We’re nearing the end of the year… and in Canada that brings two things:
The cold, and
“tax-loss selling” season.
Tax-loss selling happens in the Canadian markets at the end of every year. Investors sell their stocks… write off the loss… and buy them back in the New Year.
This causes a predictable dip – and then a predictable rise in prices.
And this year, the extreme cold is bringing another opportunity to the table…
Click below to watch my video update (or read the transcript below) and get the latest on what’s coming…
Got your hat on? Good. It’s a little bit chilly here.
Those of you in Minnesota or New York state are going to laugh at me, but it is pretty cold for Vancouver. It’s getting close to zero here, and I’ve actually come down to film this right by the water. I’ve got the bay behind me, which is one of the coldest parts of Vancouver, and I’m doing that to make a point, which I will get to in a moment about one opportunity that I think is going to be a big one for us the next few months.
Latest on Rare Earths
As you know, a few months ago I became very bullish on rare earth elements because of some happenings that I observed firsthand in Southeast Asia that I think are going to be a big disruption to supply.
And other people are starting to pick up on that theme. Forbes magazine actually published an article a couple weeks ago calling on the U.S. government to ensure supplies of what they call “critical elements.”
Critical elements include rare earth elements, vanadium, and cobalt, which are other metals I’ve invested in in [the International Speculator] portfolio.
That was encouraging. Even bigger than that was an editorial published in Breaking Defense, a defense watchdog, by a fellow named Andy Kaiser.
Andy Kaiser was a former national security advisor to the Trump administration, and he published an article basically saying what I said in my original update on rare earths, that 80% of the world’s supply of rare earths comes from China, and that is a major security risk not just for the U.S. but for countries around the world relying on China for supply of metals that are that critical to defense applications, aerospace, things like that.
Mr. Kaiser basically was exhorting the U.S. government to ramp up domestic supplies of rare earths, which would be great for a number of [International Speculator] portfolio holdings.
So all of that was very positive.
Buying When Markets Are Quiet
The market in general is quite quiet now, the commodities and stocks market.
On the Canadian exchanges where many of these mining companies are traded, we’re getting into the end of the year and that’s typically a time when Canadian investors engage in what’s called “tax-loss selling.”
Many Canadian investors will sell companies at the end of the year to take a tax loss so they can write that off against their taxes for the year. Often what happens is they buy them back almost immediately in the New Year, so while you get a drop in the end of the year in November and December, you often get a surge in January and February as everybody buys back into these companies that they sold, not because they wanted to get rid of them, but because they wanted to book a tax loss.
I’m expecting that to happen. I expect the next few weeks up to the end of the year are going to be quite quiet because of things like that, so I’m not looking for a lot of action. But it’s encouraging to see that the themes we’re talking about are going more mainstream, and it’s just confirming my thesis that these are big stories waiting to unfold like the rare earth elements.
I think we’re going to be hearing a lot more about that. In the meantime, if you’ve got your positions in the rare earths companies, hold tight. Same with vanadium and cobalt.
We’re in, we’re positioned. It often takes time for these big-picture themes to unfold, so all you can do is get in, and you want to get in when it’s most quiet. We’ve gone into these stocks at pennies, and a day will come when people are going to be falling over themselves to get into them at a dollar or two dollars, five dollars. So the fact that we’re buying now when things are quiet enables us to get in at these cheap prices. It means we have to wait a little bit for the story to unfold, but I’m happy to do that to have extra upside on the stock once things start to move.
Why Energy Stocks Could Explode
So what else is happening?
Well, the reason I’m here braving the cold weather, is because I want to talk to you about energy…
Now energy is an incredibly beaten-down sector of commodities right now. Some energy companies – I was just doing a screen on midstream companies, companies that operate oil and gas pipelines.
Some of those companies are trading at incredibly cheap valuations. One company I was looking at, one midstream firm, is paying a 22% dividend yield. So if you buy a dollar worth of stock it will pay you 22 cents, which means if you held it for five years you would actually make your entire purchase price back and more and still own the stock. It’s incredible to see valuations like that.
