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  • Finding Gold Dollars In Nevada: Thomas Drolet

    Patience is the key to a golden future for both investors and miners. Thomas Drolet of Drolet & Associates Energy Services Inc. is an energy expert who is also an avid gold investor. He typically visits the mines in which he has a stake and talks turkey to managers. He has found a sweet spot for gold in his basic portfolio-and he shares a few of his favorites with The Gold Report.

    The Gold Report: Why is the price of gold stuck?

    Thomas Drolet: The central banks of the world are fighting gold in order to save their fiat currencies, so there is a fight to the bottom, and gold suffers. I surmise that the U.S. dollar will continue to dominate world currencies for the next decade. That makes gold produced outside of the U.S. in some of the safer jurisdictions a very valuable investment going forward. And it also helps domestic production for the obvious reason of predictable laws and regulations at home.

    TGR: When you talk about the U.S. dollar being dominant for the next decade, what do you base that prediction on?

    TD: The Chinese and the Russians are talking about trading oil and gas, mining and building pipelines within the yuan and the ruble currency axis, bypassing or ignoring U.S. dollars for normal worldwide fossil commodity trades. That will gradually lead to less use of the U.S. dollar, globally. Those U.S. dollars will stay home, creating a shortage of available U.S. dollars for the rest of the world. That will keep the U.S. dollar high.

    Our markets are doing better than other export markets. China is looking inward, trying to supply its domestic markets via internal sources. That means less use of U.S. dollars by the Chinese, and less accumulation of U.S. dollars worldwide, which adds to the shortage of U.S. dollars in the market. Now that quantitative easing is over in the United States, that will mean the Federal Reserve will stop printing money, which is a sign that the supply of U.S. dollars is turning a corner. As interest rates rise, investors will return to buying shares in the U.S. and Canadian gold miners.

    TDR: Who is positioned to benefit from that resurgence in gold investing?

    TD: I am very high on Nevada and the Carlin Trend of gold mines, Barrick Gold Corp. (NYSE:ABX) and Coeur Mining Inc. (NYSE:CDE) are doing really well in the Nevada gold fields.

    TGR: What qualities do you look for in mining administration?

    TGR: Smart managers are patient managers. Gold mining is a long-term game. It requires perseverance and expert knowledge about how the overall financial and precious metals markets work. A savvy manager creates value for his company without having to dilute its share price. Playing to the royalty game is one sign of clever management.

    TGR: What is up with Coeur Mining's operation in Nevada? It does a fair amount of silver production along with gold production.

    TD: Coeur Mining is redeveloping the Rochester silver-gold mine in an area of Nevada that has been mined for close to 100 years. Coeur is bringing in more modern, efficient tools for drilling. This is a story well worth looking at as it proceeds. The Street has an eye on it because Coeur is beating its own projections.

    TGR: Are precious metal prices bound to go up, or are they going to stay flat for a while?

    TD: Gold is highly responsive to geopolitics, but I see the price as turning from a bottoming process. Selective, smart gold investors look for more than one product line, a combination of gold and silver and royalties. Patient investors will be well rewarded for waiting out this period of a strong U.S. dollar. But for a quick buck, gold mining is not for the faint of heart.

    TGR: As an energy and gold investor, you have been through many short-term market fluctuations. How do you ensure that your portfolio is positioned for long-term success?

    TD: A smart approach is, as always, a portfolio with lots of variety. Don't get carried away by believing in ten-baggers. Assume that your best investments will double in seven years. Spread the money around. Not just in mining, but in energy, infrastructure and so forth. I come out of the big utility electricity world. The successful big electrical utilities are those that have coal plants, hydroelectric plants, natural gas plants, nuclear plants. Successful utilities are investing cash in renewable energies, be it solar, wind or geothermal. Look what has happened to coal, as impacted by the Environmental Protection Agency in the U.S. The coal generating side of the electricity business is in decline. A utility that had bet the house on coal would be out of business now. A solid, sustainable business, be it energy or mining or any type of endeavor, spreads its risk.

    TGR: Thank you for being with us today, Thomas.

    This interview was conducted by Peter Byrne of The Gold Report and can be read in its entirety here.

