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Will The Government Bailouts Create More Stock Warrants?

By Dudley Pierce Baker
Founder – Editor
Common Stock Warrants

The Federal Government is promising massive loans to large corporations due to the massive slowdown and halting of much business due to the covid-19.

What will the government get in return for those loans, if anything?

On Tuesday evening we had news, that yes, the government will be receiving stock warrants on many of the airline companies being a part of the loan/bailout program. We still ask, ‘what about Boeing”, ‘what about other industries’?

From MarketWatch (April 14)
“Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines have told us that they plan to participate in the Payroll Support Program,” Treasury Secretary Steven Mnuchin said in a statement on Tuesday afternoon. “Conversations continue with other airlines regarding their potential participation.”

Barrons Article Out This Morning:
Airlines Are Finally Getting a Government Bailout. Here’s Why Their Stocks Are Falling

This appears to parallel the situation in the financial crisis in 2008-2009 where the government stepped in and bailed out the banks and auto industries.

As I write this, I have not seen the details of the stock warrants for each airline company, i.e., the exercise price of the warrants and the expiration date.

In the financial crisis, all of the large banks including J.P. Morgan Chase, Bank of America, Wells Fargo and many others received loans from the government. Also, General Motors and Ford were bailed out. In return the government received stock warrants (most with a 10 year life). In effect, the government had an equity interest in each company.

Eventually the government sold those warrants (cashed in) and those stock warrants began publicly trading on the U.S. stock exchanges. Investors had the opportunity to purchase these warrants which gave them greater upside leverage than purchasing the common shares of those companies. In my, “The Stock Warrant Handbook, Your Personal Guide To Trading Stock Warrants”, I mention that while the common shares of Bank of America increased by 114%, the stock warrants gained 2,376%, a leverage of 20.8 to 1. Many investors made millions of dollars by buying these warrants.

There is little doubt that one day, perhaps a year or two, we will be hearing that the government is selling these airline warrants via a placement in the market at which time the warrants will become publicly traded giving investors an additional way to own the airline stocks.

These new trading stock warrants on the airline companies will be a welcome addition to our current databases of resource companies, biotechnologies, pharmaceuticals, shipping and many more industries.

Perhaps this would be a great time to join us as a subscriber?

 

Is The Coronavirus Bullish For Stocks?


February 7, 2020
Chris Vermeulen
TheTechnicalTraders.com

 

 

Note from Dudley - These Guys Are Good:
Chris and his team are providing investors with a great road map for the direction of the markets, which is why I am also a paid subscriber to TheTechnicalTraders services and encourage you to consider a subscription as well, The ideal service to supplement your other subscriptions as well as my CommonStockWarrants.com.

"...We believe the scope of this parabolic rally in the US stock market should actually concern skilled traders.  Markets just don’t go straight up for very long.  The last time this happened was in the 1970s and 1980s.  Very minor volatility during that time prompted a big move higher in the US stock market that set up the eventual DOT COM collapse...."

IS THE CORONAVIRUS BULLISH FOR STOCKS?

 

 

 

Investors don’t forget the great opportunities available with stock warrants which will increase your potential gains and greatly decrease your investment cost by at least half.

E.B. Tucker with Casey Research, recently referred to Dudley as ‘the top expert in the field with over 40 years of experience‘ with stock warrants.

“I also encourage you to check out the work from our friend Dudley Baker. Dudley is the founder and editor of Common Stock Warrants. He’s been trading warrants for 40 years and has developed an exclusive database of all stock warrants trading in the U.S. and Canada. We’re paid-up subscribers as well.”

Jeff Baker
Senior Analyst – Admin/Web Developer
B.Sc. Geological Sciences (UTEP)
Common Stock Warrants & Junior Mining News

If History Repeats, Gold Is Headed to $8,000

If History Repeats, Gold Is Headed to $8,000 
Contributed Opinion

Source: Jason Hamlin for Streetwise Reports  (11/18/19)

Jason HamlinSector expert Jason Hamlin explores the potential of the current gold bull market by charting the courses of past bull markets.

