A Reality Check

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#1 Tue, Apr 10, 2012 - 10:25pm
Joined: Jun 15, 2011

A Reality Check

This is the first time that I have read anything on this forum or logged on in quite a while.

After the financial crisis I decided that I needed to understand what the hell happened back in '08 and in essence I took the "Red Pill" and learned about a myriad of structural problems we have with the economy in the western world and the world in general. Through that journey I bought into the "Gold to the Moon" theology and planned to protect myself by buying some precious metals and then through the influence of several alternative news sources decided that there was a fortune to be made in Mining Stocks. Why not? After all, if the underlying commodity/money/whatever you want to call it is going on a 11 year bull market and a mania phase is yet to come, then it makes sense that the companies that produce this stuff was also going to go to the moon, with leverage.

Well armed with some savings and a brand new trading account, I bought some physical metals and put the rest into the trading account. At first I did well, everything was going up and then the great fall of 2011 occurred in the mining stocks. Everything I owned went into the tanker and I couldn't make a decent trade into or out of anything. Companies that had great fundamentals, making tons of money, producing at low cost like SilverCorp (yes I know about the scandal) all devalued and don't even get me started on the juniors producing or exploring. I took massive losses on Canaco, Romios, San Gold, Smash Minerals etc, etc.

The big lesson was that in the end, these are all stocks and if you are going to invest in stocks, you must learn the technicals and marry them with the fundamentals. Now, I look at Silver Wheaton and don't think that it is going to be a $400 stock when Silver finally hits $150/oz, I think this chart sucks right now and it is going to $28 bucks AT LEAST and I'm not buying a single share until it bottoms out, probably later this year, maybe the fall.

So I changed some of the rules for myself on what I'm going to look at and not. Take this post for what you will, love it, trash it but I write this hoping to help and not disparage because I do believe these stocks will make people fortunes, just not today. I still hold my physical well because its one of the only things I'm in the money for besides my most recent trading activity which is not in mining stocks and because the metal is my insurance. I'm also still holding some of my micro juniors because they are so low now, selling them off wouldn't buy me 10 shares of Apple anymore and in case they hit the magic hole.

That said, here's what's changed and how I'm going to keep sane...

1. I cut back on a lot of my reading/listening to the alternative financial media and replaced it with...nothing. I still love, TF, Eric King, Max Keiser, Bob Chapman, and all their associates but while they are good at giving you the macro picture, none of these sources will be able to tell you what to do TODAY or even next month for that matter. Yeah I hate the Silver Manipulation, the Naked Shorts, the coming Gold Mania and debates about deflation vs inflation, the coming Derivative Explosion, etc, etc but none of that has helped me make money which in turn allows me better protect myself from the coming depression.

2. I'm learned not to be either a perma-bull/bear. I.E. You read ZeroHedge everyday, you mind gets warped into thinking the world is going to end tomorrow and Gold is going to go straight up. Neither is completely true and all you have to do is look at silver chart for the last 12 months to see that. Yes, these macro trends are true but you can lose a lot of money and your sanity getting tunneled into this kind of mindset. Now, I'm very very slightly in the right camp but ready to go either direction depending on the wind.

3. I am learning to actually trade and investing serious time in getting good at it. Learning technicals, reading charts, money management, controlling your emotions, etc, etc because the fundamentals are great at knowing which companies to invest in but getting in at right time has become as important if not more than the fundamentals and that is, quite frankly, better than buying something, watching it go down 30%-70% and hoping 8 months later for it to just recover. The guys that Eric King interviews are not telling you their proprietary trading strategies so rather than trading off on 14 min interview get competent on it yourself. The trading has actually forced me to look at other sectors as well like oil, and uranium as well.

3. I'm not investing in any junior explorer that doesn't have 2 years of cash on its balance sheet, I don't care what the drilling results are or who the management team is because talking to my well placed friends who work on Bay Street, raising capital is going to get hard in the next while and frankly, I think we are just starting a tank on the markets in general so everything and I mean everything is going to go down and when the ship is sinking, the margin calls are going to force the liquidations and the miners will be the first to go down and deeper. Back in 2008 a lot of juniors simply disappeared.

4. If they got cash, then maybe but their existing drilling results gotta be world class. Man who knows what inflation will do to the cash costs to produce so if they haven't got results in the upper tier. Forget it. I need to know that if it costs 1100/oz to get out because Iran gets bombed and Oil goes to 200 a barrel, it will still be worth it.

So guys, I guess we should just hang in there, we don't have a choice but maybe the mindset has to be different, more real than rah rah. Let's try and find the creme de la creme so that when this market finally bottoms we can buy but until then, I've gone short...


Edited by: KiniK on Nov 8, 2014 - 5:19am