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Stas,

You're a shrewd, savvy analyst who does his homework and whose opinions I respect. So I don't need to pull punches.

In another thread, you said that copper was "getting ready to break out". I said that call was a year late. You replied I was confusing the producers with the commodity. There's tons of things I get wrong, but charts aren't one of them. As the linked chart shows, JJC and COPX have 0.95 correlation with each other. To trade one is to trade the other, with this diff. COPX offers more liquidity. Its spreads are half as wide. Never mind its 2.4x greater gains. https://schrts.co/zUInVpFs

There's a gazillion ways to make money in markets. TMF's way isn't the only way, nor is it even a good one for most would-be investors who lack the skills to understand, vet, and then manage the stock tips they pay for. They'd be far better off sticking with simple, obvious things like sugar, corn, wheat, crude, 'beans, cotton, coffee, etc. that the world actually needs, uses, and generally prices pretty correctly, as opposed to buying yet another small/midcap "growth" stock whose financial statements --when closely examined-- are accounting fictions or futile hopes for future profitability.

Here's the real kicker. Even the fantasy known as Modern Portfolio Theory argues on the basis of past performance --which is all we realistically have-- that a 16% allocation to commodities would not only dampen portfolio volatility, but would enhance returns as well.

Arindam
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No. of Recommendations: 2
Right, there can often be very close correlation between JJC and COPX but when you open it up to a 2- and 3-yr comp, you'll see that the miners dropped badly and then jumped up fast, perhaps too fast? (JJC is a relatively new, unpopular product and you are correct, again, that it is not very liquid.) In that regard, you are right that the equities are up substantially and the train has probably left the station and it may not be worth trying to catch up. :) But from what I can see in terms of supply constraints, demand forecast and the likes of GS and other big players all of a sudden liking commodities again, I think there is plenty left there. Relatively soon, I expect a move beyond $5/lb and expect silver to move beyond $30/ozt. I personally do not like ETN's, ETF's etc for commodities unless it's for a short-term trade as opposed to a long-term hold so it gets quite challenging with most commodities for me thus I stay away from, again, most of them. But as I've mentioned previously... I really don't have -- or choose not to have? -- much time and capital to trade at the moment so it's an even easier decision for me. :) Regardless, analyzing them is critical and understanding what's going on in this world is as important as the world of capital markets.
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Stas,

You're a good sparing partner. You raise points I hadn't considered.

Yes, on charts with longer lookbacks, copper merits no attention. But yesterday's markets can't be bought. What might be the forecast for copper? The world's response to covid has disrupted supply chains, creating upward price pressure. But global industrial activity is down, creating downward price pressure. Meanwhile, any country that can is de-dollarizing as fast as it can, and some of that capital is going into hard assets. So, how to trade the "opportunity" (if it is one)?

It requires very little money to trade futures contracts, and it can even been done in an IRA. But trading futures responsibly --due their being leveraged instruments-- requires more knowhow than the "average" investor wants to acquire. The fallback is ETFs/ETNs, which are a pain to deal with at tax time, but easy enough to get in to and out of with small money, and they are fun to trade. More to the point --as you suggest-- tracking them forces an awareness of the world beyond the nonsense that is passed off on the major networks as "important news" (instead of the gossip --or worse-- it really is).

As for coat-tailing the big boys into copper, that's a game I'd rather not play. They're not "the smart money". They're merely "the big money", and they are always late to trade, both in and out.

Arindam
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I don't like the bid-ask spread on JJC. Don't like the liquidity or rather lack thereof which is related to the spread. I'm mostly watching the copper situation unfold and continue to believe that there is upward pressure on the price - don't see it getting softer any time soon. Not really actively trading it and I'm not all that into miners but you always ask that good question - how can this be traded profitably, if at all?

The silver trade is more doable as there are more liquid choices in the ETF/CEF universe (SLV, PSLV, etc) and trading and storing physical is a lot easier than copper for those that prefer that to "paper" trading. Heck, 100 lbs of copper is valued at just $450 - yikes! :) (That weight = around $40k in silver.)

