How to Invest

How to Invest?
In a nutshell, as we have been urging you, continue tightening up. At this point,
other than a handful of more speculative plays (and we hold those for good reasons)
we have focused our portfolios on companies with proven projects, great
management and sufficient cash to see them through to the other side.
While that has not protected most of these companies from the scramble to sell
anything with a bid, and some are off quite steeply, trying to exit at this point would
be, for the most part, counterproductive.
That contention is made, however, with the thought – make that the hope – in mind
that you have followed our constant counsel to invest in these stocks only with funds
you are able to watch get cut in half, or more, and still sleep at night. I cannot
communicate how much I hope you have taken that counsel to heart. Because
otherwise you are now finding yourself in a very uncomfortable position, perhaps, of
having to sell out of necessity, and not based on any cool calculation.
Make no mistake, we continue to believe that gold – and, in time, gold stocks – are
going to be major beneficiaries of the current turmoil.
As Bud Conrad commented this morning, “Size is important. Investment in global
equities amount to something like $150 trillion. A 5% loss, therefore, is $7 trillion.
But all the gold stocks in the world add up to something like $200 billion, so even a
modest flight to safety that attracts investors to the gold stocks could be wild.”
In the final analysis, how you decide to act at this point will be based on your
personal circumstances and your own psychology. But here are some thoughts:
Use any positive market reaction to the Fed’s cuts -- and whatever other
moves are next announced by the government in an attempt to stave off the
tempest -- to liquidate all but your core equity positions. Being over-weighted
in a combination of cash and gold at this point makes a good deal of sense. If
you don’t know exactly why you own a stock, sell it.
If you have a lot cash or gold, hold tight. This situation is not going to be
resolved quickly, and could take months or even years. Buying opportunities
will abound, so be patient, picking up more of the best resource stocks on big
down days.
Again, nothing profound, but important. If we have used the phrase “Rig for stormy
weather” once, we have said it a dozen or even two dozen times. We hope you have
battened down the hatches and are ready for the storm that is upon us. If not, use
any positive reaction to the moves made by increasingly desperate governments
over the next few weeks to finish making your preparations. And then hold tight.
We’ll stay in even closer touch.
Best wishes…
David Galland
Managing Director
Casey Research, LLC.