OK there! I said it. The bull is back.

After vacillating back and forth for the past three weeks as to whether or not I would get a test of the December lows before the next advance, the action in the SPX this week has finally allowed the bull back into the barnyard. The greater question is going to be "For how long?".

The reality of the current stock market conundrum is that the world just suffered a couple of shocking bank failures including the 18^th largest in the U.S. and the forced merger of European banking giant Credit Suisse that dominated headlines from the end of the first week of March until early this past week with the net result being a 3.5% SPX advance for the month.

Not only was their economic news showing a clear slowdown in consumer spending, but bond yields also resumed their ascent once the spinmeisters on Wall Street were able to convince investors that whatever it was that killed Silicon Valley and Signature was "ring-fenced" and therefore carries NO chance of contagion causing further routs.

SPX

In closing out the first quarter with such strength, the SPX has now virtually cemented the strong probability of 2023 being an "UP" year as I predicted back in January when the almighty January Barometer issued a powerful "BUY" signal at the close of January's month of business.

The only chance of negating the JB signal was if the SPX would have taken out the December lows at 3,764 in Q1 which did not happen.

What is shocking is that there was every opportunity for that to have happened by mid-March with the bank failures and accelerated volatility but when stocks shrugged off such dire events and massively outperformed simply by not going down, it told me to avoid the temptation of joining the Twitterverse in calling for "new lows by summer" and simply wait for the SPX to show me the light, which it did, in spades, this week.

What will get thrown at us by the usual parade of perma-bears is a barrage of evidence that the economy is decelerating and that inflation is again kicking up and while that may be true, the only thing that matters is what I own and what I paid for it. I now own zero positions in the SPX but massive positions in a number of junior mining and energy developers and explorers and while I am largely underwater on positions taken on in 2022, I am still doing just fine on positions taken on pre-pandemic when gold wallowed beneath US$1,200 per ounce.

However, I only cover the U.S. markets through the SPX because the juniors face very little headwind disturbances when the SPX is in an uptrend versus the unsettling influence they felt two weeks ago into the banking crisis despite the huge move that the precious metals were having.

One last note on the U.S. equity markets: when I say that "The bull is back, "what I mean by that is that my starting set-up has shifted. In bear markets like the one I identified in January 2022, the minute I suspect that we have entered a "bear" phase, my account moves from cash to short (or long put options) and then back to cash. In bull markets, it is the opposite. I move from cash to long to cash.

The Magnificent Vessel

The very odd occasion I will execute a "paired trade" where the sector (such as energy) is under pressure from lower oil prices but only short-term, so what I do is short the lowest-quality of the sector and buy the strongest on the assumption that if the industry gets whomped, it will punish the weakest far more harshly than it will the strongest.

We are now at the point where I will move from cash to long and then back to cash and I estimate that it will be a fairly "clear sail" from the March close of SPX 4,109 to 4,150-4,200. We might eke out a stretch to 4,300 where I will reassess but for now, if two bank failures and an indicted former U.S. President cannot deter the bulls, then I do not want to be short — period — and every time you hear Sara Eisen of CNBC use her nasally-challenged whine to remind us of all of the "moderating inflation numbers", remember the immortal words of the Stagflation 70's survivor: "Never underestimate the replacement power of < stonks > within an inflationary spiral."

"Never underestimate the replacement power of < stonks > within an inflationary spiral."

Many, many years ago when I lived in the southwestern Ontario town of London, I had a very good friend whose father, a prominent lawyer and Founder and Senior Partner in the city's most prominent law firm, passed away suddenly leaving a considerable estate to be divided up amongst the three surviving children. My friend was kind enough to invite me to the non-public and very private auction of collectibles that abundantly adorned the walls and tables and shelves of the patriarch's most-impressive study which included 15' ceilings and an 8'-wide stone fireplace with double-door entrance to a rose garden with trickling waterfalls and fascinating Koi pools.

