Is Your Stock Portfolio Under Water?

Precious Metals Warrants (07/13/2009)
"You can limit your risk by investing less. This is not meant to be a wise-ass answer so listen up. Strange as it may sound to you, using long-term warrants or perhaps LEAPS can limit your risk exposure to the markets.

In a very simple illustration, let's take Agnico-Eagle which closed Friday at C$49.00. They have a long-term warrant, which closed at $19.50. This warrant has over four years of remaining life and will greatly outperform the common shares if our rally unfolds in the coming months and years.

In effect, we/you have taken a position in AEM for only 40% of the cash outlay as opposed to buying the common shares and our potential gains will be much greater. You have thus greatly limited your risk my investing a smaller amount of monies.

One cautionary note: The warrants are thinly traded and you must use limit orders in the placement of your trades.

In our service, in addition to our warrant database, we also have a separate table of all of the natural resources companies with Options and LEAPS - a valuable resource for all investors.

Our Current Market View

Even though gold and silver have been hit hard over the last few weeks we believe the longer term uptrend is still intact. There is a good probability we will see higher prices in the coming days and weeks. But we need gold to break through $1,000 to really get this party going again. A solid break of $1,000 will attract new investors around the world and then it will be 'game on.'

To Summarize

These are challenging times and while we may not have all of the answers we strongly believe in our current positions and have the patience to ride out our convictions and for numerous reasons (another future article) we see a top between January 2011 and January 2012 in the precious metals sector. Can you hang in that long? That is a question only you can answer."

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Under SEC rules, analysts are required to disclose their interest in securities that they cover. We strongly encourage you to contact them to understand any potential conflicts of interest they may have.

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