Risk-Off: Cash, Energy and Patience

Holding gold, hunting value in chemicals and refusing to force trades in this market

Good Sunday to you,

Markets have well and truly shifted into risk-off mode. What to do? Conserve capital, have plenty of cash, stay exposed to energy, and be selective elsewhere. That is what I am trying to do in my own portfolio.

In this week’s commentary, I flagged a number of UK stock ideas. I must say I really like the look of the chemicals, although I’m not quite ready to jump in just yet. The sector has been beaten up, valuations are low, the industry appears to have tidied itself up and there is plenty of demand for its product.

Gold is struggling with rising rates are a headwind, but the house view remains that we range trade for a year. What we are experiencing is a mid-cycle correction. These can be frustrating.

I was encouraged by Friday’s action, which saw stocks markets sell off, while gold rallied. One day does not a market make, but that’s a healthy decoupling I’d say and signals that the hot money has left the sector and gold is no longer deemed a risk-on asset.

Silver is holding up surprisingly well - I expected it to hit $50 if gold hit $4,000. But it never got close. We’re currently at $69 - and the $60 handle has held.

A man I was speaking to last night was having a go at himself for not selling his gold when it was 20% higher. The problem when you sell is buying back: it’s a surprisingly hard thing to get right and very few do with the result that you end up without a position. “Just hold onto it and forget about it,” I told him. If you’re in the UK you just have to own some gold. The political risk to the currency is too great. But he carried on beating himself up.

If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.

In other news, I have been taking part in some investment roundtables organised by veteran speculator Doug Casey and not quite so veteran Matt Smith.

A junior resource company presents to a panel of seasoned experts, who then grill the company. The company then leaves the call and the panel discusses what it’s just heard, often quite candidly.

If you’re a speculator in this small cap neck of the woods, then it might be of some interest. Here’s a link to this week’s.

Doug Casey Thinks Midnight Sun Could Be a 10-Bagger.

I’m travelling this week, but I’ll be back on Wednesday with my mid-week commentary. Goodness knows what the world has in store over the next few days. Not too many surprises, I hope. In the meantime, keep your powder dry.

Until next time,

Dominic