Erik Wetterling Discusses The “Patience Arbitrage” In The Current Valuations Of Junior Exploration Stocks

Shad Marquitz
November 25, 2021

Erik Wetterling, Founder and Editor of The Hedgeless Horseman, joins us to share his thoughts on current backdrop in junior gold exploration stocks.  With the pullback in many companies throughout 2021, he sees a “Patience Arbitrage” available for resource investors that hold for more assays to be reported and better sentiment to return in the sector.    


We start off discussing how some companies, like (ESK.V) Eskay Mining, have outperformed most of the pack and how he has benefited by not trading and letting his winners run.  We wrap up with the contrasting situation in other gold exploration stocks that have continued to sell down for a few different reasons,  but that Erik is still constructive on like (CBR.V) Cabral Gold, (DMX.V) District Metals, and (KFR.V) Kingfisher Metals.

Click here to visit Erik’s site – The Hedgeless Horseman.

    Nov 25, 2021 25:06 PM

    District Metals (DMX.V): Massive Sulfides, Two Additional Projects and Blue Sky Exploration
    The Hedgeless Horseman – November 25, 2021

    Nov 25, 2021 25:28 PM

    Patience arbitrage? LOL. Jim Rogers, please move over. Seems more like silent suffering until the market picks up, and it will. BTW, is HH on the Crescat Capital payroll?

      Nov 25, 2021 25:42 PM

      Didn’t see his name mentioned there but noticed Quinton Hennigh joined Crescat not too long ago.

      Nov 25, 2021 25:46 PM

      Not everyone is capable of nailing the bottom on the day. I have “suffered” through every correction since 2015 and just kept on buying lower and lower every time. Seems to be an acceptable strategy given that I am up 20 fold. Buying cheap is never a mistake even if you would have to wait (silently suffer) 3 years for a 100% return. It’s we who are too impatient and greedy for our own good most of the time.

      I am not on Crescat Capital’s payroll but I do like and am invested in a lot of the names they own. Some are banner sponsors as well so I assume I am biased.

      Best regards

        Nov 26, 2021 26:06 AM

        Thanks for that disclosure on the companies that are banner sponsors amigo. Everyone should check out the free articles that Erik writes over at The Hedgeless Horseman website, as he takes a lot of time to do some deep dives into the companies he researches and does and excellent job. Cheers!
        P.S. – I taking advantage of the patience arbitrage on a number of companies right now that have been slow on news due to assay lab delays, and the market has thrown in the towel, but when the assays finally come back in over the next 2-3 months, and when the sector sentiment picks up into next year, then we may see some of these get moving in a bigger way and then investors will be chasing them higher.

        Nov 26, 2021 26:58 AM

        STATS Price Quality (PMs) :
        Short term swings can be accurately determined.
        General markets may be an influence.
        (NY Time: 20211126.0900)

          Nov 26, 2021 26:30 AM

          Copper holding. Lithium meandering.
          Uranium & Oil may have turned.

            Nov 26, 2021 26:58 AM

            General markets ‘influence’ kicks in!

      Nov 26, 2021 26:25 AM

      Thank you Erik for your regular output of news and interviews, which are very useful. Patience is good, and buy and hold at this juncture will probably do very well. You are quite critical of traders and yet there are some very good reasons in support of trading. You appeared to be on the defensive with regard to the fifteen month decline in many of the juniors prices. That is quite unnecessary when taking into account so many other factors currently bearing down. You did refer to tax loss selling but not to real rates and sentiment, the attraction of the main market, the recently very strong $USD. I have been studiously selling for some time and am cashed up at a very point in time.

        Nov 26, 2021 26:39 PM

        Very welcome and very glad you get some value out of it Christopher!

        Patience, buying low, lower, more patience, more pain and more patience etc is not sexy. In forums people often get trolled for owning something that is down for an extended period of time and I think our egos have a hard time looking wrong for more than a short period. You might be right on the defensive thing. I guess it is because I know it looks and sound so weird that someone could be bullish, even increasingly so, after such a long decline. I mean on surface it looks like everyone owning miners have been continuously wrong for 15 months. Yet, that comes with the territory and my goal is to simply buy cheap, and increasingly so, as it gets cheaper. I have no idea when the next leg up will start but I know that I expect my portfolio to double from here and if it takes another year it would still be worth it. In the meantime I do try to find some that can buck the trend even in this poor market environment where nothing positive gets discounted really.

