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Kaiser Research Online: Ready for a Resource Junior Turnaround


Kaiser Research Online - Ready for a Resource Junior Turnaround

Kaiser Research Online has been revamped to deal more effectively with a resource junior bear market that is now entering its eighth year since gold peaked at $1,900 in 2011. And we are now better positioned than ever for a turnaround. All features of KRO are now available through one single-user KRO Individual Membership that costs USD $450 per year or $200 for 90 days with or without auto-renewal. Visit our Membership 2019 for details.

Although I am tackling 2019 as if the resource sector bear market will continue, I believe we are close to a turning point for a sustained revival of market interest in the resource juniors. At the end of 2015 when I published the 2016 Bottom-Fish Edition I stated that this is the best ever collection of bottom-fish and that we will never see anything like it again. During the first half of 2016 the juniors experienced a strong uptrend which stalled in August 2016. My 2019 collection of companies with bottom-fish spec value ratings has a considerably weaker cash pool than in 2016, but it is cheaper, more diverse, and interesting. I am excited about it, especially companies I have never written about.

Spec Value Rating Key - 2019 onwards
Unrated Spec Value Zombie Spec Value No Spec Value Poor Spec Value
Bottom-Fish Spec Value Fair Spec Value Good Spec Value
Bottom-Fish SV Favorite Fair SV Favorite Good SV Favorite

I have redesigned my speculative value rating system so that it sits on a spectrum and gives me flexibility to change a junior's rating. All Bottom-Fish and Spec Value Hunter picks from the 2016-2018 have been closed out and assigned a rating under the new system. Some have been tagged "Unrated" because they require further research. Visit the New KRO Guide for an explanation of the Spec Value Ratings.

A preliminary list of resource juniors with Bottom-Fish, Fair and Good Spec Value ratings is available through the Daily SVH Report. It has the daily market activity for each company and the news release links for the current week. All KRO comments for the last 7 days will show up in the KRO Comments. This report will include Zombie, Poor and No Spec Value rating comments. There are two types of comments. One is a Spec Value Rating such as Spec Value Rating for Nevada Exploration Inc which also shows up at the top of the KRO Company Profile and within the KRO Search Engine results. Out of necessity these SV Rating comments are short. The title for the online comment will never reveal the actual rating. The other type of comment is the kind KRO members are familiar with, either a development specific comment or an extended analysis which will have a title that hints at the topic.

KRO has an important improvement that deals with the technical headache associated with posting a comment online. In the past a comment I wrote during the day showed up in the daily report but only after the entire web site was updated, usually between 7-8 pm pst which is late for east coast members. I would then post new comments manually afterwards and maybe send an email notice. The late web site updating is a result of key data feeds, so that, unfortunately, will not change. But I have now automated the comment posting process so that I can quickly post a comment online as a standalone anytime during the day and have it show up in the KRO Comments report. I can also drop the link into the SVH Slack channel and notify everybody that it exists.

Active KRO Individual Members are eligible to be members of the KaiserResearchOnline Slack workspace at my discretion, which means that if anybody becomes abusive or starts spamming I will deactivate their Slack membership. I encourage KRO members to accept their Slack invite and register. You can set up Slack to send you an email notice whenever a message is posted in a channel to which you subscribe, or, even better, download the Slack app to your smartphone. Over the next 6 weeks there will be a constant flow of new Spec Value rating comments as I work my way through the list.

Currently there are a couple hundred companies with Bottom-Fish, Fair and Spec Value ratings, a number that can grow or shrink over time. This list is large so that I, and those KRO members who like to do their own research, can more effectively track them for developments that might make buying them timely. On January 1, 2019 I will publish a much shorter list of favorites that will show up in the Daily KRO Favorites Report. This will be like the original Daily SVH report which featured market activity, news release links, and any comments related to the favorites published that week. If a company is tagged as a favorite it means that I believe it is more timely and topical than others with Bottom-Fish, Fair or Good Spec Value ratings, and thus deserves more detailed coverage. The KRO Favorites list is intended for members who don't want to do their own research, just focus on the companies that have my favored attention.