    Thomas Drolet is the principal of Drolet & Associates Energy Services Inc. He has had a 44-year career in many phases of energy-nuclear, coal, natural gas, geothermal and distributed generation, with expertise in commercial aspects, research and development, engineering, operations and consulting. He earned a bachelor's degree in chemical engineering from Royal Military College of Canada, a Master of Science degree in nuclear technology/chemical engineering and a DIC from Imperial College, University of London, England. He spent 26 years with North America's largest nuclear utility, Ontario Hydro, in various nuclear engineering, research and operations functions.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
    2) Thomas Drolet: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    3) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
    6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

    101 Second St., Suite 110
    Petaluma, CA 94952

    Tel.: (707) 981-8999
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    Nov 19 1:15 PM | Link | Comment!
  • Jack Lifton Says Innovation Is The Key To REE Independence

    China's geology, cost structure and disregard for environmental degradation have led to rare earth world domination. But the landscape is changing. In this interview with The Mining Report, industry expert Jack Lifton shares his vision for a world where centralized modern processing could make it possible for mining companies in the United States, Europe and Australia to start producing truly critical materials with small capex.

    The Mining Report: Jack, as we move into the age of technology metals, what is the current state of the rare earths sector inside and outside of China?

    Jack Lifton: The rare earth elements [REE] are not rare in the common sense of the word. It's that they're rarely produced because of production costs. Rare earths typically are present in small proportions to what is otherwise being mined; they are almost universally byproducts. This presents a very high cost picture for developing an REE "mine."

    Processing REEs is another impediment to their development. The traditional processing technique for separating REEs from each other and purifying them hasn't evolved very much over the last century. It's gotten a little easier, but it remains very slow and very expensive.

    The idea of building a very expensive mine coupled with a very expensive separation plant has put an economic burden on the development of rare earth sources, at least outside of China, in the last 10 years. Very little thought went into the REE boom that began around 2007. Nobody asked what was the point. What were we going to produce that was in short supply? The excitement of the venture took over.

    In 2011, the Chinese ministry put out a notice saying that it was considering a halt of HREE exports. Suddenly, the sky was falling. China was going to stop exporting HREEs. That will kill our industry, destroy our military and life as we know it. What actually happened was that the Chinese ministry in charge of setting goals for industries backed off. It didn't stop exports, but it did tighten up the export controls and reduced the quotas.

    You have to understand that the Chinese don't think about North America, Australia or Europe as competitors in the REE sector. In August, I attended a meeting in China where the chairman of Baotou Steel Rare Earth, whose Baosteel division produces LREEs in Inner Mongolia, declared his company the world's largest LREE producer and the largest vertically integrated company in the REE sector. In effect, he was saying, we produce so much of this stuff we don't even know what to do with it.

    He announced Baotou would produce a minimum of 30,000 tons [30 Kt] of surplus cerium this year. I understand that because you have to produce all of the rare earths to get any of them, but my question was why? The answer was the 15% of Baotou's deposit that's neodymium and praseodymium, the magnet metals. That is really what Baotou is after. The Chinese just keep producing and stockpiling the other stuff to get at the critical magnet material they need.

    No matter how you figure it, there isn't enough of the magnet metals to meet actual demand, never mind projected demand. China isn't producing enough neodymium and praseodymium to meet its own internal demand. One way to augment production is to start producing LREEs, which are 85% stuff you don't need, to increase the production of the 15% you do need. That seemed to be what the Baotou chairman was saying. I came back thinking that the last business I want to be in is one that depends on a revenue stream from LREEs, which are being produced in surplus in China.

    TMR: Is there still demand for HREEs outside China?

    JL: Yes, of course. The point is China is still the only HREE producer because of the cost structure. Heavy rare earths occur almost everywhere in the world in extremely low-grade deposits. In China, for example, HREEs come from the so-called ionic adsorption clays, which are just a few hundred parts per million. Now luckily for the Chinese, mining ionic adsorption clays is not nearly as expensive as underground or even surface mining of hard rock material.

    For example, if I have 50 parts per million of dysprosium in ionic adsorption clays, I need to process 1 million tons [1 Mt] of clay to get 50 tons of dysprosium. By comparison, if I move 1 Mt of rock at Mountain Pass, California, I will produce 50-80 Kt of REEs. In China, I'm going to get 50 tons of dysprosium. The Chinese do this on an immense scale, producing as much as 15 Kt of these materials, of which only 8 Kt to 10 Kt tons are the REE-related element yttrium. The Chinese are washing millions and millions of tons of clay.