        All the best,

        Nov 26, 2021 26:56 PM

        Christopher – I’d agree that for the vast majority of commodity mining stocks, that trading them has been a much more profitable strategy, and not just in gold & silver stocks, but copper stocks, lithium stocks, uranium stocks, palladium & nickel stocks, oil/gas stocks, etc….
        Many retail investors try to force the Jesse Livermore “old-turkey” philosophy of “buy right and sit tight” [which he was doing in the general stocks indexes and blue-chip stocks] onto the very cyclical and volatile commodity stocks, and that just creates road-kill turkey most of the time… (and not the kind that would be celebrated for Thanksgiving). 🙂
        Sure, there are a few extreme examples from best in class companies one could cherry pick about buy and holding working out — like Great Bear, New Found Gold, or Eskay Mining or maybe Wesdome & K92 Mining, but for the other 1000+ gold and silver stocks and the hundreds of other base metals and battery metals stock buy and hold was not the best approach. Most of the mining stocks have whipsawed all over the place for many years, had a few months to maybe a year or so of big legs higher, and many other periods of big legs lower as well, but mostly chopped around rising and falling dramatically in different parts of the cycles over the years.
        Most mining stocks were absolutely much better trades, than simply buying and holding and not taking appropriate action to manage downside risk, and maximize upside rallies. When time were good the buy and hold crowd did not trim some back in the rallies, and were forced to watch their paper gains come right back down again. When times were rough in the sector, buy and hold investors were “all in” or reluctant to buy back into the selloffs at a better cost basis. This is especially obvious in the explosive exploration plays that may shoot up like a rocket ship, and then come crashing back to earth like a meteorite. Most investors that bought and held haven’t seen much traction over longer periods of time in the miners, like they would have in the general market indexes, with many miners essentially flat, and some even down over longer periods of time. That’s not a winning strategy, and why there are so many disgruntled resource investors, because they are treating these like Facebook or Amazon or Tesla, and that is not how the commodities or mining stocks behave.
        It is interesting that most of the whining and gnashing of teeth we get from jaded investors in chat forums here, on, on stockhouse, hotcopper, seeking alpha, twitter, youtube, etc… with regards to sentiment in mining stocks, is coming from the retail hordes that ignore technical analysis, bought into strength once the easy money had been made in rallies and the move was finally “confirmed,” and then held tight because they felt right at the time, only to watch paper gains evaporate and big draw downs happen. They assume everyone is as poor at investing as they are and say there were no opportunities for gains in this sector and that everyone is losing money. Clearly that isn’t true, but they see the world through their portfolio and assume if they are down that so it everyone else.
        Instead of taking accountability for their own poor decisions, and risk management strategies they blame the companies, blame the sector, and blame manipulation, when the problem was they executed bad trades. I’ve personally made far more money trading mining stocks than if I had just bought and held, even considering often buying the dips and getting good initial entry points. Good entry points are great and part of it, but so is pulling profits on rallies, and then repurchasing on pullbacks. Many of my best returns came during periods of time where it was essentially sideways action that provided a series of rallies higher, and pullbacks lower. There are many stocks in my portfolio that I’ve trade dozens and dozens of times, all while keeping a core position in place for the occasional surprises to the upside. It was still better to trade the rallies and the corrections accordingly, and the whipsaw is fantastic for traders, while it frustrates longer term buy & hold investors.
        However, moving into 2022 and 2023, even the buy and hold investors in the PM sector should be nicely rewarded, as we should have a longer run to the upside in the years to come. It seems likely that after the near-term weakness is finished, that moving into next year the looming Fed rate hikes on the table, that the PMs will perform much better, and we may see another run more akin to late 2018 – mid 2020.

    Nov 26, 2021 26:38 AM

    GDX Double Crow-Line support broken:
    Potential downside.

    Nov 26, 2021 26:14 AM

    Oh my! Crude oil is down below 69.xx, over -11%
    The top of the big down trend channel is 66.50 +/-
    Any chartist have indicators sparking?

      Nov 26, 2021 26:01 AM

      Holy crap – Oil is now down to $68 and is down 13% today.

      What a waterfall decline to end the week!

        Nov 26, 2021 26:35 AM

        Partial fallout from the decline in trucking?

          Nov 26, 2021 26:32 PM

          The narrative in the mainstream media is that with the new strain of Covid that there will be more global lockdowns, less airline travel, less driving, and thus lower demand, but Oil had already rolled over from around $85 and was correcting down in the mid $70’s before any of this fear-based news surfaced today.
          In addition there is a big OPEC meeting coming up (where the world finds out if they are going to increase production or not), and as mentioned earlier in the week the US, China, Japan, South Korea, India and the UK are releasing strategic oil reserves into the markets to assist with quelling prices. However the amount all these countries are releasing is small and just a drop in the bucket, so it wouldn’t account for an over 20% drop in oil in such a short time frame. Just another market dislocation based on human emotions…

    Nov 26, 2021 26:35 AM

    Been wondering…… this what they call the Santa Claus rally???

    Nov 26, 2021 26:16 PM

    Been trading around core positions, & using the selloffs to lower my cost basis. Bought some Kingfisher recently at 28, see where it goes…