Is a liquidity crunch at hand? The way money is being sucked out of the junior miners a liquidity crunch is already upon us.
- Discover Silver (DSVSF)* is below $0.94 – 52 week high: $2.23
- Sassy Resources (SSYRF)* $0.24 – 52 week high: $0.82
- GoldSpot Discovery (SPOFF)* $0.35 – 52 week high: $1.25
- Vizsla Silver (VZLA)* $1.29 – 52 week high: $2.87
- Silver One (SLVRF)* $0.24 – 52 week high: $0.67
- Gatos Silver (GATO)* $2.87 – 52 week high: $20.26
Plan A: Junior Miners
I can say that I am not afraid of any of these names. Certainly, there could be unexpected problems, but from what is known today, these are some of the best positioned silver exploratory companies around. Commodities are still the theme of the decade. A liquidity crunch right now is setting up some great entry or dollar cost averaging opportunities. Accumulate the low prices slowly and lower your cost basis. At some point after the rally in miners starts – and it will – slowly sell your high cost shares into the rally. Be sure to keep the wash sale rule in mind when doing this.
There isn’t a reason based on the price of silver, company conditions at the mines or industry trends that says these should be falling the way they are. I can only surmise that a liquidity crunch is nearby, or the fear of a liquidity crunch is anticipated.
Plan B for a Liquidity Crunch! Dividend paying companies.
Yes, dividend paying stocks can also get dumped. Example: Anteros Midstream was priced at $2.50 paying a $1.25 annual dividend in March 2020. Unreal right? A 50% annual dividend. Know you company and be hungry looking for these opportunities. Line up some favorite dividend payers and be comfortable buying on short notice. And no, you are unlikely to buy at the exact bottom, so don’t put much energy into being perfect.
I am always short on cash and this time is no different. I have no favorites of the LOTM mentioned names that I would suggest selling to raise cash. There are companies in the past I wish I owned more of that I sold for a profit (and loss) that I would buy today. Calumet (CLMT) is one company. Price targets are being raised in the current environment. At $12.46. Yes, it could go lower but that’s the problem – we never know until after the curtain goes down on the play. Hence move slowly but move to accumulate for the next rally cycle. We are coming full circle – Liquidity crises March 2020 to the peak of the liquidity flush February 2021 to nearing another liquidity crunch, May 2022. That is not that long!
Be careful – try to accumulate during the crunch and sell into the rally following the liquidity crunch. The finesse is in the timing.
Best wishes and good luck. Avoid borrowing money that is subject to causing trouble. I hope you feel a bit gleeful about the opportunities – that means your maturing as a speculator. I’m going to get myself into trouble, aren’t I?
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
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