Transcription
This is the 10-minute contrarian podcast. This is VP. We are a solutions-based podcast diving into the world of contrarian investing and alternative finance. You will find us hosted on the No Nonsense Forex YouTube channel, nonsenseforex.com, and podcast players everywhere.
Episode 5 is brought to you by my book. I wrote one. It's pretty good. 163 reviews so far on Amazon Kindle, and it's a 4.8 out of 5. So public opinion says it's pretty good too. And honestly, whether you're a forex trader or not, most of the concepts you will find in that book carry over to every other aspect of trading, investing, and sometimes life. I was hesitant to put a lot of life stuff in there because, far be it for me to tell anybody else how to live, but it turns out the life chapter ended up being one of the most well-received out of the entire book. Who knew?
So what I'm going to do is down below in the show notes, give you a link to a page on nonsenseforex.com that has a video that briefly describes what the book is about. It wasn't already obvious, and a link that takes you directly to the United States version of Amazon Kindle where you can go buy the book directly there if you so choose to. The book is available on eight different Amazon sites all over the world. So if you don't see it on yours, I am sorry. There's nothing we can do at this time, but I thank you for your interest.
It is the 10-minute contrarian podcast, and I could have put this episode really anywhere, but I wanted to put it early and have it go down as one of the core pillars of what we learn here because I'm going to wager to say that many of you are interested in mining stocks because that falls under commodities, and that's one of the major things we talk about here on the podcast. And I'm also going to assume that you fall into one of two categories. Either you were going to be a 100% do-it-yourselfer and put in all the research and kind of take your lumps along the way, but at the end of the day, you're gonna be completely self-sufficient. Or you are going to seek out the help of an expert, whether that's going to be a paid version or a free version or what have you. But I will say this, regardless of which route you take, there is going to be some work involved.
Because let's say, for example, you purchase somebody's paid newsletter and that's the advice you're going with, you're going to run into a particular problem. You are probably going to receive too many investments from your newsletter writer because you don't have this knowledge in advance in terms of how much they're going to give you. And these people usually have endless supplies of money to invest with, either because they're very good at what they do, they've done it for a long time, or they have a bunch of subscription fees rolling in every month, and it's usually a combination of all three. So unless this situation also applies to you, uh, you're going to face a bit of a problem to where you are still going to be able to have to find a way to take the information you were given, to take the investments you have been alerted to, and still find a way to narrow them down.
If I knew in advance that homeboy was going to give me 15 trades in the span of one calendar year, well then that's easy. You know, I can divide my investment capital up into 15 little buckets and just take everything he says. But you're never going to have that prior knowledge, and this guy has more money than you, so you're going to end up with too many trades. So this is where the process of elimination game begins.
Now here's my advice to you. When you're doing this part, understand that these sectors already have, just on their own, tremendous amounts of upside. You don't really need to go for more. My advice is that you pay attention to your downside above anything else. We do this in forex, and it has served us very well. I would go as far as to say that this episode is extremely contrarian because even within the mining sector, I think way too many people chase upside for upside's sake. The upside's already there. It's baked in. Focus on eliminating as much downside risk as you possibly can.
Now, what's one way to do that? Well, first off, understand that most mining stocks fail. And there are greater chances of failing if you are in a country or a jurisdiction within a country which has not historically been super friendly to mining. This is called jurisdictional risk. There are countries out there that as soon as things go bad, or as soon as things get really good, they start getting super greedy. Those of you who have watched my copper video, we just saw this with Chile. A country that has done a lot of things right over time, but for some reason, out of nowhere, has decided to ratchet up taxes to such a ridiculous level that nobody wants to mine there anymore. No foreign investment wants to come in anymore. And if you have any Chilean mining stocks, you have felt the effect.
And again, sometimes it's by region. Sometimes the people in certain regions get together and just out of nowhere decide that mining is icky, and they don't want you tearing up their land anymore. And they form a group, and the politicians see these large groups of voters and they pander to them, and they put crazy regulations down on the foreign mining companies that are there, and sometimes get rid of them all together. And then, even in extreme circumstances, you have countries that say, "Hey, nice mine, foreigner. Now it's our mine. We have no idea what we're doing, but we kind of need the resources. It's in our land, and we get to make the rules." And rip to any retail investor who has exposure to these areas when these things occur. It's pretty scary.
So as retail traders, what do we do? Well, there are resources out there to help us, and we're going to go over those today. The first off is kind of the, the gold standard for everybody, and these are the reports that come out from a place called the Fraser Institute. They have several reports that come out. I'm going to link one in particular down below in the show notes. It is in PDF form, once again, so be mindful of that. And it is the Fraser Institute Annual Survey of Mining Companies 2020. So if you're listening to this episode in the future, make sure you have the most current version of this. 2021 is not over yet, so 2020 is the most current we have right now, and that's what I will link down below.
