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Gold Mining? Try Cloud Computing

Diehards quit gold mining for new ideas...
 
"THIS is the worst I've seen in 30 years," recounts Bill Bonner in his Diary of a Rogue Economist.
 
The scene was the recent Sprott-Stansberry Natural Resource Symposium in Vancouver. The subject was mining equities. And the opinion was becoming familiar...
 
The price of gold is down by about 8% over the last five years. Precious metals miners, as measured by the Market Vectors Gold Miner's ETF, are down by about 70% over the same time.
 
Mining execs say banks won't return their calls. Promoters say they are thinking about taking their firms into cloud computing, video games, or Chapter 11.
 
"What do you know about cloud computing?" we ask.
 
"Nothing. But I know gold mining. And I know it's no place to make money."
 
Here at the Diary, we are champions of the down and out. We support diehards and last-ditch campaigns.
 
Partly, it's a romantic and poetic attachment to the underdog. But there's a practical reason, too: There's often money to be made in woebegone assets.
 
We favor Russian and Greek stocks...provided you have a very long time horizon for your investments (and a strong constitution to boot).
 
The Russian and Greek economies are said to be at death's door. Greece is in trouble because it has lived beyond its means for too long and because it creaks under a corrupt and sclerotic bureaucracy. Russia, meanwhile, has been hit by a double whammy.
 
The first came when the price of oil got cut in half from its peak of $108 in July 2014. Roughly half of Russia's tax revenues come from oil exports. Half-price crude oil export prices mean half-full government coffers.
 
That's why Putin just slashed over 100,000 government jobs.
 
The second came when the US and the EU came up with a provocative plan to impose economic sanctions for alleged misbehavior in Ukraine.
 
Greece and Russia may be down. But they are unlikely to be out forever.
 
Nor is the mining industry...
 
Unloved. Unbought. Unwanted. Mining is the Greece of investment sectors. Particularly unloved is mining for gold.
 
Market Insight editor Chris Lowe has begun to prepare a weekly internal memo highlighting particularly absurd trends in the popular financial trend.
 
It's soon to be available to lifetime subscribers to The Bill Bonner Letter. But for now, it's circulated exclusively among our analysts and researchers around the world.
 
This week's memo focuses on the intense loathing in the gold market. Reports Chris:
"As is the norm when the gold price falls, the mainstream press is going through a bout of schadenfreude.
 
"The Washington Post, for instance, recently ran an article under the headline 'Gold is doomed'. Bloomberg says gold is 'a textbook short'. And Jason Zweig in the Wall Street Journal claims gold is nothing more than 'a pet rock'..."
What to make of all the negative sentiment toward gold in the mainstream press? Chris again:
"This is exactly the sort of thing that happens during panic selloffs and major lows. In the same way that wildly bullish articles come out at the top, there's an avalanche of bearish commentary as we approach the lows."
Also unloved, but definitely not in the pet rock category, is copper.
"Copper is the most important metal in the sector," said mining mogul Robert Friedland at the Sprott-Stansberry event on Tuesday.
 
"More important than gold. Because copper is in everything. Houses. Autos. Computers. Much of the Internet functions on copper. So if the price of copper goes down, it tells us that the whole world economy is soft."
The Financial Times says world trade fell 1.2% in May...sliding four of five months in 2015 to date.
 
If the global economy is slowing, as the numbers suggest, there is little reason to expect a comeback in copper any time soon.
 
On the other hand, there's no way copper is going to disappear from the world economy. It's essential. And it's intensely cyclical. Prices go up; miners produce more. Prices go down; they cut back until supplies are tight again.
 
So, although the price may be down...copper is not out.
 
You can count on the Fed – and other major central banks – to exaggerate the commodities cycle with more cheap credit.
 
We doubt gold is out for the count either.
 
Excess debt set off the 2008 global financial crisis. Today, according to McKinsey, there's about $60 trillion more debt in the world than there was back then.
 
It is only a matter of time before today's counterfeit stability gives way to genuine panic.
 
Then the "pet rock" will turn out to be "man's best friend".

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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