Part I of this three-part series dealt mainly with the general. It identified the basic premise of successful investing (“buy low/sell high”), and then explained both empirically and as a study in psychology how/why most investors violate this Golden Rule with their investing.
Readers were introduced to the Contrarian paradigm of investing. It was then shown how adopting this Contrarian perspective offered investors the only realistic possibility of buying low and selling high – on a potentially consistent basis.
The first part of this series then concluded by explaining what makes gold and silver mining companies a Contrarian’s Dream: a “low tide” sector which is currently bereft of any investment capital; yet despite the un-loved status of this sector it has a 12-year bull market behind it.
The obvious inference here is that if a sector at “low tide” can have a 12-year rising trend behind it; imagine where it will go when the tide finally comes in. Emphasizing this premise; Part II will illustrate how/why precious metals and precious metals miners have the most-favorable fundamentals of any sector…going forward.
There are far too many bullish fundamentals backing gold and silver themselves to merely list them all. Indeed, summarizing only the reasons why precious metals “must rise” in price over the long term is beyond the scope of this piece. However, readers interested in such analysis have plenty of past commentaries from which to choose, beginning with The Three Legs of the Precious Metals Bull.
It will full occupy the space available for this analysis just to explain why gold and silver miners must leverage those gains in bullion prices over the longer term.
When one speaks of any commodity-producer “leveraging the gains” in price for the commodity they produce (over time); this notion is not a mere suggestion. It’s not a “theory.” It’s not even merely “conventional wisdom.”
This is simple arithmetic, and so (just as 2 + 2 = 4) it must be true. An easy, hypothetical example demonstrates this concept in tautological terms.