Michael Campbell: David Pescod of Canaccord Wealth Management joins us today. David will be joining us in the Edmonton on May 14th for the Money Talks Resource Investment Conference. I’ll be there myself and we’ll be broadcasting from there. Just go to www.Moneytalks.net and click on the banner above for more information about David Pescod, Mark Leibovit, Ryan Irvine on small caps, Peter Grandich, Keith Schaeffer on energy, Victor Adair and others for this terrific show we have planned.
David let’s talk about the records in gold this week and the 30 plus year highs in silver. Can you put that perspective?
David Pescod: The people who own physical gold and silver right now are doing okay, but you notice in the markets there is not that amount of joy. We’ve all heard the phrase sell in May and go away, I get the feeling that it might have been April this year. One thing that Rick Rule brought up the last time I heard him talk in December he said that there’s now 5,000 junior mining companies out there, at the rate they’ve been coming out lately it’s probably up to 5,500 now with the number of financings that have been done over the last couple of months, and some of these private placements coming out, the question that is being asked by so many people is there simply too much paper? So the people who own the physical materials right now are doing okay, and I start to wonder if we don’t have a couple of months of shopping here to pick between those that do have the money and will continue to grow and those other companies that don’t have the goods won’t be able to finance. There’s been some easy money made over the last 18 months yet I have a feeling that we’re going into an era where it’s going to be more difficult in the market.
Michael Campbell: I see the price of gold move up $8 or $12 or what have you, then I start looking at the actual stocks and some did react, but many don’t react, in fact some even have negative days the very day gold was making a new high. There certainly has to be some level of a warning sign there.
David Pescod: Yes it is a warning sign. Like and that old saying about “sell in May and go away” we don’t know what it is. In the oil and gas sector it makes sense, spring demand for oil and gas is going to go down because of weather so it makes sense. Why does it happen eight or nine years out of ten in gold and silver mining? I don’t know, but there’s a reason we’ve heard that saying, so if it’s right again this year that means you’ve got a couple of months of shopping before the usual cyclical turn up which usually happens at the end of summer.
Michael Campbell: With over 5,000 sort of junior stocks in the precious metals, if we are going to get an opportunity to do a little shopping, what characteristics are important to you?
David Pescod: It comes down to people. You’ve mentioned some interesting names that will be at your Edmonton Conference, people that just seem to have a consistency in picking stocks over time. I know in the oil and gas sector Keith Schaefer’s only been around for two years but followers of his subscription have had some pretty good winners. I write newsletter everyday and it gives us contact with people who run companies or are analysts, and we just notice that some are simply better than others. One of my favorite people I have got to mention this is Jed Richardson formerly the mining analyst at Sprott. He had got involved in a mining company because he thought they had a chance.
And Amazon Mining Holdings Plc came up with a potash play in Brazil that I went down to see, this is the best part of this investment business. Some time a guy like you with your show is going to start investment tours where you can go to Brazil to see this. When you go to a place like Brazil and see agriculture where some of the crops get three harvests a year. On eucalyptus plantations their grow a 50 foot tree in seven years, sugar cane as long you can see. People are saying that we’ve got a food problem in the world? I say no we don’t because Brazil’s going to be feeding the world. But you go there and you meet a Jed Richardson first hand and see what’s going with Amazon, well I’m so glad I did it.
The Amazon’s a ten bagger we’d have never gotten into the play if we hadn’t seen it and hadn’t met Jed Richardson. He looked at Great Quest Metals Ltd, another fertilizer player in Africa; it’s ten times your money. Right now what is he looking at? And of course we’re just mentioning this it’s a speculation, but African Gold Group. He says the play in Mali itself is probably worth close to a dollar a share which is more than what it’s trading for. But they start working in Ghana in two months. Its a speculation but it’s coming from a great source and it’s in a great area of the world. When you’re talking about speculative stocks it’s people and it’s reputations that have been made and earned.