I have revamped KRO with a simplified rating system and cheaper membership fee that covers everything. I have also permanently restricted the KRO Company Profiles and Comments while still providing lots of free stuff in the form of the Free Corporate Profiles and theme based resource centers such as the Nevada Center. I will also continue Discovery Watch except that it will draw on work I have already done for the KRO membership which the new SV rating system will accommodate.

But why bother with the KRO revamp if the resource juniors are having the most miserable yearend finish ever in the absence of a 2008 style crisis, and that at the end of a bear market that began in 2011?

The prevailing mood is that extinction follows the seven years of famine that followed seven years of feast. The course plotted by the Trump administration for the world in geopolitical and economic terms is leading to a period of extreme uncertainty and turmoil one would expect to further dampen speculative interest in resource juniors. Since June 2018 metal prices and resource producer equity prices have been in a downtrend, behaving like a canary in a coal mine with regard to the outlook in 2019 when the complex consequences of an escalating global trade war start taking effect. What happens after a sharp equity market correction and economic downturn in the United States? When the dread of a shrinking personal future which underpins a rising global enthusiasm for thug rule gets replaced by an explicit reality? Destabilizing resentment will go through the roof, squaring off within the rural-urban, old-young, rich and not so rich, and secular-religious divides that have evolved in the United States. What matters is not how social conflict unfolds within the United States, but how thug nations elsewhere in the world cope with their own internal stresses in response to the American withdrawal from a unifying global leadership role. This is the uncertainty that is relevant to the resource juniors, because there is only one universally plausible response - a rush for physical gold ownership. Demand for raw materials may sag, but demand for insurance against uncertainty will soar.

Gold fared poorly in 2018 as a mesmerized world watched the Humpty Dumpty Show, waiting for Humpty Dumpty to end the show by falling off the wall, after which everything can get back to normal. But the moral of the Humpty Dumpty story is that of crossing a point of no return. Have we gone through this inflection point? I hope we never do but the threat may take a long time to fade, for Humpty Dumpty goes beyond one individual, and that is why I expect that the recent gold uptrend will develop staying power. We are not facing a financial crisis in the style of 2008 where the savings of risk-adverse individuals were endangered by the house of cards constructed by the financial sector. We are facing a perceptual crisis of what defines the global order, a slow motion process that allows niche sectors such as cannabis and the resource juniors to flourish. The Bitcoin bubble with its endless crypto clones and US dollar parasitism is done, and while blockchain is a promising technology, especially for a world losing its sole super-power leader, it is more of a replacement necessity than a very profitable, winner-take all big new thing. The Canadian cannabis bubble is in a lull, but it will revive as it shifts its focus to the possibility of legalization in the United States. During the past couple years it has sucked the risk capital oxygen away from the resource juniors, but precisely because it is a winner-take-all story already in an advanced stage, new cannabis startups are dead in the water. They missed the boat. Resource juniors, in contrast, do not benefit from winner-take-all dynamics because, except in the case of obscure metals, no deposit economic at prevailing prices displaces other mines. Every serious resource junior can become a winner in its own right. If gold develops an uptrend sustained not by rising inflation or declining exchange rates which leave the mine economics a wash, but rather as an uncertainty hedging destination for capital while existing gold owners become increasingly reluctant to part with their gold, investor interest will return to resource juniors with a gold focus, be it "ounce-in-the-ground" optionality plays or discovery exploration plays. Even while everything else starts to become unglued!

The outlook for other metals is complex, but if the Humpty Dumpty Show fosters geopolitical conflict that disrupts global supply channels, there will emerge fascinating opportunities for resource juniors. We are entering a phase similar to the late seventies when America seemed to have lost its way but different in that deflation risk, not inflation, characterizes the current situation. During the seventies gold went from $35 per oz to a peak of $850 before settling back at $400 after Paul Volcker's monetary shock therapy tamed inflation. At the time the main rival to the United States was the Soviet Union, a country with a smaller population that proved to be more a mirage than a reality. Today the rival is China, a nation with a four times bigger population run by an authoritarian dictatorship that has no qualms about growing itself by stealing technology from others. From a military perspective China is not even a mirage, but on the global economic stage it is very real and catching up to the United States as the biggest economy. A foreign policy of stopping China in its tracks and forcing it to stand down is a recipe for a much higher real gold price. The 23 minute presentation I gave at the MIF November 2018 conference spells out my outlook in greater detail.

 
 

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