Things are breaking

My junior gold and silver mining stocks fell to lows I could never imagine, closing at $30.02 vs a 5-year low of $26.81. They were higher back in 2018, when gold was ranging around $1,280/oz vs $1,700 today. It’s like that in much of the commodity space right now as the underlying companies are getting sold like crazy.

Here’s something even more crazy, to take a page from Jeff Snider’s work (literally):

*If you want to see amazing, professional research like the charts above for free, look up Atlas Financial and subscribe to their newsletter, which is where Jeff Snider’s work currently resides. I get this from email links in my inbox from Markets Insider Pro

While everyone complains about the price of gas at the pump, the US supply of gasoline is down below 2020 lockdown levels! Meanwhile, the energy sector ETF XLE is down over 34% from its recent highs on June 8th while oil remains stubbornly close to $100/barrel.

Back in 2008, I remember investing in the darling stocks like Petrobras (PBR) and CNOOC which were up like crazy, building out offshore rigs to produce oil. Infrastructure was being built like crazy. Now, we see none of that! We’re all being told that we won’t need oil anymore in 10 years, and that the federal reserve will squeeze the demand out of the economy, all while government attacks local production with threats of capital seizure, sabotaged oil leases, and a regulatory framework designed to block as much investment as possible … all amid a growing food and energy crisis and a proxy war with one of the biggest food and energy producers! It’s almost like they’re trying to sabotage the world economy and create a food and energy crisis in some Thanos-like way of reducing the human population! To make matters worse, we’re hitting a major drought cycle in a few years as Lake Meade sinks to the lowest levels recorded and the colorado system dries out, all while California blocks permits for desalination plants as if they want to cause a human and environmental catastrophe.

Anyway, all we can do is go forward and hope for the best. If we ever get leaders who decide to continue the upkeep (and hopefully expansion) of the critical infrastructure that humanity needs to survive, then we’ll need to do a lot of mining. We’ll need plenty of other things like oil to be sure, but I see the tiny mining sector as the highest risk part of this trend with the biggest potential upside, so I’m piled in there.

Here’s where my portfolio ended up:

  • HEDGES (15.7%)
    • 15.7% TLT Calls
  • PRECIOUS METALS (33.0%)
    • 4.0% AG
    • 3.9% MTA
    • 3.7% SILV
    • 2.7% LGDTF
    • 2.8% EQX
    • 2.4% SLVRF
    • 2.4% SAND
    • 1.9% MGMLF
    • 1.7% SSVFF
    • 1.6% RSNVF
    • 1.6% BKRRF
    • 1.4% HAMRF
    • 1.8% MMNGF
    • 1.1% DSVSF
  • URANIUM (25.3%)
    • 4.9% CCJ
    • 3.5% DNN shares & calls
    • 3.4% UEC
    • 3.2% UUUU
    • 3.2% BQSSF
    • 3.0% UROY
    • 1.8% ENCUF
    • 2.3% LTBR
  • US CANNABIS (14.9%)
    • 1.8% AYRWF
    • 1.7% CCHWF
    • 1.6% CRLBF
    • 2.3% CURLF
    • 1.7% GTBIF
    • 2.2% TCNNF
    • 1.3% TRSSF
    • 2.3% VRNOF
  • BATTERY METALS (10.8%)
    • 5.1% NOVRF
    • 3.9% SBSW
    • 1.8% PGEZF
  • CRYPTO (2.6%)
    • 2.6% XRP
  • OTHER (3.1%)
    • 2.3% DOCN (w/ covered calls)
    • 0.6% OGZPY
    • 0.1% TWTR call
    • 0.0% ATCO calls
  • CASH (-5.2%)

My hedge in TLT calls actually worked this week, as my portfolio was only down 1% despite the smackdown in all my mining stocks. I managed to add a bit into the deluge, picking up more UROY, PGEZF, MMNGF and EQX. I’ve also been pushing as much money into my trading account as I can, including changing my credit card to minimum payments rather than paying the full balance so that I could still reduce my margin. Credit card balances can be expensive, but they can’t suddenly force you to liquidate and pay them when your portfolio dumps.

Meanwhile, work is busier than ever (construction in the Los Angeles area). I have 22 active projects and an endless stream of bids which I’m hopelessly behind on, and one of our estimators is retiring in 3 weeks. It’s like the polar opposite of 2008 where all my work dried up, so its better to be busy, but I’m still earning the same amount in nominal terms – much less in real terms – which is really frustrating. That’s why I run such a high risk portfolio, I need to get ahead somehow and we’re in a world that only rewards asset holders while endlessly punishing labor. Everyone needs to hope and dream, its part of human nature.

So best of luck riding out this part of the cycle. It’s one heck of a rollercoaster, but it’s also a chance to get some top quality assets at bargain basement prices. Things will improve considerably when the Fed finally pivots and real investment can start, but we are in a resource-constrained decade.

In the 2000-2010 decade, investments in natural resource companies soared while other sectors such as Tech, consumer staples, and consumer discretionary struggled. Be ready to see that again after this bear market finally bottoms out.

About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at gluskinsheff.com. Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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2 Responses to Things are breaking

  1. phusg says:

    > we’re in a world that only rewards asset holders while endlessly punishing labor.

    I’m with you on that one! Hope you don’t mind me throwing a few well intentioned questions your way…

    > all amid a growing food and energy crisis and a proxy war with one of the biggest food and energy producers! It’s almost like they’re trying to sabotage the world economy and create a food and energy crisis in some Thanos-like way of reducing the human population!

    Isn’t Putin the baddie here trying to sabotage the economy? IMHO our own Western governments are at least (admittedly often haplessly) stumbling in the right direction, namely a low oil economy (and not allowing our economy to be held to ransom by Putin).

    Shouldn’t you be generally happy with this, as your portfolio is heavy Uranium (which has to be a big part of that future) and light on oil?

    Surely you’re not calling for more investment in oil production to avert a human and environmental catastrophe? Doesn’t it make more sense to call for investment in clean energy generation including lots of nuclear?

    • johnonstocks says:

      We need both.

      If we want renewables or electrification, we need mined minerals like copper and nickel and we need diesel to run the mining equipment.

      Many of the products we use and fertilizers are byproducts of oil and gas production.

      I’m very pro nuclear, but the plants take more than a decade to build – mainly due to a hostile regulatory system – and we need to fix that. Even then, the best we can do with oil and gas is to actively replace the need for it before we reduce the capacity or we’ll just end up burning lots of dirty coal like Germany.

      There are practical solutions to all of our major problems today, we just need leaders that can start to see science as a process that is open to new data rather than a religion with a given answer to force through.

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