"You're asking all the wrong questions!"

“You’re asking all the wrong questions!”

How do you find the stocks that are most likely to return 100-1 gains?  That’s the question Chris Mayer wanted to answer.
After a year-long study of the biggest performers of the last 50 years, Chris believes he’s gathered a “template” of the main characteristics of top performers.
Chris was a corporate banker before joining Agora Financial as an editor in 2004.  He recently released his findings in a new book, 100-Baggers.
I asked Chris about his findings and how they might apply to resource stocks…

collapse bail in“The capitulation we’ve been talking about for a couple of years is beginning to occur…
I suspect that this capitulation will be over by the end of October. And it could get MUCH WORSE before then.” 

Charles-PonziThis particular Ponzi scheme hit close to home for me because I knew Robert personally.
When I found out about it, I couldn’t believe this person I’d spent time with was capable of this criminal act.
But as sobering as that was, it pales in comparison to another Ponzi scheme most of us have been suckered into…

Gold Miners WinnersWe are seeing a select group of producing miners – and companies that are close to production –catch higher bids in the stock market.
The losers are still getting punished but the most solid companies are moving higher.
Smaller gold miners that are successfully producing and generating revenues are bottoming out and going higher.
The chart below shows the recent history of a few of these companies over the last year and a half:

barbaric relic‘Barbarous Times’ Ahead
Some call gold a ‘barbarous relic,’ after famed economist John Maynard Keynes used this term to describe the gold standard in the first half of the 20th century.
They’re right. Gold is a barbarous relic, but these are also ‘barbarous times’

minerOur main subject today, though, is a trend we’ve been seeing in Canadian gold stocks.  Some companies have seen much higher share prices over the last 18 months.
Steve Todoruk, a broker at Sprott Global Resource Investments Ltd., reveals the common thread in a handful of Canadian stocks that have risen significantly in this timeframe:

In the mining sector, mergers and acquisitions can deliver rapid returns to shareholders.
Investors in Cayden Resources saw their shares swell by 300% in price late last year, when Cayden received a takeover offer from Agnico Eagle Mines.
Steve Todoruk, a broker at Sprott Global Resource Investments Ltd., has been eyeing the next possible takeover.  He believes he’s narrowed down the most likely targets.
In a recent note, he explains why it comes down to safety for the company making the acquisition:

As Rick Rule puts it, “There are over 2,000 junior exploration companies around the world and most of them are destined to fail for geological reasons alone. The idea of investing passively in a basket of small and micro-cap companies and weighting them based on their size is problematic in the gold sector.”
Rick said this is why this new ETF is so significant.
Until now, there hasn’t been a way to own a junior gold mining ETF that favors some companies over others based on qualitative factors. “I want to own companies based on their track record of creating value, not on how big they are.”

Over the last few years, gold has simply been losing the war against the US dollar, says Rick Rule.  
Now gold’s price is stabilizing, but Rick noted in his recent call that gold’s struggle against the US dollar is uphill, and that the dollar still has a strong upper hand:
The dollar remains the predominant world currency, and I think it will remain so for many years to come. It’s just that over the last 12 months, gold has been losing less badly against the dollar.”

We’re not there yet.   The gold price hasn’t been low enough yet for there to be a real cleanse.   The landscape is still littered with the ‘walking dead’ among junior miners and management teams.   For that reason I’m not convinced that we’ve seen the bottom or that we’re going to see a rapid turnaround in mining stocks.
The bull market was especially long.   I’ve never experienced ten years of ‘summertime’ in the mining sector before. Usually the bull market trends are a lot shorter.  During those years of ‘summer’ we saw a horrendous waste of capital. A lot of money was spent on poor projects and poor mines. It’s going to take a while for all that to wash out.

Gold has fallen from over $1,300 in mid-August to around $1,200 per ounce as of October 3, dragging many gold-related stocks down with them. 
Should cautious investors steer clear of the sector for now?  Or is this an opportunity to buy gold stocks?

Besides what the Fed is doing by printing money, there is another big threat to the dollar, warns Alasdair Macleod. Countries in Asia are banding together in order to rid themselves of using the dollar in international trade.

There is a thing called the Shanghai Cooperation Organization, an agreement principally between China and Russia, whereby they tie up the whole of Asia as their backyard.   Other members are the countries north of Tibet, Tajikistan, Kyrgyzstan, Uzbekistan, and so on.
In or soon after September, four new members will join – India, Pakistan, Iran, and Mongolia.  That’s almost half the world’s population. The objective of the SCO is basically to settle international trades between these countries without using the dollar.

It’s not just members of the SCO, either, that could eschew the dollar.  The Middle East, for example, now principally sends exports to China and India, so there’s no pressing reason to use the dollar there.
If they succeed, the whole Asian continent, at some point in the future, will be off the dollar
They’ll use their own currencies, gold, or something else.  That’s a very big change, and I don’t think people fully appreciate what that means for the dollar.”

silver mineJust days ago, a Canadian mining company, Imperial Metals Corp. (III-T), announced that their tailings pond wall had been breached in one area at their Mount Polley copper-gold mine in central British Columbia, Canada.  
In less than 24 hours after the breach, horrific damage had been caused by the tailings (leftover rock that was mined that had very little copper or gold) and water that burst into a nearby river. 
Here is what the Mount Polley mine disaster means for mining companies: