That's a mod to my original thesis. The volume and productivity is down, and what isn't because of the Depression of 2009-12?
Significantly, profit "margins" are up due to the basic price of the commodity, which in retail terms means, SLW was able to "raise" its prices even though the volume downturned last year a smidge.
It's a lousy analogy but look, think of it this way, it'll chase the daytraders out at bargain prices, and allow retrenchment of our dollars hanging out at a low, and finish strong when the world figures out that silver is headed back up to $20 purely as a currency play.
Today will be a wild day, starting with an uptick as bottom feeders come back into the market after hitting Nov 2008 lows, and SLW gets argued about all day.
To make things less a home run, silver is off today about one percent on kitco--but hasn't impacted SLW on its rise for the previous four days or so.
Step right up ladies and germs, the show is about to start, and it is going to be wild in the streets.
Specie is safe haven in times of inflation, when you know the trend. But when there is disarray, uncertainty, inflation or deflation or both, specie is STILL safe haven for a market beat to death by mortgage fraud and 800B traunches with no strings.
It's heads I win, tails you lose, and patience is required.
Thanks to all for this thoughtful thread and dialogue. It looks like the positive bias got eaten today by the market hitting its 6 year low matching the end of the dotcom bubble.
SLW gets 16% increase in cash flow for every 10% uptick in the POS. Significant increases from Penasquito, 8M ounces in the next two years, 30,000 ounces by 2013, low debt levels, 400M to finance new growth, over the next 12-18 months the company will accrete through buying companies that provide immediate cash flow, or they will retire more debt.
The uptick for 2009 is based on 2008 capacity and the deferred shipment from the fourth quarter--so you'll see a flatter production this year fully dependent on the POS to grow to grow profits, closer to third quarter prices, if you want to annualize. So 15-17 is some fourth quarter drift.
6-7M 1st half, 9-10 second, cash good, debt repayment through July 2014 would seem silly if they are only paying 1.5% on it, rediculously low and not repeatable if repaid....so the loan capability goes away if they pay it down....
By the way, while I'm resting, if Barnes exchanges any of the money he has at $1.5% he claims he has, and tosses that into destroying that wonderful loan (I want some), he's NUTS.
I'd wait for the dollar to deteriorate against the Canadian again in the next three years and think about it. Now's not the time.
Like I posted above, this can be argued endlessly, to no avail.
<<<Inflation is an increase in the supply of money and credit.>>>
Inflation is a result of the money supply increasing faster than the underlying economy is expanding. The difference is subtle but important. The "money supply" comes from the amount of money and the velocity of the money.
The supply/demand imbalance in the housing market is because 1) too many people are gunshy about buying right now, even though they could get the credit if they wanted to, and 2) lenders are being very strict about who they will lend to (they actually care about being paid back, how about that?) and they are requiring high credit scores and ample money down, which inhibits marginal buyers.
The housing market has not come to a standstill, lots and lots of sales are in progress, and it is always a statistical thing, even if it were only 5% off, a serious imbalance would build up, which is where we are now. The imbalance will right itself eventually.
This theory about "contracting credit" is just a backwards way of saying that velocity of money is depressed, so the money supply is contracting. If that were the case, there would be deflation, but in fact it is hard to argue that there is contracting credit at the low consumer level, when there are plenty of neigborhood banks willing to extend credit, if they get a "live one" walking in the door.
They want a reasonable down payment, they want a decent credit score. They want someone who is employed, and making enough to afford what they are buying. It is more of an issue of demand from willing buyers, than it is an issue of banks not having money to lend. The riff-raff is now being weeded out instead of mindlessly indulged.
End of argument.
One last word from me. You will know we have inflation when wages start to go up. Anybody here getting a raise this year?
In fact, most people I know are having their wages CUT. Some are being laid off, but many more are being forced to take unpaid time off. Most engineering firms I know have required their employees to take a minimum of an equivalent 5% pay cut due to unpaid time off. That is not something you would expect in an inflationary economic environment.
Inflation is an increase in the supply of money and credit. Deflation is a decrease in the supply of money and credit. Part of the housing bust is due to oversupply, but most of it is due to the credit bust (i.e. the inability of people to continue to take on more debt). Thus, the collapse in housing prices is due to deflation because credit is contracting. The increase in prices was due to lax lending standards which enabled anyone to get a loan and flip a home for profit. That was inflationary. With the decrease in available credit, we are now seeing deflation work its magic.
And the thing that keeps confusing so many people are the supply/demand imbalances.
There are more houses than there is demand right now, so prices fall somewhat to try to reach equilibrium. That is NOT deflation. Front page Yahoo finance, "Oil prices surge on report of falling inventories" but that is NOT inflation, it is again Supply/Demand.
People confuse the end product (prices going up or down) with the cause, which can be either supply/demand or inflation/deflation.
The imbalances are caused by consumer uncertainty, too many end-of-the-world messages on the TV, radio, newspapers, the web.
The inflation is coming from more and more money. Just wait until people start spending all that new money, and the velocity of money comes back to normal.
We ARE in a very unusual situation, and if you believe in historical cycles, it is the end time of the 80 year upcycle that brought us out of the depression. It is the fourth such 80 to 100 year cycle we have experienced in our brief American history. It is going to be VERY long in playing out, and VERY painful.
I have been expecting DOW 4000 since last September. I have no faith in the broad market, it is hanging by a thread. I shouldn't have sold my TZA, I'm seeing it just keep climbing, even though it is sold short more than half its total shares.
The only question is this: Is the broad market headed into the basement now, or will it happen in April? It WILL crash, I just wish I knew when.
Not my mentor, and much of what he says is over the top, but he's 100% correct about deflation.
Here's a good explanation of why we're in a deflationary environment.
BTW, Roubini continues to change his forecast as the evidence becomes more and more dire about the state of the economy. He's bearish, but not nearly bearish enough.
Nothing is a certainty. Anyone who acts as if something is certain (i.e. selling off everything and hiding the cash in your scenario) is a fool. Let's just say I think SLW is a good play right now because silver IS money, and SLW is a like an option on silver. I am not in any other stocks.
Anyway, why do I need a reason to post here? Entertainment alone is a good enough reason.
We're 70% consumer driven economy, so if no one buys goods because of deflation thinking "I can still get that next month at the same price or cheaper" the economy comes to a jolting halt, as we are experiencing. If the government wants the economy to move there has to be an inflationary move, so that people will not sit on their money and start spending. This is why we've seen the "I" word crop up in the last 2 days - there has to be inflation. But things are so screwed up in our economy that if they do what they need to do to bring on inflation to let loose some spending, it can go exponential. Well, maybe not exponential...but we are not unacquainted in America with double digit inflation.
Today is a day of great uncertainty.
The broad market indexes just don't know which way to go. According to the Elliot Wave chicken entrail readers, we should be at a point where the market will soon rise for a few months, and then crash big time, but not now.
But, it looks to me like it is hanging by a thread right now.
PM spot prices are declining in spite of a remarkable inflation report on the front page of Yahoo Finance right today. This is temporary.
No matter what the gold miners and SLW do today, they are all solid long term bets for the next 2 years. And maybe not today, but sooner or later, people will buy based on future expectations, not recent past performance.
Future expectations are what has been propping up the major financial institutions to now, even though nobody in their right mind should be holding Citibank or B of A, given they will be nationalized within the next 2 months, some idiots still expect that they might survive and are holding the stock like a gambling addict in Las Vegas at the roulette wheel.
There is nothing remarkable about that inflation report. Crude goods were down 2.7% on the month and intermediate goods were down 0.7%. What this means is that the manufacturers of finished goods are trying to raise prices to cover their catastrophic losses. That is not sustainable in the current environment.
There is no inflation. We are in and will continue to be full-blown deflation for the foreseeable future.
That doesn't necessarily mean PMs will crash. They do well in times of uncertainty compared to everything else.
I sold first thing this a.m. at 7.20 and bought back at 6.90, after it looked like we bounced off YDMs low, although we're consolidating now a little lower than that. The whole PM market is irratic today, once the earnings of SLW, GG, NEM, EGO are absorbed and compared to the "mixed economic readings" in the market hopefully we'll head towards YDMs pop to 7.50 - does your cyrstal ball still hold to the 7.99?