An astute reader asked me about exit strategies going forward, specifically in light of the lack of one during the 2011 peak for resource stocks. That may seem like a problem for another day—a day that may seem far distant while resource markets are still down. But it’s good to think ahead.

First, let me say that when investors speak of exit strategies, they usually mean as regards individual long-term investments. I suppose one could say that a day trader has an exit strategy. But that time horizon is measured in hours or minutes. It’s really just implementing the short-term trading strategy. More generally, the idea is to consider how to get out of a substantial investment before getting in.

Here are some considerations I keep in mind as a junior resource stock speculator:

So, one way to look at an exit strategy for the next resource market peak is simply to apply whatever exit strategies you adopt for individual speculations very consistently as you go. That locks in profits as you go, so you don’t have to worry about timing the perfect time to exit the market as a whole.

After that, it gets murky. Exiting an entire market implies calling a top. Few people can do that except in hindsight. Consider the Bitcoin (BTC) craze of 2017. By September, BTC was up 5x for the year. A good time to exit? Maybe, but it doubled again by November. That was surely the time to sell, right? But it almost doubled again a month later. No one could have said in January that the right time to sell was when BTC hit 19x for the year.

But this I can say: when things go from being undervalued contrarian speculations to overvalued popular picks, it’s a good time to look to make more exits than entries.

As always: caveat emptor.

Monday, December 10, 3:16pm, EDT, 2018