Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to review why some junior mining stocks are not moving despite the continued rally in gold, silver, and the precious metals producers. We discuss that quite often the value drivers of earlier-stage explorers in the junior mining sector have little in common with the specific direction of the underlying metals price action or even whether it is a bull or bear market.
We get into the current environment we are in here in tax loss selling season, where a junior can pop or drop by 10% or 20% on no fundamental news and even if metals are flat on the day, just because larger investors are getting into or out of positions as their rebalance their portfolios into lower volume. Erik also pointed out that the best offense and defense for him has been consistently buying into the weakness when he felt valuations were cheap. He clarified that a stock being cheap is not equal to the last day of selling or a bottom in a stock, so if it continues to fall it is just varying degrees of absurdity.
As the sector gets more absurd, volatility is the only currency he uses to capitalize on market inefficiencies. He reiterated that most investors have been shooting themselves in the foot by only trying to find stocks that will no longer go down anymore, and then are stuck chasing rallies to the upside, having sacrificed many multiples of gains that could have been had if they were just comfortable with the idea that the stock could still go a bit lower after buying a cheap valuation.
*In full disclosure, some of the companies mentioned by Erik, such as (IAU) (IAUX) I-80 Gold Corp in this interview, are personal positions in his portfolio and may be covered or site sponsors on The Hedgeless Horseman website.
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