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The Lunatic Fringe - Trading talk.

dpong

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SPX closed below the 10 week moving average for the 3rd week in a row. This keeps my WTT trailing stop losses at 10% which is pretty tight. And I can accept no new trades as long as this is the case.

[I have 12 open positions. For 11 of them the trailing stop loss is above the purchase price. I always enjoy that milestone whenever it occurs.]

kZRVBGbA.png
 
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Lancers32

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I still feel like I've seen this play out before.

View attachment 182841
Not sure at this point. Miners don't seem to be acting right at this point. Last week's lows not a bad buy point but might see lower. Gold needs to recapture $1920 and close over a couple of days I think. Prepared to be wrong as always.
 

JayDubya

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What Happens When Hot IPOs and Financings Hit the Market in Tech and Gold
by Marin Katusa

-

Initial Public Offerings (IPOs) are riding high right now.

You might’ve heard about the Snowflake IPO making headlines.

It’s a company with a special type of deal structure that most investors might not have heard of before.

Leading the charge and fury in the IPO markets are SPACs, (Special Purpose Acquisition Companies).

SPACs start as a shell company and sell shares to investors. It doesn’t have any operations or business of its own. The purpose is to acquire one that does.

It’s like a backdoor route for large sums of money (think $100 million, or more) to get into the stock market.

Investors and the private equity funds behind these SPACs love it, because there is much less underwriting, and the paper pushing process through the SEC is easier.

Much like private placements in the red-hot mining space–which we’ll get to in a moment–SPACs have rules.

  • SPAC’s have a deadline of 24 months to acquire a business.
  • If they don’t, investors get their money back with interest.
  • You can also request your money back if you don’t like the acquisition.

However, you can make money with SPACs – and quickly.

Anyone that invested in the VectoIQ SPAC before or during its acquisition of Nikola Motors (NKLA) could have made 10x returns.

We recently alerted subscribers to a SPAC in the Katusa’s Resource Opportunities newsletter portfolio.

It's been up by as much as 30% since the first research report.

With all the headlines, we could expect that IPOs will flood the market.

In fact, in the next chart you’ll see that YTD in 2020 we’ve seen the 2nd lowest number of IPOs (113) in 6 years.

But the return of those IPOs through the lens of the Renaissance IPO index is much higher than the last 6 years.


What Happens When New Paper Shares are Created?

Capital flows are one of the least understood, most closely guarded secrets in the resource sector.

Bull and bear markets are driven by expansions and contractions in capital flows.

This capital comes from everyone—retail investors all the way to trillion-dollar sovereign wealth funds.

Knowing how to profit from these tidal changes in the market is incredibly important for the contrarian investor.

We have all heard a few marquee lines related to trading:

  • "Buy when there’s blood in the streets."
  • "The market can stay irrational longer than you can stay solvent."
  • "You know it’s time to sell when shoeshine boys give you stock tips."

I want to talk about the last one…

Being a good seller is as important as being a good buyer and stock picker.

Realizing a profit is important, but selling is a lot more than placing a market sell order for your entire position and moving on.

Selling should be just like an alligator: Slow. Methodical. Strategic.

Always use limit orders.

Let the buyers come to you.

Discipline is required, when buying and selling shares.

And here’s why…

How to Prepare for Amateur Hour…

I want to use my points above to help you understand how fund managers (who get redemptions) and amateur investors sell and put pressure on a stock.

My expertise is in finding and getting myself and my subscribers into resource deals in gold, oil, copper, uranium and silver.

We are coming into the last few months of a year—that has seen share prices of good and bad gold deals soar because of the rise in the gold price.

Throw in a U.S. Presidential election… I believe we are going to see pressure on many resource stocks.

Now, this could be a major opportunity for us.

Let’s start with how much capital has been raised in the metals and mining sector.

Last year, we saw equity financings rise above CAD$12 billion for the sector—a value not seen since the last run up from 2009–2011.

2019’s spike was due in large part to Katanga Mining’s CAD$7.6 billion rights offering.

