Resource World Magazine

D E C E M B E R / J A N U A R Y 2 0 1 9 www.resourceworld.com 39 Speculations by Leonard Melman I f there is one word which truly describes the investment background as we approach year-end 2018, it is 'uncertainties'. Those uncertainties seem to abound in numerous directions such as political, economic, securities markets, metals markets and the direction of regula- tory emphasis. There is also the matter of unfulfilled expectations. During the past several years we have seen a collection of occasions when the news background appeared to indicate a potentially monumental crisis which stim- ulated decisive market action, only to have the 'crisis' evaporate. As a result, many of our markets have lurched suddenly in one direction only to lack follow-through and then correct in the opposite direction. It is easy to provide examples over the past 24 months, coincidentally since the election of Donald Trump as President. During that time, we have seen the follow- ing peaks and valleys: Gold: 1130, 1295, 1215, 1295, 1210, 1355, 1240, 1360, 1165 and presently 1214. Silver: 16.00, 18.60, 15.15, 18.15, 14.13, 17.80, 14.00, 15.00 and presently 14.10. Currency markets have also been short- term volatile but long-term trendless as illustrated by the C$, quoted in US cents: 74.30, 76.50, 73.00, 83.00, 77.50, 81.00 and presently 75.00. During the past year, the Dow Industrials have also demonstrated similar patterns, with that market average tracing out moves between 26,500, 23,300, 25,700, 23,200, 25,400, 24,000, 26,900 and pres- ently 24,614. Quotes are taken from charts and are approximations. One possible answer to the question of why markets moved so decisively and continuously during the great metals bull market of 1976-80 as opposed to their current choppiness and lack of dynamic trends can be found in this contrast. During that prior bull market, public concerns grew steadily by the accumula- tion of events which affected the lives of the public and also fed their reasonable fears. These included steadily rising rates of con- sumer price inflation which they could not help but notice as well as sharply rising interest rates on home mortgages, car loans and personal loans. In addition, Russia invaded Afghanistan, thereby raising fears that the US and USSR (at that time) could become embroiled in a military conflict and the US' withdrawal from the 1980 Moscow Olympics did not help. Also, there was the matter of the Iranian government holding American hostages that raised the specter of military conflict in that area as well. Contrast that with the past two years when wars appear ready to break out, but don't; when consumer inflation appears ready to break out, but doesn't; when the American government seems to be on the verge of breaking down – but doesn't. Each seeming crisis does beget some short- term market action which, however, then reverses itself when the presumed crisis fades from headlines while the lives of the public remain unaltered – for the most part. Aside from the lack of 'crisis follow- through', there are other uncertainties which metals investors in particular might consider. These could include: What is the impact of huge new mari- juana investments? How much marijuana stock buying is being diverted from the mineral sector? Will the Democratic triumph in terms of the American House of Representatives strengthen the hands of environmentalists and result in an explosion of new regu- latory initiatives regarding mining and the environment? Also, will the change result in America's re-entry into the Paris environmental accord with the pos- sible imposition of anti-mining regulations from that direction as well? Are there any remaining possible problems which may result from the widening acceptance of alternative currencies such as Bitcoins and other cyber-currencies? And, there is also the over-riding ques- tion of the direction of the American and Canadian securities markets, since his- torically gold and silver tend to perform well when securities markets are in crisis decline, but perform less well when securi- ties markets are stable or rising. At present, this is another area of great uncertainty as predictions of the economic future range across a wide gamut. The situation is so uncertain that just a few days ago, The Wall Street Journal carried these two headlines in the same edition; "Strong economy draws women into US labor force" and "US econ- omy flashes signals it's downhill from here." So, what are investors to do to protect themselves? As an ex-broker, here are a few suggestions. Perhaps it is time to take profits from some successful investments while holding on to others which remain in strong uptrends, while lightening up on other holdings until markets move more decisively. Also, after consulting with your investment advisor, one might con- sider protecting present investments with offsetting option or commodity strategies. With mining investments, we await – sometimes impatiently – for a time when these choppy moves will transform them- selves into dynamic and hopefully positive trends. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relating to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@ shaw.ca Investment uncertainties – the only certainty

• Cover