Ralph Aldis: Junior Mining Stocks That Will Let You Sleep At Night:
The Gold Report | Dec 19, 2013 02:24AM ET
The best time to buy gold is when the market hates it, especially when it comes to junior explorers with market caps under $1 billion, asserts Ralph Aldis, senior mining analyst with U.S. Global Investors. In this interview with The Gold Report, Aldis shares his main modeling themes and companies that fit the bill. He also explains the win-win-win advantages of flow-through stock issuance, a technique allowed by some noteworthy Canadian provinces.
The Gold Report: At the New Orleans investment conference, U.S. Global Investors CEO Frank Holmes reminded investors that gold is not a means to get rich quick, but should act as a diversifier in a portfolio, a form of insurance. Do you have to remind investors of that?
Ralph Aldis: We do. We always stress that no more than 10% of a portfolio should be exposed to precious metals. Given gold's poor performance in the last two or more years, the trend has been to chase the market and the S&P 500. This is exactly when investors should be using gold plays to diversify and provide a bit of insurance. If they made good money in the market, they could take 5% or 10% off the table and deploy it in gold plays.
Right now, gold is one of the most hated sectors in the market. That's when investors should buy it—when nobody loves it.
TGR: You and some of your colleagues at U.S. Global Investors pay a lot of attention to the economic data published by the U.S. government. Recent data suggest that the American economy is gathering strength. What's your view?
RA: I think the economy overall is gaining strength. That's what the Federal Reserve has wanted: low interest rates and for the long end of the Treasury curve to go down. The 10-year Treasury note was free money on the table even though it did reflect economic risk; it was crazy not to buy it.
The same thing is true of the S&P 500 these days. The Fed wants inflation, and that starts with inflation of asset prices. Again, it's almost like getting free money.
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