The Buzz From New Orleans

Written by Gerardo Del Real
Posted November 5, 2018 at 3:28PM

It feels good when it buzzes.

The 2018 New Orleans Investment Conference just wrapped up, and despite a challenging resource space, the attendance at the conference this year leads me to believe there are better days ahead.

Outsider Club founder Nick Hodge and I presented on the good, the bad, and the ugly in the junior resource space.

Needless to say, there’s a lot of bad and a lot of ugly out there.

So why my optimism?

For one, the conference had the best attendance I’ve seen in years.

Secondly, although there were familiar faces, there was definitely a new wave of speculators curious to understand the opportunity that the junior resource sector presents.

What was everyone’s favorite commodity this year? For the fifth year in a row it was uranium.

I kid, but uranium definitely solicited a lot of questions.

The risk/reward proposition is a simple one to understand and uranium really is a question of when, not if.

The bottom line is the bear market has done a very efficient job of handing out Darwin awards to all but the better management teams in the space, which means picking quality uranium names in the junior resource space is a lot easier than it was seven years ago.

Yes, it is harder to find companies with airtight share structures, but the better management teams always find a way to use bear markets to their advantage, adding or developing accretive assets for the next leg up.

On the macro side, everyone from Peter Boockvar to Jim Grant agreed that we should all get accustomed to volatility.

There has been nearly a decade of central bank stimulus and three decades of an unprecedented run in financial assets.

Stimulus and a run that are not sustainable, and like uranium, the question is not if there will be a great reset, but when.

Context. Since 2008, central bank balance sheets — on a global scale — have grown upwards of 200%.

Jim Grant pointed out that this isn’t just a U.S. problem. Chinese bank assets vs. global GDP have increased from 12% in 2007 to 48%, accounting for almost half of total bank assets.

There is always an order, however, and the system will not implode all at once.

The recent volatility in U.S. markets is capital’s way of trying to determine what the investment landscape will look like after the midterm elections.

Expect that volatility to continue and intensify. Don’t expect a bear market in the major U.S. stock indices, especially now that the blackout on buybacks is lifted as earnings season passes.

There are too many dominoes lined up elsewhere — hi Europe — to fall before the U.S. is toppled over.

Capital will continue to seek refuge where it’s treated best and for the time being that is the U.S.

Capital looking for new homes is part of why I believe gold is catching a bid. You know my views; I don’t believe the move is sustainable yet but it may have legs.

Be mindful of tax-loss selling season where losers — and there are plenty this year — are sold off to offset the tax liability from the winners.

If you’re a real contrarian, you’re using tax-loss selling season to add or initiate positions in the quality names.

There is a massive disconnect between the share price performance of even the best juniors and the underlying value of the better companies.

That won’t last forever.

I’m adding aggressively to my personal portfolio because I understand that, like a good piñata, sometimes you have to take a beating to get to the prize in the middle.

The prize is always worth it.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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