Eaten at Both Ends

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Being a small cap investor in this market is hell and that’s because your portfolio is being eaten at both ends. 

At one end, your winners are being looked at like raw sushi by majors/mid-tier producers, who know a deal when they see it and know that if you buy in a down market you do not overpay. I think we are going to see lots of companies that could have been real winners go away for pennies on the dollar.  Imagine a whole fresh copper river salmon going for the price of six salmon rolls (and that’s at the cheap sushi place around the corner from Teck’s office on Bentel). 

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On the other end are the bottom feeders in your portfolio, who are busy barfing up new paper at two or five cents to stay alive, or they’re just folding/going away; in either case, your position is wiped out. I am seeing companies who are going to be doing a rollback every year from the way they are restructuring, and in that case they are failing to complete the new financing at five cents after rolling back….

In the middle stands you; historically, the winners paid for the losers, but in this case the winners are not winners and the losers are just wiped out. Overall, nothing looks good. 

The question is: are we at market bottom or is it still not here yet?

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