Jim Letourneau's Blog

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The word “mania” is being thrown around with increasing frequency. There is a mania in metals, in metal-related ETFs, and in energy stocks to name a few. Investments that increase in value by responding to the fundamentals of supply and demand are not not necessarily the result of a mania. One of the challenges of being early on a long term trend is that your investment profile shifts over time.

At first you’re a contrarian, buying companies that nobody has heard of or cares about. Then you become smart money as some institutional money starts to participate. Financial products tailored to institutional clients start to appear allowing increasing amounts of capital to efficiently participate in the growth. Eventually you’ll be a momentum investor as good companies start to overshoot their traditional metrics. The crowd will want in at any cost near the end of the trend. Then we can start worrying about a mania.

I think the transition from being contrarian to being smart money has occurred for resource stock investors. We still have a few good years ahead of us before a true mania kicks in. Meanwhile the word is continually being misused by financial journalists when they apply it to commodities. Supply and demand will take many more years to re equilibrate.




The closest thing that I have seen to a mania is in “alternative energy” stocks. While many companies in the alternative energy sector have working products and increasing revenue, there are a few out there that are running on empty.