Day one of the Sprott Natural Resource Symposium kicked off Tuesday morning (July 27) at the lavish Fairmont Hotel in Vancouver.
Specifically, some speakers were unanimously in agreement that silver is currently the top dog in the precious metals sector, having outperformed gold this year and moreso post-Brexit. Other talks made suggestions for opportunities outside of the stock market and what to keep in mind for the short and long term (including Brexit).
The Investing News Network (INN) was on the floor for a handful of talks and presentations, which included the following:
- Barry Potekin, vice president of Rutsen Meier Belmont (RMB) Group;
- Keith Neumeyer, president and CEO of First Majestic Silver Corp (TSX:FR); and
- Louis James, senior investment strategist at Casey Research.
Barry Potekin: Brexit is just the beginning
The first speaker INN was on the floor for the day was Barry Potekin, vice president of the RMG Group, who has been involved in commodity research and trading activities since 1985.
Potekin’s presentation focused on post-Brexit, the advantage of exposure to commodities and the difference between “long” and “short.”
“First of all, commodities a double play,” he said to the room, emphasizing that they have a “huge advantage”. “They have the ability to go long or short.”
Potekin explained that long means the purpose of making an investment thinking something is going to go up, while short means making an investment thinking something is going to go down.
“Short is better than long,” he added.
With that being said, Potekin added that commodities like gold, silver, oil, platinum and palladium, are powerful in true diversification and that the key to protecting ones’ self, for example in the wake of the “black swan” Brexit, is through diversification.
Potekin stated that with information moving so quickly nowadays, long and short can change a handful of times in a small time frame. He exampled the relationship between Russia and Ukraine, ISIS and relationships in the Middle East as “black swans.”
When it comes to protecting oneself, Potekin said that as an asset class, managed futures is a proven way to diversify your portfolio.
“Diversification and an uncorrelated asset class is the key,” he said, and reiterated that “short” goes very fast while “long” is where people get very fearful. “If people see something going down, they will get fearful and will get out.”
Potekin concluded his discussion with an argument for diversification:
- Markets move together in a connected world making it more difficult to diversify;
- It’s impossible to know what event or series of events will cause the next crisis;
- Brexit dramatically increases the odds of a crisis; and
- Managed futures move independently of everything, which is critical to portfolio management.
With the upcoming presidential election in the US, and specifically the seven and a half year cycle where a president is elected two times in a row and then power changes, the market goes way down.
Potekin reminded the crowd that he suggested silver was entering a bull market back in January. Several months later, he confirmed he still stands by the statement.
Keith Neumeyer: The new bull market
Up next was Keith Neumeyer, president and CEO of First Majestic Silver. Neumeyer founed First Majestic back in 2002 and has been dealing with the financial, regulatory, legal and accounting issues within the investment community for a number of years.
He has also made comments that silver is entering a bull market, but most notably that the white metal will see triple digit numbers in the next two years.
“Silver is a strategic metal,” he began. “I call it strategic because we couldn’t do what we do on a daily basis without silver.” He added that the metal is used in a variety of things such as vehicles, electronics, cell phones, appliances, and so on.
Neumeyer continued by saying that while silver is a very important metal, it’s also misunderstood.
“It’s a precious metal, of course, but it is a lot different than gold,” he said.
When it comes to the silver price, Neumeyer said when it comes to the gold-to-silver ratio, the gap will continue to get smaller. He suggested that when silver prices were as high as $50 in 2011 and the ratio was 32, he believes that the ratio could get back there again soon.
“Where do I think it’s going?” Neumeyer asked the crowd before displaying a comparison as to high silver can go in relation to gold:
- $2,000 gold would mean $222 silver;
- $3,000 gold, $333 silver;
- $5,000 gold to $555 silver; and
- $10,000 gold to $1,111 silver.
Neumeyer’s presentation ended with a slide that said, “as we become more reliant on technology, we become more reliant on silver.”
Louis James: It’s not too late!
Last is Louis James’ presentation, which was similar in ways to Potekin’s wherein James advised the audience to think about commodities in the short and long term.
Other points he discussed were that just because certain things have happened historically in the market, it may feel like it’s too late and difficult to put money into a new acquisition. James exampled the gold price and where it was in 2008 before the crash.
“As we go forward and it looks like it’s too late, it doesn’t have to be because of what’s happening next, not what’s already happened,” he said.
“If you’re thinking about where is gold, have I missed it already, the fact that commodities as a whole is turning is very important,” James stressed.
He also said that if you’re only investing in commodities based on your gut feeling, or whomever will become the next president, that decision makes it harder to have a lot of confidence.
While James discussed everything from the presidential election to everything that’s happened in the world lately, precious metals respond to chaos. He added that if those are of the belief that there’s likely to be more chaos and fear for awhile, “then it’s not too late” to buy into commodities.
“When you’re looking to buy, the first place you have to look is in the mirror,” he said “What kind of investor am I?”
Some things James suggested were:
- sticking with producers if investors sell when stocks go down;
- looking at prospect generators or companies entering into exploration if investors want to maximise; or
- the risk and reward approach with development stories and whether or not they will make money.
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Securities Disclosure: I, Jocelyn, hold no direct investment interest in any company mentioned in this article.