Pulling me aside to a distant corner of this massive den, my grieving friend opened a small cubbyhole and removed a hand-crafted model of a 17^th-Century Spanish Galleon. At first glance, I was less than impressed as it had not been looked after what with considerable tarnish on the rigging and oxidation on her bow. However, as I looked more closely at this charming figurine, I pulled out a magnifier, a "loupe" used typically by jewelers or geologists in their investigation of grade and/or purity.

On second glance, I had to catch my breath because while the lines and rigging appeared to be of some type of white metal, what was revealed to me under loupe magnification were sails of platinum wafer and rope lines of a minute braided silver of only of the highest of quality and workmanship. The main body of the ship had pure gold where wooden beams and scaffolding were to be represented while copper was the connecting valence between the decks. The flags were not even the size of a clipping of one's fingernail yet upon intense magnification shown to be intricately detailed with all of the appropriate colors of the Spanish Armada.

Since that fateful day in 1992, I have never failed to attend estate auctions.

I was astounded. Moving this regal vessel back and forth to ascertain weight, I had already begun my mission of assessing the "melt value" but by the time my friend caught me in the hallway punching in numbers to my ancient HP calculator, he simply smiled at me and said: "US$125,000 to the public tomorrow at 11:00 a.m.; US$65,000 to you if you cut me a cheque now."

I was certainly in no position to even try to haggle with my friend and most certainly would have avoided it in the interest of good taste and proper decorum. I thanked him for his consideration and promised to get back to but I never did. Several years later and long after I had relocated to Aurora, Ontario from London, I ran into my friend at King Valley Golf Club where I was a member for a number of years, and asked him about that wondrous artifact. He told me that it sold for US$225,000 at the estate auction in 1992 but was later put up for auction at Sotheby's in Beijing where a Chinese software magnate bought it for over US$10 million.

Since that fateful day in 1992, I have never failed to attend estate auctions and it matters not whether the dear departed is a millionaire or billionaire because the best "finds" are always in heirlooms of high emotional significance rather than features obvious to the roaming human eye.

That magnificent vessel, whose melt weight might have exceeded ten pounds, remains the finest piece of Old World artistry that I have ever held in my hand. Under the magnifier lens of my diamond loupe, where I expected the flaws of a hidden form of ancient solder to be the bond between platinum and silver, it turned out that the artist had instead crafted a type of miniature metal "corner notch" common to those that are familiar with the construction of log cabins. Throughout the entire ship from stern to bow, there was zero discoloration from any form of alien adhesive. All for an item that fits into the palm of my hand…

Silver and Gold

Also, love to look at silver; I have my collection of 100-ounce bars in an industrial-strength, high-security vault in my home positioned right beside my Louisville Slugger and my 270 Winchester which I have owned since it was gifted to me by a dear friend back in 2001 (right after 9/11). I have had a great appreciation for silver for as long as I have known. My mother was an accomplished Wasaga Beach artist and pianist that wrote books and had on her piano a beautiful silver "music desk" which  I adored as a child.

Why am I writing all of this mundane BS about the beauty of silver and the majesty of an old museum piece? Why am I wasting your precious moments when I should be providing useful and very actionable trading ideas designed to put money in all of your pockets?

Look at that collection shown above. That is a figment of beauty rarely seen in everyday life. When a servant looks to his "true wealth," he opens his bank statement; when a truly wealthy person looks to his "true wealth", he pours himself a high-end single malt, fires up a Cuban Montecristo, and then simply opens his vault.

As I move into Q2/2023, I am utterly convinced for the first time in many months (years?) that gold and silver prices are about to undergo a rerating.

Of all of the asset classes that get "talked about" on CNBC, there is nothing that irritates me more than the precious metals narrative. Not one commentator has either the desire nor capability of taking an entire one-hour segment to discuss how gold in all forms might have acted as a life-saving asset over the last 5,000 years.

