NA-Marketletter (NAML):
It's been six years
since we had our first chat. Many things have changed since then.
You've had quite a run!
GOLD: You don't need to tell me! The last time we met,
I was hovering near the $350 level, but I recently visited $1000
nearly a 190% gain, in just 5 years! By the way, I would
like to thank you guys for supporting me. You were one of the
first to be bullish about me. It wasn't a very popular call back
then, was it?
NAML: Not at all. The mood was best described as dense
ignorance. Market pundits viewed your early advance as a bounce
in a lengthy bear market. We remember that one analyst called
you an "old relic."
So it wasn't surprising that
people were sceptical about our bullish report but we're
used to that by now. Amazingly, many people still don't get the
point that we're in the middle of a "hard asset" cycle.
These are times when you, along with Energy and Metals, usually
kick up your heels.
GOLD: You guys are right. In fact, I am the only investment
vehicle that has produced a profit every single year for the
last nine years. Just recently, I had a chat with money managers
about my prospects and I was shocked. They are still reluctant
to recognize my achievements. It is even worse with the general
public. Everybody has heard something about me but they are all
clueless about my potential and unwilling to take any action.
Outrageous! After all I've done!
NAML: It's all music to our bullish ears! Aren't doubt
and disbelief the key ingredients of every bull market?
GOLD: Yes, you're right. In fact, I do my best to confuse
these talking heads. For example, now I am in the midst of a
perfectly normal, seasonal pause. You know, just a little R&R.
This resting time allows me to gain strength before the next
up-leg. I do that to shake off over-excited bulls who jump on
me each time I am about to complete another up-leg. Believe me,
it's hard to move when you have these Nervous Nellies
on your back.
NAML: We understand that but some people say that the
1000 level will be very difficult for you to get through.
GOLD: They always find "excuses" to talk
me down. Be patient - once I gather enough strength over the
next few weeks, I am going to teach all these investment bullies
a lesson. They don't even know my long-term plans. I would love
to see their faces when I reach my ultimate top.
NAML: You've done very well but how about Gold stocks?
GOLD: I have to admit that most of them have been lagging
in the last few years. But again - it is perfectly normal behaviour
and similar to what we've done together in the past. Let me explain.
I usually start first. Then
the big-league stocks, such as Barrick Gold, Agnico-Eagle or
Goldcorp, sense my turnaround and begin to show their strength.
However, during the first phase of my advance, most Gold stocks
underperform. It is helpful, in a sense, because everyone sees
it as a weakness - read "wall of worry."
Then, in the later part of
my advance, which is about to begin, Gold stocks join me. The
first ones to come along are the big-caps, and then middle-sized
producers show their muscle. In the end, you see junior stocks
joining the buying stampede.
NAML: Do you have any particular stocks in mind?
GOLD: I would single out a few - just recently Alamos
Gold and Royal Gold had breakouts from multi-year trading ranges
that point to a significant upside potential. There are many
others too, but come on - you guys are very good at choosing
the winners. I remember when you recommended Virginia Gold at
$1.50 a few years back - then the stock was bought out by Goldcorp
for nearly $13 or thereabouts. Well done!
In smaller stocks, Rubicon
Minerals is breaking out from a large trading range. Lake Shore
Gold, Western Goldfields and Corriente Resources (even though
it is not strictly Gold) are also doing well. There are many
more but your Buy&Sell covers most of them. In general terms,
focus on the strongest stocks with multi-year bases that can
support much higher targets. Look for stocks that are trading
above their rising 200-day moving averages and at or near their
52-week highs. And of course, avoid the typical mistake of "bargain
hunting."
NAML: Don't tell me you're aiming at $1200?
GOLD: Let me rest up first (smiling).
Contributed by Olaf
Sztaba