CPI Surges the Most in Four Years
Trader Scott’s Market Blog
February 15, 2017
The prices in the US rose in January the most in four years. We’ve got some problems to deal with. Now the $ is at multi-week highs. So now the people who love to destroy their accounts with the emotional swings due to prices going up and then back down and then back up, blah blah,,,,now they’ll be bullish on the $ again? This is all we need to know – the $ is back at resistance (chart below), and notice the stair step higher.It’s time for the President to make another useless attempt to talk down the US$. But the reason for being long the US$ for years is not my belief in the US economy, nor “because” of rising interest rates. The “reasons” are about the big accumulation area in the $ basically from 2004-2012, the large global US$ short position, and the problems in Europe, especially, and all over the place. Japan is a basket case long term, and China plus India are messes for the time being. The $ is the reserve currency (for now), and as crappy as it is, almost every other currency is crappier, thus strengthening the case (finally) for PMs, commodities, and certain other sectors. Some commodities, like copper, got ahead of themselves. But agriculture which has been lagging for years, especially wheat, is showing some life. And lowly cocoa is back at a big support area. Food inflation is joining the party. My belief in January 2016 was we would see the bottom in inflation in the Spring of 2016, and we are now seeing it ramp up. And now we get to soon watch the spectacle of Janet Yellen claiming inflation is “transitory” and can be “contained’.
About
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
'Trader Scott’s Market Blog – CPI Surges the Most in Four Years – February 15, 2017' have 19 comments
February 15, 2017 @ 5:31 pm traderscott
I don’t own any of these, but GG, ABX, and KGC announced earnings today:
GG – Fourth quarter operating cash flows of $239 million and adjusted operating cash flows(1,2) of $383 million , of which $169 million (1) was used to repay debt, $61 million was used to fund the growth pipeline and $16 million was used to pay dividends. Available liquidity at December 31, 2016 stood at $3.17 billion .
ABX – Fourth quarter operating cash flows of $239 million and adjusted operating cash flows(1,2) of $383 million , of which $169 million (1) was used to repay debt, $61 million was used to fund the growth pipeline and $16 million was used to pay dividends. Available liquidity at December 31, 2016 stood at $3.17 billion .
Here’s a recap from IBD:
Barrick Gold
Estimates: The world’s largest gold miner is expected to report a 138% EPS gain to 19 cents. Sales should rise 1% to $2.27 billion, which would be the first rise in four years.
Results: EPS of 22 cents on revenue of $2.32 billion.
Outlook: Expects to maintain annual gold production of at least 4.5 million ounces.
Stock: Barrick Gold rose 2.2% late. Shares erased modest early losses and finished up 0.3% at 19.32.
Barrick has benefited from a debt-reduction and cost-cutting plan, including the sale of noncore assets.
RELATED:
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IBD’S TAKE: IBD’s Mining-Gold/Silver/Gems industry group is ranked No. 166, up from dead last — No. 197 — six weeks ago. Still, investors usually find more success focusing on groups much closer to the top tier. Check out IBD’s Industry Snapshot feature highlighting groups showing more potential. The latest looks at automotive chipmakers, including Nvidia.
Goldcorp
Estimates: Analysts expect a profit of 9 cents per share, reversing a year-earlier loss of 15 cents a share, as revenue falls 5% to $1.01 billion.
Results: EPS of 12 cents on revenue of $898 million.
Outlook: 2017 gold production of 2.5 million ounces.
Stock: Goldcorp rallied 1.1% late. Shares ended up 0.2% at 16.66.
Kinross Gold
Estimates: Analysts expect a 1-cent per-share profit vs. a year-earlier loss of 6 cents a share, with revenue up 19.5% to $843.63 million.
Results: Adjusted loss of 4 cents a share on revenue of $902.8 million.
Outlook: 2017 production of 2.5 million-2.7 million ounces of gold equivalent.
Stock: Kinross fell 1.3% late. Shares closed 0.5% higher at 3.95.
Barrick and other gold miners sold off as the price of gold sank after Trump’s election, on expectations that his planned infrastructure spending, tax cuts and deregulation would boost the dollar and shake the economy out of its slow-growth, low-inflation malaise.
