At the end of every year, I ask other junior mining investors what they learned in the past year and what they are looking forward to in the new year. I'm not one for New Year's resolutions, however, I do believe that the turning of the page to a new year offers an opportunity for reflection and assessment.
What could I possibly say about 2022 that hasn’t been said already? If anything, 2022 has wiped away many illusions that people had about a variety of topics including the value of various cryptocurrencies, covid vaccines, and various trading strategies that revolved around making memes and HOLDing no matter what.
If 2022 was a year of wiping away illusions and exposing the massive amount of misinformation and blatant fraud out there, I predict that 2023 will be characterized by a return to the truth (in the form of real assets and sound money) and a renewed focus on mental health.
Many people I know are overworked, stressed out, and very few are truly happy with their lifestyles. I envision a trend of people purposely disconnecting from the matrix and relearning how to interact with other human beings face to face. Frankly, most people I come across on a daily basis are starving for real human interaction and they are becoming increasingly challenged at creating this sort of intimacy.
2020 and 2021 were largely characterized by impersonal interactions via Zoom meetings and social media. These years also saw a tidal wave of people who thought that they could quit their day jobs and make fortunes through cryptocurrencies, meme stocks, NFTs, and options day trading. At the end of 2022, the survival rate for these newcomers is probably less than 1%.
Personally, I know of several friends who were part of this crypto/Gamestop/memestonk frenzy. All of them have experienced roller coaster rides throughout 2020-2022 and eventually generated large trading losses that forced them to return to the workforce in the second half of 2022.
In a way, it’s sad to see so many people ‘fail’ at something that gave them so much hope. But the market is a cruel mistress, and I know of no other way to become a profitable market participant than to experience some epic failures early on in one's journey. Too many people suddenly woke up to an “everything bull market” in 2020/2021 and thought that stocks and cryptocurrencies only went up. However, the reality is something very different. 2022 has been a year of reality setting in and delivering a great deal of hard lessons in the process.
Less experienced market participants have a tremendous advantage relative to my generation (of 20 years ago) due to the massive amount of information that is available for free out there. However, with that firehose of information comes a great deal of noise, and often conflicting analysis/strategies/timeframes etc. The challenge is sifting through that noise while having the right mental approach to markets. Most newer market participants are working with a faulty mindset (mental operating system) and poor risk management. Two books that I have found priceless in my journey are Trading In The Zone and Hedge Fund Market Wizards.
Personally, my biggest lesson from 2022 is that a life wholly dedicated to a market P&L is an impoverished, unfulfilling existence. Stock prices, chart patterns, interest rates, and winning/losing streaks in trading are all transitory. When we attach our personal happiness and self worth to these transitory phenomena that are ‘outside’ of who we really are then we are destined to feel unfulfilled. Making a nice trade, or seeing an investment holding generate an outsized return are nice cherries on top of an already fulfilling life that includes a healthy lifestyle, loving family and friends, and a desire to give to others.
Markets cannot fulfill you. Only you can do that.
I don’t have any profound market forecasts for 2023 other than to say I believe the US dollar price of gold will make a new all-time high at some point in the next year. As global central banks grapple with trying to engineer a soft landing while staring in the rearview mirror, I believe market volatility will continue to remain elevated throughout 2023. Entering 2023, it seems that most investors are too pessimistic, however, considering the insane euphoria and excesses that permeated markets throughout 2021 it feels like this period of extended pessimism is part of the healing process and could stick around for a while longer.
We are currently exiting the worst year for US investors in at least 150 years as illustrated by the following chart:
This gives me some optimism that 2023 will be a better year than 2022 (Yes, my tongue is in my cheek as I write those words).
As I do every year, I asked a number of friends and CEO.ca users for their insights on what they learned in 2022, and what they are looking to bring into the new year….
@Dmandman - “What I learned in 2022? Or 'remembered' may be better phrasing, is that 'path' is important. One can be bullish commodities in the long term but short to medium term there is growing odds of a big - meaningful hurdle to cross.
