GTIC Investments

Ten Myths About Dividend Stocks

2010-09-16T14:43:00.002-07:00

Once you have your house in order, have checked to make sure you aren't falling into common pitfalls of investors...it is time to start picking investments. In this unstable and unpredictable market, one of the safer stock picks are blue chip companies that pay good dividends. Before you race out to buy your stocks, I thought looking at dividend Myths and Truths might be a good start.

This article by Lawrence Carrel appeared in the September edition of Canadian MoneySaver. To read more, go to Canadianmoneysaver.ca.

If you were to ask a stock market investor or analyst about dividend stocks, it may surprise you to find that you are encroaching on a touchy subject. Much like politics and religion, dividend stocks tend to illicit a heated debate among investors about who is right and who is wrong.

On one side are the cheerleaders who believe dividend stocks are the next best thing to free money. On the other are the naysayers who believe that dividend stocks are the next worst thing to a government takeover.

As is usually the case when people start taking sides, their radical beliefs are based on myths or misconceptions implanted in them by misinformation or someone else’s misdirected advice. The truth tends to lie somewhere in between. Only by stripping away some of the most common and influential myths is the truth revealed. For a more balanced view, read on for ten common myths about investing in dividend stocks.

Myth: Dividend investing is reserved for retirees.

Truth: Dividend investing is admittedly attractive for seniors, whose goals are typically capital preservation and income. Younger investors, however, can also benefit from a dividend investing model, even if it comprises only a portion of their portfolios.

Dividend investing isn’t a get-rich-quick strategy. It’s a great way to build wealth over the long term (which means you want to start when you’re young) to secure a steady cash flow for your retirement years. All affluent older investors were young once, and many of them followed a relatively conservative dividend investment strategy even then to build their wealth.

Myth: You can get better returns with growth stocks.

Truth: Although growth stocks may offer more in terms of share price appreciation, dividend stocks often make up the difference in dividend payments. Dividend stocks can see returns grow in three ways:

· Share prices can rise.

· Dividend payments can increase.

· Reinvested dividends can purchase more stock. More shares pay out more dollars in dividends, which you can then reinvest again, and increase the profits from capital appreciation.

When comparing growth and dividend stocks, compare their potential in terms of total return on investment. For the dividend stock, this means share price appreciation plus dividends. Sometimes, slow and steady really does win the race. Growth stocks may carry a higher potential for bigger returns, but they also carry a higher risk for bigger losses. If you do experience a loss, your other holdings need to perform that much better to make up the difference.

Myth: Dividend stocks are safe investments.

Truth: Investing is risky no matter how you slice it; the risk of losing money is always present. However, some investments, including dividend stocks, tend to be safer than others. In 2009, for example, financials and real estate, which had paid reliable dividends for some time, went into a tailspin.

Don’t put all your investment eggs in one basket. Even when investing in safer options, diversify to spread the risk among several sectors and among companies in the various industries you choose to invest in.

Myth: Companies that pay dividends will limit their growth. Truth: Growth investors often argue that companies paying dividends would be better off reinvesting that money to fuel their growth. Although the suggestion may be the case with some companies in certain situations, the reasoning is valid only if that money is well spent.

Companies that don’t pay dividends give managers unrestricted use of the profits. Corporate executives often make acquisitions or start projects more to boost their personal worth (through bonuses and reputation) than to boost shareholder value. Risky acquisitions outside the company’s main business often promise big results and just as often turn into money pits.

Meanwhile, a commitment to paying dividends keeps management honest. Knowing the company must generate a certain amount of cash flow per quarter to pay the dividends shareholders expect, tends to motivate management to manage effectively. In addition, paying dividends leaves management with less capital to squander on risky business ventures. As a result, management must evaluate prospective business ventures more carefully.

Some of the largest companies in the world pay dividends, and they didn’t start out big. They began from scratch and grew; many continue to post significant growth despite paying dividends.

Myth: Companies should always pay down debt before cutting dividend cheques.

Truth: Debt isn’t necessarily a bad thing, although excessive debt certainly is. Whether a company should pay down debt before cutting dividend cheques depends on the circumstances. If the company is buried in debt and struggling in a tough economy, paying down debt before paying dividends is not only a good idea but also an essential move to protect the company’s survival. If, on the other hand, the company carries a reasonable debt load and its other fundamentals are solid, continuing or even raising dividend payments sends a positive message to the market.

Before purchasing a dividend stock, carefully inspect the company’s quarterly reports and take a close look at the quick ratio. The quick ratio indicates whether the company’s current assets are sufficient to cover its liabilities. The break-even point is a quick ratio of one, which usually means the company can afford to cover its liabilities, including its declared dividend payout. Anything less than one may mean that the company needs to borrow money to pay dividends, which is a bad sign.

Myth: Companies must maintain a stable dividend payout.

Truth: Companies are not obliged to pay dividends or to keep the payment stable after they start. However, dividend cuts tend to reflect poorly on a company and its share price, so companies tend to be conservative in establishing a dividend policy. Companies protect themselves by choosing a dividend payment method that allows them to manage shareholder expectations:

• Residual - With the residual approach, the company funds any new projects out of equity it generates internally and pays dividends only after meeting the capital requirements of these projects. In other words, investors receive a cut of the profits only if money is left over at the end of the quarter. Knowing this, investors are less likely to sell their shares if they don’t receive a dividend payment for a particular quarter because they know the next quarter may still bring a dividend.

• Stability - A stability approach sets the dividend at a fixed number, typically a fraction of quarterly or annual earnings, called a payout ratio. This gives investors a greater level of certainty that they’ll receive a dividend payment and how much it’s likely to be. Companies that implement a stable dividend payment approach tend to make conservative projections so that they don’t disappoint shareholders.

• Hybrid - The hybrid approach is a combination of the residual and stability approaches. Companies that follow this approach tend to set a low, fixed dividend that they feel is easy to sustain and then distribute additional dividends when they can afford to do so.

Myth: My dividend increases won’t even keep up with inflation.

Truth: Some companies’ dividend increases do in fact fail to keep pace with inflation. Your goal as a dividend investor is to ensure that the dividend payments from companies you invest in at least keep up with inflation and hopefully exceed the inflation rate. If you’re a growth investor looking for income, don’t dump a stock just because dividend payments aren’t keeping pace with inflation. Look at the stock’s total return, including share price appreciation, and continue to monitor the company’s fundamentals and the market at large. If the company is doing well, especially in a tough market, it may have the potential to raise dividend payments sometime in the future and perform well for you.

Myth: All dividends are taxed at the same rate.

Truth: Dividend investing fell out of favor in the 20th century because of unfavorable dividend taxation. A major reason for the resurgence of dividend investing was the lowering of the tax rate on dividends.

Myth: You should always invest in high-yield stocks.

Truth: Don’t judge a stock by yield alone. Yield is a valuable measure of how much bang you’re getting for each of your investment bucks, but it alone doesn’t determine a stock’s true value; you also need to look at the share price. You can use a minimum yield to screen out stocks that don’t meet your income requirements, but carefully evaluate a company’s fundamentals before investing in it.

A high yield can mean many things – some positive, some negative. High yield may be a sign that the company’s share price is sinking and that the company may be in trouble. If the high yield is out of whack with its sector, that may be a sign of an impending dividend cut. By the same token, don’t immediately write off low-yield stocks.

Myth: REITs and bank stocks are no longer good for dividends.

Truth: Two major factors that contributed to the fiscal crisis of 2008-2009 were a housing bubble that pushed the prices of real estate properties to astronomical heights and banks that approved mortgage loans for borrowers who couldn’t afford the payments. Not surprisingly, real estate investment trusts (REITs) and bank stocks, traditionally big dividend payers, were some of the hardest hit in the stock market crash of 2008-2009.

With little cash to pay their obligations, many REITs and banks were forced to cut or eliminate their dividends. However, a few strong companies continued to pay out dividends and even raise payments because they took less risk and managed their debt well. As many investors write off all of these companies in one fell swoop, now is the time to look for bargains among the healthy survivors.

Conclusion

Investing in dividend stocks is one of the top strategies to survive market instability, and you shouldn’t let misconceptions and myths hold you back from getting in on the action. Once you know the truth, you’ll be well on your way to adding dividend stocks to your own investing portfolio and making the most of your investments – in any market.

Top Ten Investor Mistakes

2010-09-07T11:47:00.002-07:00

Once you have a budget and plan in place, you will start to notice that your funds available for investment will increase. Before we dive into the investment world, I thought it might be a good idea to look at the top ten mistakes that investors make which I found on the Alberta Securities Commission website and in a local article published in the Money section of the Calgary Herald.

1. DESTINATION UNKNOWN
Are you planning for retirement, buying a house or
saving for your child’s education? Different goals may
require different investment strategies. Failing to plan is
planning to fail.

2. BEING SHORT SIGHTED
Investing is a long-term process. Attempting to buy and
sell with perfect timing is not only impossible - it can
also cost you a lot of money. Long-term strategies may
not make you a millionaire overnight, but they won’t
bankrupt you either.

3. BUY FIRST-LEARN LATER
Investing first, then learning about your investment, is
putting the cart before the horse. The results can be
hard to swallow. Check First- there are many sources
of information to help you learn about the investing
process and specific investment vehicles.

4. THERE'S NOTHING TO IT
If it were possible to consistently beat the market,
analysts and brokers would all be millionaires (they
aren’t). Don’t overestimate your abilities or those of your
adviser.

5. TOO MUCH OF ONE OR TOO LITTLE OF EVERYTHING
Trying to eliminate risk by choosing too many investments can destroy opportunities for good returns.
Conversely, having too few investments or focusing on
one industry sector will significantly increase your risk.

6. FOLLOWING “HOT” STOCK TIPS
Building wealth takes time, patience, and discipline.
“Hot” tips are often from uninformed sources and based
on misinformation. By the time you get a tip, it’s often
too late and the opportunity has passed. NEVER buy a
stock based solely on a tip.

7. THE “I LIKE THEIR PRODUCTS” PHILOSOPHY
They may make your favourite beauty product, snack,
or vehicle, but that doesn’t mean they are a well-run,
profitable company. Research is the only way to find out
how good a company really is.

8. DOING THE WRONG THING AT THE WRONG TIME
Buy low. Sell high – it’s sage advice for making money.
If you have a good investment plan, there’s no need to
panic when markets fall. Spend the time to make a plan
and stick to it through the downturns – they’re often a
great time to buy rather than sell.

9.TAXES? WHAT TAXES?
Taxes play an important role in investment planning.
Different investments are taxed differently. Involve a
qualified professional to speak about Canadian taxation
in your financial planning process.

10. RISK? WHAT RISK?
There are many types of risk that can affect an
investment. Even guaranteed investments have some
risk. Your investment objectives will help you determine
how much risk you should take.

The Alberta Securities Exchange has lots of other resources to assist investors. I recommend you check it out by going to http://www.albertasecurities.com/Pages/Default.aspx.

Financial Literacy Step Two: The Plan

2010-08-11T08:30:00.002-07:00

Once you have had time to think about your dreams, the next step in the process is developing a plan on how you are going to achieve your dreams. Your plan will consist of many steps but essentially it will involve setting up both your household finances and your investing habits to move you along your path to success.

The household finance step or better known as budgeting, is the first discipline that your plan should focus on. You will need to take a month to analyze where your money is coming from and where it is going. After this analyse, you are able to stream line your budget so that it is the most tax efficient while moving you towards achieving your dreams. Most financial experts agree that "Paying Yourself First" rule should always be in effect. Take a portion of the household money coming in and turn around and invest it by paying yourself before you pay anyone else. This will obviously need to be an amount that fits your budget but must be a consistent habit that occurs everytime you are paid.

The site http://www.bankrate.com/finance/financial-literacy/secrets-to-creating-a-budget-1.aspx clearly outlines the seven steps to creating a budget which I have posted below:

Indeed, budgets play a pivotal role in helping consumers pay off debt, feather their nest egg and make the most of their hard-earned dollars.
Yet, despite their best intentions, many Americans lack the money-management skills necessary to get their bank accounts under control. Why? Often, it's because they don't know where they stand, says Jim Tehan , a spokesman for Myvesta Foundation, a self-help consumer education Web site.

"People write out budgets all the time without knowing where their money is really going," he says. "What they've created is a wish list of how they'd like to spend their money, but it's not realistic. It's a page of lies."

