Ex – Although the Euro is primary Dollar Index driver, on Friday another force became apparent. Probably the Yen.

Any target now is dependent upon the immediate move from here. If down, the possibility of Painting the Gap (Hash Lime Line) comes into play. If up, a Top Retest is expected, which could expand as seen in the Quarterly Chart just added (full extension unlikely).

Expansion targets: 115.65 (27.2%) and 116.00 (38.2%).

Last week Rick Ackerman projected a lengthy retracement followed by higher: https://www.rickackerman.com/2022/09/dxy-nybot-dollar-index-last112-98/. He may have an update tomorrow.

As mentioned previously, a non-linear break may trash all of our thinking. Beware flocking Black Swans. – BDC

Hi Ex, your show has markedly improved since the old days. Just taking the time to listen in to your interviews which are very insightful, requires a lot of attention and thought. If you aren’t receptive to change which is what we get here every week, from the exchange of ideas, you won’t do well as an investor. The best part is it’s free, not many things these days are free without giving out some of your personal information. That is the world we live in today. DT

I posted this rant on last weekend’s show, but had also posted it over at ceo.ca and got a number of responses both privately and publicly afterwards. It really ties into the discussion we had with Jayant on many aspects so, while a bit lengthy, it seemed relevant to post it here again for consideration, with a few added tweaks.

It would be great to get others thoughts and strategies for how they invest in the junior mining stocks.

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As for what kind of exposure most people should have to commodities or gold, I’ll share a few ideas, but ultimately I believe all investing and which sectors people decide to get positioned in are 100% their own prerogative.

Nobody should be telling others what they should be doing — whether that is buying, selling, or going to cash, as it is an individual quest, and everyone has different risk tolerances, time horizons, and different styles or approaches to how they invest. It is much the same as music, or films, or food, where one persons favorite is despised by another, one person’s genre of preference is the antithesis of someone else’s interests. To assume there is only one clear action or path forward for everyone is the height of ignorance and hubris.

We hear these silly mantras all the time in many asset classes where someone urges all their fellow investors to go “all-in” because their pet stock is “going to the moon” (with rocket ship emojis)… or the converse “Sell everything and go to cash”. Then there are the mantras of the buy and hold crowd that don’t trade the stocks or sectors but mostly buy a position and just sit in it for better or worse like a bump on a log, (regardless of the technical or fundamental trends) with phrases like “buy right and sit tight” or “hold on for dear life” or “I’m never selling = diamond hands.”

The problems with being uber-bullish, uber-bearish, or perpetually neutral (but hopeful) is that they are not really strategies, and they will have people leaning the wrong direction a great deal of the time. The other issue that presents itself in the commodities space is that they are cyclical in nature and have their times where they are shunned, and also have periods where they get their time in the sun. However the issue that further compounds things is conflating the underlying stocks with their respective commodities, when that is simply not the case.

Often times, especially when stepping down into the Junior mining stocks that are explorers or developers, they can be completely unhinged from the trajectories found in their related commodities, and they really trade on the basis of their company’s individual success or failure, dilution from capital raises, key breaking news (good or bad), drill success, new discoveries, spending money on only marginal drill results, permitting wins or setbacks, community relations wins and setbacks, and on and on…

The reality is that most buy and hold value investors do not have the right thought process or approach when investing in any mining stocks, especially the explorers, prospect generators, and developers, but to a lessor extent even the producers. They try and extrapolate over the Jesse Livermore concept of “buying right and sitting tight” that works fine for blue chip stocks and general equities over longer time periods, or even buying physical metals. However, the error in thinking is trying to force those investing strategies on a much different cyclical and volatile sector like commodities that is more of a giant whipsaw and game of whack-a-mole. PM Mining stocks, base metals mining stocks, minerals stocks, or oil & gas stocks, especially the juniors, should be traded, and very few have been great longer term “buy and hold” type of equities for many years or decades at a time.