Gold bull and bear

The gold price bottomed in late 2015 around $1,050 per ounce. It has since advanced to a high of $1,555 in early September, followed by a pullback to the current price of $1,470. Gold is in a well-defined uptrend channel with higher lows and recently higher highs. The breakout above $1,360 this summer was significant and we have seen follow-through buying. The $420 move in the price of gold from the bottom in late 2015 represents a gain of 40% in just under four years.

While this is a respectable gain, it only scratches the surface of the potential move ahead. To understand why, let's take a look at the last two major bull markets in gold.

From 1971 to 1980, the gold price rocketed from a low of $35 to briefly peak at a high of around $850 ($678 high on the weekly chart) for a gain of just over 2,000%. It was closer to 850% in inflation-adjusted terms.


Gold Price, Source

Of course, this massive move was driven by the abandonment of the gold standard window by Nixon, a stampede into gold as a safe haven from double-digit inflation, oil price shocks, a weak dollar, and political instability that made investors fearful and nervous.

Fast-forward to 2001 and we can see that gold made another impressive move from $250 to a weekly high of $1,825 ($1,920 daily) over the course of roughly the same time period. This represents a gain of around 600% in that decade, or 450% in inflation-adjusted terms.


Gold Price, Source

The current bull market cycle in gold is nearly four years old but hasn't broken out of the gates yet. The 40% move higher since the start of 2016 is a modest advance relative to the last two bull markets. The gold price is moving higher today, so the chart below shows a 38% gain since the bottom.

The price would still need to go up roughly 15x (1,400%) to match the 1970s bull market, which would take the price to over $22,000! Or it would need to go up another 5.5x (450%) to $8,000 to match the magnitude of gains from the 2001–2011 bull market.

Put simply, the gold price has an explosive move ahead if the current bull cycle is to come anywhere close to the magnitude of the past two bull cycles.

While we don't have runaway inflation (yet) and we aren't facing a closing of the gold convertibility window as Nixon did in 1971, we do have quite a few factors that should be supportive of the gold price going forward.

These include record debt and deficits, a record-high debt-to-GDP ratio, interest rates dropping toward zero, the Federal Reserve expanding its balance sheet at twice the pace it was during QE3 (just don't call it quantitative easing!), the Fed intervening in various markets to provide emergency liquidity, a crisis in confidence in governments and political unrest worldwide, the potential for the impeachment of the United States president, elevated geopolitical tensions between world powers, a global de-dollarization movement that is accelerating, slowing economic growth, historically overvalued equity markets, a record low commodity-to-equities ratio and record-high total stock market cap to GDP ratio.


U.S. Debt-to-GDP, Source

If anything, the underlying conditions that caused the gold price to spike 20x in the 1970s could be viewed as even worse today. We have a massive derivatives issue and corporate debt problem that many view as ticking time bombs. This grand experiment with fractional reserve fiat paper money being used as a world reserve currency is likely coming to an end.

As it does, people will move toward forms of money with a limited supply that are not controlled by centralized authorities. Whether this is gold-backed money, digital currency from a tech giant or increased usage of Bitcoin for reserves and international exchange, the legacy financial system is on the way out.

Assuming another ten-year bull cycle for gold, there are just over six years left in the current move and upside of 5x to 15x the current price. In this environment, cash flows for quality mining stocks will absolutely explode and provide investors with leveraged returns. At a modest projection of just 2x leverage, there exists the potential for 10x to 30x returns in gold mining stocks over the next 5 to 6 years!

This is precisely the type of asymmetric trade that we look for at Nicoya Research. If you would like to receive our top gold stock picks, real-time portfolio, monthly newsletter, and trade alerts, you can sign up for the top-rated Gold Stock Bull subscription here.
Read the original article here.
Nicoya Research.

Jason Hamlin is the founder of Nicoya Research and goldstockbull.com and has published investment research for over a decade. He previously worked in data analytics for Nielsen, the world's largest market research firm, where he consulted to Fortune 500 companies including Nestlé, Johnson & Johnson and Del Monte. Hamlin's investment philosophy takes into account political, historical and socio-economic factors to determine macroeconomic trends and isolate the sectors that stand to benefit. He then applies fundamental and technical analysis, as well as proprietary models, to find companies that are undervalued within those sectors. Hamlin is a contrarian, cycles investor and student of Austrian economics.

Want to be the first to know about interesting Gold investment ideas? Sign up to receive the FREEStreetwise Reports' newsletter.

