Mexico has long been a silver juggernaut. The indigenous peoples had been successfully mining this shiny-white metal since well before the Spanish colonials swarmed the shores in the 16th century. Several hundred years of Spanish development globalized Mexico’s silver prowess. And still today in the post-independence era silver mining is still going strong.
The Chinese stock markets have been rocketing higher in a popular speculative mania. New Chinese investors are flocking to their local red-hot markets, borrowing heavily to buy hyper-speculative stocks. Like all past manias, this one is guaranteed to end badly. And when China’s parabolic stock indexes inevitably collapse, the global stock markets face serious risks of getting sucked into that fear-fueled stampede.
In simple-average terms, the elite S&P 500 stocks were trading at a staggering 25.9x earnings!
And in market-cap-weighted-average terms, their collective P/E wasn’t much lower at 24.0x. These levels are dangerously high. 14x is historical fair value for US stocks. 21x is expensive, and twice fair value at 28x is hyper-risky bubble territory.
The Spaniards of centuries past controlled the world’s elite maritime fleet. And this fleet’s colonization of the Americas is well-documented. The Spanish Crown would have told you their primary mission was to convert the indigenous people to Catholicism. But in reality it was trade and a craving for all things exotic that ultimately supported this campaign.
And perhaps the one thing that the Spaniards couldn’t get enough of was silver. In Mexico and Peru in particular they found hoards of this shiny-white metal. And via both conquest and discovery they quickly gained control of the world’s silver trade.
Though Spain no longer controls the trade today, Mexico and Peru are still atop the silver rankings, collectively responsible for about one-third of the world’s mine production. And this allows for fortunes to be made by the mining companies on the ground in these two countries. In Spanish the word fortune is translated as fortuna. And Fortuna Silver Mines is poised to live up to its name as one of Latin America’s premier primary silver producers.
Silver reversed sharply higher over the past week or so, surging dramatically. This was just after it had successfully retested major secular lows, ramping the odds this strong buying is the vanguard of a long-overdue major new upleg. As usual, silver’s coming gains will be fueled by gold’s own advance. As the yellow metal mean reverts higher initially on heavy futures short covering, capital will flock back to silver.
The mighty US dollar has been red-hot in March, rocketing higher on the incredible divergence of major central-bank policies. While the Federal Reserve’s first rate-hike cycle in 9 years looms, the European Central Bank has started aggressively monetizing sovereign debt for the first time ever. The resulting yield differential has catapulted the dollar parabolic, portending a major reversal and fantastic trading opportunity.
The bottom line is the parabolic US dollar is caught up in a popular mania of universal bullishness.
After just enjoying its second biggest and fastest rally on record, the USDX is the most overbought it has been since 2008’s once-in-a-lifetime stock panic.
After all past extreme parabolic surges, the USDX has suffered major corrections that erase most of their gains.
Odds are a similar reversal is imminent today.
The latest record highs in the US stock markets have unleashed astounding complacency.
Traders are utterly convinced that the past couple years’ massive Fed-fueled rally will continue indefinitely. But with today’s lofty stock markets extremely overvalued, wildly overextended, and rampantly euphoric, a serious selloff is looming.
The prudent contrarians preparing for this inevitable major reversal are going to earn fortunes.
Mexico’s massive precious-metals belts are some of the world’s finest.
As global #1 in silver production they are obviously quite well known for the shiny-white metal.
But these belts have also been flexing their gold muscles recently, placing Mexico among the world’s top-10 producers.
The US stock markets’ latest record highs have left traders exceedingly euphoric and complacent. They are utterly convinced this stock bull will power higher for years to come. But their enthusiasm is very misplaced. In real inflation-adjusted terms, the US stock markets only just regained breakeven levels 15 years after the last secular bull peaked. Now the secular stock bear ever since is overdue for a new cyclical bear.
Gold’s sharp early-year surge has fizzled in recent weeks as investment demand faded. The primary reason is the universal belief that the Fed’s upcoming rate hikes are very bearish for gold. Higher rates will make zero-yielding gold relatively less attractive, argues this popular thesis. But history proves just the opposite…
There’s no doubt the gold-mining stocks remain deeply out of favor, collateral damage from the Fed’s gross financial-market distortions of recent years. But sentiment is shifting, with stock traders starting to regain interest in this left-for-dead sector.
Gold-stock trading volume is really growing as capital returns. And since higher volume is an essential precursor to major new uplegs, its growth is a very bullish portent.
It was in 1896 when prospectors stumbled across large quantities of gold in one of the tributaries of the Yukon’s Klondike River. Word of this discovery spread like wildfire. And in no time at all prospectors from far and wide set course to get a piece of the action. The aptly named Klondike Gold Rush ended up being one of legend!
Gold surged this week on massive buying from stock investors and speculators. This critical group of traders and their vast pools of capital utterly abandoned gold in the past couple years. So to see them start to flock back is a watershed event, heralding a major reversal in gold’s fortunes.
And with their gold exposure remaining near extreme lows, they have vast buying left to do to restore prudent portfolio diversification.
Silver looks to be on the verge of a major new upleg, finally emerging from the past couple years’ ugly sentiment wasteland.
This beleaguered precious metal recently bottomed as futures speculators threw in the towel on their extreme shorting.
And while investors’ ongoing silver stealth buying continues, it’s been modest.
So there is vast room for capital inflows to accelerate dramatically as gold mean reverts higher.
Silver dropped 19.7% in 2014 after plunging a brutal 35.6% in 2013. Such dismal performance naturally left silver universally despised, the pariah of the investment world. But that is changing.
Silver is ready to run again, a very exciting prospect given the huge uplegs it is renowned for.
Gold stocks have suffered a miserable few years, becoming a laughingstock even among contrarians.
But this despised sector’s seemingly-endless downward spiral has left gold stocks vastly undervalued relative to gold, which drives their profits.
The fundamentally-absurd disconnect between gold-stock price levels and gold can’t last.
And it sure looks ready to end, making 2015 the year gold stocks shine again.