October 3, 2022

Newmont Mining – Getting Ready For A Price Explosion

Newmont Mining (NEM) has been a frustrating stock for many investors over the past 14 years.

As the price of gold moved from the $390 range in May 1996 to $1200 today, Newmont’s stock price is only $3 above the all time high of $59 reached in May 1996.  Long term Newmont shareholders are certainly justified in wondering when the price explosion in gold will be reflected in Newmont’s stock price.

Based on recent relative price performance and fundamentals, Newmont shareholders should finally be looking forward to an explosive move upward in the price of the shares.

During the recent price correction in gold, Newmont’s shares have shown a strong relative price performance compared to other large major gold producers.  Short term price pullbacks in Newmont were quickly recovered, indicating eager buyers at lower prices.

NEWMONT GOLD OUTPERFORMS

NEWMONT GOLD OUTPERFORMS -COURTESY YAHOO.COM FINANCE

The fundamentals on Newmont are exceptional and do not seem to be fully factored into the stock price.  Newmont sells at a forward price earnings ratio of only 15 times earnings, has had quarterly revenue growth of 46%, enjoys a 17% return on equity, has had quarterly earnings growth of 188%,  is sitting on $3.4 billion in cash ($7 per share) and the stock price has recently hit an all time high.

newmont-ready-to-fly

Based on the trend in fundamentals and strong relative price performance, look for a blowout earnings announcement by Newmont on July 28th.

Disclosures: Long NEM

Why It Just Became More Difficult To Get An FHA Loan -Declining Markets

mortgageNew Appraisal Guidelines Effective April 1, 2009

All FHA appraisals dated on or after April 1, 2009 must include a Market Conditions Addendum in order for the loan to be insured by the FHA.  There are also new guidelines for appraisers to follow when the property is in a declining market area.

Appraisal-Related Policy Changes and Clarifications

Due to current conditions in the real estate market, it is paramount that appraisers are provided with sufficient guidance to properly appraise and document the appraisal report. Fannie Mae recognizes the Uniform Standards of Professional Appraisal Practice as the minimum appraisal standards for the appraisal profession. In addition, Fannie Mae has established its own separate appraisal requirements to supplement the Uniform Standards.

Adoption of Market Conditions Addendum and Appraisal Reporting Requirements for Properties located in Declining Markets

For all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009, the appraisal must include the Market Conditions Addendum.

Use of Closed Comparable Sales and Active Listings/Pending Sales for Appraisals in Declining Markets

As economic instability continues to impact many segments of the economy and as home prices continue to decline in many housing markets throughout the country due to job losses and increased foreclosures, FHA finds it necessary and prudent to set forth additional guidance for collateral assessment practices for properties located in a declining market. This guidance is also effective April 1, 2009.

Declining Markets

Although there is no standard industry definition, for purposes of performing appraisals of properties that are to be collateral for FHA insured mortgages, a declining market is considered to be any neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.

Appraisal Reporting Requirements in Declining Markets

Appraisals of properties located in declining markets must include at least two comparable sales that closed within 90 days prior to the effective date of the appraisal.
In some markets compliance with this requirement may be difficult or not possible due to the lack of market data and, in these cases, a detailed explanation is required.

In order to ensure that FHA receives an accurate and thorough appraisal analysis, the inclusion of comparable listings and/or pending sales is required in appraisals of properties that are located in declining markets. Specifically, the appraiser must:

• Include a minimum of two active listings or pending sales

• Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables.

• Adjust active listings to reflect list to sale price ratios for the market.

• Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios.

• Include the original list price, any revised list prices, and total days on the market (DOM).

• Reconcile the adjusted values of active listings or pending sales with the adjusted values of the settled sales provided.

• Include an absorption rate analysis, which is critical to developing and supporting market trend conclusions, as mandated by the Market Conditions Addendum. F

Data Requirements

Data regarding market trends is available from a number of local and nationwide sources. Appraisers must be diligent in using only impartial sources of data.

Lender Responsibilities

Lenders are responsible for properly reviewing the appraisal and determining if the appraised value used to determine the mortgage amount is accurate and adequately supports the value conclusion.

Direct Endorsement lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible, equally with the appraiser, for the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes.

Impact of New Appraisal Requirements

The new guidelines should ensure that an FHA purchaser is not overpaying when purchasing a home.  This benefit may be offset, however, by the fact that it may become more difficult for a purchaser to receive seller concessions from the seller since it will be more difficult for the concessions to be absorbed into the sales price. In the past, there would have been more latitude available by the appraiser to build the seller concession into the sales price through a higher appraised value.

