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It's Ugly Out There

Gold fell below its mid-November low of US$1,142 per oz. on Friday, sinking to US$1129.80 before rebounding slightly to close at US$1,133.30. This morning a bear raid in Asia slammed the price down to $1,088 for a short time. It is currently hovering just above $1,100.

So I was wrong. Mid-November was not the bottom.

But I am not awash in tears. In fact, buying off that November bottom and then managing risk by selling parts of positions when the price performed means the Maven portfolio was still up 11% as of today’s open.

(Portfolio performance calculated as simple average of gains and losses to date of active holdings. All equities are given equal weighting except those where partial sells lowered the average cost base (ACB). For those, contribution to overall portfolio performance is reduced proportionate to the amount of holding sold; if a third was sold, the gain on the ACB is reduced by a third for portfolio performance calculations.)

Couple things I like about that.

  • A gain is a gain. Sure, it’s not guaranteed. But that fact that Maven could sell everything now and walk away with 11% means there are gains available. Bottoms last an aggravatingly long time, but they do offer up opportunities in the form of seasons and specific equities.
  • The confidence from pulling a gain from these bottomed-out markets means I am excited for another bottom – hopefully the real one, this time – because it means new opportunities.

During gold’s January run I kicked myself many a time for not jumping onto certain stocks that jumped 50% in a month. Over the subsequent six months at least a dozen explorers and miners have gone on bull runs; some are in the Maven portfolio but others I missed.

A solid pullback now will generate a second chance to enter some of these winners. And I will take them.

I will also add to some of my positions. If this is the true bottom, stocks should soon be as cheap as they going to get. I’ll take that opportunity to pick up more of the most prospective stories in the Maven portfolio.

I outlined my investing outlook to Maven subscribers mid-last week. The first point was: A crash might be coming. That was validated within 24 hours.

Another directive: Don’t try to catch a falling knife. I do not know what gold is going to do. Forced to guess, I would say there is more pain on the horizon. Chartists and technical analysts generally agree that, once it broke below $1,142, gold had another $100 to lose easily, perhaps more. Sentiment is negative; momentum is to the downside.

The only significant support I see for gold comes, ironically, from those seeking to profit off its slide: the shorts. Short selling positions are massive right now, in gold and in gold miners.

All those shorts create downward price pressure, to be sure – but only until prices slide enough that the betters get nervous.

Short selling is a very exposed gamble. The faster the price of gold falls the harder it will be for gold shorters to stick to their guns. As gold declines pressure will build on shorters to buy gold to cover their bets.

So that’s positive for gold in the short term, once the price weakens even more. The bigger the resulting bounce, the more confidence it will create that this truly is the bottom.

After almost five years of pain, I think the mining bear market is now throwing its final punches. This last leg down might last a few days, a few weeks, or a few months. Wish I knew how long it would last, but I don’t.

What I do know is that, until it is, things are going to be ugly for those of us left in mining. And then it will get better.

So hold on. Perhaps don’t bother checking on your mining stocks this week. Don’t let yourself check the price of gold too often. The bleeding will gradually slow, then stop, and then it will be time to average down on favorite holdings and establish positions in quality stocks that you have long eyed.

But no rush.

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Thanks for all your hard work, but especially your honesty and integrity. I can feel your desire to take of us through your writing. As you have recently written, that is not always the case in this sector….I’m sure your new subscribers have no idea what they are in store for. I have almost doubled my portfolio since the lows in March. I would have done even better if I could have exited my positions when you recommended them, but I was overseas and unable to act. I was okay with it as I knew from experience it would bounce back. and boy has it AND ITS JUST STARTING!... After many years in the red, all but of a couple of stocks are in the green. The daily rise in my portfolio is unbelievable. And a lot of that is happening is because I trusted you. I’m afraid I’m going to need the benefits of your hard work and wisdom to once again help my family and because of all your hard work I’ll be able to if they need it. I can’t thank you enough for the sacrifices you make to make what you do possible. If your religious at all, you really are doing God’s work. You are making a difference in many peoples lives.

Blessings upon you and your family.



-PM (June 1, 2020)

Great letter this morning Gwen. I am not "all aboard" with your picks but your understanding of how best to manage a high risk portfolio is second to none. And I did buy a lot of G when you made the call and sold it about a month later for a very healthy gain. Thank you very much!
As for "shiny ponies" that are moving on anticipation and will move big on good news, you need to get on the BAY train. Just sayin’..........

-PL (June 7, 2018)