Disclosure: The following represents my opinions only. I am long AAV.TO, ARX.TO, CRE.V, EOG.V, TAO.V, TNZ.TO, AOI.TO, SEI.V, NSE.V, and XYZ.V (Image credit to Markus Spiske on Unsplash)
A little over a year ago, I drew on the wisdom of Kenny Rogers with good results, but remember that The Gambler tells you that you need to know when to hold ’em… and when to fold ’em. If I’ve learned anything from my trips to Vegas over the years, it’s that the tables will always teach you about the importance of humility should you ever get too confident in your ability to predict random future events. To that end, I’ve played shoes of blackjack where it literally didn’t matter what I did; I just couldn’t lose. Likewise, I’ve played other shoes where, no matter how ‘skillfully’ I played, I just couldn’t win. Trust me when I say that coming to the end of the “can’t lose” shoes always has you thinking about how much more you should’ve/could’ve bet, while the “can’t win” shoes will make you wonder how it’s even possible that a stack of random cards could be so cruelly organized. To that end, ask any blackjack player about the concept of “streaks” and I guarantee you’ll get some stories. The fact that streaks happen doesn’t somehow fly in the face of statistics, but when they do happen, they definitely feel “unnaturally” good or bad… and they will evoke all of the emotions from glee to despair. I bring this all up because, from the 2020 lows, the market was one giant “can’t lose” shoe. It didn’t really matter what you owned coming out of those market lows from two years ago… a monkey could’ve made money throwing darts in that market. Heck, people were paying $300,000 for cartoon pictures of monkeys (not even real ones) before the streak broke. It went something like this… First, the meme stocks broke, then the SPACs and unicorns, then crypto, then just tech stocks in general, then the indexes — and now, the market malaise has finally caught up with energy and commodities. As a group, energy stocks are down around 25-30% from their June highs, while most metals stocks (copper, uranium, lithium, take your pick) have been nearly cut in half since their April highs. That’s likely an unfamiliar feeling for folks like me who have benefited from the resilience of commodities since the broader market peak six months ago, which brings me right back to where I started this paragraph — humility. Things had become pretty heated in the commodities square, and pullbacks are inevitable, but it seems like it’s probably a good time to take stock of where the market stands.