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Resource
Investors – Keep Your Eyes on the Prize
August
29, 2007
Dudley Pierce Baker
Precious Metals Warrants
Investors
continue to experience losses in their portfolios due to the
recent market fears.
We continue to
remind ourselves, as should all investors in the natural
resource sector, that the big picture has not changed and the
reasons and arguments for these investments are as sound today,
if not more so. Corrections will come and yes, they will go,
leading us to another great rally. But obviously that day not
yet arrived. Patience and focus is essential for all of us at
this time.
We have shared
with readers in the past comments from one of our very savvy and
insightful subscribers and would like to present some of his
current views on the markets. I will caution you that some of
his comments are rather bearish in the short term, but in the
end he knows he is correctly positioned with his investments and
continues to ‘keep his eyes on the prize’.
He wrote to me
last week and followed up on the morning of August 29th:
“An article dated August 22, 2007 by Martin
Wolf in The Financial Times, “Why The Federal Reserve Has To
Keep The Party Going” attempts to explain the macro global
economic/financial realities...how we got to where we are now as
well as future prospects.
I really wish this writer and others would deal
with the verifiable fact which is that central banks of the
major industrial nations have been creating
liquidity/facilitating and allowing money to be created at about
4x the rate at which their respective GDP’s, adjusted for price
inflation, have been growing.
Why is that so important? Think of the
compounding effects of excessive money creation and what that
does in stimulating demand as well as in skewing consumption and
investment decisions. Initially it creates a fool’s paradise –
a convergence of easy money, little savings, growing and huge,
but unsustainable, consumption and lifestyle enhancement which
all begin to seem normal. Of course, ultimately there are
consequences and the proverbial pay day of escalating price
inflation run amok unless severe policy constraints come to
bear, such as much higher interest rates and limited access to
credit. Of course that leads to a severe recession, but a
necessary brake on an out of control economy heading on a
hyperinflationary spiral.
This is why I continue to be a believer in my
kind of investment portfolio...precious metals, energy and
commodities generally. Since it appears there is no political
will to rein in the growth of liquidity/money supply/credit for
consumption, the result I outline is inevitable. It is just a
matter of when and to what degree. I say this because
governments and their central banks increasingly opt for the
politically easy way out of any problem by ignoring the longer
term, addressing only the present and immediate future using the
same tools that churn the current upheaval in financial markets
– greater liquidity and easy credit.
I have studied the political process from the
time I was kid and have experienced the process close up
throughout my career. I know the political mindset and the
instinctive response of the system makes it absolutely incapable
of doing anything substantive requiring thorough thinking and
tough decisions which extend beyond the date of the next
election. Unfortunate, but true. Moreover, this harsh
conclusion makes no partisan or ideological distinctions.
Electoral systems holding out the promise of large rewards for
the winners do not encourage participants to make those tough
decisions requiring long term thinking and requisite public
policy.”
____________
“It is Wednesday morning, August 29th
following another bad day in the financial markets. So what,
you say? Nothing much different than the volatility that we've
been observing for the past month.
In terms of my portfolio, I continue to be
buffeted, especially on my uranium, but also in the other energy
and precious metals. Do I wish circumstances were different?
Of course. I said in my last minor missive that in
retrospect...just like all Monday morning quarterbacks...one
should have liquidated his entire portfolio the day the DOW hit
14,000, placed his money in 30 day TBills and rolled them over
as long as was necessary until one found the most desirable time
to re-enter the market. Of course I didn't do that and most
everyone else did not sell at that optimal point either.
I continue to sit with all the investments I
had before the tumult comfortable in the knowledge that the
components of my portfolio are where I want to be over the
longer haul...precious metals and energy, especially uranium and
oil, as well as a few other select commodities. Because I am so
convinced that I am incapable of being a successful market timer
and resist the temptations of trading for fear of being
whipsawed, I constructed a portfolio which anticipated the
tumult we are experiencing with my eye firmly fixed on the
longer term future. Admittedly I don't enjoy the daily
experience of seeing my portfolio losing its value, but I remind
myself that most of my investments are still considerably above
the price I paid for them.
Because I spend so much time reading a
diversity of financial fact and opinion, I had more or less
anticipated the roiling of the financial markets we are
currently experiencing. I am increasingly coming to the
conclusion that what we are seeing is a financial hurricane
approaching in slow motion. My sense is that the shear
magnitude and diversity of the arcane investment products make
rescue measures by central banks inadequate and probably
ineffective. So much is beyond their reach, even their
understanding of the elephant with which they are dealing. All
they can really hope for is to cause the financial unraveling to
be sufficiently opaque and slow in order to maintain some
modicum of order and investor confidence. Maybe better stated,
they desperately want to avoid a severe crisis of confidence
among the investor class and general public. Maybe this is the
best case scenario?
The reasons I cite for this gloomy assessment
relate primarily to the monetary system. The routine creation
of money by most major nations at a rate averaging more than 4X
the growth of their GDP, is the main source of the financial
malaise. Couple this with easy credit, low interest rates and
virtually no financial discipline or rigour in the financial
services industry and only limited and selective oversight by
the likes of the SEC, we end up with what we observe and
experience today. Therefore, if the system doesn't tumble big
time today, it will will tomorrow. Sorry, but I can't find
much reason for optimism.”
Our personal
comments:
We are
privileged to have this friend as a subscriber to our service.
You can sense that he has a long term view for his investments
and has selected the shares in his companies and/or their long
term warrants very carefully. Think long term and be confident,
for our day will come and we will be rewarded therefore.
For those readers desiring more information on
warrants you may wish to visit
www.PreciousMetalsWarrants.com where you will find much
more information and education on warrants in our new Learning
Center. You may also signup for our free weekly email, The
Warrant Report.
Dudley Baker is
the owner/editor of Precious Metals Warrants, a market data
service which provides you with the details on all mining &
energy companies with warrants trading on the U. S. and Canadian
Exchanges. As new warrants are listed for trading we alert you
via an e-mail blast. You are provided with links to the
companies’ websites, links to quotes and charts, tips for
placing orders and much, much more. We do not make any specific
recommendations in our service. We do the work for you and
provide you with the knowledge, trading tips and the confidence
in placing your orders.
Disclaimer/Disclosure Statement:
PreciousMetalsWarrants.com is not an investment advisor and any
reference to specific securities does not constitute a
recommendation thereof. The opinions expressed herein are the
express personal opinions of Dudley Baker. Neither the
information, nor the opinions expressed should be construed as a
solicitation to buy any securities mentioned in this Service.
Examples given are only intended to make investors aware of the
potential rewards of investing in Warrants. Investors are
recommended to obtain the advice of a qualified investment
advisor before entering into any transactions involving stocks
or Warrants.
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