Knowing that there are growing numbers of precious metals investors who are new to this sector, I've tried to provide some educational commentaries to help people learn to invest in this sector on their own. Previous commentaries have explained the “leverage” offered by precious metals miners, grouped these companies into specific categories, and provided criteria for evaluating these investments.

This time I will seek to pass along some strategic advice on how investors may want to manage their precious metals portfolio. Given that investors have different needs/goals, different levels of risk-tolerance, and different perspectives on this sector, these tips should be considered merely guidelines – rather than some rigid formula.

The U.S. propaganda-machine has been steadily ratcheting-up expectations for the 2009 holiday-shopping season. This is not surprising. As a consumer economy, the health of the retail sector is critical to the overall health of the U.S. economy, and the retail sector itself is totally dependent on the Christmas shopping season.

Clearly the U.S. government cannot pretend that the U.S. (consumer) economy is “growing” if, in fact, retail sales are declining. Officially, the preliminary reading for “Black Friday” sales (the day after U.S. Thanksgiving) showed a tiny 0.5% increase. However, that figure is not adjusted for inflation.

There was some quirky behavior in the gold market – as a consequence of the market-shock from the announcement by Dubai World that it was essentially defaulting on its debt. The first reaction of the gold market was a move up, although gold gave up those gains over the course of trading on Thursday.

Then there was the much more suspicious move in the gold market the day after the announcement – which (by pure coincidence) occurred when U.S. markets re-opened after the U.S. Thanksgiving. Gold plummeted over 5% in essentially the blink of an eye. It then bounced back nearly as quickly.

On June 12th , I wrote a commentary titled “The Death of the U.S. Consumer Economy”. In that piece, I detailed the two, concurrent trends which guarantee a paradigm-shift in the U.S. consumer-economy.

The first of those trends is the maximization of available credit. Not only is the U.S. a consumption-based economy – an inherently unsustainable economic model – but for the last decade this unsustainable economic model has become entirely dependent on an exponential increase in debt/credit. This has resulted in me labeling the U.S. a “Ponzi-scheme economy”, since Ponzi-schemes also rely upon exponential inflows of capital in order to be sustained.

U.S. perma-bulls were once again giddy Tuesday morning with the latest reading on “existing home sales,” which spiked to an annualized rate of just over 6 million units. However this comes only days after a piece of much gloomier news, which (naturally) was ignored by the media propaganda-machine.

One in seven U.S. homeowners with a mortgage are either delinquent on their mortgage payments, or already in the foreclosure process. Thus, we are presented with data that more people are buying homes in the U.S. but less people are paying for them. Surely it is evident to even the most obtuse market-observer that it is irrelevant how many people are buying homes if they can't afford to make the mortgage payments.

As I wrote a month ago in “Price of Gold in Controlled Ascent”, gold (and silver) is in the midst of a methodical, well-behaved rally – with few signs of the market over-heating. In that previous piece, I credited China's government for being in the “driver's seat” of this rally: pulling back on demand when the price starts to spike, and overwhelming the “shorts” with vastly superior buying-power each time they make another feeble attempt to push the price lower.

However, in the last few weeks it has become clear to me that we “gold bugs” also owe a “thank you” to the gold perma-bears – for doing their part to keep this rally from getting over-extended. It's really becoming hilarious listening to all these “Chicken Littles”, who are oblivious to their own self-deprecating irony.

Like all commentators, I am somewhat constrained in what I write about: it has to be a subject in which people have interest. Sure, I could write about Greek mythology or backpacking in Bolivia, but if no one reads it, it becomes a fruitless exercise – and raises that cliché question “if a tree falls in a forest...?”

Regular readers will have noticed that I have been writing about precious metals mining companies more often in the last few months – and this is no accident. In my interaction with readers/investors there has been a sharp rise in awareness of and interest in these companies.

There are no shortage of universal truths in economics for people, like myself, who like to study “the big picture”. As I see discussions of current unemployment and speculation about future employment prospects, it is clear that no other commentators understand the long-term dynamics of employment.

Let me begin with one of the “universal truths” to which I referred. Since the dawn of the Industrial Revolution, more than 200 years ago, new technological advances have eliminated jobs faster than they create new employment opportunities. There are no exceptions. Indeed, the most commonly heard attribute of any new invention is that it is a “labour-saving device”.

Since I began writing about silver, one of the first facts which really caught my eye was that there had been more, new silver patents than for any other metal. More patents translates into more, new products and applications – which, in turn, translates into greater demand.

The latest innovation in silver technology to reach the market is silver upholstery fabrics. The Silver Institute has a write-up on this extremely important news for the silver market. A fabric-maker named CF Stinson Company won the 2009 “Gold Award for Healthcare Fabrics” at the NeoCon trade show in Chicago. NeoCon is described as “the world's largest commercial interior trade organization”, meaning this new product has just obtained wide exposure to this massive market.