    China is the only place that produces HREEs from ionic adsorption clays. That happened as dysprosium-modified magnets became extremely useful and necessary.

    TMR: Is that due to demand for permanent magnets for electric cars?

    JL: Right. Magnets used in extreme environments of hot and cold need to be modified with dysprosium and terbium so that they don't permanently lose their magnetization when they go through a heat cycle.

    Quite frankly, if these elements had been found anywhere else in the world, they probably wouldn't have been developed. The world is fortunate that they were found in such a low labor cost, but highly developed country.

    Ionic adsorption clays exist in Vietnam, Thailand, Cambodia, Indonesia, Malaysia. They haven't been developed there for many reasons. Some are ethical reasons. Ionic adsorption clay mining is extremely dirty environmentally and very difficult to contain.

    A significant source of this material was discovered in Thailand right under a resort area a couple of years ago. The Thai government said it didn't give a damn what anybody thought, nobody was going to start ionic adsorption clay processing next to the swimming pool in a country where tourism is the number one revenue source.

    The Vietnamese have a wide variety of rare earth sources, hard rock, as well as ionic adsorption clay, but dealing with the country has been impossible so far.

    TMR: You've mentioned that the cost of processing may be going down. Will that make HREE mining outside of China more practical?

    JL: Yes and no. Yes, if somebody creates a central processing facility. Outside of China, I've been counseling people not to commit to building a solvent extraction plant until they've looked at the other technologies that are available. The impediment is that none of the other technologies has been operated at scale. However, pilot plants are underway in North America and Europe for at least two non-solvent extraction technologies.

    TMR: Is there any hope for extra-Chinese companies if they can utilize shared processing at lower costs?

    JL: If these materials are critical for our military and our lifestyle, somebody will have to capitalize security and independence. Geography is destiny in geology. The Chinese have these materials. They don't have to pay to develop mines or develop new ways to separate the material.

    The only thing that's impeding China is its own internal inflation, its cost of labor and chemicals, its skilled labor. These are going up all of the time. Now, China is looking for REE sources elsewhere in the world.

    Isn't this the ideal situation in a capitalist system? We have somebody who wants something we've got. Why aren't we developing it?

    TMR: Any closing thoughts?

    JL: In the West, our cowboy capitalism is looking for new ways to apply existing technology to REE separation. A genuine change in how REEs are processed may be the salvation of the non-Chinese industry. It costs a bundle to build a mine and processing plant-amounts of money the market cannot support because there isn't enough profit to be made to repay the debt. It's way too late to raise that amount of equity.

    I'm advising the industry to look at processing together because even if all the names I mentioned in this interview were to reach their target production, there still wouldn't be enough material to meet existing demand. If you built a central processing plant in North America and that cost were taken off the business model, that might help convince investors to fund one or all of them. We need all of them.

    TMR: Thanks for your time and your insights.

    This interview was conducted by JT Long of The Mining Report and can be read in its entirety here.

    Jack Lifton is an independent consultant and commentator, focusing on market fundamentals and future end-use trends of the rare metals. He specializes in sourcing nonferrous strategic metals and due diligence studies of businesses in that space. He has more than 50 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting and refining industries. Lifton is also an author at InvestorIntel.

    Want to read more Mining Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit The Mining Report homepage.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) Jack Lifton: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid as business operations consultant by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over what companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    3) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
    6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Mining Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Mining Report. These logos are trademarks and are the property of the individual companies.

    101 Second St., Suite 110
    Petaluma, CA 94952

    Tel.: (707) 981-8999
    Fax: (707) 981-8998
    Email: jluther@streetwisereports.com

    Nov 11 2:47 PM | Link | Comment!
  • Frank Holmes Talks No-Drama Investment Strategy

    Frank Holmes' advice to investors? Chill. In his interview with The Gold Report, the veteran commodities investor shared some strategies that help him "sit back and stay balanced," namely by diversifying and following the money. Find out about the indicators Holmes watches to read the market's pulse, and why a +/- 35% move for gold doesn't keep him awake at night. Holmes also profiles his favorite mining stocks, including one that generates what could be the highest per-employee revenue in the world.