Follow the money: Track your spending
The first step to developing a budget, says Tehan, is to track your expenses for at least a month, using a checkbook ledger, a sticky note inside your wallet or a Bankrate daily expense work sheet. Be sure to record every purchase no matter how small, including ATM fees.
"Once you know where your money is going, you can make an educated decision about how best to allocate your money," he says.

Many novice budgeters make the mistake of becoming too financially conservative, at least on paper.

"The No. 1 rule of setting budgets is to not cut all the fun out of your life. Inevitably, Spartan budgets that have no allowance for entertainment are doomed to fail."

Instead, learn to moderate. "If you're eating out every night, and that's something you enjoy doing, try eating out once a week instead," says Tehan. "It's not about cutting out everything that gives you joy in life. It's about better allocating your money."

Make savings contributions automatically
Though every budget scenario is different, Curt Weil, a Certified Financial Planner for the Lasecke Weil Wealth Advisory Group in Palo Alto, Calif., says a good rule of thumb is to allocate at least 10 percent of your earnings toward savings, using direct deposit to pay yourself first.
Tehan agrees. "If you put that money aside before you even see it, you won't miss it. Direct deposit helps to put your savings on autopilot."

Short-term savings that you may need to access can be held in an interest-bearing savings account, six-month certificate of deposit or money market fund. Long-term savings, meanwhile, should be directed toward a tax-friendly retirement savings tool, such as an individual retirement account, or IRA, or 401(k).

The ultimate goal, of course, is to maximize your RRSP , the maximum is $18,500 for 2010. But those just starting out should contribute at least enough to get the employer match, says Weil.

Define spending and priorities
Another 35 percent of your earnings, he says, should be earmarked for housing and utilities. Weil says, however, that homeowners can often up that percentage since principal payments are already a form of forced savings, and the mortgage interest they pay is tax-deductible.
If you're saving for something specific, such as a new car or your child's college education, you may want to set aside another 10 percent of your earnings into an interest-bearing account or a tax-favored 529 college savings plan.

Everything else-- the remaining 45 percent-- is discretionary, for use on food, entertainment, clothing and vacations.

That's where priorities come in. You can't have everything you want, says Martin Siesta, a Certified Financial Planner for Compass Wealth Management in Maplewood, N.J., but you can direct your dollars toward things you want the most.

"If consumers start by deciding what's most important to them, then cutting back on some of the things that aren't that important isn't really a sacrifice," he says.

Pay with cash
One you've determined how much to set aside for saving, spending and investing; it's time to make those numbers stick. The growing popularity of credit and debit cards makes it all too easy to overspend.
With the exception of your mortgage and car loan, most consumers should implement a strict policy of paying with cash for groceries, clothes, vacations and nonessential items.

advertisementSiesta also recommends relying less on ATMs, especially those that charge a fee. Withdrawing a fixed amount of discretionary money at the beginning of the month, he says, forces you to make better spending choices.

"By spending cash out of an envelope you begin to get a better feeling for where your money is going and what your priorities really are."

Strategically pay down expensive debt
Financially speaking, of course, you'll never get ahead if you don't also implement a plan to pay down your debt. Interest payments made to credit cards not only cost you big, but also deny you the ability to apply that money toward savings or entertainment.
"I approach it from an investment point of view," says Weil. "Not having to pay interest is the same, economically, as earning interest. So not having to pay credit card interest is like earning 18 percent."

According to Myvesta Foundation, the average American carries $2,328 in credit card debt, spread out over 2.9 cards.

Conventional wisdom maintains that consumers with multiple credit card balances should tackle the card with the highest interest rate first, while continuing to make minimum payments on their other cards. Once the first card is paid off, focus on the next highest rate card.

Tehan contends, however, some debt-laden consumers get a psychological boost by paying off the smaller balances first. "Paying off your highest rate card first makes sense because it saves you the most money, but if you have several smaller cards it can be easier psychologically to get those out of the way first. That way you can see some immediate progress, which gives you a little boost," says Tehan.

The secret to paying off debt is to determine how much you can afford to send each month and make those payments consistently.

"It's important to keep sending the maximum amount you can afford to send," says Tehan. "Some people make the mistake of reducing the amount they send when they see their payments going down."

Build a safety net
No matter what your debt situation, you should also begin saving for a rainy day.
Financial planners recommend setting aside three- to six-months' worth of living expenses into an emergency fund, in case you or your spouse lose a job, fall ill or get hit with an unexpected bill.

"It's important to set aside savings while you're paying off debt," says Tehan. "It may sound backward, but if you don't have an emergency account and you pay down your credit cards for six months and then an emergency pops up, all the progress you have made is going to be instantly wiped out."

The most painless way to save, of course, is to set aside any financial windfalls you receive, such as bonuses, tax refunds or yearly raises. You could also try saving your change or any $1 bills that find their way into your wallet.

Live within your means
Learning to live within your means is a simple matter of spending less than you make. For most consumers, that means cutting back. It does not mean doing without.
According to Siesta, there are dozens of ways to reduce your monthly expenses without crimping your lifestyle.

And above all else, stop trying to keep up with the Joneses. Your neighbors with the latest clothes and luxury cars may be drowning in debt, and while you may not sport a designer watch, you will be able to sleep at night.

"Being in control of your finances not only saves you money, but it also makes you a more financially secure person and family," says Tehan.

Financial Literacy Step One: Having a Dream

2010-08-11T07:30:00.005-07:00

The famous quote by Martin Luther King, "I have a dream.." should be the first part of everyone's financial plan. King's dream was the vision that provided him guidance and reassurance when things were not going well. The markets will have ups and downs as will your life, so having a dream will keep you on your path towards where you want to be.

The dream also acts as your rationale for all of the other steps in your financial literacy plan. Some of the steps will not be easy to do and will test your will power. Having a strong rationale will prevent you from swaying off course. Your dreams should be clear and specific. They need to be shared with your family and friends and then this way they can support you as you move along your path.

Possible dreams could be to retire by the age of 55 so that you are young enough to truly enjoy retirement. Others may include: developing passive income streams to pay you while you sleep, travel to exotic places in the world, build a cottage on the lake or start a dream business. Achieving your dreams will essentially be the essence or the true test on whether you have developed your financial literacy to the fullest.

Financial Literacy Series

2010-08-04T11:35:00.002-07:00

As many of you have known, developing my own financial literacy has been one of my passions over the last few years. I am now embarking on my own blogging mission to uncover as much information and share it with whoever will listen on this very important topic.

To begin, I thought a good starting point would be to look at the definition of financial literacy. According to http://www.financialliteracyincanada.com/eng/about-financial-literacy/definition.php; The Canadian Task force on Financial Literacy defines financial literacy as having the knowledge, skills and confidence to make responsible financial decisions.

•“ Knowledge ” means understanding personal and broader financial matters.
•“ Skills ” are the ability to apply that knowledge in everyday life.
•“ Confidence ” means feeling self-assured enough to make important decisions. This is often a key factor in galvanizing people into action.
•By “ responsible financial decisions ,” we mean that people will be able to use the knowledge, skills and confidence they have gained to make choices that are appropriate to their own circumstances.

Barely a day goes by that Canadians do not have to make a financial decision of some kind or other. Some decisions are routine, such as what groceries to buy or whether to pay by cash or by credit card. However, others are more momentous, such as deciding to open a savings account, or to go away to college or university or to take out a first mortgage.

To make decisions, people draw on their existing knowledge in a particular situation and apply it in such a way that is appropriate to their circumstances.

My goal over the next few months will be to assist people in the educational component of financial literacy. I believe this fits well with our mission as a club and will also assist me in developing a deeper understanding on all topics related to financial literacy. I will be using various sources to support the content but strongly encourage participation and comments on each blog post. Some of the topics that I will touch on include: Saving Money, Using Credit, Mortgages, Insurance, Investing and Estate Planning.

Marc Faber on Leverage

2010-07-13T18:00:00.000-07:00

Technical Analysis Update

2010-07-13T17:39:00.001-07:00

Is Europe really in the Worst Shape?

2010-06-20T21:54:00.002-07:00

Small Cap Picks from the Calgary Resource Show

2010-04-29T13:21:00.010-07:00

The Calgary Resource Show had lots of interesting small-cap companies that I met with but a few caught my attention. I thought I would share these companies as ones to add to your watch list. I am still of the belief that we are in need of a correction to cool the market off and when this occurs, it may be the right time to load up on some of the these small cap gems.

The first company that caught my eye at the conference was Compliance Energy (CEC-V). Compliance is essentially a coal company that has access to 75,000 hectares of freehold coal and mineral interests and 2,046 hectares of Crown Coal licences in the Comox Coal Basin on Vancouver Island, B.C. Through the Comox Joint Venture agreement, Compliance owns 60% of these interests and Itochu International and LG International own 20% respectively. The company is well positioned to take advantage of the Asian demand for metalurgic coal. They are located in a distressed lumber camp area and thus have access to motivated and experienced workers. The government is also behind compliance's efforts as it is good for the local economy. On the resource front, they have increased their measured and indicated resources to 71 000 000 tons on their Raven Deposit. Another advantage for compliance is an experienced management team that has brought other mining projects into production. One analyst (Fundamental Research) is following the company and has a target price of $1.32. Based on the chart below, you can see that over the next two years as the company moves toward production, there should be some very good upside in this stock. Finally, the company is now in the process of receiving environmental approvals from the Federal and Provincial governments. This is a positive next step in the mine development plan and shows that the management team is serious about sticking to its production schedule.

Another company that caught my attention at the conference was a Junior Rare Earth Metals exploration company called Commerce Resources (CCE). Commerce Resources Corp. is an exploration and development company with a particular focus on tantalum, niobium and rare metal deposits with a potential for economic grades and large tonnages. The Company is specifically focused on the development of its Upper Fir tantalum and niobium deposit in British Columbia, Canada. Commerce is well positioned with sufficient capital to advance the commercialization of a prospectively lucrative mining operation for tantalum and niobium. The company is led by an experienced management team that has just added two key people, Dr. Axel Hoppe and Ian Graham. Both bring experience in the mining industry that will assist Commerce in moving their exploration to development. Tantalum is a rare metal that has the highest capacity for electricity out of all metals. It is used in cell phones, electronics, nuclear power plants, jet engines and wind turbines. The global supply of tantalum is currently 4 million pounds behind the global demand which is having a positive impact on the price of tantalum. Niobium is used as an alloy for the production of harder and stronger load bearing steel. This steel would be used for bridges, buildings,and oil pipelines. Considering the fact that infrastructure around the world is in need of upgrading, demand for Niobium will continue to increase.

Keeping in mind that Tantalum and Niobium are fairly unknown to the investing public, you would be investing at the front end of what I think will be a long term trend.

Finally, for those that are interested in Gold and Silver, I have two companies that came across my radar at the conference that may be of interest to you. The first is called Geologix Explorations (GIX-V). Geologix is primarily a Gold and Copper explorer focused on projects in Mexico and Nevada. What attracted me most to this company is the management team which is loaded with experience and connections. The board has connections to Silver Wheaton who have already committed some financing to the company. Their main exploration property is the TEPAL project in Mexico. It was purchased from Arian Silver last year and already has over 1.5 million ounces of gold proven and 413 pounds of copper. This property has great infrastructure and property that could be put into production very easily. The management team is now focused on developing their properties in Mexico and is anticipating lots of positive news in 2010.

Another Gold and Silver company that I didn't get a chance to meet but who was being talked about by many of the newsletter writers at the conference was Explor Resources (EXS-V). Explor is a junior gold company that is drilling in the Abiti Greenstone Belt (West Timmons Area). They have a huge land position there and there management team has experience working in the area. There has been a renewed interest in the West Timmons area after Lake Shore Gold discovered a large deposit on their property right next to Explor's. What Lake Shore discovered is that the Gold bearing zones are much deeper on the West Timmons side than the East Timmons side. All of the previous drilling in that area went only 300 m deep but the Lake Shore discovery occurred at 900 m. The Explor management team thinks that they can follow the model set by Lake Shore and drill deeper in the efforts of uncovering another huge gold discovery. This stock ran up to $1.60 a share on anticipation of an Elephant discovery on there first 10000 meter drill program. The results from that program were positive but not what the speculators were after and thus a sell-off occurred in the stock. Explore has announced a larger drill program focused on the same area and I predict that once again, investors will push the stock higher with anticipation of a huge discovery. This is definitely a drill bit play but has some pretty major upside potential. The chart below shows the spike that occurred prior to March's announcement.

