NOTE: The transcript of the audio recording (with accompanying charts) was cleaned up for easy reading. Interview number 2 under my belt now. To listen to the recording (24:55 minute length) click here. Thanks for listening/reading everyone.
Vaughan: Welcome everyone to Vaughan Discovers, a new series dedicated to uncovering the people behind the handles in our community. I'm your host Christopher Vaughan. I'm the community moderator at CEO.CA and I post under the handle @Vaughan at CEO.
Today I have the pleasure of speaking with one of the first users of CEO.CA that I started to follow back in 2016: Goldfinger. Goldfinger has always been and remains one of the top followed users on the platform, providing daily technical analysis commentary in public channels and in his trading lab. He frequently shares articles on a whole host of topics of interest to our users, including a recent article on the current technical analysis (T.A.) setup from mid-tier gold producers and developers, which I intend to discuss with him today.
Goldfinger, welcome and thanks for joining me today.
Goldfinger: Thank you Vaughan. I appreciate the invite and I actually just found out your first name for the first time. I'll keep calling you Vaughan for the purposes of this conversation because I think that's how everybody knows you by but thanks for having me.
Vaughan: I think most people know me under that handle and most people may not even know it's my last name.
Goldfinger, users are accustomed to seeing your commentary on the junior markets and it's clear you aren't a newbie in this space. When and how did you first get interested in the junior resource markets?
Goldfinger: So that's quite a story. It dates back to 2003. I had just gotten done with school and I was looking for what I was going to do with my life at age 23 or 24 or thereabouts. My father was always a big investor, whether in private companies or in public companies and he really took an interest in the gold sector around 2002. He had read a lot of value research that indicated that gold was probably at a major bottom buying opportunity and it was time to start to accumulate gold mining shares. He really dedicated himself full time at age 72 to researching gold mining companies, namely junior mining companies that were traded in Canada.
One particular story, Northern Dynasty ,who some of the listeners probably know a little bit about, was at a very early stage in 2003 with their Pebble Project in Alaska. I watched my father hit a 10 bagger between 2003 and 2004 on his Northern Dynasty shares and I was hooked. I was absolutely hooked. I had never really bought a stock before, I certainly hadn't bought a mining stock at that point, but I followed him and I talked with him about what he was doing.I watched Northern Dynasty go from 50 cents to five dollars in about 12 months. That's how I got started in the sector.
Vaughan: I stumbled upon the industry at the beginning of 2016. If you remember the first half of 2016 it was really something to behold. From that point on, I was hooked.
Goldfinger: It's interesting how you started in a bull market phase - I wouldn't call it a bull market but it was a phase, about six or seven months of a bull market environment - and I got started at the beginning of what was arguably the greatest bull market run in the mining sector between 2003 and 2007. In a way that's good because it gets you interested and you make money hopefully. In a way it's a negative though because when you start in a bull market you lose your scepticism or at least some of your scepticism. It could end up being very costly down the road during a bear market environment or maybe when you buy the wrong stock so to speak and their project doesn't work out and the shares drop by a large amount.
I definitely learned my lesson in 2008 though. I got a nice beating during that big bear market year of 2008 where many mining stocks dropped by 90 per cent or more over a few months. So now 16 years into the game, I've seen several bull market cycles and I've seen a few bear markets cycles too. I've sort of tasted it all over 16 years which undoubtedly is very valuable.
Vaughan: I can attest personally having found the resource space in a phase of a bull market that the old expression "everyone's a genius in a bull market" holds true. I think it was around mid summer 2016 when I looked at my portfolio and I realised I knew nothing about what I held. Luckily enough I took a look in the mirror and said "What are you doing?" And so I sold everything in July 2016.
Goldfinger: That was good timing!
Vaughan: It was luck, and I'll take all the luck I can get, but over 2018-2019, it's been pretty brutal.
Goldfinger: I recall talking to Tommy at the end of 2015 (Tommy is the founder of CEO.CA and he was the one who got me on CEO.CA the first time in 2015) the last month of the year, and it was just tough. It was really tough. All these stocks were just beaten to death. Nobody wanted to buy anything because at the end of 2015 we were almost three years into a bear market. Can you imagine what it's like to be in a bear market, a vicious bear market, for three years? Where companies are just getting sold every day and any good news is getting sold into. It really kills the sentiment and it kills your will to take a chance again.
