Monetising the Gold Bull and Crypto Bear
1. It was a hell of a day across the market yesterday. Stocks got dumped! I don’t necessarily mind big down days like that. Volatility like that can get you in to stocks you want to own at lower prices!
As I told you yesterday, my thematic for the moment is cheap gold stocks. I stepped in and picked up Northern Star Resources Ltd [ASX:NST] within an hour of the open. It closed green in the end.
Interestingly, two of the goldies I nominated yesterday — EVN and RMS — held steady for the day. GOR was down by a whisker.
I’d like to think it’s for the reasons I detailed yesterday. They’ve already been slapped around a bit lately.
But they are still making lots of money. Gold bounced in US trade too, so Aussie dollar gold is back pushing toward $2,400. Now we just need to see if it can hold.
One thing that can give you confidence around gold is that ‘real’ interest rates (taking inflation into account) are still negative. That’s usually when gold does best.
However, never forget the nitty-gritty here. Mining is a tough business. You can get the gold direction right and still take a 10% bath if one of your stocks misses their production guidance or has to shut down for any reason.
I’m chancing my arm on NST a bit because I’m not as familiar as I should be on its operations. But hey, trades on a day like yesterday don’t wait around for me or you to get comfortable!
However, I can’t help but say there seems to be a lot of upside in gold stocks relative to their current pricing.
Don’t forget almost all of them are well down on the highs they hit in 2020.
2. Yesterday’s note also contained the notion that Bitcoin [BTC] would remain the premier network in the crypto space for the foreseeable future. Right now, it doesn’t matter what crypto you own — you’re taking a bath! Yep, they are all getting dumped.
But, hey, that’s crypto! You don’t get a chance to make crazy gains without a commensurate dose of high risk and high volatility.
Let me share an observation with you after having been involved in this market since 2017.
When cryptos run hot, everybody tries to jump on board the gravy train for the quick and big win. Hey, I get that.
However, crypto’s nature, at least of as now, is to have big bear drops that spook all the weak hands, momentum players, graph ninjas, and whoever else isn’t prepared to ‘HODL’.
At exactly the moment people should be getting MORE interested, they dump the whole idea and go looking for the next hot thing.
Far better to do your homework now, take advantage of the lower prices, and get ready for the next surge up.
My colleague Ryan Dinse received a fantastic customer letter the other week from a client of his that came on board his crypto service in either 2017 or 2018.
That client then preceded to endure the crypto winter for over a year. Yep — crypto went flat for a long time. Bitcoin collapsed from US$20,0000 to US$4,000.
But this client stuck it out. And then spring and summer came again. He told Ryan a few weeks back he was up $800,000 at one point.
We can’t say for sure what’s happened since. But when you have a gain like that, you have a powerful position to weather bear phases like now.
The point is you have to commit to the sector, I think, and put a strategy in place from the get-go. Are you trading or investing?
You should at least save yourself some heartache. I have another mate that somewhat incautiously threw 10 g into Ethereum [ETH] at the wrong moment. Now he’s stuck down 50%.
He reasoned at the time he was in it for the next five years. Probably that should be OK over time. But much better to start off on a stronger footing than that.
Editor, The Daily Reckoning Australia
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