I'm curious where miners' debt is trading. I bet discounts were huge a year ago! Assuming debt pricing is closely tied to equity... yields are likely not great in that space currently knowing where COPX sits. I may take a peek at copper miners' bonds one of these days...
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Stas,

You're right about JJC being hard to trade. But if one isn't trying to 'trade' it, but is looking at it as an 'investment', the illiquidity and wide spreads can be tolerated. Also, a would-be "investor" shouldn't be tracking it with a daily charts. Weekly bars tell the story in a timely enough manner.

Depending on how "exotic" one likes one's charts to be, the bars could be formatted as a line chart (or Renko, Kagi, Three Line Break, etc.). But Heikin Ashi is good enough, because it filters out some of the noise seen with just conventional candlesticks. https://schrts.co/CCXKSiQB

My comment on that chart is this. When you see that many up-trending, white bars, you know you're late to the trade, especially when you note that the price of JJC has nearly doubled in just a year's time. That isn't a 'value investment'. It's a 'momentum trade', which I despise, because that's not how I live my life in the real world. If broccoli was $1.49/lb last week, and this week it's $2.50, I don't buy more. Same-same with bell peppers. If last week they were $0.79 each, and this week they're two for a buck, I do buy more and adjust my menu accordingly. I'm a "value shopper", and I'm a "value investor", just as Ben Graham laid it out in his classic intro.

As has been noted endlessly, stocks are the only thing that people rush to buy as the price goes up. The more the price goes up, they more anxious they become about "missing out". That's absolutely crazy, and the trade they are making is this. They are increasing 'price risk' when they minimize 'information risk'. Absolutely crazy, as Mamis lays out in The Nature of Risk. Admittedly, it's a game some people play well, notably, Wm O'Neil. But it's not a game I want to play. So I don't chase prices. I missed copper's move, and that's fine with me.

Silver's another matter, as is gold. Yeah, both have industrial uses, and both are a "love trade" as the gold bugs like to say. But their real use to an investor is as an inverse to the $US, and I was in and out of some miners and the index that tracks them earlier in the week and made good money. Right now, I'm trading small, just trying to work out the bugs of a campaign for when it will make sense to put on size.

Arindam
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Lots of good points - thanks for putting them all together.

I'll tell you that I've noticed that on top of stocks, many commodities and cryptocurrencies also suffer from sort of a FOMO moments. It certainly works or has worked for some but doesn't mean everyone should do it!

And as to metals, I kind of like to lay my three favorites in this order of industrial use as percentage of total production:
1) copper (almost entirely industrial)
2) silver (at least 50% industrial but pretty heavy investment too)
3) gold (mostly jewelry & investment)

That's a whole separate discussion though but those uses certainly drive spot prices of underlying commodities as well as derivatives' pricing and what we see in the equity space although some miners are tied to multiple commodities as silver if often a by-product of copper mining, etc. I know little of miners' capital structures... would be interesting to see what those are and if there is something there by way of nicely-priced bonds. Probably not at this time. :(
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Stas,

Re: Miners' bonds.

Buy 'em if you can find 'em. I've made good money with Anglo Ashanti's debt and a couple of the other gold miners. But right now, there's little available that's worthwhile. OTOH, look at their common. Some offer fat divs.

A
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If you’re looking for a commodity play, check out SRL. They just announced a plan to focus on plan to maximize the value of their into ore royalties with a new dividend policy and the elimination of non- core operations. At $2/sh in royalty income this should be worth $50. Currently priced at $15.50.
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Very interesting - never heard of them but just looked into a bit. Nice pop recently from $8.xx to $14.xx or even $15.xx. There must have been a reversal of some bad news reported/suspectied in 2020. Thanks for posting.
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SRL stock price has been moving south lately. Is there a dividend policy in place or still nothing? Curious if anything changed since May. Didn't seem like it to me from a quick review.

As to debt... The only mining bond with YTM of over 5% I was able to find in August... Hecla Mining out of Idaho, 7.25's of 2028. Not much out there still.
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