“Gold—what can it not do, and undo?” – William Shakespeare
I grew up in the 1970s and 80s. My dad was an environmental scientist with an obsession for gold. After he saw Raiders of the Lost Ark (1981) with Henry Ford, he got himself an Indiana Jones hat, a bullwhip, a metal detector, and gold-panning equipment. I’m not sure why the whip? Anyway, he went out West a few times to go gold panning and he was always taking his metal detector to the beach and anywhere else he could find buried treasure. It’s no wonder he was obsessed…the price of gold rose from $35 in 1971 to $850 by 1980. It was responding to inflation, oil crises, and international conflict.
Over the past eight years, I’ve been trying to make a career out of writing and publishing niche material and investing in gold miners. While I’ve never made much money publishing books or blogs, I used to do well as an investor by following analysts and their “Buy” signals. This was before I knew anything about gold. When I moved out of traditional mutual funds and ETFs, and started teaching myself how to trade real stocks and options contracts, my portfolio went south, and I lost most of my retirement. It didn’t go a little south—it went all the way to Antarctica and it’s been there ever since.
I won’t blame it entirely on the Fed’s artificial engineering. There were things I got wrong, and learned the hard way. First, I underestimated the power of sentiment in the market. It didn’t occur to me that a business could be unprofitable from the get-go, while its stock price could become extremely overvalued. I didn’t appreciate “narrative” in the matrix of investing or how many investors would become gamblers and gamers. I didn’t understand how much logic was destroyed in this era of low interest rates, and I didn’t fathom how money printing was like rocket fuel for markets.
I also didn’t understand triple-leveraged ETFs and the decay they endure. I thought I could beat the VIX, but just missed it in 2020 when I sold my UVXY position a month before it soared to a point that would have resulted in over a $1,000,000 gain for me. I didn’t know the government could freeze my Russian stocks and force my ETFs into closure. I did not have a handle on what made gold go up or down, or it’s relationship to the dollar. I didn’t understand how algorithms were gamed. I didn’t anticipate how volatile and depressed the mining sector would become despite gold’s continual rise.
Gold and silver miners are some of the most hated stocks you can own, even by their investors, and they don’t mess around when they decide to move up or down. While the miners have been a major source of frustration for me, the whole market has given me a severe case of Post Traumatic Stress Disorder (PTSD). I lost so much money. I don’t know how many times I’ve heard, “You’re the only one I’ve known who has lost money in this market!” Indeed, it feels like I’ve been cursed to lose no matter what, even when I have the right idea, like with Russia’s wealth of natural resources.
Well, I’m not the only one who has lost her shirt, but I’m definitely in the minority. Ironically, passive investors have done great. If I had put my money in a growth fund and forgotten about it, like I did before I tried to play a stock connoisseur, I’d be absolutely fine. In fact, I would have been very happy with my returns, but I also would have learned nothing. As a result of my curiosity and drive to do better, I’ve had the best most expensive education you can get through investing. I do have patience now, and a great deal of self-discipline, and that’s why I’m still here doing what I do. Discipline!
My downfall really started in 2016, after the election, but in 2020 my entire portfolio was obliterated during the Covid crash. I was down 75 percent! In 2021, I went nowhere. In 2022, Biden froze all my Russian stocks and ETFs and I still haven’t been able to take those capital losses on my taxes. From April 19, 2022 to the end of September, I was down 30 percent. Then from March 9, 2023, to April 18, I was up 40 percent, only to go back down another 26 percent over the next 11 months. On March 1, this year, my portfolio screamed up 44 percent. Now it’s April again and I’m biting my nails, scared senseless.
Over the last five years, the price of gold has increased 83 percent, from $1285 to $2354. Yet the miners haven’t moved in tandem. This isn’t logical, and I expect them to take off soon, when others least expect. It’ll probably happen when everyone tries to sell Nvidia and there are few to no buyers, because of some devastating global event. But what do I know? Nothing. I have no track record or justification for saying this time things will be different. If the pattern remains the same, the miners should start heading down hard in another week or so. I am betting they won’t be down for long!
