Benj Gallander, co-founder and president of Contra the Heard Investment Letter, says there’s danger in investing in new sectors like cannabis and cryptocurrencies, where scammers are taking advantage of speculators.
Speaking with the Investing News Network (INN) at the end of day one of the International Mining Investment Conference in Vancouver, Gallander said of the slew of cryptocurrencies on the market, “a lot of them are quite frankly sketchy con jobs.”
He added, “with marijuana, it’s similar. There are so many companies, only so many will be successful.”
Gallander said he believes that appetite for cryptocurrencies and cannabis will cool off eventually, but until then investors needed to be inspecting possible investments with a magnifying glass.
More broadly, he said that the world economy is firing on “most” cylinders, so as a contrarian investor it is slim pickings. That said, he also thinks that governments around the world are squandering an opportunity to pay down debts.
“So when we get in trouble again, which we will, they’re going to have less ammunition in the tank to try and turn things around. Our governments are being very, very negative in terms of the way they’re operating,” he explained.
Watch the video above for more insight on investing from Gallander, or read the full transcript of the interview below.
INN: It’s the end of day one at the conference here in Vancouver. How does the mood feel so far?
BG: You know what, I love coming to these conferences. Cambridge puts on really good ones, I’ve been coming for years. You get a diverse group of speakers. The people — I was just talking to a gentleman, he said he got to talk to many of the people that he wanted to. It’s fairly intimate in a certain way. I had a great crowd tonight, the room was full. I’m happy to be in Vancouver too. I live in Toronto, so it’s always nice to come out here.
INN: Fantastic. And so, speaking of Toronto, you said at PDAC two months ago that prices for some resources might indicate a bubble ready to burst. Any thoughts on how commodities are going now?
BG: Well, gold has just been coming up. It’s been pretty flat though over the last while. We’re seeing a lot of demand from places like China and the economy, and there is a question about how high things might go. We are used to these cycles in commodities, and they go very much with the economy. Right now, the global economy is really firing on most cylinders. The question is how long will it keep going. Employment is great in many countries, we’re certainly seeing that in North America. Unemployment is at a low for — we’re talking around two decades. Not in both exactly, but pretty close on average. So I think we still have some legs left. But at some point these things certainly do turn and often people aren’t ready for it.
INN: As the name of your newsletter suggests, you’re a contrarian. Is there much out there for you to buy at the moment?
BG: It’s much harder for us to buy things now. A few years ago my list was about 350 stocks to watch, now it’s closer to 250 stocks. The thing about what we do at Contra the Heard is we don’t buy a lot of stocks. In the two portfolios we have between 15 and 25, about six of them overlap. So all we have to do is find a few positions, and that’s it. Last year I bought only three companies, which was the least in a number of years. Ben and Phil, who manage the Vice-President’s Portfolio, they bought more. But to be able to cherry pick, especially in sectors that are out of favor, that’s one of the great ways to get great returns, and one of the reasons our returns were amongst the highest out there.
INN: Any success stories that you’ve been looking at that have been flying under the radar?
BG: I’d like to think, in terms of commodities, Alacer Gold (TSX:ASR) is a company that will hopefully come into its own. We’ve held it for awhile, it really hasn’t moved. It’s a gold company out of Turkey. They’re far away from the action in the capital city and some of the political problems there. This is a revenue-producing company that is profitable. They’re expanding their asset, and they’re expanding it on time and under cost, and in the mining sphere that often doesn’t happen. It’s trading a little over [$2], I think it can go over [$6]. But quite frankly, it’s very successful. But on this one, we expected it to move earlier, and it hasn’t. I think it might have to wait until production comes online from this. So in the next couple of years, I think hopefully it’ll start to move.
INN: How far along is their project?
BG: It’s come along quite quickly. I’d say they should be done within a two-year timeline for that.
INN: Speaking at your talk earlier today, you said that cryptocurrencies and marijuana are for people that want to make money very quickly, but that they have to be very wary. Can you just elaborate on that point?
BG: Well, if you look at cryptos — when I was first told about bitcoin, about five, six, maybe seven years ago, it was the currency out there. There were very few. When I’m on television every few months, I get asked about them. And a number of months ago I was saying, there were over a thousand. Now there’s almost 1,700. Most of those aren’t going to go anywhere. A lot of them are quite frankly sketchy con jobs, and one has to be very, very wary.
With marijuana, it’s similar. There’s so many companies, only so many will be successful. So it can be worthwhile; it’s not what I do. But for someone who wants to diversify, they could buy an ETF. But again, you have to be wary. There’s unfortunately a lot of scammers out there. They look at the hot fields — marijuana’s a hot field. And the valuations there make very, very little sense, even for the big companies. So I think things will cool. I think there’s money to be made, but you really have to study them. It’s great to talk to management. And don’t listen to your friend who says, “this is great, because I heard it from my friend’s cousin who lives in ‘Wawa.'”
INN: Just wrapping up, can you share with me some thoughts on challenges that are facing the market at the moment?
BG: I think one of the challenges is the markets of North America have gone up so much, especially the US. So in 2009, 2010, 2011, when we were buying a lot of US financials, it was the time to buy. It was the time buy stocks, when things were beaten up and blood was running in the streets. Now that the markets have moved up so far, there’s less possibilities out there. And also, the governments of North America, they should be running surpluses now. You’ve got unemployment down at levels where it hasn’t been in years. And therefore, you’ve got to get your economies in order. And unfortunately, Donald Trump’s tax plan, they’re going to run about a trillion dollars in debt over the next number of years. In Canada, the feds, the provinces, they’re running more and more debts.
So when we get in trouble again, which we will, they’re going to have less ammunition in the tank to try and turn things around. So our governments are being very, very negative in terms of the way they’re operating, they’re not doing what’s best for people. People know if you are having financial difficulties, that’s not when you want to take on a super amount of debt. When things are going well, that’s when you want to pay it off. Our governments should be so sensible.
INN: Just finishing up, is there anything extra that you’d like to add?
BG: Well, it’s a pleasure to be here. People should do a lot of reading. A great way to get good returns is to pay off debt. If you have debts, instead of investing in stocks, pay it off and you’ll be further ahead.
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Securities Disclosure: I, Scott Tibballs hold no direct investment interest in any company mentioned in this article.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.