As I have previously stated, the economic propaganda which the U.S. government calls “statistics” do not just represent exaggerations of actual data – but often simply complete fabrications. The most obvious example is that any and all state-by-state data shows the U.S. economy still plummeting downward, while “national” data (i.e. the aggregate total of the state-by-state data) shows the U.S. economy mildly improving.

I already pointed to one specific example of this (see “BLS jobs numbers contradict BLS jobs numbers”), also involving employment data: the fact that the measurements of unemployment by the Bureau of Labor Statistics on a state-by-state basis did not come close to equaling the national numbers (the total of the state-by-state numbers).

The long-awaited debut of the Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) finally arrived Wednesday. Anecdotally, there has been a lot of investor-interest in this new fund, as demonstrated by the strong interest and many inquiries I received after first writing about this fund in June (see “New ETF provides access to junior gold/silver miners”). The question is: Will it live up to those lofty expectations?

Looking at the SEC filing, the prospectus contained one piece of information which was disappointing to me, personally, and one aspect that should give investors some pause for concern.

In Part I, I introduced readers to the different categories of miners, and outlined some of the basic characteristics which these companies possess. In the second part, I will provide some guidance on what to look for in separating the “contenders” from the “pretenders”.

Naturally, the starting-point in looking at the quality of any mining company is the quality and quantity of ore in their property. The quality or “grade” of the ore will go a long way in telling us about the profitability of a miner (or the potential profitability of an exploration company).

Investors familiar with the precious metals sector are used to seeing a pattern in each short-term rally in this market. Silver begins these rallies especially undervalued versus gold, then gains back much of its lost ground by outperforming gold for the duration of the rally.

However, with gold's recent surge we have not seen this typical pattern repeat, which begs the question: why not? Clearly, investors need to gain some understanding of this new, recent behavior in order to decide when/if to increase their investment in what is arguably the most under-priced commodity on the planet.

There was no surprise with the announced third-quarter GDP for the U.S. economy (+3.5%), however, there was some personal disappointment for me. The disappointment relates to the fact that few, if any, commentators were willing to speak up and exclaim that “the emperor is wearing no clothes.”

The reason that this is such a big disappointment is that the “official” number for U.S. Q3 GDP cannot withstand the slightest analytical scrutiny. So, allow me to analytically dissect this obviously fraudulent number.

I find it utterly amazing how the same group of commentators who could not “see” the U.S. housing bubble – the largest asset-bubble in human history, can suddenly see “bubbles” everywhere (except in the U.S. economy).

The most frequent target of these “bubble sightings” is China, where the simplistic reasoning of these “experts” seems to be that if China's economy is growing much faster than anywhere else, then this must be where the next “bubble” will occur.

Given that this was such a simple news story – with nothing especially surprising about it – my first inclination was that it did not merit a commentary on the subject. However, seeing the reaction to this news convinced me that my first inclination was wrong.

Reading several reports on this news item, the “analysis” is remarkably the same: India's purchase is a “surprise” because everyone expected China to grab the first share of this gold, but this “removes some anxiety” from the gold market which the IMF's long-promised sale supposedly caused.

Wal-Mart Stores Inc. (WMT), the U.S. retailing behemoth which under-cuts all of its competitors with its made-in-China merchandise, has declared “war” on other U.S. retailers – a “price war”, to be exact.

For the second time in a month, Wal-Mart announced large price-cuts on many of its leading, brand-name toys. Wal-Mart has openly vowed to be the “price leader” during the upcoming holiday shopping season. Naturally, with Wal-Mart announcing a second round of cuts before the U.S. holiday shopping season officially begins (after Thanksgiving), this has forced other retailers into price-slashing of their own.

Another Friday night salvage-operation by the FDIC netted a big haul this week: nine U.S. banks were officially declared insolvent – all part of a large, banking chain, bringing the total this year to 115 banks. The remnants of these corpses have been absorbed into other financial institutions, but at a net cost to the FDIC of another $2.5 billion.

Some will suggest that my title deliberately twists and exaggerates this news, since the FDIC only conducts these operation one day a week. Those same people would also likely object to my observation that fifteen U.S. bank failures have been announced in the last eight days.

Being one of the most vigilant observers of the U.S. housing market – as well as one of the most vociferous critics of fraudulent “statistics”, there was little chance that Bloomberg's attempt to “rewrite history” would slip past me.

Here is what Bloomberg wrote on February 3rd of this year:

It is a long-established pattern of the precious metals sector that in any long-term bull market the precious metals miners outperform bullion, itself – with this especially being true at any medium-term tops and (of course) at any long-term top. The fact that relatively few investors know anything about these companies is one indication that this market is many years away from peaking. However, with gold recently reaching a new nominal high it is only natural that investor curiosity about these companies should start to grow.

Unfortunately for investors, there is not a lot of guidance openly available on these companies. Those advisors who specialize in this sector and focus on the mining companies typically offer their advice by subscription only. For novices to this sector, even those who are willing to pay for a subscription , knowing who is worth the time and money for such a commitment can be a very difficult question to answer.