Andy’s Corner

Andy’s Corner

September 30, 2024

Thoughts from the past week

“Honey, I need you to take care of everything on your list today.  My mom’s flight gets in at 3:00 pm today and I need everything done before she gets here.”  I casually scan the honey to do list, and I immediately become overwhelmed.  The list includes fixing and repairing a few things around the house, a lot of yard work and cleaning outside, taking our dog Rusty for grooming, and then picking up my son Collin from his ballroom dance lesson.  Collin dances competitively in Latin and Ballroom, he is a three-time national champion.  How am I going to accomplish all of this before my mother-in-law gets in and how am I going to finish up all my writing and planning for the next week?  Plus, Collin had a competition over the weekend which served as a warmup for the world competition that is held at the end of October in Montreal. 

I think back on the past two years since I launched my website NaturalResourceStocks.net, along with our YouTube channel (well over 100k downloads per month now) and podcasts (over 1500 downloads per month now).  We have experienced incredible growth since I started this project. I have had to add staff and take on a partner to help me with the digital production.  Where is all of this going and what is the goal?

Fair enough questions.  I originally started the site and the channel because I was (and am) an active investor in the space.  I originally started with just interviewing a few friends and acquaintances and then it quickly grew.  The first two big names that were agreeable were Marc Faber and Jim Rogers.  Both were mentors from afar to me.  I remember buying Jim Rogers book “Investment Biker” in 1992 (or was it 93?) from Barnes and Noble in Anchorage Alaska.  After reading that book, I was hooked.  Ready for adventure.  The next year, I enrolled in a very small liberal arts college in Lookout Mountain, Georgia (why Georgia?  Because this school was the only School in the entire country that offered a study abroad program in Eastern Europe.  After a semester, I signed up for the study abroad program in the Czech Republic (where I would backpack all of over the continent three to four days per week when I wasn’t in class) and where I would eventually meet my wife.  I was living the dream. Every country I visit, I would ask the question, “would the great Jim Rogers invest here?” I was hooked on investing.  I would tune into CNBC and watch Jim being interviewed and then I would noticed the man Marc Faber, who would often be on during or after a Jim Rogers interview.  Marc and slicked back hair and a ponytail and talked with a thick Swiss/German accent.  He would preach about bubbles, the corruption of central banks, and sound money and commodities.  And with under a thousand subscribers, I booked both.  Others would follow.  Names Like Rick Rule, Adrian Day, David Morgan, and Bob Moriarty, just to name a few.  I was doing it.  I was interviewing all of my heroes. 

Circling back, what was and is the goal for NaturalResourceStocks.net?  My original goal was threefold:  First, have great conversations and ask great questions with a few of my friends and then grow it to having conversations with some of the biggest influences on my life.    Second, to share these conversations and experiences with anyone else that wants to be a part of them.  These conversations have certainly had a focus on natural resources, but haven’t or don’t there.  Many of these conversations have ventured into the geopolitical arena.  And that has been a tactical move on my part, because geopolitics has such an impact on natural resources.  Finally, I want to give exposure to natural resource companies.  The good ones.  I believe we are in the start of a huge bull market in natural resources.  The reasons are many.  And I want to serve these companies and my tribe of viewers and listeners so they can take advantage of the big moves that are coming. 

All that is to say, thanks for joining us in the ride.  I hope that it is financially rewarding for you, but more than that, I hope that you  learn something or see things from a different perspective. 

Here is a list of interviews I have for this week of 9/29 to 10/5:

Ben Kelleran of Kontrarian Korner

https://www.kontrariankorner.com

Lobo Tiggre of Independent Speculator

https://independentspeculator.com

Adam Hamilton of Zeal Speculation

https://www.zealllc.com

Dennis Leontyev of VixChange:

https://naturalresourcestocks.net/vixchange

Larry Johnson, former analyst of at the CIA

https://en.wikipedia.org/wiki/Larry_C._Johnson

Keith Weiner of Monetary Metals:

Keith Schaefer of Investing Whisperer

https://investingwhisperer.com/terms-and-conditions

September 16, 2024

How I Beat Goldman Sachs and Morgan Stanley by Building a Bullet Proof Gold and Gold Stock Portfolio 

“Andy, I need you. I know you have a background as a stock and commodity trader and working with hedge funds.  You are always sending me these articles on how to invest and trade.  Goldman Sachs and Morgan Stanley already have proposals in front of me and I need your help.”  Click.

