It's so outrageously simple that few investors can actually do it: buy low and sell high. The manic highs and lows of the market are actually good news for those investors who have mastered the discipline of buying low and waiting, according to Louis James, the senior editor of the International Speculator and Casey Investment Alert. In this interview with The Gold Report, James talks about how not to be fooled into timing the market and how he finds value in precious metals by scouring some knock-out jurisdictions like Mexico and China.
The Gold Report: In a recent Casey Research article you asked investors if they are brave enough to buy low. It's difficult to be a true contrarian and have the guts to buy when everyone else is selling. What guidelines do you give people who need reassurance in markets like these?
Louis James: It's good news and bad news. There really aren't reassurances. No matter how far down something has gone, until it hits zero, it can still go down farther. The good news is that precisely for this reason, markets tend to overdo things. They are volatile. They fluctuate. They get manic and go too high, and get depressive and go too low. But that's actually good for those with the discipline to buy.
So, when's the right time to buy? The answer is that there is no right time. You don't try to time the market. That's the fool's game. You look for value. If something you'd be happy to own at $1/share is now at $0.50/share – that's a great buy. Can it go lower? Yes. But it can also go higher and is a better deal than when you first liked it. If you buy value, you increase the odds of coming out ahead of the game, regardless of whether or not the stock goes down before it goes up.
I hate to say it, but really there's a reason why it's hard to buy low and sell high. It's so logical. It's so simple. But so hard for most people to do.
TGR: Money manager Adrian Day recently suggested in an interview that investors should buy quality juniors and hold them for what could be a painful six months before things start moving up. How long do you think investors have to make the plunge before what you've called "stupid prices" are gone?
LJ: I just said I wouldn’t try to time the market, so the real question, if there are six months of pain ahead, is why would I buy today? The answer is that we don't know if it's going to be six months of pain ahead. The global economic situation is surrounded by a swirling cloud of black swans. Which one of these is going to land first and upset the apple cart? It could be any of them, and it could happen tomorrow. That's the reason not to wait six months or whatever number of months you think it is. Things could reverse very sharply, sending certain assets upwards again, particularly precious metals.
TGR: You travel the world doing site tours. Are there some countries that are overlooked because of mistaken risk profiles?
LJ: It's great to buy things in Ontario and Québec where you feel very safe, but you pay a premium for that. That's where everybody else feels safe, too, so it makes it harder to buy low.
However, there is no place in the world, even in Canada, where things can't change all of a sudden. Even Québec increased its royalty a while ago. You have to expect that. When miners are making money, governments are going to want a bigger pound of flesh. It can happen anywhere.
There are countries that are extremely high risk and visibly getting worse. Argentina would be one of those, which is a real shame because it has a tremendous mineral endowment. The good news is that regulation of mining and minerals is largely the domain of provinces down there and some provinces are better than others. Depending on your temperament, that could be an opportunity. If the place crashes, it could be a great opportunity to pick up related stocks cheap. I wouldn't want to buy in advance of that, though.
Another good mining jurisdiction that's turned kind of scary is Peru. There is a lot of anti-mining sentiment. There have been riots and violence; mine camps have been burned down. The government is actively trying to help the miners now with the military and other options.
It is a dangerous world out there, but there are overlooked jurisdictions. I like the Guiana Shield in Venezuela, Guyana, Suriname and French Guiana. The big gold deposits in Venezuela are on the same greenstone belts that stretch from Venezuela to French Guiana. It's the same rocks that have big deposits across the ocean in West Africa. They are making discoveries in the Guyanas. Companies have been able to come in and make progress on various projects. The governments seem quite supportive.