Buying Opportunity

I said a couple weeks ago, to a group of friend and investors, that I think a buying opportunity in the precious metals space is coming. Well, I think that opportunity is here.

Not only are the shares absolutely depressing but the sentiment is at an extreme low.

As an investor it makes a lot of sense to bet against the crowd when market participants are highly concentrated on one side of a position. In the case of the gold miners this is 96.67% of traders. Who is left to sell? How much further can it go? The answer is not much, we are already at a historical extreme.

The best way to capitalize on this opportunity is to purchase high quality producers, such as New Gold and Aurcana, and the royalty companies like Franco Nevada and Silver Wheaton. A basket of these four companies or any quality miners should prove a prudent investment through the rest of the year.

Alternatively, for the more risk adverse investor, a combination of PHYS, PSLV, GDX, GDXJ would produce similar results.

Investing in a Low-Growth World and We Have Met the Enemy, and He Is Us

In GMO's 4Q 2012 Letter, Jeremy Grantham revisits last quarter's topic in "Investing in a Low-Growth World" and Ben Inker challenges investors to rethinktheir search for diversifying assets, strategies, and managers in "We Have Met the Enemy, and He Is Us. 

PDF Here:
https://www.dropbox.com/sh/5d0p5r60p8jpbzw/AzRzbjDQpX/GMO_QtlyLetter_4Q2012.pdf

Sprott - Ignoring The Obvious

Ignoring The Obvious
By: Eric Sprott & Etienne Bordeleau

Not a day goes by without hearing about the fiscal cliff, the debt ceiling or another political deadlock. We would not disagree that some of these are important issues that need resolving but, in the grand scheme of things, they are relatively superficial. As we all know, central banks around the world have been frantically expanding their balance sheets. While exceptional times might warrant exceptional measures, Figure 1 below paints a rather troubling picture. The monetary base, the amount of money in circulation in the economy, has expanded at an incredible pace. Since the mid-80s, the U.S. monetary base had been very stable at around 5-6% of GDP. Through fractional reserve banking, this amount was sufficient to maintain annual inflation around 2-3%. With the banking system collapsing in 2008-2009, it was necessary for the Fed to increase the monetary base. However, banks are now in much better shape than they were in that period and the benefits of monetary expansion seem to be waning. The Fed is not the solution to every economic and social woe and trying to hide real problems (eg. structurally high unemployment and rampant poverty, unsustainable income inequality and exploding government liabilities) with money printing achieves nothing constructive.

Continue Reading...