After a while, all investment advice seems to blend together. One piece of advice sounds similar to another piece of advice. In today's market, a lot of that advice has to do with gold ("buy gold!" investors are told) and volatility ("stay on the sidelines!" investors are told). So it's refreshing to hear a different perspective. Even if you ultimately don't agree, some counter-insight can give another point of view.

At the recent San Francisco Hard Assets Conference, we met up with one of the speakers – John Thomas – who is the founder of "the Mad Hedge Fund Trader". We started by asking him about his speech at the conference and that led into a discussion of markets and trading.

"What I tried to do [during the speech] was place the hard asset investment in the global context," Mr. Thomas said. "How [hard assets] fit in the 'risk-on, risk-off' parameter that currently holds the world's financial assets prisoner." He told attendees that they only want to hold hard assets when the world is in 'risk accumulation' mode. He added that investors want to be out of stocks, foreign currencies, commodities, oil, natural gas, and gold and silver when the world is in a 'risk-off' mode.

Later, he added how he felt about the market's volatility: "I love volatility," Mr. Thomas said. "It's a license to print money. People complain about volatility and I say, 'watch out for non-volatility. It's ten times worse.' With high volatility, if you don't like a price just wait fifteen minutes and you'll get the one you like." Later, he added: "Long term, prices for precious metals will go up. But in the short term, expect extreme volatility. Gold had a $200 down day earlier this year. Expect more of that, especially on the down-side."

So, what should investors do? Mr. Thomas' advice is simple: "Trade like a demon. 'Buy the dips, sell the rips'." Then he gave us an example of some successful trades he's had in the past: "Three years ago I bought gold low at $700, it traded down to $680, and then we played the bounce from there. I've been selling gold – shorting the big rallies – up to $1900 since September. We got a couple $200 bites on the downside. Doing that through out-of-the money puts on GLD were very profitable trades. We got doubles on the options both times we did that."

After that, our conversation broadened slightly to talk about the companies that were present at the Hard Assets Conference. Mr. Thomas' thoughts were very frank: "The majority of these companies are low probability events. They're miners who have prospects and rights but no actual physical production. So it's always a high-risk situation but if you get it right, the pay-off is 100-to-1."

So, how should investors invest if that's the case? Here's Mr. Thomas' advice: Trying to out-geology the geologist (which is what you really have to do to pick actual winners in these things) is quite hard for the layperson to do. And by the way, geologists can't do it either. Everybody here has the best intentions, they're sincere, they're honest, they're making an effort to deliver a product but only a small proportion of these companies will ever get to end-production… The intelligent way to invest is to go buy all of them. Take a $100 portfolio and put a dollar in each one. If 3 out of 100 come through, their share price goes up 10 times, you make money in that scenario."

Next, we talked about China. Mr. Thomas is an expert in China (he's currently a consultant to the government of China and he's spent much of his career working in or reporting on Asian countries). His insights were very interesting and they offered a depth we have not heard from other experts: "China is in the process of going through a permanent downshift in its growth rate from the 11%-13% range to something closer to 8%. The initial headline will be 'China Crashes' but it's not crashing, it's just slowing down."

As for Chinese manufacturing and innovation, he said: "Manufacturing will only come back to the US when American workers work at the same rate as Chinese workers will, which is about $10/day. So basically it won't happen. What is more likely is that the 25 million jobs that we lost in the last 10 years will be matched by another 25 million in the future."

Although America is not keeping up with job creation, China is struggling with innovation. "China is way behind in a lot of the most basic technologies. They were great copiers but terrible innovators. Everything they manufacture in China is designed here [in the US]… Americans have the ability to imagine; Chinese don't. They absolutely admire that in us. They wish they could copy imagination but they can't. That's why we're originating things like iTunes, Twitter, Facebook, Google, Windows 7, designs for every electronic product… and the Chinese aren't [originating those things]."

After a discussion about China, Mr. Thomas then shared his thoughts on natural gas: "The 100 year supply of natural gas that we have here also exists in China. They just don't have the technology yet. It's likely that we'll create the natural gas here and export it to China, which makes us the next Saudi Arabia." And later he added, "The way investors can play this is by investing in pipeline companies and service companies."

Mr. Thomas' Mad Hedge Fund Trader is a hedge fund that considers all asset classes worldwide, long and short. That includes stocks, bonds, foreign currencies, commodities, energies, options, futures, and ETFs. He adds: "The advantage of looking at everything is that insights on one asset class give further insight into additional asset classes. So if oil is going through the floor, it's time to unload the S&P 500."

With that in mind, we asked him where he saw future opportunities for investors. He talked about innovation and said that investors could expect it in technology, energy, or healthcare. "The company that cracks cancer will make a fortune and there are probably a thousand trying," Mr. Thomas said.

And how should investors approach the near term? "If we have a recession next year, gold could drop down to as low as $1000 because we have far more leverage and far more hot money in gold than we have in previous rallies. After the 1979 peak, gold fell 75% over 20 years. That's something to be careful of going forward," said Mr. Thomas. Then later, he added: "If we get a recession next year, it will be a big year for a strong dollar. So look for weakness across all precious metals and hard asset classes. If that happens, run to the dollar; run to treasuries. It looks like a good 'risk-off' year."

Investors who want more of Mr. Thomas' insights can learn more about him at his website where they can subscribe to his Trade Alert service (which sends out emails and Twitter alerts and SMS feeds whenever Mr. Thomas' hedge fund trades).

Mr. Thomas brings a unique "all-global-assets" viewpoint to the hard assets discussion and it helps investors gain a new perspective to our world of resource investing.

REFERENCES

www.madhedgefundtrader.com

http://www.hardassetssf.com/