Commentaries

Top 10 Reasons Why You Shouldn’t Invest In Mining Stocks

In consideration of the once profitable mining sector…here are the top ten reasons why you should avoid mining stocks at all costs…

1. They Go Down – Owning an investment or asset that goes down in value occasionally is not the type of situation we want to find ourselves in, or become accustomed too. For example, if you wake up one morning (or any morning for that matter), you will see that your mining stocks are down 25%…leaving you with only 75% of your asset. That 25% literally, got up and walked away. However, if you wake up in the morning with a gold coin in your hand, it will be the same size and weight as the night before—not 25% “lighter” as in the case of mining shares.

2. Nationalization of Mines – Every government in the world today is minutes away from seizing all natural resource assets(whether they know it or not), including the US, Australia, and especially Canada. There are lots of industries that represent safer risks, ones that governments will not interfere with—such as insurance, banking, and the auto sector. In all likelihood, these governments will be seizing natural resource deposits, auctioning them off to the highest bidders, and using the funds to speculate on mining shares. I’ve seen it happen too many times.

3. It’s Just Paper – Despite the fact that many individuals and funds are making millions (and sometimes billions) investing in and building public mining companies, it’s all just a paper game. At some point, the entire paper money and global finance system will freeze up, reset, and all paper assets will become worthless. Remember–if it’s not small enough to fit in your hand and hold, you don’t own it (that includes your house).

4. Manipulation – It’s commonly believed that the US Federal Reserve and Global Central Banks, are actively shorting and suppressing gold and silver mining stocks. It works very simply–your stock broker sends a monthly financial report to the US Fed which details your mining stock holdings, and then they go to work. They short what you own(even if its just a few thousand shares of a $.50 cent stock), long enough to induce you to sell. Once you’ve sold the position, it gets updated in the broker’s system, and the Fed covers its short positions—and in doing so, drives back up the price of the stock. Unbelievable.

5. They Don’t Go Up With Gold – Anyone who’s invested in mining shares in the last few years knows that they no longer track the price of the metals. If you want proof of this, simply look at a chart of the GDX compared to gold going back to 2008. Up until that time, the miners outperformed the metals—but those times are history, and due to the reasons on this list, they will not be returning. Many people say they’re undervalued, and will snap up in price…yatta, yatta. We’re in a new economy now, and this time it’s different.

6. They’re At Historical Lows and Going Lower – Compared against the metals, mining shares are at their lowest levels in nearly 30 years. A 100 year old man was mumbling about this recently, but again, when we look at the performance of the shares since 2008 (included with the other items mentioned on this list), it’s quite clear the shares are going to go much, much lower. When an asset is at or near all-time historical lows, that usually means it’s going to be at or near a new all time historical low.

7. The Charts Look Horrible – When looking at the following chart and applying the science of “directional analysis”, we can see that the overlying trend is pointing down. As all great investors say, “The trend is your friend”—we must respect the trend, and understand (as proven by the red arrow) that it’s pointing down towards zero.

8. They Have Not Confirmed Themselves – One of the best strategies to keep in mind before we even consider investing in the mining sector (haha, fat chance, I know), is to wait for the shares to move higher and break to all-time highs to confirm that they’re going to go higher in the future. If they can prove they’re going higher, by first going much higher…then we know the coast is clear, and that they’re about to go even higher. At that point we can go “all in”—with as much leverage and borrowed money as possible to sweeten up the deal. After all, the new trend will have proven itself to be in place at that point.

9. George Soros Is Getting Involved – By our higher moral and ethical code, we cannot be involved with any investment that George gets his grubby capitalist hands on. This includes mining shares. He has recently invested hundreds of millions in the GLD and the GDX (a portion of which is in call options), and we simply cannot be aboard any ship he sets his foot on, even if that ship is a luxury yacht. Cork the wine, throw the champagne overboard, the party’s over. George is here. We can either sell him our shares, or even short some, while giving him and the Soros Fund Management team the other side of the trade. Besides, clever old George is only holding paper, and as we all know, it’ll be worthless as soon as the yacht makes it out of port.

10. Societal Collapse – When society ultimately collapses(due to war, peak oil, hyperinflation, famine, disease, Katy Perry, etc.–there’s too many things [and people] to mention here), the only value mining shares will offer, is in the utility of being taped together into a roll and hung in the bathroom. At that point, items of value will include canned goods, hunting weapons (the outdoors will be the best source of food), a dry place to sleep…and of course, beef jerky.

Reflection

If we allow logic to be our guide in the marketplace at this point in time, it would behoove ourselves to divest of mining shares, and accumulate canned food, quality bows & arrows, pocket knives, and a durable beef jerky (Slim-jims will suffice if nothing else). A forest cabin with double-locked doors would also offer utility…a very small one…just large enough for a twin-size bed and an electric stove.

As John Wayne once said, “Life’s hard. It’s even harder when you’re stupid”–so let us not fall prey to the mining share proponents and pranksters, who all assure us this is a once in a lifetime opportunity to invest in the precious metals mining sector.

All the best,
Tekoa Da Silva