Last week, some of the world’s most renowned investors gathered in downtown Vancouver for the sixth annual Sprott Natural Resource Symposium. From July 30 to August 2, behind-closed-doors sessions let attendees gain insight from industry experts at the Fairmont Hotel Vancouver that was on par with this year’s theme,
The Best of the Best.
Stockhouse was on-hand to see all of the big names and rising companies in attendance, including
Sandstorm Gold Royalties (
T.SSL,
SAND),
Tectonic Metals Inc., and
Almaden Minerals Ltd. (
T.AMM,
AAU). Like the beautiful sunny skies outside, the mood throughout the conference was very cheerful and optimistic as market sentiment towards natural resources shows signs of brightening.
Nowhere was this truer than at the closing panel on Friday. Moderated by
Sprott US Holdings Inc.’s CEO Rick Rule and featuring a star-studded cast, panelists were upbeat and joked with each other as they recapped some of their biggest takeaways from the conference. Included were Adrian Day, CEO of
Adrian Day Asset Management, Doug Casey, Founder of
Casey Research, Jim Rickards, Bestselling author and editor of
Agora Financial’s
Strategic Intelligence newsletter, and Grant Williams, investment advisor and author of
Things That Make You Go Hmmm… financial blog.
The panelists were asked about what’s coming next, and not just in the world of natural resources. From witty quips to serious debates, they openly discussed which market sectors they’re focused on, as well as those that they’re likely to avoid. Here are two of the highlights that captured our attention.
(Rick Rule moderates the last panel of the 2019 Sprott Natural Resources Symposium)
Commodities could get explosive
Doug Casey joked that, outside of friendly aliens landing on the roof of the White House and curing the world of all financial and economic ills, he’s pretty confident about his market predictions. One of those predictions that he went in-depth on at the panel was that many commodities are raring to go:
“I’ve gotta say, it’s not just gold. Almost all of the commodities are really cheap and could get explosive. Like for instance the hog [pork] market. I trade commodities, I’ve usually stayed away from hogs, because of the cycle of baby hogs to big hogs is too short. Anyway, right now, you never know what to believe, but it appears that the Chinese already called about 30% plus of theirs [sic] because of African swine flu... Swine flu is spreading all over Asia and into Europe. So you think, well hogs could explode upwards in value.
And then I look at corn. But wait a minute, hogs eat corn, and if there are less hogs they’re going to eat less corns. Even though corn is above break-even for farmers.
These commodities are really interesting. Coffee is selling way below the cost of production. Soybeans, even in South America where we can go them cheaply, they’re so cheap. I’ve got good soybean land and we haven’t even bothered planting soybeans this year... All of these commodities are very cheap, at or below cost of production. I don’t recommend you trade futures, it’s very dangerous. But I think we’re going to see a big commodity boom. It’s not just going to be gold and silver.”
(Jim Rickards responds to a panel question at the 2019 Sprott Natural Resources Symposium)
Look to business development companies (BDC)
When asked where investors could find a “safe haven” for investment in today’s relatively uncertain market, Adrian Day found that his answer has changed drastically over the last year. When he looks around the world, he can’t see a definite place that he would endorse to invest or put a lot of money in, because “frankly everything pretty much is expensive right now.” But one sector that he’s keeping his eye on is the business development sector in the US.
“At the moment, the market was worried about interest rates, and worried about the economy slowing, so companies that lend money to small businesses typically have been hurt, [because] the sentiment is wrong. I think the market is missing that these companies actually do well in recessions… You look at Ares Capital. That is the largest, a $16 billion dollar company, and one of the more conservative. It's yielding over nine percent. Nine percent fully covered by net operating income… Golub Capital, GBDC, they have never had a single default. This is astonishing for a company that lends money to small businesses. They're yielding over seven percent.
These are extremely good yields in this kind of environment. And these are yields that are covered by net operating income, which is the mantra they have to use to base their payouts. Obviously, when you say business development, there's a lot... High risk ones, low risk ones… some specialize in mezzanine, some do equity as well, some specialize in a sector like tech… You can't just say ‘I like BDCs and I like them all,’ there's a structure, just like real estate trusts or corporations. Nobody could say ‘I like corporations.’ But some of these are just astonishing right now, frankly. They sold way off at the end of last year, because of [sic] interest rates going up, and they just haven't fully recovered yet.”
If you missed the conference and want to catch up on this and other panels, you can
purchase recordings of the entire symposium.