager to take advantage of “cheap” metal). We have seen this consistently now for more than 10 years (that’s called a “pattern”).

Similarly, depress the miners and you depress supply. Depress supply and it’s impossible to meet the (highly-stimulated) demand. Inventories must decline. When inventories decline prices must rise – at the very latest when inventories reach zero. Again, this is nothing more than a simple tautology of arithmetic and thus it must happen.

Newer investors to this sector need some historical context in order to properly understand the dynamics here. It was the successful suppression of the gold and silver markets during the 1980’s and 1990’s which created this 10+ year bull market of the New Millennium. Actions carry consequences.

The price of gold was pushed to a multi-decade low. The price of silver was pushed all the way down to a 600-year low. This created the voracious demand for these metals at once-in-a-lifetime prices.

Equally, pushing gold and silver prices to those extreme lows destroyed the supply chain at precisely the same time they were creating massive demand. Thus the fact that gold and silver have had the most-bullish supply/demand fundamentals for any class of commodities over the past decade was also the inevitable consequence of the machinations of the bankers.

Artificially create a bear market (for any commodity) and the inevitable consequence is a bull market.

What’s different now is that the bullion that the bankers dumped onto the market to stomp on prices during the 1980’s and 1990’s is gone. Meanwhile their paper Ponzi-schemes teeter much more precariously than during the 80’s and 90’s. The reasons to flee to the 5,000 year security of gold and silver grow by the day, while the capacity of the bankers to impede their advance continues to dwindle.

All roads lead to higher gold and silver prices. When it comes to the manipulation of these markets, “success” for the bankers leads to their inevitable defeat. Wile E. Coyote could never catch the Roadrunner. And the schemes of the bankers cannot trump the Laws of Arithmetic.

There Are 7 Responses So Far. »

  1. best regards on you thoughtful analysis. as a long term holder of AXU and bullion i look forward to the ‘vindication’ of our mutual convictions…………

  2. Jeff, I agree that mining company stock prices are in a state of depression. But there is no conspiracy here – it is a lack of interest and investable funds on the part of the public as far as the juniors go and the seniors do have operational risks that are being more heavily discounted than usual by big investors. The gold price – which we think has no way to go but up – may go down and down hard first. That is adding to operational uncertainty for investors that cannot take on more than average market risk.

    In addition, there are dozens of stocks outside of mining that have single digit valuations; The entire market is in a state of depression, with a few exceptions that the media likes to talk about.

    The only way forward for the juniors are takeovers or cash rich companies going it alone with projects de-risked enough to attract some bank financing. Why on earth would bankers not want to fund a hedged gold project? It’s up to the companies to deliver bankable feasability studies. If they cannot, they are indeed worthless.

    My involvement with the juniors, like yours and everyone else still in has been painful, especially these last few months. But history shows stock breaks like this are not permanent. Suggest you check out S&P multiples for years like 1934 or 1975. They came back with a vengeance.

    The real question then, is this time different?

  3. DaveG,

    I think you have missed the main point. If you are right, and mining stocks are justifiably in a depression for not making a good enough case for their value, the media should be screaming about the “undervaluation”, as they are for stocks in general (most recently, courtesy of Easy Al).

  4. Jeff, I don’t think the media gives a crap one way or the other. Their mission is to sell ad space. I also don’t think sophisticated investors pay any attention to media prognostications, other than as a contrary indicator – sometimes.

    Here is an example though of a gold comany underplaying success. During Barrick’s analyst call their exploration manager said flat out that Turqouise Ridge could be producing 800,000 oz a year (up from 175K) as a result of new discoveries there. There was no mention of this anywhere in the media analyst reports that I see or even in the company’s own official material. You know as well as I that an 800K producer is a big deal, even for Barrick. And they also left out any reference to the other Nevada property, Goldrush, in their estimates, as do the analysts. So the whole growth story – which the media woudl n

    Well,what do they expect if one in a million people can pick this out?

  5. ….. So the whole growth story – which the media would ignore anyway, is practically suppressed by the company.

  6. DaveG, Warren Buffett was pumping U.S. banks AGAIN over the weekend…bankrupt, corrupt, fraud-filled U.S. banks. Why doesn’t Warren Buffett have anything nice to say about gold miners?

    Are we to assume that Buffett REALLY isn’t intelligent enough to understand the appeal of precious metals (after BEING a former silver investor himself)?

    At what point does EXTREME implausibility become “conspiracy”…?

  7. I think there is an effect whereby PMs mining companies have become “conservative” in their reporting lest they be smeared as “loony goldbugs”… even though extracting the stuff is their business!

    At any rate, smart MAINSTREAM analysts should be pounding the table about the value of these companies, even if the companies themselves aren’t promoting it. But of course the Wall Street sell side isn’t interested in this; they now see PMs as a full-on competitor for all paper money securities, and the media is the same. So neither holds each other in check, as would be the case for “value” in any other sector.

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