In my personal opinion, most people don’t have the stomach to trade the volatile commodities sector and the wild swings it has within a cyclical pattern, and they will get run over if they just sit there lifeless. Be it Oil or Nat Gas or Copper or Nickel or Uranium or Lithium or Graphite or Potash or whatever, most buy and hold investors are not really equipped emotionally or technically to trade either the futures markets or the volatile individual extractive companies, and while holding Gold or Silver for decades may be a good strategy for the actual metals, it is a terrible strategy for just plopping money in a few mining stocks and hoping for the best. Most investors don’t really have a system for the vetting process of individual names, and instead rely on tips from other investors, recommendations from newsletter writers, or just pick a few names they see being discussed as trending on different chat boards and forums.

For most investors that want to wade into the commodities sector, but don’t have the time to research each company in a sector, then I’d recommend getting any exposure by using an ETF for the whole resource sector, or an ETF for each individual commodity sector that they want exposure to. This takes the individual company risk (but admittedly some of the potential upside reward) out of the process, but it diversifies one across a basket of stocks and will capture the general trends of that sector. For those that enjoy the stock-picking aspect, there is always the option of building one’s own ETF in a sector, which is what I do personally, to pick the companies, the weighting, and number holdings one is comfortable with personally. This also allows one to actively manage their own basket or personalized ETF to make substitutions or change weightings whenever they see fit, as well as get spin out companies, and dividends when they happen.

As for Gold, it still makes sense for people to hold a small percentage of their net worth in the physical metal or have the physical held by a storage company in their name where they could actually still take delivery. Many suggest 5%-10% of overall net worth, but few actually have that allocation. Most people have 0% holdings in physical gold or silver, and then the die-hards really have much more exposure than that. Again, I think that is a personal call and wouldn’t presume to suggest what others should do.

Gold is a mostly uncorrelated asset class, and an “un-currency” in a way. It’s not the hottest speculative trade on the market and shouldn’t be thought of in those terms. Gold is a way to preserve wealth over longer periods of time as hard money. It hasn’t done that well as an inflation hedge over the last 2 years, because energy stocks were much more effective, but it did do well when the Ukraine war broke out, and it does respond over time to fiscal malfeasance and bad monetary policies. It is not really supposed to be a great asset class to trade or speculate on, as it is simply a good store of value and that is the role I see the yellow metal plays in one’s mix of assets. This is why comparisons between Gold and Bitcoin fail to hit the mark, as Bitcoin is so much more speculative and seems to be correlated to tech stocks, compared to Gold’s lone ranger role. Some investors do just fine owning no gold at all, while others have done well over longer stretches of times precisely because they had outsized weightings to gold, so there is no steadfast one-size-fits-all approach.

If people do want to speculate for outsized gains, then that is where the gold mining stocks (and all mining stocks) come in. However, investing in Gold and investing in gold mining stocks are apples and oranges and totally different risk profiles, volatility, and investing styles. People erroneously lump mining stocks or energy stocks in with the underlying commodities, and try to overlay the macro narratives on micro equites. However, in stating what should be obvious but apparently isn’t…. the commodities are actually on the periodic table and traded on futures markets as the hard assets the are; while the other group of mining stocks are actually equities and companies with many more risk/reward points around management teams, capital structure, access to capital, environmental, labor, fuel, permitting, social engagement in local communities, jurisdiction risk etc…

Investing in a gold or oil or copper junior exploration company is nothing like actually investing in gold, oil, or copper directly, and an individual mining stock and the related underlying commodities can have vastly different trajectories. The macro narratives that may apply to the individual commodity (like copper or gold) may not really apply meaningfully to a drill play explorer as they are 2 very different things, with different value drivers, and different strengths, weaknesses, opportunities, and threats.

