Saying What Needs to Be Said

by FI Fighter on July 30, 2016

in Precious Metals, Real Estate Thoughts, Stock Investing Thoughts, Thoughts

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Well, I’m sure the last post I wrote is bound to ruffle a few feathers… Obviously, what I said will never be popular or generally accepted by the mainstream of investors, but hey, that’s not my problem… You might have sensed it from my tone, but I really did my best to just tell it like it is… I didn’t want to pull any punches and I felt like it was necessary for me to lay it all out there in the manner in which I did.

I’m sure long-term readers of this blog can appreciate my stance and where I’m coming from… As for some of the others, hey, if I lose some more readers, this wouldn’t be the first (or last) time that that’s happened.

It ain’t ever easy going against the grain…

When it really comes down to it, I think most everybody out there invests in the same manner because everyone is “conditioned” into doing so. Look around you… Every news outlet, mainstream media article, blogger, etc. is out there pimping out index funds, dividend growth investing, FAANG stocks, and real estate investing to you 24/7…

Doesn’t it almost feel like that there’s literally no other alternative?

Perhaps, maybe you’ve considered something else, but ultimately decided against it because it felt too awkward and… wrong.

If so, that’s a shame…

And a lot of my frustration stems from exactly that — I know people in my personal life, guys way, way, way smarter than me who hold PhDs from the most respected universities out there… But when it comes to investing, they are absolutely hopeless… I’lll show them a chart of overvalued stocks and another one of undervalued stocks, and they won’t be able to decipher the differences… because of their preconceived notions and biases…

20160711_EOD7_0

QQQ_chart

Screen Shot 2015-09-20 at 8.53.29 AM

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But a typical first grader would easily be able to pass the test…

As readers know, last year I was damn adamant about the upside potential that I felt was present in gold and silver mining stocks. Many times on this blog, in fact, I called it an “opportunity of a decade”, or “opportunity of a lifetime”.

On September 20, 2015, I even went as far as to say:

I’ve got to be patient with this. But if I’m right, I’m confident that this speculation will be my best move ever.

Better than Bay Area real estate, where I made 300%+ leveraged returns.

 

Well, of course I shared my “best ideas” with those family members and friends closest to me. Some were very receptive to the idea of investing in a most undervalued asset class, but most were extremely skeptical… Some folks even got defensive…

As was no different from this blog, the rebuttal was always along the lines of:

  • “If it was so easy, how come nobody else is doing it?”
  • “What makes you think you know more than the markets?”
  • “You’ve gone off the deep end again, FI Fighter…”
  • “I’m gonna stick to index investing.”
  • “It seems risky…”
  • Etc.
  • Etc.

Of course, being a blogger and having interacted with tons of different investors from all over the globe, I guess you could say that by now I’ve got a pretty good handle on human psychology and how people think, especially as it pertains to investing…

The fact of the matter is, the majority of people out there will never feel comfortable enough to invest in something they don’t understand…

That’s fair enough.

Unfortunately, most people are so damn busy with their lives that they will never make the time to do the necessary homework to build up the needed conviction to bet big on these type of “best ideas”…

My friends who missed out? Here’s how they would respond today…

  • “I thought about it, seriously, but I just never got around to it…”
  • “I was gonna do it, but then the stocks started to go up and I was waiting for a pullback…”
  • “I just don’t have time for this…”
  • Etc.
  • Etc.

Hey, people are freekin’ busy, I can totally understand and appreciate that. What irks me is not that people aren’t listening to me… Seriously, I’m not a financial advisor so nobody should ever follow me blindly!

No, what annoys me is that there are very, very few bloggers out there who are willing to tell it like it is…

Maybe if more people would write articles that were straight-up, and without any fluff or bullshit (mostly hidden agenda or ulterior motive in the form of $$$), then more people would be open-minded and receptive to what are currently considered “outlandish” ideas, such as gold and silver mining stocks…

Because truth of the matter is, there were some friends and family members of mine who were just as convinced as I was, and they bet the farm on these stocks last year… Many are up hundreds of thousands of dollars, a few hundred percent gains, and I wouldn’t be surprised if someone in my network has now eclipsed a portfolio value of $1,000,000….

