Free Stock Market Advice

The hottest area for risk-capital equity speculators now is mining shares. The second hottest area is U.S.-listed Chinese stocks. Both offer growth, momentum and liquidity, but only one sector offers improving fundamentals and that's the mining business. Gold is hot. Silver is hot. The underlying business environment in mining just couldn't be any better.

China is still a fast growing economy, but things are getting a little out of control in the real estate market. It won't take much, but one decent shock to the system and the whole marketplace could unravel, at least temporarily.
As I've written before, U.S.-listed Chinese stocks tend to move as a group and lately they've been trending downward. The equity markets in China are now in a correction and, if the bubble bursts in housing and development, stocks over there could take a long time to recover.

The best industry fundamentals are now in precious metals. Naturally, a lot of the best stocks in the mining business have already gone up in value. This is no big surprise. But, when the spot price of gold is hitting records, the business model in mining becomes exponentially more attractive. Profitability doesn't just go up; it goes up exponentially, because, in the mining business, your costs are relatively fixed.

There are a lot of good fundamentals for gold. We're about to enter a new inflationary phase in the global economy (largely due to the massive amounts of money being printed by most central banks). There remains a fragility to the debt situation in Europe. Asian economies are doing much better. Industrial demand for gold is rising. The supply of gold is relatively static.

Frankly, I think the performance of gold has been quite lackluster over the last two quarters. From my perspective, the price should be a lot higher.

In precious metals, you can speculate on the commodity itself in the futures market. You can own a precious metals mutual fund or exchange traded fund. You can buy gold bars or coins. You can speculate in mining stocks. There are a lot of options available to investors who want exposure to precious metals.

I would definitely have a large-cap, established gold producer in a well-balanced equity portfolio. I'd also have a mid-cap silver play. At the speculative end, one or two junior mining plays could be considered in gold, silver or copper.

With the financial sector improving and interest rates still low, you can expect a lot of takeovers in the mining industry over the next 18 months. It's going to be one of the hottest areas for mergers and acquisitions. In any junior mining investment, I'd make sure that the size of the opportunity (the property and the expected resource) is large enough to be on the radar screen for larger mining companies. If you're going to speculate in mining, you might as well improve
your odds with the potential for takeovers.
Things are going to be pretty exciting in the mining industry over the next several years. It would be a great industry to go into right now.