“I have not seen capital markets in the junior industry this gloomy for a decade,” Rick Rule told clients of Sprott Global Resource Investments Ltd. on a conference call Monday, November 18.
“Twice before, I have been in a market this gloomy,” Rick continues, “in 1991 and 2000. Within a year and a half of both periods, the market went much higher. In 1991, the benefits to me were spectacular. And the recovery off the 2000 low was even better by a large margin.
“Now, after three years of pain, I suggest it is in your interest to hang around for the gain,” he says.
What Goes Around Comes Around…
“In a conversation with Eric Sprott about four or five weeks ago, I was lamenting my own behavior at the peak in 2010. I observed at the time that it was hard to buy – which probably meant it was time to sell. I even communicated this to clients at the time. And we did sell some at the time – but not our entire position. Why did I hold on when I believed the market would go lower?
“What I learned from Eric was that you never sell everything at the top. This is a consequence of our own confidence and simple hubris. We believe ourselves to be better investors and analysts than the rest. We believe our management teams are smarter than others, and that our properties are of higher quality. We believe our companies have better balance sheets. What happens is that we ride our stocks over the top and then, with some of them, back down to the bottom.”
Were we wrong to think that we owned better stocks than most investors?
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In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us at ‘Stock Trader’ our premium investment service.
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