Portfolio Update: It’s Beet Red These Days! (November 12, 2015)

fresh-beetroot-juice-100290613

Recently, a good friend of mine decided to start investing in the junior mining sector space. It did not take long for them to realize just how cyclical this market really is! Since surging in October, gold mining stocks have been trading in a severe downtrend for about the last 10 trading sessions or so. My friend was not fortunate enough to be able to time the market exactly (but seriously who can?) and is now somewhat discouraged to see their portfolio down a good 15 to 20% in such a short period of time…

Have no fear, I say! Although my friend’s reaction is natural, this is just the nature of the business that is the natural resources space; if you want to speculate here, you must have a strong stomach for insane volatility!

For myself, I’m not doing much better and in fact am feeling a lot of pain right now. I wasn’t planning on putting together an update on my overall mining portfolio until the end of the year, but I think now is as good a time as any to post an update…

Readers can see first-hand the type of short-term devastation these type of speculations can impart on a portfolio:

As of market closing, November 12, 2015:

Screen Shot 2015-11-12 at 1.37.30 PM

Yup, that’s right — currently, I’m down about 10% and over $22,000!!!

Would you say I am discouraged and regretful?

Absolutely not!

I know that you can never time type these things exactly, and I accepted upfront that I might potentially lose 10% or 20% or even 50% of my principal along the way… before the tide ultimately turns in my favor.

Similarly, when the shares are trading UP, UP, and UP, I don’t let the good news get to my head… It feels like an eternity ago, but around this time last month, this SAME exact mining portfolio was UP about $23,000

Things sure change quickly in this space!

As long as the fundamental story hasn’t changed (for each individual company), why trip out about it?

In the long run, I’m convinced (more than ever) that this move will play out and we will ultimately emerge victorious. We must be approaching near a bottom because gold and silver are currently trading at or near the cost of production

From Gold Price:

Screen Shot 2015-11-12 at 2.11.22 PM

There is much talk that gold will soon drop below $1,000/oz… If that were to happen, I would more than welcome it! Even at the current spot price of $1,085/oz, gold is trading at a bargain… Ditto for silver at $14.28/oz

In fact, I’m hoping to save up some cash over the next few months so I can add more physical metal to my portfolio. It’s hard to turn away from such a rare buying opportunity!

But if the spot price were to decline precipitously further, I can only imagine that demand would go through the roof… and the decline would be very short-lived!

In almost no other market will you be able to find a commodity that decreases in value as demand goes up!

From Gold Core:

Gold-Demand-Trends2

Not to mention, the Comex is currently leveraged 300:1 (300 oz of paper gold for every 1 oz of physical gold)… So, who knows how long that game can continue to go on before FINALLY breaking?

Also, we are starting to witness large copper and zinc mines shutting down, which will only further constrain supply of both gold and silver (much of the world’s silver is produced as a byproduct of these mines)… And with emerging markets like China and India continuing to grow out their middle-classes, we can all rest assured knowing that the world’s appetite for metals will not be satiated anytime soon… If anything, demand into the future will only continue to skyrocket further, especially at such low prices!

So, I refuse to be deterred! I continue to approach this speculation with a long-term perspective and not that of a short-term trader:

I learned from real estate back in 2012 that it’s fruitless to try and pick out absolute bottoms; in the end, it isn’t necessary when you are able to buy assets for pennies on the dollar!

I purchased Rental Property #1 for $315,000 and overpaid by $70,000 or so… Had I gotten in months earlier, I probably could have won a similar property for $270,000… In 2012, it seemed like a pretty big deal… In 2015, it’s been long forgotten… Whether I won the property at $315,000, $330,000, or $350,000… cheap is cheap!!!

Over time, the delta of negotiation between the best deals always just end up looking like tiny drops in a bucket…

Today, in the case of gold mining stocks, I truly believe that we are much, much, much, much closer to a bottom (final capitulation) than we are anywhere near a top… which can’t be said for the S&P 500.

For gold and silver, quite simply:

  • Demand is strong.
  • Supply is constrained.
  • And prices keep falling…

As a deep value investor, you’ve got to love that! Whether we are talking about physical gold and silver, or the mining stocks, they are both trading at absurdly cheap levels right now. All I can think about is: BUY, BUY, BUY!!!

And it’s at the near bottom of markets where we have to fight human psychology — It ALWAYS feels like it can go lower at the bottom… until it doesn’t anymore.

Just like it ALWAYS feels like prices can ONLY keep going up at the top of the market…

But if there was ever a time to be GREEDY, it’s NOW!

So, again, I’m not going to even bother wasting my time trying to pick out the absolute bottom… Right now, I’m finding bargains everywhere I look…

 

That’s where my focus is.

 

This feels like deja vu… Actually, this is even (better) than it was when I was buying up real estate in 2012…

 

Happy Speculating!

 

Photo Credit: Free Digital Photos

Print Friendly, PDF & Email
Sharing is Caring:

16
Leave a Reply

avatar
9 Comment authors
My Investing Days Are About Over… For NowBeSmartRichFI FighterRyanjoe Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Jon
Guest
Jon

Hi there

Do you generally like the Casey research stuff?

Income Surfer
Guest

Haha, funny isn’t it Fighter. Three years ago, everyone was a gold expert….and believed the spot price was going to $5000 per oz. Now that the appetite for hard assets is subsiding….and furthered by a strong dollar……everyone is an expert and the spot price is going to zero. Silly Sheeple!

I will add to my BBL position, but now that it’s an “accidental high yielder” at 9%…..i am tempted to wait for the inevitable dividend cut 🙂 Like you said, can’t time the bottoms perfectly.
-Bryan

Vivianne
Guest

I think you are right about precious metal. I’m thinking of buying up mining as well. I’m on the look out for fcx. I’m waiting for the first interest rate increase. People are speculating December, but the Fed might not make any move at all.

The interest rate increase would make the dollar more valuable, in turn would make commodity prices cheaper. It would be a great entry point then. But like you say, it’s all speculating at this point. In the meanwhile I’ll keep my 401k in mostly s&p 500, and my taxable in dividend paying stocks so I can build up some cash flow,,getting ready for retirement mode.

Cheers!

Financial Samurai
Guest

You are a brave man, man!

I’ve been buying structured notes with downside protection e.g. a Netflix note with 35% downside protection to earn 14% a year. I’m just trying to hit singles and doubles. Good luck to us all!

S

mike
Guest
mike

FiFighter,

It takes a lot of courage to lay what you got on the table. Most people would downplay or not disclose the truth in what their real return is. It speaks a lot about your character, to which is admirable.

keep up the good fight son!

joe
Guest
joe

will either be a home run or a very expensive lesson

Ryan
Guest

FiFighter,
First of all, like many here, I admire your honesty as you so openly disclose to your current and significant losses. That takes guts!
You mentioned briefly copper in this post. It’s currently at a 6 year low. If you’re interested in buying commodity as cheap as possible, including metals, I’d say Buy Buy Buy to copper. So I guess I’m curious as to why you’re favoring silver over copper? Or are you not investing in more copper simply because your buying power has been reduced lately?
All the best and in the meantime, sit tight 🙂
Cheers!

BeSmartRich
Guest

Gotta love your strategy. Who knows when the market turns. The commodities have been beating badly and it will eventually turn. Maybe a month or two or even longer but it is at historical low and therefore the risk is minimized!

trackback

[…] Beet Red – November 12, 2015 […]

Close Menu