When stories surface about Polish Jews escaping the death chambers by selling their candelabra or silverware to German (or even worse, Polish) border guards during WWII, was the item of interest a stock certificate or and crypto token?

When the Allies finally occupied Germany and Hitler was smoldering in an underground bunker, what exactly were the three occupying Armies seeking out? Was it German marks held in their banks? What did Stalin instruct his rapist beasts to look for other than the young daughters of German farmers? Was it Reichsmarks?

The unit of barter was gold. In all cases. The medium of exchange was gold. In all cases. Stalin cared more about the virgins than he did the Reichsmarks. The only item of value that mattered was the gold. Whether it came from the vaults of the Viennese businessman or from the dental cavities of Holocaust cadavers, gold has remained the most important symbol and fabric of "true wealth" since the dawn of commerce five millennia ago.

As I move into Q2/2023, I am utterly convinced for the first time in many months (years?) that gold and silver prices are about to undergo a rerating of sorts where the dollar-denominated price is allowed to reflect a valuation far more capable of collateralizing the U.S. debt load, now estimated to be US$32.7 trillion. Using the central bank's reported figure of 8,311.5 metric tonnes, the U.S. has approximately 293 million ounces of gold acting as collateral for debt.

At the current spot price of US$1,969.70, the total value of that collateral is US$577 billion. Stated another way, the total debt (US$31.7 trillion) divided by the total ounces held as collateral (293,096,735) equals US$108,155 per ounce.

Governments are rapidly running out of options and unless someone can demonstrate any other source of collateral upon which these political hacks can rely, gold and silver remain the logical solution.

It ignores the unfunded pension liability of US$7T (pre-Covid) and potential drawdowns from commercial real estate of US$2.3T so one simply must ask oneself where the U.S. government is going to source out new collateral.

Tax receipts are off the grid and asset confiscation would be political suicide so all that is left is to take the existing collateral which is already "on the books" and simply reprice it. It essentially means the devaluation of the USD and even if it is a partial gold reset to represent 10% of its total debt, the dollar price for gold will be US$10,815 per ounce, 5.59 times the current price.

As it is no great secret that gold and silver miners are deeply discounted by all measurements used in traditional securities analysis, a price reset of such magnitude would not be inflationary because it is the most under-owned asset class on the board.

If it were to enrich 85% of the investing public, it would be seen as troublesome but since portfolio managers own little or no gold and since the public left the gold and silver party in August 2020, a tiny segment of the population would experience a windfall while the U.S. government would have extended the can-kicking runway by many, many miles.

Governments are rapidly running out of options and unless someone can demonstrate any other source of collateral upon which these political hacks can rely, gold and silver remain the logical solution.

Gold Companies to Watch

Liberty Gold Corp. LGD:TSX; LGDTF:OTCQX

Liberty Gold is focused on exploring for and developing open pit oxide deposits in the Great Basin of the United States, home to large-scale gold projects that are ideal for open-pit mining. This region is one of the most prolific gold-producing regions in the world and stretches across Nevada and into Idaho and Utah. We know the Great Basin and are driven to discover and advance big gold deposits that can be mined profitably in open-pit scenarios. Learn More

MAG Silver Corp. MAG:TSX; MAG:NYSE American

MAG Silver Corp. is a growth-oriented Canadian development and exploration company focused on becoming a top-tier primary silver mining company by exploring and advancing high-grade, district scale, precious metals projects in the Americas. Its principal focus and asset is the Juanicipio Project (44%), being developed with Fresnillo Plc (56%), the operator. The project is located in the Fresnillo Silver Trend in Mexico, the world's premier silver mining camp, where the operator is currently advancing underground mine development and commissioning a 4,000 tonnes per day processing plant. Underground mine production of mineralized development material commenced in Q3 2020, and an expanded exploration program is in place targeting multiple highly prospective targets at Juanicipio. MAG is also executing multi-phase exploration programs at the Deer Trail 100% earn-in Project in Utah and the recently acquired Larder Project, located in the historically prolific Abitibi region of Canada. Learn More