If you remove that…

Equity financings totaled just CAD$4.9 billion, which would make 2019 the worst year since 2008 when the TSX began releasing statistics.

It was a very tough year for many companies.

2020 will be an improvement. Gold has performed well, and financings are already approaching CAD$4 billion.

What’s more important is what these financings represented versus the sector’s market capitalization.

How Much Money Really Went into the Precious Metals Sector?

In the next chart, you will see equity financings as a percentage of sector market capitalization.

Historically, financings represented between 3.5% and up to 8% of the sector’s market capitalization. Over the last 5 years, financings have cratered.



Again, if you remove Katanga’s rights offering, financings in 2019 would have represented just 1.7% of the sector’s market cap (red dot).

Even with the precious metals market rocking, so far in 2020, financings have represented just 1% of the sector’s market cap—the lowest representation since at least 2008.

For the last 7 years, the trend has clearly been toward less capital going to work, regardless of sector performance.

This means that although mining stock prices are rising, financings are not increasing at the same rate.

You can attribute this trend to 3 different factors:
  1. Prices are rising faster than financings are happening. That is not the case when compared to previous cycles.
  2. The bigger funds and the generalist funds have not yet gotten into the mining financings like they have in the past.
  3. Passive funds are focusing on ETFs rather than on equities.
Number 3 is where I believe the significant change is.

But with all the new IPO, listings, financings, deals that are hitting the markets, what happens to all those new shares once they start trading?

The Great Flood: Free Trading Stock Will Flood the Market This Fall

We are data nerds. We compile incredible amounts of data that others do not.

Scouring through our two best data terminals along with the TSX financing data, we have compiled a chart you won’t see anywhere else.

Ironically if you used each data terminal individually you would get three different numbers for financings this year and every other year.

As you know, a large portion of equity financings are conducted through private placements.

Shares in those financings are restricted for 120 days after the close.

It is only under an IPO or short-form prospectus financing that there is no four-month hold.

Once the 120 days are up, the shares become unrestricted and investors in the private placement are free to sell their shares.

For every seller of shares, there needs to be a buyer.

It’s not rocket science to expect that the stocks that have financings coming "free trading", will trade lower.

The expiration of the restrictions can create significant selling pressure as investors look to recoup their capital—all at the same time.

The Gold and Silver Paper Wall

You’ll want to pay attention to this.

The chart below combines the data sets and encompasses 95%+ of the equity financings in the last 12 months—any equity financing over CAD$5 million.

From this new data set, we’ve calculated the dollar amount of upcoming free trading stock.

So, beware.

This is where the flood of paper will enter the market…



You’ll see that the next few months have significantly more free trading stock than the previous 8 months.

In fact…

I estimate over CAD$2.5 billion worth of mining sector stock will go free trading over the next few months on the TSX and TSX-V exchanges.

The majority are gold and silver stocks.

This is an enormous amount of capital for the mining sector to be able to absorb.

To put it in perspective…

If I do not want to disrupt normal trading activity, it can take many days or months for me to close positions worth 7 figures.

Now extrapolate my situation to the entire market and it’s CAD$2.5 billion dollars which is coming free trading.

This creates a serious problem for relatively illiquid listed mining companies.

I highly doubt there is CAD$3-4 billion in new capital ready to step in and absorb those shares in the open market at the current prices—which are much higher than the financing prices.

A Real-Life Example

Here’s a real-life example of a situation likely to experience major havoc sometime this fall:

A small junior whose management team I have never heard of and that has never been involved in mining before raised $2 million in May.

Share prices since the private placement are up 800%, not including the warrants. The company trades 225,000 shares a day right now.

The private placement was for just under 30 million shares. Again, the math doesn’t lie. Converting "paper" profits to realized profits will be nearly impossible for those investors.

The list of these types of deals is pages long.

Most of the companies are doing financings to keep the lights on or to fund a promotion or to raise the price higher so they can unload stock.

I’ve always avoided those types of pie-in-the-sky burning matches and I’ll continue to avoid them for the rest of my career.