In fact, here’s a snippet from a retired reader of this blog.

True Gold Shout

“Buy low and sell high”.

What a novel concept, right?

In case you were wondering, anyone who bought into shares of True Gold Mining (TGM.V) last year would be up anywhere between 400-500% this year, in the form of Endeavour Mining (EDV.TO) shares, due to the merger…

And this guy owned 1.25 million shares of TGM.V!!!

55,000 shares of EDV.TO * C$25.37 = C$1,395,350

Or $1.07 million USD

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Life changing…

But you never hear about these type of success stories… like ever on the mainstream… No, all you ever hear about is how index investing over 30+ years trumps everything else out there… And how it’s the ONLY way to make money in the markets… because everything else is super risky!

Outside of this blog, I do joke around frequently with some of my best friends that my goal in life is to retire them early… Just because I’m out of the rat race, it doesn’t mean that I’m gonna stop fighting the good fight… I wanna help as many people out there as I possibly can.

For anyone reading this blog, most importantly, I’m never going to bullshit you… I have no newsletters to sell… I don’t earn any revenue, fees, or whatever for promoting any type of stock ideas… You won’t have to worry about any “pump and dump” techniques being employed here…

Hell no!

I’m just sharing with folks everything that I’m doing and everything that I have done that has allowed me the ability to retire from my corporate engineering job at the age of 31.

Yes, it’s true that real estate investing is the asset class that took me to the Promise Land… But look beyond that (and few folks are willing to b/c they are so damn enamored with real estate), and you’ll see that my success was a byproduct of “being in the right place at the right time.” By coincidence, real estate just so happened to be that wonderful vehicle that helped me earn 300%+ returns on each Bay Area rental property that I owned (I have cashed out over $200,000 from refis)…

But the point I’ve been trying to hammer home for so long is that real estate isn’t the ONLY answer out there… Sure, it has treated me very well, but I’m not devoted to it, or blinded from reality… There are many asset classes out there and many opportunities that regularly present themselves to folks who dream of retiring early.

My message has been one and the same for awhile now… If it wasn’t crystal clear already, it’s this:

“You make money in the macro. Look for the most hated and deeply undervalued asset class there is out there… If you can locate it, study the hell out of it. Pour hundreds if not thousands of hours learning the ins and outs of it. Master it. Only then will you be in the position to determine if its the right investment vehicle for you to try and help you achieve your dreams of early financial independence.”

I did precisely that for gold and silver mining stocks in 2015… I researched non-stop, around the clock to build my conviction.

That was the only way possible.

Otherwise, I never could have done what I did…

Education will ALWAYS be key, because without it, you’ll be susceptible to listening to so-called “experts’ or “pundits” who will basically just kick an asset that’s already down (because that’s the easy thing to do)… And you’ll believe every word they say, when in reality, they don’t know jack shit about what they are talking about…

Case in point with gold and silver… By mid 2015, everyone was calling for sub $1,000/oz gold

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And the outlook for 2016? More of the same… Here’s what a “top forecaster” suggested by April 2016.

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Gold was useless they said, and nothing more than a pet rock

Others, would always like to make the stupidest of accusations against precious metals stocks — Pull up a 10 year chart, and these miners look horrendous, these folks would argue smugly…

VanEck Vectors Gold Miners ETF (GDX) performance from January 01, 2006 to January 01, 2016.

