A Monday Morning Musing from
Mickey the Mercenary Geologist
Contact@MercenaryGeologist.com
My dad was a baseball star back in the hills of Missouri but gave it up
when my mom told him, ÂItÂs either me or the game. My dad evidently
wanted a left-handed son who was a ballplayer and loved the game as much as
he did. So I guess thatÂs why IÂm around, and no doubt the reason thereÂs
a photo of me at age 3 with glove, ball, and bat in hand.
As a young man, my dad played ball against Mickey Mantle. He was not
impressed and told stories about the kid being Âjust a wild-armed shortstopÂ.
Contrary to a commonly-held opinion, I was not named after The Mick. Fact is,
on the day I was born, my mom named me ÂMickey after some neighborhood kid
that she especially liked.
But that did not stop me from choosing the New York Yankees all-star
center fielder as my baseball hero, and when I first played Little League at
age 7 the number 7 was sewn on the back of my uniform. From
then on, if you wanted me to play on your team, I wore 7 or I
found another team. Luckily as a kid and later on as an adult, I was good
enough to demand that concession.
Long story short, 7 is my lucky number. There is nothing unusual
about that as it is both the English- and Chinese-speaking worldÂs favorite
number. 7 is also lucky in craps.
Plus the junior resource stock market.
Witness the following scan of a composite Vancouver Stock Exchange Index
chart from 1986 thru 1989 and also a chart for the VSE and Toronto Venture
Exchange Indexes from early 1991 to the present. I did not obtain a chart for
1990 but that does not deter from the patterns discussed herein:
Vancouver Stock Exchange Index
1986-1989 (Courtesy Murray McInnes)
Vancouver Stock Exchange -
Toronto Venture Exchange Index1991-2014
Notice the junior markets hit major highs in every year ending in the
number 7 before going into exponential freefall. I recently discussed
the catalysts that caused these crashes and refer you to that musing for
background information (Mercenary Musing, December 14, 2014).
The reasons for this curious decade-long cycle, much like the junior
resource market, are highly speculative in nature but could include the
following:
·The commodity cycle of strong metals prices is generally 4 to 7 years in
duration. These occur within longer secular trends of 20 to 30 years.
However, the junior market takes a couple of years to react in a significant
way to both a rise and a fall in prices. Therefore, the timeframe from when a
deficit in metals production occurs, prices climb, monies are raised and
spent on exploration and new developments, and enough supply comes on from
new mines to satisfy demand averages about 10 years.
·About every 8-10 years, a new and naïve group of middle to upper-middle
class professionals reaches the age where they have substantial discretionary
income for speculation. Spurred by rising commodities prices, their
collective greed and irrational exuberance to get rich quick drives
the market to a new speculative high before the inevitable collapse occurs.
·Also every decade or so, another group of investors reaches late-middle
age and comes to the realization that government and broker-managed
retirement accounts will not provide sufficient income for lengthening
lifespans. Driven by panic, they decide to speculate in higher risk-reward
stocks in a futile effort to make-up projected shortfalls.
·Institutional pension funds enter into riskier investment vehicles to
counter cyclical periods of low interest rates and when future non-funded
liabilities become of concern. So when commodity prices are high, they tend
to enter the sector full-force.
·Hedge funds react with a group-think mentality. Therefore, they
exacerbate parabolic chart patterns by moving en masse into a market
sector near its bottom and abruptly exiting once the sector loses favor.
Regardless of the reasons, the above charts stand as evidence that for the
past three decades a junior resource market top occurred in years ending in 7.
In early March of 2015, the Toronto Venture Exchange will be a full four
years into the latest bear market cycle. Other than the predictable new year
rebound in micro-cap resource stocks that I discussed last week (Mercenary Musing, December 24, 2014), there is
little evidence in sight for a near-term recovery.
However using past as prologue, I can speculate the junior resource market
will repeat its10-year cycle that resulted in market tops in 1987, 1997, and
2007. If this indeed happens, the scenario could include a bull beginning
sometime in 2015, a strongly performing market in 2016, and an exponential
rise to a top reached in 2017. This would be followed by a one-time catalyst
that would send the market cascading downward in 2018.
I realize this is a pie-in-the-sky prediction at the present juncture, but
offer it up to illustrate an undeniable point to you:
By employing a contrarian philosophy of buying select stocks when they are
unknown, unattractive, unloved, and undervalued by the greed and panic-driven
sheeple, smart money speculators can position themselves for the inevitable
bull market that will occur sooner or later.
And make a fortune whenever that comes to pass.
Will 2017 be another golden year for us?
No one knows but remember folks, the baddest bears beget the biggest
bulls.I encourage you to position now for the next bull market.
Ciao for now,
Mickey Fulp
Mercenary Geologist
Acknowledgment: I thank my long-time broker and friend, Murray
McInnes, for the original idea of junior bull markets culminating in years
ending in 7, our subsequent discussion over adult beverages, and the
1986-1989 Vancouver Stock Exchange chart.
Gwen Preston is the editor of MercenaryGeologist.com.
The Mercenary
Geologist Michael S. ÂMickey Fulp is a Certified Professional Geologist with a
B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc.
Geology from the University of New Mexico. Mickey has 35 years experience as
an exploration geologist and analyst searching for economic deposits of base
and precious metals, industrial minerals, uranium, coal, oil and gas, and water
in North and South America, Europe, and Asia.
Mickey worked for junior explorers, major mining companies, private
companies, and investors as a consulting economic geologist for over 20
years, specializing in geological mapping, property evaluation, and business
development.In addition to MickeyÂs professional credentials and experience,
he is high-altitude proficient, and is bilingual in English and Spanish. From
2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile,
and British Columbia.
Mickey is well-known and highly respected throughout the mining and
exploration community due to his ongoing work as an analyst, writer, and
speaker.
Contact: Contact@MercenaryGeologist.com
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