Wednesday, May 18, 2016

Overvalued vs Undervalued compared to a time perspective

What is overvalued and undervalued is a subjective judgment. Institutional investors, either they are ETF, which are passive investors, so by indices, the S&P 500, or what not... or they are active managers, and the hedge funds are also active managers. Now, they don’t care about what will happen in five years time. They care what will happen within the next week. They want to be in stocks that move within a week, within a month, because they need to show performance. If they don’t show performance, then the clients leave them. So everything has become very short-term oriented, and I would suggest to an investor to forget about the short-term and to think from a longer-term perspective, where is their value?

I happen to think and agree with Rick Rule that there is value in gold mining shares. And personally I hold, of course, much more in physical gold than in gold shares, but because I’m a director of NovaGold and Sprott Inc. and Sunshine Mining and Ivanhoe, I also own shares, and I think they’re very cheap at the present time, and they could easily double, all of them, easily.

Look. Investors buy high and sell low. Please remember that. 

I went to dinner, in 1999 in St. Moritz in Switzerland. There were lots of people with money and they said, “Oh. We make so much money buying and selling the NASDAQ and tech stocks as well. 

Then they ask me my opinion. 

I said, “Gold is very cheap.” It was, at that time, $255, or something like this. Then they said to me, “Gold only goes down,” because yes, it has gone down from $850 in 1980 to $255, but I told them, “Because it only goes down, it interests me to buy it, because it’s a neglected asset class.”