Jim’s Mailbox

Posted at 2:38 PM (CST) by & filed under Jim's Mailbox.

Is That A Bell I Hear Ringing?
CIGA Bill Holter.

Dear CIGAs,

Attached is a chart ( www.stockcharts.com) for the HUI index going back 3 years on a weekly basis.  I usually do not talk or write about charts because they can and are "painted" to make a picture that the "planners" want us to see. In my opinion, they have painted themselves into a corner where the mining stocks are concerned.  So what does this mean to you?  It means that IF you have endured and held on to your mining shares and not been scared out, you will FINALLY get paid and get paid BIG! Let me explain.

If you look at the chart, you will see the MACD at the bottom (moving average convergence divergence), these are the two squiggly red and black lines that keep crossing over each other. Whenever the black line crosses over the red line from a high point or low point, it usually tells you the direction of the index for the next couple of months or so. You will notice that the highest crossover point where black crossed red to the downside was back in 2009 (after the ’08 crash). Each successive rally reached a lower height on the MACD’s and the low point crossovers were successively lower. This, while the HUI index is just a little bit higher but has been basically "marking time". During this period, Gold has outperformed the shares in a huge way. Another way of saying this is that the shares are now more undervalued vs. Gold than they have been over these 3 years. In fact, the shares have only been this undervalued twice since the bull market began, 2001 and 2008.

OK, so let’s put this sucker together. The MACD is right now crossing over to the upside from a very low point AFTER Gold has doubled in value and the shares have gone nowhere for 2 to 3 years.  The RSI (relative strength) at the top of the chart is nowhere near overbought, the index is above the 200 week moving average and bumping up against the 50 week moving average (after trading below it for much of last year). What I am describing is a coiled spring!  I am not saying that we go straight up from here, I am saying that the "trend" should be UP for the next 2-3 years while the weeklies work their way back upwards on a cyclical basis.

Charts can be painted yes, which is why I say the "planners" have painted themselves into a corner!  The have "painted" the mining shares into a position where the weak hands have already exited and are now owned by strong hands.  Of course, this "painting" that I speak of has been done by "shorts" bombing the shares in the hopes of depressing their prices and "bust" various companies.  It has worked to some extent but now the shorts must implement their "exit strategy".  The shorts who have painted SUCH a pretty chart for us now must buy!  Their own chart says so!  Forget charts, the fundamentals say so.  Fundamentally there were only 2 previous times in the last 10+ years to buy mining shares as cheaply as they are today relative to Gold.

THIS is exactly what Jim Sinclair was saying last night and this morning on his e blast, the shorts are about to get the daylights squeezed out of them as they compete with the entire list of buyers! This list included everyone, technical traders, fundamental buyers, weak hands looking to get back in, strong hands looking to add, sovereign wealth funds wanting to lock up resources etc.. Last but not least on this list are the shorts themselves, both legal and illegal shorts will now be forced to compete with each other to cover the BILLIONS of shares they have already sold some of which never even borrowed or exist!

Charts are usually "backed up" and explained later by fundamental events.  The list of potential Gold/mining share bullish fundamental events today is very, very long indeed.  Continued printing on top of already bloated central bank balance sheets and money supplies, defaults of banks, central banks and sovereigns, war, a derivatives meltdown to name just a few obvious ones.  The point I am trying to make is that the "setup" is here and now. The possible fundamental events exist at the same time the chart says that something BIG is coming!

Can we go through another "paint job"?  Of course we can.  Does it take another 6 months before this scenario takes place from a more oversold fundamental and technical position?  Of course. …but I don’t think so.  I believe here and right now, the mining shares begin to accelerate and we will finally get paid in a huge way for gutting it out!  I believed a couple of weeks back that another raid would take place which I do believe "they tried" and failed at.  Now, I think I can hear the bell (that they never ring for the masses to hear) ringing!  I think right now, you need to be as "long" as you can be, the mania stage is just beginning…finally!
Regards,
CIGA Bill H.

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Counting Ounces, The Most Important Concept Of All
CIGA Bill Holter

Dear CIGAs,

Following up to my piece (above) "Is that a bell I hear ringing"?, I wanted to break down the fundamentals (realities) of why.  You saw the chart of the HUI index and how it has been "coiled" and compressed to where we are now which is potentially, a very explosive mode. As I mentioned, technicals are always "explained" by the fundamentals after the fact. This time will be no different no matter how many hedge funds sell naked short or the official sector plays games to depress Gold and Silver prices, "water will seek its own level", true values will be recognized as Mother Nature cannot be denied forever.