And these aren’t fly-by-night companies. These are well-established companies that own huge networks of pipelines, of shipyards, of barges. And seeing things like that makes me think there’s a big opportunity lurking in the energy sector.
And there’s a number of other things that have made me think about energy.
New York is going through an interesting turn of events right now. Some of you who live there are probably acutely aware of this in that there is a growing or looming natural gas shortage in New York.
So what happened? The state utility that supplies natural gas to consumers’ homes, they wanted to build a natural gas pipeline to bring in more natural gas supply that they could then pass on to consumers.
The state nixed that pipeline; they refused to approve the permits for the pipeline, citing environmental grounds. And this is all against the backdrop of growing climate change concerns where anything oil- and gas-related is seen as potentially contributing to climate change and is being held back on those grounds.
The natural gas pipeline that the state utility wanted was not approved. The utility then turned around and said, “Well, we don’t have enough natural gas to supply customers. We’ve got thousands of people who want to hook up to natural gas to stay warm when temperatures are like they are now here or colder, but we don’t have the gas to supply them. So we are not going to hook up any more customers because it’s going to endanger the supply to our existing customers.”
Well, this caused an uproar, all the way up to Governor Cuomo, who got involved and publicly berated the utilities, said they were gouging consumers and threatened to strip their license. He gave them 14 days in fact to come up with an alternative plan or he was going to strip their license.
Now this is the height of insanity, to say to a company, “We’re not going to allow you to have natural gas supply, but you must keep supplying everybody and more.” I mean how are they supposed to find the supply magically? And Governor Cuomo said, “Well, they should look at alternatives. They should look at building an LNG [liquified natural gas] facility.” And if they can’t permit a pipeline in New York state, permitting an LNG facility in Manhattan is going to be impossible.
So anyway, it was a big rigmarole. Finally, the utility capitulated and said, “Okay, all right, we’ll go ahead and hook up these people anyway.” But the end result here is probably heading toward a natural gas shortage, and these local natural gas shortages in big markets like New York can be incredibly explosive.
We’ve seen prices – when the wind is blowing like it is now – when it gets cold, even though the overall natural gas market is quiet, prices in some places the last few years have suddenly exploded. You hear about the natural gas price being $2.00 per MCF [1,000 cubic feet], in some parts of the U.S. they have temporarily exploded as high as $400 per MCF during periods of cold weather.
So those are the kind of big dislocations in the market that I’m interested in because some stocks can really take off when things like that happen. And we’re at a place in the energy market, I believe, where we’re going to see an increasing number of those local disconnects, mispricings, misallocations of supply where some stocks are going to be well-positioned to take advantage of this.
Another recent example is an oil tanking company, oil shipping company, called Teekay Tankers.
Teekay has ships that are used to transport crude oil around the world, and in this case the disruption was Iran. The world’s biggest oil tanking company, a Chinese firm called Cosco, got caught using their ships to bring oil to Iran, which is against international sanctions.
Immediately the U.S. sanctioned Cosco, sanctioned the Chinese shipping company, which suddenly meant that everybody who is shipping oil around the world could not use those ships. They’re the largest supplier of oil ships around the world, and suddenly all those ships were untouchable. Well that caused a massive surge of demand for ships that were not part of the Cosco fleet, such as Teekay Tankers’, which is a U.S. company that provides similar ships.
Now, when that happened a couple of months ago, the share price of Teekay Tankers doubled from $10 to $20 in a matter of weeks.
So those kinds of things are happening right now where we’re getting explosive growth in energy stocks. Watch for more content on unfolding opportunities in energy as we go into the New Year.
In the meantime, stay warm. I’m going to keep walking the path quickly here so I can stay warm. I’ll talk to you soon. Take care.
Dave Forest is our in-house commodities expert. He’s a professional geologist… global explorer… and successful gold stock speculator.
He travels to remote corners of the globe to uncover the best money-making opportunities. His recent visits include Brazil, Myanmar, Colombia, and Uzbekistan, just to name a few. All told, he’s visited 30 countries and over 200 mines.
Every month in his International Speculator newsletter, he uncovers junior mineral exploration companies with the potential to double or triple in 12–24 months. It’s the perfect resource for anyone looking to make a fortune during the coming commodities boom.