Into the Market Frying Pan!

When I wrote in last Friday’s Rude Awakening that I had sold my stocks, I had a funny feeling I’d be back in sooner rather than later. It seems I prefer the frying pan of the markets to the fiery waiting of purgatory.

Jay Powell announced his 50-basis-point cut last Wednesday, and I was surprised. I had thought a 50-basis-point cut was too much, too late. The market would know that Jay knew something was wrong with the financial plumbing, which would be bad for the stock market.

The stock market initially fell on the news but rallied hard on Thursday. It’s been pretty flat ever since.

Move Over, Laowai

Then, the People’s Bank of China (PBOC) had to get involved. Their monetary stimulus would provide an unforeseen fillip to the commodities markets. After all, when China does something, it’s inevitably big.

The PBOC rolled out its biggest moves since the pandemic earlier this week to stabilize the economy and revive market confidence.

The PBOC reduced the reserve requirement ratio (RRR) by 0.5 percentage points, freeing up approximately 1 trillion yuan ($142 billion) in liquidity. Further reductions in the reserves Chinese banks must hold may happen this year.

To encourage borrowing and investment, it also cut the seven-day reverse repo rate from 1.7% to 1.5% and reduced the medium-term lending facility (MLF) and loan prime rates by 20-30 basis points.

Mortgage rates for existing home loans will be reduced by around 50 basis points, aiming to lower household expenses and stimulate consumer demand. Additionally, the downpayment requirement for second homes was reduced from 25% to 15%, targeting the property market’s recovery.

The PBOC introduced new tools to support the stock market, including a swap program and funding facilities for commercial banks to assist with stock purchases and corporate share buybacks.

With the Chinese easing so decisively, I knew it was inflationary and that commodities and their plays would benefit. Almost inevitably, it was time to get back in. But before I reveal my portfolio to you as it currently stands, let me first tell you what I left out.

No Tech Yet

Though I may be wrong, I’m not entirely comfortable with the price action in my three tech stocks.

ASTS

ASTS is trading 30 cents below its 50-day moving average. It has been going downhill since the end of last month.

But Ray Blanco says there’s still plenty of upside to this stock, and I believe him. The stock’s warrants expire on Friday, and that may root out more shorts. That, and many other catalysts, can shoot the stock towards $60.

NNE

Nano Nuclear’s price action has been abysmal lately. I should’ve stopped myself out of this trade weeks ago. However, I still like this stock’s long-term prognosis.

PLTR

There’s nothing wrong with Palantir.

It’s starting to pull away near the year’s anniversary of my picking it for the Whisk(e)y Bar in Vegas. I think it’s a great pick, thanks to the Cantillon Effect, which makes investing easy. Still, I’ll wait for a pullback to re-enter if I find nothing more desirable.

RKLB

As my son used to say, “Ouchy!”

This stock had a YUGE day yesterday, and it looks like it’s doing nothing but going up. I don’t want to chase it too hard right now. Hopefully, it’ll settle for a bit before its next ascent.

The Miners I Left Out

OGN.V

This is Rick Rule’s pick from Vegas, and has more than doubled since he recommended it. It’s just looking a bit toppy right now.

Perhaps I’ll revisit this stock soon, but for right now, I’ll leave it out.

PGE.V

Stillwater hit $0.22 and then died. Its price action since that peak has been abysmal. I’m thrilled to be rid of this loser.

Now, here’s what’s in my portfolio.

The Miners That Made It

Avino Silver and Gold (ASM), Hecla (HL), Kinross Gold (KGC), and SilverCrest (SILV) all return to the portfolio.

After a prolonged absence, First Majestic (AG) and Sibanye Stillwater (SBSW) are back in my portfolio.

Endeavor Silver (EXK) and Coeur Mining (CDE) are new entrants.

All of these stocks were up bigly on Tuesday.

Immediately Back: ASM

I loved ASM’s price action on Tuesday. It broke out of its nearly 6-month range.

HL

Hecla had broken out previously, but just broke out again!

KGC

It’s not a full breakout from KGC, but I like its chances.

SILV

After a couple of massive days, SILV is poised to break out again.

Above $10.20, we’ll target $13.00.

Back After a Prolonged Absence: AG

Another big up candle two days ago, signaling a breakout:

That’s after a big double bottom in August and September. The stock has recaptured both its 50-day and 200-day moving average. Once the 50 exceeds 200, we’ll be in for smoother sailing.

SBSW

This one is much more of a risk.

Ultimately, SBSW is a play on South Africa. That’s risky, but hopefully, being a BRICS member will smooth this out. Once we get above $4.50, we target $5.00. Above $5.00, and I think we have smooth sailing for a while.

New Entrants: CDE

Coeur Mining just came off a double bottom and had two technical breakouts recently.

The first target is $9, then $13.

EXK

Though riskier, I like Endeavour Mining’s chances.

The upside target for EXK is $11.25.

Bonus: FSM

After resetting my portfolio, FSM appeared on one of my favorite stock screeners.

I didn’t want to own more stock, so I expressed my bullish view with call options.

I paid $0.84 for 10 Dec 20 4.50 calls. If the stock hits my upside target of $6.70, the option should trade for $1.36, which would net me a 61.9% return in under three months.

Wrap Up

Am I loaded with miners? Yes.

Am I swinging for the fences like I did a year ago? I don’t think so.

Some of these stocks are riskier, but most are solid companies that will do well in a commodities bull market.

I invested 9.5% of my portfolio in each stock and just under USD 1,000 in my options position, as the options are time-constrained. I may add to that option position later.

23.4% of my portfolio remains in cash, waiting for the right time to take advantage of Ray Blanco’s excellent tech and biotech picks. Like Warren Buffett, I’m keeping some powder dry for now.

None of this is financial advice; it’s just the unvarnished truth of what I’m doing now.

I hope this helps.