In classic bull markets, greed rules and investors become speculators. Fearful of missing the next big thing, they indiscriminately throw money at each and every opportunity.
It’s especially important at these times to try and separate the few contenders from the many pretenders, find a few good companies that have a chance to become miners, and disregard the majority who exist solely to “mine the stock market” (Mercenary Musing, October 20, 2008).
In late January 2011 I sensed that gold stocks had became overbought and, made a conscious decision to lighten my exposure. At that time I ceased coverage on two advanced explorers from which we had taken our doubles in less than 12 months. Four months later I exited a typically underachieving gold explorer and subsequently took a tax-loss on it at year’s end (Mercenary Musing, September 12, 2011).
As market valuations have dwindled over the past 14 months, it has become increasingly apparent to me that the Toronto Venture Exchange is overloaded with and burdened by a plethora of junior gold explorers that will never be successful and reward shareholders.
Little wonder the investing public has become disillusioned, disinterested, and disgusted.
Now that we are in a bear market for juniors, most stocks, whether good or bad or ugly, will suffer in a like manner. Some writers, mavens, gurus, and pundits have recently called the bottom or surmised that the bottom is near and now is the time to buy.
We are coming into May when selling is normally expected to pickup, and that will be followed by the dog-day doldrums of July and August. The economic outlook in Europe is no better, Chinacontinues to slow its economy, the US Fed, partisan policymakers, and politicos will do nothing of import before the November elections, the price of oil remains high, and metals prices are stagnant. Markets are skittish and subject to a whim within an undercurrent of trepidation. None of the above factors will inspire the confidence of risk capital in the short term.
Although I am a contrarian by nature, I do not foresee a catalyst for improvement before Labor Day at the very earliest, and I do not intend to participate as a wholesale buyer at this juncture.
The real question in front of cannot be answered at this time: Could this game be over or is it just in an extended rain-delay?
That said, at some point valuations for the small minority of fundamentally strong gold companies will make for some no-brainer buys. Until then, I prefer to sit on the sidelines and simply watch the carnage continue.
Despite my bearish bent, I remain a committed shareholder of two gold companies currently covered via Mercenary Alerts for free email subscribers only. These two issuers have the requisite three key criteria listed above and have maintained strong share prices even in this down market.
In addition, those who follow me know that all is never lost and I can always find something to go long on. Currently my cash is looking for graphite explorers and developers and oil companies with upside production stories and low debt. As always, I continue to search for compelling copper oxide and uranium plays.
Anybody out there got a hot tip? You know how to reach me.
Ciao for now,Mickey FulpMercenary Geologist
Acknowledgement: Erin Ostrom is the editor of MercenaryGeologist.com.
The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from theUniversity ofTulsa, and M.Sc. Geology from theUniversity ofNew Mexico. Mickey has over 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, andAsia.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 24 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries inPeru,Nevada,Chile, andBritish Columbia.
Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.
He will present a "Q&A on Junior Resource Stocks" and talk about "Graphite: The New Big Thingl" on Tuesday, May 15, during the New York Hard Assets Investment Conference.
Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.com LLC.