Jim Letourneau's Blog

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Everybody Knows a Bear in Canada

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows
Leonard Cohen

Earlier this week I attended the World Resource Investment Conference in Vancouver where I spoke on topics that included "Is the commodity bull market over?" (yes if you use 2 year charts, no if you use 10 year charts) and "Big picture trends in oil and gas".

This conference is primarily populated by junior mining enthusiasts and while the conference organizers marketed the conference with a similar program to last year's, attendance was down significantly. Still, approximately 5000 investors visited The Vancouver Convention Center (VCC), one of the most stunning in the world. The breathtaking backdrop of Vancouver Harbor, Stanley Park and the North Shore Mountains may be recognizable to those who watched the Winter Olympics as the VCC  served international media headquarters. Many of Canada's exports are shipped to the Pacific Rim from here including coal, forest products, grain, sulphur, and potash. Cruise ships are continually docking at Canada Place which housed many previous conventions. While this facility features a stunning white sail fabric roof, it is not sound proof. I've had the opportunity to pause a presentation several times while the noise of a seaplane taking off drowned out the PA system.

The weather was fantastic, sun is one of the rarer commodities in Vancouver so when it arrives everybody makes the effort to get out and walk, blade or cycle along the seawall or drink coffee on a patio (they are mostly covered and for good reason). Against this international backdrop of sun, tourism, trade and commerce, you'd think it might be possible to find an optimistic investor.

I'm an optimistic person and like to think that I attract other optimists into my life. I think I was in the wrong place this year. I heard several stories of investors riding down their portfolio of junior companies to near catastrophic losses only to be rescued by the recent liquidity driven bull trend. This time there is a lack of conviction in the markets. People are selling. They are happily selling because they don't want to relive the pain of the last market downturn. Nobody knows how low the markets will go this time but they sure remember how low they got in 2008 and that is plenty bad enough thank you very much.

Commentators at the conference were negative on most everything with the exception of precious metals. Even senior gold companies were whacked during the 2008 downturn and the general populace isn't feeling particularly trusting of ETFs or any other paper construct designed to represent owning gold. Only hard assets and sound money will do. My friend David Morgan likes to bang his silver dollar money clip on the table to illustrate the point that sound money... makes a sound. No longer will investors be calling brokers. Instead they will be driving to coin shops and bullion dealers with barred windows and/or bulletproof glass. Is everyone going to be carrying around scales so they can conduct trade using gold? Shades of Deadwood?

Everybody knows this market is going to hell in a handcart. In conversations with a 40+ year trader my optimistic thought of a short term rally was quashed by his statement "who is going to buy?"

Certainly not Mark Steel of BMO Capital Markets who says Go to Cash - In Plain English. His call rivals Eric Sprott's September 2007 assertion to Keep it simple... BUY GOLD for brevity.

Everybody knows.