Magnifi Communities

It’s time to update the S&P 500 index chart as it emerged inch-perfect since the last update in July.
Source: TradingView
To refresh your memory, I kept the main paths untouched and added new crucial highlights.
The idea of the upcoming breakout of the Falling Wedge pattern (blue converging trendlines) was posted right on time on the Blog as it played out instantly. Indeed, the Bullish Divergence of the RSI indicator with the price chart played out as planned supporting the breakup of the pattern’s resistance.

The majority of readers got it right choosing the red path as a primary scenario. The price action has been amazingly accurate in the 61.8% Fibonacci retracement area where the price failed to overcome the barrier and reversed to the downside from the minor top of $4,325 following the red zigzag.
I added the 52-week simple moving average (purple) to show you how strong the double resistance was at the $4,347-$4,349 level.
The next support is located in the valley in June at $3,637.
After the minor top has been established, we can make a calculated projection of the downside target. It is located at $3,143, where the current leg down would travel the same distance as the previous leg down.
This time, I also added the time target (orange) based on the earlier move, which took 23 bars to unfold. It falls on the end of January 2023. The Fed might take a break lifting the interest rate then. More often than not the time it takes second leg to emerge doesn’t match with the initial move. However, it is still good to have this benchmark.
The $4,325 mark has turned to be a resistance now as the index could still build a more complex structure to the upside reviving the green path.

 Loading …
Now let me reveal the reason behind the title of this post in the next chart.
Source: TradingView
This is this comparison chart of the gold/silver ratio (red) and the S&P 500 index (blue). The idea is simple; the red line shows the risk-off mode when it moves up as safe-haven gold becomes more valuable than the industrial silver. The risk-on mode is active in the opposite direction and the S&P 500 index starts to grow.
There is a long period of unconventional monetary policy that interrupted the link when both gold/silver ratio and the index has been growing. However, we could still distinct several local areas where this opposite correlation works very well in spite of the large uptrend. Since 2020, this link is back to normal with visible crossovers and opposite extremes.

The S&P 500 index is clearly on the edge now as it has been very close to crossing the red line down lately.
We can see that the gold/silver ratio has a lot of room for further growth to retest the all-time high of 113 oz. It could be a 24% rise of the ratio.
The risk-off mode would reach its climax then putting a huge pressure on the stock market. The relevant drop of 24% in the S&P 500 could hit the $3,090 mark, which coincides with the downside target calculated in the first chart of the index above.

 Loading …
Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

On August 31st, Russia’s state-owned energy company, Gazprom, stopped the flow of natural gas in the Nord Stream 1 pipeline. The pipeline ran from Russia to Germany and was scheduled to be discontinued from August 31st until September 3rd. But September 3rd came and went, and the pipeline remained shut down.
At first, an oil leak was reported, causing the pipeline to remain shut down. But then, it was evident that the shutdown was in retaliation to the sanctions the West had implemented against Russia due to the war in Ukraine.
Many experts predict the economic pain in Europe will increase as the cold weather sets in across the continent. Some have gone as far as to say that the economic pain will be felt in both the coming winter and next winter, 2023-2024. Some are even saying that energy rationing will be required to ensure everyone has enough natural gas for heating.
However, many in Europe have been planning for this to occur for some time. Russia had reduced the pipeline operating volume to just 20% of what it could provide.

This was far less than what Europe comfortably needed to make it through winter. Thus, the European Union and other entities have been working on replacing the lost volume through other means. So while the pipeline shutdown is not ideal, it was predicted to happen at some point this winter.
Many are saying Russia is attempting to weaponize its gas supply to hurt the EU and other nations in an attempt to have Western countries drop or reduce sanctions against Russia.
At this time, there is no sign that either the EU or Russia will bend to the will of the other, and it is likely that we will continue to see elevated oil and gas prices in Europe. Thus, comes the opportunity for savvy investors.
I want to note that I am not condoning an attempt to profit from someone else’s pain and suffering. I want to point out the high likelihood that natural gas prices will likely increase this winter as the EU finds ways to replace the gas they acquired through the Nord Stream 1 pipeline.
With that all said, let’s look at a few of the options you have if you want to invest with the idea that gas prices will rise this winter.
The best way to invest in natural gas is with Exchange Traded Funds. Something like the United States Natural Gas Fund LP (UNG) or the United States 12 Month Natural Gas Fund LP (UNL). These funds buy futures contracts on natural gas.
UNG holds near-term monthly futures while UNL holds the 12 nearest months contracts. Owning the futures contracts gives the ETFs exposure to the price movements of the commodity. Gas prices go higher; the contracts are worth more. But, the same happens if gas prices go lower. UNG and UNL will essentially move at a 1X leveraged amount to the gas price before fees and contango occur.