GDX_chart

Without the right education, you will be duped…

As I’ve said so many times before, gold and silver mining stocks are NOT suitable as Buy and Hold Forever type of investments! The fact that they are insanely volatile actually makes it that much easier for investors to make a fortune trading them! Volatility is your best friend if you want to make serious money! Just make sure you aren’t buying at market tops, and your risks will be mitigated (not eliminated)…

Of course, the critics can’t realize this simple fact because they are too fucking lazy to do any kind of proper research… Again, they just want to pile on with the crowds and kick an asset that’s already down and out… And according to their asinine logic, ONLY Buy and Hold Forever type of investments are legitimate and everything else is just doomed to fail…

But if you’re just a retail investor, and you hear something enough times, you’ll probably just naturally assume that it’s right… Even when it’s absolutely not! These days, the popular narrative is you NEVER sell anything you buy… To me that’s just crazy talk! Not selling EVER, is like someone trying to play sports and only focusing 100% of their effort on offense and completely ignoring their defensive assignments…

Buying makes up a strong portion of your investment repertoire… But to dismiss selling entirely, dude, you are seriously selling yourself short!

Don’t listen to all the mainstream idiots out there… That’s just terrible advice.

Stupid! Just plain stupid!

That type of behavior doesn’t help anybody out there…

The reality is, yes, you can make a shit ton of money off of gold and silver mining stocks. And many people have. But at some point, you DO HAVE TO SELL THEM! Otherwise, you will inevitably be forced to take the rollercoaster all the way back down again (boom and bust, that’s what mining stocks ultimately do!), and nobody wants to experience that (else the naysayers will win the day)! Also, yes, you will have to monitor these stocks most actively, (if you aren’t buying an ETF such as GDX and/or GDXJ) but a little work shouldn’t be so bad when we are talking about an asset class that has the ability to help you generate 100%+ type of returns…

Year-to-date (YTD) performance.

  • VanEck Vectors Gold Miners ETF (GDX); up 123.0% YTD
  • VanEck Vectors Junior Gold Miners ETF (GDXJ); up 160.6% YTD
  • First Majestic Silver (AG); up 430.3% YTD
  • Barrick Gold (ABX); up 196.2% YTD
  • B2Gold (BTG); up 206.9% YTD
  • Endeavour Silver (EXK); up 241.5% YTD
  • S&P 500 (SPY); up 6.5% YTD

GDX_GDXJ_AG_ABX_BTG_EXK_SPY_chart

Anyway, I’ve rambled on for long enough… let me try and wrap up now. If it wasn’t clear to readers by now, let me just say it again:

There are a million and one ways to invest out there… Don’t make assumptions about asset classes and investments that you know nothing about. Education is key. Get properly educated first and foremost before you come to any definitive conclusions…

For myself, I have done Buy and Hold investing… But let me be straight with you… I was able to retire at age 31 because I made 300%+ returns on my Bay Area rental properties… I bought the right assets at the right time because I chased deep value… I made my purchases around the time when most investors were scared and sitting on the sidelines…

With gold and silver mining stocks, I tried to take my education in real estate and apply the same tactics there… Again, we are talking about deep value, the common theme in both cases. With gold and silver mining stocks, I saw an even better opportunity, as these assets were even more depressed than real estate was back in 2012… So, I studied up on the sector most relentlessly, and built up the absolute conviction that I needed to back up the truck. In less than 1 full year, my gold and silver mining portfolio has grown from around $300,000 to over $730,000.

Those are life changing gains!!! But very few bloggers out there will ever let you in on this type of investing “secret” because everyone out there is too busy preaching Buy and Hold Forever… There’s nothing wrong with Buy and Hold Forever… But it isn’t the only way to early FI!

 

Do you hate your job? Tired of the never-ending 9/5 grind? Do you really want to achieve early FI at a young age?

 

If so, stop listening to all the garbage that keeps getting perpetuated out there… With everything in life, explore all options available and approach things with an open mind. Always. Most importantly, get properly educated.

 

Early FI is the stuff that dreams are made of… Anyone can achieve it, but most won’t because they aren’t willing to think outside of the box.

 

Keep at it, I’m rooting for you!

 

Fight On!

{ 22 comments… read them below or add one }

1 Dividend HustlerNo Gravatar July 30, 2016 at 5:04 am

That’s an awesome post Jay. You’re rocking it bro.
Happy for your progress and conviction.
Keep up the good fight. I will join you on your next idea as I’m ready to open my mind more and find the next deeply valued asset class.
Thanks for sharing and let’s keep at it. Cheers bro.

