The Warrant Report
How Bad Could It Get – Carlos Slim is a Miner
In this issue:
1. How Bad Could It Get
2. Patience Now – Rewards Later
Patience Now – Rewards Later
In my latest interview with Ellis Martin of The Ellis Martin Report we discuss the current market activity and the frustration and disappointment of investors. We also talk about Carlos Slim being in the mining business and our continuing to be extremely bullish long-term but short-term cautious, so we encourage patience now and rewards later.
Listen HereHow Bad Could It Get?
How bad could it get? And one simple way to deal with uncertainty.
From Steve Saville at www.Speculative-Investor.com we bring you an interesting write up in his current issue….and I personally am in tune with the views of Steve Saville.
“…Rick Rule, a very successful investor in natural resource companies, recently gave interviews in which he opined that the market for junior mining stocks will get much worse before it starts to get better. Click HERE to check out one of these interviews. The part about the market for junior mining stocks begins at around the 5-minute mark and continues to around the 9-minute mark.
Mr. Rule’s view, in a nutshell, is that the large percentage losses suffered by most junior mining stocks to date have occurred via a fairly gradual whittling-down process, but in his experience this type of bear market doesn’t usually end until there is a cataclysmic sell-off — a spectacular market-clearing event that eliminates everyone who has been desperately holding on. He is talking about a situation where stocks that have been sold down from, say, $1.00 to 20c over a period of 1-2 years suddenly, in the space of a couple of days, collapse to around 7c. The stage is then, and only then, set for an epic bull market, not only because every last weak-handed and/or under-capitalized and/or inexperienced holder has been chased out of the market, but also because only the companies with the best assets and balance sheets are left standing.
We disagree that there needs to be a more spectacular sell-off to end the cyclical bear market. Some individual stocks will go on to make new lows over the months ahead, but we suspect that on a sector-wide basis, including the junior end of the sector, it just got as bad as it is going to get. Our reasoning is that by most measures the market is already as depressed as it was following the spectacular sell-off that occurred during August-November of 2008. However, the Rick Rule view of what’s needed to bring about a sustainable turn for the better should not be dismissed out of hand. It should be accepted as one possible (and plausible) future.
By the way, we get the impression that despite his guess that the environment for junior mining stocks will get worse before a new bull market begins, Mr. Rule has been adding to his junior mining exposure. In other words, he’s not betting everything on a view that a better buying opportunity lies in the future. Sometimes an investment is cheap enough, so you do some buying even if you suspect that it will get cheaper.Accepting, at all times, that there are numerous possible futures is an important part of being a successful speculator, but such acceptance tends to elude most people. Instead, the average speculator develops a view of how the future will unfold and is fine as long as events happen roughly in line with this view, but ends up being “all at sea” when the future unfolds in a very different way to what was envisaged. Frustration results when hopes or expectations collide with a reality that doesn’t mesh with those hopes or expectations. If the frustration becomes sufficiently intense it will become anger and eventually despair.
Frustration can be minimized, in speculating and in other endeavours, firstly by accepting that you do not KNOW the future, secondly by embracing the reality that the future could be a lot different (in a bad way) from what you currently expect, and thirdly by considering what you can do now to account for the possibility that the future will be much worse than expected and what you will do in the future if worse comes to worst….”
EDUCATION – INVESTMENT IDEAS – PERFORMANCE
Dudley Pierce Baker
Founder and Editor