The Flying Frisby - money, markets and more Genius or Madman?
I am rotating some of my gold and silver profits into oil and gas, as I think energy is next. I will have more on this very soon. I promise. But we need to talk gold and silver today, plus we have an update on top pick Metals Exploration (MTL.L)
I thought Monday was the top. Silver went from $100/oz to $115/oz over the weekend and then on Monday in US hours reversed and gave back all those gains. It looked like we were shaping up for an island reversal.
Here we are on Wednesday and, as I write, we are at $115 again.
This is one strong market.
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Let’s all do the Randolph?
I have a friend. We’ll call him Randolph (which I read means “”wolf shield” - cool, huh?). He’s about 30 and he works in the City, as a quant analyst or something. After some extensive research, a few months back he put 95% of his entire portfolio into a silver mining company by the name of Hycroft Mining (NASDAQ.HYMC). It was $5.
Bear in mind, he has no real estate, so to put 95% of his entire portfolio into something can’t be that far off 95% of his entire net worth.
The research he’d done into both silver and, specifically, into the situation that was Hycroft, and the trust he had in his own judgment, gave him the conviction he needed to go for it.
Today the stock is trading at $50. He’s 10xd his money.
Randolph was talking to me about the company in December when it was $13. I resisted. I got so many ideas thrown at me, I can’t buy them all and I already had my silver exposure via Sierra Madre (SM.V) which was going and continues to go great guns. (It has almost tripled since December so it’s not like I can complain).
But you always hear about the ones you should have bought. The ones you were tipped that then collapsed - they get forgotten very quickly.
So good for Randolph. Events have proved him right. You’ve got to be in it, to win it, and all that.
But what if events had gone against him? What if silver had turned down 30%? He’d have been up the proverbial, and some.
But it didn’t and he’s been proved right.
My buddy Simon Catt, by the way, who was in Hycroft even before Randolph, thinks Hycroft can go up another 10x from here.
He could be right. I am just too cautious about buying things that have moved this much. Maybe I shouldn’t be. I didn’t buy bitcoin at $10 because it had just 10xd.
But, as I say, you only remember the ones that went up.The price is always there to remind you and eat away at you.
The ones you didn’t buy that collapsed - the gazillion of shitcoins and shitcos I’ve avoided over the years - I’ve no idea what they even are. I should put them all on a spreadsheet, calculate how much I’ve saved by avoiding them and use the money I haven’t lost to buy myself a new frock.
I don’t advocate doing what Randolph did because there is so much that can go wrong.
When it does go wrong, the person who advocated it will get the blame as much as the person who actually did it. More importantly, it’s a poor way to manage risk
But I’ve done something similar myself. And ballsy bets can and do work - when you get them right.
But they are better done when young I’d say. If they do go wrong, you still have plenty of time to recover.
My mate Swen Lorentz, who writes the exemplary Undervalued Shares says he sees it among his readers. “Many went from 10k to 100k and then from 100k to 1m with ballsy bets. Thereafter things can become more normal.”
The problem is when you ‘re wrong.
Position sizing - especially when using leverage - is everything.
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Where you need to be with silver right now
With all the above in mind, here is where I think you need to be with silver. The easy money has been made. In the miners and leveraged silver plays, the asymmetry is no longer what it was.Yes, I can see a bananas scenario in which the calls of the most ardent silver bulls prove true and silver goes to $300/oz or even $700/oz. Unlikely, though possible. In such a scenario, Hycroft and Sierra Madre and many other silver miners besides will be 10 baggers and more, even from today’s prices.
But silver could just as easily top at $125, and go back to $25.The more elevated a price gets the more vulnerable that market becomes. It’s only a month ago that silver was $50 and that felt high.
Many will feel differently and want to be all in. Animal spirits and all that. But Auntie Dominic says you should be in a position with speculative silver plays, where you now have your original investment off the table, and have banked some profit.
The rest you can let run, in case those higher prices do actually come into play.
Every time we feel at a point of extremity take a little bit more off the table.
But you do not want to be in a state where this winning position could still turn into a loss.
There is a bullet-proof vest available to you. You may as well put it on.
We need to look at Metals Exploration (MTL.L)