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KMW Blog Oct 4, 2016: Jim Goddard of This Week in Money interviews John Kaiser about the Mines and Money Americas Show


Posted: Oct 4, 2016JK: Jim Goddard of This Week in Money interviews John Kaiser about the Mines and Money Americas Show
Published: Oct 1, 2016HSC: This Week in Money: Jim Goddard asks John Kaiser about the Toronto Mines and Money Show

On September 27, 2016 at the Mines and Money Americas show in Toronto I presented A Crowd-Sourced Model for Valuing Exploration Projects which will revolutionize the global junior resource sector if it becomes a reality. I am currently working with an Australian group to develop an online portal which will allow members to privately engage in outcome visualization of exploration plays and, if they so choose, share their visualized outcome in a public space, a "Boomtown" dedicated to that exploration project of the publicly listed company. For an example of a visualized outcome, check out the KRO Outcome Visualization page where I post the outcomes I visualize with the help of the offline software I developed to make it easy.

The crowd-sourced version will carry a disclaimer warning that all members who share a visualized outcome are assumed to have a conflict of interest with the agenda of manipulating the market and the behavior of their peers so that they can personally benefit. That is how the financial world actually operates, but because its participants do so from the basis of credentials that demand trust, nobody will ever admit that this is the reality. My crowd-sourced portal avoids this problem because its members' untrustworthiness is explicit and because sharing privileges require a real world anonymity for the members. The are nobodies. No fancy abbreviations trailing their names. In other words, all members who start sharing their visualized outcomes or critiquing those of others start out with a zero reputation and never ever have credentials. Nobody knows if an outcome shared to a Boomtown by JohnDoe was created by a newsletter writer called John Kaiser, a professional geologist, a mining engineer, a stockbroker, a person who reviews technical reports for the BC Securities Commission, a company shill, a teenager, a short seller, or even the Prime Minister of Canada. Each member is acting as a private citizen, and as such is entitled to dream and share those dreams with the world in a public space. The member's reputation evolves exclusively from how he or she behaves within the portal which keeps track of everything including the reactions of all its members and makes it completely available to all members. There is nothing like this in the real financial world because most dealings are between specific parties behind closed doors, not inside a fish bowl with memory. In the real world outrageous abusers end up in jail or barred from operating in positions of trust, but subtle abusers wander from victim to new victim because the past is not public.

Mermbers of a crowd-based portal where everybody is assumed to have a conflict of interest can only evolve a capacity to influence others by developing a crowd-reviewed reputation. Without his prior branding Donald Trump would be ignored as nothing more than a blowhard on the street corner. My portal will allow anonymous individuals to create brands that are worthless outside the arena. Cobbling together an outcome that relies on implausible assumptions will not build anybody's reputation. Nor will consistently sharing negative outcomes because that is mother nature's bias and any dummy can build a track record of consistently predicting disappointing results. Sharing outcomes that are plausibly linked to existing information and matched with appropriate mining cost scenarios will build a member's reputation, even when exploration results fail to deliver the projected fundamentals. Presenting a plausible hypothesis and adjusting it to reflect new information in the style of the scientific method regardless if it boosts or diminishes the hypothesis will build reputation. When a member shares a visualized outcome for the first time to a Boomtown the system will alert all other members who have chosen to follow that member. If that member has a strong reputation, lots of members will check out the new visualized outcome. How does its implied value relate to that of the market value or the consensus range of outcomes already shared by others? Do the underlying assumptions make sense?

A strong reputation motivates members to track down good exploration plays, accumulate a stock position, and then share the visualized outcome with a reasonable expectation that there will be some stock price and liquidity gain as others take note. Front-running your "pick" and selling into the market response is fine if you are anonymous and have no real world credentials on display. The difference with the real world is that your "pick" is not a "trust me" tout that exploits the greater fool theory. Your "pick" is an after-tax NPV based on several dozen discrete numeric decisions you have made that is adjusted by the system to reflect the uncertainty associated with the stage of the project (the "rational speculation model") and turned into a fair value stock price. If your rich price target rests on non-sensical numbers, you will be publicly flamed by fellow members. The quest for reputation within a competitive, transparent arena will cause the distribution of shared outcomes to deliver a consensus range that can become the basis for the project's market value and the outcome investors bet with or against. Since it will never be clear whether it is the market trend or the crowd's consensus trend that is determining the other, and because exploration work delivers results whose fundamental nature was unknown before the start of the program, there is no "solution" to this "game" like there is for tic-tac-toe.