Overall, there is a lot of excitement in the Junior Resource Sector. Many companies have weathered the financial storm of last year and are now doing what they love to do...find new deposits and develop them. Money is also flowing back into the sector which will allow the scientists behind these companies to do their magic. With commodity prices continuing their bull trend, many junior exploration companies will benefit from the great land positions and drilling that they have begun. There were many other companies that I liked at the conference including: Strathmore Metals (Uranium), Copper Fox (Gold and Copper), Farallon (Base Metals and Silver), Phillipine Metals (Gold) and Orex Silver. One thing to keep in mind is that if you miss one bus, there will always be another. Due your due diligence, research, ask questions and have confidence once you have made your choice.

Calgary Resource Show: The Good, The Bad and the Ugly

2010-04-15T10:46:00.011-07:00

This weekend, I spent some time at the Calgary Resource Show. My goal was to get a sense of what people were thinking in terms of where the investment world was heading while at the same time learn about a few small cap companies that might have some potential for big returns down the road.

This post will focus on the Macro-Economic ideas that were presented by speakers at the conference. I will follow up with a post latter on in the week focusing more on particular companies we should be watching this year.

The first speaker I attended was Dr. Michael Berry who was speaking about "The New Currency Regime". He began by stating that Gold and Silver are now being traded as currencies. As indicated by the chart below, the US dollar has been in a 10 year bear market and has lost much of its purchasing power.

This drop has ignited the price of commodities which have all hit new highs in the last couple of years. Dr. Berry went as far as saying that copper is now being held as money by countries like China. He believes that there will continue to be a wave of takeovers in the base metal area and favors projects that are in good locations (Peru, Argentina, Chile and West Africa) and have access to gold as well.

The second speaker I attended was John Lee from Mau Capital. He has spent lots of time working in Asia and truly believes that they have the capital to continue to fuel commodity prices for years to come. Investing in commodities is part of a hedge strategy that they are employing to protect themselves from a continual devaluation of the US Dollar and US Treasury Bills (which they are the biggest holder of). On the investment front, he is really bullish on Moly which is a base metal used to strengthen metals in pipelines, nuclear reactors, etc. His favorite company in this sector was Roca Mines (ROK-V). He also is thinking that this is a good time to start looking at Natural Gas. He thinks that the market is putting too much faith in shale gas plays and that they are now finding that production out of these areas is less and offer shorter reserve lives than traditional gas production. He mentioned Anderson Energy (AXL-V) and Prophecy Resources (PCY-V) as two of his favorite small caps in this space.

On Sunday, I attended a presentation by Danielle Park who is the best selling author of the book, Juggling Dynamite. She started her presentation by asking the audience how many people were bullish on the American Economy. Only a few hands went up but everyone admitted to being bullish on the Canadian economy. Her contention was that export economies like Canada, Australia and China suffer the most when the US Economy is struggling. She then went on to discuss interest rates and how low interest rates have created an abuse of debt by individuals, companies and even countries. Currently, we have a 398 percent debt to GDP ratio in the US which will create a big drag on the economy. Banks are keeping the money that they received from TARP to protect against default on their obligations and are not using it to stimulate small business. She believes that we have excess capacity around the world. This includes having too many houses, too many cars and other products. You can see from the Baltic Dry Index chart below that world shipping rates have recovered from their lows but have a long way to go to reach their highs. She sees this as one of the biggest indicators of an "economic" recovery.

Overall, she believes that we are once again caught in a speculation thesis not an investment thesis in the last year of our stock market rally. This has been fueled by the US Dollar Carry trade and overall US dollar weakness. With the US dollar starting to strengthen again, there is a high probability that the market will correct. She ended by stating that Canadians will not be left unimpacted by this coming correction. Canadian Real Estate is some of the most expensive in the world and we have followed our american cousins by taking on too much debt. Currently, the average canadian has a debt to income ratio of 145 percent. We owe way more than we make which does not leave us in a good position if the economy turns. Overall, Danielle's main point was that we need to be realists as investors and not try to think that we are immune to what is happening in the world. She sees modest growth for Canada down the road but nothing like we have had recently.

I also got a chance to listen to Mark Leibovit who is a stock market timer...and a very good one at that. He credits alot of his success to the book Stock Market Almanac written by Yale Hirsh. His strategy for timing the market is called "Volume Reversal Analysis" which essentially looks at changes in volume in the stock market and how this can be a leading indicator for what might be occurring. He also likes to look at what the media is saying and invest contrarian to their opinion. From his analysis...he sees a correction or change in direction coming in the market in late spring...early summer. This recent video provides insight on his current thoughts on the market.

As per usual, there was lots of enthusiasm at the conference for the small cap sector. It was mentioned many times that the venture exchange outperformed all markets in 2009. This is the good of the story and the fact that there are some very good juniors out there that are creating value for shareholders. The bad is the fact that we have been in a huge bear market rally fueled more by speculation and cheap credit than by a recovering economy. The Ugly is the fact that as Canadians we still haven't bought into the new Economic Reality that we are faced with and could get burnt like our American cousins unless we change our thinking. I will be adding another post shortly with a few of my specific picks from the conference.

Whats lies ahead for 2010?

2010-01-10T15:27:00.008-07:00

The governments around the world worked their magic in 2009 and managed to stimulate financial markets that were on their death beds. By pumping trillions of dollars into the economy through quantitative easing, financial markets began an eight month rally that saw markets around the globe recover over 50%. The question now becomes...What lies ahead for 2010? Should we take profits while we can or let it ride? Why do I feel like we are in a Casino..not a stable financial world?

To begin, I thought I would look back on my predictions from January 2009 to see if it is even worth my time trying to guess what might occur in these turbulant times.

1. Gold and Precious Metals will Shine in 2009- Yep...this was definitely the place to be in 2009. Gold rose to all time highs...over $1200 an ounce. Most precious metal mutual funds enjoyed gains above the market...some over 100%. Good Prediction!

2. Oil will hit a gusher in 2009- Ok..keeping in mind that Oil was trading around $30 a barrel when I made this prediction...it has definitely exploded to its current price of $80 a barrel. Good Prediction!

3. Real Estate is still not out of the hole- Real Estate foreclosures continued to increase in the US in 2009 although the rate of increase may have slowed down. Interest rates of close to O percent (lowest on record) and plenty of government assistance has slowed the decline and some areas like Canada and Australia have actually had a real estate boom. So, although I may have miscalculated the impact government stimulus could have on Real Estate...it is definitely still not out of the hole.

A little stats from our friends at the Casey Report to back this up:

•Existing home sales in the U.S. are down 15.9% from the September 2005 peak seasonally adjusted annual rate of 7.25 million sales, but up 35.9% from the January 2009 trough of 4.49 million sales.

•Existing home inventory stands at 3.574 million, which reflects a seven-month supply. This compares favorably to the 11-month supply peak inventory figure of 4.575 million back in July 2008.

•The median home sales price in the U.S. of $172,600 is 4.7% above the January 2009 figure of $164,800, but is still 25% below the July 2006 figure of $230,300.
Furthermore, the Census Bureau reported a couple weeks ago that November housing starts rose 8.9% compared to the previous month.

On the surface it appears housing may be stabilizing somewhat. But if you dig a little deeper you’d find… not so much.

First of all, the slightly improved sales figures and marginal rise in prices likely have much to do with the first-time home buyer tax credit and the move-up/repeat home buyer tax credit, both of which were recently extended through April 30, 2010.
Second, the Census Bureau’s report was statistically insignificant. The margin of error (with a 95% confidence interval) on these figures is +/- 12%.

4. The China Dragon will continue to Roar- The Chinese government responded like so many other governments around the world in stimulating its own economy...to the tune of over 80% this year. Emerging markets was a great place to be in 2009, so another good prediction!

5.US Dollar will continue to Fall- This was one of my best predictions. US dollar was down over 30% in 2009. Most americans don't know this but if you ask a Canadian...they know that their money is back close to par with the US. This is not good for our export oriented economy but great for people that want to take a vacation to the states.

6. Agriculture will grow your portfolio- Although agricultural companies followed the market up...they did not show the type of returns that I expected. Towards the end of 2009 we started to see life in the prices of soft commodities like grains and cotton. Look to 2010 for a major recovery in the price of agricultural goods and stocks as inflation really starts to kick in.

7. Infrastructure will keep the Economy from Falling Apart- Like agriculture stocks, infrastructure plays moved up with the market. This is still a safe place to put your money as I regard a lot of these companies as protected by government economic stimulus programs.

8. Smallcaps will continue to get their kneecaps taken out by Creditors- Well, small caps didn't get hammered like they did in 2008, they were definitely late to the party in 2009. What does this mean for 2010....buy small caps. More talk about this in a second.

9.The Green Team will Win- Well just like my hockey team, 2009 was not the best of years for green stocks. The controversy with the British scientists didn't help but I continue to believe that green will win over the long term. Lets wait till energy prices move up a little more and I think you will start hearing more about our green stocks.

10. Death by Mutual Fund- The mutual fund industry had a great year in 2009 which is due in a big part to the market recovery. The industry continues to adapt to changing economic conditions and investor demands. Unfortunately, with over 90% of people having no clue on investing, these financial instruments will continue to be used by the uneducated. One day people will wake up to the fact that we are paying these people way too much money to lose our money.

So, overall...I hit some of my predictions but missed a few. I still think I am batting over 50% which is good for a lowly educator. So back to our question, What lies ahead in 2010? Well here I go...buckle up and hold on for the ride..that is the theme I am going with.

Lets start with a chart..showing bear market rallies after THE GREAT DEPRESSION

This chart simply demonstrates that there can definitely be major market advances during a bear market. We have experienced one of the greatest rallies of financial history. Way to go Ben and the rest of the central bankers around the world. You have helped Wall Street and pulp and paper companies.

1. My first prediction is that we are in a Bear Market Rally which means that it we should see a substantial pullback in market performance in 2010. I can see this happening between May and August of 2010. So..I think it is safe to stay in the market for the time being but be ready to set some sell stops on your winners this spring. We could essentially see a complete opposite to 2009 where instead of the market recoverying in March...it will get hammered.

2. Debt will continue to Rise- Although consumer credit and home mortgage debt declined 0.8% and 0.9%, respectively, in the third quarter, increases in government debt more than made up for this marginal decline. Federal, state, and local government debt outstanding grew 4.2% in the third quarter, pushing total debt outstanding to a new all-time high of $34,551.9 billion, according to the Federal Reserve’s newly released Z.1 Flow of Funds document.
This document also revealed that in the third quarter, personal savings dropped 17.8% based on the seasonally adjusted annual rate figures. Governments will have to take on more debt to keep votes.

3. Interest Rates will begin to Rise- With interest rates at all-time lows, it doesn't take a genius to predict that they won't remain there for long. US and other governments will be forced to raise interest rates to thwart another housing boom and bust and to attract foreign investors back to their currencies. I think Canada will be first to raise rates and will start in the middle of 2010. The US government will be forced to follow other countries to save what little value the US dollar has.

4. Inflation will support Commodity Prices- The massive injections of money by Central Banks will provide support for commodity prices where they are and we will begin to see further increases in these prices in 2010. Oil will pass $100 a barrel and Natural Gas will pass $10 in 2010. Look for copper, nickel, uranium, etc. to also increase in price by 20-30% in 2010. This will help commodity stocks and provide some big profits to companies that are unhedged.

5. Silver will outperform Gold- Gold had an amazing run in 2009 and I believe that it will continue to move higher. My prediction is that gold will pass $1500 an ounce in 2010. Silver traditionally lags gold and that was the case in 2009. Look for silver to outperform the increase in gold prices in 2010. Prediction is that silver moves over $30.00 an ounce. By your Olympic silver coins while you can:)

6. Smallcaps will recover during the first part of 2010- I see this happening already and feel that people are having a larger risk appetite after the recent recovery. Unfortunately, this will be a short lived move as small caps will get hammered with the market when it corrects this summer. Once again, hold on for ride and set stops along the way.

7. Agricultural Land Prices will increase- The one shining star in real estate will be agricultural land. I continue to believe that with an emerging middle class in Asia forming, demand for food will continue to rise. Unfortunately, there is less and less farmland available due to urbanization. So...sell your mansions and buy a farm...

