Erik Wetterling – Talking Junior Mining Stock Investing With The Hedgeless Horseman
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to outline why he still sees a great deal of upside in the “beta” type of mining stocks with upside optionality to proven resources in the ground, as well as exploration stories that have key milestones to report in 2023.
In this interview we discuss a number of general concepts and strategies for investing in base metals or precious metals mining stocks, and focus on Magna Mining (TSX.V: NICU), I-80 Gold Corp (TSX: IAU) (NYSE: IAUX), Eloro Resources (TSX.V: ELO) (OTCQX: ELRRF), and District Metals (TSX.V: DMX) (OTC: MKVNF) as case studies that Erik sees value drivers in for this year.*
*In full disclosure, the companies mentioned by Erik in this interview, are positions held in his personal portfolio, and many are also site sponsors of The Hedgeless Horseman website. Shad has a position in I-80 Gold corp.
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He was a great contrarian indicator in September when he was yelling in all caps to sell everything and go to cash.
Silver had already bottomed at that point the mining stocks bottomed right around the time of his repeated dire warnings, only to rally for the last 3 1/2 months.
So really if people had done the opposite, as I mentioned repeatedly at that time, and deployed their cash into oversold valuations in PM companies (instead of selling things near their low to go to cash), then they’d have done much better the last few months.
Almost everything I added in Sept & Oct is well in the green now. Gotta love it! 😉
>>> @Joe – Sep 11, 2022 11:00 AM
“TICK TOCK, TICK TOCK….”
“The countdown to the next rate hike and subsequent smack down in PMs is underway.
Another week and half for the next bomb to drop, and PMs will be smashed down again.
You still have time, any rally in PM shares should be seen as a merciful window of opportunity to do one thing and one thing only…..
SELL
SELL
SELL
“This is the LAST opportunity for you to unload your shares before the last quarter of the year starts and these stocks are ground into a fine powder.
Get your cash stockpile up, you’ll need it.”
SELL
SELL
SELL
— Joe
@Joe – Sep 24, 2022 24:40 PM
“And it’s down the tubes again for PMs and the miners.
I’ve been warning you all for months, how many of you actually listened and took the appropriate action?
No many from what I can tell.
> It’s far from over.
> You might think we’ve hit the bottom, that the darkest of times for this sector are about to pass, but you’d be wrong to think that.
> The last quarter of this year will be a washout to end all washouts.
You will see companies in this space trading for less than cash.
You’ll even see some bankruptcies.
And no amount of Excelsior multi-paragraph, specious diatribes will stem the tide.
Strap in, it’ll be a hell of a ride.”
— Joe
So those were the wrongo in the congo proclamations above from Ole’ Joe that again were the ultimate contrarian indicators (as were the #JoeWasRight followers), as clearly the mining stocks and ETFs starting bouncing from just this point in September.
In contrast to the dire warnings above from our prophet Joe, I had posted this message on the same blog, which was pretty on target and accurate. (and which he not surprisingly took a swipe at).
I feel pretty good about how my comment aged in comparison to his overconfident proclamation.
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@Excelsior – Sep 24, 2022
“I liked Goldfinger’s target of $1625 in Gold as potential spot where buying could come in, stop the bleeding, and then cause a reversal squeezing the shorts back higher. It was also encouraging the last 2 weeks to see Silver bounce off $17.40, and then springboard back up into the mid-$19s again, but it lost $19 support already to close this week at $18.91.”
“There is a lot of bearishness out there, and sentiment is getting about as bad as it was in 2015 again, so that is actually a contrarian bullish signal. The BPGDM chart going down to a reading of 7 is also a contrarian bullish signal, as the market breadth in the gold stocks is fugly. There are other readings of gold stocks below their 200 day moving averages, or making new 52 week lows that are now so bearish, that they look contrarily bullish.”
“Still, the markets can stay oversold and irrational longer than many can stay solvent, so these conditions could still deteriorate further. The BPGDM could go to 0 and stay there for a month like it did a few years ago, so it isn’t a great timing tool; but at these low levels, it is definitely showing we are closer to at turn than we are a whole leg lower. So while we could still see things sell off further, scaling into positions into this weakness is a solid approach for those that like to catch tradable rallies.”
So in late September, my diatribe comments that he ridiculed:
1) Had me agreeing with Goldfinger’s target for gold of roughly $1625 for a place for it to find support and hit a bottom where buying would show up, and then suddenly squeeze the shorts to much higher prices.
Gold then went on to do a triple bottom around $1620, right down in that area, where the buying support did in fact keep showing up, with the lowest intraday level being on November 4th at $1618. So the gold support target I resonated with far in advance, was within $5-$7 of where it bottomed, and then the shorts did, in fact, get squeezed and Gold tacked on $200 in a month.
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2) “It was also encouraging the last 2 weeks to see Silver bounce off $17.40, and then springboard back up into the mid-$19s.”