This is also where some of the misunderstanding as to strategies and qualities of assets come in, especially with Gold. Gold is a buy and hold longer term or possibly even lifetime hold, that can be passed down to ones children or grandchildren. So “buy right and sit tight” works just fine for the yellow metal. Gold stocks are nothing like that, and again, most are not good buy and hold stocks for years or decades, not even the majors or mid-tiers. Sure there are periods in the past where that may have worked, but those are limited examples, and the harsh reality is that most gold stocks, like all commodity stocks, are companies, with their own qualities and trends, and they should be traded by accumulating weakness and selling into strength.

I’d suggest the that closest way for people to play mining stocks to capitalize on the macro trends of the underlying commodities is to buy royalty & streaming companies, with diversified baskets of income producing revenue streams spread across dozens of operating companies, but without the same inherent risks that the mining companies have individually. Buying PM royalty companies can still very much be trades, but they actually can be longer term buy & hold. Just pull up the charts for the last 20 years on companies like Franco Nevada or Royal Gold and they have performed more like the blue-chip stocks in the space with gradual value creation over time. The mid-tier and junior royalty companies though, are much more speculative and still best sold into strength and accumulated into weakness as trades.

Those that use technical analysis or follow the fundamental news on companies or individual commodity sectors very closely can spot opportunities to buy mining stocks low and sell them high, but it is a limited number of folks that actually put in the time, homework, and gain the skillsets to effectively trade volatile sectors effectively. Of course, this is true of any valuable skillset attained in life and doesn’t just apply to investing, as a great golfer, or great sailor, or great chef, or great teacher, or great artist puts in many years of work, accumulates both learned knowledge and experiential knowledge, and then comes up with their own system and process. Investing and trading is no different, and most people that try to do it casually as hobby, has it cost them like a hobby does.

Investing in mining stocks is more akin to speculating in biotech, or cryptos, or meme stocks, or other hot money sectors, where the gains can be explosive, but so can the losses, and those in the sectors need to pick their spots, cut losses quickly, and harvest outsized gains when things get too overbought to take their winnings off the table. This takes experience in recognizing technical patterns, watching momentum and sentiment, and being able to put their emotions in check, and execute trades swiftly and definitively with the conviction from gained experience. Even with all that experience, it is not an easy craft to master, and that is why most fail.

What I have observed in the last 23 years of my investing journey (having really gotten going trading individual stocks in late 1998/early 1999) is that most people that try to be “traders” (including many various newsletter writers or talking heads seen in the financial that are considered the pros or thought leaders in the sector) fail at actually trading the speculative sectors they follow. In most cases it is that they are not disciplined or systematic and go with their guts, or because they are permabulls always buying and never selling, or because they are slaves to their emotions of greed and fear.

Most are victims of recency bias, expecting the next 12 months or 12 days to be just like the last 12 months or 12 days, and very few have the foresight to pick up on developing trends and skate to where the puck is going to next. They resist actually buying assets when they are unloved and underappreciated and when the valuations are low (like at present, when they are actually most attractive), and fail to sell when things are overbought and frothy (like in the summer of 2016 or 2020 or all all the dozens of tradable rallies for 1-3 months that we’ve seen over the years).

As a result, I don’t think that most generalist investors or even most longer-term value investors should likely be playing in the commodities space, or biotech space, or cryptoverse, or meme stocks, or growth tech stocks; nor should they be managing their own money. Hell, 90% of most fund managers on Wall Street or Bay Street can’t even beat the underlying indexes over extended periods of time. It’s not easy.

Brian, 53 also happens to be the level of the 61.8% Fibonacci retracement of the move off the 2020 low.
Here’s a quarterly look with 4 forks to consider:
https://stockcharts.com/h-sc/ui?s=%24WTIC&p=Q&yr=30&mn=0&dy=0&id=t2509082134c&a=826847551&r=1664743294440&cmd=print

Bonzo, it appears to be at/near a daily chart/short term low but the weekly/intermediate term is less friendly even after 6 straight weeks lower.
Daily:
https://stockcharts.com/h-sc/ui?s=%24NATGAS&p=D&yr=1&mn=7&dy=11&id=p64552520194&a=1065248041

Yeah, I’d agree that the big move already happened in Lithium, and as mentioned up towards the top in a response to Thomas, I harvested my gains in the Li stocks last year in the Autumn. There are a few special cases in the direct lithium extraction subsector that may still be of note, but as you mentioned, even then, much of the easy money has already been made over the last few years in the Lithium miners.

