Where to from here?, page-33

The topic is "where to from here". You can't address this topic without talking about broader markets. If you ask me where to from here, it's the next and final collapse (for a long while) of the stock bubble which is going to bring all equity values lower. If you want to talk about SAR it is overvalued in this context with a PE of 27. The company doesn't even have enough gold reserves in the ground to support this PE. The company would need to have earnings per share (EPS) of more like 42 cents/share (not 19.1c) to justify its current valuation of $5.15 or alternatively a price of $2.29 per share to justify its current earnings.

A stock market bubble allows such valuation inconsistencies to take hold. Take Tesla for example, the real canary in the coal mine that is currently being ignored. It sells only 0.5% of all passenger cars worldwide, doesn't make any money but is valued higher than Toyota the largest car maker in the world. You need to look at the tail risks of all your investments. Sure if you are betting on SAR or any other equity at the moment at the margin of your wealth, it's no big deal, but if you are "all in" equities or SAR for that matter you need to consider a scenario where the market enters a true cyclical bear market like during the 1970s. Under this scenario all stock prices will trade on traditional metrics based on earnings not the current meme of the stock market bubble which is the so called "growth stocks". Growth stock is just code for bubble stock, ie a stock whose price does not reflect its earnings but only some rosy and unsubstantiated view of the future that will never arrive. Alternatively a growth stock is a stock that is wholly dependent on the expansion of credit (money printing). Do you really think the super pit deal could have been done without the credit bubble expansion? Do you think the gold price would be rising without the credit expansion?

With the end of the credit expansion comes the end of the stock market and all asset bubbles and we are getting close because as I've said before, governments can't afford to print more money but they also can't afford to stop printing money. A "Catch 22" situation with the same end result which is the end of the credit expansion one way or another followed by a long decent into financial darkness. It's a bit like the theories physicists have about the end of the universe. Space and everything in it either continues to expand leaving a cold dark universe where galaxies and stars gets so far apart that when you look into the night sky all you'll see is darkness or the universe reaches a limit of expansion and contracts again leading to the big crunch where all the galaxies and stars end up disappearing back into the singularity from which they arose.Esh