Central banks across the globe absolutely 100% MUST create more liquidity to "cover up" the global insolvency. This will not and cannot work forever but it can and already has postponed the final day of reckoning in bankruptcy court.  Very simple, as these central banks try to postpone reality, they are making their existing currencies worth less and less with each "printing".  Real money, Gold on the other hand can only become more "plentiful" over time as each ton of ore is dug up, crushed, leached, heated into dore and then refined into ounces.  THIS is what mining companies do, not to mention what is done beforehand to map, scratch the surface and drill to find out where to start digging.  My point is this, mining companies are the real life twin of central banks except their product IS real money as opposed to that which is simply printed or digitized.

  If you can understand this concept, that mining companies ARE the true central banks to a real monetary system with a real currency, then you will understand what I have said for several years now…"if you own mining shares, you will be a charter member of the next banking system".  Here is a very simple question, 100 years ago, would you have liked to be one of the founding partners who owned and controlled the Federal Reserve?  How fabulously wealthy could you have become?  How many future generations of your kin could you have provided for?  THIS, is exactly where we are now in the monetary system.  The system will, MUST be changed and you have the opportunity to become a charter member of this new system!

  As to the fundamentals of "why" the shares are in my opinion the buy of a lifetime, here goes.  First, the shares have only traded this "cheaply" in relation to Gold twice in the last 10+ years.  All of the obvious signs are now in place that what is now considered "money", is dying.  Money, in today’s form is backed by debt.  This debt without question is pure and simply "bad", there is too much of it and the quality is laughable.  The global banking system is upside down as is real estate (the collateral) on a global basis.  While the debt was being created, to "juice" the system even further, over $1 Quadrillion (yes, with a "Q") of derivatives have been created.  The "catalyst" for the coming monetary death can come from any direction at any time.  We could have a daisy chain of banking failures, sovereign credit failures, failed auctions, central bank dishoarding of U.S. Treasuries, an oil shock caused by a war, fraud that cannot be hidden any longer, or a natural or man made disaster to name but just a few.  Or…we could wake up one day and there be "no bids" for anything…anywhere…for no apparent reason.  The bottom line is that the charts are saying that the time is "ripe" for SOMETHING to happen in a big way.

  The chart of the HUI and the chart of the HUI relative to Gold (attached from www.stockcharts.com) are screaming "buy" and for good reason.  Major mining companies are trading like Gold is $900-1,000 per ounce, exploration companies are trading as if Gold were $300-400 per ounce!  The near future will be all about "counting ounces", the cheapest "ounces" on the planet are those that are still in the ground and owned by mining (primarily exploration) companies.  If you understand the concept that Gold, can in Dollar terms, literally go to infinity then you are half way there.  The rest of the way there requires that you understand that buying an exploration company with "X" amount of proven ounces in the ground can work out to buying (controlling ounces) Gold at $30 per ounce or even less!  So, for your same Dollar today, you can control 50 times the amount of present above ground ounces in hand, and this does not even take into consideration that your mining company will continue to explore and probably find even more mineable Gold!

  Is "this" it time wise?  I think it is, but what I think does not matter.  The "market" will tell us and the charts are saying that right now is a very likely point in time.  Of course, we can go through yet another cycle where the shares move up and fail to break out only to set up again exactly where we are now.  Fundamentally, once the shares do break out, massive amounts of money will flood into a pathetically small market capped industry no matter what Warren Buffett says or what the "planners" want you think.  Maybe today isn’t "the" day, week or month, it really doesn’t matter because "it" is coming.  "It" being the process of counting ounces and calculating your net worth by how many ounces you own and control.  If anything that I have written or said over the last few years was important or had merit in any way, the concept of "counting ounces" under your control, ranks as THE most important concept of all!
Regards,
CIGA Bill H.

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Good evening Jim,

Beautiful article. I wish things weren’t the way they are, but no use in fighting reality. Recognizing the true state of things seems to be a task only a few are willing to understand and more importantly accept. I appreciate what you have so graciously offered, it is a gift and I thank you. All I have in return is to let you know that I have my stock certificates, my physical, an in ground reserve placer deposit which I’ll be micro mining slow and steady, and a willingness to act when the rest of the world looks on in the other direction. Saving the world by saving myself. I’ve tried to help others see what is taking place but nobody cares. Even when they do care and request what they should do because time is proving our line of understanding correct, they still fail to act.

Thank you for being real,
CIGA Paul