Doc’s strategy for trading PM stocks
Today Doc shares his strategy for investing in precious metal stocks. While the overall feeling is that the stocks might have a little more to give back the downside is limited as we are looking forward.
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Doc, Do you still think GDX will go down to the 19-20 region? And VIXY seems awfully low now so it appears to me a good place to start getting in slowly, as volatility downside is very minimal, but the upside could be very good, Am I thinking correctly?
Pardu; I believe the odds are pretty good for GDX to hit those levels. I personally have been focused on individual stocks and don’t particularly care if GDX hits those levels. I do think pricing has paused but we could see a slow move down yet in GDX. I believe we might have about another 1-11/2 weeks of pressure on the the VIXY before a rebound. The question then becomes how much of a rebound.
Doc, I agree with you. We’ve had a nice correction in the miners so I bought some PPP and TORXF last Fri, and some SAND today. If they go down I’ll buy more. I’d like to buy some OCANF if it falls more to add to my collection.
Yes Bonzo Barzini – your collection will not be complete until you add in the OceanaGold.
I like Primero, Torex, and Sandstorm as well. Be well. Do well in your investing/
EX; I also own Oceanagold and am getting ready to purchase a little more since I believe I can purchase at a little lower price.
Yes, I’ve owned it off and on over the last year since their acquisition of Romarco, but may pick some up if it pulls back a little more. I consider it one of the best run Mid-Tiers producers out there with a great growth profile. It doesn’t offer as much percentage upside as the smaller companies but it is solid; like Agnico Eagle is in the Major category.
Bonzo; I own PPP and plan to purchase a lot more of it as we move deeper into June. I have a feeling that their 2nd quarter earnings will move the stock higher. I believe that they’re beginning to get their act together —I also am waiting for a little more move down in SAND and then I’m a buyer. I recently sold my position at the top but want to purchase again for my long term hold.
Thanks, Doc. Hard to see how we can go wrong with PPP at 3 times cash flow. And maybe they’ll win their case with the Mexican taxman and soar again. Glad to hear you also like SAND and Oceana. I may buy more MUX if it goes back under 2.
I’ve said it before, but I really think Nolan Watson, the CEO of Sandstorm Gold, is one of the sharpest young CEOs in the business. In addtion, I like their growth profile more now that they have the Teck royalty package, and the streaming deal with Yamana.
Expect more value creation from the team over at Sandstorm in the years to come, and it is a solid place to park some money for the longer term. Sandstorm will outperform its peers like Franco Nevada, Royal Gold, and Silver Wheaton on a percentage basis, but won’t have the larger percentage gains that the smaller producers and developers will have (but it also doesn’t carry nearly as much risk as a 1-2 mine operation, so there is a trade-off).
Doc,
I hope you enjoyed your holiday.
Out of interest, whilst on holiday, do you keep in touch with what is going on in the markets or do you completely switch off?
Hope you don’t mind me asking.
Well, I just back from a nice holiday myself and tried to switch off…. (mostly). Like a dummy I placed all kinds of trades the day before and the day we left at the airport, so I had to keep tabs on those whenever there was a spare moment.
This was no small feat as when we go into Vacation Mode – we go all in! We were hiking in the mountains, strolling around lakes, crossing the ocean via ferry boat to an island, walking through zen gardens, rose gardens, natural parks, several waterfalls, and still grazing through a myriad of restaurants, toasting a breweries and wine tastings, weaving through urban architecture, and on….and on….
I couldn’t really follow the news or the markets, as was limited to just a few minutes, but I still traded the numbers and the charts.
One time at lunch I excused myself from the conversation to check on my positions and exclaimed, “Well, I just made a trade that paid for our vacation,” right as we got our meal starters. However, about 20 minutes later I told her, “Bad News, I just lost all that money I made earlier on a stinker trade.” Luckily, by dessert I was able to pull another u-turn and said, “Good news, I just made a trade where I made the majority of the sum back and have paid for the vacation once again.”.
She remarked, “I couldn’t deal with that kind of stress…..I’d go crazy.”
I replied, “Well, look at me…..I’m already there.”
*(needless to say she made me put away the smartphone after dessert – trading hours were officially over on her calendar). 🙂
Today was a fun day. Lots of buying and selling in the energy space (Oil, Uranium, Lithium) and some nice nibbles at a few of the miners that are coming down nicely.
Good to be back in front of a full-sized computer screen again.
I love that story, EX.
She was right to end on the high note and get refocused on the vacation at hand; (plus she would have killed me if I had made another trade and lost it all a 2nd time).
Happy wife; happy life…..