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2 FI FighterNo Gravatar August 3, 2016 at 3:40 am

DH,

Thanks buddy! Glad I was able to find your message through the spam and get it posted again.

Best of luck with your new trading account. I hope you score some killer deals!

Take care!

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3 TomNo Gravatar July 30, 2016 at 7:34 am

Right on FI,
Can you believe it, even now lot of people still sitting on the sideline and wait for miner stock to correct 30% before buying.. Good luck to those people.

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4 FI FighterNo Gravatar August 1, 2016 at 2:03 am

Tom,

It’s been quite a wild ride hasn’t it? I think for the most part, it takes a lot of momentum before most retail investors will be interested in participating.

With any asset class, a changing sentiment is usually the start of a bull market. With gold and silver, we could still have ways to go… This party might just be getting started.

Take care!

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5 GermanNo Gravatar July 30, 2016 at 8:10 am

Awesome post! I read it all the way to the end. I used to have a lot of gold in my portfolio and sold all of it when it topped $1,900. However, I missed the lows. Now, most of the gold stocks are 200-300% higher. For sure, deep value investing is the way for make a big buck. You just have to be patient and accumulate assests while they are ultra cheap. Like B2gold was a buck not a long time ago and now it trades at 4 bucks!

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6 FI FighterNo Gravatar August 1, 2016 at 2:05 am

German,

Thanks! Glad you enjoyed the post. Good job on being able to sell out at the top of the last cycle, not easy to do at all.

Yeah, it’s pretty crazy how fast some stocks like B2Gold have run up, isn’t it?

All the best!

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7 JCNo Gravatar July 30, 2016 at 8:12 am

The average Joe investor won’t put in the time to fully research just one asset class let alone constantly changing the class they’re after every few years. That’s why I think so few people do it and that’s what really makes you different from most investors. My goal is to eventually add in more deep value investments because they can be life changing kinds of gains. No you won’t go broke investing in JNJ or the like every month, but you also won’t make any quantum leaps with your money that can knock years or decades off of your FI journey. At this time we can’t plow any money into the markets because things are still hectic here, we currently have no income source, but once things settle down I hope to sprinkle in some deep value investing to make big advances in our investments. Always love these posts.

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8 FI FighterNo Gravatar August 1, 2016 at 2:08 am

JC,

Thanks for stopping by buddy! Always appreciate your insights. I would have to agree with you there — it’s really tough to research and figure out a single asset class, let alone a bunch of them. But if you see opportunity, then it’s kind of necessary in order to build up the investment thesis.

Absolutely, there’s nothing wrong with income investing and JNJ is a wonderful stock to own. It lets investors sleep well at night, its stable, and the gains are solid. Like you said, it’s more the slow and steady approach, but I think there’s a time and place for it. If you want life changing gains, this stock probably won’t deliver in the near-term, which is why I tend to gravitate more towards deep value plays.

With where we are in the markets today, I’m starting to see a shift and many more investors gravitating towards value plays… The investing landscape is always changing, so we’ve got to stay fluid and adaptable.

Best wishes!

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9 TrevorNo Gravatar July 30, 2016 at 8:22 am

Been long time follower of your journey and getting to where you’re at. I originally came to your blog through DividendMantra who eventually sold out which he said he’d never do. /sigh Your blog has been the one refreshing one that gives me a different perspective on how to invest and try to get to early FI. I wanted to backup the truck with you on the gold/silver but unfortunately buying a house for the wife and having a new kid sucked up a lot of capital. Don’t leave me hanging on your posts and all of a suddenly disappear!

One question I have, if you had extra capital to deploy right now, would you deploy it in Lithium or gold/silver mining stocks?

