Tavi Costa – The Accumulation Period For Deeply Discounted Resource Stocks Is Now

Tavi Costa, Portfolio Manager at Crescat Capital, joins us to discuss the recent bounce in precious metals, and what’s next for the resource stocks.   We start with some of the macroeconomic trends that have led to the recent bounce and if he has changed his outlook or strategy in light of recent developments.  Next we review how silver appears to have bottomed before gold, the recent outperformance of silver over gold, and silver stocks over gold stocks all as positive signals for the precious metals sector.


We then shift over to potential catalysts that could bring new generalist investors into the sector, and the conversation touches on the importance of exploration discoveries, area plays, acquisitions, and look ahead to a bit more positive news for the sector.  We also look at how it is taking a while for the new generation of investors, that made easy gains in FAANG stocks,  hot growth tech stocks, and cryptocurrencies, to process the different reality now that we see a true bear market unfolding and a different economic backdrop as we head towards a further contraction in economic growth. 


We wrap up by getting Tavi’s thoughts on if the success in the battery metals theme, and if the run the lithium companies have gone on the last 2 years, may bring in new generalist investors, and what it could mean for the other battery metals mining stocks focused on copper and nickel that have not run as much yet.



Click here to learn more about Crescat Capital.

    Nov 09, 2022 09:52 PM

    Shawn Khunkhun of Dolly Varden has recently also been appointed to a position at Strikepoint(SKP), which is a Crescat and Sprott holding.

      Nov 09, 2022 09:19 PM

      Yep. Cory & I spoke with Shawn and Mike yesterday about Strikepoint Gold, but is sounds like they are working on a few more things behind the scenes, so we are going to wait to bring them on until they provide more clarity.

    Nov 09, 2022 09:36 PM

    Nomi Prins is the next big deal independent Phd. economics person…world class ideas…and at least to me seems to be describing what is occurring rather than selling false narrative for gain…imho

    Nov 09, 2022 09:28 PM

    To Tavi’s point… some of the current crop of neophyte investors in the general markets are going to have understand they are in a bear market, and the buy the dip one-way market that existed for a dozen years has been over since the end of last year.

    Tavi mentioned looking at the chart for the poster girl, Cathy Wood’s, Ark Innovations, which was the epitome of the growth-tech stocks so many of the herd piled into during 2020 and 2021. It has corrected 80%+ since the end of last year, with buy-the-dippers getting sliced up since Q4 of 2021 through present.

    As mentioned on yesterday’s blog… .the crypto markets have been imploding the last few days as well.

    Ethereum was down about 16%-17% yesterday and another 14% today.

    Bitcoin down double-digits the last 2 days… down to $16,520 at present.

    Other Cryptos taking it in the shorts even worse.

    > Here is a coinbase pricing link that shows the crypto-carnage:

    It will be interesting to see how this plays out, and if any of the folks that may decide to exit that sector (especially the Bitcoin maximalists) get motivated to look into some of the overlapping themes with precious metals (scarcity, decentralized or no 3rd party counter-party risks, hedge against fiat currency debasement, etc…)

      Nov 09, 2022 09:17 PM

      Here is a chart of the Ark Innovations Fund to illustrate the point:

        Nov 09, 2022 09:52 PM

        The way the Ark Innovations Fund (cram packed with all the toxic no-revenue generating flavor-of-the-day growth tech stocks of yesteryear) traded in 2020 into 2021, and then from mid 2021 to present, perfectly illustrates irrational exuberance.

        We kept hearing that revenues didn’t matter, that valuations didn’t matter, and that fundamentals didn’t matter when we’d question the insane nosebleed levels the growth tech stocks were trading at by 2021. Even some of our show guests laughed and said “Valuations don’t matter… until they matter.” 🙂

        Well, we see how that worked out for the throngs of lemming herd investors that became bagholders. It turns out that valuations and fundamentals do, in fact, actually matter. Eventually truth will out, and then investors stampeded out…. tripping over one another as they ran for the exit doors…

        It was exactly the same thing in the “Stay-At-Home Stocks” and “Meme Stocks” where they went into the stratosphere, way over their skis, and newly minted pandemic investors didn’t care about fundamentals or valuation metrics, because they believed they were in control and that stocks could only keep going higher. As we know, what goes up one side of the parabola, also goes down just as sharply on the other side of the parabola.