Michael Campbell: I say the second part is that they’ve been earned. That they’ve proven to have a methodology that works. David you’ve been in the business well over 30 years, so you can appreciate when I talk about the phenomenal tuition fee I was forced to pay to learn some lessons. The ones I don’t like are the ones I had to learn several times, like I failed the first four courses on the same lesson. These people you talk about have track records, and your point’s very well taken that you want to check their track record.
David Pescod: They never have a 100% track record but the guy who has an 80% record you’re going to listening to. Amazon Mining of course is a fertilizer player in Brazil and we still don’t know how successful that could be. There are some people that suggest it could be multiples of its current level but it’s a new kind of fertilizer. The interesting thing about Brazil is while it’s going to feed the world, it has to import 92% of its fertilizer, and that’s why it’s very important to the Brazilians. They are bending over backwards to try and make sure that this company works.
Michael Campbell: What are the big mistakes you see individual investors making?
David Pescod: Selling. No one knows when to sell and everyone has a problem with it. Buying is so easy, but everyone wants to sell at the top. Sooner or later with maturity you get over that, if you have enough grey hairs eventually you realize you’ll never be able do that.
Michael Campbell: I think that’s fantastic advice. The older you get, the more you realize that the name of the game is not to be correct, not to be right, it’s to make money. And a lot of people make that mistake, they want to get in at the low and sell at the high. People like yourself, myself, Victor Adair, we’ve all learned that that’s a fool’s game.
David the other dichotomy you’ve set out is there’s a difference between owning the metal itself be it gold silver or platinum. You can do that by owning the physical metal itself or you can own an ETF, an exchange traded fund that mirrors the underlying metal. Can you briefly describe for investors ETF’s and which I should own?
David Pescod: You know I think they appeal to a very different crowd, there are those that can relate to the concept of owning a company versus owning the actual physical commodity. There is just something about owning that commodity,people that just simply feel more comfortable owning that physical metal versus an ETF that trades on the stock market which seems to attract a different crowd. You feel comfortable owning a bit of a company that you can get out of quickly. You know someone like Ghadaffi may feel quite comfortable owning that gold, but all of a sudden if he wants to sell it maybe he can’t. So there’s two very different crowds, both want to play the area; it’s just two very different ways to do it.
Michael Campbell: When we see a divergence in the market where the stocks weren’t responding in the same way they were to the upward movement and new record high in gold as an example, it’s not quite the same investment in those terms. Obviously it’s influenced but it doesn’t have to be one to one.
David Pescod: No, there’s so many companies and with so many financings, there’s just so many hundreds of billions of shares right now it’s starting to weigh down that market. And I think we are going into the next phase in precious metals where you are going to have to sort the companies out, and it’s going to become a little more difficult picking the winners and losers. Up until now any virtually any company exploring for gold did well.. With the couple of bumps we’ve had in the last month, all of a sudden people are going to be a lot more picky, they are going to be looking harder at management and harder at the properties they’ve got. After the last surprise we’ve had with countries, all of a sudden you are a little bit nervous about whether you want to be in Peru? For sure you don’t want it in Bolivia, and of course not Venezuela, but there’s a little sorting out going on there as well. Africa still seems to be a great place, but all of a sudden there’s a couple of countries don’t want to be in.
Michael Campbell: Interesting conversation David and I look forward to hearing your whole presentation May 14th at the Radisson Hotel in Edmonton. I think it’s going to be an exciting time with you, Mark Leibovit coming up and Ryan Irvine coming up Victor Adair is going to be there, and of course as we just alluded to we’ve got David there., Mark Leibovit, Ryan Irvine on small caps, Peter Grandich, Keith Schaeffer on energy, Victor Adair and others for this terrific show we have planned. Simply go to moneytalks.net right at the top there’s a banner for the Money Talks Resource Investment Conference just click on the banner or HERE or click on the banner belowfor tickets.
David Pescod: Thanks Mike, I really enjoyed our conversation.