8. Currency Traders will Reap Big Profits- The FOREX market is the largest market in the world, trading volumes of 3 trillion dollars a day. Currency traders make their money on the volativity in the market. 2010 will be a very volatile year and thus traders will be able to take advantage of big moves in currencies. The advantage to this market is that you can make money when currencies are going up or down. Just look for the trend and jump on.

9. Another Big Financial Company in the World will fall- The Dubai World scare proves that many big companies have pretty bad balance sheets. Look for another "Lehman" type collapse due to too much debt and not enough assets. This may spark the next leg down in our Bear Market.

10. GTIC Investment Club will make money- My final prediction is based on the fact that we all learned a lesson in 2008...don't marry stocks..even our market darlings. We watched Bronco Energy move from $1.00 a share to $19.00 a share and then all the way down to $0.30. We won't make that mistake again...I hope. We will follow a more disciplined approach and will sell shares in our big gainers as they rise.

2009 was a very good year for our club. We gained 5 more members and doubled our share value from $1000 to over $2000 a person. It will be important in 2010 to protect our gains and be prepared to sit in cash when necessary. So, it will be interesting to look back at these predictions and see if I can nail a few more. The most important one is that the club continues to learn and make money. Happy New Year everyone and heres to a very profitable year in 2010.

Part One of Inflation Nation

2009-12-10T22:46:00.001-07:00

Man Tries to Sell a One Ounce Gold Coin for $50

2009-12-10T22:22:00.001-07:00

Meredith Whitney

2009-11-17T22:40:00.000-07:00

Marc Faber Speaks to BNN Part Two

2009-11-11T22:19:00.000-07:00

Mark Faber Speaks to BNN

2009-11-11T22:12:00.000-07:00

Mother of All Carry Trades

2009-11-11T21:28:00.000-07:00

Hunting for Opportunity

2009-10-20T10:31:00.000-07:00

Time to be Cautious

2009-10-16T20:07:00.004-07:00

As we move into third quarter earning territory, I believe it is time to take some profits off the table before we could see an even bigger collapse than we did last year at this time. Why do I think it is time to be cautious? Lets start with the recent run that all world markets have had since its March lows. Most markets are now up over 50% with some stocks up over 100%. This rally whether the government wants to admit it or not is completely being fueled artificially by government money being pumped into the system. All world markets are definitely set for a breather.

I believe that we are definitely in a bear market rally and until we see change in the employment picture in the states where currently there are 15 million people unemployed, we will continue in a bear market. With recent layoffs, the american consumer is petrified and has moved into a self-preservation mode. They have seen their houses loose value, their retirement savings eroded and for those smart enough, their currency drop in buying power. If the enthusiasm in the market takes a change for the worse, watch out! Everyone will be ready this time and will have their finger on the sell button...hoping to prevent what happened in the last crash from reoccuring.

From an investing perspective, this scenario can be quite scary. All of those gains that I have just mentioned could be wiped out for those that are not prepared. The normal safe place to be is in precious metals which will probably continue to show great returns. If the market crashes, people will once again be forced to sell their winners to pay for their losers. This means that commodities stocks will probably be hit just like other indexes. Investing in real gold, silver, etc. is going to preserve your wealth the best and will be the safest alternative in a market collapse. Cash, treasury bills and bonds are probably your second safest bet.

Over the next couple of weeks, I will be posting videos and more commentory on this topic. My hunch could be wrong and as per usual the government always has a way to control the market if it believes that things might go awfully wrong. The important thing to remember is that things don't always go up. Gravity will eventually pull things including stocks back to earth. I know that I have set my stop losses and have already actively started taking profits on stocks that have moved substantially.

Jim Rogers Speaks on Investing this Fall

2009-09-26T16:01:00.000-07:00

Inflation versus Deflation

2009-09-26T15:54:00.000-07:00

Currency Trading Opportunity

2009-09-23T19:40:00.003-07:00

The world financial crisis has forced governments around the world to inject trillions of paper dollars into the world markets. This exponential increase in money supply has created a very unique opportunity in the currency markets. The volume of trading of currencies has increased dramatically along with the volativity in prices on a daily basis. This volativity is where you can make money as a currency trader.

Currency trading used to be left to financial institutions but recently the market has been opened up to everyone through user friendly platforms. Individuals can now trade currencies just like the big banks with all the same tools at their disposal.

It is a great time to learn about currency trading and add it as a tool in your investment knowledge box. Click on the link below to start your journey in the currency markets.

Start Trading with Currency Connect!

When to Pull the Plug

2009-09-17T08:01:00.006-07:00

The last month has witnessed an unprecedented rise in world stock markets as central bankers around the world proclaim that the recession is officially over and we are poised for positive economic growth.

Last night, I had the pleasure of listening to a seasoned veteran in the investment community, Peter Drake, VP of Investments at Fidelity. Peter was cautiously optimistic on where he thought he saw the markets heading for the rest of 2009 and into 2010. He mentioned that for economic markets to truly recover we need to see three things:

1/US Housing Prices stabalizing
2/Credit markets normalizing
3/Positive Economic Growth in Global Markets

He presented the Case-Shiller Graph of Housing Prices which demonstrated that there has been a potential basement hit from the plummetting of house prices. The small uptick that has recently occurred could be evidence that house prices will stabalize. Unfortunately, there are 14% of american homeowners that have mortgages that are higher than their house values. In California, Nevada, and Florida....the number is in the 50% range. It is still hard to fathom where demand will come from. Warren Buffet at a recent presentation mentioned that to solve the problem of having 9.4 months of housing inventory we should just bulldoze homes for the next 12 months. Cash for Home Clunkers might be the next government stimulus program.

Being an economist, Peter had a lot to say about the Credit Markets. To begin, he believes that Central Bankers are the heroes in this fairy tale. He showed a really cool chart that demonstrated the coordinated action of dropping of interest rates by all major central banks when the credit crisis hit. He saw this as necessary to keep credit markets and the economy from completely seizing up. I compare this to a shield put out by bankers to deflect the explosive collapse of Lehman Brothers, AIG, GM, Etc.

The next weapon used by central bankers was a massive injection of liquidity. Trillions of dollars have been pumped into credit markets by world governments to stimulate the flow of credit. This acted as a sword, lashing out at frightened banks that were sitting on their money (not lending) and could not trust each other.

The final tool being used recently has been quantitative easing where central banks are actually buying up debt, securities, etc. in the hopes of stabalizing the economy. The challenge that Peter is confidant that central bankers will be able to accomplish will be to "PULL THE PLUG" on its pumping of liquidity at the perfect time. This will be very challenging as we are still operating in a very fragile economic world. Unemployment is still rising, foreclosures are increasing and debt levels continue to increase both for governments and consumers. If governments act too quickly, they will topple the house of cards that they have built through the efforts of the central banks. If they wait too long, the massive money supply that has been injected into the system will cause inflation and potentially "hyper-inflation".

Mr. Drake was asked during the meeting what his thoughts on precious metals were. He admitted that he wasn't a gold bug but felt that it came down to a personal decision on how much faith you had in the central banks in preventing inflation from occurring. If believe that problems like unemployment, continual house price deterioation, wars, strikes, company failures, etc. will continue to occur...you should hedge your portfolio by owning precious metals. If you think that central banks around the world, will be able to suck up all the excess liquidity that they have recently pumped into the system without collapsing the economy, you should stay away from precious metals and stick to a balanced portfolio of stocks/bonds.

From the research I have done, I am tending to lean towards an increasingly inflationary environment. I believe that it is more important to central banks to have a positive economic climate than a strong currency. This thinking is very bullish for oil, stocks, real estate, and most importantly precious metals. Basically, the devaluing of the world currencies will increase prices in all of these hard assets.

In summary, I am happy I attended Peter's presentation and thought that he was very interesting and informative person to listen to. I am finding it difficult to agree with his confidence in central bankers and the United States in getting themselves out of this mess that they have created. It appears to me that the solutions to the problems will just fuel more problems of the same nature. It is always nice to hear different perspectives as this I feel will assist you in making better choices down the road.

Dr. Doom Speaks Again

2009-09-04T21:36:00.001-07:00

Quantitative Easing and US Government Debt

2009-07-02T18:14:00.004-07:00

The newest strategy being employed by the US Government to keep its economy from folding, Quantitative Easing, was announced in March of 2009. Here is the definition of Quantitative Easing taken from the June Sprott Report.

"Quantitative Easing was pioneered by the Japanese in the early 2000's. It is an extreme form of monetary policy used to stimulate the economy when interest rates are at or close to zero. In practical terms , the Federal Reserve purchases assets including treasuries and corporate bonds from financial institutions using newly created money. The Federal Reserve typically controls the cost of money using interest rates but because interest rates can't be negative, the Federal Reserve manipulates the quantity of money by printing more of it."

Since this was first tried by the Japanese, we can begin by looking at how successful it has been for them. The result of the Quantitative Easing for the Japanese is quite horrific. The Japanese economy has been stuck in the doldrums for the last 20 years or since the government began its quantitative easing program. Japanese Bonds are some of the worst performers in the world and as its population ages, there is not much stimulus in the near horizon. The chart below shows the yield of Japanese Government Bonds over the last 10 years.

In its report, Sprott outlines the debt obligations that the US Government will have in 2009. According to their numbers the government will have raise 2.041 trillion dollars to pay for its budget deficit of 1.845 trillion. They then looked at the biggest purchasers of US Debt or Bonds in 2008. The top five were: Intergovernmental Holdings(42%), Foreign and International Holders (28%), Mutual Funds (6%), State and Local Governments (5%). Sprott looked at what each of these holders of government debt were doing this year and discovered that all had lowered the amount of debt purchased this year and some were even sellers of it.

What does this all mean for us the investors? Well, to begin the current "green shoots" that popular media and government want all of us to believe are indicators of a economic recovery are not accurate. The US Government will have to continue to print more and more money to bail itself out and hope that the rest of the world won't notice the massive liquidity. Weakness in the US Dollar is pretty well a given and thus you can bet on hard assets priced in US Dollars continuing to increase in price. Stocks and US Real Estate may go up in price but in inflation adjusted terms they will continue to fall in value.

The third quarter has just begun and I am predicting that it will be a messy one for the US and World Stock Markets. Things have already started to turn around over the last few weeks and with today's poor job numbers, the writing is on the wall for a major correction or even worst crash in the market.

I have personally sold the majority of my holdings (especially those that have participated in the 40% rally in the market). I still hold some physical gold and gold companies. These may be next to go considering that if the market corrects, everything will get sold off. My number one holding will be Horizon Beta Pro fund that shorts the US Market. I will be putting my money where my mouth is. The other holding that I think will be quite prudent is CASH. This will allow you to get back into the market after the crash.

Must Watch

2009-07-02T13:24:00.001-07:00

Harry Dent Speaks on 2009

2009-06-27T08:09:00.001-07:00

Inflation Returns...get prepared

2009-05-22T11:52:00.005-07:00

For the last 11 months, we have witnessed a catastrophe drop in the prices of all goods. Commodities were absolutely hammered and most lost 50% of their value or more in that time. The collapse in these prices along with home prices in the US has created a deflationary adjustment on a scale that we have not experienced for decades.

The government response to this economic crisis has simply been to pump as much money as printable into the system. They have opened up their coffers and have created a massive injection that has never been witnessed before in history...a

t least recent history. You can see from the chart below that we really are in uncharted waters when it comes to our monetary base in US Dollars.

What does this mean for us as investors and more importantly people trying to get by each day. Inflation or what some people believe, HYPER INFLATION will have a number of impacts on our investments and our lives.

1. The cost of all goods priced in US dollars will go up. That includes oil, natural gas, gold, silver, copper, uranium, nickel, etc. These items will essentially double in price in the next year and will continue to go up for years to come.

2. The cost of food will go through the roof. Remember those days when a loaf of bread was under a $1.00. Not anymore.. Your food bill will be hit hard by inflation and will benefit food producers and the government of course since they will receive more tax income.

3. Real Estate will re-bubble and that means go up! This may take a little while longer for people to embrace based on the heartache caused by the last collapse. Eventually, people will again turn to their houses as ATM's and this the government believes is the only way to really re-ignite the economy.

4. Stocks should increase in monetary value...due to all the money floating around.

Now a lot of people have been comparing the japanese economy of the 1980's and its deflationary crash to the US today. Japan has been stuck in an economic bust for the last 20 years and might never get out. Technology will be the key to Japan's growth but with inflationary pressures around the world causing commodities to explode in price, you can right a recovery off.