US Stock Market Hasn’t Cleared The Storm Yet

September 8, 2019
Chris Vermeulen
TheTechnicalTraders.com


Note from Dudley:
I am also a paid subscriber to TheTechnicalTraders services and encourage you to consider a subscription as well, Chris has been spot on with his projections and gives us a roadmap with his market forecast. The idea service to supplement your other subscriptions as well as my CommonStockWarrants.com.

US Stock Market Hasn't Cleared The Storm Yet

Investors don’t forget the great opportunities available with stock warrants which will increase your potential gains and greatly decrease your investment cost by at least half.

E.B. Tucker with Casey Research, recently referred to Dudley as ‘the top expert in the field with over 40 years of experience‘ with stock warrants.

“I also encourage you to check out the work from our friend Dudley Baker. Dudley is the founder and editor of Common Stock Warrants. He’s been trading warrants for 40 years and has developed an exclusive database of all stock warrants trading in the U.S. and Canada. We’re paid-up subscribers as well.”

A few examples for you to see the power and leverage
of using stock warrants.

Stock Warrants – Power Point Presentation

 

Jeff Baker
Senior Analyst – Admin/Web Developer
B.Sc. Geological Sciences (UTEP)
Common Stock Warrants & Junior Mining News

Could Hong Kong Disrupt China & The Global Markets Further?

September 1, 2019
Chris Vermeulen
TheTechnicalTraders.com


Note from Dudley:
I am also a paid subscriber to TheTechnicalTraders services and encourage you to consider a subscription as well, Chris has been spot on with his projections and gives us a roadmap with his market forecast. The idea service to supplement your other subscriptions as well as my CommonStockWarrants.com.

Could Hong Kong Disrupt China & The Global Markets Further?

Investors don’t forget the great opportunities available with stock warrants which will increase your potential gains and greatly decrease your investment cost by at least half.

E.B. Tucker with Casey Research, recently referred to Dudley as ‘the top expert in the field with over 40 years of experience‘ with stock warrants.

“I also encourage you to check out the work from our friend Dudley Baker. Dudley is the founder and editor of Common Stock Warrants. He’s been trading warrants for 40 years and has developed an exclusive database of all stock warrants trading in the U.S. and Canada. We’re paid-up subscribers as well.”

A few examples for you to see the power and leverage
of using stock warrants.

Stock Warrants – Power Point Presentation

 

Jeff Baker
Senior Analyst – Admin/Web Developer
B.Sc. Geological Sciences (UTEP)
Common Stock Warrants & Junior Mining News

Eye Opening Currency Charts – Why Metals Are Falling

 

May 22, 2019
Chris Vermeulen
TheTechnicalTraders.com

"... Our predictive modeling systems have been warning that a price advance in Gold and Silver will take place between April/May of 2019 and Aug/Sept or 2019.  We are calling this the “initial upside price leg” because we believe this upside price move will be just the beginning of a much larger move higher for Precious Metals...."

Eye Opening Currency Charts - Why Metals Are Falling

Investors don't forget the great opportunities available with stock warrants:

 

 

Stock Warrants - Power Point Presentation

 

 

 

 

 

Has Gold Reached Upside Resistance Near $1340 – $1360?

Our research has indicated that precious metals should be setting up for a period of rotation and sideways trading over the next 20~30 days.  We issued a research post on January 28, 2019 warning that precious metals would be consolidated over a 30~45 day period before setting up for a massive upside price move, here.  This research was based on our Adaptive Dynamic Learning price modeling system and from our Adaptive Learning Cycles system.  We believe this research is still very valid and want to alert metals traders that resistance in GOLD can be easily identified near $1340-1360.

The Weekly gold chart, below, highlights the resistance channel that originates in 2016 and continues with multiple peaks in 2017, 2018 and now.  We believe this resistance will act as a price ceiling over the next few weeks before metals prices attempt an upside breakout as we suggested in our January 28 research post.

Pay attention to the Fibonacci downside projected price targets near $1270~1295.  These levels are very likely to be retested if the current resistance level holds.  In other words, gold prices rotate back to below $1300 on moderate price rotation over the next 30 days before attempting to break resistance and move higher.  Be prepared for a potential “washout high” price pattern setting up early this week.