I would say direct yourself to page 17. This is what I look at more than anything, and it's called the Policy Perception Index. Basically telling you what countries and which regions are the most friendly to mining, and which ones are the least friendly. Now, in terms of where you put your benchmark line, like, you know, 75, 80, 65, that's totally up to you and the amount of risk you're willing to take. But again, this is information that most people, even in our tiny little sector, are not looking at, and I find it to be extremely helpful. So anytime you're stuck on which investment to move forward with, you can simply come and reference this for help. I have a separate bookmarks bar just for my mining stuff, and this index is certainly part of it. So now it can be part of yours. But it comes out every year, so make sure you keep up to date with it as well.
And another research we can use is a phenomenon that just happened recently, and it was brought to light and brought to the masses by the great Canadian billionaire Marin Katusa, who we will be referencing quite a bit on this podcast. Not really this episode so much, but the podcast in general, you're going to hear this name come up over and over again. And this concept is the concept of positive and negative swap line nations. Now, what the heck is this? Well, the United States has decided to extend lines of credit to, as of right now, 14 different nations using the power of the United States dollar that everybody still wants, unless your name is China or Russia, and even they probably secretly want it.
These swap lines are pretty much how we're creating allies in the 21st century. By extending these lines of credit, we're pretty much telling these countries, "Hey, you can have this line of credit for as long as you want, so long as you play nicely and don't screw around with us or our trading partners." And currently, that would be Mexico, Canada, Japan, and South Korea, to my knowledge. As we know, mining and the energy that comes from mining is of utmost importance, and that's a big reason why I think these swap lines were created. If we or one of our trading partners has mines in these countries, we do not want them tampered with. And if these countries get a bright idea to tamper with them, then bye-bye goes the swap line. And trust me, countries are fine with this. India, for example, does not have a swap line yet, but they have stated clearly out loud that they have swap line envy and they want one.
So for right now, the countries who do have positive swap lines, I'm going to go ahead and link an article from Marin Katusa down below in the show notes as well, if you want to check this out yourself. But just think, for all you forex traders out there, of the eight major currencies, they all have them. So European Union, UK, Japan, Australia, New Zealand, Canada, obviously. And then Switzerland. Add on Scandinavian countries, so Denmark, Sweden, and Norway. Also add on the remainder of our trading partners, so add on Mexico, South Korea, and then also add on Singapore and Brazil. Because of these swap lines, pretty much by default, we can feel pretty comfortable mining in these areas should they apply. But again, these swap lines change as well, so pay attention.
I can remember Indonesia used to have one, and now they don't. This was really weird because Barrick Gold, largest gold mine in the world, has millions and millions of acres in Indonesia. And then Indonesia decided to [ __ ] with it, and then we gave them a swap line, so then they stopped. But now they don't have one. I researched this, I couldn't find any current information on why they don't anymore. But my point is, keep up on stuff like this. It doesn't take much time out of your day. You could honestly check in once a month, and probably nothing has changed, but you're going to want to be on this.
And if you want to go outside of these safer jurisdictions, that's fine too. There's opportunities there. I told people in the copper video how I have a silver miner in Peru, and I was okay with that risk. And so far, I have gotten bit. They elected a socialist, which I did not see coming. You know, it's like, nobody expects the Spanish Inquisition, you know? But sometimes it happens. So I've taken a really nice hit on that one, but I remain optimistic. And I remember something Rick Rule said that I probably should have said back in episode three, but I forgot. He said that every 10-bagger plus that he has ever gotten dropped at least 50% while he had it first. So that made me feel better. I was going to hang onto it anyway, but that did make me feel better. But this is one of the largest factors you're going to need to weigh in when you are narrowing down your choices. As I said before, this sector on its own already carries tremendous upside. Take as little unnecessary risk as possible.
So a big thanks to all of you for sitting through a much nerdier episode of the 10-minute contrarian podcast. Future episodes will have varying degrees of nerdiness, and you just have to stay tuned to find out how much. Also, stay tuned for a fire-ass blog I'm writing. I'm going to have that out probably Monday or Tuesday of this week. If you follow me on Twitter, I will tweet that out. But if not, just check in every other day or so to the blog tab of nonsenseforex.com.
But to sum it all up, investors, decide if this is something you really want because there is going to be homework involved. And things like jurisdictional risk is a concept that you just do not get to ignore. You must embrace it. Maybe don't mention it to your friends because they're not really going to care. They're gonna look at you like you're crazy. But as you guys know, we are far from crazy. We're just early.