My current working base case is something meaningful will break in '23 and with it major capitulation of all asset classes (except the US dollar and US Treasuries), and with that event a return of QE. The second part of my base case is that a larger portion of the QE flows we've seen in the past will go into hard assets/companies given today's commodity scarcity environment; via geology, ESG, neglected capex.”
@Oops: - “In 2022, I learned that the only driver that can cause more fatalities the slower it goes without stopping is the FOMC.”
@CautiousNow - “2022 Lessons: I had placed a much greater emphasis in late 2021 on “don’t worry, be patient” stories that would be well positioned to do well in the mid to longer term, notwithstanding potential market turbulence in the near-term. I was very pleased at how that positioning had enabled me to remain fairly calm when the overall mood in markets and on ceo.ca was overwhelmingly negative. 2022 again reminded me of the major potential benefits of having a large cash position at all times to take advantage of special opportunities-a strategy that I had once again failed to follow in 2022. 2022 also reminded me of the importance of remaining grounded and remembering the things of greatest importance in my life.
Goals for 2023: Be more strategic with proceeds insofar as I reduce or exit positions in 2023, remember to learn from my mistakes from prior years and reduce the emphasis on juniors in my portfolio.”
@chad_NV (Chad Peters, CEO Ridgeline Minerals) - "I learned lots In 2022 😂 but a key thing I realized was that Ridgeline had been underfunded since inception but “got away with it” because we were in a decent bull market and could raise money whenever we needed it. When the wheels really fell off in late 2021 it became clear that I need to do a better job in the future of raising more cash when the opportunity is there to make sure we can keep growing, even in a bear market.
In 2023, we’re looking to continue growing partnerships with the majors as well as show the markets that Selena is a legit CRD play with big growth potential. To do that we likely need to put out a maiden resource."
@Fischlaender - “ In 2022, I learned the very hard way that despite my otherwise very strict trading rules even highest conviction trades that are based on hard facts (management track record, exploration results, financials) can and will fail if the overall market sentiment is broken. Ultimately we all dream of a GBR-type "trade" which in fact is not a trade but a long term commitment to your conviction. The money for such investments has to come from the long term- A 'don't look' box. And you earn the daily deeds by true dedicated trading. But rich you will eventually get if one of your high conviction investments pays off over a long time.
And the funny thing is, this happens every other year and still one tends to react surprised, swap positions, flip around, THAT'S when you lose money. Never understanding how others cannot also see the impeccable logic of the conviction trade. Hence, conviction trades have to be committed conviction investments. Ask the GBR investors, they held steadily for the long term and gain irrespective of the short and even mid term swings. All other "trades" have to be solely based on catalysts (news, drill results etc.) and sentiment. Free of convictions.”
@Tommy - “Reflections on 2022:
- Balance is hard. One minute you're binging Clint Eastwood movies pining for something to do, the next you’re completely overwhelmed by a new project.
- The childless have a huge competitive advantage to outwork their peers. This never occurred to me pre-kids.
- It’s a right of passage to succumb to greed and get smoked late-cycle. A beautiful, quieter phase follows where the most focused value creating executives are accessible at realistic prices. It is morning again for wealth creation in America.
Resolutions for 2023
- Be the partner I would want to have. Leave nothing on the field in business. Communicate clearly, decisively and respectfully.
- Pay attention for the “D” word (Distressed assets).
- Use the tools available to me to quiet anxiety. I am starting the year with an 80% cut to my coffee intake and no social media on my phone. Let’s see how it goes!
Happy Holidays Robert!! Thanks for all you do!”
@TheGalvanizer (Doug Ramshaw, President Minera Alamos) - “Honestly my biggest lesson in 2022 was breaking my discipline when it came to making some investments in March/April. I had had a big win and for a few short weeks I splashed cash more recklessly than any time in the last 4/5 years and as a result was creating a lot of tax losses this last month. So for 2023, it’s back to an investing approach that has served me well with the lesson learned of not deviating from a plan.