Metallic Group of Companies

The Metallic Group is a collaboration of leading precious and base metals exploration companies, with a portfolio of large, brownfields assets in established mining districts adjacent to some of the industry's highest-grade producers of silver and gold, platinum and palladium, and copper. Member companies include Metallic Minerals in the Yukon's high-grade Keno Hill silver district and La Plata silver-gold-copper district of Colorado, Group Ten Metals in the Stillwater PGM-nickel-copper district of Montana, and Granite Creek Copper in the Yukon's Minto copper district. The founders and team members of the Metallic Group include highly successful explorationists formerly with some of the industry's leading explorer/developers and major producers. With this expertise, the companies are undertaking a systematic approach to exploration using new models and technologies to facilitate discoveries in these proven, but under-explored, mining districts. The Metallic Group is headquartered in Vancouver, BC, Canada, and its member companies are listed on the Toronto Venture, US OTC, and Frankfurt stock exchanges. Learn More

Seabridge Gold Inc. SEA:TSX; SA:NYSE.MKT

Seabridge Gold Inc. is designed to provide its shareholders with exceptional leverage to a rising gold price. From 1999 through 2002, when the gold price was lower, Seabridge acquired nine North American projects with substantial gold resources, including Courageous Lake and KSM. Subsequent exploration by Seabridge has significantly expanded its acquired gold resource base. Seabridge considers each of its common shares to represent an indirect ownership interest in its reserves and resources. Our aim is to increase the value of this ownership interest by growing reserves and resources faster than shares outstanding. Project acquisitions, exploration and engineering programs are carefully designed and monitored to ensure that equity dilution required to fund these activities is more than offset by additional reserves and resources. Seabridge is pursuing three value-enhancing strategies. First, the Company continues to search for gold projects in North America which would be accretive in terms of gold resources. Second, Seabridge funds exploration and engineering work considered likely to expand resources and upgrade them to reserves. Third, Seabridge sells or partners its projects when they reach the production stage, to limit risk and share dilution. Seabridge Gold recently completed an updated Preliminary Feasibility Study for its 100% owned KSM Project located in British Columbia, Canada capturing 47.3 million ounces of gold, 7.3 billion pounds of copper and 160 million ounces of silver in proven and probable reserves. The study projects a 33 year open-pit only mine life generating an after tax net present value (at 5%) of US$7.9 billion and a life of mine total cost (including all capital, reclamation and closure costs) of US$601 per ounce of gold produced after base metal credits. Over the 33 year mine life, average annual metal production is estimated at 1.0 million ounces of gold, 178 million pounds of copper and 3.0 million ounces of silver. Learn More

Stillwater Critical Minerals PGE:TSX.V; PGEZF:OTCQB; 5D32:FSE

Stillwater Critical Minerals Corp. ("Stillwater CM") is a TSX-V-listed Canadian mineral exploration company focused on the development of high-quality platinum, palladium, nickel, copper, cobalt, and gold exploration assets in top North American mining jurisdictions. The Company's core asset is the Stillwater West PGE-Ni-Cu-Co + Au project adjacent to Sibanye-Stillwater's high-grade PGE mines in Montana, USA. Group Ten also holds the high-grade Black Lake-Drayton Gold project adjacent to Treasury Metals' development-stage Goliath Gold Complex in northwest Ontario, which is currently under an earn-in agreement with an option to joint venture whereby Heritage Mining may earn up to a 90% interest in the project by completing payments and work on the project. Stillwater CM also holds the Kluane PGE-Ni-Cu-Co project on trend with Nickel Creek Platinum's Wellgreen deposit in Canada's Yukon Territory. Learn More

Michael Ballanger Disclaimer:

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Disclosures:

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