"we might have a silver mini bull run here that could be just spectacular. And even if not, it'll go along with..."
Louis James interviewed on Streetwise Reports
The commodity supercycle could be on an upward curve, and among the commodities, the energy metals could see the most lift, fed by demand for alternative energy going mainstream among consumers, posits Lobo Tiggre of Louis James Ltd. and founder and editor of Independent Speculator, in this interview with Streetwise Reports.
The Gold Report: Lobo, lots of readers know you as Louis James, your pen name for many years. After a long stint with Casey Research, you have gone off on your own, formed Louis James Ltd. and started the Independent Speculator newsletter. Would you tell us a little bit about your new publication?
Lobo Tiggre: Yes, I'm very happy to. I have worked with and learned from Doug Casey of Casey Research for almost 14 years. I would say he taught me everything I know, except that I had other teachers like Rick Rule and many famous geologists, who all gave generously of their time and understanding. I've gotten to the point now where I want to do it on my own, and have started the Independent Speculator.
I feel it's important to have skin in the game. I like it when, in evaluating a resource company, I look at the ownership and see that management has put a significant amount of their own money in the stock, that they will suffer or celebrate the same ups and downs that their shareholders will. So I thought it was important for me to be able to offer the same thing to my readers, which I wasn't able to do under my previous employment.
This is one of the main ideas of my new service. I write about what I'm investing in. I'm active as a speculator. I'm applying everything that Doug and company taught me. And I am very happy at this point in the commodity cycle to be able to put my own money into the market, to benefit from what I think is coming. And I want to have skin in the game with my readers, to be in the trenches with them.
TGR:Let's talk about the commodity supercycle-where is it and where do you think it's going?
LT: The commodity supercycle is interesting because it's such a strong pattern. You see commodities moving together in big waves. They go down and up, and they all seem to move together. But if you look at what drives any particular commodity, it seems completely unrelated to anything else. Oil is up recently because of the Iran nuclear deal being scrapped by the U.S. administration. What does that have to do with the price of industrial metals? And yet, most are up this year.
I don't have a really great explanation for why this is, or should be so, but it is a fact. The correlations are extremely high. And gold bugs should beware-silver bugs too-that the correlation between precious metals and other commodities is extremely high. I agree that they are also monetary metals and safe-haven assets, different from pork bellies and coffee. And they do diverge under moments of stress in the global economy, which is what they should do. But apart from those moments of acute stress, gold and silver tend to move with the other commodities.
That's good news for us right now because the commodity supercycle is in an upward curve. I personally think that all that we saw from 2001 to 2011 was a warm-up. We're going to see a bigger cycle and a bigger mania blow off at the top. It will take a while to gather steam, but I do think that's what's coming.
Why? It's not just the supercycle. It has to do with my macroeconomic view. All the money printing that governments around the world have done is going to show up in real stuff, including commodities. Things are going to respond to all of the liquidity that has been created since 2008. So I'm very, very bullish. On the exact timing, I don't have a crystal ball. But I do think it's coming. And I do think that while the markets are still languishing in the remaining grips of the bear, it's a great time to be buying. I'm very glad to be able to be doing that myself right now.
TGR: You said that in the supercycle commodities run generally in correlation, but do you see some doing better than others in this next cycle, this bullish cycle?
LT: I do. I'm particularly bullish on the energy minerals, excluding oil. Oil is the old energy mineral. The new energy minerals are set for a stellar run. This is driven by a true paradigm shift out of burning fossil fuels for energy and into renewable energy. That is big and real and powerful and gaining steam. It used to be the pet project of a few people with an ideological axe to grind. Then governments started putting in incentives, pushing to make it happen sooner than the market would have adopted it. But it's gone beyond that now.
There's really been a tidal shift. Consumers want these new products and services. Consumers want electric cars now. Before, EVs used to be like golf carts, right? Nobody wanted really an electric car unless they were really hard-core environmentalist types. But now, Tesla Motors Inc. (TSLA:NASDAQ) has smashed the old image of what an electric car could be. The change is not just about Tesla. Everybody's getting into this because they realize that customers want these new products.
It used to be that solar power was very inefficient and expensive. It was just something for ideologically motivated people. But now it pays for itself, even without government subsidies in some areas, and there are government subsidies in many areas. If you go with a Tesla roof, you can even get financing. You don't even have to cough up all the money up front and hope to get it back over decades of free electricity. Add a solar roof to home electrical storage, and you can have electricity at night or when there's no sun for a couple of days. That changes the equation. It makes going solar much more desirable.
So this is a big tidal shift. I see this as supportive for the related minerals and metals for decades to come. Everybody's talking about lithium for lithium-ion batteries. But lithium is not rare, and the big producers can and are ramping up production. So I'm cautious about lithium.
