Resource World Magazine

O C T O B E R / N O V E M B E R 2 0 1 8 www.resourceworld.com 23 At the Market by Rodney Blake RESOURCES – the forgotten sector N o one ever said it was going to be easy, but then again they also never said it was going to be this hard either. By 'hard' I mean trying to figure out the resource markets in 2018. As I write this, in mid-September, most resource stocks or resource sectors that I follow are trading – as represented by the TSX Venture Exchange – at or near multi- year or record lows. At the same time – the major North American Indexes – represented by the Dow Industrials, the S&P 500, the NASDAQ and the TSX Composite have set and are still trading at or near all-time highs. How can this be? How can most equities be at record highs while just one sector is at record lows? How can one sec - tor be so forgotten? Perhaps it's the herd mentality. Most have heard of it and also seen it in action. Take a look at a farmer's fields and you'll notice that most of the animals are usually spread out across the field, mean - dering back and forth in an orderly or balanced manner and with no untoward consequences. But now and then – some- thing excites the herd and they close ranks for protection and start to move in unison. Take this to an extreme and you have a stampede where the animals all running – not necessarily knowing why – in the same direction, in a like mindset to get to some perceived end. Thankfully, the stampede usually slows from exhaustion, but it can end badly if the herd meets a cliff, fence or other formidable obstruction. Stampedes also leave stragglers – those few that can't keep up or who are simply forgotten in the rush to keep up with the herd. But amazingly, stragglers can become leaders when the herd tires and turns back in the previous direction while wonder - ing what all the fuss was about in the first place. Or, in extreme cases, the stragglers may be simply be survivors when the rest of herd comes to an ominous end. Now, for our purposes – let's repeat the above scenario but substituting investors for the herd and resource stocks for the stragglers. This is mass investor psychol - ogy in action. In 2018 to date, investors for the most part, and with the influence of a very enthusiastic media, have been chas- ing the new marijuana and the large cap FANG tech stocks to ever higher evalua- tions. And in their enthusiasm, they have left behind or completely forgotten the resource sector, feeling it is an old and tired part of the market. But what is old and forgotten can become new and exciting again. It looks to me that the resource sector bottomed sometime in mid-August with gold at US $1,184/oz, copper at US $2.56/lb, crude oil at US $64/bbl and the Venture at 668. These numbers have slowly been improv - ing since. A test of the bottom may be needed, but if history and seasonality repeat themselves – resource prices will continue to rise through the new year, and the herd may soon start to migrate once again back to this sector. Resources – for- gotten for now but perhaps not for long. n Rodney Blake is an Investment Advisors with Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp, Member- Canadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Rodney Blake, Canaccord Genuity Corp, or its subsidiaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this article, we do not assume any obligation to update the infor - mation or advise on further developments relating to these securities. This article should not be considered personal investment advice or a solicitation to buy or sell securities. Canaccord Genuity and holdings of its respec - tive directors, officers and employees and their associations, from time to time may buy or sell any securities mentioned herein. The views expressed are those of the author and not necessarily those of Canaccord Genuity Corp. He can be reached at 604-643-7567 or rod.blake@canaccord.com

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