No matter, I’ll ride these stocks up and down for as long as it takes. I’ll visit Antarctica again and again. I’ll buy LEAP calls when they get slammed good enough, and I’ll take profits when they go up, while retaining my core position. It’s a sport for me now, and I’ll stick to the strategy I’ve developed until gold hits $5,000 and then $10,000 and beyond. I invest in what I believe in and what I want the world to believe in and make happen. I will not buy defense stocks because I don’t want war. Get it? I vowed from a young age to never work a job I wouldn’t do for free, and so far, I’ve stuck to it.
“Miner, fiddler, and singer, at Columbia, Tuolumne County, California.”
Forms part of a group of field materials documenting John Stone performing Anglo-American music on August 5 and 6, 1939, collected by Sidney Robertson Cowell in Columbia, Tuolumne County, California.
I checked to see how the miners are doing relative to gold, comparing GDX (gold miners) and GC=F (gold prices) on Yahoo Finance. I couldn’t believe my eyes! The VanEck Gold Miners ETF (GDX) is the same price today that it was on May 8, 2006, when gold was $710! That’s how undervalued they’ve become in the era of low interest rates and money printing. You can imagine, after 18 years of going nowhere why sentiment is so low. Still though, I believe we are at a turning point, and gold miners will become part of the new FANGS in the not-so-distant future. I’m not sure I’ve ever seen a sector so undervalued, except when the price of oil went negative during the Covid crash.
When you believe in someone or something, you don’t bail because they let you down—you manage, you go to counseling over them, you make things work with them because you just know they’re going to shine sooner or later. I do not give up on people, and I don’t let up on my convictions, either, no matter what they put me through. My stubbornness, my intense focus, has hurt me with magnitude, but I believe it will pay off in the long run. Call me crazy, but once again, I’m holding the miners. The world is changing, and I’m going to be there covered with blood-sweat-tears, when people finally wake up. I don’t have a black belt in karate for nothing. Ad Astra!
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“Outstanding, sophisticated, and mesmerizing…a spiritual intrigue similar to Dan Brown’s The Da Vinci Code.” —ForeWord Reviews
I also have some experience in losing money, so I thought justified me making the comments below.
IMO: At this point in time, no one knows the true value of any security. It is all speculation game now, not investing.
For many reasons….but just a few….
1) equity markets, even whole economies, are suspended at artificial levels through massive government deficit spending and massive monetary intervention by central banks. Have been since 2008/2009, but really, from even before that. Entire industries exist because of this deficit spending (to pay transfer payments to consumers) and/or low interest rates. Sometime soon, the market forces will be too big for central banks to manage, and government deficit spending will be cut, or taxes raised, or both, or price inflation will destroy consumer demand.
2) In “theory”, stock price valuations are based on discounted future free cash flows including dividends and assumes such cash flow extend out over a period of years, usually at least 5-10 years of the explicit forecast period. (But then an assumption is made that there is stable growth/free cash flow in perpetuity after this forecast period.) Implicit in this theoretical approach is that the economic world in which equities exist will continue to grow exponentially year after year. But is that true now? I don’t think so. I think we have reached the end of exponential economic growth due to energy and resource constrains. Time will tell if that is true. In any case, no one really uses these old techniques for determining stock values now. It is just a momentum game now, trying to figure out which sectors and companies the excess market liquidity is going to flow to.
As for gold and silver miners? I have no idea, or course. Maybe they make a run higher in stock values when the Game Stop guys at Reddit decide to jump in. Ultimately their value would seem to depend on their ability to pull metal ore from the ground and process it into metal and sell at these much higher prices for gold and silver. There are major costs to digging in the earth at industrial scale. One of the major costs is diesel fuel to run operations, and diesel fuel could be one of those things that runs a little short soon, or goes much higher in price.
But who knows. We are all in a speculation game now. Please be careful! Consider some hedges.
Good thoughtful points. I’ll definitely try to be careful. 🙂 Yes, the miners’ success is based on their ability to be able to pull the stuff out of the ground and get it to metal. But since I view gold and silver as real money, I see the miners as makers or printers of this real money. And I think we are at the end of fiat. I suppose it could go on longer, but I can’t see how. When fake money fails, real money takes over who is making it? As I discussed in another, it’s not Bitcoin or cryptos for exactly the reason you said: energy and resource constraints. So then what else could possibility become money and who is making it?