Palisade – Sprott Monthly Market Update with Rick Rule: Gold- “Don’t Try To Catch A Falling Safe!”
Post Fed meeting, the freefall in gold and gold stocks continues. It’s a perverse characteristic of investing that the narrative gets better as the market gets worse. Rick Rule believes that a 35-40% decline in gold stocks makes them 35-40% more attractive. He shares with Palisade a two part strategy for investors and speculators.
Part one: alpha investments in the best-of-the-best juniors, via private placement financings when available. The summer’s strong junior mining stock performance has now given way to falling prices. That means better value for prudent investors.
To a sophisticated, accredited investor, Q1 2017 should be superb because the aftermarket action- particularly in the junior gold sector- will be challenging.
Part two: beta investments when the market tone returns. Exchange Traded Funds (ETFs) expose you to the direction of the market with little liquidity risk and greatly reduced individual company risk. Eventually gold will be cheap enough, and the confidence driving general securities markets will evaporate.
Rick is confident that while the price of gold mining companies have deteriorated 15% in a few days, the values improve with every trading session. He remembered to us that in 1975 the bullion market fell 50% from $200 to $100/oz, shook investors out, and then ran to $850/oz.
Talking Points From This Week’s Interview:
•Private placements are now available with full 5 year warrants. Deals like these were not available six months ago
•Senior mining management has exhibited more prudence in the past year of this bull market, than in prior bull markets.
•There is now sufficient liquidity in instruments like the Sprott Junior Gold Miners Trust.
Rick Rule began his career in the securities business in 1974.. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.