The Proshares Ultra Bloomberg Natural Gas ETF (BOIL) will give you a 2X daily return on natural gas price movement. That means if natural gas increases by 1%, UNG and UNL will move about 1%. But, BOIL will move by 2%.
Finally, if you feel like the price of natural gas is overinflated, you could buy the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD), which will short the price of natural gas. So, if gas falls by 1%, KOLD will actually increase by 1%. But again, the opposite is true, and if gas prices rise by 1%, KOLD will lose 1% of its value.
Now before you buy a natural gas ETF, it should be noted that these funds, besides KOLD, are all up a lot in 2022. This is likely because many investors were expecting Russia to cut off its supply eventually. However, that still doesn’t mean that natural gas prices can’t or won’t go even higher than their current levels.
Matt ThalmanINO.com ContributorFollow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Should President Biden’s recent pay-for-votes forgiveness of student loans make you nervous if you own government-guaranteed securities?
Although it seems highly unlikely, the student loan giveaway could create a slippery slope that leads next to mortgage forgiveness for veterans or some other protected or politically favored class, or some other form of federal debt relief. 
In that event, what would happen to so-called government-guaranteed securities backed by VA mortgages if the president declared that some or all of those loans were forgiven? Why not FHA loans, that are made to many of the same people who have student loans, i.e., those who supposedly have trouble paying back their loans or getting them in the first place because they have marginal credit or can’t afford a large down payment.
It wasn’t very long ago that Fannie Mae and Freddie Mac, the twin secondary mortgage agencies, failed and were taken over by the government, leaving equity investors with shares worth next to nothing (both are currently trading at about 50 cents a share on the pink sheets).

Before they went bust during the global financial crisis, it was widely assumed that Fannie and Freddie were backed by the full faith and credit of the U.S. government, which turned out not to be the case (as that great legal scholar Felix Unger reminds us).
Assuredly, mortgages backed by the VA and FHA are different animals than those issued by Fannie and Freddie, but that doesn’t mean they’re invulnerable (they historically have high default rates). With interest rates on mortgages now north of 5% and a recession possibly looming, how long will it be before pressure grows on Biden to give the weakest homeowners a break?
Now it doesn’t seem so far-fetched, does it? Today student loans, tomorrow home mortgages. How far do we want to take this? 
In the past we’ve heard some people say we should weaponize Treasury securities against our foreign adversaries, such as the Chinese, who own so much of our debt. Does this now become a little less of a fantasy and more of a possibility, as our relationship with Beijing continues to deteriorate and the president is in such a forgiving mood?
The actual dollar cost of Biden’s student loan giveaway has yet to be calculated, but it’s safe to say it’s a lot more than he and his defenders claim. Some analysts say the total cost will be about $1 trillion, which certainly seems reasonable. It could certainly add up to a lot more, if and when those saps who are still repaying their loans wake up and realize that they have indeed been duped and demand forgiveness, too, or simply stop paying.
Politicians love to play fast and loose with debt, as long as it isn’t owed to them. Since the global financial crisis of 2008, government officials and politicians on both the left and the right have heartily endorsed Modern Monetary Theory as a way to solve today’s economic problems by simply wishing them away. Have the government issue massive amounts of debt backed only partially by tax receipts, with the rest purchased by the Federal Reserve, and all will be well. Now they’re writing a new chapter of that theory, which involves simply erasing parts of that debt by the mere stroke of the chief executive’s pen.
One important thing missing from the MMT playbook is taxes. According to the theory, the government can continue to spend money and run massive deficits until inflation is created, at which point it should turn off the spigots and raise taxes and put everything back into equilibrium. But as we know, no or little tax increases are on the horizon, certainly not in an election year, despite federal debt of more than $30 trillion.
The current administration likes to blame inflation on everything but out-of-control government fiscal spending. Rather, Vladimir Putin, supply chains, greedy corporations, etc., are to blame. Fighting inflation, the president tells us, is the sole domain of the Federal Reserve, and he will do nothing to threaten its independence. Except he does want the Fed to use its bank regulatory powers to decide which industries get access to funds (solar energy, electric vehicles) and which don’t (oil and gas producers, gun manufacturers).

Which leads us into the next potential mine field. If things go wrong for companies in the most favored categories, will the government or the Fed step in with even more subsidies or some kind of debt relief?
These are the risks we run when the government plays favorites in an otherwise free economy. Hopefully, most of these scenarios will never come to pass, but as the student loan bailout should teach us, anything can happen.
George YacikINO.com Contributor
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

While the S&P-500 (SPY) has taken a beating over the past month, leaving the index 18% from its highs, the damage inflicted has been tame relative to the shellacking we’ve seen in the Gold Miners Index (GDX).
Not only has the GDX’s decline been double that of the S&P-500, but the most recent drop is one of the worst in a decade in terms of velocity. This is because the GDX was down 44% in just 95 trading days last Friday, translating to an annualized decline of 79%.
(Source: Daily Sentiment Index Data, Author’s Chart)
This decline, coupled with muted 10-year returns since the peak of the last bull market cycle (2011), and lifeless 2-year returns since the August 2020 peak, has led to despair in the sector, with many investors not even interested in looking at their portfolios if they hold precious metals stocks.
I believe this has bred conditions for a violent rally to the upside, especially with sentiment for gold (GLD) sitting at its lowest levels in 18 months, as most investors have also given up on the metal.