As we now all know, not only was it encouraging to see Silver bounce of $17.40 to over $19, that was the bottom in Silver to the penny, and it was incredibly significant. Just sayin’….
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3) “There is a lot of bearishness out there, and sentiment is getting about as bad as it was in 2015 again, so that is actually a contrarian bullish signal.”
Yes, sentiment was a contrarian indicator in late September, and Daily Sentiment Indicator (DSI) got down to a reading in single digits for both gold and silver around that time.
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4) “The BPGDM chart going down to a reading of 7 is also a contrarian bullish signal, as the market breadth in the gold stocks is fugly. There are other readings of gold stocks below their 200 day moving averages, or making new 52 week lows that are now so bearish, that they look contrarily bullish.”
Yep, that was a much more cogent point and perspective to hold at the time, compared to his message of sell everything as the “last quarter of the year will be the washout to end all washouts.” (how about no Joe…)
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5) “So while we could still see things sell off further, scaling into positions into this weakness is a solid approach for those that like to catch tradable rallies.”
Once again, clearly this was the better read on the setup, to be scaling into positions in late September, (which I did and those have been solid profitable trades), instead of selling at the exact wrong time like he was advocating for.
Many gold and silver stocks were already bottoming by the time of those 2 posts from Sept 24th, but quite a few others bottomed the following trading session on Monday Sept 26th or Tues Sept 27th. So that was the bottom, and yes, scaling in around then was the correct strategy to deploy, given the data we had at the time.
Some have said that Joe was right for awhile but they are wrong. Those people don’t realize how well off they’d be had they treated every scary low of the last 6 months as a buying opportunity. Of course Doc thinks Joe’s been “erudite” and now somehow has been selling even though he never told his hapless fans that he was buying. Maybe he reported nibbling as that’s how he hedges his endless uncertainty but he never said the miners were an unambiguous BUY. We have a new bull market getting thoroughly confirmed and should be focusing on buying weakness not messing around with selling little tops and trying to buy back lower. Such is for fools which is why fools are roadkill in every bull market.
Ex uses facts, data, history and other expert opinion when laying out his theories on direction and performance of the markets. When being offered only assertions as a contrary theory with no support, I will go with Ex every time.
It is common sense that unsupported claims or actions that bully are of no value and only achieve the level of noise when trying to decide how to invest.
We thank you Ex, Cory and The Korelin Report for providing valuable, quality, thought-out insight to assist us in one of the most complex investment markets of them all.
Now …where do we go in 2023? Let’s see how it unfolds… it starts at this site.
Thanks for those comments Lakedweller2.
Yes, facts and data lend credence to a thesis, in stark contrast to unsubstantiated claims being used more so to troll the site.
Bearish theses are just as welcome as bullish ones, but back them up with some kind of fundamental, technical, or quantitative analysis.
Repeatedly people asked for why he was convinced the sector was going to be “ground to a fine dust in the final quarter of the year”, and after so many posts yelling in all caps about certain doom to come, there was no data to back the dire warnings… only hyperbole.
To be fair there are times when it pays to be in cash and get back in the market when you can see a turn. These times are few and far between. I was only out for about ten days. I had sold everything sometime around October and it paid off for me. I mentioned it here at this time. I am now fully invested and have been since then. When I got back into the market I bought into some pretty defensive plays and slowly started selling them and pivoting back into mostly precious metal stocks.
For now, I am not interested in base metal securities unless they have a strong precious metal component. I believe this whole electric car push is not going to play out for many years, and the economy looks to be in crash mode. Uranium does have a near bright future as the World’s supply of power needs to ramp up before these changes in electric vehicles can be more than a pipe dream for the average citizen.
Good points DT and well-stated.
Yes, there absolutely times when it’s best to go to cash, and those are times of uncertainty. There are only 2 ways to actually bet on the market from the long side or the short side.
If someone is truly convinced the markets could go up then they go long. If someone is truly convinced the markets are going down, then they would short them and make money to the downside. Someone with a true thesis and conviction has no problem putting their money where their mouth is.
In contrast, when someone goes to cash it is actually a neutral position of uncertainty because you’re not sure which way things are going to trend.
This is why proclaiming to go to cash as the ultimate best answer is really proclaiming you have no idea what’s going to unfold or come next. That is a fine stance if one is unsure, but not an investing stategy, more of an avoidance of investing.
If someone was really so convinced the markets are going to go down in a huge bloodbath phase, then any bear with conviction of their own thesis would have shorted those markets. Period.
Clearly, it would have been a disaster to have listened to Joe or his followers and shorted the precious metals and related PM mining stocks or to have sold everything and gone to cash in mid to late September, when Silver had already bottomed. and when mining stocks were bottoming into the extreme sentiment lows. Doing the exact opposite and deploying one’s cash into oversold silly valuations was the right investment strategy.
It’s been several months since I’ve last seen Doc tout the percentage of cash he’s in. Doc excells at calling tops, or sideways to down rhetoric
Well, Joe should be eating his shorts by now…