I saw this comment on twitter earlier today:

“Almost every single PM bull I follow on fintwit (some free, a few paid) have said in past 24 hours that we are going lower next”

My Take:

I don’t make investing decisions based on TA but I do follow people who put out TA and I do look at charts for the individual companies that I own now and then. However my experience is that a lot of people tend to believe that PMs will go down if they have recently gone down and up if they have recently gone up (Note that not every chartist does this!). The old “What’s the weather tomorrow? Same as yesterday” thing. In a clear trend this will of course tend to be right.

However, I have never seen gold or silver charts to look anything but ugly during bottoms. In other words almost no one will see a bottom except in hind sight. Some want “confirmation” that a trend has changed for the better before jumping in. In other words one is willing to miss the rally off the lows in order to be more confident that the trend is up. I might be alone but this strategy has never appealed to me. It’s at the very lows, regardless of how the chart looks, that the valuations will be obscenely low. When the valuations are obscenely low the Risk/Reward becomes obscenely good and a leg higher becomes a matter of WHEN and not IF…

So what if I buy something that I am confident will go up 100% one day and it goes down 50% before that. It simply means it will go up 300% sometime in the future. Even if it takes 3 years from my initial purchase to first go down 50% before it goes up 300%, and I see a net 100% return, it is still a fantastic return. If one could compound ones portfolio by 100% every three years then that is a Compounded Annual Growth Rate (CAGR) of 25.99%. Doesn’t sound like much?

Well, in 10 years a $10,000 investment will have grown to $130,822.31 without any additional deposits having been made.

If one would deposit $300 per month, on top of the initial $10,000 investment over the same period, the portfolio would have grown to $298,179.19 in 10 years.

Ps. According to global investment bank Goldman Sachs, 10-year stock market returns have averaged 9.2% over the past 140 years.

If it took 7 years for a 100% return the CAGR would be 10.41% and would still be better than the expected return in the broader stock  market.


Everyone and their mother is way too greedy and have way too high expectations in the short term. A lot of people believe that if they buy something that does not show a profit within a month or two then it was a bad investment even though say a 20% return that took 12 months to get would be a return that the vast majority of people will not achieve in the long term.

How do you get a better Expected Return?

Buying even cheaper.

Additional Thoughts

I truly do not understand how so many can even think about selling for example junior miners who are so mind numbingly, blatantly undervalued simply out of fear that they might go lower (get even cheaper). Imagine going up to the most successful value investors of all time and state your reason for selling something cheap to be “I was afraid if might get cheaper”. What does Berkshire Hathaway do when Buffett/Munger believe their stock is too cheap? They buy back their own stock because the Expected Return on a share of Berkshire Hathaway goes up when the Price drops lower relative to the underlying value of the business.

If a true value investor can’t pay the price of pain, by owning something that goes down, then said “value investor” will also pay the price of lackluster future returns…

The producers are trading at their cheapest valuations in ages.

Many juniors are even cheaper still.

I personally think many juniors are trading like they had a PE ratio of say 4 (not that they make any money but it’s an example of the valuation environment). How on god’s green earth could I ever hope to be a successful value investor if I wasn’t even strong enough to buy and hold companies with a PE of 4 out of fear that they might first become companies with a PE of 2? If they became a PE 2 companies it would just simply mean I should buy more because a dollar invested in a PE 2 environment would theoretically earn a bankable 100% return every 2 years instead of 100% every 4 years as in a PE 4 environment (which would still be an awesome return).

Sometimes I get a question like: “You liked company A when it was trading at X, what do you think about it when it’s trading at 0.7X?”

… Well if nothing fundamentally bad has happened I love it even more…

… If something fundamentally good has happened and it still went down then I love it a LOT more.

Things to Ponder

I have never tried to time the mining sector.

I have never bought or sold a company based on where  I think gold/silver is going in the short term.

I have never sold a top and never bought a bottom.

Any money I get I use to buy companies that I think are cheap.

Then I just wait until they are not cheap or I find something cheaper.

It might take weeks, months or years until they go from cheap to not cheap.

But even if it takes one year to show a 20% profit then that is a very very good result if I can replicate it.

If it takes three years for a position to show a 100% profit then that is an awesome result.


Most people are too greedy and think that the short term is important.

Lower your expectations in the short term and buy/sell companies based on what you expect to earn on average over a 12-36 month period instead.

I refuse to sell something that is blatantly cheap regardless of how bad the gold/silver charts are.

I think every investor would see their LT portfolio returns increase a lot simply by changing focus to a “simple” investing theme such as:

“What companies can I find that I think will probably appreciate by 50% over two years?”


“What companies can I find that I think will probably appreciate by 100% over 3-4 years”

Using and STICKING TO simple criteria like this could change your future returns a LOT. It is also a lot easier to replicate than spending ones time and effort on trying to find 10-baggers all the time. Lets face it, they are rare and one will miss most of them anyway. It’s a hard game that is not easy to replicate.


  • If I started a newsletter with a stated goal of achieving 40% returns over 2 years I might get X subscribers.
  • If I started a newsletter with a stated goal of finding “10-baggers” I might get 95*X subscribers.

… You know it’s true and it just highlights my points in this article.

The greatest gift I can give a reader is not a stock pick (a fish to eat for a day).

The greatest gift I try to give a reader is to have them potentially become better fishermen (better at catching ones own fish for life)

In other news:

Best regards,

The Hedgeless Horseman

8 thoughts on “Value Investor: Am I alone?

  1. Franco Melato says:

    Very good, truly wise, with great advice

  2. Jeff Allison says:

    Thanks – I really needed this. I wish I had some dry powder for times like this – unfortunately I am already all in. I am not invested in the metals to get rich. I am just trying to protect my children and grandchildren.

  3. Roel says:

    Wonderfull article!
    Question is: what are you buying? everything? gold expl? silv expl? copper expl? Any preference?

  4. Paul Joseph Cernac says:

    I saw Tavi’s chart the other day. Not only are PMs cheap compared to equities, but they are cheap compared to other commodities. We should cheer this development as investors with a multi-year timeline. Once again, thanks for these articles preaching patience and reminding us to take the long-view.

  5. Gary Godec says:

    Thanks Erik, well said.

    I see Erik tied to ships mast of value as the sirens sing their song.

  6. Marshall says:

    HH indeed teaches us how to fish (patiently).

  7. Ryan says:

    Gold up 20 but Novo Eskay NuLegacy E79 all down – one wonders if there’s an effort to discourage gold stock investors.

  8. john Hay says:

    You are a value investor only if gold production is guaranteed to rise. The problem is this gold bull market will be unlike any other. The debt markets will collapse, and debt is needed for fund the building of mines for your juniors.

    1970s was a gold bull market without debt markets collapsing. Great depression was a gold bull market without debt markets collapsing. We never had a global fiat currency system with secular declines in disposable incomes so highly leveraged forced to inflate away the debt before.

    You are a speculator, and eventually, probably a rich one, but without cash flows today, or a 100% guarantee your junior miners will find, define, and build a gold mine, can’t say value investor.

    Love these post btw.

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