Which ferry did you take to which island, out of curiosity?
That leg of the journy was the Ferry from the Tsawwassen Terminal in Vancouver to the Swartz Bay terminal on Vancouver Island. From there went hiking in the John Dean Provincial park, then to Buchart Gardens, then to Beaver Lake, and finally arrived in Victoria to eat, drink, and be merry, and see things, and then eat, drink, and be merrier….. 🙂
In Seattle we took the Ferry Boat to Bainbridge Island to check out the Bloedel Reserve and the wineries.
Those were our only 2 Island stops this time, but we did get to see Galiano Island, Mayne Island, Prevost Island, North Pender Island, Moresby Island, and Salt Spring Island on our trek back and forth between Vancouver and Vancouver Island.
Quite the trip Excelsior. Other than Moresby I have lived in almost all those places at one time or another. Great country out there. And I intend to never go back. The world is just too big a place.
Ex, Bird, Doc, MAtt et Al,
just wondering if you know of an shorting vehicles for the Toronto/Vancouver housing market? Toronto’s housing market seems to be going parabolic right now. I’m living here now, but am starting to get that same tingly feeling that something aint right….like when I was living in NYC back in 2007. My lady and I are thinking of selling later this year and moving to the country.
People have been wondering how to do that for a few years now with little luck. There are one or two non-bank household lenders that were on the list but I don’t think you will make hay there.
Same with the big 5 banks. They are well insulated so don’t even bother because their exposure to mortgages in Canada is fairly limited due to how the insurance system works.
It’s actually the Federal Government that’s on the hook for most of the damage via CMHC. But the problem is so big its going to skewer the whole economy for a few years as it unwinds.
You will want to therefore be short CAD and long USD as the most accessible of trades once the house deflation starts (late this year or early 2017).
I think the Loonie is going back to .60 during 2017 which is some 1650 points lower than it sits today and the trade will work because USD is set to outperform just anyway even as CAD weakens due to how the housing bubble will skewer the Federal budgets in Canada.
That’s my view anyway. If it helps, there are Hedges who are shorting China via Australia and other commodity currencies so the trades can be indirect on major markets too. But this is obviously not for everyone and it needs plenty of time to work so don’t expect fireworks in a day.
Check the CAD monthly chart and just try to tell me that sucker is not about to take a face-plant and a belly flop off the high board. That’s what cheap oil and a housing bust will do for you.
http://finviz.com/futures_charts.ashx?t=6C&p=m1
But obviously if you are Canadian your trade is to sell the bubble and rent. You can buy back in a few years down the road when it looks to be settling down. If you asked my opinion I would say that it could take years for balance to be restored but I don’t want to get too depressing for you on that score. The other thing is this….if I am correct (and that is never a guarantee), you should consider opening a US Dollar trading account to take advantage of both the falling CAD and rising USD. Your account might other wise get hammered in the next 18 to 24 months just based on the currency differential that look to be setting up. You will have to look into it for yourself obviously. Ask someone smarter than me!
Birdman – yes the world is a big place for sure…. I’d like to see more of it. I’m fascinated by different world cultures, belief systems, and ways of approaching life.
Confused, I don’t really know how to short the Toronto/Vancouver housing markets, but you could short the financial institutions and mortgage companies holding the assets.
That’s the problem Shad. The Canada Mortgage and Housing Corporation (a governmental body) is the backer for virtually all high ratio mortgages. If you put down 5 or 10% you had to take out CMHC insurance and it is ultimately on the hook for defaults….not the banks who made the loans. In this way the Canadian banking system is sheltered from the day of reckoning and the public is actually on the hook for the problem when it comes. So it is the Federal budget that is going to go deeply negative if the bust is anywhere as big as some people are predicting. This will show up in several ways all at once. Rising unemployment as trades, services and all the jobs associated with housing suffer and then the associated losses from the retail sector as discretionary income is eviscerated. Secondly, CMHC will be called upon to make good on unpaid debts / defaults to the banks who issued the loans. So the government is going to suffer falling revenues due to substantial job losses and simultaneously face much higher costs for unemployment and a slowing economy. It is all going to come out in the strength of the Canadian dollar naturally as the rest of the world tries to size up the damage to the economy and gauge how much pressure will be created to fund this disaster. I am not saying bond risk is going up but its fir to say that the government is going to have to go to international markets to raise the needed extra cash and that could be very costly. This is going to be all the worse if oil and commodities don’t show signs of recovery as that is still a large segment of the economy.
