By MoneyMorning.com.au
In a moment we’ll show you why this is the wrong time to invest, but the best time to punt on stocks… And we’ll show you one sector that looks very eye-catching.
But before we get to that, remember to check out Dr. Alex Cowie’s latest presentation.
In it he outlines his six best resources opportunities for 2012. Click here to see what the Doc has to say now…
We’re not talking about investing here. We’re talking about a good old-fashioned punt.
We’re not talking about you putting your rent money on the line. This is something you should only do with your play money… Cash you’re hoping could earn you a 50%, 100% or 200% return within the next 12 months.
If you know anything about investing in stocks you’ll know you can’t make those gains popping your cash in a 6% savings account. That’s where you should stash your rent money and your retirement money.
But for your play money, we’ve got a better idea. Check out this chart:
It’s the S&P/ASX 300 Metals & Mining Index.
From this year’s peak, the index is down 28.7%.
That’s almost twice the drop of the broader S&P/ASX 200 Index which is down 15.6% from the peak.
And if you look at the above chart, it doesn’t look good. There’s a case to be made that if the global economy turns really bad, resources stocks could head back to 2008/2009 levels.
If they do, that would mean investors taking a big hit.
But, here’s the thing. Looking at an index and using it as a reason to not punt on stocks is one of the biggest mistakes you can make. Why?
Simply because even in falling markets, some stocks go up (just as some stocks go down in rising markets).
For instance, a stock my old pal, Diggers & Drillers editor, Dr. Alex Cowie picked in the March issue of his monthly newsletter has jumped 95%, even though the Metals & Mining Index has slumped 28.7%.
Of course, that’s not to say all stocks will rise. After all, an index represents the performance of a group of companies. If most of them fall, odds are the index will fall too.
But there will always be one or two stocks that will surprise you and buck the trend.
The point is, as an investor it’s easy to get side-tracked by “noise”. You know what we mean… Debt this… Credit that… Euro bailouts… and so on…
The fact is, despite all the noise, companies still make money. Miners still find untapped resources… And savvy businessmen still cut deals… such as billionaire sparky-turned-mining-entrepreneur, Nathan Tinkler…
As Bloomberg News reports:
“…Nathan Tinkler, Australia’s youngest billionaire who yesterday agreed to sell his coal assets for A$2.72 billion, is now looking for his next mining deal overseas.”
Just over a year ago, Tinkler’s company was valued at just $1.2 billion. That’s a pretty good turnaround – a 126.6% gain.
The interesting thing is how Tinkler makes money. He told Bloomberg:
“I like risk, I like leverage and that’s something that’s served me well in the past and will serve me well in the future. I have an aggressive mindset in the way that I do things and the way I deliver opportunities.”
One way of getting risk and leverage is to borrow a heck of a lot of money and put all your investing (or punting) eggs in one basket… such as buying a coal mine.
For most that’s neither possible nor desirable. The fact that so few people do that successfully tells you how risky it is.
But, taking risks is important. And so is using leverage. The key is how you manage it. Tinkler is like Warren Buffett. Few people can do what he does. So unless you’re one of the few, you shouldn’t try.
But that doesn’t mean you have to miss out. It just means knowing when and where to take a punt. And right now, with stocks taking a beating and the news full of noise about Europe and the U.S., it’s a great time to punt on a few carefully selected stocks.
Because just as a falling index can mask rising stocks, it can also hide stocks that have fallen further than the index.
Of course, there’s no guarantee this is the bottom of the market… But with many metals and mining stocks falling so much… And with the potential for big gains… it’s a risk worth taking.
That’s what we want to make sure you get. Yes, be careful. The market is very volatile. But don’t let that stop you punting on stocks that could reward you with a bumper payout… if the market goes up… or even if the market keeps falling.
Cheers.
Kris
P.S. Our old pal, Dr. Alex Cowie has a similar view about punting on small-cap stocks. The market is down, but in that, he sees opportunity. That’s why he’s released a new presentation where he talks about his six best resource investments for 2012. Unfortunately, we can’t reveal the details here, but if you’d like to know more about this rare opportunity, click here…
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Special Report: Six Extraordinary Resource Investment Opportunities for 2012
The Only Gold and Silver Stocks to Buy
The Secret Aussie ‘Bank Run’ is a Sign to Buy Gold
Why Gold Should Become Your ‘Stay Rich’ Asset
From the Archives…
How to Turn Paper Money into Silver and Gold
2011-12-09 – Kris Sayce
Will Silver Break Through $50 an Ounce in 2012
2011-12-08 – Dr. Alex Cowie
Investing in the Market for Survival and Prosperity
2011-12-07 – Aaron Tyrrell
China, the U.S. and the Scramble for Commodities
2011-12-06 – Dr. Alex Cowie
Santa Claus: A Market Rally Not Worth the Risk
2011-12-05 – Kris Sayce
For editorial enquiries and feedback, email moneymorning@moneymorning.com.au