Precious metals investors frequently want to see the world make a kind of sense – so that when silver jumps 25% in a span of days, they look at their portfolio of silver miners, and expect to see a multiple of that gain. They want to see an immediate and satisfying connection between the price of the metal and market rewards.
It doesn’t happen that way. You will rarely ever see gold and silver stocks move in some kind of stairstep magnification of what the underlying metals do – at least not over a short enough time frame that will be satisfying to observe.
Keep in mind Warren Buffett’s metaphor for the market. He uses the analogy of the market as a trading partner, Mr. Market, who offers you prices every day. Sometimes the prices are low relative to the value of what’s being sold. Sometimes the prices are sky high relative to the value.
The goal is to buy value on sale, and to hold it until Mr. Market offers you a favorable bid.
It’s tempting to want to hold Mr. Market to account, and to expect him to be rational – to notice that gold and silver prices are well above what they were several months ago, and to adjust his perception of where the mining stocks should be.
Again… Mr. Market is inscrutable and emotional and unpredictable. You can’t concern yourself with the notion that he will ever be rational, at least for very long.
You just have to keep taking good deals, avoiding bad deals, and waiting for Mr. Market to come around.
Right now, with silver and gold prices bumping up against all-time highs, it’s very normal and rational to expect to see the entire mining sector soaring. But it’s not. It’s not doing badly either.
We’re in a good spot. We have a steady trickle of appealing offers from Mr. Market across all of our portfolios – with almost every single stock I cover being well under my fair value estimate.
Mr. Market is being generous, if slow.
Don’t get impatient.
Be thankful we have this kind of lagging market in the miners. It makes it a lot less hectic to buy high quality companies.
There may come a time over the course of this bull market when a big jump in the price of the metals results in a multiplicative jump in the mining stocks. That’s only good news if you own them now: before they move!
I know with the New Year, you want to put your best foot forward. With that in mind, I sent you a brief message this morning about what I think you should be looking at right now. I sat down with my long time friend and colleague Porter Stansberry to discuss what I’m seeing in the precious metals space. I’ve been mentioning this sit-down for the past few days, and I sent it out this morning at 11am, but if you missed it:
Take a look at our conversation here.
And be patient! It’s going to get much better for investors who can keep their heads during the next stage of this bull market.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio