Britain’s international aid budget costs the equivalent of 22 days of national borrowing from international markets. By 2015, British Aid will have increased by 34.2% to £11.5 billion per annum. Including personal donations and state spending, Britain gives 0.8% of GDP in international aid. With state aid increasing, more people should ask: Why are average per capita incomes in Africa lower than 40 years ago after $1 trillion of aid being given over that period?
If there is one thing I simply do not understand in this scenario, it would have to be why Britain feels compelled to help Africa at all. The British government’s only concern should be with taking care of its citizens and acting directly in their best interest. (Of course, as a libertarian, I’m inclined to argue that this can be accomplished simply by ensuring that property rights are observed, and that the taxation necessary to ensure this result is as small and painless as possible.)
I simply do not see how giving aid to Africa is in the best interest of British citizens. Need cheap labor? Asia is a good place for that, and doesn’t generally require near the amount of aid that Africa does. Besides which, Asian labor is more reliable in terms of quality, and many Asian governments have made a point of developing their infrastructure. So why care about Africa?
This question becomes extremely poignant once on also considers that African countries have not simply stagnated in spite of aid, but have actually regressed. This being the case, it seems obvious that aid, if not hurtful, is at least irrelevant to African countries. And if they can’t manage the money transferred to them from the pockets of productive first-world citizens, then how and why would anyone think that they are worth investing in?
Quite simply, it is time to cut the purse-strings to Africa. They squander the generous gifts given to them time and again, and it appears that this trend isn’t going to change anytime soon. If insanity is doing the same thing over and over again while expecting different results, then the sane thing to do at this point might be to cut the aid and force Africa to stand on its own feet. And who knows? It just might be crazy enough to work.
The recent tumultuous downturn in stocks has created deeper values and new opportunity in the agricultural space. Dahlman Rose & Co. Managing Director Charles Neivert is a near-term bull on fertilizer companies, but the window could close and diminish prospects in the not too distant future. In this exclusive interview with The Energy Report, Charles talks about the complex dynamics that affect the farming and fertilizer industries, and reveals his best pick for a core holding.
The Energy Report: Charles, I was looking at an un-weighted basket of fertilizer stocks, and they were down about 23-24% for the last week of July through the first six trading days of August. Has this opened up some tremendous value for investors? Or is this downturn signaling a commensurate slowdown in agriculture along with the general economy?
Charles Neivert: I think that as a group this is probably more of a signal of a very strong value for investors over the next three to six months—possibly longer than that depending on the company. We don’t see a great change in the agricultural landscape due to the changing economy. It is certainly part of the things going on, but it may have less bearing on the fertilizer names than some other material spaces. That’s simply because food is involved and the grain crop out there that may have been damaged in some ways—though possibly not quite as definitive as we might see in other products. As a result, we think there is a lot of value in the fertilizers.
TER: The key difference is that it’s food?
CN: Yes. The demand for food is less elastic. Certain amounts of food are needed to keep going and global inventory is limited. This year, a number of grain crops were not exceptionally large. As a result, we don’t see a big rebuilding of inventories. The potential is that the price of some of these grains could continue to go up if the harvest does not come up. So, you could see things going up even though the economy is backing off simply because supply is being cut away.
TER: It sounds like you are near-term bullish on some fertilizer names, but that you have longer-term fundamental concerns.
CN: Yes, that is the case. Company prospects really depend on which nutrient is involved during which timeframe. The near-term is very good, I think, for any nutrient given the food and grain situation. However, as you mentioned, fundamentals for some of these products could potentially deteriorate over time while others are likely to be stronger for a little bit longer.
Again, given the nature of the agriculture business, it is really difficult to have a very long-term outlook within the context of a potentially extremely volatile production range, meaning grains. That is because the grains can go anywhere from very, very large harvest years to rather challenged times without any real rhyme or reason. There are no traditional business cycles. The agricultural cycles are all based on weather. If weather is extremely cooperative across a broad range of geographies, you could have an enormously large crop at a time when you don’t really want an enormously large crop. You may already have inventories, but there is not much you can do about it.
You might also get a small crop on top of small inventories, or something in-between. You don’t have the same control, particularly on the supply side, as you do with a manufacturing operation that can back off production when inventories are long. For the most part, the rules that governments have put into place to enforce land set-asides to help control production, have largely been abandoned. Those policies are no longer used, particularly in the U.S. and even in some other areas. So, you can get large or small crops completely opposite of what you might want or need at that time.
TER: Let me just flip here to the macro-economy for a moment. In a detailed statement following a meeting of the Federal Open Market Committee on August 9, the Fed signaled a prolonged period of slow growth and, in an extraordinary comment, said that interest rates are expected to remain low until mid-2013. How does this affect the agricultural universe?
CN: Well, those rates are pretty much focused on the United States. So, I don’t think it really has that much of an impact on the Ag space. In fact, it may have none. Low interest rates, to the extent that they affect the dollar could present some potential challenges because the dollar is weak or because the dollar is strong. That does have a lot to do with corn or soybean costs to potential importers of U.S. products versus some competitors. But, it will have nothing or little to do with what the farmer is going to plant in any given year.
TER: Charles, what are your institutional investor clients telling you now during this selloff? Are they holding off on buying stocks for fear of needing cash for redemptions at this point?
CN: Each portfolio manager may take a different tack, so really this one is a little hard to answer. My guess is that now people are moving and seem to like the Ag space for the time being. We are seeing good activity. A lot of it is to the buy side where activity levels are good.
TER: Can a case be made that some of these plant nutrient producers are defensive stocks?
CN: In the current environment, you can make that argument. They are not typically defensive in the way you think of a food stock in a recession. In a recession, these guys get hit. When grain production is being challenged, they become defensive opportunities.
TER: Potash is traded in a negotiated market, not a globally efficient and tight market. But we have seen some transactions of $490/ton in India. Could this represent an upward trend?
CN: Well, the price of this product has been coming up for over a year now as demand has come back from the trough of 2009. I won’t say it’s impinging on capacity, but it starts to be a snug market because we have run through a fair amount of inventory over the last year to a year-and-a-half. That is what ultimately justifies the fertilizer price. For the sake of argument, if this year’s crop turned out to be extremely large and we rebuilt inventories substantially, fertilizer pricing would have a very tough time going up from here. By the same token, if the crop comes in short, and the way it’s looking, it would increase the price of grains and therefore be a bit supportive of a price increase in potash. What we found in 2008 was that crop price is a very important determinant in what the fertilizer price can ultimately do.
TER: Are you currently bullish on potash as a commodity?
CN: No. Near term I like all the names and products, but on a longer-term basis, I’m not as bullish. I see an awful lot of capacity on the horizon. Some has begun to come up and more is coming over the next few years. It will be a pretty steady stream from a very wide variety of potential producers and some new entrants.
TER: At what price-per-ton would you be bullish on potash equities generally?
CN: I don’t look at the price of the product as a sign at all. I look at the price and prospect for the grains and consider what needs to happen from that point. So, when grains are at low prices and the crop is looking strong, I’m not going to be bullish.
TER: Is the extraordinary heat wave in the U.S. affecting crops?
CN: It’s definitely affecting crops. The timing of the heat wave is also an issue. If you get periodic rain, it reduces that impact. But, there are times where heat can be extremely damaging and other times when it’s less damaging. If heat hits at certain points of the growth cycle, plants can be far more damaged than at other stages of their growth. The heat that came through the Midwest earlier in the year hit around a time when certain plants were going through a key stage maturation, and that can be a problem.
TER: Is there a play for investors on drought-resistant crops?
CN: Seeds haven’t yet gotten there. There is no seed out with the label of drought-tolerant. It’s hard to say resistant. It’s really a matter of degrees. If you get no water, nothing will help you. But, if you get smaller amounts than normal, some seeds under development will still produce near- or full-yields under less-than-ideal conditions, but they are not in the market yet. They are within a few years, so the claim goes, and we will see when they make it. All the major seed players are working on that particular trait. You can get into the companies that would provide that pipeline by looking at the typical seed names of the world—du Pont de Nemours & Company (NYSE:DD) and Monsanto Company (NYSE:MON).
TER: Low equity prices have left a lot of companies with cash on their balance sheets. What does this bode for M&A activity?
CN: It’s a tough call. It depends on the product because some of the markets may be so consolidated already that it will be difficult to get anything by the antitrust people. Cheap prices may or may not allow for acquisition because people will look at the price from six weeks ago for comparison. A perfect example is what PotashCorp (TSX:POT; NYSE:POT) went through when BHP Billiton Ltd. (NYSE:BHP; OTCPK:BHPLF) took a run at them. The stock was down in the high ’80s to low ’90s for a long time. BHP was thinking it could get the company for $130, but just before the offer, PotashCorp’s share price went up to $106 because the wheat market in Russia started to give way. Russia was experiencing a serious drought. The prices started to move up, and even though the $130 offer was actually still a pretty substantial premium, it was not accepted. Not only was it not accepted by the company, but, as conditions in the grain marketplace worsened with stress from the U.S. corn crop, that price got even higher. So, it easily surpassed the offer number. Either people were expecting a much higher bid, or something is going on that makes the stock just worth more—like getting another bid. When the BHP bid was pulled, the stock didn’t drop.
TER: What are you telling your clients right now Charles? Where are the value and the growth stories?
CN: The name we like the most in the group is CF Industries Holdings Inc. (NYSE:CF) because we see the pressure on the corn crop in particular leading to a very positive, constructive situation for corn into 2012. The biggest beneficiary of a corn crop that needs to have a very large planting is more likely to be a name that is heavy in nitrogen, as opposed to one heavy in potash and phosphate.
We think there is going to be a fairly significant increase in corn acres planted next year, and if you need acres in corn, the U.S. doesn’t have a lot of new, unplanted acres to go after and would have to probably use acres currently in another crop. Often that tradeoff is in soybeans, which would result in an increase in the application of nitrogen.
TER: Even in this downturn, CF Industries is still up 82% over the past 12 months and it’s flat over the past month. So, it’s held up pretty well under this pressure.
CN: CF Industries is our only straight-out buy. We’ve been recommending this stock for a long time. Even when I was less constructive on the industry, this was the name we liked the best.
TER: Even though CF Industries is your only straight out buy-rated stock, you still recommend that money managers create a basket of these stocks, do you not?
TER: And, what would that basket include?
CN: We are sort of constructive on all the fertilizer names, at least through the fall application season and possibly a bit beyond. CF is only in nitrogen with some phosphate exposure and no potash exposure. So, we would tell people to get some potash exposure, but pick your name carefully. We lean toward PotashCorp as a name, but you have to look at it at that moment in time and see how the company is performing against The Mosaic Company (NYSE:MOS) or Intrepid Potash Inc. (NYSE:IPI). It’s really a close call based on a lot of different metrics. That is why we recommend a basket within the group to your preferred weighting. You have to own some of everything, but include some of all of the nutrients. You could cover it all with two or three stocks in the basket.
We have upgraded the entire industry to an attractive level, and in a strong agricultural situation, you don’t want to be left completely unexposed to one particular nutrient because they will all move well and you want to catch some of that. It’s always hard to tell which one will be the best of the group.
TER: These companies are all mid- and large-cap. Are there any small- or smaller caps under a billion dollars where investors might be able to get a little more leverage?
CN: The only one that I deal with that gets down close to that range is CVR Partners LP (NYSE:UAN). It is a pure play on the nitrogen side structures as an MLP (Master Limited Partnership). It features a good payout, but tends to mute the share price a bit.
TER: Want to mention any other phosphate, potash or nitrogen companies?
CN: The only company I haven’t mentioned in the universe is Agrium Inc. (NYSE:AGU). I hesitate to use the word defensive play, but it has a big retail operation that it uses very effectively to move an awful lot of product. It does very nicely in that business. It is also spread across all the nutrients. It has nitrogen, potash and phosphate exposure. It also happens to be based-in and sell a lot of product in Canada, which means that it is a bit isolated from the rest of the market. That actually gives the company a pricing advantage because the market up there is a bit higher-priced. Its big retail exposure is sometimes a little bit of a turnoff if what you are trying to do is play the fertilizer space in a pure way. It’s a good company and well run. But, people tend to look at it and say it’s not exactly what they are after.
TER: Charles, thank you very much for your time today.
CN: Thank you.
In May 2009, Charles Neivert joined investment bank Dahlman Rose & Company LLC as managing director to head the firm’s new Agriculture and Chemicals Research division. Prior to Dahlman, Charles was an executive director at Morgan Stanley where he re-launched the firm’s commodity, specialty and fertilizer chemical equity research practice. He was also co-founder and president of New Vernon Associates, an equity research boutique specializing in global chemicals, which was awarded Institutional Investor’s “Best of the Boutiques and Regionals—Commodity Chemicals” honor for nine consecutive years. At New Vernon, Charles conducted all fundamental industry research on a global level, including analysis and forecasting of 50 distinct chemicals. He earned his Bachelor of Arts degrees in chemistry and economics from the University of Pennsylvania.
Financial Express recently did a special feature about 20 interesting people in India’s economic reforms. In that, I wrote this profile of Vijay Kelkar.
Vijay Kelkar’s is a fascinating story in Indian public policy. He started out as an economics Ph.D. and turned himself into a consummate policymaker. While he did many interesting things in the field of oil and gas, and as executive director of the IMF, I worked with him in his fiscal phase.
This involved carrying forward the tax reform agenda of the 1990s, translating the intent of the FRBM Act into a concrete workplan,
leading the transformation of income tax administration through innovative institutional arrangements in the form of the Tax
Information Network (where the implementation was contracted out to NSDL), analysing and championing the Goods and Services Tax (GST) and leading the 13th Finance Commission.
For most people, the idea of the fiscal reform is exhausting. Fiscal systems have many moving parts, and suffer from the political economy problem of entrenched beneficiaries. I used to get astonished at the way Kelkar, who is 20 years older than me, consistently found the energy and morale to go back into the fray again and again, chipping away at solving long-standing problems. This also taught me that while weary cynicism is a more fashionable pose, progress is only achieved through the dint of boundless optimism.
Practical people are often dismissive of the world of ideas, but that is not the Kelkar that I have known. For one thing, he made a point of reading the current global research in economics on an astonishing scale. I have been frequently humbled in finding that his knowledge of the current literature was better than mine. I suspect his years at the IMF were very useful in tooling him up in modern open economy macroeconomics, which is often a gap in the knowledge of those who experienced a closed India in their formative years. Kelkar has always encouraged me, saying that in an open society, ideas matter, so it was important to build good ideas, and to push important messages out in the public domain, even when this makes many people uncomfortable.
After decades of engagement, Kelkar is no longer active in the public policy work of the New Delhi community. However, he has begun a stint as chairman of the National Stock Exchange (NSE). Given the immense importance of the equity market in the Indian economy, and the immense complexity of ownership and governance of stock exchanges, it is indeed valuable that a person of his wisdom is performing this public service.
The Mortgage Bankers’ Association purchase index will be released at 7:00 AM EDT, providing an update on the quantity of new mortgages and refinancings closed in the last week.
The Challenger Job-Cut Report will be released at 7:30 AM EDT, providing an estimate of the number of layoffs in August.
At 8:15 AM EDT, the monthly ADP Employment Report will be released. Investors will be watching this number to get advance notice on the state of the job market in advance of the government’s report on Friday.
At 9:45 AM EDT, the Chicago PMI Index for August will be announced. The consensus index value is 54.0, which is 4.8 points lower than last month, but is still above the break-even level at 50.
At 10:00 AM EDT, the Factory Orders report for July will be released. The consensus is that there was an increase of 2.0% in orders from the previous month.
At 10:30 AM EDT, the weekly Energy Information Administration Petroleum Status Report will be released, giving investors an update on oil inventories in the United States.
At 3:00 PM EDT, the Farm Prices report for August will be released, giving investors and economists an indication of the direction of food prices in the coming months.
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With the price of gold soaring to over $1,900 an ounce and investors abandoning equities for commodities, John McClintock, equity research analyst at Mackie Research Capital, sees gold mining companies benefitting from this flight from risk. In this exclusive interview with The Gold Report, McClintock identifies several gold mining companies with great upside potential.
The Gold Report: With the recent performance of the gold market, what expectations do you have for the next 6–12 months?
John McClintock: I think nothing is really going to change on the equity side until we see the risk trade coming back on to invest in equities. That risk trade is going to be a function of the U.S. housing market rebounding, as investment is a function of wealth, and the resolution of the debt crisis in Europe. We are going to see companies that have shown consistent operating performance continue to outperform the market. Currently, the focus on quality is paramount, and we are likely going to see that continue for at least the next six months.
TGR: The situation is a little different from past markets when people were jumping into mining stocks because the metals were going up and they were buying almost anything in sight.
TGR: So are people now being a lot more selective?
JM: Yes, in where they are going. People are focused on just the risk trade. If you look at the equities, all the major precious metals in Toronto are down on the year and definitely underperforming the commodity. It is not because the companies are themselves poor. Investment dollars for the equities other than institutions, predominantly retail, are largely going to exchange-traded funds (ETFs). ETFs are competing with the supply of funds for all of equities. People are saying, “I don’t want to own Treasuries as much anymore.”
I’ve already seen a bit of that. Just go to the commodity, be safe right now and then when we get out of this turbulent time, maybe in six months, you’re probably going to see stocks run. Maybe by September we’ll have more visibility. Going down the market cap, you’re going to probably see people start focusing on the intermediates and the junior producers that show consistent execution.
TGR: So what do you like in that range?
JM: Two stocks that I cover have had very good execution and share prices that are actually outperforming the commodity index and their peer groups. Argonaut Gold Inc. (TSX:AR) is in Mexico and Avion Gold Corp. (TSX:AVR; OTCQX:AVGCF) is in Africa. They share very strong commonality on execution.
TGR: Unlike a lot of juniors, Argonaut came out of the blocks fully loaded with cash. The company did a big IPO and has projects that were producing and ready to produce. Isn’t this unusual for a company that went public in the last couple of years?
JM: It is and it isn’t. It was a functioning mine, and produced, I believe, 40 or 50 thousand ounces (Koz.) prior under the name Castle Gold Corp., with cash costs in excess of $1,000/ounce (oz.). The new management team came in and executed. Even though it seems that it started with an extra handout because it did the large IPO, the funds were spent in a prudent, focused way. I look for three very simple things: 1) whether the company owns the asset, and this includes permitting risk or any subsequent geopolitical event, which would affect development; 2) merit of the assets—what are the technical/geological characteristics, and how do they affect profitability in different commodity and cost environments; and 3) management, management, management. With both Avion and Argonaut, unlike many stocks that come across my desk, I can check all three boxes. Somewhat proof that my system works is that both Argonaut’s and Avion’s stock prices are going up in an otherwise very bearish equity market.
TGR: Can you give us a little bit more background on the company?
JM: Absolutely. I call the company Meridian Gold 2.0 affectionately, although it is definitely not Meridian Gold currently. Meridian was acquired by Yamana Gold Inc. (TSX:YRI; NYSE:AUY; LSE:YAU) in 2007 for about $3.8 billion. Brian Kennedy, who was the president and CEO of Meridian at the time, is now chairman of Argonaut Gold. The CFO, Pete Dougherty, is the current CEO of Argonaut, and Edgar Smith, who is the COO of Argonaut, was also the COO of Meridian. They reassembled the team after their non-compete clauses with Yamana expired, and started Argonaut.
The team was very strategic in the asset they picked and asked, “What can we do at this point in the market with these gold prices?” A lot of assets in Mexico, Chile, Peru and Argentina became available in the crash. In the prior Meridian days, the team ran such assets as El Peñón mine, which is a very high grade gold and silver mine that will go down in mining history as one of the best assets ever. What Argonaut selected as its starting point was the El Castillo mine, which was low grade with small defined resources at that time, and people just saw it as a push along owned by Castle Gold. These guys came in and saw a diamond in the rough. I very much liked Castle Gold, but the company had some difficulties due to undercapitalization.
The Argonaut team saw an asset that had an incredibly good leach-recovery cycle and was able to cut a deal with the prior management of Castle Gold. Argonaut saw an ability to prove up or increase the reserve by 100% through a very strategic drilling program. Its mine development expertise was second to none from putting mines into production in the Meridian days. Given the complexity of a simple heap-leach operation in Mexico, it wasn’t really challenging.
Along with developing that mine, Argonaut also kept an eye out for other opportunities. One of the companies in Mexico that was available was Pediment Gold Corp. It had two simple heap-leach projects, which were very similar to El Castillo, called San Antonio and La Colorada. Moreover, Argonaut continues to add value post the acquisition. For example, at San Antonio, the previous resource mine plan was based on a mix of sulphide and oxide ore, and Argonaut took a calculated risk by stepping out certain zones and expanding the oxide resource. So it went from a potential four-to-six-year oxide production to about a 10-year oxide mine life resource.
Another example of Argonaut’s management caliber is its development strategy at La Colorada. La Colorada was a historical producer that Eldorado Gold Corp. (TSX:ELD; NYSE:EGO) had closed in 2001 because of low commodity prices. I recently came back from the site. I had always been a little skeptical of the asset, but Argonaut could very well have another 50–70 Koz. producer by 2013. Management was able to see a diamond in the rough and execute. Now the market is rewarding it for good execution.
TGR: Argonaut released earnings recently and, apparently, beat expectations.
JM: Yes, two reasons. On the cash cost side, it came in at $578/oz. We were expecting $580/oz., but General & Administrative and other corporate expenses came in lower than we expected. Q211 earnings were more a sign of management successfully executing on all concurrent things the company is doing. Argonaut has a 57,000 meter (m) drill program at La Colorada that is being financed out of cash flow and it is committing to another 10,000m of drilling at San Antonio, out of cash flow.
TGR: Are you expecting that trend to continue? The gold price jumping up the way it has is probably going to make a lot of companies look better than originally expected.
JM: We don’t think it’s reasonable to expect Argonaut to beat every quarter, but we view the operating risk associated with the company as low. With regards to the gold price affecting other gold equities, a high tide does raise all boats. However, in the context of current market conditions, execution is paramount, which translates into cash flow and good growth prospects with lower funding risk. Again, Argonaut is one such company.
We estimate by 2013 Argonaut should grow its production to 185 Koz. at cash costs of $541/oz. from 70 Koz. at cash cost of $581/oz. (or 164% production growth and 8% decline in cash costs) through: 1) expanding the mining rate at El Castillo in 2012 from 28 kilotons/day (kt/d) to 36 kt/d at minimal costs (we expect this to add 20 Koz. of average annual production); 2) construction of the San Antonio project in 2013 (Life of Mine (LOM) average production of 84 Koz. at total cash of $493/oz.); and 3) the addition of the La Colorada project (LOM average production of 47 Koz. at total cash costs of $499/oz.), also expected to be completed in 2013. We estimate the total capital cost for all three production expansions to cost $123 million (M). Moreover, this production growth is fully funded by internal cash flow—at $1,500/oz. Argonaut should generate $88.3M; a net cash balance of $22.7M; and the execution of 25.7 million warrants with a strike price of $4.50/share.
TGR: Do you think Argonaut has enough on its plate at this point or is it still out looking for other properties?
JM: I don’t think it would be acquiring tomorrow, but a mining company should always be looking for new assets and new opportunities, and should never stand still. If a great opportunity walks in the door, sure. But with two development projects on your plate, you should finish that up or at least get them closer to the finish line before you go out and buy more.
TGR: The other company you like is Avion Gold. You call it a turnaround story.
JM: Prior to Avion getting the Tabakoto asset in Mali, the mine was built by a company called Nevsun Resources Ltd. (TSX:NSU; NYSE.A:NSU), which had some problems understanding the block model on it. Nevsun spent approximately $150 million to build the mine, only to close it 18 months later. Most of the investment community looked at it and said, “It’s a broken asset. Sell it for scrap.” Two very astute people, Andrew Bradfield and Don Dudek from Avion, looked at it and said, “It is not the asset. The block model is not so bad, it is just misinterpreted.” They went in there and merely focused on the structural geology of the deposit, and reinterpreted it from, I believe, a solely north-south trending deposit to one with east-west cross-structures. Sure enough, the grade came in line with the drilling, and the asset was able to restart. But not everything in Avion went perfectly for the first year—it started in 2009. It missed on two quarters but since then, it has had, I believe, five quarters of stable execution.
Very much like Argonaut, Avion was able to not only focus on production, but also to grow its resources at Tabakoto from 0.9 Moz. in 2008 to 2.2 Moz. in 2011. It also, like Argonaut, was able to do two very astute, very cheap acquisitions—the Kofi Project from AXMIN Inc. (TSX.V:AXM) and then the Houndé Project in Burkina Faso from Avocet Mining plc (LSE:AVM). Avion picked up the Houndé asset, I believe, for $10M in an all-stock deal, and the Kofi project for $0.5M in cash and 4.5M Avion shares. Here’s another team that said, “What can we add value to?” and be very strategic. The similarities between the Avion management team’s view of things and execution and Argonaut’s are just striking.
TGR: What are the prospects on these other two properties—the Kofi and the Houndé?
JM: The Houndé Project right now has a current inferred resource of about 0.6 Moz. at about 2.87 grams/ton (g/t). That current resource is based off 800m of strike. Avion has drilled it on strike to about 3.7 km with very consistent intersections between 6, 10 and 15m, all within +1.8 g/t. One striking comparable that I like to use is Gryphon Minerals Ltd.’s (ASX:GRY) Banfora project. The company trades at about a $400M–$500M market cap. It has an approximately 2 Moz. resource at 2.1 g/t. We look at Houndé and it has the same mineralization footprint. Avion hasn’t closed yet but completed a $50M deal to raise funds to drill out that project. Right now it has a visibility on 2.2–2.5 Moz., and it’s just a function of drilling now to see where it gets it. The updated resource due at the end of the year will probably only come out with 1.5–1.7 Moz. That’s only a function of time and drilling, not a function of the deposit or the potential there. Again, Houndé is a deposit that I’m quite excited about.
The second project Avion bought was from AXMIN just recently. It’s in the Loulo trend. Loulo is a mine run by Randgold Resources Ltd. (NASDAQ:GOLD), and it is definitely the marquee asset in Randgold’s portfolio. Currently, the Kofi Project has another 0.6 Moz. resource at 2.47 g/t broken up in nine zones. It’s quite interesting because four of these nine mineralized zones are located within an approximately 5 km wide structural corridor. This structural trend, which intersects the Kofi property, is associated with a conductivity feature that extends for 19 km on the Kofi property, and hosts at least 17 Moz. of gold on the Randgold property. Although, Kofi is much earlier stage than Houndé in terms of where it could go, we don’t believe the market has really caught on to the potential there. The Avion market price is really just factoring in the production from Tabakoto and the ongoing expansion, and the next stage in Houndé’s resource growth. You can’t really see what is going to be there yet, but there is the potential that Kofi could someday be better than Houndé. Only the drill bit will tell, but I’m excited.
TGR: A question some investors might have is about political stability in countries like Mali and Burkina Faso.
JM: Absolutely. In 2003 and 2004, West Africa had a big wave of transformation to attract mining investment by changing tax codes and giving exoneration periods for taxes to keep companies there. Now, the prices of commodities, particularly fuel, have caused a dramatic increase in domestic prices, which has had a destabilizing effect on the broader economies. People who don’t make a lot of money don’t have a large propensity to spend. There has been civil unrest, much of it focused at government. People want subsidies for agriculture and fuel. In Burkina Faso, we have seen riots and things get out of hand a little bit. Do we think there’s going to be a full civil war or change in government in Burkina? No. But we do think there is an upward pressure on royalty rates and taxes on mining companies that will have to be factored into the valuations.
Right now, depending on which West African country you are in, there are exoneration periods for taxes for 4, 6, 8, even up to 15 years. Tax rates are generally lower, about 20–30%, and although the governments do get carried interests of 10–20%, the mining companies don’t pay out dividends to the government until all capital is paid back. So the governments really don’t get much of the immediate cash flow from the company. We do believe that the revenues and profits, particularly with the very successful companies, will have to be redistributed to some degree to keep political stability and also to ensure a long-term mining industry there. So investors should be aware that royalty rates will change. A lot of it has already been factored into the stocks, we believe.
TGR: Do you have any closing thoughts you’d like to leave with us as far as the gold market in general and expectations for juniors and mid-tier mining stocks?
JM: In the general macro scheme, I think gold will be the thing. The U.S. will have to deflate its dollar and rely heavily on exports. Inflation in the U.S. will not be put away for at least 5–10 years. In the early 1990s, it took the Canadian government about 10 years to get out of it and cut its deficit. Europe will have to print money to get itself out of its current situation. Who knows about the debt and real estate situations in China and other emerging markets worldwide? So in the longer term, I’m very bullish on gold and commodities, in particular, hard assets. It has been an investment trend that is likely to continue, particularly in the precious metals. Industrial commodities like copper can be expected to come off with an economic slowdown. People seeking safety and wealth preservation will cause gold to continue to be strong for the near and mid-term, without a doubt.
TGR: Hopefully that will filter down to the equities?
JM: For sure. It’s just a function of the risk trade coming back on. The U.S. will not hit 4% gross domestic product any time soon. We need the housing market to bottom, and people to get back into the equity market and begin to make investments. When people have taken 30–50% haircuts on their biggest asset, they can’t afford to lose a lot of money in the stock market anymore. So people are very risk averse right now and it is about wealth preservation more than wealth generation. With the long-term commodity price the way it is, people will come back to the market eventually, but it’s not going to be tomorrow or next month. We are going to see a volatile market here, but six months from now, I’m optimistic the gold stocks will catch up.
TGR: It looks like we are still in the fear stage. So we need fear to turn into greed.
JM: I’m sure you’ve heard that one before.
TGR: So your final thoughts?
JM: I’d say just stay focused on quality and on management teams that have executed like Argonaut and Avion. If investors want to focus on the development companies, we would suggest again to focus on quality strategic assets for senior and intermediate companies. Such a company would be Chesapeake Gold Corp. (TSX.V:CKG). Although it is a development company, it is catalyst-rich, reasonably funded, has excellent management and its Metates flagship asset is very strategic for either senior or intermediate companies. Metates is a gold deposit in Mexico that has 28 Moz. gold. We estimate it can produce 1 Moz. of gold at sub-$475/oz. cash costs at a 20-year mine life. It is assets like those that have strategic importance for major companies that people should focus on.
TGR: That’s another one our readers can take a look at. We greatly appreciate your insights and a couple of good stories that look like they have some solid potential. Thank you very much for joining us today.
John McClintock is an equity research analyst at Mackie Research Capital, specializing in mining and metals. Prior to joining the firm in 2008, John was with Bank of Montreal Capital Markets where he worked in investment banking. John began his investment industry career in 2005. He holds a Bachelor of economics and commerce from the University of Toronto.
Well, let’s wake Wiz up.
Now we have two specific numbers, both by Penn State researchers, with comprehensive economic impact analysis of the development of Marcellus Shale in Pennsylvania.
Just out and dated August 2011
Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009, by
Timothy W. Kelsey (Penn State), Martin Shields (Colorado State), James R. Ladlee (Penn State), and Melissa Ward (Penn State), in cooperation with Tracy L. Brundage (Penn College), Jeffrey F. Lorson (Penn College), Larry L. Michael (Penn College), and Thomas B. Murphy (Penn State)
and this from last month, dated July 20, 2011:
The Pennsylvania Marcellus Shale Gas Industry: Status, Economic Impacts and Future Potential, by Timothy J. Considine, Robert Watson and Seth Blumsack
The former said the 2009 employment impact in Pennsylvania was 24,000 net new jobs while the latter says 44,000. Future projections are always fraught with uncertainty, but with this being late 2011, these are both ex post numbers for the most part. Both use the same economic model (IMPLAN) and they both state they attempt to capture direct, indirect and induced economic impacts of all known Marcellus Shale related activity. It goes without saying that the differences must come from variation in what numbers are fed into the model to begin with.
With so much volatility in the stock market recently, choosing which firm you use to invest is a more important decision than ever, due to the major differences in trade execution, quality of support, services offered, and costs associated with trading and maintaining the account. It’s very important to analyze your personal needs and compare them to the options available before making your choice.
Trade execution is especially important if you are a frequent trader or scalper that looks to move in and out of positions rapidly, because any delays in transmitting your order to the exchange could cause you to miss out on your expected price, but should be a consideration of any investor. Many retail brokerages do not focus on this aspect of trading because most of their customers do not place trades often or rely on small price changes to make a profit on a trade, but there are brokerages known for their execution speed, and it is important to understand how your trades are routed between exchanges, dark pools, and other markets to make sure you are getting the best price possible.
Customer support is an aspect of investing that is often overlooked, but can save you large sums of money if you need them. Whether there was a problem with transferring money in or out of your brokerage account, the execution of a trade, or access to your account, prompt, helpful customer support can be the difference between profit and loss in certain situations.
Another factor when choosing an online broker is the number of services offered. It can be very convenient to find a broker that offers the ability to trade multiple financial instruments from a single account, rather than having to manage separate accounts for equities, options, bonds, ETFs, and currencies. Also, many brokerages are offering banking services, which can make managing your money even easier. The final service to consider is the options available for accessing your account. A mobile application or mobile-friendly website can allow you to easily trade from anywhere, and could be a big benefit in certain situations.
Last but not least, the cost of the account must be considered. Most people focus on the cost of trades when choosing an account, but it is important to determine the total cost of the account for you. Infrequent traders might be better off paying a higher fee per trade in exchange for lower account fees, frequent traders might focus only on their cost per trade, and traders with large sums of money might be most concerned with finding the best interest rate available.
In summary, you are the only person who can decide which brokerage is the best for your financial future. Be sure to do some research, discuss the options with other investors, and then choose wisely, since you are using them as an aid toward improving your financial future. If you’d like to do some further research, the SEC has some good advice.
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At 7:45 AM EDT, the weekly ICSC-Goldman Store Sales report will be released, giving an update on the health of the consumer through this analysis of retail sales.
At 8:55 AM EDT, the weekly Redbook report will be released, giving us more information about consumer spending.
At 9:00 AM EDT, the monthly S&P/Case-Shiller home price index report will be released. Given that most economists don’t expect the overall U.S. economy to improve until housing prices end their decline, the market will be watching this number closely.
At 10:00 AM EDT, the monthly report on Consumer Confidence for August will be released. The consensus index level is 52.5, which would be a 7 point decrease from July’s number.
Also at 10:00 AM EDT, the State Street Investor Confidence Index will be released, which looks at changes in the amount of equities held in the portfolios of institutional investors.
At 2:00 PM EDT, the FOMC Meeting Minutes will be released, which will provide insight into how the Federal Reserve board governors and bank presidents view the economy.
I sympathize with the sentiment, but this
is a dumb way to analyze free trade:
Decades of outsourcing manufacturing have left U.S. industry without the means to invent the next generation of high-tech products that are key to rebuilding its economy, as noted by Gary Pisano and Willy Shih in a classic article, “Restoring American Competitiveness” (Harvard Business Review, July-August 2009)
The U.S. has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products. Amazon’s Kindle 2 couldn’t be made in the U.S., even if Amazon wanted to.
First, how can Gary Pisano and Willy Shih be sure of the keys to the future? The eight-track used to be the way to the future of music; the laserdisc used to be the future of home movies (as did HD-DVDs). How can anyone say with any degree of certainty that high tech products are the key to the future, especially in light of diminishing marginal returns? The simple fact of the matter is that there is no way to predict what people in the future want, and there is no need, then, for this sort of histrionics.
Second, who says manufacturing is the key to future wealth? What makes Apple products so popular isn’t their manufacturing specs; it’s how they’re marketed. It may be that marketing is key to the future, especially if consumers become considerably more concerned with status. As such, focusing on America’s ability (itself a logical fallacy) to manufacture certain products is shortsighted and unnecessary.
Finally, why is the ability to manufacture high-tech products considered a hallmark of American competiveness instead of domestic economic policy? If one truly wants to understand why American manufacturing has declined, one need look no further than the federal government’s domestic economic policy. It has become increasingly anti-business and anti-manufacturing over the past decades, and more supportive of foreign trade. As I have demonstrated many times now, this combination is eventually going to prove fatal to American businesses.
Thus, the problem isn’t that “America can’t manufacture a Kindle,” it’s that American businesses are being increasingly hamstrung by the American government. The solution, then, is to repeal the economically destructive laws put in place by the government; it is not lamenting over the decline of high-tech manufacturing.
Chen Lin stumbled into investing. While working on a doctorate at Princeton, he turned $5,411 in his wife’s retirement account into $1.5 million. In his newsletter, What is Chen Buying? What is Chen Selling?, Lin shares the fruits of his analytical aptitude. In this exclusive interview with The Gold Report, Lin reveals his latest finds in undervalued gold miners, and why he has high hopes for silver, too.
The Gold Report: With gold trading around $1,800+/ounce (oz.), famous precious metals investor Eric Sprott announced that he is selling 2 million units, or $30 million (M), of the Sprott Physical Gold Trust. Sprott then said he would take that cash and put it into silver, which he called “the investment of the next decade.” What do you think of his long-term silver strategy?
Chen Lin: Silver and gold are both precious metals, but they move at different times. Right now, the gold:silver ratio is a little bit over 40. Obviously, Sprott is more bullish on silver versus gold. I take a pretty even point of view. I like gold. I like silver. I know that historically the gold:silver ratio is much lower than it is right now. I checked Chinese history and it’s about 10:1. Even China has much less gold than the rest of the world and is richer in silver. We could have a much lower ratio, which means silver would outperform gold going forward, but personally I’m betting evenly on gold and silver.
TGR: Another interesting development is that Venezuelan President Hugo Chavez has announced that he will nationalize all of the remaining non-state-owned gold mining operations in the country. Is this announcement likely to affect the share prices of small-cap companies operating in other countries with leftist leaders, like Bolivia or Peru?
CL: I think it’s possible. What Chavez is doing will probably destroy the country’s gold mining industry because it needs the juniors to lay the groundwork so the majors can dig out the gold. If Chavez nationalizes, it will probably lower the gold production. I think one day he will regret that. It will increase concerns about the political risk in countries that have those close ties to Chavez.
TGR: Recently, we saw the Dow Jones Industrial Average drop a little over 400 points in a day. What’s your outlook for gold? Are we going to see $2,000/oz. gold before the end of 2011?
CL: It’s very possible. I personally do not want to see the parabolic move of gold. I hope gold doesn’t rise as fast as silver did in the second half of last year. But in the back of my mind, I think gold could do that. There is a dramatic difference between this year and 2008, however. In 2008, gold initially went down along with the stock market. This year gold went up as the market went down, which means investors believe gold is the place to put money. I read a report that some banks in China have low gold inventories because individual investors are buying gold like crazy. It’s very possible gold goes to $2,000/oz., but I hope it goes slower. I invest in gold. I have gold exchange-traded funds, gold futures, silver ETFs and silver futures on my recommendation list. But I hope they go up gradually.
TGR: Do you fear a correction?
CL: I hope we have some correction. I expect that the margin will increase another six times before gold has a real correction. That probably will push into early next year. Usually the gold season is strong from September into Chinese New Year. A severe correction could come in February.
TGR: You’ve said that you are seeing a decoupling of gold stocks versus stocks in the broader market. Can you explain that?
CL: Now, when the market takes a huge dive, gold goes up. Quite a few stocks, including Yamana Gold Inc. (TSX:YRI; NYSE:AUY; LSE:YAU) and Franco-Nevada Corp. (TSX:FNV) actually went up into the green. Many others, such as Pretium Resources Inc. (TSX:PVG), are up as well. Majors will start to stabilize and move up despite the stock market going down. As things stabilize, the juniors will likely catch up. As gold moves up, gold stocks are likely to outperform gold for the rest of the year.
TGR: Your investment success is somewhat legendary. You took about $5,000 in 2002 and turned it into about $1.56M by the end of 2010. Even as your portfolio regressed this year, it’s only by 10%. What’s changed in 2011 that is making it more difficult to find small-cap companies poised for big gains?
CL: This year has been difficult. The resource stocks got hit as investors took profits and ran. Fortunately, I have a pretty diverse portfolio. I have stocks, ETFs and futures. It is a very difficult year for small-cap companies, but I see some great opportunities. I’m ready to buy because investors are selling gold stocks indiscriminately. This is the time to buy. There are some great opportunities for investors that have a relatively long-term vision.
TGR: So then, what is Chen buying?
CL: Pretium, which I mentioned earlier, is run by Bob Quartermain, the founder of Silver Standard Resources Inc. (TSX:SSO; NASDAQ:SSRI). Management is really key at gold and silver companies. There are tons of companies that just go nowhere. The management raises money to pay themselves. With great management, like Bob Quartermain, there is a proven track record. He doesn’t just grant options to management. He buys them. He bought shares on the market like every other shareholder. He has a couple of projects that are becoming very promising in British Columbia, which I am visiting next week.
TGR: Is that the Snowfield Project?
CL: Yes. Pretium is in low-grade Snowfield and high-grade Brucejack. I think the Snowfield Project will likely do a deal with Seabridge Gold Inc. (TSX:SEA; NYSE.A:SA). Quartermain is more focused on the high-grade area with about 15 kilograms/ton of gold. Some people don’t believe it. They say it must be silver. It’s gold. That is what he is focused on. He is looking to do a very high-grade underground operation, which was permitted before. He just needs to reapply for a permit and get into production.
TGR: The company has a positive preliminary economic assessment, but it really hasn’t produced a dramatic rise in the stock price.
CL: That was based on previous results. In the new drilling tests, the company intersected a lot more gold. That will help them when people realize the valuation of the deposit. Another catalyst would be the deal with Seabridge and a major investing in the lower-grade area. The feasibility study is not very high, but the company used a conservative gold price. Eventually, people will catch up with it.
TGR: What are some other names on Chen’s radar screen?
CL: Barkerville Gold Mines Ltd. (TSX.V:BGM) has been on my list for a pretty long time. I like the company. I met the management. The stock has already gone up pretty significantly since my recommendation. However, it recently has been in consolidation, which could be an entry point. The company keeps making progress. It keeps producing gold, which means it can generate a lot of cash flow at the current gold price. That will fund its next move versus going into the market begging for money.
TGR: Barkerville is planning to mine about 50 thousand ounces (Koz.) from the QR Mine this year. Is it on target?
CL: I will be following that very closely. As long as the company is producing gold, it should be doing fairly well. As long as it can produce, even if it’s not 100% as planned, the higher gold price will compensate. If the company can make its target, that will be a great bonus.
TGR: Has Barkerville forward-sold any of its gold or is it fully exposed to the gold price?
CL: No, it is fully exposed to the gold price. You don’t want to invest in any company that has hedges in place. Then it would be selling gold at maybe $1,000/oz. when it could be getting $1,800/oz. or more.
TGR: Barkerville has about 937 Koz. outlined in all categories. That is still a pretty small operation. Do you believe that as the company produces gold and takes some of that money to further exploration, it will continue to discover more resources?
CL: The company is getting good drilling results. I’m sure when it updates its new resource, it will be much higher. Once the company starts to get into a good financial situation, it will do more exploration. Gold is prolific in that area—there is a lot to find.
TGR: What else is Chen buying?
CL: There is a very small company called Majescor Resources Inc. (TSX.V:MJX) that just announced fantastic drilling results. The stock is actually up about 89% right now. It’s a very tiny company with about a $20M market cap. It’s drilling next to Newmont Mining Corp.’s (NYSE:NEM) latest project in Haiti. Newmont’s chief executive said it is one of his most important projects. It’s had fantastic drilling results of 77 grams over 10 meters (m). It’s very shallow at about 100m deep. Plus, it has many other intersections with very high-grade gold and copper. For this market cap, it looks very promising.
TGR: It’s trading between $0.25 and $0.30. Is that a good entry point?
CL: I think the current price still looks very good.
TGR: How high could it go and still be a good entry point?
CL: There are heavy insider purchases at $0.20. I think anything between $0.20 and $0.30 is a great buy.
