Best of Caller Questions

SPEAKER_1 (0:01)

This is InvestTalk, from KPP Financial, helping investors make sense of the markets one day at a time. And now, here are Justin Klein and Luke Guerrero.

Justin Klein (0:16)

To take a live call, Dan in Walnut Creek wants to talk about precious metals.

SPEAKER_3 (0:21)

Hi there, Justin. Thanks for taking my call. Yeah, it's just kind of curious.

It's since precious metals seem to be in a little bit of a downtrend right now, it's a good time to buy.

Justin Klein (0:31)

I do think we're getting to that point where it's going to be a nice buying opportunity. Now, we still may see a little bit more down from here, but we're starting to enter the zone.

And when I say the zone, it means the area where these stocks broke out. Now, are you talking about gold and silver itself or the miners?

SPEAKER_3 (0:52)

The miners, mainly, they held on for a little while, but they're starting to go down a little bit now too.

Justin Klein (0:58)

Yeah, they pulled back. The GDX hit the lowest level today since early January. So even with this large pullback, it's actually still up on the year. And it's approaching levels where you saw the peak back in October and you had a bit of a sell-off that refreshed everything, went through a consolidation period and then broke out kind of the beginning of the year.

And that high in October was right around $85. GDX today closed at $88.

So I think there's support in this area. When you have a pivot, we call it a pivot point where it hit a high and reversed for a period of time and then it broke back above, broke out of that pivot point. Oftentimes, when it returns to that price after the subsequent sell-off like you're skidding now, that is good support. And so, is there another 2-3% down on miners maybe over the next week or two? Absolutely. I think that's certainly possible. But this is that zone. Mid-80s is where you want to pick up GDX or the subsequent miners within it if you feel you need to up your position in precious metals. Now, a lot of people have a lot already, especially if you listen to this program for a period of time, you've probably bought some precious metals and you own a lot. So maybe you're feeling a little pain in the near term, but clearly, it's still in a broader uptrend and it's starting to enter that zone of adding to positions, especially if you maybe trimmed your positions over the past couple months ago when I was saying sentiment was a bit frothy. Now, it's starting to get reset and I think that's a good buying opportunity.

SPEAKER_3 (2:36)

What about copper? I know that southern copper has been going down and I don't know if that's because of issues and people are concerned with Mexico or if that's just what's going on with that.

SPEAKER_4 (2:48)

No, it's simply industrial epic.

Justin Klein (2:49)

When the input to industrial products is energy of some kind, whether it's natural gas or oil, then it makes it less economical to produce those goods and that means less money or less demand for things like copper. There's also the stronger dollar that's an aspect here. There's a dearth of supply coming out of the Middle East as well. So there's a lot of reasons for this pullback in metals in general, and copper, I think, is just getting caught up in that. And I also think that we're close to getting to a point where it's a good place to pick up some names. Thanks for the call.

Luke Guerrero (3:28)

Let's head over to the InvestTalk YouTube comment section of the question bank to take a look at this question that came in yesterday. And it says, You mentioned fertilizer and second beneficiary. Would you say petrochemical companies and grains especially will do well moving forward? Supercycle or just medium term, ADM, CF, and ANDE are examples. Thank you.

Well, a little bit convoluted to be able to fully predict what second-order effects will be of rising input costs. We talk about this and we actually have a story we're going to be talking about a little later on about how a lot of people are focusing on oil, but the components that are making up fertilizer, a lot of that comes from the Middle East and passes through the Strait of Hormuz. I have heard stories, been talking to people, farmers who are already worried about the cost of fertilizer. And it's not just a cost thing, right? At a certain point, it becomes less about how much you have to pay. And if you'll be able to pay at all, will there be supply for you to purchase? And so certainly a lot of these names have run up as you expect revenues to increase dramatically because of how important and critical a lot of these goods are. Grain, food, things that need to be produced.