    The Gold Report: Your talk at the New Orleans Investment Conference was titled "The Optimistic Investor in a Pessimistic World." How do you stay so positive when gold falls 2% or even more in a day?

    Frank Holmes: The biggest thing when it comes to gold-something I've always advocated-is to maintain a 10% weighting, 5% in gold stocks and 5% in gold jewelry or coins, and to rebalance each year. That has been a wonderful way for investors to deal with the volatility of the capital markets and to sleep at night.

    TGR: What is happening in commodities? What are the most important indicators you're watching?

    FH: If you're really in tune to the stock and commodity markets day in and day out, it's kind of similar to arriving at a party and being able to tell if there is good energy or if it's not the place for you. There are these patterns you notice.

    When it comes to commodities, a magic number for looking toward the future is PMI, which stands for Purchasing Manufacturers Index. In America, it's often called the ISM Manufacturing Index, which is exactly the same. J.P. Morgan publishes a global PMI every month, which surveys the major economies of the world, the G20 countries. I like to look at what happens when the one-month average of the world is above the three-month average, and what happens when it goes below. It's remarkable to see the law of inertia take hold.

    The global PMI was so very strong in 2003, 2004, 2005 and 2006. Europe, America and Asia were just roaring, and commodities were ripping. Since 2008, the patterns have changed. There are so many new fiscal rules, Federal Advisory Committee Act [FACA] rules, money movement rules, etc., that you can't get the synchronized global PMI running in a very constructive way.

    But it's important to look at what Europe is doing, because Europe is a bigger economic trading partner with China than America is. So when Europe slows down, that puts a real dent in China's economic prosperity. But the real psychology in the stock market is Quantitative Easing 3 [QE3] ending.

    TGR: Do you think the headlines about ending QE3 are a short-term pain for the commodities market, particularly precious metals?

    FH: The biggest thing that's really hurting commodity markets, and gold in particular, is a stronger dollar. Whenever the real rates of return in America are negative, gold starts to rally, which it did for the first six months of this year. And now the rates have gone positive. So all of a sudden, gold starts taking it on the chin. But the positive note is that India has been buying gold and so has China-there has been record demand on the back of these selloffs. There is a slow tectonic shift taking place globally for this credible metal.

    TGR: Let's talk about how the fundamentals vary among asset classes and whether the volatility we're seeing right now is normal.

    FH: We did a special report in August/September, trying to explain this DNA of volatility. The piece was called "Managing Expectations: Anticipate Before You Participate." Everything in life is about managing expectations. As Warren Buffett says, if you want to have a long-lasting marriage, have low expectations, and everything is on the upside. The same thing happens with earnings. Do you expect the PMI to be positive? Do you expect the earnings to be positive?

    What we have done in our research is look at all the asset classes, and we have noted that they each have different DNAs of volatility. When you look at gold and the stock market, it's about the same. It's a nonevent for gold to go +/-15%, and it's normal for the S&P 500 to go +/-15%. But mining stocks, energy stocks, emerging markets and biotechnology have a DNA of volatility of +/-35%. If biotechnology is off 35%, it's brutal feeling it as an investor, but it's just normal. So right now, we have gold stocks off 35% over 12 months, and they're down one standard deviation.

    Now, if gold falls 50%, that means the odds favor a reversal. Last year at Christmastime, we commented that gold stocks and bullion were down two standard deviations, and we were due for a big rally. And positive interest rates went negative until June. Over those six months, gold rallied right back to its mean. Everything reverts to this mean average, which is important for investors to recognize. So when you're looking at the volatility, it shouldn't frighten you. The only time you really lose on this is if you're forced out of a holding.

    TGR: As we're entering tax-loss selling season, what is your strategy for the end of the year?

    FH: I look for companies that are trading way below their book value and are candidates to be taken out. When you go down the junior spectrum, the question is how much cash does a company have, and can it survive for two years without any funding. If not, then there is dilution risk. I try to stay away from the micro-cap stocks, which often spend money faster than they're able to get their per-share reserves or production up.

    TGR: You still have more than 80% of the Gold and Precious Metals Fund and more than 90% of the World Precious Minerals Fund in gold. What is your strategy there? What are your top performers?

