Beware of Landmines

Photo: Beware of Landmines

Yesterday we discussed how this gold bull market could be longer, and more sustainable than what we saw in 2008.

To recap:

Gold supply and demand fundamentals are highly bullish for the gold price

Central banks all over the world are debasing their currencies to avoid defaulting on debts in response to the Global Pandemic

Central banks will keep interest rates low, generating negative real yield on Government bonds

In times like these, Ray Dalio, co-chief investment officer of Bridgewater Associates (the world’s largest hedge fund) recommends holding 10% of your portfolio in gold.

If gold offers insurance - gold equities offer leverage. For investors looking to maximize capital gains, there are serious returns to be made in mining stocks.

Keep it Simple: Buy Low and Sell High

The market is packed with distractions. Swing traders, Reddit armies, and big tech companies are soaking up the spotlight, but it’s important to look past the hype. We need to find value driven alternatives to a stock market that increasingly looks like a roulette wheel. If you are a value investor, stick to the game plan.

Age-old market wisdom tells us that when the conviction of the masses is disproportionately strong, it’s a good idea to find something they’re not seeing. Take a look at the chart below showing how disconnected things have become:

I am not saying equities won’t climb higher - but I consider probabilities.

I will let the legendary investor, Jim Rogers, simplify this, “You want to buy cheap assets and sell expensive ones.”

Enough said.

And as we see below, commodities are CHEAP:

As commodities begin a broad bull market, gold is often the leader. Throughout history, this has been the case.

Investing in physical metal is great insurance for any portfolio, but the big bucks are made in mining stocks.

This is where the 10x, even 20x gains will be coming in the next few years. Finding the right junior miner, with the right team and the right assets can be a game-changer for a portfolio.

And FYI - junior miners are CHEAP… Take a look at today’s chart compared to the all-time highs in the last bull market:

The GDXJ (largest junior gold mining index) suggests a 250% rise in the price of junior gold miners would be needed just to reach the last bull market’s peak valuations.

These are wild times. Through my 50 interviews that made up the 2021 VRIC, I found one theme especially valuable:

“Beware of landmines”

As the market heats up, many investors will make a fortune. And many will get burned.

Expert guests like Rick Rule, Adrian Day, Brent Cook and David Morgan all had similar warnings when it came to investing in this ongoing gold bull run.

In a hot bull market, there will be more companies “selling a narrative” than bringing concrete value to their shareholders.

This reminds me of one of the most important things Rick Rule, CEO at Sprott US Holdings has ever taught me:

“If I had only bet on the same three or four individuals throughout my career, I would have made 10 times as much money and worked a tenth as hard as I’ve had to.”

At the end of the day, it comes down to the people. I’ve said it time and time again. My core goal at Cambridge House is to help my subscribers identify the best people in the business.

As the precious metals market heats up, so will the noise and pollution in your news feed and deal flow...

When I trust the people, I can sleep well at night.

Tomorrow I will outline an opportunity we showcased at the VRIC that is attracting outsized support from the smartest money in the business.

The management team has already hit two home runs for shareholders, now they have stepped back to the plate.

I am not going to give too much away, but tomorrow I will highlight a position that I built in the open market, and that I am comfortable sitting on for the long run.

I think it’s just a matter of time before they get noticed in a big way.

This bull market is going to be fun, but when FOMO kicks in, expensive mistakes are made. Have a plan, and trust your process.

You can be sure that I’m working night and day to stay on top of what the smart money is doing.

Stay tuned,

Jay Martin
CEO, Cambridge House