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Thursday, February 08, 2024 12:01:00 PM
1. the miners are making money now, but not tons....with gold at 2020, the big producers are in pretty good shape, so too the developers. Still, the macro outlook gives mixed signals. It feels very buoyant, very 1999, and as we know in 1999, that great tech internet bull market, the miners were very bad. We today have a major tech bull market in AI, and the Big 7, so we should not be shocked to see the pattern repeat. A no brainer
2. the devastating differentiator is Bitcoin, and Ethe. The market cap of bitcoin and its associated products is staggering, something that puts the mining sector's market cap into the dumpster can. Clearly, people are buying bitcoin. It has gone mainstream and even the u.s. government allegedly has "diversified" into bitcoin.....And when any 30 or 40 year old looks at the returns of bitcoin the past year, vs. gold and especially gold miners, that ends the debate. Bitcoin is lapping gold to understate it.....So the money that is anti system, ...it is an easy choice which to pick, especially with the etf's being approved..
3. So what about the miners. Well historically, the solid gold miners have received healthy PEs on the nature of 20 to 30 to 1 type PEs. and even higher than 30 as befits a bull market in the metals...; now you can see them at less 15 perhaps the very finest that is.. But in lieu of bitcoin, that is probably no longer appropriate.
They deserve as a wildly under achieving asset class something lower and possibly far lower. When Steel manufacturers went out of favor, like U.S. steel, which has a lot of mining assets, as does Cleveland cliffs, the PEs went to 2 and 9 respectively. So there is a lot of room for PE shrinkage....and there is no time soon that AEM or Gold or NEM will have a PE anywhere close to even 10. ....so this does not bode well whatsoever.
We are in a bad spot in time, and also there is a competitive product. Killed on both ends. Steel waited many years for the companies to get a modicum of respect as they all shrank...U.S. steel from over 90 to 7 at the bottom, and cleveland from over 50 to 5 at the bottom....it took many many years. as the PEs shrank as the market collectively said, I don't want to own this sector, no matter how low the PEs, ..These companies are facing many headwinds, china among them, and so too today, the miners are in a bad spot in time, the 1990s revisited, plus they too have a hot rival like china called Bitcoin, running them out of buisness.
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