In this update, we’ll look at two high-quality miners that have been thrown out with the proverbial bathwater:
Agnico Eagle Mines (AEM)
Agnico Eagle Mines (AEM) is the world’s 3rd largest gold producer, on track to produce ~3.3 million ounces of gold in 2022 from more than ten mines globally.
The major differentiator for the company relative to its peers is that it operates out of some of the safest jurisdictions globally (Canada, Australia, Finland) and boasts a margin profile that would make most producers salivate.
(Source: Company Presentation)
This is evidenced by its ~$1,010/oz operating costs in FY2022, giving the company 42% margins even at a $1,725/oz gold price. This figure compares very favorably to the industry average, with margins sitting closer to ~25% across a basket of 80 producers.
However, the other large differentiator that can’t be overstated is the company’s development pipeline and ability to grow production from existing mines. This is a big deal in an inflationary environment, and I would not be surprised to see AEM increase production to 4.1 million ounces by 2029.
This may not seem significant to investors unfamiliar with the sector, but when it comes to million-ounce producers, even holding the line on production is an achievement, given that grades are declining at most mines.
Just as importantly, AEM recently joined forces with another major producer in a merger of equals, projected to give it a benefit of $40/oz or more from synergies. So, while many producers are struggling to hold the line on margins, AEM should actually see its costs decline year-over-year ($975/oz vs. $1,010/oz).
(Source: FASTGraphs.com)
Agnico’s steadily rising production and lower costs will allow it to grow annual cash flow per share and EPS even in a flat gold price environment. In a rising gold price environment, I would not be surprised to see cash flow per share increase to $6.50 in 2024.
However, despite this key differentiator and the fact that it’s more diversified after adding three new mines following its merger, the stock trades at barely half its historical cash flow multiple. In fact, as of this week, AEM sits at 7.3x FY2023 cash flow (15-year average: 13.7x).
Given this deep discount to fair value, I see AEM as a rare mix of growth and value.
Osisko Gold Royalties (OR)
While Agnico Eagle is cheap and one of the most attractively priced names, especially given that investors are being paid to wait (~3.9% dividend yield), one small-cap gold name is as mispriced, if not more mispriced. This stock is Osisko Gold Royalties (OR), a $1.8BB market cap royalty/streaming company.
For those unfamiliar, royalty/streaming companies are a much lower-risk way to gain exposure to precious metals, given that they finance projects and mines up front and collect a portion of the sales from the asset over its mine life. The result is that, unlike producers, they are inflation-resistant and not subject to rising labor costs, materials costs, and energy prices.
In a sector with multiple royalty/streaming stocks to choose from, Osisko Gold Royalties stands out for several reasons.
The first is that the company has the #2 growth profile in the sector, expecting to grow annual attributable production from 80,000 gold-equivalent ounces [GEOs] in FY2021 to 135,000 GEOs in FY2026. This means that even if gold and silver prices go sideways at $1,750/oz, its revenue will increase from $160MM in FY2021 to $236MM in FY2026, an 8.1% compound annual sales growth rate. If gold prices return to their highs, this growth rate jumps to 11.5%, giving OR one of the highest growth rates sector-wide.
The other key differentiator for the company is that its royalties/streams are in some of the safest jurisdictions globally, meaning that it’s not subject to repatriation risks in Kyrgyzstan, violence in Mali and Burkina Faso, and a shift to more leftist policies in South America. This makes the company’s growth much lower risk and lets investors sleep well at night with the comfort that the mines it has royalties on will remain in production without any negative surprises.
Despite this robust growth profile with an 8.1% revenue CAGR at conservative gold prices, and assuming the company does no additional deals on producing assets over the next four years OR trades at a massive discount to its peer group.
This is evidenced by OR being valued at just 0.80x P/NAV and less than 10x FY2024 cash flow estimates or ~8x cash flow after subtracting out its investment portfolio. The current valuation figure is 50% below the historical average of more than ~20x cash flow and 1.60x P/NAV or higher for the larger royalty/streamers.
As new assets come online and production grows from existing assets, I see the potential for a significant re-rating to more than $18.00 per share.

To summarize, I see the stock as a steal below $10.00 per share, and I believe the current valuation can be justified by just its six largest royalty/streaming assets (Malartic, Eagle, Mantos, Windfall, Island, Renard) and its investment portfolio, let alone its more than 100+ other royalty/streaming assets it’s not receiving any credit for in a market where fundamentals have gone out the window.
(Source: Osisko Gold Royalties Presentation)
With the gold sector being the most hated it’s been in years, it’s easy to shy away from the opportunities, especially with many producers seeing a margin crunch.
However, these opportunities lead to forced selling of the best names, and OR and AEM are practically being given away due to despondency sector-wide. Hence, I see this correction in both names as a buying opportunity.
Disclosure: I am long OR, AEM
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.