We are still actively seeking a deeper price rotation/retracement in Gold/Silver before we initiate any new trades.  We believe the upside pricing pressure has reached a level that will prompt a move back to below $1300 on healthy price rotation.  If we are wrong, we will know soon enough.  If we are right, then the momentum rally setup that will occur near or below $1300 will be a great trading opportunity for all investors.  Follow our research to stay informed of this future price movement.

We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members.  In fact, we are about to launch our newest technology solution to better assist our members in creating future success.  Visit www.TheTechnicalTraders.com to learn more.

Chris Vermeulen
Technical Traders Ltd.
www.TheTechnicalTraders.com

How to trade with warrants | Futures Magazine

Editors Note:
This is a re-visit of an old, yet timeless, article on stock warrants. Nothing has changed with warrants and the opportunities are endless as we now have warrants trading in all industries and sectors including resources, marijuana/cannabis, pharmaceuticals, biotechnology, etc., some with expiration dates of 5 years or more.

My contact info which was on Futures Magazine in the original article has changed, but otherwise, all is correct.

Read the entire article on Futures Magazine or below:

Many traders are familiar with call options and have spent many years and study hours learning strategies to employ them in the markets. Warrants, however, are still a little known and little-understood investment vehicle, even after 80 years of availability. In 1949, Sidney Fried wrote “The Speculative Merits of Common Stock Warrants.” In it, he captures the profit potential of these instruments.
He states:

“Common stock warrants turn in the most spectacular performance of any group of securities…. The speculative potentialities of common stock warrants are enormous…. With potential profits and potential losses so great it is a source of wonder that so little understanding of the nature of common stock warrants exists not only among the investing public who might be forgiven this sin, but even among the many professionals of the business upon whom the public depends for information and guidance.”
Sidney Fried’s observation in 1949 remains relevant today. Most investors and analysts do not take the time to understand the potential leverage — and the consequences — that warrants can bring to a portfolio.

Here, we’ll take a closer look at warrants from the trader’s perspective, compare them to call options and discuss when call options or warrants would be the most appropriate investment vehicle to accomplish a particular objective.

WARRANTS VS. OPTIONS
A warrant is a security issued by a company giving the holder the right, but not the obligation, to acquire the underlying company’s shares at a specific price. That right expires on a specific date in the future. Generally, warrants are issued in connection with a stock or a bond offering. Frequently, they are done so in the context of an “equity kicker” or “sweetener.” The reason a company will issue a warrant is simple; think of it as additional incentive to get the deal done.

There is an obvious similarity to call options. The two instruments are closely related. The major difference is that a call option is created in the marketplace by investors and not issued by a company. Typically, options trade on designated options exchanges, such as the Chicago Board Options Exchange. Warrants will trade on a traditional stock exchange, such as the New York Stock Exchange or the Toronto Stock Exchange, just like their common shares.

Warrants first came about in the 1920s. At one time, even AT&T had warrants trading, as well as some of the big company names of the past and present: Tenneco, Avco, Holiday Inn, International Tel & Tel, Lowes, General Tire & Rubber, Mack Trucks and many more.

Fast forward to today, and you will discover that many warrants are issued on the shares of natural resource companies, an area in which many traders have a special interest because of the commodity boom. Many companies that offer warrants trading are involved in the extraction and processing of gold, silver, oil and gas, uranium, coal, zinc and copper.

To name a few, you will find Goldcorp, Kinross and Silver Wheaton with warrants trading, as well as call options.

TRADER OBJECTIVE
The first step in warrant trading is selecting the right underlying company. This is of utmost importance because if the company does not execute on its business plan and the common shares do not rise, holders of either call options or warrants will not make money. Each investor must perform his or her own due diligence on companies that are attractive for investment.

The next consideration is time horizon. Once a viable company is selected, the decision to purchase a warrant or a call option will depend on the timeframe of the trader’s goals. While traditional call options generally have a life of between 30 days and one year, warrants often are issued with five years or more until expiration. Thus, short-term traders may see more opportunity in call options, while longer-term investors may be more comfortable with the several years until expiration that warrants provide. This additional time can be a great asset in the volatile markets we have experienced over the last two years.
Whether the investor is considering call options or warrants, the underlying reason is basically the same: increased leverage. Both warrants and options offer additional leverage over purchasing a stock outright. Of course, as with all forms of leverage, the leverage afforded by warrants cuts both ways.

