Dave Erfle – The Trivial Many And The Vital Few
Dave Erfle, Founder of the Junior Miner Junky, joins us to outline some of the macroeconomic data he’s watching out for, technical support levels in the precious metals sector, and how he’s managing his portfolio. The markets will be transfixed on the CPI and PPI inflation readings the next 2 days and will speculate on how this data may impact the ongoing Fed rate hiking cycle. We review some of the technical pricing support levels in gold, silver, GDX, GDXJ, that are within range to see at least a short-term bounce from oversold levels. However, Dave concedes that lower levels and a “scare you out” corrective move are still a potentiality. We contrast similarities and differences to prior bear market periods, but ultimately we are in a much different macro backdrop than any time in the last few decades.
We then zoom back to talk about the fundamental strategies of trading mining stocks that these junior resource stocks shine very brightly “like a lit match” but that overall mining stocks haven’t really outperformed over longer time periods of time over the last few decades. It is for precisely this reason that to make money in this volatile and cyclical sector, one needs to buy the dips and sell the rips in the mining stocks. Dave did a great job of building up cash and is starting to add to some positions, but he is still holding back a lot of that cash to be able to seize upon further drops in valuations in the junior mining stocks.
We wrap up with a discussion on trading psychology, and why it is seems to be so difficult for investors to take the simple action of buying when stocks are cheap and oversold, and conversely, trimming or selling out when the stocks have already made outsized gains. Dave mentioned the book “The Trivial Many And The Vital Few” that highlighted why this is has always been the case, and it boils down to traders not being able to manage their emotions when buying or selling, and thus must underperform the markets as a result.