Invest in what you know, not what someone thinks they know. For me that often means a lot of SEDI filings :)”
Trevor Hall (@MiningStockDaily) - "In 2022, I learned that an entire generation of investors and speculators are mostly ill-prepared for a drastic change in monetary policy. For many, including myself, a younger generation put capital to work on a ZIRP environment where speculations inflated tech, housing and even cryptocurrencies. In 2022 we saw this end. In 2023, I’ll continue to study and report on financial ideas to help this same generation prepare for a macroeconomic environment that is foreign to them."
@PennyQueen - “This year, I learned what risk-off truly means. After a euphoric 2021, many investors, myself included, were blindsided by the rapid downturn in the small cap market. In hindsight, all the signs were there. History shows that small caps are the first to drop and then the first to rise.
The CSE composite index fell from 521 to 191 (a drop of 63%) and many CSE and TSX stocks fell 90-95%, some with positive progress. The only thing that fell faster than stock prices was investor sentiment, taking along with it a rational outlook on company fundamentals. Many companies were punished for high quality private placements (I’m looking at you $MDNA) and many more continued to fall on good news (still looking at you $MDNA).
For me, 2022 was a year of large financial hits, most of which I deserved, and some of which I did not. My biggest mistake was not adjusting my risks early enough. Liquidity became an issue with many of my favorite companies, positions that had seemed manageable became unwieldy. For my actual long-term picks, this meant relearning all about conviction and the long game, where to add and when to say goodbye. I learned that potential means nothing when investors are scared. Intrinsic value will be ignored in bad markets, even more than it is ignored in exuberant ones.
Key takeaways for me are maintaining appropriate position sizing, relying more on technical analysis and a solid examination of the company’s financial position as well as their executive compensation plans. I will not invest in any companies in which the executive team is selling, regardless of their reasoning.
Catalysts have limited power in this market, especially when other shareholders are underwater and looking for a way out. Sell on the news has never been apt a description.
I leave 2022 as a better investor, and while my pockets are lighter, my standards are higher and my plan of attack of for 2023 is very clear:
For me this means a combination of small cap growth and speculative companies, dividends and options plays. While I love clean and disruptive technology companies, I will be adding many more resource companies to my portfolio as a commodities boom looks inevitable. For growth, I will focus on financially stable companies with a lot of room to grow. On the speculative side, I will keep my potential runners and wait for the investment thesis to be proved by revenue.”
Bob Moriarty (@Fingerprint42) - “2022 has to be the giant negative effects of the sanctions on Europe and I see a massive change in the way the world looks at the US in 2023. I think the collapse is very near. Russia and China will probably announce a gold based currency.”
@drjimjones - “As 2023 is about to begin I am reminded of my mentor from decades ago who first introduced me to the perils and bounties investing can bring. His written words of caution “Time is the most valuable capital a man has to spend, try as you might you cannot save it, bank it or compound it. It’s a depreciating asset. Your account balance continues to decline perpetually, finally reaching zero on the day you die. The only choice you have is HOW it is spent.” He was a banker btw. This coming year I plan to give more of my time to my loved ones and myself and less of it arguing with the senseless faceless trolls on the internet. This last year was a challenging one for sure, black swans, wars, politics limiting the invisible hand of the free markets. I lost money and made money and found myself inches from where I began in 2022. I don’t bemoan not selling the tops or not buying the bottoms. When investing in a company I have my research that I’ve compiled into a thesis and will allow the markets time to do the rest of the work. Do your due diligence. Know what it is and what your time horizon is prior to investing. Spend your time wisely.”
David Lotan (Chairman, Aurion Resources) - “2022 saw many bubbles commence their inevitable deflation; unprofitable tech, real-estate, crypto, sovereign bonds, influencers. Even blue-chip equities and the big-tech champions saw substantial declines. Notably less affected were energy and metals. Market transitions are rarely smooth but it is possible that we are in the midst of a sea-change. Capital has been flowing, for years, into the metaverse and away from the sectors that provide the essentials for human societies and their flourishing. It seems, perhaps, that markets are on the “front-end” of discounting a rebalancing of these flows.”
I would like to thank everyone who contributed to this year's post. I would also like to wish everyone a happy new year and an abundant and healthy 2023!
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