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10 FI FighterNo Gravatar August 1, 2016 at 2:12 am

Trevor,

Thanks for following along! Always love hearing from the long-term readers. Yup, I’ll do my best to stick around and keep posting updates whenever I can. From time to time, I’ll take some breaks and be out traveling around, but as long as I have wi-fi, I should be able to keep things somewhat regular around here.

In regards to gold/silver vs. lithium, that’s a tough question. My short answer would be this — It depends on your views on the current market environment. If you are bullish and think the economies of the world are doing well and innovation will keep progressing forward, then lithium will do very well, especially if EVs boom.

On the other hand, if you are more pessimistic and think a market crash or major correction is coming sometime soon, then definitely gold/silver will provide better downside protection. I would expect lithium stocks to sell off with the broader market. With gold/silver, the equities might get hammered initially if there is a liquidity type of event (margin calls), but I would expect it to be shorter-lived.

Regardless if there is a crash or not, at some point, it will be “business as usual” again… And I fully believe that clean energy, grid storage, EVs, solar, etc. will be the next major tech revolution. I’m all onboard the lithium/graphite train.

But this is why we hedge 🙂

Hope that helps!

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11 BowmanNo Gravatar July 30, 2016 at 8:43 am

Thanks again for the post FIFighter, you are a refreshing exception in the FI blogging world. I too owe you for getting bitten by a gold/silver bug last year. Keep up the good work!

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12 FI FighterNo Gravatar August 1, 2016 at 2:19 am

Bowman,

Thanks for the support! I’m so glad you got onboard the gold/silver train last year. It’s been one amazing ride so far!

Your portfolio must be looking good these days, and I’m thrilled for you! 🙂

Best wishes!

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13 JonNo Gravatar July 30, 2016 at 10:26 am

Well done FIFighter. Youve really earned it, and I love your work.

My main question: will you continue to do the research and make such good decisions now that a. You don’t have the ‘security’ of employment and b. You don’t NEED to swing for the fences anymore…you’re already there.

I really hope so!

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14 FI FighterNo Gravatar August 1, 2016 at 2:17 am

Jon,

Thanks for the kind words, I really appreciate the support!

Great questions, let me see if I can address them.

A) I believe that I will always be an opportunist. Regardless if I have a W-2 income or not, as investors we will always be looking for value. So, I don’t think I will ever stop paying attention to the markets completely… And as I mentioned in the article, my goal these days is to help others get to early FI as well… I still talk to investors regularly, and get wonderful opinions and viewpoints from a variety of sources. Anything good I find, I will be sure to share on this blog.

B) No, definitely I do not need to swing for the fences anymore. To be perfectly clear, my #1 goal is to secure a reliable income stream (in addition to my current income stream from rental properties). Right now, I think it’s too premature to be cashing out of the miners, but at some point, I will gladly sell and re-allocate to passive income…. If everything goes to plan, I should have more than a surplus of cash flow coming in every month… With the excess, I will either target more income producing assets, or other type of value/hyper-growth plays… So, I don’t think the investing journey will ever end for good, and I will always be on the look out for the next good deal.

Hope that helps!

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15 ChenNo Gravatar July 31, 2016 at 9:20 am

Keep these articles coming, you are a straight shooter and that is why I keep coming back to hear what you have to say. #realtalk

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16 FI FighterNo Gravatar August 1, 2016 at 2:20 am

Chen,

Appreciate the support! I still need to install WhatsApp and hit you up soon! Hope you are recovering and doing better!

And be safe out there! It’s gonna be a crazy next few days in HK with the typhoon heading our way…

All the best!

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17 Midwestern LandlordNo Gravatar July 31, 2016 at 10:54 am

With an increase of $300K to $730K in under a year representing a 250% plus return, there is no reason to look at the $730K as not creating a yield, a large yield has already been created. Much more than a traditional yield would have. But it will need to be sold at some point to lock in the gains. And that is the hard part. Do you have a strategy on when to sell? Would you do it partially over time or all at once? Part of the decision comes down to how far along in the cycle you believe we currently are. Do you think gold and silver stocks still have a ways to go?