        When people talk about speculative flows coming back into the markets to start a new bull market and this being the buying opportunity of a generation, it is curious where those funds are going to come from, as plenty of investor capital was vaporized and went to money heaven. Those funds are gone… Bu-bye…

        It’s the same with so many of the herd that piled into the Cryptoverse… convinced 2022 was the year for 6 digit Bitcoin and 5 digit Ethereum…. By November of 2021 when BTC hit $69,000, there were Bitcoin “experts” trashing all other asset classes, and convinced that in 2022 we’d see $100,000 or $200,000 or higher BTC. Their catch phrases were to HODL (Hold On for Dear Life), and that they must have “Diamond Hands” to hold through any corrections, and they mocked all other investors with caring statements like “Have fun staying broke.”

        As we know, that is all tough talk and bluster, and at the time they felt invisible, buying more and more cryptos and selling all their other assets to move totally in cryptos. Their forums had their own Joes at the end of last year screaming with megaphones to “Sell everything and go to Bitcoin or Ethereum!!” They had supporters that would say, “Look, Anthony Pomp, Max Keiser, and Michael Saylor were right!”

        Tom Brady and Matt Damon had “laser eyes” as they promoted crypto, to show how laser-focused they were. Alec Baldwin was doing crypto commercials to mock traditional investors and show them how easy it was to just copy other successful crypto bulls. It was too easy…. right? (wrong).

        All the herd piling into cryptos, and recruiting friends and family to do the same, took their cues from the sector pied pipers, but of course, eventually became the bag holders as Bitcoin has dropped from $69K to $16K, and as Ethereum fell from $4300 to $1100. That hot money investor capital got torched, and those funds were incinerated. Where are all those HODL’ers? It turns out they were RFDL’ers (Run For Deal Life), when the poop hit the fan. Where are all those diamond hands?

        No, the reality is between the implosion of growth tech stocks, stay-at-home stocks, meme stocks, biotech stocks, defi stocks, cryptocurrencies, and crypto miners…. megatons of speculative investor capital has been wiped out in the last 18 months, and many are not coming back into the casino of the markets again. Sure there will always be hot money and trending sectors (look at Oil and Nat Gas stocks or Lithium stocks the last 2 years), but in general, many new investors that left the workforce to be Meme-Stock millionaires or Bitcoin billionaires, are learning a valuable lesson from Mr Market. It is not as easy as most assumed to get that Lambo.

        Ever Upward!

    Nov 09, 2022 09:10 PM

    SBF Warns FTX Investors of Bankruptcy Without More Cash: Bloomberg

    Danny Nelson – Coindesk – Wed, November 9, 2022

    Nov 09, 2022 09:14 PM

    ‘May The Force Be With You’

    Jesse Felder – The Felder Report – November 9, 2022

    “This trend has now gone so far that some, like hedge fund manager David Einhorn, claim that value investing may, in fact, be dead.”

    “I don’t know that it ever comes back. Most of the value investors have been put out of business. Nobody knows what anything is worth.” – @davidein

    Nov 09, 2022 09:16 PM

    EPG Weekly Oil & Gas Market Update

    Energy Prospectus Group w/ Dan Steffens – November 5, 2022

    Nov 09, 2022 09:46 PM

    Beaver Blood Moon Rally For Precious Metals

    by @Goldfinger on 9 Nov 2022

    “We also had midterm elections in the US and a full blown crypto market meltdown. Change is in the air and we are finding out who has been swimming naked all this time. Cryptocurrency will always have a place in the world, however, the sector is experiencing a badly needed cleansing process. The rebuilding process will come next (shades of early 2019 for the crypto sector).”

    “There could be many potential explanations for why traders decided to buy more than $10 billion worth of gold futures contracts in less than one hour yesterday. I don’t think the US midterm elections had anything to do with it; gold is still trading around $1715 this morning despite it becoming increasingly likely that the Democrats will still hold the Senate. However, I do believe the crypto ponzi meltdown at FTX probably motivated some larger money to increase their gold holdings. It could also be that some larger short positions in the gold market didn’t like the prospect of staying short into Thursday’s CPI report and schedule of six Fed speakers.”

    Nov 10, 2022 10:16 AM

    Took advantage of crypto route to nibble on GBTC. Let’s see what another day brings

    Nov 10, 2022 10:48 AM

    Hi Ex, whatever the policy of The Federal Reserve Board is The Central Bankers can’t stand to see a panic. They have been so involved in nefarious schemes that they will always decide that anything is better than a panic. We know as investors they have the keys to the kingdom, and they don’t want to relinquish any of their ill-gotten gains unless a panic can be averted.

