Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners / Commodities / Gold and Silver Stocks 2018
Summary
1)2018 has seen so muchvolatility in the equity and bond markets after going straight up since 2009.
2)"Everything"bubble is simply the result of record low negative real rates manipulated byCentral Bankers to prevent deflation by all means possible.
3)The ending of QEcombined with increasingly inflationary concerns has sparked the US to startraising rates.
4)Unwinding of easymoney policies could be quite painful.
5)Stay away from marginand company's with any debt on their books.
One of the mostoverlooked stories in 2018 has been the volatility in equity and bond markets. The"everything" bubble is simply the result of record low negative realrates manipulated by Central Bankers to prevent deflation by all meanspossible. In 2008, the US banks were on the verge of collapse, the Fedsince that time has tried every effort to protect the economy with easy moneypolicies.
The result since 2008has been remarkably effective. Unemployment in the USA is at record lowsonly ten years following the government bailouts of banks and the auto sector. Thereal estate foreclosure crisis has been completely turned around.
We must not forget thatfor every action there is a reaction. The unwinding of easy moneypolicies could be quite painful. The ending of QE combined with increasinglyinflationary concerns has sparked the US to start raising rates. Bond yields are now the highest in manyyears spiking higher taking the investment world by storm. Real interestrate hikes are happening for the first time in many years. The Fed hasstarted warning investors about rising risks most notably recently withDeutsche Bank.
First hit is now Italywho has always lived the sweet life heavily indebted. Next will be Greece ormaybe Spain or Portugal and the PIIGS as interest rates increase. Don'tworry about Spain, Greece and Italy they will be bailed out by the EU againwith another lifeline. Instead, be concerned for many young people livingin debt. They may have jobs now with record low unemployment. Nevertheless,in many cities such as NYC, LA and Miami the average teacher can't afford aplace to live.
As rates rise again tohistoric levels, I expect to see many more delinquencies. The recentconcerns at Deutsche Bank may be just the beginning.
I remember how fastthese bank panics happen. First it started with Bear Sterns then Lehmanand then AIG in 2008. All during that time the pundits in the mainstreammedia said there was nothing to worry about and that housing and the marketswere booming forever and ever.
A similar phenomenoncould be happening right now. We have so many warning signs of anothercrash. The biggest one is the major increase in bond yields in 2018. Notonly have rates moved higher but it jumped quickly the most in many years.
I expect the recentwarning signs from the Fed Reserve on Deutsche Bank to be just the beginning asdebtors who became over leveraged to low rates pay the price now as rates risequickly. I don't believe the Fed is done raising rates until there is asevere market downturn.
There is no doubt thathighly leveraged borrowers at record low interest rates will come into trouble. This begs the question how many of the banks still have derivativeexposure like AIG and Lehman.
Remember statisticallywe have up to 50% corrections or more once every 10 years or so. I knowyou don't like to hear it but this is the second longest bull market since the1920's which led up to a major crash and the Great Depression. We are inthe midst of trade wars not seen in 100 year since the Smoot Hawley Era whichmany blame as one of the accelerants in deepening the Great Depression'sdevastating effects.
How does one protectoneself? Stay away from margin and company's with any debt on theirbooks. You might want to look at hedging against the financials, realestate and bonds (TBT). Stick to small cap stories with no debt overlarge caps with debt and look to see if they have real assets preferably in theform of some sort of commodity in the ground. The mining sector (GDX)which has been under attack by the activists and unloved for years may actuallybe one of the best places especially gold (GDX), silver (SIL) and copper miners(COPX). The energy (XLE) and agriculture (DBA) sector may also be safeareas which over time could outperform during a potential bear market panic.
Conditions point to abear market and possible flash crash this summer. Please prepare for realestate and stock market valuation to come back to earth as rates move higher.
What is deeplydiscounted right now and could soar again if we see double digit inflation likein the 1970's? The junior miners could be the best place especially rightnow the beaten down exploration stocks which have been brutally neglected bythe major producers for years. I recently went to a mining conference inNYC put on by 121Mining and met with some of the top CEO's and Fund Managers.
One of my really smartprofessional subscribers Art pointed out Shanquan Li. Mr. Li manages theOppenheimer Gold and Specialty Minerals $OGPSX. Before entering theinvestment sector he was a director of a think tank for the Chinese Governmentand then joined Brown Brothers Harriman before joining Oppenheimer where he hasbeen for 22 years managing the precious metals fund since 1997 building it tojust under $1 billion under management. He has significantly outperformedhis peers recently with picks such as Kirkland Lake $KL, Endeavour $EDV andNewmont $NEM. The fund pays a yield of 2.99% and has four stars fromMorningstar. Over the past year Li's $OGPSX fund has stayed in positiveterritory while most mining funds have been down.
He mentioned to me hedoesn't buy stocks until they reach a minimum market cap but he does like to followthem and start doing research at an early stage. He comes to these showsbecause he realizes in his experience as a portfolio manager that big minersstart out little and grow. He is smart, humble and constantlylooking as he does not want to miss some big discoveries in the junior miningsector. This may be an actively managed fund that I may look into. Checkout this recent interview with Oppenheimer Portfolio Manager Shanquan Li by clickinghere...
At the conference I haddozens of meetings with juniors. One of the things that impacted me mostwas when the CEO's showed up and mentioned to me that they were recently buyingtheir own shares. This is a very bullish testament to me as an investorand it was nice to see two of the CEO's telling me that they are puttingheavy amounts of their own net worth in recently as they believe their ownstock has value and should rise. I'm still doing due diligence to confirmwhat they are telling me is correct but Liberty Gold $LGD and Victoria Gold $VIT may have had some recent insider buying. Ifyou find insider report please emailit to me.
There were a few selectjuniors showing some great momentum at the conference based on priorresults and good discoveries this included Teranga$TGZ, Fireweed Zinc $FWZ, Corvus $KOR and Silvercrest $SIL.
Many of the companiescame to the conference already well positioned financially recently raisingmoney such as GoviExUranium $GXU. Some recently announced financings like Alexco$AXU which seems to be a top takeout target for high grade silvercompanies.
Interestingly, manyinvestors are still unaware of the recent investment by Eric Sprott into whatcould be the next Novo which went up ten fold last year. Sprott just madea $10 million investment in a small company which is just starting to pick up. The CEO was justinterviewed and was one of the first I've seen on this rising junior in thePilbara in Western Australia.
Also incredibly I spoketo some of the top lithium experts on the internet and they were not aware of adiscovery that I was one of the first in the industry to highlight back in Novemberlast year which could be huge. Since that time they raised $2.5 mil CADand are advancing permitting and metallurgy. The stock has gone from a quarter to1+ and it could be just a start as there have recently been some major advancements with the permitting.
Make sure to stay tunedas I expect a positive turn in the mining market to be imminent. Becareful of the overbought cannabis and cryptocurrency sector which hasattracted a lot of speculative capital and tons of fraudsters. See therecent article entitled, "Buyer Beware: Hundreds of Bitcoin Wannabes ShowHallmarks of Fraud" or "SEC Tells Investors Potential For Fraud inCompanies Tied to Cannabis Industry". Please be careful...caveatemptor! If you have gains in cannabis or crypto, it might be prudent torotate into cheap mining stocks.
By Jeb Handwerger
© 2018 Copyright Jeb Handwerger - All Rights Reserved
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