When we had that turn at the end of January in 2016 where we were coming off such a brutal bear market and share prices were so low, that first move was so powerful. We had stocks going up three, four or five fold in a month because they were so depressed and if you can catch a turn like that it can make your year, it can make your decade! Especially if you have warrants or things to add leverage to the upside. It can be really powerful and I think a lot of people made a lot of money in 2016 who had been holding on to their shares and buying at those rock bottom prices at the end of 2015.
So 2016 was a good year for the sector but then you're right: We've had some really tough years since. Honestly while this summer was nice and I made some money over the summer, I think a lot of other people did too, but overall 2019 has been pretty challenging in the junior space. The seniors are a different story and they've held up a bit better.
I'm at a conference in Palm Beach as we speak. There's 35 companies here, about half of them are junior mining companies, and one of the themes of this conference is that the cannabis bubble and bust has sort of killed the speculative appetite in these small and microcap shares. People don't want to take risk anymore. You know the cannabis sector has burned a lot of investors especially in Canada and the current sentiment in the junior mining space is honestly as bad as I've ever seen it. That's saying a lot because I've seen a lot of bear market.
Some companies can still finance discounted to market, which at least there's some money available but the fact they have to mark the price down versus the market price shows that sentiment is very weak. So maybe it's not as bad as it's ever been (October 2008 you couldn't raise money if you begged) but it's tough out.
Vaughan: Parallels between now and the end of 2015 perhaps?
Goldfinger: Honestly except for the gold price being higher it's very similar.
Vaughan: As the community moderator at CEO I get to watch the conversation in real time and gauge the sentiment of the different users. I can certainly attest to the fact that the cannabis boom and bust is being felt hard. You can see it in the way that people interact with each other and it really stands out as something that has been hurting the speculative markets this past year.
Now if you don't mind I'd like to turn to your article from November 16th for a couple minutes. In this article you discussed the potentially bullish T.A. setup for mid-tier gold producers and developers. I encourage anybody who hasn't read it to go check it out: It's a quick read, concise, always to the point, like all Goldfinger's articles.
A week after posting your article, has anything changed in the setup that you described?
Goldfinger: It's interesting, not much has changed really. Prices are a little bit lower than they were one week ago. At the time I published GOEX was at $24.03 and as of this Friday's close it's at $23.45, so just like two percent lower. So not that much happened. For those unfamiliar with it, the GOEX is an exchange traded fund on the AMEX for gold mid tiers, which is actually not a heavily traded exchange traded fund but it serves our purposes for charting the sector .
Quite frankly in this article, you see how I sort of wrapped it up, I said "...seasonal tailwinds will kick in once we say goodbye to November". That still holds true. November will end next week and we'll enter the final month of 2019, the final month of the decade, and the final month of the year is often a bullish month for the gold space. This setup is in fact even better than it was when I wrote this article a week ago and I made the point that I wasn't saying it's a buy at this exact moment. I was saying it's setting up for an end of November buy. The downside risk is less because the price is a little bit lower.
A bit of an aside but I want to make one point about T.A.: T.A. doesn't tell me it's bullish but what T.A. tells me is that it's an attractive spot to enter because the upside potential is attractive relative to the downside risk. This is really what we want to use charts for: to identify these attractive spots where we could buy a stock or an exchange traded fund with relatively low risk and a very clear stop loss. If we're right that the market is about to turn in the next week or so then we could make a very nice profit relative to the amount that we took as risk.
Looking at an updated chart of GOEX, I'm still drawing the shaded rectangle showing the 200 day moving average as support which is a very key moving average and we just basically tested that on Friday at Friday's low. So in most bull markets - and this is a bull market because it's above the 200 day moving average - we'll come back to test that moving average at some point and that is generally a buying opportunity. We could see a turn in the final month of 2019.
Actually I just did a video this morning for my subscribers in the trading lab that I think next week is the buying opportunity in the gold sector. I think that you want to put some capital to work next week in your favourite gold mining shares. If you want to be lower risk and just buy gold itself or a gold exchange traded fund that's another way to play it.
Vaughan: We can see that the setup here for the mid-tiers is potentially signalling a time to buy. How does this line up against the T.A. of the major metals at this moment in time?
Goldfinger: I'm just going to talk about gold. I like copper here but I'm not going to pull up the copper chart, and silver generally follows gold pretty closely with obviously more volatility. So I'll just look at the gold chart because gold is normally driving the bus in the metals space.
