Storm Clouds on the Horizon

Source: Michael Ballanger for Streetwise Reports   06/07/2019

Sector expert Michael Ballanger discusses macroeconomic factors and his trading decisions.

I have had more than a few emails asking me what I think of the current set-up for stocks, bonds, currencies and gold since everything began to re-inflate a few days ago and without going off on a literary tangent, it is obvious that the banks are absolutely freaking out over the declining high-end real estate numbers coming in from not only the money centers but also the fringe regions. Mortgages, the bulk of the loan portfolios for the global banking industry, are only as sound as the collateral upon which they are hypothecated (secured) and if you go back to the sub-prime crisis of 2008, the big revenue drivers for the banks were the sheer volume of homes being financed. Like every masterfully run Ponzi, the Greater Fool Theory is allowed to sustain itself only as long as the banks and the regulators all agree that there are “no limits” and with that, “no rules.”

It was 2003 that the U.S. real estate market was experiencing a modest correction and no one was particularly worried about it because they had years and years of payments into their houses and “SO WHAT?” if the market was going sideways. However, the bankers, so astute at managing leverage, had earlier decided that it was time to reduce the margin requirement so while you and I could care less about a 5% drop in the “median house price,” if you were a Goldman banker or a Merrill banker or a JPM banker that was operating at 30:1 leverage ratio, that 5% drop put you out of business. Which, as we all know, did occur and indeed DID put the banks technically “out of business” until Helicopter Ben rode in and along with the U.S. Congress, allowed the banks to not only survive, but actually issue bonuses to the in-house criminals in the same year in which the public taxpayer bailed them out!

It is with one look at the National Debt chart that I stubbornly refuse to participate in the 2019 stock market rally. I see far too much risk. Where I sit today is that I am flat all call options on the metals and miners and hold only a 25% position in NUGT (Direxion Daily Gold Miners Bull 3X Shares), having taken profits earlier this week with the last tranche of the JNUG (Direxion Daily Junior Gold Miners Bull 3X Shares) going out at $9.15. Average sale prices were around $8.80 adding another 25% return to the portfolio. NUGT will generate about the same and that is pretty darn good considering I was underwater on both JNUG and NUGT on May 25. Amazing how fast they turn…

I have Goldman Sachs once again on the radar after covering at around $181 with a sale of the July $180 puts at $6.60, which was a triple but on a relatively small allocation. Had I allocated the same in that trade as I had in the Miner ETFs, it would be “Pop the Cork” time and I could head out on a world tour and take the rest of 2019 off. However, I didn’t and therefore I can’t so here I stay, chained to the desk, destined to churn out profitable trades so that angry wolf is unable to enter the house. The junior explorcos continue to be ignored but I am urging everyone to keep a close watch on Getchell Gold Corp. (GTCH:CSE) whose program has been completed with assays pending. As the company reported back in January, it intended to drill to a maximum depth of 3,400 feet through an enormous 1 km³ resistivity anomaly and if that zone is mineralized, the response is going to be substantial. We should find out in about three weeks so at $0.20, it is a pretty cheap call on what could be a brand-new Nevada discovery.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Getchell Gold Corp. My company has a financial relationship with the following companies referred to in this article: Getchell Gold Corp. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
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Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

( Companies Mentioned: GTCH:CSE, )