I am sure you have heard about the WallStreetBets crowd short squeeze on Gamestops stock over the last two weeks. We have also been deluged bey the media with anecdotal stories about the guys that turned a few thousand dollars into millions.
This is great for them but it is like telling the story of a lottery winner. Just because a guy down at the local tire changing shop won the lottery does that mean we should play the lottery? Of course not it is a suckers game.
Catching a few hedge funds offsides being naked short a stock like Gamestop is a great trade but that is an anomaly and function of being in the right spot at the right time. It is not a consistent way to make money in the market.
The way to make long term and consistent profits in the stock market is to buy undervalued companies, countries, securities, and hold them until they become fully valued. This is how the great investors make their money.
For example
The chart above shows the fact that investment in new mines is at a 62-year low. This means that all of the materials we need for civilization and economic growth have not been invested in which is leading to a supply squeeze in many of these materials. In fact, many of materials we will need for the green new deal or electrification of the economy will potentially be in short supply.
The price for these materials will have to rise substantially to incentivize investors to find and bring on the new production in order to meet the demand for these materials. That is an opportunity that few are currently aware of and one that can be exploited by people in the know.
We are looking ahead to a decade of higher commodity process as years of under investment in new supply now makes its mark on the markets. This is a consistent way to make money in my view and one that will not be a one trick pony.
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