The result of the above situations could be a lot of very unhappy people. There will be a disconnect between prices going up and job creation. We can already see this with unemployment levels in the US nearing 10%. The burden will once again fall on governments around the world to bail out their economies. Governments have very few options which include cutting taxes, lowering interest rates and printing money. All of these options are inflationary in nature except for cutting taxes.

The following discussions on CNBC with Jim Rogers demonstrates the impact that coming inflation will have. Interestingly, Jim says he is short nothing at this time. He believes that the massive printing of dollars will artificially propel the stock market higher. The next post will look at how to profit from an inflationary environment.

Here is a series of recent Jim Rogers discussions.

Second Video

Final Video

2009: The year of Hope

2009-01-26T11:57:00.005-07:00

Looking back on 2008, there really was not very much good news for the investment community. Most major stock indexes were down by 30-40% making 2008 the worst year for investing in a very long time. The crash in the market forced many hedgefunds, mutual funds and individual investors to de-leverage and de-risk their portfolios. This process hammered many of the small cap resource stocks that we follow creating some very enticing opportunities.

The good news that should come out of this mess is that the shake-up in the financial community will make our investment climate safer in the long run. Gone are the days when anybody with a heartbeat will be given money....lets hope! We should also see tighter reporting in financials and more transparancy in the markets....we hope! Hope definitely is the theme for 2009, spurred by the inauguration of President Obama. So where does this HOPE lead us for making some money in the investment world in 2009? I have compiled a list of personal predictions for our year of hope (2009).

1. Gold and Precious Metals will Shine in 2009- The stimulus programs that the US and other countries around the world are proposing will require the printing of billions of dollars to fund. Governments have decided to sacrifice their currencies to prop up a very sick economy. The increase in money supply will eventually result in inflation (price of goods/services will rise). The one way to protect yourself from this is to invest in precious metals. Another driver of these safe haven investments will be continual conflicts around the world. As food crisises increase, nations will be forced to fight and protect their resources. This instability in the political world will attract nervous investors in hard assets like gold and silver. Like other resources, there will be less production of precious metals in 2009 because of depleting reserves in major mines. As demand rises, there will be a shortfall in available physical metals causing the metals to become even more precious. You just can't print a gold bar like you can a dollar bill.

2. Oil will hit a gusher in 2009- The dramatic collapse in the price of oil over the last 6 months has left many people wondering if we will be going back to $10 a barrel oil. The world recession has caused investors to question the vitality of the energy business. With factories shutting down, people not driving and less overall energy consumption in the world, it appears that demand destruction is in full force. The reality is that speculators drove the price of oil up to $144 but have also drove it to its current level. People will not go back to heating their houses with wood and riding horses. Demand for energy will continue around the world and unfortunately our world production is dropping. (Peak Oil) Oil is a non-renewable resource and thus there is a limited amount of it in the world. One of many recent developments in the energy scene supporting that view occurred this week when we learned that the output at PEMEX, Mexico’s state oil company, fell 9 percent in 2008. This is, unfortunately, a trend solidly in motion: from its peak production of 3.8 million barrels per day in 2004, Mexican production is now ringing in at just 2.8 million bbl/d, a startling drop of 1 million bbl/d in just four years. Another reality is that many oil producing nations require a much higher oil price to maintain their current levels of living. The IMF recently compiled a list of break-even prices that various oil-producing nations require in order to avoid a budget deficit in 2009. Those figures are as follows: Bahrain $84, Kuwait $34, Oman $78, Qatar $24, Saudi Arabia $54, United Arab Emirates $24, Algeria $60, Azerbaijan $35, Iran $90 (!), Iraq ($94), Kazakhstan $67, and Libya $53. Oil companies and exporting countries have acted fast in their cutting of production to ensure that oil prices return to a much more profitable level.

3. Real Estate is still not out of the hole- The subprime crisis which has decimated real estate prices around the world is not over yet. The speculators and greedy mortgage companies that fueled the Real Estate boom are either bankrupt or in jail. Home ownership which has been viewed as part of the American dream has become a nightmare for many. As prices continue to decline, many people cannot justify the payments that they are making and are simply walking away from their houses. This can be seen in a recent bloomberg article that stated:

Jan. 21 (Bloomberg) -- Home prices in the San Francisco Bay Area fell 44 percent last month from a year earlier as discounted, foreclosed properties lured buyers, MDA DataQuick said.

Falling prices coupled with increased unemployment and tighter lending requirements have essentially killed the real estate market. Why would someone want to buy a house that will be worth less next year? I personally believe that we will continue to see a decline in house prices this year and thus would not recommend anyone tread into these rough waters at this time. The deals might seem good now but wait till next year....

4. The China Dragon will continue to Roar- Although rattled by declining demand for its exports, China will continue in its trend to becoming the New Economic Engine of the world. They are predicting a drop in GDP growth from 9.3% to 6.9% this year. The key is that they are still growing their GDP, which not many other countries can say. The Chinese have also been much more responsible with their debt both as a country and as invididual consumers. Most Chinese have savings accounts unlike their american peers. Industrialization will continue in China as part of an economic plan that will be funded by a well financed government that has much more control over its economy than the US has. Meanwhile, millions of Chinese are moving into the middle class tax bracket each year, filling the void left by the US consumer who is regressing to lower class (by debt standards). This new influx of consumers will be aiming to acquire all the luxuries that other middle income earners around the world have made essential parts of their lives. Some economists/historians have gone as far as suggesting that China's economy resemblies the American economic situation during the Great Depression. Before the depression, Britain was the world economic power but after the depression, the US emerged as the world power. We could see the same occur with China taking over for the US as the new Economic power in the world. It helps that foreigners led by China – were responsible for buying something like 80% of the U.S. Treasury bonds sold over the last couple of years. China has essentially become the bank for the US and will profit from the massive socialization of the american economy.

5. US Dollar will continue to Fall- The fact that the US Dollar has fallen by over 40% over the last few years is lost by many. This trend will continue due to the massive printing of dollars that is occurring. The buying power of a US Dollar will continue to erode and the biggest benefactor will be commodities and the nations that produce those commodities. This will result in one of the biggest transfers of wealth that has ever occurred in human history as money flows out of the US into resource rich nations. Obama will need a weaker currency to make its exports more competitive on the global markets. The debt ridden US will need a lower currency to melt away some of the debt it has on its books as well. Overall, fiat world currencies are all in trouble and it wouldn't surprise me to see a new world currency within the next ten years.

6. Agriculture will grow your portfolio- As the world population continues to grow, demand for food will continue to rise. This demand will benefit agricultural producers like Agrium, Saskatchewan Potash, etc. I recommend buying a basket of these companies through an ETF with great tickers like MOO and COW. The movement of more people into the middle class will also have a positive impact on the agricultural sectors as the quality and quantity of food required to sustain demand will rise. Food is a basic need (not a choice) and thus will be less impacted by the recession than other consumer driven areas like electronics.

7. Infrastructure will keep the Economy from Falling Apart- Anyone that has listened to the news lately has probably heard that one of the key components of the economic stimulus packages is investing in North America's aging infrastructure. Obama keeps expanding his promise of jobs that will be created by this investment which I think is now at over a million. Just today the Canadian government announced that they would be investing 7 billion dollars in infrastructure projects this year alone. Companies that work in this area (ex. Stantec, Cemex, etc.) will benefit hugely from this government money and will thus see their bottom lines increase. This will be good news for investors in the area. I recommend buying an infrastructure ETF like Brookfield Global Infrastructure to take advantage of this trend in 2009.

8. Smallcaps will continue to get their kneecaps taken out by Creditors- Being a small company in 2008 was to say the least...awful as the small cap index was down 80%. Some of the best bargains in the land are in this area but unfortunately the bankers who hold a small cap's companies future in their hands will not see it this way. Lending will be very constrained and investors that have been absolutely burnt by last year's massacre will not be willing participants in private placements at a tenth of the price of the original buy-in. To survive, small cap companies will have to be very conservative with their cash (if they have any) and will have to merge with other companies to improve their financial shape.

9. The Green Team will Win- The inconvient truth is that people (including the government) have woken up to the fact that we are destroying our planet. Part of the government infrastruture stimulus will be directed at green projects like wind energy, high-speed transportation systems and solar energy. Rising energy costs coupled with increased pressure from environmental groups will force people to begin to use more environmentally friendly sources of energy. Governments will ensure this occurs through green tax incentives.

10. Death by Mutual Fund- The mutual fund concept has been around for close to 50 years and the industry has become massive over that time. The original concept of pooling resources and then let a group of investment experts invest those assets was a great idea at the time. Unfortunately, over time this good idea has been tainted by greed and mismanagement. 2008 has done little to affirm that people should be paying 3% for the expertise of investment managers since many of them could not foresee the crash in the market. The mutual fund industry is also crippled by the fact that the structure of a mutual fund only allows the investor to make money when the market goes up. People are starting to figure out that they can't just trust their money to others and hope that at the end of the day they have something to show. The front end and back end loads that are paid out to advisors for putting their clients money into funds is starting to reveal its ugly head as advisors have changed their focus from good management to good fees. One benefit of seeing your portfolio cut in half is that it causes you to take a closer look at what is happening in your investments. This closer look will cause investors to think twice before they trust the individuals that are running these funds and those selling them to them. The Madoff Ponzi scheme will also have a determental impact on the industry as investors will demand more transparancy on where their investment money is actually going. Another crippling blow to the industry is the irresponsible investment by many money managers in high yielding products like asset backed commercial paper. Many mutual fund managers are now petrified to make any decisions which will cause a further lull in their returns and ability to beat the market. With the advent of low fee ETF's, investors have the ability to invest in markets that they believe will do the best. They essentially will have the ability to make money when the market goes up and when it goes down. You will start to see more investors using this technique as they become more aware of it. They will probably have to fire their advisor first though as they won't be the first touting it as an investment product since many do not contain any fees or perks.

Overall, these are just a few of my thoughts as we move into 2009. I believe the stimulus packages proposed by governments around the world will cause an "Obama" rally that will be short lived. We should see a retesting of the market lows starting in June led by dismal corporate earnings, rising unemployment, tightening credit and a free fall in real estate prices. We are not out of the mess yet as this recession could last longer than most expect. The buy and hold strategy touted by many will prove to be the downfall of many portfolios including Mr. Buffett's. An active investor will be able to take advantage of the volativity in the market and protect themselves from downswings by setting stop losses. The club will have to move its focus to companies and/or investment vehicles that will take advantage of the current uncertainity in market and will be survivors that emerge out of the chaos. We will continue to try to find great investment opportunities by finding tomorrow's great companies. In our search, we will have to be extra diligent in analyzing the financial situation of the company to ensure that management is making good decisions with the capital available. Keep in mind the saying, with crisis comes opportunity!

Armageddon in the Markets

2008-10-13T18:37:00.002-07:00

With all markets in the world down by an average of over 20%, people that have been so used to good returns have been a little shocked..to say the least. The media is now calling this the bottom and even our very own prime minister is predicting that a recovery is close. The question that we all now ask, is this the time to pick up some bargains?

Technically speaking, markets are due for a bounce but will it be a dead cat bounce or will we see a fall rally. The biggest barrier to this rally is the fact that credit markets have pretty well shut down. Banks are not lending to each other and are not lending to companies or individuals. There is a crisis in confidence around the world and the result is a lack of trust. No one believes the governments and their bail out plans, no one believes the banks and now people have lost faith in the capital markets.

So during this time of mistrust, where is the best and safest place to keep your money? The overall commodity market has just been hammered. The fundamentals are still very good but with lending frozen, some of these companies with great properties may be forced to sell out or go bankrupt. The producers that have positive cash flow and low debt levels will be the survivors.

For the short term, the safest place appears be in the commodities of Gold and Silver. Interestingly, both have gone down in the last week, even though we are in an ideal environment for these two precious metals. To begin, the government's fiat money system has placed the printing press on full blast, hoping to inject enough monopoly money into the market to make everyone feel better. Its kinda like a drug junkie hitting up. He feels better for a short while but then feels a lot worse. His condition continues to worsen each time, which is what is happening to the markets each time a liquidity injection occurs.