Also, what is your conviction on lithium stocks moving forward. I definitely get the clean energy trend but there is a very distinct difference between the lithium play and the gold / silver play. Do you think current oil prices being low factors into the lithium play.

Looking back in hindsight, it is logical to see the run up in gold / silver. One, the sector was beaten down badly and two with all of the QE and large deficits / national debt and equity stocks at an all time high at some point there is a run to safety. Something physical that will hold value. But I can see where it could be hard for people to invest a sizable amount of money in one sector.

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18 FI FighterNo Gravatar August 1, 2016 at 2:28 am

Midwestern Landlord,

You make an excellent point there — appreciation is sort of a pseudo-income… I definitely look at things in the same light as you do… Total returns, whether from cash flow, appreciation, or both, is the bottom line and that’s ultimately what counts.

In regards to selling, I’m going to start a post on that very soon, perhaps even later tonight. You’re definitely right, an investor needs to cash out at some point to realize the gains, otherwise it’s all just “paper”.

I have been selling parcels from time to time to lower my cost basis on some individual positions. I honestly can’t see myself closing out everything all at once, so it will probably come in chunks. But bottom line, none of my current mining holdings are Buy and Hold Forever investments. The only gold stock I would ever hold forever is Franco-Nevada (FNV), which I could conceivably switch into later on in the cycle.

With lithium, I see explosive growth in the clean energy sector, driven primarily by EVs and grid storage (which will be heavily promoted due to the rapidly declining cost of solar). With lithium, I see governments around the world clamping down on regulations and concerns about global warming, and in Silicon Valley, everyone knows that it’s the next big thing. When you have Apple, Google, Tesla, etc. all chasing this trend HARD, I can’t see how it will fail… Too much big money pouring in, and I think like a dozen or so new gigafactories due to come online in the next 3-5 years… This revolution will overwhelm everyone like smartphones did, I’m totally convinced. So, it’s lithium and graphite for me to play this trend.

Yup, gold and silver were massacred from 2011-2015… even into early parts of 2016. With hindsight, it was the most obvious deep value trade that I’ve ever seen in my life… Actually, even without hindsight, I thought that was pretty apparent, but it’s extremely tough to look at things objectives when the sentiment is so awful. I have never in my life seen an asset class as hated as gold and silver were in 2015. That was my sign to buy and buy a lot.

For sure, it takes a ton of conviction to bet big on any one asset class… That’s why I stress getting educated and doing homework more than anything else… Without the proper background and research, it’s near impossible to go “all in”.

Take care!

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19 AdrianNo Gravatar August 1, 2016 at 12:55 pm

Another great post. Question for you on Lithium and deep value and buying assets that are looked down upon…

Lithium doesn’t seem to be hated via mainstream or be a contrarian play at the moment… but it does look like it’s going to rise dramatically and it’s still early days.

It may have the big rush Uranium did in 2005-2007.

The way I hope it plays out is gold/silver –> Lithium –> Uranium

a 3 stacker…

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20 AdrianNo Gravatar August 2, 2016 at 9:20 pm

Hey Jay – sorry just wanted to follow up on your thoughts on this one…. since Lithium isn’t really a “hated” asset class/contrarian play now. More of an early days bull I would say yea?

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21 FI FighterNo Gravatar August 3, 2016 at 3:43 am

Adrian,

Yup, early day bull for certain!

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22 FI FighterNo Gravatar August 3, 2016 at 3:42 am

Adrian,

In regards to lithium, I don’t view it in the same light as gold and silver and wouldn’t necessarily categorize it as deep value… Lithium to me is more a hyper-growth story, in the same vein AAPL, GOOG, TSLA, FB, etc. were when they first got started. For sure, lithium isn’t hated like gold/silver, so it’s also not a contrarian play.

Agreed, those 3 hard assets should scream much higher in the future… All the catalysts are in place… Uranium might take awhile longer, but it’s selling at a ridiculous bargain right now, and for many miners well, well under the cost of production (at least with hard rock).

Best wishes!

Reply

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