Thanks for that info on the CMHC. I didn’t consider that they were underpinning the whole thing but would end up sticking it to the public, and the associated job losses due to direct connections to the housing industry, and the indirect job impacts from a shrinking disposable income (like the retail you mentioned). When it goes it will be a mess.
If you are really interested in the subject Shad you might try reading The Greater Fool website. You will no doubt learn more than you ever wanted to know about the Canadian housing disaster that is coming….but it is more than entertaining.
The link is http://www.greaterfool.ca
You will love the comments section.
One last aside Shad….Canadian government debt is some of best rated. If there are bond issues at good rates coming its worth considering as Canada is one of the few countries that has never defaulted on creditors even once.
Thanks for the heads up on the Greater Fool website. I’ve seen Garth Turner interviewed before but had never seen his site.
That’s a good point about Canadian bonds. Very solid. Venezuelan bonds….not so much.
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As for the Canadian Real Estate Market – here’s a timely & related Video from BNN:
‘What would Trump do?’: Bay St. urges Ottawa to target foreign homebuyers
Jameson Berkow, Reporter, BNN
11:45 AM, E.T. | June 2, 2016
“Canada’s federal government is prepared to take further action against skyrocketing Vancouver and Toronto home prices, but Bay Street is split on whether Ottawa should….”
BOB; I didn’t completely switch off. I did take my computer and watched with interest as the PM stocks started to correct. There was a big time difference so it was interesting to tune into the market after supper when it was still active.
Thanks Doc.
This guy – link below – Chris Vermeulen seems to think that the conventionals are about to crash and go into a 3 to 5 month drop.
Thanks for the link Bob UK. I forgot to check in with what Chris V. has been up to.
Much appreciated.
Do you rate him or not? I have no idea of his track record.
I enjoy getting input from a number of different sources, and appreciate what Chris has to say. I’ll take a few moments to review his technical research periodically as I think he is a sharp enough guy and I’ve been reading or listening to him off & on for years for his short to medium term outlooks.
He’s actually been on here on the KER a few different times this year if you search for his last name. They were pretty good interviews and he seems level-headed enough not to have too much of bias one way or the other regarding Precious Metals or Oil, which I appreciate in an analyst.
Here’s a link to the shows Chris Vermeulen was on here on the KER (if this works):
Excelsior, what country were you hiking in? I’ve never owned a cell phone which is very relaxing(unless I ever need one in an emergency).
I was in Seattle, then Bellingham, then Vancouver, then Victoria, then back to Vancouver, then back to Seattle. We had a blast but were always on the go so if it wasn’t for the smartphone, I would have been up the creek without a paddle.
Yes, I find cell phones to be both a blessing and a curse.
……and before anyone says it…..no I didn’t try to buy a house when I was in Vancouver.
😮
I wonder if Doc took his cell phone while climbing the Alps in Austria, and if it worked up there?
In between Doc’s gallivanting with the ladies, imbibing Austrian beers, dancing on the table tops, and climbing a wall of worry in the Alps………….
……… ……………… I bet he still found time to “nibble” at a few mining companies he likes…. as the markets “muddled around”….. (ha!)
Thats cool-EX.. We do a lot of island hopping on the M/Cycle. Curious.. Where actually is home for you??
I live in Tennessee, but we are likely moving to Seattle in about a year, and keep going out to check out different areas, but it is a big difference in the cost of living.
This time we thought we’d tie in a trip to Vancouver and then we sandwiched in that Victoria trip in the middle. Fun times!
Vancouver was truly fun for us (but I realize many on the site like to knock it regularly), but we hit about 5 different parks, went up in the mountains, got out on the water, and had a splendid time. Many of the aspects we like about Seattle were very similar in Vancouver. Now I just need to drop about 10 pounds after we ate our way through both cities like champions 🙂
The Pacific northwest is great. But yes, Seattle is pricey! Good thing you navigate the markets like a pro 😉
Rick has a target on sp500 of 2169…and without speaking for him I believe that is due within 1 week or so. Prepare to be surprised!
Gold on the hourly chart is forming a dome. Looks like we get a retest of 1200 today and maybe some suspense for the weekend if we don’t break down. Personally I would like gold to hold above that number until next week but that’s only because I have a sense of humour!
I’d like to see Gold hold above $1194.13 (the 200 day EMA), and as a fallback, for Gold to hold above $1191.70 (the October 2015 peak). If those give way, then that would concern me more than if Gold bounces from right below the 1200 level.
http://stockcharts.com/h-sc/ui?s=%24GOLD&p=D&yr=2&mn=0&dy=0&id=p36125046411
Mining stocks are paper assets as well. They can be diluted to pay management with stock options or to raise money.