Once a crowd-based portal of this nature is operational, the expectations of the crowd will converge upon the fundamental reality of an exploration project well before the a QP signs off on a 43-101 or JORC resource estimate or economic study. It will never be exactly the same, because the crowd does not have the actual data and is limited to a DCF formula that relies on life-of-mine averages whereas a 43-101 economic study will be based on optimized ore and depreciation schedules. Provided enough members have shared outcomes to a project's Boomtown, somebody's outcome will be closer to the 43-101 outcome than those of others. Sometimes it will be the pessimistic or optimistic outliers. Some members' reputations will gain, others will lose some reputation. Nobody is dead right all the time, but some will be more often close than not. A reputation built over time can only be destroyed by embarking on a deliberate betrayal of the crowd's "trust" in that member courtesy of the reputation that was exclusively build up within the portal. The regulators will probably not like this one bit, though the smart ones will realize that not only will this bring greater integrity to the market's understanding of what an exploration project is all about, but it also bestows legitimacy on the 43-101 reporting system.

My crowd-based portal will revolutionize the resource junior sector because it will empower the crowd to connect the information dots provided by the companies in a public manner that enables everybody to understand the size of the expected prize and on what it is supposed to be based. Imagine a Boomtown as a Roman coliseum on whose arena floor members share and defend their visions like gladiators. Imagine other members choosing to enter the Boomtown coliseum and being seated based on their reputation. Imagine each member having the ability to color their seat red, gray or green to reflect their current sentiment about the Boomtown. Imagine each member giving thumbs or down to specific gladiators on the arena floor. Imagine you as a portal user asking to see who likes or dislikes JohnDoe's outcome for that BoomTown and clicking on that member's seat so that you can explore thhat member's history. Imagine running a time series "video" of that Boomtown's coliseum stands to study the changing sentiments. I am just scratching the surface about what can be done with crowd-based portal of the sort I am developing.

A big thing missing from the resource junior space is the old rumor mill, not just about pending results, but about capital in and out flows. Market activity no longer makes sense because algo programs now operate in the market, largely on the basis of trading activity data. Brokers used to play a very important role as network hubs. But nobody uses the phone anymore. Stock forums such as Hot Copper and Stockhouse are the new network hubs, but they are linear and unstructured. Investors do not know what the rest of the crowd is currently thinking or trending. The junior resource sector is screaming for a mirror such as I am building. JaneDoe can see herself in the coliseum crowd or the arena floor; everybody else can see her too but only she knows her identity. Imagine watching yourself on TV at a soccer game either as a spectator starting a "wave" or a player kicking ass as the crowd roars or boos. Imagine monitoring the market value of the project in comparsion to the valuation implied by the consensus outcome, or that of a high reputation member who has just entered the Boomtown arena as a gladiator. Imagine how much fun it will be again to gamble on exploration juniors, either as longer term fundamental bets stretching over an exploration season, or as intra-day bets ahead of or right after news that requires a rethink of the project's fundamentals.

My crowd-based portal is projected to be ready for beta testing in Q1 of 2017. Anybody interested in being a beta tester should contact John Kaiser at Why would you want to be a beta tester? Because when the commercial version goes live you will already know how it works and you will have a head start building your reputation from the starting point of zero. The portal will initially feature all serious ASX/TSX/TSXV listed resource juniors and their main projects, but eventually there will thousands of Boomtown project nodes waiting for somebody plunk down the first visualized outcome. It will be like a gold rush as thousands of retirees, students, professionals, punters, and others scour company web sites and pick IR reps' brains for the basic information needed to visualize a plausible outcome and "stake" it to that Boomtown before the rest of the crowd arrives. Resource juniors who have not been adopted by one of the financial cartels better get ready for this rush which will bypass those juniors run by lifestyle management teams.

 
 

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