By: Chad Williams, Chairman & Founder
“Markets can remain irrational a lot longer than you and I can remain solvent.” – J. M. Keynes
The performance of almost every mining stock –other than those focused on uranium and (until recently, anyway) lithium — has obviously been terrible over the past year.
Those of us that own mining shares have seen our portfolios get pummeled.
An old joke comes to mind: Question: “What’s the best way to make $1 million in mining stocks?”
Answer: “Invest $10 million and wait a while”
LET’S PUT THINGS IN PERSPECTIVE:
- Mining and commodity prices are cyclical. Repeat that mantra three times so you believe it. Consider getting it tattooed.
- Almost every single mining stock is oversold on a technical basis; long and deep basing patterns bode well for future positive price recoveries.
- The world needs more supplies of every metal on the periodic table. There’s no doubt about that.
- Mining is exceedingly difficult. Ask any producer – and it won’t get any easier.
- The U.S. dollar has been extremely strong. Commodities are actually doing well in just about any other currency but it doesn’t feel like a bull market in metals yet.
- Very few new projects are being built so any spike in demand can’t be met by supply no matter the metal price. Let that sink in.
- The supply of most strategic metals other than copper comes from Russia or China. Not good.
- Younger global demographics (especially in the U.S. and Africa) point to higher materials demand for years to come.
So, continue to chip away at quality mining stocks. That means solid management and bestof-class assets in stable jurisdictions. Every mining stock is on sale right now, so might as well buy the very best at these bargain-basement prices.
You have to buy low if you want to sell high. There’s another tattoo idea! And of course, that is precisely when it’s psychologically the hardest time to buy. Trading volumes are down. When no one else is buying it’s very daunting to step in. It goes against our neanderthal mind: drinking from a new source of water may have killed you back then – wait for someone else to try it first! But that is not how wealth is made.
Good hunting