When it comes to warrants, traders can expect to achieve at least a two-to-one leverage over purchasing the common shares; this is reasonable with most of the warrants currently trading. What this means is if you believe the common shares will rise 100%, then the warrants have the potential to increase by at least 200%.

WARRANT EXAMPLE
One stock that has attracted a lot of attention in the mining sector is Agnico-Eagle Mines. Focused on gold, with operations in Canada, Finland and Mexico — and additional development activities in the United States — Agnico-Eagle Mines benefits from significant international exposure. Its LaRonde Mine in Quebec is Canada’s largest operating gold mine, measured by reserves. Not surprisingly, the company’s stock has risen significantly along with the price of gold, and its warrants have been similarly popular.

The company trades under the symbol AEM on the NYSE, as well as the TSX. For several years, AEM had a long-term warrant trading, but it was overlooked by most investors and analysts. The warrant traded under the symbol AEMLW in the OTC market.

To see how the leverage of this particular warrant can amplify returns, go back to 2006-07. Each warrant entitled the owner to purchase one share of Agnico-Eagle common stock at $19 until Nov. 14, 2007. By then, the warrant had been trading for several years.

From the stock’s low on June 13, 2006, to the close on Oct. 12, 2007, it rose from $26.02 to $54.68, a rise of 110%. The warrant rose from $10.86 to $35.75, for an increase of 329%, providing the warrant trader with three-to-one leverage over owning the common stock. Investors privy to the warrants trading on Agnico-Eagle made an incredible gain on these warrants in a rather short period of time. Of course, if an investor had purchased call options during this period of time, they also would have made a significant profit.

A few other examples of warrants with great leverage returns in the last few years are Kimber Resources (6.1-to-1 leverage), Peru Copper (10.4-to-1 leverage) and Blue Pearl Mining (2.8-to-1 leverage).
Sometimes, it’s argued that warrants have a dilutive affect on the company’s capital structure and that investors should avoid them. From an accounting standpoint, the warrant is already issued. It is already trading on the market, and its effects are already in place. Interested investors are only taking advantage (if they desire to do so) of the leverage opportunities that the warrant furnishes.

In addition to speculative opportunities, warrants also provide hedging benefits. When combined with both put and call options, warrants also can be used to construct some rather interesting, sophisticated and potentially profitable trading strategies.

About the Author

Dudley Pierce Baker is the Guadalajara/Ajijic, Mexico-based founder and editor of Junior Mining News and Common Stock Warrants, (formerly Precious Metals Warrants). His e-mail address is support@commonstockwarrants.com

GOLD BREAKS LOWER – WHAT NEXT?

February 6, 2019 Chris Vermeulen     The Technical Traders Ltd. research team has been on top of nearly every move in the metals markets over the past 12+ months.  On February 1, we posted this article: Get Ready For The Next Big Upside Leg In Metals/Miners.  In this post, we suggested that the recent peak in Gold, near $1330, would likely end and prompt a downside price rotation over the next 45+ days. Subsequently, on January 28, we posted this article: 45 Days Until A Multi-Year Breakout For Precious Metals.  In that post, we highlighted our predictive modeling systems support of a sideways price correction in the precious metals markets that would align with US stock market strength and US Dollar strength. Today, the price is moving in favor to confirm that our modeling systems and research is correct again.  Gold has recently broken lower, below $1315, and appears to be … Continue reading

45 Days Until A Multi Year Breakout In Precious Metals

January 28, 2019 Chris Vermeulen       Today is the day we want to warn our followers that we expect the precious metals to continue to base with a fairly narrow price range for about 45 to 65 more days before upside pricing pressures start to take hold of the markets.  There has been quite a bit of chatter about Gold breaking above $1300 recently.  Many people have been expecting it to move much higher fairly quickly.  We don’t believe that will be the case – but expect it have another significant rally in April, May or June.   Monthly Gold Forecast Chart – Posted October 2018 Back in early October 2018, we shared this chart with all of our followers suggesting that Gold and precious metals would rally to above $1300 near December/January using our Adaptive Dynamic Learning predictive modeling system.  We’ve been suggesting to our followers for … Continue reading