The bottom line for many buyers may be that they now need significantly more cash at closing, in addition to the 3.5% down payment money.   It is not uncommon to have seller concessions of 4 to 6% which absorbed prepaid expenses and closing costs.  If the seller concession is not available, the borrower could easily be looking at additional cash out of pocket requirements of around $5,000 on a $150,000 purchase, in addition to the $5250 down payment.

Borrowers attempting to refinance (especially in a declining market), may find it much more difficult to do so with lower appraised values.  In addition, every reputable FHA lender will be examining FHA appraised values much more closely due to the lender liability for a poor or fraudulent appraisal.

The tighter appraisal guidelines should ultimately result in appraised values that more accurately reflect  housing values and thus prevent problems associated with inflated appraisals that occurred in the past.   Whether or not more accurate appraisals will lead to a more stable housing market is another matter, subject to debate.  A matter not subject to debate is that for anyone purchasing or refinancing through the FHA, getting a loan approval has just become more difficult.

Where Is The Physical Gold And Why Does US Restrict Gold Purchases? Does The GLD Have Any Gold?

Strange Situation In The Gold Market

Two recent articles seem to suggest that there is a large physical shortage of gold.

Is the physical shortage of gold the reason for the large restriction in US Mint gold coin sales?   If there is no physical shortage, then why would the US government be severely restricting the ability of its citizens to own physical gold?

Furthermore, if there is a physical gold shortage, how is it possible for the ETF GLD to purchase 45 tons of gold last month?  Do the gold ETF’s really hold physical gold?

Gold Coin Sales Further Restricted By US Mint

US Mint Suspends Production of More Gold and Silver Coins

March 14, 2009 | Filed Under US Mint | 11 Comments

The United States Mint has officially announced the suspension of another slate of gold and silver products. The affected products are 2009 dated American Gold and Silver Eagle coins produced for collectors. These coins are considered collectible versions of the bullion coins.

Although these are collectible coins, they represent a sizable amount of precious metals sales and represent a method of gold and silver investment for many individuals. Last year, the US Mint sold 1,157,911 ounces of silver in the form of Silver Eagle coins minted for collectors. They also sold 155,740 ounces of gold in the form of Gold Eagle and Gold Buffalo coins minted for collectors.

The following message was posted on the US Mint’s website in the space where the collectible Gold Eagle coins typically appear. The proof coins has been offered uninterrupted since 1986. The uncirculated version has been offered since 2006.

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins.

This adds to the lengthy list of 2009 dated precious metals products that have been “temporarily delayed” or suspended by the US Mint. In my previous post Actions of the US Mint Discourage Gold Ownership, I mentioned the delayed release of 2009 Gold Eagle fractional coins, 2009 Gold Buffalo coins, and all 2009 Platinum Eagle coins. The delay, which was first announced in November 2008, continues with no further explanation provided.

That makes a total of 38 precious metals products which have been delayed, suspended, or discontinued by the US Mint.

As it currently stands, investors or collectors looking to purchase newly minted American Eagle or American Buffalo precious metals products have only two options available. These are the 2009 1 oz. American Gold Eagle and the 2009 1 oz. American Silver Eagle. Both of these products continue to be subject to rationing.

Did The ETF Fund GLD Really Purchase 45 Tons Of Gold Last Month And If So, Where Did It Come From?

Where Do All The Gold ETFs Get Their Bullion From?

Don’t you think it is about time GLD and all the other popular international gold ETFs told its owners exactly what kind of gold they claim to own?

Can you imagine a situation where a person buys a gold ETF to own “non-gold” but finds out that they in reality own OTC derivatives on gold? That would be an investment in the same type of financial instrument (not gold) that one owns gold bullion to protect against.

The failure to unearth the Madoff scandal becomes incredible when one understands that the returns from the market claimed on the size of the hedge fund were logically impossible.

The exact same reasoning screams bloody murder when applied to the many Gold EFTs in terms of what it is they really own.

This begs one major question: From where did all the gold claimed to be owned by all the gold ETFs come from?

Where did funds such as GLD get their additional 45 tons in the last month?

We certainly can forget about that gold coming from the Comex. 12 deliveries would stand out like a sore thumb.

This concept and record keeping eliminates all exchanges around the globe as the source of bullion delivery in any size to all Gold ETFs.

The physical market is so tight that coin minting has all but closed down compared to what it was one year ago. It is hard to accept that the Gold EFTs can buy what the mints can’t.

Like so many other surprises of the last two years the Gold ETF shareholder may actually have no gold at all.

A perfect Ponzi scheme would allow you to surrender shares for bullion. You need only think about it.