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Stock Market Repeating Itself: Michael Ballanger
Source: Brian Sylvester of The Gold Report (2/13/12) http://www.theaureport.com/pub/na/12572
The resource markets have weathered some death defying ups and downs lately. But Michael Ballanger, senior investment advisor with Toronto-based Union Securities, is looking for a renewed period of growth in the TSX Venture Composite Index. Is it too soon to see such a heady rebound? In this exclusive interview with The Gold Report, Ballanger makes his case for history repeating itself.
The Gold Report: The TSX Venture Composite Index reached a bottom of around 1,300 in October after it more than tripled from 2009 to early 2011. You believe the index is poised for another two-year gain. It's an interesting theory. Why should we believe that history will more or less repeat itself so quickly?
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Michael Ballanger: It's all about mathematics. However, underneath that forecast lurks a much deeper premise. I'm a member of a very small minority that believes we're now in the continuation of a massive bull market in resources. The TSX Venture Exchange has had one sharp correction since 2008. It's now resuming its uptrend.
I'm also looking for a resurgence of the "manic phase" of markets. During the last manic phase in 1978-1981, the Vancouver Stock Exchange quadrupled in an 18-month period as gold went into its final ascendancy.
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TGR: What were some characteristics of the market in the '70s that are comparable to what's happening now?
MB: Psychologically there are a lot of similarities to 1978 because investors have been behaving like scared rabbits. Fund managers were throwing things under the bus in October that I couldn't believe. It was mass liquidation for no reason. It was a generational buying opportunity.
TGR: There seems to be a lot more global instability now. Are you expecting "black swan" events in the next few years that could create further instability?
MB: I'm not looking for Armageddon at all. I think we are going to have a really good two-year run. There will be bumps along the way as the world financial system irons out its issues. Nothing cures debt levels better than inflation and growth, however.
TGR: This does seem to be a very friendly environment for commodity prices and resource companies. But aren't we just one negative macroeconomic data point away from being right back where we were?
MB: The problem with the media is that it continues to use European and North American data as its guidepost. Developing nations are creating demand for resources like I've never seen before. The population is growing and resources are being used at an increasing rate despite Europe, Japan and the U.S. struggling.
A lot of these populations approach gold and silver differently than the West does. They're not looking to trade it. It is part of their legacy that they pass down to generations. That's where the demand for the precious metals will come from. It's a shift in demand.
TGR: Most of the junior mining companies listed on the TSX Venture Exchange are gold companies. If you believe the TSX Venture Index is going up, you have to believe the gold price will head higher, too. What's your trading range for gold in 2012?
MB: Industrial metals, like zinc, copper and nickel, are going to outperform the precious metals in 2012. Just as the base metals got hammered violently in '08, the same occurred in the latter half of '11. The resultant rebound should show a greater percentage move based on the global recovery.