That was the message I received in late 2006 from Joe, the owner of the tech company I was working with. He was the pillar of one of the wealthiest families in the State of Georgia.  He made his money by starting small businesses and then scaling them up on a national level.  With the sale of each company that he sold (and they each worth tens of millions of dollars) he would pour that money into real estate, both individual housing units and commercial property.  Over time, he amassed a fortune in the hundreds of millions of dollars. I was dumbfounded. I never expected such a phone call.  

A few years earlier, I was a commodity futures broker from a small boutique commodities firm based out of Incline Village, Nevada.  I was a young trader. During the 1990’s, I made a small stake trading junior mining companies (Does Bre-X ring a bell?) and commodities.  Anything that would really move and I could get leverage, I wanted to trade.  While working at the small firm, I built a book of business with clients that were not only in the U.S., but in different exotic parts of the world, such as South America, Russia, and Europe.  That is where I met Dennis Leontyev, who would become a good friend and mentor.  I would leave the firm in late 2000 yet would continue to trade my own book in stocks and commodities.  I was newly married and a new father, and the world of trading for clients or a fund was no longer appealing.  Long hours and instability.  It would take only one mistake, and I would be fired or no mistakes other than a client wishing to move their money to another account or firm. So, I left.  I would no longer be in the fund world, only trade my own book, and work a 9-5 job in the world of technology.   

“Hey Joe, how Ya doing? Congrats on the sale of the company.  Sure, I can meet you.  How about Tuesday?  Bring me your paperwork from Goldman and any others that are pitching you, and I am happy to evaluate what they have.”  A meeting was arranged the next week.  I

When I reviewed the other proposals, I was surprised by two things:  First, just how basic the portfolio recommendations were.  There was the usual allocation to stocks and municipal bonds, treasuries, and then different internal hedge funds and products.  My second surprise was most alarming:  none of them had any stress or risk testing that was back dated.   Joe asked me to construct a portfolio that was exceptionally minimal risk if we were wrong about the word, would offer maximum protection if we were right about the world, and would be gamed out and back tested.  No problem.  This is what I did in my previous career.  But I need help.  So, I made a call to Dennis Leontyev.  And this is what we came up with: the portfolio that beat Goldman Sachs.

50% to Gold 

Dennis and I recommend both physical gold and the gold ETF – GLD. We broke this out with half of the allocation to GLD, and the other half of the allocation to physical. 

Why we liked physical.  The obvious: if/when things hit the fan; we want to have gold in our physical possession.  Plain and simple.   

Why we liked GLD.  

First, with all its problems, it tracks gold remarkably well. 

Second, liquidity.  If we wanted out of a position, sell into strength, reallocate percentages to another asset, GLD had the liquidity to do this.   

Third and final, it was optionable.  This allowed Denisa and I to sue some of our favorite strategies to hedge risk and to generate income on a sizeable position.  

Gold stocks 

We had a 15% allocation to Gold Stocks, broken down as 10% to the majors, 5% to everyone else.  

How we allocated to the major producers. 

This was easy.  The company had to be in the top four in market cap (we also required that these have stocks to all be optionable but being this size they all were).  This would allow us to hedge and create income through various option strategies.  Why four?  We wanted to pick five, so the first four were the largest, and then we added a fifth company – whoever we wanted, which turned out to be BHP Billiton (now BHP Group).  Why BHP?  It checked all our boxes and then some.  It was/is one of the largest mining companies in the world, it gave us exposure to not only gold but other commodities, it was/is optionable, and it paid (and still does) a healthy dividend).  Listed below are the largest cap gold stocks: 

The remaining portion of the portfolio would be in cash, short-term treasury bills, municipal bonds, cash and a combination of value equity plays. 

By doing just the above strategy, we accomplished the following: 

1. Portfolio stability: Half of the exposure in gold 
2. Very safe and limited downside: Holding short term treasury bills and municipal bonds (for tax purposes).  
3. Upside exposure:  Gold stocks (weighted significantly to senior producers).  

Dennis performed a Monte Carlo stress test simulation on the portfolio and what we found was incredible stability (that’s what gold and short-term bonds will give you.  Side note: the timing was similar to today (fall of 2024).  The yield curve was inverted, so we were happy to take a 5% on 6–12-month treasury bills).  And this is how we beat the likes of Goldman Sachs. 

Next week, we will discuss evaluation of junior stocks.   

Andy