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Q & A with Eric Coffin and Peter Grandich
By Eric Coffin
Tuesday - December 8, 2009
Category: Investment, Gold, Mining
I recently had a chance to talk to Eric Coffin, who, along with his brother David, produces the HRA (Hard Rock Analyst) Advisories. Eric, Dave and I have been friends for 15 years and we run into each other several times a year at conferences we all speak at. I've talked about some of the companies we both follow in the past few months and wanted to get some more information from "the horse's mouth."
I've commented before that I think the Coffins produce some of the best material out there on exploration companies. They have decades of experience in the mining business between them, and David is one of those rare guys in the gold and resource newsletter business who can sit down with a map and geology report and actually understand them. David logs thousands of miles a year travelling to exploration projects for a hands-on look. That kind of background is worth a lot and it shows in the companies they pick.
One thing that is interesting about HRA is that they are always following a few companies, some of them big wins, that are not getting covered by anyone else (at least when they start). I like the fact that they don't just follow what everyone is talking about and they make their own choices based on their own experience. I also know these guys are 100% straight up. They have paying subscribers and only select companies they think their readers will benefit from knowing about.
A couple of short quotes from the start of 2009 shows you that they were telling their readers the right things about gold and metals even as the markets were coming apart.
Here's one on gold:
"Gold's currency status will continue to provide support and the potential for higher prices going forward."
And one on other metals:
"Base metal companies have to be viewed as long term trades but the patient and the brave should be able to harvest large profits next year on good companies accumulated near their trading bottoms."
Keep in mind that both of those quotes are from January this year.
I twisted Eric's arm a little to get HRA to offer a couple of special items for Grandich blog readers. One is a package of samples of recent issues so you can see some of what they follow and how they cover it. The Coffins also offered a short term shot at savings of $600-1000 on their Alert service.
More on that near the end of the interview.
Don't Forget: Eric is a keynote presenter at the Agoracom Online Gold and Commodity Conference, Dec. 3 - 4. You can watch his presentation and get a feel for HRA's views on the markets right now.
P: It's been a crazy year, with markets and commodities taking huge dives then soaring to year highs, and of course all time highs for gold. Is this making any sense to you?
E: Much of it we expected, though we are surprised by the strength of some the moves and the size of these swings. Like you, we saw a bottom in March and expected to see good rallies coming off of it. We also expected metals to do well this year. We've been saying we're in a secular bull market for commodities for years and that belief seemed validated when base metal inventories at the London and Shanghai exchanges topped out early this year at about one third the levels they reached in 2001-2002. That was at the end of a far milder recession than the one we are going through now. To us, that was further proof that the metals markets were tighter than at any time since the 1970's, which was the last secular bull market for metals. Indeed, we said in January that we expected the top percentage gainer of North America markets would be the TSX Venture. I think people were looking for a rubber room for us back in January on that comment.
P: But this is a bea r market rally?
E: That's how we are treating it but I am not losing sleep over what to call it. Even if we're in a secular bear for most G7 markets that doesn't mean we have to see lower lows. Anything is possible but it's not a necessary condition. I think it's just as likely we will put in an intermediate high then pull back and bounce around in a narrower range, maybe for an extended period. It's not uncommon to go sideways in a broad trading range in a bear market, for years sometimes, while company earnings catch up with the valuations being given to them by the market. We expect a pull back since the move has been so large off the bottom and volumes across many markets are still light. Clearly, there are traders who are not convinced the move will last. Whether those people capitulate and buy or wait for a large pull back remains to be seen but, at this point, I think they will wait. It increasingly feels like the US particularly is in a funk that will not pass soon. Unless the inventory cycle generates some jobs in Q4 and Q1 2010 to cheer people up and invigorate what Keynes use to call the nation's "animal spirits" the US economy is in for a hard slow climb out of recession. I do expect gains from inventory re-stocking but unless companies are comfortable to start re-hiring people it will be tough to sustain.
P: But that doesn't mean just stay out of the markets?
E: Well, not for us. If this is a "normal" secular bear market and we chose to stay completely out we would be twiddling our thumbs for another nine years which could get a bit tedious. I know there are perma-bears telling everyone to stay away from equities but if you are a trader you should certainly be able to play a rally as large as this one, but you have to be sensible about it. In a bear market you have to take money off the table on good trades. When the market does pull back it's safer to wait for the market to show you a bottom before buying in again. In bull markets people always worry about being too late but in bear markets it can be just as dangerous to be too early. No, it's not a risk free proposition to do it, but you can always buy Treasuries and get a 0.01% yield if that is where your comfort level is. It's a matter of finding value and taking profits when the market offers them or accepting you might have to wait out a large dip in the markets on some holdings. If you are taking some money off the table when you get a good price move you can bring your average costs down enough to be more comfortable if you do have to sit on a position for a while.
To read the full interview please go to: http://grandich.agoracom.com/2009/12/qa-with-eric-coffin/
Contact:
Nichola Vermiere
HRA Advisories
Email: nvermiere@hraadvisory.com
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