Precious metals mining shares are on the give away table....Are YOU buying??

That Was Not a Crash 

John P. Hussman, Ph.D.

Actual market crashes involve a much larger and concerted shift toward investor risk-aversion, which doesn’t really happen right off of a market peak. 

"Historically, market crashes don’t even start until the market has first retreated by 10-14%, and then recovers about half of that loss," 

offering investors hope that things have stabilized (look for example at the 1929 and 1987 instances). The extensive vertical losses that characterize a crash follow only after the market breaks that apparent “support,” leading to a relentless free-fall that inflicts several times the loss that we’ve seen in recent weeks.

Hand-in-hand with the exaggeration of the recent decline as a “crash” and “panic” is the exaggeration of investor sentiment as being wildly bearish. The actual shift has been from outright bulls to the “correction” camp, but that’s a rather meaningless shift since anyone but the most ardent bull would characterize current conditions as being at least a market correction. 

Historically, durable intermediate and cyclical lows are characterized by a significant increase in the number of outright bears. That’s not yet apparent here. Indeed, Investors Intelligence still reports the percentage of bearish investment advisors at just 26.8%.

DYI Comment:  No doubt in this blogger's mind this was no crash; the real McCoy will come soon enough.  Central banks stimulus(world wide), tail end of world wide Boomers savings glut, and lower oil prices have kept this market levitated far longer than most would expect including me.  Highly volatile oil prices if they were to move back in a meaningful way would be one possibility to knock over this house cards stock and bond market(junk bonds).  Whatever the pin that pops this bubble is up for grabs. This is NOT the time be be purchasing stocks on a whole sale basis such as a large lump sum unless you can tolerate a 50% or more draw down and have two or more decades ahead before you need the money.  That is correct at least two decades.  This market is that overvalued.    

These Two Major Miners Are Giving Up On The Markets

How long will it take before metals prices start to rebound? 

No one knows for sure -- but one of the indicators to watch is when the world's biggest mines begin to shut down because of poor economics. 

And we got not one, but two, examples this week of mine closures from some of the world's largest metals producers. 

The first was base metal major Glencore. With the company saying Monday it will close two of its largest copper mines in Africa -- for at least 18 months.

 Major Peruvian silver-lead-zinc producer Volcan Minera also said that it is conducting a review of all of its mining operations. With management noting that "any operation that is unprofitable at current prices will be temporarily suspended."

DYI Continues:  Precious metals mining is the exception(plus oil &gas stocks) as they are in the mist of a major bear market bottom with stock prices down on average 75%.  With mine closings this signifies the bottoming process is in place for this beleaguered industry.  A wonderful time to dollar cost average into your favorite precious metals mining mutual fund.  DYI's favorite, of course, is Vanguards Precious Metals and Mining Fund symbol VGPMX.  Happy hunting!

DYI