Supercycle Bust

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I can no longer resist commenting on the fall in metal prices that seems to be making a liar of every mining investment pundit. You have no doubt read more than I could write about falling metal prices. Thus I do not present any new, discouraging data here. Rather I look at other signals that things may be slowing down, so that you can make the only decision that counts: do you sell, hold on, or buy like mad at the lower prices.

I work part-time for InfoMine. We currently have eight geologists who analyze mining company data and post it in a database that is accessible for a large fee. More and more people are signing up for this service. Seems there is an extraordinarily growing interest in data about mining companies on the part of investors. I cannot help wondering if that means that fundamentals are suddenly coming back into fashion as a reason to sell or buy stock. Seems like the higher the metal price, and the higher mining stocks, the fewer the number of people who look at the mining company fundamentals before buying stock. Seems as though in times of high prices, people are buying on faith or simply following a herd instinct. In a falling market, they get selective.

Because of the increased demand for the InfoMine service, we are looking to hire more geologists, mining engineers, or intelligent people to undertake the analyses. Normally we cannot raise even a single resume from the mining industry-employed folk. Last week we were flooded by applicants for the new jobs. Seems that every single one of them is working for a junior mining company and every single one of them is terrified they are going to be laid off. Simply put: the job market is slackening.

My daughter worked in Orange County for a consulting company serving primarily the housing, big building, and infrastructure civil engineering market. They ran out of work for her and two other juniors. Luckily she soon enough got a job with a consulting company serving the good old stand-by market: contaminated site cleanup, particularly contaminated mine site cleanup. Good for her, but not good for mining stocks.

InfoMine has a section called EduMine. It provides on-line courses on mining topics. Again the demand for these courses has soared. Just like, apparently, the number of people seeking to enroll in MBA courses has soared. Two similar indications of peoples insecurity about the security of their jobs. I believe that we are instinctively sensitive to unquantifiable factors that may affect our incomes and security. So we "see" or "feel" the downturn coming well before we can articulate it. Seems a lot of people are "seeing" things regarding jobs security. You decide if this is the cause, result, or predictor of metal price movement and share value.

Then there is the even more gloomy fact that we have now seen both presidential hopefuls in action in a church. And we realize that both are more interested in faith, redemption, and revenge than in the economy. The only difference between them is how quickly they will go to war, how soon they will prosecute a woman and her doctor for what is currently legal, and whom they will appoint to the Supreme Court. Neither seems to have a clear handle on, or for that matter an interest in, what to do to the energy issues or hence the economy and metal and share prices.

I have written before that I believe these things are totally unpredictable. But that does not mean you should not be sensitive to storm clouds, or that you should refrain from seeking bargains when they appear. Personally I am watching to see the value of the better mining companies go down, then I will swoop in to buy. But you will have to decide for yourself what sell, hold, or buy strategy you adopt in a time of obvious down. I cannot help but believe there will always be a demand for gold at Wal-Mart prices.