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Desperate Resource Traders Are Selling at 80 Cents on the Dollar

By Matt Badiali, editor, S&A Resource Report
Wednesday, February 27, 2013

The signs of a desperate bottom are starting to appear in the junior-mining sector... We're starting to see dollar bills trading for 80 cents.
Regular Growth Stock Wire readers know we keep close tabs on small resource stocks. Because this sector regularly goes through huge booms and busts, it's a good friend to the speculator. Get in the booms early and avoid (even short) the busts, and you can make huge returns.
For the past two years, the sector has been in bust mode. Things are so bad now, many companies are starting to trade for less than the cash they have in the bank...
We like to gauge the price action in small-cap "junior" miners and explorers with the Toronto Venture Exchange Index. It can be considered the "Dow Industrials of small resource stocks."
As you can see from the chart below, the Venture has been stuck in a downtrend since early 2011. It enjoyed two brief rallies last year. But as of this month, it's back to its lowest values since 2009...
The Venture Index Exchange is Down 53% From March 2011 High
Investors are throwing in the towel on junior-resource stocks. Desperate sellers are willing to take almost any price. That's driven prices on about 4% of all the junior resource companies below the value of their cash on hand. Here are some examples...
Market Value
to Cash
Strategic Metals
Don't mistake this for a list of recommendations... it's not.
But this is the kind of thing we see at market bottoms. Desperate sellers dump their shares with no regard to their underlying values. Investment funds "puke up" their holdings to return what's left of their investors' money. And you can buy dollar bills for 80 cents or less.
If you're a contrarian, you've got to be getting interested right now.
Good investing,
Matt Badiali

Further Reading:

This summer, Matt predicted that as many as 1,000 junior-resource stocks would go under over the next year. "Junior miners burn through cash," he wrote. "The only way for these companies to refill the till is through issuing new shares. And right now, there are no buyers." Find the full story here: If You Own a Small Gold Stock, Read This.
And last month, he told traders to watch the Venture Exchange Index's "line in the sand"... "I've learned one critical fact over the years," Matt explains. "When the overall trend is bearish, it doesn't matter how good the company or how great the deposit. In the end, they all bust." Read more here: A Key Level for Small Gold Stocks.

In The Daily Crux
Market Notes
For-profit educators Apollo Group and Corinthian Colleges are down 50%-plus over the past year.
Housing-related companies Home Depot, Sherwin Williams, and Mohawk are up 45%-plus in the last 12 months.
High-cost oil producer Suncor hits a seven-month low... oil-sands stock is down 12% over the past month as oil prices drop.
High-cost oil producer Petrobras hits a four-year low... state-owned company drops more than 70% from its 2009 peak.
Market Watch
Symbol Price
S&P 500 1553.28 -0.4% +11.1%
Oil (USO) 33.28 -0.3% -15.2%
Gold (GLD) 152.81 +1.7% -3.5%
Silver (SLV) 26.39 +1.5% -14.1%
U.S. Dollar 82.75 +0.2% +3.4%
Euro 1.30 +0.5% -0.5%
Volatility (^VIX) 13.92 +0.2% -16.7%
Gold Stocks (^HUI) 328.04 -0.8% -25.6%
10-Year Yield 1.69 -4.0% -22.1%

World ETFs
Symbol Price
Singapore (EWS) 13.89 -0.2% +14.3%
Japan (EWJ) 10.96 +0.6% +13.8%
USA (SPY) 155.16 -0.5% +13.5%
Israel (ISL) 14.25 +0.4% +7.4%
Taiwan (EWT) 13.28 -0.4% +4.4%
India (IFN) 20.49 -0.4% +2.7%
Canada (EWC) 27.54 -0.6% +1.6%
China (FXI) 35.64 -0.9% -1.1%
S. Africa (EZA) 62.45 -0.1% -3.3%
Lat.America (ILF) 42.94 +1.0% -5.8%
S. Korea (EWY) 55.77 -1.9% -7.0%
Russia (TRF) 14.50 +0.2% -9.9%

Sector ETFs
Symbol Price
Construction (PKB) 19.43 +0.6% +41.6%
Media (PBS) 19.16 +0.2% +29.7%
Health Care (IYH) 97.00 -0.7% +26.2%
Consumer Svcs (IYC) 97.18 -0.3% +22.2%
Real Estate (IYR) 70.72 +0.3% +19.4%
Water (PHO) 22.25 -0.5% +18.8%
Financials (IYF) 67.22 -0.3% +18.4%
Insurance (PIC) 19.01 +0.1% +18.3%
Utilities (XLU) 39.57 +0.4% +18.0%
Defense (PPA) 22.74 +0.1% +17.1%
Transportation (IYT) 107.34 +0.5% +15.4%
Biotech (PBE) 26.03 -0.4% +15.2%
Telecom (IYZ) 24.71 +0.7% +15.1%
Industrials (IYJ) 79.84 -0.2% +15.0%
Retail (PMR) 27.33 +0.3% +8.9%
Software (PSJ) 29.07 -1.3% +8.9%
Nanotech (PXN) 6.48 +0.0% +2.9%
Big Tech (QQQQ) 67.86 -0.8% +1.5%
Basic Mat (IYM) 68.04 -0.4% +0.5%
Semis (PSI) 14.84 -0.6% -4.4%
Alt. Energy (PBW) 4.20 -0.2% -17.2%

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