The risk/reward is horrible.

However, many good companies also financed earlier this year. And most certainly there will be investors looking to recoup some principal.

In the event of a sudden selloff or a few bad days in the gold market, it can provide us alligators with MAJOR opportunities.

And we’ve run the numbers on a handful of companies we want to own. They are on our alligator watchlist.

As the newly created shares come free trading, there will be pressure on many gold and silver stocks.

Prepare for that opportunity well before it comes.

It could be your last ticket to pick up shares of great gold and silver stocks, on the cheap.
 

Zed

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So far the pawns refuse to come out of the box and get on the chess board.

[I too have been shocked, though I guess I should not have been. It was all too easy, so far.]
We have some top legal minds questioning the legality of many of the measures taken. It will not surprise if this government ends up in deep legal shit when the populous see the damage and go looking for heads to put on sticks. I'd not bat an eyelid if we end up jailing a raft of public servants here.
 

dpong

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We have some top legal minds questioning the legality of many of the measures taken. It will not surprise if this government ends up in deep legal shit when the populous see the damage and go looking for heads to put on sticks. I'd not bat an eyelid if we end up jailing a raft of public servants here.
I hope the best for you there. All of my observations are from over here. And it is not encouraging at the ground level. I hope for a mass awakening. No evidence of that yet.
 

Zed

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I hope the best for you there. All of my observations are from over here. And it is not encouraging at the ground level. I hope for a mass awakening. No evidence of that yet.
There is latitude to a point. For the time being they have a grace period given that most people where unsure of what this was. It will come in time and what they do next will be fairly important IMO.
 

Lancers32

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I saw a post on Twitter with a picture of a Australian Rules Football match that was held in Brisbane. It was originally supposed to be held in Melbourne but was moved. The pic shows the crowd with no masks. Was the picture legit?
 

Zed

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I saw a post on Twitter with a picture of a Australian Rules Football match that was held in Brisbane. It was originally supposed to be held in Melbourne but was moved. The pic shows the crowd with no masks. Was the picture legit?
Yes. It pissed a lot of people off, we couldn't manage to get children to hospital in Queensland but we could managed to get football teams on a field. Money Talks I guess.
 

dpong

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My friend Randy bought Sunrun (RUN) using the WTT system. The system bought it at 29.23. Currently traded at 76.45. Currently holding a 161% gain. Trailing stop loss set to 10% off the weekly high, so this shouldn't last much longer.

[My friend Randy is super lucky.]


ZJVyxe6U.png
 

jelly

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David Hunter's recent thoughts:


The melt-up is beginning. October will be strong. Should see S&P to 4500, DJIA to 36,000 & Nasdaq to 15,000 in 4th qtr. We will also see gold to $2300-$2500 & silver to $35-$36. GDX to $55, GDXJ to $100, SIL to $75, SILJ to $30. Oil to $50-$55. T-bonds beginning a correction.
 

dpong

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[Substitute “Stocks & Gold” for the phrase “commodities and services.”]

“If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the 'twenties, called flight into real goods (Flucht in die Sachwerte)or crack-up boom (Katastrophenhausse).5" -- Ludwig von Mises
 

Lancers32

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Yes. It pissed a lot of people off, we couldn't manage to get children to hospital in Queensland but we could managed to get football teams on a field. Money Talks I guess.

My point is there seems to be a fair amount of push back with all this nonsense. That's good. I want Mr. Bill to be the first to get injected with his vaccine.
 

Lancers32

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[Substitute “Stocks & Gold” for the phrase “commodities and services.”]

“If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the 'twenties, called flight into real goods (Flucht in die Sachwerte)or crack-up boom (Katastrophenhausse).5" -- Ludwig von Mises

Probably more so when your Fed account your digital account loses value instead of getting pennies in interest.
 

oldgaranddad

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My point is there seems to be a fair amount of push back with all this nonsense. That's good. I want Mr. Bill to be the first to get injected with his vaccine.
They probably will show Mr. Bill getting one of the first injections but they won’t let you inspect the vial or syringe for distilled water.
 