Secondly, there is a great deal of FEAR and UNCERTAINTY in the markets. No one really knows what will happen next. To make matters worse, the biggest investors in the market right now are baby boomers that are just years from retirement. Many have seen their nest eggs that they have worked their lives for cut in half. This can make anyone feel uneasy but especially those that do not have time to wait for the markets to recover. The baby boomers will move to safer investments which usually means bonds. The one problem with bonds is that they are backed by companies and governments that have the highest debt levels ever seen in history. Is there a chance that some of these bonds may go belly up like the ones with AIG, Lehman Brothers, etc. have? The one thing about Baby Boomers is that some of them have pretty good memories. They can remember what happened in the 1970's and early 80's when gold soared to an inflation adjusted price for today of over $2000. Some can even remember back to the dirty thirties when Gold was the only asset that didn't lose its value. Housing, stocks, etc. all were hit during the dirty thirties but Gold went up. Could they be thinking that this might happen again?

Finally, the world political seen is very fragile right now. The middle east is teetering on all out war between Iran and Israel. Pakistan and Afghanistan are in the midst of political changes that could totally destabilize the countries. Even Russia is fighting with the US and you know that this can not be a good thing. This unstable nature of the world plays well for gold and silver. If you don't believe me, just watch the next time a major terrorist event, attack or war breaks out. The first thing that happens in the markets is that gold and oil go higher. I predict that the number of these type of events will continue to increase and thus will be good for Gold and Silver.

If all of this hasn't convinced you to buy physical Gold and Silver, the cherry on the cake is the fact that there is now a world shortage of these precious metals. This seems odd, since the paper price hasn't really gone up...but it will. It is just a matter of time and when it happens, expect it to be explosive. We got a small taste of this recently when AIG collapsed. If you don't have time to go to a bullion bank (Bank of Nova Scotia in Calgary) or a coin dealer, the best way in my humble opinion to play the commodity is through the HORIZON BETA PRO GOLD Bull fund. The fund offers 2 times leverage to the price of gold, can be bought in your RSP and can be traded just like a stock. The safest bet is still physical gold versus derivative and futures gold which the Beta Pro trades in but for the short term you can make some real money with a rise in the price of gold. Happy Thanksgiving and Happy Trading! Let's hope the government does not make Turkeys out of us through their continued lack of responsibility and printing of money,

Dog Days of Summer

2008-07-23T13:05:00.004-07:00

The dog days of summer are here again and as the July heat warms us up, our stock portfolios have been frozen by uncertainities in the financial markets, panic selling and the irrational trading activity of investors around the world.

It is an understatement to say that 2008 has been a very challenging year to be an investor. At this point in time, the best advice is to research your portfolio holdings and develop a deeper understanding of why you made the investment in the first place. Some dogs with fleas will surface and should be put out of their misery before they cause more harm to your portfolio returns. On the other hand, some real gems will also become more apparent and should be bargain hunted before the rest of the market wakes up. Commodities have been the one area in the investment world that continues to rise, although some so called "experts" want us to believe that they are also a bubble ready to burst. The one difference between commodities and other bubbles like the technology and real estate ones is that the fundamentals of supply and demand are backing this rise in price. With emerging markets like China, India, Brazil, Russia, etc. all expanding at astounding rates there has been an insatiable demand for energy to drive this growth. Problem is that most large oil fields around the world have reached peak output and some are now in decline. So essentially you have demand increasing and supply decreasing. This is the main reason you have seen energy prices double over the last year. The second fundamental occuring is the depreciation in the US Dollar which commodities are priced in. As the US government continues to attempt a rescue of its economy by printing greenbacks, they are actually creating one of the highest inflationary periods of recent history causing the price of the commodities to continue to rise. Finally, you have a very unstable political climate in the world today. Iran and its fundamental opposition to the US and Israel has movied it to the top of the list of problem areas in the world and being one of the top oil producing nations, any action in that area will drive energy prices even higher.

We now need to look at what commodities offer the biggest near term gains for the companies that produce them and then invest in these companies. Gold, Silver, Copper, Uranium, etc. all are projected to go higher in price over the next year. The one issue is the costs to produce these metals has actually increased more than the metal prices. This is hurting the bottom lines of producers and will require a drastic rise in the commodities prices to make up for the high energy costs. Thus I would hold these companies or sell some of the dogs that you think might not beable to hang in there until their commodities increase in price. I still predict that gold will break $1500 an ounce by next spring and is thus a great investment. Gold Ishares is a direct way to play this but some believe buying the physical metal is safer.

The one commodity that will greatly benefit from rising prices but will not be as hard hit by inflationary pressures is natural gas. It just happens that the summer months are one of the best times to invest in this commodity as there is less demand at that time. I am thus reccomending that you take advantage of the current correction in prices (especially in the companies producing natural gas) and do some bargain shopping. Here is a quick breakdown of the companies at the top of our list. Please do your own research and use this to guide you in selecting the companies that you think have the best investment potential.

Here is a little bit more background from one of our anaylsts:

Energy - A Huge Disconnect

"TSX Energy space off almost 4% today on the back of a 3% pullback in crude. While on the surface this might make sense, it overlooks the huge disconnect between the performance of the energy stocks over the past year vs. the performance of crude. Consider the following chart:
Crude is up 100% over the past year, while the TSX Energy index is up 20%. In our view, one of two things are at play here: 1) There is a huge amount of skepticism in the sustainability of the crude price and we are destined to see prices fall sharply; 2) There is a huge amount of value in energy stocks.

Now, it's easy to say that oil prices are going to come down, but very few people seem willing to explore the alternative - that oil prices are going to go significantly higher. We have thrown everything at oil in the past six months - sharply slowing North American demand, huge subsidy cuts in China, Indonesia and India, sharply slowing economic growth, a stabilization of the US dollar - and yet oil shrugs it all off (kind of like the anti-Shylock - "prick us, do we not bleed", well, actually, no you don't). Our guess is that the doubts about $130+ oil may soon start to ebb and the oil stocks may ride a very big wave for a while.

What if we're wrong? The stocks price in $90 oil now, so being wrong is fairly well insulated. That doesn't mean that the stocks won't go lower if crude pulls back sharply, but we're confident that the slide will be manageable and they'll quickly bounce back. Further, should crude pull back sharply, the rest of the market probably catches a bid, so portfolios probably skate through okay. On the flip side, we're worried we'll be right and this may be the only area of the market that holds us up for a while."

Stocks to Buy

Majors: Encana (ECA), Canadian Natural Resources (CNQ), Suncor (SU) and Canadian OilSands (COS.UN)

Intermediates: Crew (CR) and Celtic (CLT)

Juniors: Delphi (DEE), Iteration (ITX), Cinch (CNH), Tusk (TSK), Glamis (GLM.A), Open Range (ONR), Vero (VRO), Alberta Clipper (ACN), Profound (PFX)

Offshore: Antrim (AEN), Ithaca (IAE), Solana (SOR), Pan Orient (POE), Grand Tierra (GTE)

Service Companies: Cathedral (CET.UN), Calfrac (CFW), Precision Drilling (PD.UN)

Remember to always do your own research and have fun shopping during the Dog Days of Summer. Some of these dogs just might turn out to be darlings...

Doom and Gloom at Calgary Gold Show

2008-04-16T09:36:00.003-07:00

The Calgary Gold Show occurred over the weekend and brought together investors, industry experts and junior resource companies. The central theme at the conference was the huge mess that the US has got itself in and how the inflationary rescue of printing more and more dollars to cover up the mess will only worsen the situation. This is terrible news for US Citizens who have savings, real estate or are invested in the US Markets.

The silver lining to the Doom and Gloom message was that one asset class will definitely benefit from the US Economic Strategy of printing money and getting into more and more debt. If you want to make money as an investor, you will need to invest in commodities (hard and soft) and energy. Gold, Silver, Platinum, Copper, etc. will all continue to rise in price as the dollar falls. This will assist the bottom lines of the companies that are mining them and will offset inflationary pressures which are currently holding them down. When the general public (CNN, CNBC, etc.) start to recognize this we can expect a stampede of investors into commodities. This is the stage where the most money is made and we need to start thinking about an exit strategy. The experts agreed that this will not happen for a few more years but will continue to build. Eventually the misguiding of the media will be discovered and revealed for what it was. Unfortunately, many americans and other people around the world will have lost their hard earned savings by that point of realization. Energy will also continue to rise in price as demand from China, India, Brazil, Europe, Etc. will make up for a recessionary slowdown in demand from the US. Uranium and Alternative Energy will continue to benefit from increase energy demands and tighter environmental rules.

There were some very interesting companies were presenting at the conference that could provide us as investors with big gains down the road. In no particular order, here is a quick run down of some of my findings.

Companies we currently hold:

Silver Eagle Mines (SEG)-http://www.silvereaglemines.com/overview.php
Company has proven up reserves of over 30 million ounces of silver. They will be coming out with a new resource estimate this summer that could double that reserve. They are producing and will grow production expontially over the next two years. Trading at $0.80 a share and I have a target price of $2.00 a share by next year this time.

Aurcana (AUN)-http://www.aurcana.com/s/Home.asp
Aurcana's management has maintained its strategy of acquiring past producing mines and putting them back into production. They recently signed a deal with Silver Standard Resources to take over the Shafter Silver Mine in Texas. There goal will be to have it into production in 15 months. Once into production, it will add 2.5 million ounces of silver to their production profile per year. This will provide huge leverage to the price of silver. The company will be doing a financing in the near term to pay for the acquisition. This will hold the stock down but as it moves closer to getting this mine into production, you can expect a rise in price closer to its peer group of 2 million ounce plus producers. That would value Aurcana at about $2.50 a share when it is currently trading at about $0.75 a share.

Avalon Ventures (AVL)http://www.avalonventures.com/
We spent a lot of time speaking with the president of this rare earth gem. Avalon has been progressing towards becoming the first rare earth producer in Canada. Changes in technology (Hybrids, Batteries, Solar Cells, Flatscreen TV's, IPODS) recently have created a huge demand for Rare Earth Metals. This year alone there will be a 50 000 ton shortfall in production which is coming primarily from China. Avalon has been meeting with Japanese Investors who need to secure these metals for production of electronics. The company has a 100 million dollar market cap but potentially over a Billion dollars of metal in the ground. We liked what the president said and see this company as a leader in this new niche market. Target price by next year is $3.00.

Interesting Companies to Keep an Eye On

Metanor Resources (MTO)
http://www.metanor.ca/exploration-miniere/apropos_profil_ang.cfm
I have liked these guys for a while now and was excited to hear that they would be presenting at the goldshow. Metanor is a producing gold company (45000 ounces this year) that is operating near Val D'or, Quebec. They have a number of properties located around their mill and have reserves that are now over 1 million ounces of gold. The really exciting fact I learned at the tradeshow is that Robert Cohen, Fund Manager of Dynamic Precious Metals fund has just bought 3 million dollars of stock in the company on the open market. Metanor's cashflow from operations will be reinvested in the exploration and increase of the companies milling capacity. I have a target price of $2.00 a share on this one as well.

Arian Silver (AGQ)http://www.ariansilver.com/s/home.asp- I might be a little biased on this one as they took me out for a fabolous dinner on Saturday night. I did get a chance to sit next to the CEO and took the opportunity to fire a million questions at him. I was impressed by his passion for the project and his knowledge of the deposit. Arian is striving to prove up 100 000 000 ounces of silver in the next year. They have the goal of putting the San Jose mine back into production by 2009. A 4301 resource estimate should be arriving this summer which will greatly enhance the fundamentals of this project. Trading at a discount to net value at $0.35. My target on the stock is back to its high of $0.70 by next fall. That is a near term double which is always nice in the investing business.

Gold-Ore Resources (GOZ) http://www.goldoreresources.com/s/Home.asp
This is a small gold producer that is headquartered in Sweden. They took over a past producing mine and have put it back into production. They will exit 2008 at 25 000 ounces of gold. The gold that they are mining is actually found in quartz. They are planning on building shareholder value by using the funds from production to explore some very prospective deposits on the same property. I was impressed with the management team at the conference and with the fact that the CEO was the past president of Cumberland Resources which just last year got taken over by Anigo Eagle.

There was many other interesting companies at the conference and the excitement was definitely in the air over things to come for this sector. Some other companies of note include: Barker Minerals http://www.barkerminerals.com/s/Background.asp, Discovery Air http://www.discoveryair.com/ and Kodiak Exploration http://www.kodiakexp.com/.

I see gold and silver being caught in a trading range (consolidating) for the next few months and predict that the next leg up in the fall will drive gold to $1200 an ounce and Silver to $30.00 an ounce. The juniors haven't had a big move yet but when the prices run in the fall, the patient investors should be rewarded.

