In other words, the logic behind the Federal Reserve’s lending programs and the government’s spending programs is that by floating businesses they can help business owners and the consumers they serve get back to normal, a strategy, which will be CHEAPER THAN having these operations go under. Keep in mind the businesses were DOING FINE before the virus and are GOOD ENTERPRISES, but aren’t robust enough to withstand a global shutdown and the lengthy re-opening,
The alternative is that these small business owners go under, layoff their employees, go through bankruptcy, experience financial nightmares and the NET RESULT is costlier than the one the authorities are offering it.
This isn’t the case WITH ALL BUSINESSES. The number of layoffs has been GIGANTIC and what’s obvious is that the households HURTING THE MOST are those that are the poorest.
The first type of employees to be fired or sent on leave, which they may not come back from, are those doing part-time shifts and low-paying jobs. The U.S. economy had BROUGHT BACK many individuals that gave up on work after the Great Recession of 2008. Unfortunately, after all the effort of getting re-trained and back on the horse, they’ve now been pushed off the saddle again.
It will take years, even a FULL DECADE, to achieve pre-COVID-19 economic activity. This is the worst GDP SHRINK since 1918, 1929, and 1944. Its effects AREN’T FELT YET because of the lending programs and government spending, but they will be once those fade away.
By how EXCITED retail investors are with the prospect of a FED-INDUCED recovery, our viewpoint is that COVID-19 is, IN THE MIND of the public, a 1999-style buying opportunity, the last chance to join the roaring bull market – and they are BUYING HEAVILY.
This isn’t the top, and we do expect NEW ALL-TIME HIGHS soon, but it is CRYSTAL-CLEAR that the psyche of the investing public is that NOTHING CAN go wrong, which is exactly when there are no buyers left and the bear market starts.
You can’t DOWNPLAY a 5.2% decrease in global GDP; this is pushing 70 million people back under the $2/day extreme poverty line.
What’s not getting ANY ATTENTION is how cheap the commodity sector is compared with traditional businesses.
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Here’s a PERFECT EXAMPLE:
This is a PRICE CHART of Callinex Mines (TSX-V: CNX & US: CLLXF), a company I’ve featured MANY TIMES since 2014 in our newsletter. It falls under the EXTREME RISK category and, like other small-cap companies, it is reserved for that PART OF THE PORTFOLIO that is designated for taking CONSERVATIVE-SIZED positions, with the upside being that it morphs into a Cinderella story.
The gist of it is that the company’s PRESENT MARKET CAP is CAD$8.4M, compared with a CAD$30M-CAD$60M valuation during the timeframe of the GREEN circle on the above chart.
In that time, the company DID NOT sell any of its assets, DID NOT lose any of its competitive advantages, such as having an award-winning geological team or being situated in the most MINING-FRIENDLY jurisdictions on the planet, but it DID substantially increase its metal rich deposits through acquisitions and POSITIVE drill results.
All it did wrong was be involved in the commodity sector, primarily BASE METALS, during a time of trade wars and slow economic growth from China.
My point is this:
The company’s project in the Bathurst region called Nash Creek has a PRE-TAX net present value, which is LEVERAGED to the prices of lead and zinc, as you can see. It can reach hundreds of millions of dollars, when these resources are rallying.
Callinex Mines (TSX-V: CNX & US: CLLXF) is a classic example of a business whose assets are potentially PRICED FOR DISTRESS when there’s no need to mark them down that way.
You can see it by the fact that between insiders and associates, HALF OF THE BUSINESS is owned by people that are intimately involved with wanting it to succeed:
To recap, ANY GOOD NEWS from China about recovering from its 3-year slump would help base metals. ANY GOOD NEWS from the company itself regarding ongoing drilling programs would potentially help it. ANY climb in inflation rates would bring attention to commodities in general.
Consider shares of Callinex Mines (TSX-V: CNX & US: CLLXF)!
IMPORTANT NOTE: I’m a shareholder and have everything to gain from seeing Max Porterfield and his team thrive. The reason I am publishing this is because shares have ALREADY RISEN by 119% since the MARCH LOWS and the company has released part of its drilling results already, so with news in the pipeline, the time to position is now.
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