'Mexico Mike' Kachanovsky Believes the Best Cure for Low Prices Is Low Prices

The Gold Report: Mike, the prevailing wisdom in the market favors producers over explorers in the precious metals equities. The thinking seems to be why buy the pasture when entire farms are selling at nearly the same price? What do you think of that strategy?

Mike Kachanovsky: That is a good summary of current affairs. Market values for the entire sector have been trimmed dramatically; even many of the highest rated stocks are down 50% to 60%. From a value perspective, it makes sense to buy higher up the food chain when you have the opportunity, to buy more established companies that offer legitimate earnings and established infrastructure.

TGR: Kenneth Hoffman of Bloomberg Research notes that production from the world's biggest gold mines has dropped 17% since early 2011. He predicts that gold mines, especially high-cost mines in Africa, will start to close as gold hovers around $1,200/ounce ($1,200/oz). Is there a bullish medium-term case to be made for gold given the shrinking supply?

MK: We have been through similar severe price corrections before. At the beginning of this century, gold's market value was below what it cost to produce it. Mines closed and companies went out of business. That scenario evolved into the bull market we have today and the achievement of all-time high metals prices.

TGR: But this is not a bull market. Continue reading "'Mexico Mike' Kachanovsky Believes the Best Cure for Low Prices Is Low Prices"

Strategies for Success in a Bloody Market

The Gold Report: John, early this year you predicted that as many as 500 companies listed on the TSX Venture Exchange would go under by the end of 2013. Do you stand by that?

John Kaiser: I think at least 500 companies are endangered; I doubt they will disappear by the end of the year. The critical time will be next summer, when their audited financials are due and their annual meetings will be held. If we have not had a turnaround by then, many management teams will hand the keys over to the stock exchange and abandon their companies.

Of the 1,800 companies we follow, 761 as of June 28 have less than $200,000 ($200K) in working capital left. That is the bare minimum needed to merely exist as a publicly listed company.

TGR: Is capital on hand one of the first things that you look at when deciding whether to invest? Continue reading "Strategies for Success in a Bloody Market"

Is Gold as an Investment Finished?

Before delving deeper into that question, perhaps we should see what the mainstream media thinks.  In fairness to the MSM, we note there are plenty of articles on both sides of the debate.  Yet there has been some media piling-on since the recent hard breakdown in gold.  The aptly named Howard Gold explains:

The Case for Owning Gold Has Collapsed; Yellow metal could be headed much, much lower .

Gold could be headed not much lower, but much much lower.  This was written on April 18, when the value assigned to the monetary relic (AKA its nominal price) resided at $1391 per ounce.  So be warned, Mr. Gold advises that gold could go much much lower.  Gold bugs take heed; Mr. Gold himself has put the double ‘much’ whammy on you!

After critical support at 1524 was lost our first downside target of 1440 or so was sawn through like Balsa Wood.  Okay fine.  For those who micro manage every tick in the price of gold (I am not one), then here is the situation; the current little rebound must extend back up to and through the broken support level at 1440 or the next target in the low 1200’s is up next. Continue reading "Is Gold as an Investment Finished?"

Follow the Smart Money to Undervalued Miners

The Gold Report: Gold recently witnessed some upside price support after the Cypriot parliament proposed taking money from private bank accounts to raise the 5.8 billion needed to qualify for an international bailout. What was your first reaction to that news?

Jeb Handwerger: Any confiscation of bank accounts would just highlight what I have been saying for a long timesavers are losing money in their banks. Bank deposits are supposed to be a safe haven. Investors are going to seek out alternative hedges against the deterioration of currency and financial repression worldwide. This isn't just happening in Cyprus, but all over the world where there are citizens losing money in their banks and are experiencing negative real rates. Investors need to look for the assets that will protect and grow their wealth in case public policies continue to destroy wealth and savings.

TGR: How does this differ from what happened in Greece? Continue reading "Follow the Smart Money to Undervalued Miners"