David Skarica: July 4th Fireworks Erupting in the Junior Miners
In gold bull cycles, the junior mining companies represent the highest possible returns, especially for investors positioned early in a cycle. David believes that the next 6 to 12 months is a great time to position yourself. Historically, moves in the junior miner move between 3-5 years, and we are only 6 months into the current move! If you enter these cheap stocks right now, and invest in 20 or 30 companies, 5 or 6 of them will probably blast off, providing exceptional returns.
Today, we have some phenomenal movers. We’re seeing the type of returns that are unheard of in any other sector. Select gold stocks are up 60-90% today and several other stocks are up 25, 30, or 40%. The trading action in 2016 draws many parallels to 2003 or 2009, coming out of a decline. During those times, gold stocks went up without any major pullbacks. People were waiting for a seasonal pullback in the gold stocks from about May until the end of summer, which didn’t happen.
David’s favorite model early in the bull market is a small producing mine with production expansion potential. Explosive gains can occur when you have leverage from the increase in the gold price, plus the leverage from the increase in production- especially if the costs stay under control. Galane Gold (TSX-V:GG) is a perfect example of that type of company, up 100% on the day!
In 2013 when the market was going straight up with no corrections- bonds sold off hard that year, and precious metals did poorly. Now we have precious metals breaking out, and bonds are acting well. When precious metals stocks go higher, it’s not just a tool to make money, but also a hedge to protect against losses. In a general equity bear market, investors want to protect our money. As an investor, losing 5% or staying flat, while everyone else is losing 30, 40, 50%- then you have capital to buy stocks when they are cheap. This is why David is buying puts on select companies listed on the major US exchanges.
David also believes we are entering a final blow-off in the bond market which could mean an excellent opportunity to short bonds in Japan, Germany, USA, UK, and Canada. If you look at the parabolic blow offs it’s always the same thing. You have this long term bull market, and then in the last 6 months everything goes straight up- and we’re seeing that in the bond market right now.