When is Market Bottom?

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Before this ship can recover, we need to scrape some barnacles off the bottom, clean the oil tank of water, and buy some new spark plugs. 

The barnacles are the junior exploration companies that cannot pay their rent, don’t have assets worth saving, and fail to understand that six months is not going to save them. Some of the projects we have looked at as an industry are not going to make it. Management should have the wisdom to say, “OK, what is an economically feasible project and what will it take for my project to make it to that stage?”  If their project is NEVER going to make it, they should have the wisdom to kill it–and maybe even the company. 

 

The oil tank of water is the lack of recovery for flow-through and other market tools that have been so abused that no one trusts them anymore. Along with rebuilding trust and reliability with market tools, we need the following:

 

  • Brokers to work for the client (i.e. the investor) and not the mining company.
  • A better understanding of how online trading is killing Investment Advisors (IAs) and how the lack of direct investment by IAs is in turn killing companies.
  • Face-to-face conversations with the fast money that has left this market to see if it’s gone for good. 
  • Groups that are focused on promoting companies starting to look at cost structure; stock exchanges that have nothing to do to work on relaxing rules that don’t matter; and lawyers getting with the program and figuring out how to shed costs.  

 

 

The spark plugs are what we really need once we get the hull cleaned out and the engine’s fuel system flushed and ready to go. The spark plugs are the Voisey Bays of the world, the economic winners that pull everyone else along with them. We need some impressive discoveries that will ignite excitement and make people believe in the magic again. 

Until this happens, we are going to sputter along slowly with blueish-black smoke coming from the smokestack and no power to keep the waves of the general market from going over the deck, ending with the whole market sinking into the sea. If we clean out the engine, scrape the hull and prepare, we can recover, even if it may take some short-term pain to get to that point.

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