    FH: I think royalty companies are the safest plays-Franco-Nevada Corp. (NYSE:FNV) , Royal Gold Inc. (NASDAQ:RGLD) and Silver Wheaton Corp. (NYSE:SLW)-the three amigos. They have high-margin businesses and low cost of capital, and there are very smart people running these companies. When you take a look at a company like Silver Wheaton, 30 people are generating $500 million [$500M] in revenue. It's probably the most profitable company per employee in the world.

    TGR: And lower risk.

    FH: Correct, much lower risk. Now, when it comes to the junior spectrum, we like the stock to have great management, have a wonderful footprint from a geological point of view, be increasing its production and be very conscientious of dilution. Klondex Mines Ltd. (OTCQX:KLNDF) is one of those companies that has done a great job of respecting value per share. When it comes to big caps, Randgold Resources Ltd. (NASDAQ:GOLD) is another company that's conscientious about dilution and doing transactions that are extremely accretive.

    TGR: Klondex just reported some drill results at Fire Creek. Have you been happy with the progress it's making?

    FH: Yes. We're very happy with the company and management. It has a great track record. It has the sponsorship of Franco-Nevada. I think that's an excellent company.

    Another royalty company we have is Virginia Mines Inc. (OTCPK:VGMNF) [VGQ:TSX]. It has a big, healthy balance sheet, lots of cash and the ability to grow over time. I think that stocks like that will be rerated on any bounce in gold. They will bounce more than the Market Vectors Junior Gold Miners ETF (GDXJ:NYSE.MKT) will.

    TGR: What silver companies in the fund are doing well?

    FH: The silver companies are having a more and more difficult time. The safe play for silver is Silver Wheaton.

    TGR: What about other companies active in Mexico?

    Ralph Aldis: MAG Silver Corp. (NYSEMKT:MVG) has been advancing the Juanicipio project in Mexico. From what I understand on the ramp development at Juanicipio, MAG Silver has advanced the ramp to around 600 meters in length. The development has been slower in the upper portion of the ramp due to the more weathered nature of the rock and the occasional intersection of silicified zones, which requires additional efforts to work through. Now MAG Silver is in more of the fresh volcanic rocks and advancing at about 115 meters per month. Currently it is about one-third through the estimated 30-month timeframe to reach the vein.

    Fresnillo Plc (OTCPK:FNLPF) [FRES:LSE], its partner, seems to be moving the process along at a "not-too-fast" rate. Fresnillo's dilemma is that should it decide to buy out MAG Silver, it may have to pay a higher price once the Juanicipio is in production.

    The bigger issue, which could potentially move the share price of MAG Silver higher in the near term, would be a resolution to access to the Cinco de Mayo Zn-Pb-Au-Ag carbonate replacement deposit, after being expelled by a more radical landowner group in the area. I believe MAG Silver is making progress on resolving this issue. Hopefully we will get a positive update in the first quarter next year.

    TGR: Frank, you just won some awards for education. What is the role of education in your operation?

    FH: My blog goes out to tens of thousands of people in 193 countries, so it's amazing to see the readership. We've won about 64 awards in the past seven years. This year it was a record 10. The one that gets the No. 1 e-letter is Investor Alert. That is written every Friday night. Many publications can't produce a product like this because compliance is so rigorous, but we are able to get it out to shareholders for the weekend read. It's written by our investment team. It assesses the strengths and weaknesses of the portfolio, presents an outlook for the following week and notes major opportunities and threats. The SWOT model always has three sentences for each section and usually a chart. The fact that it's put together by the investment team makes it much more credible and timely, but it's also succinct.

    TGR: Educate us. Give us something to be hopeful about.

    FH: We're seeing record numbers of companies buying back more than 4% of their stock every year. Apple announced a 20% buyback and increased its dividend. I'll give you a good data point: Ten years ago, you bought your first iPod. Facebook was just being created. Today, 10 years later, Facebook does about $12 billion [$12B] in revenue, and the iTunes component of iPod does $18B in revenue. What Apple is doing is creating products that are synchronized together, sort of a holistic ecosystem. There is wonderful innovation in America. These things are important for overall growth in the economy.

