IKN

a plague o both your houses

Bear

Danger, soul-bearing pretentiousness coming your way.
Please tune out if investor navel-gazing annoys you.
I’ve been reflecting on my negativity about the market and its potential for trading/investment recently, and how that blue funk has seen me miss decent trading opportunities. I feel I’ve been pretty much in a negative mindset recently when it comes to investments. As far as can be seen by the myopic Otto, there are several factors in play:

One of the main problems, and it is a problem, is my natural contrarian attitude to investment and trading (and life, but that’s another story). When I see the whole world get excited about fluffy, superficial announcements be they large (Geithner’s plan compared to the months in store), medium (García and his lapdog media) and small (miners that rocket up due to people with questionable knowledge buying on questionable advice of people that should know better…see previous post) I’m one of those guys that automatically goes “hey!! wait a cotton pickin’ minute!”. This is a true weakness in my investment make-up and one that I have tried and failed to improve over the years. Put basically, why not run with the sheep for a while if it makes you money? Very true in the case of Exeter (XRC.v) (XRA) in the last few weeks, as the whole hype was clearly setting itself up. But me being me, I just can’t bring myself to buy these things even though there was money there, sitting up and begging. I’d rather rant on the stock and watch it go higher. Put simply, I recognize my masochistic weakness.

Part of this (in mitigation) is that I’m not a good trader (never pretended to be, either) and I’m a better long-term investor. I’ve always made better coin by searching for value and holding through the beta-bumps (such as the current CZZ position) or holding through the slack periods when nothing seems to happen to my stock while all around is action and adventure (such as the current TRY.to position). Basically, being boring works for me. I play with my spreadsheets, find something undervalued, try to work out what is a fair value, buy it low and sell it when it hits the target. Sounds easy, huh? Well it’s not and there are safety checks and seat-of-pants rules I’ve developed over the years, too, but all in all that’s the basic philosophy behind my calls.

Another point about being negative on this market is that in my preferred sector, LatAm junior mining companies, even in the good bullish times the number of bad companies outweighs the number of good companies by 10:1…probably more, in fact. By way of a topical for instance, an e-mail pal sent me a mail today asking about Oroco (OCO.v). To his credit he wasn’t looking for a positive on the thing because all he wanted was to get a colleague that has been boring him about the stock off his back and just asked me where to look. This is part of the mail I wrote back (including the 43-101 resource table from the OCO.v website):

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There’s more metals grading in my back garden than there is in this Oroco return

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                        Au      Ag      Pb      Zn
Category         Tonnes    (g/t)   (g/t)     (%)     (%)

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Indicated    25,250,000    0.52     8.6    0.34    1.02
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Inferred      4,690,000    0.17    19.4    0.53    1.69

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Let’s use gold at U$29/g (900/oz)
Silver at U$0.40g (13/oz)
lead at 55c/lb
zinc at 55c/lb

AND THOSE ARE GENEROUS FOR FEASIBILITY. At 100% recoveries that Oroco indicated rock is worth $15.08 + 3.44 + 1.87 + 5.61 = U$26 per metric tonne. With likely recoveries you’d have a mine that was unprofitable with gold at 1500/oz, frankly. This dog has so many fleas it would have a problem in standing up cos of the weight involved.

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Trust me, the bits of the mail I missed out weren’t any more positive.

It gets boring being negative all the time. My scam alert is set permanently on red as I search junior miners (elseways I’d be bankrupt by now), I’m bearish on short-term copper, mildly bearish on short-term gold (maybe $880 if you’re asking, but WTFDIK anyway?), I’m bearish on nine out of ten miners I look at, I’m bearish on LatAm’s macro compared to present forecasts, etc etc.

But that’s the way it is right now. In fact, that’s the way it’s been ever since I started this blog, as the overriding message that I’d like to get across is that of preservation of capital. We’re not in a situation where you can go looking for tons of alpha. Right now it makes the most sense, boring, tedious common sense, to stay majority in cash, hold bullion with a long term view and just play the odd splash’n’dash on opportunities as they arise. In my opinion, anyway. I too look forward to the day I can write my “YES! I’m bullish!” post and go 90% bought on stocks instead of the current 40% or so (I think..need to check), but that day simply isn’t here yet.

Self-absorbed post with overdose of first person now complete. Thank you for bearing with me. DYODD.

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