Mike Swanson is not only the chief editor of Wall Street Window but also the founder. He is the author of several books on the subject of investing, the stock market and of course precious metals. Mike has a wealth of experience in this area as he was a hedge fund manager for several years generating returns of over 78% for investors. The fund was ranked 35 out of over 5,000 others in 2005. He has since left the hedge fund world now writes about financial markets, current investment trends as well as American history.
Niall Brothers: Okay, this is Niall Brothers here from Gold Buyers Doctrine and I am very, very happy to say that I have got an interview with Mike Swanson, the author of The New Gold Stock Investing Essentials, which you see is referenced in The Gold Buyers Doctrine. So Mike first, hello! How are you?
Mike Swanson: Oh, I am doing great! Thanks for having me.
Niall Brothers: That’s brilliant! Thanks for coming. Can you just tell us a little bit about yourself and what project you are currently involved in?
Mike Swanson: Well, I am kind of interested in the career aspects. I mean, I got two best interests. One is I am a writer. I write history books but that doesn’t have much to do with gold. The other thing now is that I am professional investor and I write about the financial world. And I started training the American Stock Market around 1999 when the internet bubble was blowing up and I shorted that in 2000 and make money. And then I also have a Hedge Fund for 3 years and I made a lot of money there and sort of went into a similar retirement in and now, basically you know write about the stock market and getting people with some advisory pay letter.
You know, I got thousands of subscribers and a lot of them actually professional investors or credit investors. When I mean professional, that just doesn’t mean you know money majors and so forth. But when it comes to gold, I actually investing in gold in mine stocks in 2002 and then I was basically a position trainer then where I would hold stuff for 6 months or a year and so forth. As time is going on, I have actually taken more of the long-term time frame with different things investing in and become less of you could say day trainer or short term trainer. But anyway, I have been involved in the gold market and mine stocks now for a dozen of years since 2002.
Niall Brothers: Okay. So let me say you are taking a long new term view on investing in precious metals, is that in physical metals as well or?
Mike Swanson: Well, what it is right now, when I look for the financial market and into a stock, a sector or working as a whole, but I am saying gold is the financial asset, but I look for something that has already gone through a bear market and is it a bottom or a potential bottom or in a position where it is, there is often a stage between a bear market and a bull market, where things tend to just go sideways for a period of time.
Niall Brothers: Okay.
Mike Swanson: And sometimes it will get a little lower, but I think that is essentially where gold is now. It had a big round up from 2009 to 2011 and then in 2012 and 2013 it really you know, basically went into a bear market and the mine stocks were potentially they really went into, I wouldn’t exactly say that they crashed the HUI gold stock index was at around 650 at the top of 2011 and it is where talking now it you know, it had a bottom in 2013 and went sideways and has now gone lower again, it is around 160, so it is going quite substantially. So I like to look for individual stocks that are in the sector that has really beaten up because that leads to cheap evaluations. And when you want to invest, you really need cheap evaluations if you want to own something for several years.
You know, the US stock market I don’t think is in that sort of situation. That doesn’t mean you can’t go a little higher, but you know, I am really kind of like value investor and gold also you know, it costs about $1,200 for a mining company to mine out and produce one ounce of gold and it is where talking and training a little lower than that so to me that’s good value. I mean, like if you could buy a barrel of oil for $20, where it costs you know, at least I am not sure exactly but what it costs in Saudi Arabia, but here in United States it is like $60 or $75 a barrel so that is you know, that’s what I think of gold is training below or around the average production cost.
Now, there are some mining companies that produce it for lower but on average it is $1,200 an ounce so that has a bargain and that at some point it is going to go into a new bull market and go up you know, double or triple, quadruple who knows what so I think it is a good time I think to be buying and accumulating ounces of gold. Even in United States, anything, for silver also.
Niall Brothers: Yeah, absolutely. So I mean, given the position of gold at the moment, how do you actually start in investing in precious metals? Would you say small amounts let’s say would you actually take on physical gold or would you start with some form of paper ownership?
Mike Swanson: Well, it depends. I mean, if you have a brokerage account or the listener does, I mean the simple strategy to that is you can buy one of these gold ETFs
or a fund in the United States. The biggest one is as simple as GLD. It is just a fund that does not nothing but on physical gold. There is one in Canada called The Central Fund in Canada, which owns gold and silver and it is actually because at the moment the settlement is so negative in the financial markets among you know, stock clients and that fund is actually trading at a discount to what is actually in it.
Niall Brothers: Okay, that is interesting.
Mike Swanson: So that could change you know any time, but as far as I am going out and buying the physical stuff you know, if you don’t have or someone who doesn’t have brokerage account or they do and they got extra cash laying around or money laying around, that is a great thing to do. I mean, I have done that myself and you just go down to a gold dealer. If there’s more local leads in your area, you can just go and buy and had it in your hands and open up a savings deposit box or something in where you could put it in safely. And of course, there are also online dealers too where you can get the stuff shipped to you and that is very safe to do also.