    Another positive note: There are lots of opportunities in basic materials and resources. While we're talking, there are 7 billion people on Mother Earth. On the other side of the world, there are 100 million people having sex. And in nine months, there are going to be 1 million screaming babies, and that population growth is not going to stop.

    TGR: And you have a great chart [see beginning of interview] that shows how many resources that baby will use over his or her lifecycle. What are some of the highlights on the commodity side?

    FH: In 1972, China and India had no global footprint. They only had 2% of the world's gross domestic product. Today, they're 25% and 40% of the world's population. Down the road, this is very positive for commodities. When these commodities turn and we finally get synchronized growth, then I think what's going to happen is a streamlining of rules and regulations. Where you are getting the fastest growth is where there are tax breaks.

    TGR: Do you think the results of the recent midterm elections will be positive for this regulatory environment?

    FH: We'll see what happens when it happens. The difficult part for the average investor is that the best the stock markets have been is with a Democratic president and a Republican Congress. That's why we like to say that you should be diversified and follow the money. I've written about the fact that under Obama, there's been a spectacular stock market run. It's shocking. Why? Because so much capital has been injected into it. I think that one has to sit back and be balanced. One of the big things we told investors in New Orleans is that if you're worried about all this volatility, then we have the no-drama fund, the Near-Term Tax Free Fund (MUTF:NEARX). Morningstar has just given it a 5-Star Overall rating.

    Investors age 50-55 are about 15 years away from retirement. It's not a good time to take big risks like putting all assets in the stock market. Witness the huge crash of 2008 when individuals about to retire lost their nest eggs. When you compare the growth of the Near-Term Tax Free Fund over 13-14 years with the S&P 500, you can see that the fund has grown with relatively low risk. The stock market had a wild ride, but earned only a tiny bit more.

    TGR: Thanks for talking with us.

    FH: A pleasure, as always.

    This interview was conducted by JT Long of The Gold Report and can be read in its entirety here.

    Frank Holmes is CEO and chief investment officer at U.S. Global Investors Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm's chief investment officer in 1999. Under his guidance, the company's funds have received numerous awards and honors including more than two dozen Lipper Fund Awards and certificates. In 2006, Holmes was selected mining fund manager of the year by the Mining Journal. He is also the co-author of "The Goldwatcher: Demystifying Gold Investing." He is a member of the President's Circle and on the investment committee of the International Crisis Group, which works to resolve global conflict, and is an adviser to the William J. Clinton Foundation on sustainable development in nations with resource-based economies. Holmes is a much sought-after keynote speaker at national and international investment conferences. He is also a regular commentator on the financial television networks CNBC, Bloomberg and Fox Business, and has been profiled by Fortune, Barron's, The Financial Times and other publications.

    Ralph Aldis, CFA, rejoined U.S. Global Investors as senior mining analyst in November 2001. He is responsible for analyzing gold and precious metals stocks for the World Precious Minerals Fund (MUTF:UNWPX) and the Gold and Precious Metals Fund (MUTF:USERX). Aldis also works with the portfolio management team of the Global Resources Fund (MUTF:PSPFX) to provide tactical analyses of base metal, paper, chemical, steel and non-ferrous industries. Aldis received a master's degree in energy and mineral resources from the University of Texas at Austin in 1988 and a Bachelor of Science in geology, cum laude, in 1981, from Stephen F. Austin University. Aldis is a member of the CFA Society of San Antonio.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) Frank Holmes: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. The following companies mentioned in this interview are held in U.S. Global Investors funds: Apple, Franco-Nevada Corp, Klondex Mines Ltd, Randgold Resources Ltd, Royal Gold Inc, Silver Wheaton Corp, Virginia Mines Inc. and MAG Silver Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    3) Ralph Aldis: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. The following companies mentioned in this interview are held in U.S. Global Investors funds: Apple, Franco-Nevada Corp, Klondex Mines Ltd, Randgold Resources Ltd, Royal Gold Inc, Silver Wheaton Corp, Virginia Mines Inc. and MAG Silver Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    4) The following companies mentioned in the interview are sponsors of Streetwise Reports: Silver Wheaton Corp., Virginia Mines Inc., MAG Silver Corp. and Klondex Mines Ltd. Franco-Nevada Corp. is not affiliated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    5) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    6) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
    7) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

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    Nov 10 3:33 PM | Link | Comment!
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