We had a very high energy rally from the end of May to the end of August this year. Gold went up $300/oz. That's one of the best rallies in gold in the last decade or last two decades quite frankly. That led to a top at around $1,565/oz in the first week of September. Since then we're approaching month three of this pullback and gold has dropped about $100/oz. So up $300, down $100: a standard bull market pullback if we were to stop pretty soon. So in the next week or two this would be very standard textbook price action for a bull market move.
No market moves in a straight line forever. Usually the rally gets a little long in the tooth in month 3 or month 4 and that's what we saw with gold in early September. Lots of media coverage, everybody was talking about how Ray Dalio was bullish on gold and you had to get in, but $1,565/oz from $1,265/oz is a big move by any measure. We needed to digest the gain and pull back a bit and that's what we've done.
We had a high energy rally and we've had a low energy digestion/pullback and markets go in cycles from high energy, to low energy, back to high energy, back to low energy, etc. I think the timing is excellent in the next week or two to add long exposure to gold and gold mining shares.
Vaughan: You also mentioned on CEO.CA that now is the time for tax loss selling opportunities. Do you have any that you'd want to share at this point? I know I'm putting you on the spot, but it is that time of year.
Goldfinger: I'm going to have a blog post out either Monday or Tuesday on this exact subject and I'm going to mention six or seven stocks, so I'll wait till then. But I think you could go through a list of junior mining stocks and look at companies that are at 52 week lows or near 52 week lows and do some research on them. Ask yourself if these companies are being "unfairly" sold down for irrational reasons because people are booking tax losses or they're just sick of holding the stock because it hasn't moved yet.
Also ask yourself if the companies have catalysts coming up. I'm going to name six or seven stocks that I think are really attractive here heading into next year and I think that the next couple of weeks are going to be a really nice opportunity for investors to get into some really attractive stories at relatively low valuations.
Vaughan: Well I look forward to reading that article on CEO next week. Changing gears now, you mentioned earlier you've been using CEO basically since its inception in 2015. You are one of the most followed users on the site and often one of the top three trending users on any given day. But who do you follow on CEO.CA?
Goldfinger: The truth is I don't follow anyone. I don't follow them in terms of getting their updates send to me. What I do though, is I have a watch list of stocks that I follow and I do pay more attention to certain users.
I think when Tommy posts it's usually very valuable. MiningBookGuy adds excellent content, often focused on Africa which I don't dabble in too much myself. Even still, he gives valuable content on a regular basis. Eric Coffin (HRA-Coffin) is absolutely the best. It just doesn't get any better in terms of the amount of knowledge and experience that he has in the junior mining sector, and he's willing to share his knowledge and insights so freely with people. So those are probably the top three names for me.
There are a lot more people that are worthwhile to read, like Tom Szabo for example. He doesn't post that much but he's an extremely insightful, extremely knowledgeable investor in the sector. I could go down the list of valuable users, but honestly I don't follow anybody because one of my biggest challenges on a daily basis is managing my time and my attention.
I have a lot of people that want to share stories with me and honestly I'm one man with one brain and one heart. I can only do so much. So one of my big focuses is simplifying and focusing more and that's always a sort of a challenge for me. I try to keep my information intake as clean as possible.
Vaughan: There's no doubt that there's a lot of noise that we all need to learn to cut through, whether it be promotional articles or chat forum bullish/bearishness, so I don't blame you for not following users specifically.
One last question for you: given your experience in the space what would be your one piece of advice for anyone who is just now starting out in the junior resource market?
Goldfinger: Always a tough question when it's one piece of advice. There's a lot of pieces of advice here. Honestly I think the best advice is to be sceptical. Don't take things at face value and know that everyone has some sort of a bias, whether it's a personal bias, whether they're being compensated by a company or whether they own shares in a company or whatever it may be. Everyone has a bias and so our job is to filter through the information the company is giving us and quantify the risks associated with that company.
As an example, if I buy ten thousand shares of this stock at .20c today, it's a two thousand dollar investment. What's my time frame? What's my risk? What am I looking for over the coming months? Where would I sell and when would I know I'm wrong?
If you start from a place of scepticism I think you'll do better over the long run. If you're sceptical when a story comes to you and you can't find a flaw in it, maybe you bounce it off a few other insightful people and see what they think, then you're probably setting the odds in your favour. Whereas if you just accept everything at face value and you operate from a place of greed, you’re almost guaranteed to get sliced and diced in this sector.
Vaughan: So stay sceptical, thanks for that. I won't take up anymore your time so I will say thank you for taking the time to talk to me today and please keep sharing your insights on CEO.CA as they are appreciated by many.
Goldfinger: You can bet on it. Thanks Vaughan.