One of the unique things about owning the physical gold as opposed to something in a brokerage account though is that if you are really serious that this is a long-term investment, which you are, you see this is a safe haven thing that you want and you keep and that could be trading. Owning the physical is actually a very good way to go because the problem with the brokerage account is there is always the temptation to just open it up and press the button and liquidate you know, once you see it fall for a few weeks or whatever you are having and get shaken out and make a mistake. And if you own something physically, you really don’t have that temptation so that is actually a really important thing.
Niall Brothers: Absolutely, yeah. Yeah. So what would you say would be the best use of precious metals especially gold in someone’s portfolio? I mean, it is a long term investment or…
Mike Swanson: I believe so. You know, I think there is no problem with anyone having 10% let’s say of their money in physical gold or one of these ETFs. It actually I think in time I mean, it sounds kind of crazy but it can one day become a necessity. You know, I have heard something a few weeks ago, a saying that if you want to be totally safe you know someone is 70 years old, let’s say and they retired and got let’s just say a million dollars somehow or you know, just throw a number out there and they are not really interested in you know, trying to gamble it up in the stock market and they want to protect what they have.
The ultimate safest thing I think someone in their situation could do is to put 90% of their money in CEs or a savings account or a checking account and then hedge that because the risk you face in total cash if inflation and gold will protect you from that danger. And I actually think even right now you know, most people aren’t concerned about that. I do think down the road there is a very substantial risk of inflation in the future especially if one day the bar market goes into a bear market and then the dollar does or you know seeing all kinds of wild things over the past couple of years from central bankers and who knows what the future holds and that is what gold is about saving yourself in bad times and you think World War 2.
If you are alive in 1925, you never could imagine what is going to happen in the 40’s. But if you live in Germany, it was certainly a good thing to own as a way to escape you know, if you lived there in 1939 or 1940 or in Greece or in the other countries, man I am not trying to suggest war is coming or anything like that.
Niall Brothers: But there is the good years for physical gold?
Mike Swanson: Yeah, but you just don’t know what the future holds. I mean, you could look at Argentina you know, they have had 2 economic collapses in the past 20 years. There is one going on now, the rate of inflation there is really something like 30% or 40% and you know, you would be very happy getting physical gold insurance there.
Niall Brothers: Absolutely. I mean, given that long term sort of view as well, I mean what are your views of using gold on your retirement accounts like RIA or your 401K? I mean, how would you maximize those vehicles using gold itself?
Mike Swanson: Well, the same way. I mean, the simplest thing is you can buy one of these funds that investor invest in gold for you. However, it is also possible to contact the gold dealer who can take your IRA and put it into physical gold instead of what it is Exchange trader funds. So but you have to get a dealer that is able to do that or your typical broker or investment advisor is very likely to be able to do something like that.
Niall Brothers: Yeah, getting somebody very specific, somebody knows what they are doing in that sort of field.
Mike Swanson: Yeah.
Niall Brothers: Okay. So I mean as we mentioned recently gold has taken a correction in price really. I mean, what are your views and what is actually been happening with gold itself?
Mike Swanson: Well, I actually think… There’s two things I don’t get when it is gold. One is the gold price and then there is something called a commitment of trainers report, which shows you what people will be doing with gold in the future market and breaks it up into giant commercial mining companies that used gold a hedge or used the future market’s hedge or production. I mean, hedge fund trainers and small players and you can kind of get an idea of you know, how much what people are doing in the future market by looking at that.
And what it shows is that when it comes to small individual investors in the future market, they are actually short gold and Parisian gold. In 2011 and 2012 they are the opposite. They are achieving record positions in the future market but I mean that is important because usually they are wrong in part of the training points so the fact that they are negative it is suggestive that either gold is you know, it is not going to fall from here like it did from 2012 to 2013.
Niall Brothers: Yeah.
Mike Swanson: It is more likely to be near a bottoming point or a bottoming process. So another thing too is I look at these mining stocks and I have also invested in them and they are a lot more respective and more volatile. And often in a bear market, when a bear market comes to an end, you actually get another very, very huge liquidation. This happened in the US stock market in 2009. It actually also occurred in European markets in 2012 of July Greece, Italy, Spain, some of these stock markets in Europe had been in a vicious bear market that ended in July 2012 with back to back days which this market dove 10% and that is recently occurred with the mining stocks too.
Niall Brothers: Right. So I mean in your book, The Gold Stock Investing Essentials I mean you explained how to profit from sort of the current market. What exactly would be your top 3 tips for people looking to maximize their profits in precious metals would be?
