Hell Hath Frozen Over – Let’s Go Mining!

Hey Influence Traders, Well, that was an exciting week on both K-Street and Wall Street. A bunch of individual investors on Reddit put their collective voice behind GameStop and some other stocks, drove up the prices, and stuck it to the MAN … or in this case, a few hedge funds. Melvin Capital announced over the weekend that it lost a whopping 53% in January. And the nation learned new terms like “short squeeze” and “gamma boss.” We also learned that the trading platform Robinhood was a little more tied into Wall Street than previously thought. Because Robinhood shut down trading in some targeted names, and thus shut down the little guys. But the little guys lost twice because a lot of the hedge fund money lost is money managed for pensions and other funds of … little guys. It’s never as clean as it looks! Too Rich for K-Street Naturally, this drew the ire of K-street. I’ve occasionally considered what I will have to pack on my train ride to hell with some of my friends … but apparently it’s ice skates, cause hell officially froze over this past week. Look no further than Ted Cruze and Don Trump Jr. agreeing with AOC and Elizabeth Warren. The list of politicos from both sides of the aisles (and Elon Musk to boot) who piled on to the controversy became almost absurd. The pitchforks are out, the torches are lit, and the townspeople are marching from the square. The mob is coming for someone … and it ain’t the little guy. Congress is going to hold hearings. The SEC might get involved. Rep. Maxine Waters, head of the U.S. House Financial Services Committee, said that, “We must deal with the hedge funds whose unethical conduct directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price.” This is some dangerous rhetoric, but at the moment it is still just noise. Here at Power Moves we are watching the situation closely because these are the kinds of ripples that could jump across ponds and have unintended consequences. Stay tuned for more! MORE NOISE — DC Marches On While GameStop provided a nice distraction, the White House continues its march. In the first nine days of his presidency, Biden has now issued 40 executive orders, including:
  • Halting the keystone pipeline
  • Rejoining the Paris Climate Accords
  • Halting new oil and natural gas leases for 60 days
  • Signing a bill ordering the federal government to “advance environmental justice”
The President is not only pursuing his Green New Deal agenda, he’s accelerating that pursuit. But he also signed an order requiring the federal government to support U.S. businesses, which included raising the price preference for domestic goods … This could bode well for domestic producers. I’ve been talking about steel and plastics, both of which are proving to be solid plays. But there’s a third leg to that stool that will also play out … mining (and concrete, too, but I’m looping that in with mining). Why Mining? The Big Picture Wind and solar are integral to Green New Deal policies. For both technologies, ALL the underlying key components — concrete, steel and fiberglass for wind; silicon, copper and glass for solar … need to be mined! To build the number of solar panels called for by 2050 to meet the Paris green goals, it is estimated that:
  • Silver mining will jump 250%
  • Indium mining will jump 1,200%
  • Rare Earth mining will jump between 300%-1000%
To replace gas powered cars with electric vehicles, cobalt and lithium mining will have to rise more than 20x from today’s levels. For reference, 50-100 pounds of various materials are mined, moved and processed for every pound of battery produced. Why Mining? The Details Mining stocks saw a rise going into the new year, with gold and silver reaching highs … but they have since seen pullbacks. As with other stocks that I watch, I like well diversified companies that will benefit from green policies and have seen a price pullback. Let’s start with gold silver and copper:
  • Barrick Gold (Ticker: Gold): A leading mining company with operations in more than a dozen countries. In addition to gold, it is a leading copper supplier. I like that it has built a cash-rich balance sheet by selling non-core assets and repaying debt.
  • Gold Fields Limited (Ticker: GFI): Has a diverse set of resources and reserves, with a focus on gold. GFI has nine mines in Chile, South Africa, Australia, Ghana and Peru, and maintains massive gold and copper reserves.
  • Agnico Eagle Mines Limited (Ticker: AEM) An exploration, development, and production business with mines in Canada, Mexico and Finland. The company produces and sells gold, silver, zinc and copper. AEM has seen price contraction, but it’s outlook is positive and it will be announcing fourth quarter and full year 2020 results on Feb. 11.
What About Silver? There are rumors floating around that the silver market is the next target of the Reddit mob. If so, listings with shorts could be interesting. These include:
  • iShares Silver Trust (Ticker: SLV)
  • Pan American Silver Trust (Ticker: PAAS)
  • First Majestic Silver Corp. (Ticker: AG)
If the Reddit crowd acts, silver could be a wild, short-term ride. But don’t forget to also focus on the long game. More to come soon on mining, including analysis of domestic companies and alternate metals. Cutting Through the Noise for You. Frank DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

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