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-- Posted Thursday, 10 February 2011 | | Source: GoldSeek.com
A lot of short-term peaks and troughs can make things messy in the resource space, and the associated volatility can whipsaw people out of investments. "Still," says Pathfinder Asset Management Limited's Associate Portfolio Manager Taylor MacDonald, "the long-term picture itself is very much intact." The U.S. dollar is in the process of breaking down, and that will ultimately be supportive of gold. "And when you sidecar the dollar breakdown with quantitative easing, he says, "you essentially have a perfect storm forming for gold." Find out why Taylor expects the junior mining space to shine even brighter in 2011 in this exclusive interview with The Gold Report.
The Gold Report: There was certainly a buzz surrounding junior mining at the recent Cambridge House Conference, but first please tell us a little bit about your mandate at Pathfinder Asset Management in terms of companies you invest in and clients you serve.
Taylor MacDonald: Since we last spoke in August, we've evolved from a family office to a registered fund, which just went live on January 1st. We're gradually going to shift assets from the family office to the fund, and initially invite close friends, family and associates—people we do business with—into the fund. We may open the fund to the general public eventually but, for the time being, we're keeping it quite closely held and largely with just people to whom we're close.
TGR: So, it's essentially a private fund at this point but will be accepting new clientele as things progress. About how much do you have under management?
TM: $60 million mostly focused on the resource space. I'd say roughly two-thirds of the fund would be some sort of commodity, precious or base metals or oil and gas. The balance would be tech, special situations and a bit of healthcare.
TGR: What is it about the resource space that interests you? Do you feel it's an area where investors can get a lot of value in terms of growth in their portfolio?
TM: Sure. Of course, a lot of short-term peaks and troughs can make things messy and the associated volatility can whipsaw people out of investments. Still, the long-term picture itself is very much intact. We're still bullish on gold and I think the macro picture is robust. I'd say the U.S. dollar is in the process of breaking down, and ultimately that will be supportive of gold, oil and any other commodity prices.
And when you sidecar the dollar breakdown with quantitative easing, you essentially have a perfect storm forming for gold. Going forward, the U.S. will just continue to print money and debase its currency. Other nations will do the same. Unless you see unemployment down at least in the United States, quantitative easing (i.e., blatant money printing) will remain in place. That's one of the best possible tailwinds for gold.
TGR: In light of the continuing currency debasement and flight to hard assets, do you stick with precious metals companies for the resource stocks in your fund, or do you bring in other equities from the sector, as well?
TM: We do own some base metal companies, but we're primarily focused in the precious metal space when it comes to mining. While we like the broader gold space, we tend to focus on quality small- and micro-cap names, looking for significant upside potential. We naturally tend to take larger positions on those we like, and they're always on what we call our shopping list any time the market corrects or these particular names correct.
TGR: Clearly, you see the junior mining space is advancing even beyond what we saw in 2010 as we move into 2011. You don't see any price-appreciation pullback in the select junior stocks in which Pathfinder's invested?
TM: I mean things may get rocky. I think one of the biggest things we have to be cautious about out here, especially in the junior mining space, is that a little bit of selling can really impact the market. In 2010 people made phenomenal money and there's a massive income tax bill coming for a lot of people on capital gains. Come April and May, you're going to see a lot of people selling because they have a tax bill they have to pay.
The Canadian or U.S. government will come knocking; people are going to have to get that cash somewhere, and it's likely to be from their portfolios. While I like the space long term and think you can never hurt yourself by going with quality, if I had to read the tea leaves here, I'd say that we're likely due for a correction sometime between March and April when people realize the magnitude of what they're going to owe the government. I wouldn't be surprised if the summer is slow, but I think we're going to have a rocking end of the year as long as the world economy holds together. At the end of the day, I really have no choice but to be bullish.
TGR: Good conversation. We'll be watching Pathfinder Asset Management as it grows.
Taylor MacDonald is an associate portfolio manager at Pathfinder Asset Management Limited. He graduated from the Wharton School, University of Pennsylvania with a bachelor in economics in 2004. Prior to Pathfinder, he worked in equity research at Raymond James Ltd. in Vancouver, investment banking with Haywood Securities (UK) Ltd. in London, England and institutional equity sales at RenCap Securities in New York. He has been a CFA Charterholder since 2009 and is a Level II CAIA candidate. Streetwise - The Gold Report is Copyright © 2011 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. The GOLD Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. 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.
-- Posted Thursday, 10 February 2011 | Digg This Article | Source: GoldSeek.com
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