Mike Swanson: Well, I think you need to… The biggest determining factor if someone wants to get involved in a financial market, whether the stocks or some commodity or whatever the deal is, that is going into a bull market. The biggest determining factor in whether they are going to be successful or not is if they are able to buy something and hold it through what are going to be an investable durations in pullbacks and not get shaken out and that’s very difficult to do if someone goes hog-wild and puts all their money into something, it just puts such tremendous psychological pressure.
Niall Brothers: Absolutely.
Mike Swanson: So if someone just says, “Okay, I will put 10% of this in there” or whatever you know is right for the person that makes them able to feel comfortable with what they are doing, then they are able to hold and maximize their investment without getting shaken out and that’s you know up to that’s what everyone, that’s the individual thing has to do in the individual psychology. But also often people do the opposite and throw everything into one idea and then end up you know, falling into trouble. And honestly, that is actually almost what everyone does even if you go in the United States, even if I walked into the investment advisory office right now today, they are likely to tell me that the US stock market is great, invest in that and you know I will be able to retire one day and never have to work again because it goes up forever. And if I put all my money in that, I will go eventually through a hell of shit experience when that stock market declines.
Niall Brothers: Absolutely.
Mike Swanson: So diversification is very important and you know there is always people have these pet markets that they throw everything into or told to do it and often ends up in a bad situation.
Niall Brothers: So your product, your top tip is just to diversify your investment and use gold or precious metals even or whatever commodity is a part of that diversification.
Mike Swanson: Yes, exactly. And then the opposite of what’s going to happen is that if you speak in you know, in the United States, if you go tell your broker, “Hey, I want to go and buy gold” and they are going to tell you the opposite, they could say, “Oh, it is falling for 2 years. The stock market is going up so don’t buy it” which is actually the opposite you know which you should be doing. You know, anyway you have to be able to and it is actually an important thing too right now you know. As we are speaking you know, people here are very negative on gold, on CNBC, the financial media, very, very negative on it. So to be able to invest in it you have to talk and be able to tell yourself that you know I am not going to listen to these people and I am going to buy something just partly because they are telling me not to you know.
Niall Brothers: Yeah. Okay. So I mean, you will go to the very specific investment and as we said it is low at the moment so it is a long term investment. It is a really good opportunity at current times. I mean, what other kind of strategies would you recommend currently with various stocks or commodities or whatever?
Mike Swanson: Well…
Niall Brothers: Big question.
Mike Swanson: No, well it is okay; we’re in a very, very difficult right now and very, very difficult investment environment. We mentioned a book I wrote about gold and I also wrote one called Strategic Stock Trading.
Niall Brothers: Okay.
Mike Swanson: And then gold, there is a concept in that book, I also talked about it a little bit in the gold book, but it is very important and that is any financial market or asset you can look at it on a chart and tell, is this in a bull market or a bear market. And the markets have basically four stages to them. I mean you have what I call stage one which is sideways after a bear market, stage 2 is a bull market, stage 3 is when you reached the end of the bull market and starts to tap out. Stage 4 is a bear market, where prices decline. So a bear market in the United States occurred from 2008, 2007, 2009 and that was the last one. Since then, we have been in a bull market although I think reaching the end of it or are at the end of it in fact, but the thing is the longer bull market goes on, the more likely URO to end. It has been 5 years into this one.
And if you look at European markets now, they are lower this year. They are I think in a bear market in almost every market, stock market they own is two and gold in commodities really the only thing that have not gone up for several years. So right now they are the only thing from the long term investment standpoint that I really think makes sense and the stock markets around the world in getting increasingly more and more risky. So from my standpoint where I want to invest where the evaluations are cheap and the market has already been through a bear market it is very, very difficult right now to find markets besides gold or stocks involved with mining and also to that it is very tough. So I think it is actually a time where people need to be more cautious overall with their investments which is a tough message to tell people because people don’t really want to be cautious. They want to gamble it up.
Niall Brothers: Yeah. Mike that short term improvement as well.
Mike Swanson: Yeah, yeah I try to.
Niall Brothers: Yeah, absolutely. Okay, Mike that is absolutely fantastic. Thank you very much for your time. Is there anything else you would like to bring to the attention of the listeners, a new book, a blog or anything else that you are involved with at the moment?
Mike Swanson: Well, if they want to get more information from me, they could just go to my website Wallstreetwindow.com and I talk probably, I talk about all the markets really on this. And if they go there, they could read the blog post, they could opt-in to my free email list and they will get a series of videos about some training strategies and methods. There is a pay premium membership area, but they don’t need to join that to get you know to start out and get some great information.
Niall Brothers: That’s fantastic! So it is Wallstreetwindow.com is that right?
Mike Swanson: Yeah, that’s right.
Niall Brothers: Fantastic! Mike thank you very much for your time.
Mike Swanson: Thank you.