Fortunately, there are other necessary minerals for which production is not so easy to ramp up. I'm particularly keen on nickel, which goes in those batteries. Cobalt, of course, has been making headlines. I think cobalt has a long way to run. Even if the amount of cobalt in batteries is cut, it's still necessary, and the number of batteries is increasing and the supply is very constrained there. I'm a copper bull as well.
There is one energy mineral I want to highlight, and that's silver. Many people don't think of silver as an energy metal, but solar panels use a lot of silver. I understand from sources in Silicon Valley that a Tesla solar shingle uses about one-third of an ounce of silver. Conventional panels use even more. The average single-family home in the United States would have more than a kilogram of silver on its roof to go solar. That's a lot of silver that isn't part of the market today. If you add that demand in, it gets quite interesting.
I'm bullish on commodities in general. But we live in a crazy world that's good for safe-haven assets, so I'm still bullish on precious metals. And I'm also bullish on most of the new energy minerals.
As silver falls into all these categories, I've been joking that I'm a silver bug this year. It has multiple ways to win. And it is prone to going on little mini-manias of its own. You may remember that back in April of 2011, silver really took off ahead of gold. And that's not the only time it's done that. So we might have a silver mini bull run here that could be just spectacular. And even if not, it'll go along with the other energy commodities and/or the precious metals. I like silver a lot these days.
TGR: Hasn't the silver-gold ratio been at some fairly historic highs for a while now?
LT: It has. But what does that mean? I'm not sure that I want to draw too many conclusions for two reasons. One is that compared to the natural ratio, it has been in an unnatural ratio for many years. But does that mean that silver has to rise to meet gold? No. It could mean that gold could fall to meet silver. Or it could just stay out of whack. Gold and silver tend to move together as precious metals, there's no doubt about that. But silver's also much more of an industrial metal. It has other supply-and-demand factors influencing it. So the gold-silver ratio is interesting, but for me it has never been an argument for preferring one metal over the other.
TGR: Please talk about a couple of companies that you want to discuss.
LT: Segueing from silver then, I would say that there are some silver companies out there that I'm watching. I don't own these at this time, but I'm paying attention to them. One of those is Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), which is becoming a gold-silver company. Its big growth project is called Lindero, in Argentina, and it's more gold than silver by far. But it's still a profitable silver play, with growth on tap. I like it.
If I'm right about silver going into a mini-mania of its own, then any of the big silver names could deliver a big win. SSR Mining Inc. (SSRM:NASDAQ) could be interesting, and Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ), of course, the big boy.
Personally, I like to focus on the juniors, however. I'm at a stage in my life where I'm more interested in wealth generation than wealth protection, so the bigger companies, while of interest to me, are not at the top of my shopping list. I'm still working through my due diligence process on the silver juniors.
On the energy minerals, there is something to be said, again, for some of the big diversified miners. I think Teck Resources Ltd. (TCK:TSX; TCK:NYSE) is doing a great job. It's a solid company positioned to do well in the new energy environment.
Any of the big copper companies, such as Southern Peru Copper Corp. (SCCO:NYSE), should also do well. I like all those. And there are some smaller copper plays out there. Again, I'm still doing my due diligence.
One copper junior that I don't own, but it's interesting to me, is called Atico Mining Corp. (ATY:TSX.V; ATCMF:OTCBB). It's run by the same group that runs Fortuna. They are well known for delivering on their promises. So I like that one.
In the gold space, we've talked before about Atlantic Gold Corp. (AGB:TSX.V). That's a company that has done well building phase 1 of its Moose River consolidated gold mine on time and on budget. The important thing there is that was phase 1. It has more gold in the area within easy trucking distance of that mine, and it's proving that up now.
If you want a big, steady, high-performance gold producer, I like Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). That team does a great job.
Another that I like the most in the upper echelons is the new kid on the block, Kirkland Lake Gold Inc. (KL:TSX; KLGDF:OTCQX). It has some tremendous assets. The Micassa mine in Kirkland Lake is one of Canada's highest-grade operating gold mines. The Fosterville mine in Australia has been hitting it out of the ballpark. Every year, that mine gets bigger and higher grade and more profitable. And the company has other projects on tap for development in Canada and Australia, both of which are good mining jurisdictions.
TGR: Any parting thoughts for our readers?
LT: I want to encourage everybody to come and check out my new website, IndependentSpeculator.com, of course. But fear not: we have an anti-spam policy. I hate getting unwanted commercial e-mails all day long, and so I don't want to do that to my readers. There's a free letter you can sign up for as well as the monthly newsletter. I'll only send you the information you asked for, no spam.
TGR: Thanks for your insights, Lobo.
Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name "Louis James." While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has "skin in the game" with them.