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The Value Trap
By: Erik Swarts | Sunday, January 27, 2013
If you have followed me on Twitter over
the past six months you know that one of my standing refrains throughout the
weeks has been that the precious metals miners are still one of the larger
value traps of this market cycle. And similar to the financials in the tail
end of the previous cycle - it has ensnared some rather large whales in its
net. From the sophisticated palettes of Einhorn to Gundlach, the extraordinary
valuations of the miners - relative to gold, have been too attractive to simply
pass up for these marque money managers.
Generally speaking, I have maintained a bearish perspective on the miners
- despite valuations, for the simple reason I believe(d) weakness in the precious
metals complex was and is ongoing.
Perhaps it may be come sooner than I anticipate, but similar to the financials
trading through 2008 into the first half of 2009 - cheap - can get a whole
lot cheaper.
Although I am an active trader, I have always taken a broad perspective when
approaching the markets. I respect the Big Picture and attempt to place each
piece of information within its appropriate context and timeframe. I have found
that without this approach, there is very little understanding of ones expectations
in the market and an endless potential for risk.
I am not a stock picker - but trade the broader market itself in varying timeframes.
I want to know which way the prevailing wind is blowing, where the doldrums
can be expected and where the shoals will likely rise. I will not claim to
know which vessel is the fastest or most comfortable for passage - but I can
read the charts and know the risks.
I am not a salesperson for the market and its many wares. I observe it, contextualize
its moving parts - both visible and discrete - and interpret.
I practice Market Anthropology - Welcome to my notes.
Erik Swarts is not a registered investment advisor. Under no circumstances
should any content be used or interpreted as a recommendation for any investment,
trade or approach to the markets. Trading and investing can be hazardous to
your wealth. Any investment decisions must in all cases be made by the reader
or by his or her registered investment advisor. This is strictly for educational
and informational purposes only. All opinions expressed by Mr. Swarts are subject
to change without notice, and the reader should always obtain current information
and perform their own due diligence before making any investment or trading
decision.
