TGR: When we start getting some positive economic news, will that take individual investors off that wall of worry and back into the market?

CD: It will to some degree. I don't think you can have a major top in equities without people coming off the wall of worry to some extent. People will start to come out of the sidelines, put their cash into the stock market. Even if it turns out to be a misplaced investment, I think we are going to see people coming off these high levels of fear. The stock market typically bottoms six to nine months before economic recovery. If you consider that the S&P bottom was in March of this year, that means between roughly now and December we should start to see the recovery take place. That's not the only reason I have for saying that. That's just one of the reasons.

TGR: What are the other reasons?

CD: I look at a basket of stocks, which I find reflect retail consumer demand. I have what's known as the New Economy Index, which is an average of some key stocks that have been known to precede economic recovery by anywhere from three to six months. Fed Ex is a big one; Monster Worldwide basically reflects the job market; Wal-Mart, of course, the retail economy; and there are some others. Collectively, that index has been making higher highs and higher lows and that's bullish for the economy. This index has been in recovery for the better part of six months and that's another reason I expect fourth quarter to show some economic recovery.

TGR: Are you also looking at silver and other precious metals as safe havens?

CD: Gold and silver are the two main ones. I think a long-term investor should concentrate on those two metals above any other natural resource in view of the 120-year cycle bottom.

TGR: What's your thinking about the rare earths and economic metals?

CD: From a long-term investment standpoint, I'd be very cautious, but tantalum, niobium and some others will do well as long as we're in economic recovery and global economic demand picks up. We're just barely starting to see it now. Certainly into 2010 I think the outlook will be fairly good for some of these rare earths and economic metals in the intermediate term.

A good up-and-coming company to look at is Commerce Resources Corp. (TSX-V:CCE, FSE:D7H, PK SHEETS:CMRZF). They're mining tantalum—from one of the richest tantalum deposits in the world—and niobium in Canada. Tantalum is a major part of the electronics industry and, as the economy recovers in the next couple of years, I think demand for their product will be very good. Also Commerce's President, Dave Hodge, told me a number of weeks ago and they were somewhat insulated from the credit crisis. That's a plus going forward, and I do see intermediate-term investment potential there.

TGR: Is that because of the balance sheet or because they're producing or why?

CD: Part of it is the balance sheet, but also because the demand side didn't collapse.

TGR: Any other companies you can share with us?

CD: On the silver side, I've always been an admirer of the management of Endeavour Silver Corp. (NYSE/AMEX:EXK, DBF:EJD, TSX:EDR). It's a junior miner in Mexico, but I think someday soon it will become a mid-tier producer. Their mining model is very distinct from most junior producers in that they do less raw exploration. They basically go after companies that have already been fully permitted and have plants already in place and they can skip the time-consuming process of construction and feasibility, permitting, etc. Endeavour has built up quite an operation and I think they'll move very quickly into the mid-tier status of silver producers that's been vacant since Hecla Mining Company (NYSE:HL) moved into senior status. Basically, I think one strategic acquisition will put them over the hump.

TGR: Is such a strategic acquisition already in play?

CD: I don't think it's in play yet, but they're getting close. As Endeavour's Chairman, Bradford Cooke, explained it to me a few weeks ago, they're actively looking. Another thing worth pointing out about Endeavour is an unbroken five-year track record in terms of annual growth of sales, cash flow and production. Plus, it was the only silver company last year to have four consecutive quarters of falling cash costs, which is another reason I think they will hit that mid-tier status soon.

TGR: Is that because of efficiencies?

CD: Absolutely. Efficiencies and their mining model of not having to spend a lot of time and money being exploration-intensive.

TGR: Any gold companies on your radar?

CD: Romarco Minerals Inc. (TSX-V:R) is good one—extremely well-managed. Most of the shares, I believe, are institutionally held. If you look at the stock prices, it's quite phenomenal. I think it's a testament to the management of Romarco, Diane Garrett, the President and CEO. I think that's a company, Romarco Minerals, to keep an eye on.

TGR: What attracted you to Romarco?

CD: I live in North Carolina and actually the first mining boom in U.S. history took place in the Carolinas. A trend on the Carolina Slate Belt was heavily mined in the 1800s and early 1900s, but then was kind of been abandoned. Romarco has gone back in there and is reviving, as it were, the Carolina Slate Belt with their Haile Gold Mine. It has 1.62 million ounces of gold (measured and indicated) with 3.26 million total gold resource (including inferred), and is open in three directions.

TGR: If most of the shares are institutionally held and you're already pretty impressed with their share performance, how much upside is left in this?

CD: Their production can only increase, so I think they do have some meaningful intermediate term upside. Just looking at their pipeline, I think they've got one or two years of upside potential. Not necessarily straight up, of course, but excellent management and strong institutional ownership bodes very well for them.

TGR: Why is the 120-year cycle not being discussed by the media?

CD: For one thing, it's not something you see in a classical economic textbook. Basically we're taught that government and central banking control the outcome of the economy through money supply and interest rate manipulation. In fact, classical economics and mainstream financial theory do not like to discuss the prevalence of cycles. Nobody wants to think that we're at the mercy of forces beyond our control. That's basically is what a cycle is—a cosmic force or a force of nature, if you will.

TGR: Or maybe—in this case—it's too dark to bring into the light of day.

CD: Don't equate the end of the Grand Supercycle with Armageddon. No cycle should be viewed as anything more than a rough road map for navigating the markets. Rarely can any cycle be used to consistent success as a standalone trading tool. For best results, investors should combine cycle theory with chart behavior and comprehensive study of rigorous analyses of technicals, fundamentals, market psychology and market liquidity.

Courtesy: The Gold Report

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