The Number One Precious Metals Fund

2008-01-30T14:13:00.000-07:00

Today the Federal Reserve Board cut lending rates by another half percentage point bringing the key government lending rate to 3%. This follows last week's 75 point cut which makes this month's action by the Fed the most aggressive cut in rates by the Federal Reserve in history. While the Fed tries to save the US Customer who has maxed out their debt and is seeing their equity in their number one investment (their home) eroded by falling real estate prices, gold and other commodities continue to benefit from the falling US dollar.

One very easy and effective way to get some more exposure to the rising price of Gold is through a Precious Metals Fund. The 20 year bear market in precious metals eliminated many of the funds and experts in that area from the mutual fund industry. With renewed interest in precious metals investing, we are starting to see more precious metal funds pop up. The key behind choosing any mutual fund is finding out who is making the decisions. You are paying a hefty MER (usually between 2 and 3%) for this expertise and thus should know who you are trusting your hard earned money with. With the recent departure of Charles Oliver from the AGF Precious Metals Fund, this decision just became a little harder since Oliver's Fund was a great performer averaging 26% return over the last five years. The index only averaged 16% return. The sign of a good fund manager is someone who can pick high performing equities for his portfolo that are outpacing the general index.

With the departure of Oliver from AGF, another "young gun" has risen to the top of the Precious Metals Fund Manager List. His name is Kevin Maclean and his Fund is called the Sentry Select Precious Metals Fund. Kevin started the fund at Sentry Select in August of 2004. At that time, the fund had a net asset value of $13.85 per unit. By January of 2008, the NAV of Kevin's Fund had ballooned to $41.05 giving him an exceptional 3 and a half year return of 207%. In other words, $10 000 dollars invested in the Fund in 2004 would now be worth $40 000.

Kevin Maclean began his investment career in Precious Metals working with one of the most respected managers in the Fund Industry, John Embry at RBC. This experience proved invaluable in assisting him in getting the know the ins and outs of the mining industry. He applied his engineering background to the analysis of mining potentials of companies and used this to assist him in picking the winners in the industry. He is an active trader and thus has taken advantage of the volatile precious metals sector, locking in profits and buying equities when they are on sale. He recently was the Winner of the 2007 Canadian Lipper Fund Award* for Sentry Select Precious Metals Growth Fund: best risk-adjusted performance (over three years) in its category. The Fund was also the top performer in the precious metals category in 2005 and 2006.

The current top nine holdings of the fund include:
1/Yamana Gold-7%
2/Osisko-6%
3/Kinross Gold-5%
4/ Quadra Mining-4%
5/ Silvercorp-5%
6/ Jaguar Mining-5%
7/ Semafo-4%
8/ IAMGOLD-4%
9/ First Uranium-4%

Kevin Maclean's strategy is to pick mid-tier to small cap stocks that are prime takeovers or have a huge growth profile ahead of them. He is an active trader and thus his portfolio changes as value surfaces in the precious metals industry. One of his newest holdings, Jaguar Mining, has performed over a 100% in the last six months.

An investment in Sentry Select Precious Metals fund secures you a highly leveraged position in the Gold Bull Market. It also ensures that you have a proven expert in the industry making non-emotional decisions for you that have the potential to net you huge gains in your investment portfolio.

Warranting for a Great Spring

2008-01-03T20:31:00.000-07:00

The New Year has started off with a bang for commodities as oil has passed the psychological number of $100 and gold has surpassed its old high of $850 an ounce set back in 1980. A number of factors have fueled this 2008 blast off including unrest in Pakistan, further rate cuts expectations by the US Fed and a recent OPEC announcement stating that will not be able to meet production goals by 2024. This New Years rally is confirmation that the Resource Bull Market is intact and ready for another spring run.

One way to get extra leverage to this springs resource run is through warrants. A warrant is an option provided by a company to purchase shares at a set price. There are two types of warrants: free trading and non-trading. Free trading warrants can be bought through any brokerage and trade just like stocks. Warrants are usually offered as "sweeteners" during private placements to reward investors for participating in the offering. They became very popular with Canadian Mining companies after the Bre-X debacle and the subsequent bear market in commodities. It was one way to entice investors to give their hard earned money to these struggling mining companies. Fast forward ten years and we are now entrenched in a "hot" commodity market where mining companies are being given much more attention by the investment world. Old habits don't change and thus companies are still offering warrants to investors as "sweeteners".

There are a few of drawbacks to free warrants being thrown around by mining companies. One is that it adds to dilution of the share value in the stock. The other is that warrants can hold the share price of a stock back until they are exercised as people don't want to race into buying a stock that will have a whole bunch more of shares free trading. Finally, warrants trade like options in that they have a set lifespan which is usually 18-24 months from the date of issue. Thus they can expire worthless if they are not in the money (stock must be above the exercise price).

So why invest using warrants if there are drawbacks to it? Leverage! That's right, warrants allow you to make more money on a stock than you would if you were just holding its shares. Warrants provide this leverage by allowing you to buy more with less. This can also limit your downside if a stock unexpectantly crumbles. Thus, it is my belief that warrants are another very effective and lucrative way to gain a larger exposure to the resource bull market occurring right now.

Here are a few guidelines to assist you when investing in warrants:
1/ Take a Macro Look at the investing world and choose a sector that is hot (ex. commodities)
2/ Research the companies in that sector and choose your favorites based on production, exploration potential, management, etc.
3/ Check to see if the company has free trading warrants (some warrants are not free trading)
4/ Find out what the exercise price of the warrant is (price that the stock must be at to exercise the warrant)
5/ Find out the expiry date of the warrant (more time is always better)
6/ Check the chart of the stock and make sure that the warrant follows the stock

Here is a link to assist you in your research:

http://www.financialpost.com/markets/market_data/group-warrants.html

Here are a few of my favorite warrants right now:

Yamana Gold A Warrants (YRI.wt.a)- is a Canadian gold producer with significant gold and copper-gold production from seven operating mines in Brazil, Chile and the U.S., as well as gold development stage properties, exploration properties, and land positions throughout North and South America. The company is in the right industry, unhedged and is increasing production. They have a few warrants that are free trading. My favorite is the A Warrant that is currently trading at $6.50. Two weeks ago it was trading below $5. The YRI.wt.a warrants have an exercise price of C$2.50. On exercise the holder would receive 0.6 of a Yamana share. These warrants expire on November 20, 2008. These related to previously existing warrants of Desert Sun Mining. We reccomend this as a strong buy as you get access to a mid-tier gold company at a junior price.

Breakwater Resources Warrants (BWR.wt)-Breakwater is a mineral resource company engaged in the acquisition, exploration, development and mining of base metal and precious metal deposits in the Americas. Breakwater has four producing zinc mines: the Myra Falls mine in British Columbia, Canada; the Langlois mine in north western Quebec, Canada; the El Mochito mine in Honduras; and the El Toqui mine in Chile. They have great cash flow (a recent UBS report has them increasing cash flow by 130 million in 2008) and have lots of growth upside through exploration and a possible takeover premium. The BWR.wt warrants have an exercise price of $1.00. The warrants are good till January 2009.

Baja Mining Warrants (BAJ.wt)- Baja Mining Corp. (“Baja”) owns a 100% interest in El Boleo Project, an advanced polymetallic (copper, cobalt, zinc, manganese) property located in Baja California Sur, Mexico. Baja has assembled an exceptional management team who are developing Mexico’s largest copper-cobalt deposit. Baja should be producing by July 2008. The stock price should increase as they get closer and closer to production. The Baj.wt warrants have an exercise price of $1.25. The warrants are good till April 2009.

European Minerals A Warrants (EPM.wt.a)-European Minerals is a mineral exploration and development company that is developing an open pit mine at the Varvarinskoye gold-copper deposit in Northern Kazakhstan.

Independently assessed proven and probable reserves at Varvarinskoye are currently 2.2 million ounces of gold and 254 million pounds of copper at metal prices of US$525/ounce for gold and US$1.30/pound for copper. The Varvarinskoye project shows strong project economics with an initial mine life of 17 years and production is expected to commence in October 2007. With its first gold pour occurring weeks ago, European Minerals is poised to take full advantage of a gold run to $1000. The EPM A warrants have an exercise price of $1.20. The warrants expire in April 2010.

The companies above represent a variety of commodity producers and geographic regions. I prefer producers over exploration companies for warrants as their positive cash flow can outweigh some of the drawbacks mentioned above.

Happy Holidays

2007-12-22T21:26:00.000-07:00

Another year is quickly coming to an end and it is now time to hang out with our families, eat lots of good food, drink and be merry. I am sure there will also be some investment discussions during this reflective time and some moaning as we have ended the year on a bit of a downer in the investment world.

The problems in US related to the Sub Prime Fiasco are now mainstream as it is impacting just about every sector of the economy. The once mighty financial stocks of the world have fallen because of some poor choices caused by greed being made by some very highly paid analysts. Now the general public represented by the government will have to swoop in and pay for the mistakes of these individuals. Don't worry, they will still be able to drive their fancy cars and live in their big houses. The general public on the other hand will be faced with some real pressures in the 2008. Some of these pressures will include: a devalued US dollar, high commodity prices, an aging workforce, devalued homes, rising mortgage rates and increased competition from Asian manufacturers.

So the big question to discuss over the holidays is where is a safe place to keep your "hard earned" money? A place that will allow it to appreciate in value. Some people may want to think about sticking your cash in the stocking hanging by the fire. Cash is always safe unless there is a currency crisis. The way central banks are printing money and throwing it at the markets, there is beginning to be a stronger argument for this case. The other option is to look for investments that will continue to trend higher. Commodities have been on fire for the last 5 years and many believe that we are definitely entrenched in a commodity bull market that will last for years to come because of fuelling by growth in China, India, Brazil, Russia and other countries. I still believe that commodities will provide some big gains for wise investors for years to come. It won't be as easy as it has been and investors will have to choose the "best of the breed" for commodity stocks and avoid areas of the world where political decisions control the future of the company.

December was an extremely punishing month for stocks as tax savvy investors sold their losers for a tax loss and built up their liquidity for a rush back into stocks in the new year. As you are preparing to take advantage of the boxing week specials at the malls, you should also be taking advantage of some of the great companies that have been sold off unnecessarily. Here are a few companies that are in my bargain flyer.

1/ AUN-X (Aurcana)- A precious metal/base metal producer in Mexico that has a strong balance sheet, growth and no debt. Are producing 1000 tons a day now and will be up to 1800 tons a day by the end of 2008.

2/ BBP-X (Bayou Bend Petroleum)-Bayou Bend is an oil and gas exploration and production company with a focus in the Gulf of Mexico shallow water shelf area. The Company has lease interests in the State Waters of Louisiana near Marsh Island and owns interest in several Federal OCS blocks offshore Louisiana and Texas. The Company has an aggressive drilling program planned for 2007/2008. They have had some disappointing drilling results on their joint ventures but have not drilled the lucrative Marsh Island Play yet.

3/ CHX-X (Cash Minerals)-Cash Minerals (www.cashminerals.com) is a publicly listed emerging energy company focused on uranium, coal and alternative fuels (synfuels). Under an agreement with Mega Uranium Ltd., Cash Minerals has the option to earn a 75% interest in uranium prospects located in various parts of the Yukon. These highly prospective prospects include numerous iron-oxide copper-gold (IOCG), structurally-controlled hydrothermal uranium targets. Recent volume has indicated that people are already taking advantage of this bargain price.

4/ MTO-X (Metanor Resources)-A junior gold producer operating in the Val'dor region of Quebec. They have close to 300 000 ounces of gold. Lots of growth potential through acquisition and exploration around their current properties in a mining friendly region of the world.

5/FVI-X (Fortuna Silver)-Fortuna is a growth-oriented silver and base metal producer focused on mining opportunities in Latin America. The Company's primary assets are the Caylloma Silver-Base Metals Mine in southern Peru and the San Jose Silver-Gold Project in Mexico. The Company is aggressively pursuing additional acquisition opportunities. For more information, please visit our website at http://www.fortunasilver.com/.

There are tons of bargains out there and I feel pretty confidant that many of the junior resource stocks that have been sold off will be higher by spring. Merry Christmas to all and Happy New Year!

