Transcript: Gold Stock Disaster or Profit Bonanza?

When gold bullion falls, gold shares collapse.

Conversely …

When gold bullion rises, gold shares can literally explode higher.

So anyone who was caught off guard by this year’s plunge in bullion must be utterly shocked by the far sharper collapse in mining shares!

Likewise, if you’re among those thrilled by the opportunity to buy gold bullion at a discount, you must be ecstatic about the prospect of picking up their shares at an even deeper discount.

Our recommendation: Never jump headlong into any investments.

Make sure you’re fully aware of the dangers to avoid, including specific names that are most likely to underperform. Then start building a portfolio that’s ideal for the current times.

That’s what Larry Edelson’s doing in his online seminars, such as the one he just held this week.

If you missed it — or you want to review any part of it — here’s Part I of the transcript …

Gold Stock Disaster or Profit Bonanza?

Transcript of this week’s online

event with Larry Edelson, Part I

Larry Edelson here. I asked you to join me today because I want to make absolutely sure you understand the importance of this moment in time.

I firmly believe that what you do now — right now — will go a long way toward determining how rich you’ll be, how well you’ll live, and how secure your finances will be for the rest of your life.

I say this for four reasons:

First, because of the all-important, all-inclusive and extremely powerful convergence of economic forces that are in the process of creating an historic bottom in precious metals and mining shares.

Second, because of five dangers — potentially deadly traps that many gold-mining companies have fallen into. In the next few minutes, I will name those five dangers. And I will also cite ten well-known mining companies that you must avoid.

Third, because it is critical to build a core, diversified portfolio of solid mining shares that will take the fullest advantage of the next major leg up in the gold and silver bull market. I will tell you about two of them today.

And the fourth, most exciting reason: Because of the unique gold and silver stocks that are likely to be among the very first to take off to the upside.

These are stocks that posted gains of up to 11,000% in the last phase of this great gold rally. Mining shares that I believe will multiply your money many times over during the next three years.

All of this is vitally important — because if you listen to the many pundits out there who think they know the gold market, I think you will miss many of the huge profit opportunities that are now on the horizon …

How Wall Street Pundits (Even So-Called

Gold “Experts”) Can Steer You Wrong

Many of the “experts” claim, for instance, that gold or mining shares can’t rise when the dollar and interest rates are rising.

Sorry — but that’s pure baloney.

As I demonstrated in our recent Precious Metals Power Summit, gold can and often does rise right along with the dollar and interest rates.

And sure enough — just last week — even while the U.S. dollar rallied and interest rates shot higher — gold jumped from $1,178 to nearly $1,300!

So I sure hope you’re ready to act when I tell you to. There is nothing better than getting your timing right when it comes to the gold market!

And that is especially true with gold- and silver-mining shares. Just consider the following:

In September 2011, I warned Real Wealth readers that gold prices were about to plunge. I urged you to sell your gold bullion — or at the very least, to hedge your positions with an inverse ETF.

If you heeded that recommendation, you insulated your money from the price decline that followed.

If you didn’t, you lost up to 38% of your money as gold bullion fell, just as I predicted.

But if you think that’s a big loss, wait till you see what happened next. A month later, I practically begged you to dump your gold-mining stocks.

If you did, your money was safe and secure as mining shares plunged. But if you failed to follow my recommendation, your losses would have been nearly double the losses in bullion — or more.

Click for larger version

You can see it right here in this chart of the Market Vectors Gold Miners ETF.

I issued my now-famous “sell” signal just days after gold hit $1,920 an ounce and most mining companies also hit their record highs.

In the months that followed, the average mining company lost 63% of its value, wiping out $243 billion of shareholder wealth.

The carnage among smaller mining stocks was even worse:

The average small mining company lost 78% of its value …

Some juniors, like Allied Nevada Gold Corp., lost as much as 87% of their value …

And dozens more — like Patagonia Gold, Mariana Resources, and Gryphon Gold Corp. — were delisted … are in danger of outright bankruptcy, and will likely cause a 100% wipe-out for investors!

With this massive decline in gold shares, we are now at or close to one of the greatest buying opportunities in this cycle, perhaps in this century.

But first, I must give you one of my most important warnings ever for gold and silver investors:

If you think you can just jump in willy-nilly to buy beaten-down mining shares to make a bundle of money, please — think again!

Many of today’s surviving mining companies will either fail to produce major gains …

Or file for bankruptcy, leaving you holding the bag even as gold and silver start to soar again.

Why? There are several reasons. But let me address them in terms of the two main types of mining companies out there, seniors and juniors.

Among the senior mining companies …

Many have their market timing all messed up. And they’re making serious timing mistakes:

• They’re just NOW starting to hedge their gold again, thinking gold is in a bear market.

• But they’re too late, always fighting the last war. When gold and silver suddenly explode higher, they’re be left out or may even lose a lot of money overall.

No matter what, these senior miners are not going to be able to get back to the share valuations they experienced before, because they’ve sold forward their gold and silver at lower prices.

Plus, many senior miners went on crazy acquisition sprees when gold was at $1,800 and $1,900, buying up properties and tiny resource miners at premiums and doing so by borrowing huge sums of capital.

With interest rates rising now, the debt burdens on their balance sheets are going to crush those companies’ earnings and valuations.

Bottom line: There are very few expertly managed senior mining companies left that will fully participate in the next major leg up in the precious metals markets!

Most junior miners are in even worse shape!

Here’s why:

First, many juniors also took on way too much debt at the top of the gold market to buy additional properties. Now they’re finding those properties are too expensive to feasibly mine, and they too are going to choke on their debts as interest rates continue to rise.

Or they’re going to have to raise oodles of capital via secondary share offerings, diluting the heck out of existing shareholders.

Second, many junior miners do not have the seasoned management needed to navigate the next bull market in the metals.

They all-too-often behave like wildcatting speculators, who simply do not know how to manage a company. They run their businesses like gamblers who walk into a casino and drop all their money on a single number of the roulette table.

In sum, if their number hits, yes, they win big. If not, they lose everything and everyone’s money in the process.

A third reason many juniors won’t cut the mustard in the months and years ahead is that many of them ventured into far flung places of the globe, including politically unstable countries, to hunt down more gold and silver properties.

That, too, is dangerous, risking nationalization of decent properties or heavy tax rates and royalties when mineral-rich properties are found.

As I’ve recently showed you with my work on the Cycles of War, this is particularly risky in the current era. With social and political unrest due to rise sharply all over the globe — and with operations in politically unstable countries — it’s potentially deadly for small and large mining companies alike.

Part II, coming tomorrow, covers:

• The 10 mining companies to avoid! If you own any shares or warrants in any of them, dump them and don’t look back.

• Tried-and-true performers for your core portfolio.

• High-octane performers — more speculative but still with solid business models.

Good luck and God bless,

Martin