But Barrick and Goldcorp are now well above their pre-election levels, while Kinross is just above it.
The price of gold, the most important mover for the sector, has recovered more than two-thirds of its losses to $1,231.90 an ounce and is now down just 4% since Nov. 8. Gold offers both a safe haven in economically perilous time and a hedge against inflation
KGC –
February 15, 2017 @ 7:00 pm Jon
All the write-downs they took through 2015 are now fully off the books so the earnings should be “clean”from here on. Anyway, earnings are not that big a deal since GAAP was abandoned 15 or so years ago. Just look at the stock market, top line GAAP earnings have been in decline for a while now, but bottom line looks fine with non GAAP smoke, magic, and pixie dust. It’s all about expectation anymore, not reality…
February 15, 2017 @ 8:07 pm David V
Some “alternative” production figures…
2017 estimated production AG eq. oz / $ invested:
PAAS 42.1 Mil eq oz AG/2.93 B = .014 oz/$
CDE 40 Mil eq oz AG/1.72 B = .023 oz/$
AG 18 Mil eq oz AG/1.63B = .011 oz/$
February 15, 2017 @ 8:29 pm Easy Al
Scott,
The second paragraph of your first article is for GG, not for ABX.
I come across a column on the positive correlation of the relative price of gold to commodities to the risk free interest rate. In the current environment, the 30 year T-bond is probably least distorted by Fed’s QE programs. The conclusion seems that if T-bond rate rises, commodities will, in general, out perform gold. As you pointed early, silver will out-perform gold in an inflationary environment. In term of monetary properties, silver is probably closest to gold. The based metals, subjected to the supply-demand constraint, should out-perform silver. Since many silver miners also have significant base metal (most Pb and Zn) by products, it seems that in the PM miner portion of the portfolio , one should consider to give a little bit more weight to silver miners.
The link for the article is http://news.goldseek.com/SpeculativeInvestor/1487170920.php
February 15, 2017 @ 10:00 pm traderscott
Yes, I just repeated the GG for both – brilliant Scott. So here’s a recap for ABX:
For 2016, Barrick reported net earnings attributable to equity holders of Barrick (“net earnings”) of $655 million ($0.56 per share), and adjusted net earnings1 of $818 million ($0.70 per share).
The Company reported annual revenues of $8.56 billion, net cash provided by operating activities (“operating cash flow”) of $2.64 billion, and free cash flow2 of $1.51 billion.
Full year gold production was 5.52 million ounces. Cost of sales applicable to gold was $798 per ounce, and all-in sustaining costs3 were $730 per ounce.
Barrick reported fourth quarter net earnings of $425 million ($0.36 per share), and adjusted net earnings1 of $255 million ($0.22 per share).
Fourth quarter revenue was $2.32 billion; operating cash flow was $711 million, and free cash flow2 was $385 million.
Gold production in the fourth quarter was 1.52 million ounces, at a cost of sales applicable to gold of $784 per ounce, and all-in sustaining costs3 of $732 per ounce.
Proven and probable gold reserves were 85.9 million ounces4 as of December 31, 2016.
For 2017, production guidance is 5.60-5.90 million ounces of gold, at a cost of sales applicable to gold of $780-$820 per ounce, and all-in sustaining costs3 of $720-$770 per ounce.
We intend to reduce our total debt by $2.9 billion, to $5 billion, by the end of 2018 – half of which we are targeting in 2017.
The Board of Directors has approved an increase in our quarterly dividend from $0.02 per share to $0.03 per share.
February 15, 2017 @ 10:05 pm traderscott
Steve does good work. Good link EA. It was my intention back in 2015 to target gold and the miners, and my belief was we would see a retest of the lows in late 2016. And that is where I would then focus on silver and individual miners more, as 2017 would really bring in the true bull market where gold would generally under-perform. So going forward, as you say, it’s really the shares themselves which is where to be focused. All commodities actually. The shares in commodities got creamed, and got incredibly cheap.