    The lesson is plain and simple only a major disaster will get The Bankers to let go of their grip on money to stave it off. DT

      Nov 10, 2022 10:43 AM

      Agreed DT. It’s sad that it will take a panic to ring their bell, but it is human nature to procrastinate and wait for a crisis to finally take action.

      Nov 10, 2022 10:45 AM

      Crypto’s are a disaster looking for a place to happen, I am stunned by the number of experts and so- called financial Guru’s who believe they are a great investment. Crypto’s belong in the crypt. Financial X’s and O’s back by air pockets. DT

    Nov 10, 2022 10:59 AM

    It was interesting that Crescat is not into the lithium markets. I did a little research and saw where the CME doesn’t have a paper market in lithium with the spot price determined by Korea and a couple of other countries. There also appeared to be some general discussions on the interweb about lithium prices declining as more resources came available. I decided to move my lithium explorers to copper for the foreseeable future as I find the different treatment of the pricing of lithium something to consider.

      Nov 10, 2022 10:34 AM

      I should add about the CME “not being involved in lithium pricing”. I am not thinking that is a bad thing as I may tend to trust Korea more than the CME. It is the apparent lack of regulation that makes lithium exposed more so to corruption. That is just my opinion and not to be relied on.

      Nov 10, 2022 10:46 AM

      In general I agree with Tavi’s point that Lithium has already hit the speculative phase and most of the opportunity in the sector has already been realized at this point. I was in Lithium in the prior cycle in 2011-2013, and then got interested again in 2016-2017, but I sold out of my positions by the end of 2021 with nice multibagger returns, figured that had captured the meat of the move. Sure there are a few newer stories that still rallied in 2022, but at this point, other metals show much more upside potential have much more unrealized opportunity in front of them.

        Nov 10, 2022 10:03 PM

        Thanks. That was hanging in the back of my mind that you had made that statement before. I did not want to attribute it you without confirmation. That was also part of my decision and thanks for the post.

    Nov 10, 2022 10:30 AM

    It’s a bit disappointing that SIL couldn’t carry any more momentum over the last 2 weeks vs GDX given the power of the move in the metals.

    In any event, Brixton is looking solid. I wouldn’t be surprised by a backtest of the 200 WMA at some point, but it’s possible it goes a bit higher still before that happens. I believe it will be a stair step higher, with few large corrections (relatively speaking) to be replaced by more sideways action to allow the MAs to catch up to price. I’ve already got a relatively large position for such a small cap stock, but I am sure I will wish I had bought more in the months ahead.

    Nov 10, 2022 10:34 AM

    Silver and many silver miners coming up against their declining 50 WMAs. Not sure if silver can blow through it but it’s possible.

    For me the much bigger test will be overcoming the declining 100 WMA (I personally don’t think silver will be able to do it, but a substantial overshoot is possible, and it could be big enough to make bears nervous and to make wanna be longs want to jump in and chase).

      Nov 10, 2022 10:50 AM

      At the moment the action is right at the 150 month MA (the following chart isn’t live so it doesn’t show today’s action):

      I don’t know if silver will “blow through” the 100 wma but it will get through it and stay there.

        Nov 10, 2022 10:13 AM

        We’ll see about the 100 WMA, but I would say that if silver defies my expectation, it will be a serious anomaly from a charting perspective IMO–the fall that silver has suffered and its duration almost always suggest consolidative action between the declining 100 WMA and the flat to rising 200 WMA until those MAs either cross or get squeezed together. So while we may get wild moves, I don’t think silver will break above $26 for months yet–maybe out to 2024.

          Nov 10, 2022 10:49 AM

          I don’t think it would be an anomaly at all let alone a serious one since there hasn’t been even one setup like this one in the last 50 years.
          I bet it will break $26 in Q1 ’23.

    Nov 10, 2022 10:56 AM

    Yesterday I said: Those who only care about price might not realize how “done” the dollar is right now.

    Nov 10, 2022 10:20 AM

    I will say this in silver’s favor–it’s a positive that it is above the 200 WMA just as it is on the cusp of positively crossing above the 200 WMA. This is often the sign of a powerful move higher.

    That being said, the same thing happened in 1998, and silver did actually power about 50% higher, but it was short lived and given all back and then some over the next 3 years before it began its “real” move higher.

      Nov 10, 2022 10:08 AM

      meant to say the 200 WMA is on the cusp of positively crossing above the 600 WMA.

      Nov 10, 2022 10:18 AM

      I look at as much of the whole picture as I can and therefore see little noteworthy similarity between 1998 and today.