As for Uranium miners, it is similar to the Lithium miners, in that we already saw a big move over the last 2 years in the U stocks and the easiest money has been made, and I had cashed out by 85% from Sept-Oct of last year, just a little early as they peaked in mid November, but it was a hell of a run. I did start accumulating my positions back in December of 2021 – Jan of 2022, and caught another nice swing trade in the rally up though April. I trimmed some back but then bought back into them again in the summer sell-down of June/July. I’ve now pretty much got the exposure I want in Uranium miners, with just 7 portfolio positions, and when we see the longer duration term contracts start being executed with producers in the high $50’s – low $60’s there is likely still another wave higher to go, but maybe not as epic as the last few years rallies.

Longer term, if Uranium prices go north of that into the $70s-$100 price levels, there could still be some nice multi-bagger moves in the U stocks, but that may still be 2 years off. I plan on holding the positions I have until that move higher because that seems quite probable, but they are on auto-pilot for now in my portfolio, and I’m not really messing around with them much. If we do see a “sell everything” liquidity event hit all market sectors later this year or early next year, then I may add to them, and average down in that scenario; but for now, I am just treating my remaining positions as 1-2 year position-trades on the final leg higher in the Uranium sector.

Yes I wondered about imminent news myself but it’s probably not necessary to explain the action lately considering their results so far. The company has a lot of irons in the fire with each showing great potential and plenty of news to come.

I was glad Jayant came out and mentioned he was down over 60%, and he is surely not alone. There are some positioned in junior mining stocks, cryptos, biotech, cannabis, meme stocks, etc down 70%-90%.

Since my portfolio’s high water mark in early June of 2021, (where I was up over 400% off the March 2020 pandemic crash lows), my acount is now down 50%. I took evasive action at times to limit some losses and sell some portfolio dogs, and had a number of good base hits with profitable swing trades, or it could have been much much worse.

The last year has been brutal in almost every sector except oil & nat gas stocks, utilities, and consumer staples, but even those finally rolled over the last few months.

It’s always darkest before the dawn though. While we may still see a “sell everything” liquidity event hit the markets for one more big flush, most of the damage was already inflicted to the PM juniors over the last 2 years.

Some explorers are already trading at valuations at or near the company’s cash in the bank. Some development companies have gold ounces in the ground valued at $5-$10 per ounce, and they are trading 2-4 times lower than the sunk costs already spent on their projects . That is not an industry sustaining level. To Erik Wetterling’s point on Friday’s interview — mining is not going away, and no companies would want to spend a decade developing a meaningful project if these valuations were actually correct.

As a result, like Jayant mentioned on this weekend show, he knows when the tide turns that many of the positions he holds that are currently down 60% on will surge up 300%, recouping the paper losses at present, and providing nice future profits. This is the same cycle we’ve seen play out over and over again.

It depends in just how orderly or severe the next leg down is in the markets, providing we get the final plunge scenario.

We’ve had on a few pundits and technicians looking for a potential move down to $3200 in the S&P 500, and the mid $1500’s in gold. However we have had people on like Rick Bensignor, that mentioned a solid break below the $1675 support in gold setsup a retest of the $1450 pandemic low, or even a move back down to that $1370-$1375 support (that was prior resistance for years).

I don’t expect it to get that bad. Like Jordan has mentioned repeatedly, it will really depend on how severe and rapid the move down in the general markets is during the rest of the bear market.

Would be nice to get a technical update from DOC on the current status on this