The junior resource market has been so rough for the past couple of years and investors are extremely cautious about getting back into the market. But with things turning around, there seems to be a burgeoning optimism that is starting to rise.
This may cause excitement among investors, and it certainly could be a time for investors to buy, but one expert cautions investors to buy carefully – and to be wary of the unexpected.
At the recent Cambridge House International’s Vancouver Resource Investment Conference in January 2014, we spoke with Jeff Berwick, founder of The Dollar Vigilante. Mr. Berwick was a speaker at the conference and after his presentation he took some time to talk to us.
“My speech yesterday was: ‘The Sky Is Filling with Black Swans’, he said. “I talked about how there are so many things that could cause major repercussions in 2014. I think this year will be a shocker to a lot of people – it’s not going to be boring. What’s actually going to happen? I don’t know but it is going to be interesting because there are so many linchpins to this economy right now.”
Among those many linchpins, Mr. Berwick quickly listed three for us. Japan was the first one: “Japan just said they are going to double their money supply in the next two years – which is a crazy Keynesian idea that printing money will help their economy. That might cause an actual real collapse in the Japanese yen in the next year.”
The next linchpin is the US: “Of course, there’s the US debt issues, massive deficits.”
And the third linchpin he listed for us is in Europe, specifically Spain: “In Spain right now there are riots. Fifty-seven percent of people under 30 are unemployed in Spain right now.”
Although there are other linchpins to watch for, Mr. Berwick summed up his overview with this caution: “It’s not going to be a boring year. 2013 wasn’t a boring year but 2014 is going to outdo it.”
Investors did indeed see some market-moving excitement last year: “In 2013 we had Cypress, bank ‘bail-ins’, Boston turned into a police state for a few days.” And as for this year, Mr. Berwick said: “I think this year is going to be even crazier. But I think it’s going to be very good for the market we’re in – precious metals and mining because when things get really bad and crazy, that helps the precious metals market. So I think this year is going to be a lot better than 2013 for investors.”
In terms of the market, Mr. Berwick and his peers believe that the market is as bad as it can get… and that is actually good news. “This market can’t go much lower. I haven’t seen it this brutal. Even in 2008 and 2009 it was bad but it was fairly short. That happened over a number of months. This has happened over 3 years now. I’ve talked to a number of people – people like Rick Rule who really know these markets – and they all tell me that they’ve never seen anything this bad in their life. And they’re investing like crazy right now. People like Rick Rule are getting into this market. Last year I was quite lucky because I was out of the market – I was involved in other projects like BitCoin, and BitCoin turned out very well and it will still do very well in my opinion – but I’m getting back into this market right now.”
The market really has shifted, Mr. Berwick observed. Things are changing for the better: “It’s been interesting. The last month or two, there’s been a shift in this market. For the first time in 2 years, there’s been some sort of excitement and interest. There are a fair amount of people and they are kind of interested. I think this market is going in the right direction for the first time in about 3 years. I think there are a lot of opportunities. It’s not going to be easy. A lot of these companies will fail; it’s [a] speculative [industry]. But I’m very excited about 2014. I think it’s going to be crazy and I think there’s a lot of things that could happen that no one will believe – like the Japanese yen might fall, we might see all sorts of things happen in the US and Europe – but I think it’s all good for the market that we’re in, which is hard assets. I’m enjoying seeing the sentiment. It’s an interesting vibe. When I was last here, it was a ghost town. It seems like people are starting to get back into this market.”
Buy low and sell high – it’s easy to say but harder to do when stock prices are this low. But Mr. Berwick says that this is the opportunity: “It’s unbelievable that you can buy stocks for 2 cents that just last year was worth a dollar. It’s the same company with the same potential and you’re buying it at 2 cents instead of a dollar so it’s definitely a buyer’s market right now.”
Next, Mr. Berwick shared one of his favorite stock picks with us: “My favorite at the moment is Vendome Resources (TSX-V: VDR). Their operations are in Guerrero State, Mexico, which is where I live. I know these people and I’ve seen what they’ve been doing for a few years. They’ve been restructuring the company; they’ve brought in all new directors and a new CEO. I know the people behind it and I’ve seen the actual property. Some geologists have said that they think it could be the biggest silver discovery in history. It’s trading around 6 cents right now and I really think, that as this year progresses, it’s going to get better for all the miners. And also, this has a great story so if they have a few good hits, this thing could go to a dollar or two dollars, which is pretty good from 6 cents.”
We asked Mr. Berwick whether the company has money to see them through and he admitted that they don’t right now but they have a plan to get some: “A lot of these companies [at the conference] are pretty close to being dead. But Vendome is about to raise a few million from Switzerland and there’s a lot of interest in the company. They will obviously dilute the holdings quite a bit because it’s so cheap right now but they will have the capital to make a play out of it.”
Although the market is not on the fast-track to massive returns any time soon (in fact, there might still be some pain as some companies face the reality of their lack of money), Mr. Berwick believes that investors can look forward to better times if they take advantage of the low prices right now.
REFERENCES
Jeff Berwick’s The Dollar Vigilante: http://dollarvigilante.com/
Cambridge House International’s Vancouver Resource Investment Conference: http://dollarvigilante.com/