February 15, 2017 @ 6:35 pm Julian
I have been watching Cocoa, specifically the NIB etf for the last two weeks. Until today, it had fallen 9 days in a row. I was contemplating a purchase, and was wondering when you have a big decline like that, what is the best approach to entry, start with a small purchase ?, wait more for a bottom to develop ? Looking at the NIB chart it looks like we are currently in the markdown stage, following distribution ? Thanks!
February 15, 2017 @ 7:02 pm traderscott
First, my approach is to always start small and layer in. Cocoa itself is back into a major support area. The markdown was from the 2700 area, with the big distribution, into this area now. I have no direct position in cocoa, but this is where the bottom is most likely to begin. And you can see the volume in cocoa and in the NIB did come back in on the rally today. So taking a shot into weakness if you’re trying to accumulate is the way to go. My way of doing this is a broad ETF, but some of the individual commodities will outperform. Cocoa has gotten creamed, and like the WEAT thing, they have both lagged and have a lot of catching up to do.
February 16, 2017 @ 4:26 am Larry
Scott,
I’ve been watching to get back into AKG as of late (I had acquired some of their stock when a a company I owned was bought out by them, I then sold it last fall when it started trading sideways and gold was under pressure). It has been getting beaten down as of late. I can see no major reason why (they have a good future, debt but a fairly good balance sheet) other than some downgrade by a guy name Rahul Paul at Canaccord Genuity (have never heard of him or Canaccord: RE Motley Fool).
Anyway, I notice a gap down on 2/7. It looks to want to be retesting its December low (weekly) and had broken through its support on 2/07(daily). It had a big spike in volume today with a flurry at the very end. I’m looking to jump in for these reasons but want to see if the SOS thing bears it out.
Anyway, I’m working on the SOS aspect (not too clear on that yet). Could you please point out where you see, if any, SOS points and explain your reasoning? Any help would be much appreciated? Thank you.
February 16, 2017 @ 8:44 am traderscott
Larry, if you’ve done your work, and you’re bullish on the stock, then the big weakness is an opportunity. We can get too wrapped up in the method stuff. It’s nearing a support level, just start small.
February 16, 2017 @ 8:44 am traderscott
Larry, if you’ve done your work, and you’re bullish on the stock, then the big weakness is an opportunity. We can get too wrapped up in the method stuff. It’s nearing a support level, just start small.
February 16, 2017 @ 7:01 am David V
Mining executive average pay 1,400/hr. Nice.
http://www.miningandenergy.ca/mininginsider/article/top_paid_mining_executives_in_bc/
February 16, 2017 @ 8:32 am traderscott
Isn’t that your wage David? Interesting how the top is mostly GG.
February 16, 2017 @ 9:00 am David V
Yep, 33oz of AU a day is pretty good for a prospector.
February 16, 2017 @ 8:50 am traderscott
FCX is a stock that’s bullish to me (big picture). Copper and the shares have had a big run. On a short term trading basis, there are supports, but bigger picture, 13.09 down to bottom of gap are spots I’m watching – chart.
February 17, 2017 @ 3:25 pm Randy
Would Cameco (CCJ) fit into your bullish category? I see strong resistance at 13.50 and support at 10.50. I would love your take on a chart. Thanks!
February 17, 2017 @ 4:24 pm traderscott
Yes all resources. I have no position in CCJ, but the uranium thing fits in with my alternative energy bullishness. From this post about solar energy shares, and I’ve been using weakness to buy those shares. These things are cheap, have shown several SOSes, and have a lot of room to run. I’ve shown this CCJ chart a couple of times. And yes, your support and resistance is great, tho I like to give myself lots of margin of error, so below 10.50, but CCJ has seen it all – selling climaxes, accumulation, SOSes – it’s just about picking your spots and layering in. Once again, lots of room to run. So with the Dow at all time highs, the people freaked about that are missing plenty of other opportunities – thankfully you’re not.
February 16, 2017 @ 10:39 am traderscott
There will be 2 new real time videos about gold. I exited the rest of the NUGT long trade at 12.93. I wanted to show this whole trade start to finish, and everything in between. The live video of the buy for NUGT can be seen at this post.
February 16, 2017 @ 8:46 pm traderscott
Today’s NUGT videos are posted here.