GTIC Goes Nuclear

2007-11-11T21:50:00.000-07:00

The November cold weather has reminded us that we need energy to heat us, move us and power everything that we do. With the price of oil touching a $100 a barrel, people have started looking for cheaper and cleaner energy alternatives. Uranium fits this description perfectly and this could be why the price has gone up over 1000% over the last 5 years. Doesn't this price rise mean that we have missed the boat? The big gains are over? Think again, Uranium has rocketed up as a commodity but will continue to rise due to simple fundamentals like supply and demand.

Lets start with some facts about Uranium. Currently there are 437 Nuclear Reactors around the world producing 16% of the world's electricity. These reactors demand 173 million pounds of Uranium per year. In 2006 there was 102 million pounds of Uranium produced. The shortfall of Uranium was made up by dismantling nuclear weapons. This will change soon as we are slowly running out of weapons to dismantle. This demand is set to increase substantially as there are currently 32 reactors under construction as we speak. There will be an additionally 288 reactors built by 2025. Lets just say that Uranium is not going away. The fears of three mile island and Chernobyl are still there but the technology and safety of reactors has improved considerably. In the end it will come down to keeping the lights on. Without nuclear energy, the world will not be able to meet the electrical demands of an increasingly "consumptious" society.

So to take advantage of this situation, what should an investor do? To begin, the producers are where it is at as they will be able to take advantage of the demand and rise in price immediately. Currently there are only a handful of producing companies out there. Cameco is the largest, followed by Areva, BHP/RIO, and some Russian producers. Next there are the new producers on the block. Uranium One has been aggressively building its portfolio of properties and will be bringing some of them into production next year. Unfortunately, they just announced that they will not be able to meet their production targets due to a lack of sulphuric acid which is used in the production process. This has been bad news for Uranium One shareholders but I think good news for other Uranium producers as it will just drive more demand for the commodity. That leaves two other companies to choose from, Paladin Resources or Denison Mines. I like both of these companies but Paladin appears to have a slight advantage over Denison. Here is why Paladin Resources is the place to play for Uranium for the next few years.

Paladin is not a small company as it has a market cap over 3 Billion dollars. They have 47% institutional ownership in the company. They have just started production at its Langer Heinrich mine in Namibia where they have just expanded there resources to 106 mlbs of Uranium. This expands the life of the mine to 12 years, producing 7 mlbs of uranium a year. Another mine is set to start producing in Kayelekera, Malawi in 2008. This mine will produce 3.3 mlbs of uranium a year for 11 years. They also have four properties in Australia that are very prospective development projects. They hold a 82% holding in Summit Resources which is in the pre-development phase of the Vahalla (resource of 71 mlbs of Uranium). Overall, Paladin has over 279 mlbs of Uranium as its resource base. They are doing everything at the right time and there will be demand for there resources for years to come. There average cost to produce Uranium is $20lb. That leaves a lot of room for profit. They should be producing 8 million pounds a year by 2009. If Uranium just stayed at its current price, they would be generating 720 million dollars of revenue a year. Not bad.

To conclude, Paladin is a great way to get some exposure to the "Hot" Uranium market. Although the price of Uranium has come down from its highs it hit this spring, it is starting to rebound which means this is the perfect time to buy. The hidden added bonus you get with this company is the fact that they are a very attractive takeover candidate. With two producing mines, big companies like Cameco and Areva will be looking at Paladin as a quick way to increase there own production profiles. Cameco has disappointed shareholders with their Cigar Lake Mine and may never get it into production. This has been one of the reasons for the rise in the price of uranium. More problems at Cigar Lake would virtually force them to look elsewhere for production. There is not too many choices out there and Paladin is probably the best one.

Stelmach Decision Unveiled

2007-10-27T21:57:00.000-07:00

The day finally arrived on Thursday, October 24, where the new royalty regime in Albertavala, I mean Alberta was revealed. In a nutshell, new royalty rates (about 20% higher than currently) will take effect in January 2009. This will amount to an investment lost of approximately 1.4 billion dollars by Alberta's Oil Patch. If you couple that with the Trust Decision of last year, companies bottom lines will be hit. Add in low natural gas prices and high labor/material costs and you have a recipe for financial disaster in the so called "economic engine" of Canada.

It appears Premier Stelmach has chosen to take quite a different path than his predecessor by sticking it to Big Oil and instead has chosen to represent the little guy. This decision might get the government in trouble legally and from an investment standpoint. Legally, they have broken a binding agreement with Suncor and Syncrude by raising taxes. The investment community does not like uncertainty, and with the Trust Decision last Halloween and now the Royalty Decision, foreign investors have lost all faith in Canadian government.

So what does this all mean for us, the investors out there. I was a little surprised by the markets strength on Friday, especially in companies with big exposure to Alberta. I don't know if people are just taking a few minutes to take in the decision or if they believe that commodity prices will make up for any extra taxes. I wouldn't be surprised to see a sell off next week.

I have sold out of my last energy trust. Being double dinged is not my idea of "investor friendly" and I have a sneaky feeling that many are going to do just as I have. I have decided to reallocate my money into gas weighted plays outside of Alberta. The north sea has been rejuvenated by some very aggressive and ambitious juniors which will benefit from the slow down in Alberta. Two companies I really like out there are Antrim Energy and Ithaca Energy. Antrim has been hitting on every well drilled and has discovered what looks to be a huge reservoir of oil. Ithaca has been hot lately and recently hit a high of $4.00 a share. Their share prices will continue to rise with more drilling results and investor interest in the North Sea. I have also allocated some of my oil money to Argentina. With recent drilling success by Petrolifera and others, a junior has caught my eye by the name of Argenta Oil and Gas. They are brand new (just started trading in September) and have an aggressive drilling program set for the fall/winter. They are currently trading at $0.55 with a market cap of about 50 million. I have added links to both Antrim's and Argenta's websites on our watch list.

Overall, I am still quite bullish on commodities in general and gold/silver in particular. Gold has had an amazing run since September and is now ready for a little breather. It is tough to predict when gold might correct due to all the other factors occurring in the world right now. We have tensions in the middle east getting higher, mortgage defaults in the US, Bernake's rate decision, high oil prices, etc. etc. that just seems to keep gold powering ahead. No matter what happens in the short term, it is good knowing that we are definitely entrenched in a commodity bull market that has many more years to go.

New Look to the Blog

2007-10-21T13:21:00.000-07:00

As we move into the heart of the fall/winter investing season, I have decided to update the GTIC Investment blog format and its content. My goal is to use the blog as a meeting spot to explore investments, keep up to date on companies activities and share our thoughts on what is happening in the investing world.

I have added some new elements to the page that will hopefully save club members time in finding the information they are after. Through these elements it will be easier to keep track of the companies we invest in and want to invest in. We can also strengthen our knowledge which will assist us in making better decisions as investors. Hopefully, the blog will act as a lighthouse guiding us all through the myriad of decisions required to be successful at investing.

The about the editor will serve as a place to introduce people to the blog, the club and myself (the editor). I am hoping that the blog will connect our group to other like minded investors where we can share our thoughts and hopefully make more informed decisions through this communication. I encourage visitors to either email me or leave a comment on the blog.

Below the Blog Archive, I have posted the names of all the companies we currently are invested in. Each name is linked to the company website, to assist us in keeping up to date on company news. The growth of the club and capital that we have to invest has made it harder to keep track of all our investments. The blog will help us with this. If we sell a company, I will remove that company from the list. I will add any new companies that we buy to the list as well.

I have decided to add a watch list below our portfolio. Hopefully this will facilitate more indepth research and discussion on potential investments. The one company on the list that I am personally sharing at the meeting on Saturday, November 3 is Tumi Resources. They recently had a private placement at $0.72. The money is being used to fund further drilling on their La Trini Deposit. This deposit returned some very high silver grades on their initial drilling. Tumi are now attempting to expand the resource. They are currently drilling and should have assay results out by the end of 2007.

Below the watch list, you will find a number of internet research resources. The links are very valuable and provide a ton of expert advice on various investments. The forum and blog links will allow you to see what other investors are thinking.

To add to the interactivity of the Blog, I have added a poll question. I will change this question from time to time to get feedback on different issues.

At the very bottom of the page, I have added a news link that will flash current events related to gold, silver, oil and natural gas. Hopefully, these changes will increase our traffic to the blog and knowledge that we have on investments. This will help us all succeed in adding more gravy to our own portfolios and net worth.

Portfolio Holdings

2007-09-20T21:44:00.000-07:00

Bronco Energy- 16%
Ithaca-10%
Excellon Resources-9%
Northern Star Mining-8%
Cinch Energy-8%
Bandara Gold -4%
Claude Resources-4%
Baja Mining Warrants (Expire Apr 2009)-3.5%
Celtic Minerals-3%
Avalon Ventures-2%
Canadian Zinc-2%
Calvalley Petroleum-2%
Yukon Zinc-1%
Resverlogix-1%
Glencairn Warrants-Expire Nov. 2008-1%
Kinross Warrants- Expire Dec 2007-1%
IMA Warrants-Expire Sept 2009-1%

Portfolio Value is $60 000
Members Share Value is $3400 plus cash in the bank=$3500 (My guess)

Commodities start to explode

2007-09-20T21:11:00.000-07:00

The recent cut in interest rates by a half point by the US Federal Reserve has fired up commodities after the summer sell off. Economically, things are looking worse and worse each day in the US. Although companies keep coming out with positive earnings mostly due to the abundance of liquidity that is floating around, the overall picture does not look good for the coming year. The Asset backed mortgage collapse has shaken the system and we still haven't felt the full effect of the poison that has entered every financial market on earth. So what does all this mean for the Gravy Train and its investors....

Well, to begin we have been predicting this collapse for about two years now. We have loaded up on junior mining companies that will provide us leverage to the coming frenzy in commodities. Gold and Silver have both had a consolidation year after there rise in 2005. Many members are wondering when the next wave will occur...I think that wave is upon us. I am predicting that we could see a short sell off in commodities in mid October after Gold runs to $750 an ounce. This sell off will be the last chance to get into commodities when they are cheap. We should be ready to put some serious money down both as a club and as individuals. The trick will be to find the best companies to entrust our hard earned money between now and then. I predict that we will see $800 an ounce by the end of the year and $1000 an ounce by May 2008. Can you imagine how many people will have noticed gold by then. We are still in the early stages and have the advantage of foreseeing the rise that is coming. I have personally moved most of the investments into areas that will take full advantage of this run. Most financial planners will tell you that this is crazy so don't copy my actions unless you are prepared to lose it all (ya right).

Gold is not the only commodity gaining in price. Oil has also had a very good run and has broken through $80 a barrel. This should help out some of our junior producers like Bronco and Calvalley Energy. Bronco continues to be our top holding. They have had a very successful year and have recently expanded their land holdings. They have changed there plans a little as they are now drilling 300 wells this year versus the 30 or so that the originally had planned. The news flowing out of these wells should help the share price. Keep in mind that the NAV is over $20.00 a share. They haven't even started looking at their oil sands yet. Natural gas has struggled along as a commodity and has not kept up with its cousin oil. The traditional ratio of 6 to 1 on price is way out of wack. Gas should be trading between 10 and 15 dollars but is still stuck at $6.00. A cold winter could change this. Delphi, Ithaca and Cinch are all good holds to see what happens with the price of natural gas over the winter.

Overall, the Gravy Train looks poised to take full advantage of a commodity explosion. I am currently trying to track down some speakers for our October Meeting. We might have the opportunity to have the CEO from Silver Eagle Mines in to talk to us. The editor of a website called the silverbullreport has asked if we would be the audience for this presentation. The video will be put on his website for subscribers to watch. A great idea that I jumped at. Hopefully we can coordinate things to make this experience occur.

Well until next meeting, keep your eyes and ears open for some great investments and I look forward to seeing all of you in October.

First Post

2007-05-14T21:57:00.000-07:00

I thought the first step to establishing an online presence for the Gravy Train Investment Club would be to start our very own blog.

My main goal of setting up the blog is to expand the educational aspects of the investment club. I must admit that the real benefit of being involved in an investment club is the knowledge that you squeeze off others. You can then apply that new found knowledge to your own financial planning. There are many other benefits to being involved in an investment club like the big returns, forced saving plans, the beer and pizza, meeting new people, etc.

So without further adieu, lets get started. We can get started by focusing on our current holdings as a club. We can also begin a running commentary on the economic situation, market conditions and technical analysis. Finally, we can use the blog to inform members and potential new members of club activities, meetings, etc.