Lancers32

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Dow at 7200? Money has to go somewhere I doubt very highly it goes into bonds some will go into Gold much less into Silver. Only choice left is stocks. If the trend continues along it will be US stocks.
 

oldgaranddad

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Dow at 7200? Money has to go somewhere I doubt very highly it goes into bonds some will go into Gold much less into Silver. Only choice left is stocks. If the trend continues along it will be US stocks.
Lots of worthless fiat goes in to precious metals? If so, that would be propelling gold into Sinclair’s predictions. Stock are so overbought in insane multiples.
 

Lancers32

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Lots of worthless fiat goes in to precious metals? If so, that would be propelling gold into Sinclair’s predictions. Stock are so overbought in insane multiples.
Precious metals markets are too small for the big players to put too much in they favor stocks. PM will get a boost for sure but stocks get more. It won't require all that much money for the pm complex to go ballistic though especially the silver miners.
 

oldgaranddad

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Precious metals markets are too small for the big players to put too much in they favor stocks. PM will get a boost for sure but stocks get more. It won't require all that much money for the pm complex to go ballistic though especially the silver miners.
I totally agree but we all know there a tons of paper gold derivative products out there that the big boys will jump on like flies on a fresh steaming pile of excrement. I think this onslaught of big money into the paper gold arena will eventually make the house of cards collapse. It will be musical chairs with too many players, as soon as the music stops it will get very ugly, fast.
 

Rip Van Winkle

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I totally agree but we all know there a tons of paper gold derivative products out there that the big boys will jump on like flies on a fresh steaming pile of excrement. I think this onslaught of big money into the paper gold arena will eventually make the house of cards collapse. It will be musical chairs with too many players, as soon as the music stops it will get very ugly, fast.
Any of that going to siphon into PGM metals?
 

oldgaranddad

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dpong

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Gold stocks versus Gold. Notice what happened to the stocks every time Slow Sto got to this level. Another flush coming?
I see that. Another comment from me is that the chart shows gold miners have recently been as undervalued vis-a-vis gold as they ever get.

[But it's all about the timing.]
 

Strawboss

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Not too shabby for a new entry...although the lower fib level still might be tested??

Buy 'em when they are hated and out of favor....

1601835139083.png
 

Zed

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dpong

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Oh, one of THOSE assholes people.... I see.

View attachment 183075
Very funny! But actually it is very encouraging. It helps me realize how this system works. The longer I stand here with my butterfly net the better my chances to also be a very lucky asshole person. It's going to happen, man.
 

savvydon

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I would think Gold would be up more considering the USD is being taken behind the woodshed.
Yeah pre Comex it didn’t wanna give at all. PMs starting to get a little wind in their sales now. Still not convinced. This is all reflexive algo buying off dollar weakness. Feels like passive chop at the mercy of the dollar.
 

dpong

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[Maybe. I mean it's not what you'd expect.]

xd1IEwFm.png


8lggyud5.png



chart-26-1.png
 

Lancers32

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Metals look good although Gold is up against resistance. Miners could not hold the first half hour rally. Don't trust this move up.
 

Lancers32

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Low volume move higher today the longer this goes on the more I think we bottomed 2 weeks ago. Probably doesn't pay to be too cute. AG actually acted like a Silver stock today. Probably washed it out last week at just below the 50 fibo. 8 weeks off the tops now. Sucker rally or off to the races I think we get the answer this week. 1/3 long AG waiting to add HL and CDE on breaks.
 

Zed

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Very funny! But actually it is very encouraging. It helps me realize how this system works. The longer I stand here with my butterfly net the better my chances to also be a very lucky asshole person. It's going to happen, man.
That's it, it is the discipline to limit losses and REPEATEDLY go back to market KNOWING that every loss gets you closer to a win. It is HARD to do, but if you take ten small losses the odds are that you are closer to a big win than ever before. Requires a BULLETPROOF mindset.