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Pent-Up Potential for Precious Metals in 2013: Jason Hamlin

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TGR: Jason, you recently told your Gold Stock Bull readers that you had sold some equities. What were your reasons for selling?

Jason Hamlin: At the time, we were nearly fully allocated and decided to move to a position of roughly 20% cash. Even though this is a high seasonal period for precious metals, we sold a couple of underperformers to take advantage of any potential year-end selloff driven by concerns about the fiscal cliff and its impact on economic growth. There are also year-end opportunities for tax-loss selling and we want to have some dry powder for bargains that may materialize over the next few months in quality resource stocks.

TGR: Do you believe investors should reduce risk and take a more conservative approach until we know what are the repercussions of the fiscal cliff? Continue reading "Pent-Up Potential for Precious Metals in 2013: Jason Hamlin" →

Rick Mills: Low-Cost Producers Trump Larger Mines in Costly Market

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The Gold Report: Rick, is this a good time to be buying gold?

Rick Mills: There are three key reasons to have exposure to gold bullion. The traditional reason is to protect against inflation. We're printing money. More quantitative easing has taken place and inflation looks to be coming down the pike. I buy groceries. I pay for gas. I can see inflation. I firmly believe it's going to get higher over the coming months and years. Buying gold as a protection against inflation is realistic.

The second reason investors have traditionally bought gold is as a safe-haven investment. There's a lot going on in the worldfrom secession talk in the U.S. to turmoil in Israel, Iran, Syria, the South China Sea region and Turkey.

One of the things that most investors don't know about gold is that adding a gold allocation to your portfolio, especially over the last decade or so, has provided substantial enhancements to the portfolio's return.

Gold helps minimize the downside deviations in an overall portfolio. In 2002, the SP 500 was down 23%. Emerging market equities were down 6%. International equities were down 16%. Yet gold was up 25%.

TGR: That was early in the bull run in gold. Continue reading "Rick Mills: Low-Cost Producers Trump Larger Mines in Costly Market" →

Paul van Eeden on Why Gold is Overvalued

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The Gold Report: Paul, your speech at the Hard Assets Conference in San Francisco was titled "Rational Expectations." You spoke about monitoring the real rate of monetary inflation based on the total money supply.

You take into account everything in your indicator that acts as money, creating a money aggregate that links the value of gold and the dollar. You conclude that quantitative easing (QE) is not resulting in hyperinflation and is not acting as a driver for the continuing rise in the gold price. What then is pushing gold to $1,700/ounce (oz)?

Paul van Eeden: Expectations and fear. It's very hard to know what gold is worth in dollars if you don't also know what the dollar is doing. When we analyze the gold price in U.S. dollars, we're analyzing two things simultaneouslygold and dollars. You cannot do one without the other. The problem with analyzing the dollar is that the market doesn't have a good measure by which to recognize the effects of quantitative easing.

Since approximately the 1950s, economists have used monetary aggregates called M1, M2 and M3 (no longer being published) to describe the U.S. money supply. But M1, M2 and M3 are fatally flawed as monetary aggregates for very simple reasons. M1 only counts cash and demand deposits such as checking accounts. M1 assumes that any money that you have, say, in a savings account isn't money. Well, that's a bit absurd.

TGR: What comprises M2? Continue reading "Paul van Eeden on Why Gold is Overvalued" →

Rick Rule: Be a Risk Manager, Not a Reward Chaser

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The Gold Report: Rick, you believe the natural resources sector is experiencing a cyclical decline in a secular bull market similar to the 1970s. Is that true for other sectors as well?

Rick Rule: I learned the hard way not to assume that my success in the natural resource business was transferable to other sectors, so I am going to stick with resources.

However, there are parallels with the gold market. In the 1970s, we had a spectacular resource market, in particular for gold. Its price soared from $35/ounce (oz) to $850/oz. By 1975, in the middle of that secular bull market, gold had fallen to $100/oz. Those who sold at the bottom missed an 800% move in six years.

"I own gold the way that I own life, auto or homeowner insurance. I regard it as catastrophe insurance."

It is important to understand that in cyclical markets like resources, declines in secular markets are to be expected. From my point of view, you need to understand cyclical declines for what they aresales.

TGR: Is it fair to think that the prices of natural resources will bounce back as they did in 1970s, when the recession was much shorter and not as global? Continue reading "Rick Rule: Be a Risk Manager, Not a Reward Chaser" →

What Every Investor Should Know About Income and Growth: Kenny Feng

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The Energy Report: Kenny, you are a former MLP portfolio manager. You've also been an analyst at a bulge-bracket investment bank, Goldman Sachs Group Inc. (GS:NYSE), where you followed the energy and power sector, as well as MLPs. Is Alerian similar to Standard Poor's or Russell Investment's indices?

Kenny Feng: Yes, it's similar in that we are purely an indexing firm that maintains benchmarks for the MLP sector. But we are also an education provider for the asset class and aspire to be the Wikipedia of MLPsthe first-pass information source for an investor who comes across the sector through an article in Barron's, a commercial on CNBC, a conversation with a friend or financial advisor, or even through one of these interviews at The Energy Report. So besides the statistics we provide, we also speak at conferences and conduct free teach-ins to educate the investment community about MLPs.

TER: Do you manage any assets?

KF: No, and because we don't manage any assets, the investment community views Alerian as an unbiased source of information. We field questions for investors across the spectrumfrom individuals who have $100 to invest, to the multibillion-dollar institutions that are conducting due diligence on the sector prior to making a percentage allocation to the asset class.

TER: How does Alerian make money? Continue reading "What Every Investor Should Know About Income and Growth: Kenny Feng" →