TGR: Majescor is effectively almost like an exploration arm for Newmont at this point. Does Newmont have a position in it?
CL: No, but Majescor has a mining license while Newmont is still applying for a mining license. That makes them a very good target for Newmont.
Haiti is on the same island as the Dominican Republic, which hosts one of the largest gold mines in the world. Since the earthquake, the U.N. is trying to help the country create jobs. One of the key areas it is looking at is mining. Haiti could be opening up and this could be a hot new mining area in the world.
TGR: What’s another name, Chen?
CL: I just visited Prophecy Platinum Corp. (TSX.V:NKL; OTCPink:PNIKD; Fkft:P94P). It’s in the Yukon, very close to the Alaska border and only about 10 miles from the Alaskan highway. It just announced a NI 43-101 for about 12 million ounces (Moz.) of platinum, gold and palladium. The key for the company is to have very high grades. Right now, it has consolidated a little bit as the company is probably going to raise money. Sprott just announced it bought about 10% in the open market. I would assume Sprott would probably participate in one of many raisings. Then we can potentially consolidate the stock and it could go higher.
TGR: It also has a producing coal mine in Mongolia, correct?
CL: That’s actually its parent company, Prophecy Resource Corp. (TSX.V:PCY). Prophecy Resource owns 45% of Prophecy Platinum, which is a spin-off. Prophecy Resource is also a very interesting story because Prophecy Platinum’s price almost covers the entire market cap. You’ve got a producing coal mine almost for free.
TGR: It just discovered a substantial coal seam in Mongolia about 20 kilometers away from its existing coal mine, which actually hasn’t had any effect on the stock to date. It certainly could be a promising find in the future.
CL: Exactly. There are bargains almost everywhere. Investors are just selling by emotions. There are a lot of opportunities and Prophecy is a perfect example. It owns 45% of Prophecy Platinum. You can calculate the market cap. It doesn’t make sense, but the market still treats it like this. I bet the market probably won’t treat it this way for too much longer.
Another is Romios Gold Resources Inc. (TSX.V:RG; NASDAQ:RMIOF; Fkft:D4R), which I am going to visit next week as well. It is drilling the Trek Property in northwestern British Columbia, right next to NovaGold Resources Inc. (TSX:NG; NYSE.A:NG) Galore Creek Project. It’s actually drilling on top of the company’s proposed mill site, so drilling results are pending. This stock could have a very explosive movement because its market cap is very small at about $70M.
NovaGold and Teck Resources Ltd. (NYSE:TCK; TSX:TCK.A, TSX:TCK.B) need to build a $1B tunnel to get ore from the other side of the mountain. But if the pair can find ore on the Romios side of the mountain, right on top of the mill, they could save $1B and take the company over. If there are good drill results, Romios will be an easy takeover target for NovaGold and Teck.
TGR: Romios recently found some massive sulfide mineralization at the Trek Property, which is known to host large gold and copper deposits. Can you tell us about those results?
CL: It has a lot more results coming. The assay is pending, but it looks very promising. If it has a grade similar to Tech and NovaGold’s Galore Creek, this is a very easy takeover target.
I want to mention another stock that is under the radar, Helio Resource Corp. (TSX.V:HRC), which is drilling in Africa and already has 1 Moz. of gold. Its market cap is very tiny, but it has some very important, pending results coming in the next few weeks. It is drilling to a mere 200m for open-pit gold. If it can upgrade its resource to a few Moz., that could make the company very cheap versus its market cap. It could see some major movement in the second half of the year.
TGR: That is the SMP Gold Project in Tanzania that has multiple zones of gold mineralization at shallow depths. Could that be a target for a company like African Barrick Gold plc (LSE:ABG)?
CL: It’s possible. Helio is an exploration company run by geologists. Its goal is to find a deposit and then sell it to the majors. If we use $100/oz. in its existing gold inventory that is already worth $100M and it is looking at a much higher stock price. It could expand dramatically with its recent drilling results. The company is well funded with $8M in the bank. It doesn’t have to raise money for a long time.
TGR: Helio is trading at just below $0.30 right now. At what point would you not get into Helio?
CL: I think it is dependent on its drill results and those are unknown. When the stock moves, it can move very fast. With its existing resource, around $0.30 is pretty good. But I don’t know what the drill results look like, so that will decide what the new valuation will be.
TGR: On the other side of the ledger, what are you divesting yourself of right now?
CL: I have been gradually selling some gold and silver ETFs. They have appreciated a lot, so I use them as buying power on the dip on the miners. Instead of following Sprott by selling gold and buying silver, I’m reducing a little bit to use that as capital to buy undervalued small-cap gold and silver miners.
TGR: You have had success in pulp, paper and oil and gas. What other sectors do you believe are poised for growth?
CL: I like the pulp sector, including the company Mercer International Inc. (NASDAQ:MERC). There are a lot of very undervalued energy stocks, as long as oil finds a floor somewhere in the $60–$70/barrel range. China does not have enough strategic oil reserves. If oil really dips, China would probably use the opportunity to build up more oil reserves. India has no strategic oil reserve. The pressure is on both countries to stock up if oil dips. In 2008, the worldwide oil demand only dipped like 1–2%. As long as investors stay with low-cost producers with good balance sheets, they will ride out the storm.
TGR: Any parting thoughts for us?
CL: I think this market correction will create a lot of opportunity for us. The market is putting a lot of pressure on the European leaders to get their acts together. There is a lot of pressure on Federal Reserve Chairman Ben Bernanke to do another round of quantitative easing. I hope the outcome will have some stabilizing effect on the market. In the meantime, when investors are selling everything, that’s a very good buying opportunity.
TGR: Excellent. Thanks, Chen.
Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors, Inc., publisher of J. Taylor’s Gold, Energy & Tech Stocks newsletter and Roger Wiegand’s Trader Tracks. Using his wife’s Roth IRA account, Lin invested $5,411 in December 2002, and by December 31, 2010, it was worth $1,188,993—with no cash added. You can see his portfolio chart here.
A doctoral candidate in aeronautical engineering at Princeton, Chen found his investment strategies were so profitable that he put his Ph.D. on the back burner. Chen worked in the Internet and computer area where he founded a few start-up companies. After the tech bubble burst of 2000, Chen was able to move his technology portfolio into the resource sector with considerable success. Chen employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis. To subscribe to Lin’s What Is Chen Buying? What Is Chen Selling? newsletter, click here or call Claudio Bassi at (718) 457-1426.