Adrian has spoken at conferences and seminars across the country over the past two decades. His approach to investing is a dedication to value and global investing, as well as a keen belief in the worth of gold. He and his team have been managing the assets of a select group of private investors since 1991. The approach of his firm, Adrian Day Asset Management can be summarized in three words - "Global", "Value" and "Resources".



Dr. Alper: This is Al Alper talking with Adrian Day, who runs Adrian Day Asset Management. He is one of the key experts. Could you give us your impression on what is taking place in the market and the economy in general.

Mr. Day: Well, I think the biggest thing is that there’s an awful lot of uncertainty and I think it’s true to say that we simply don’t know how all of this is going to play out. I am very, very negative. I think there’re a lot more credit problems in the market that we haven’t seen yet or are only beginning to see; such as credit cards, consumer credit generally, not just the homes --- commercial mortgages. There’re a lot more of these credit problems that are going to become apparent, I think, over the next few months. With the amount of money that the government is putting in, we have to be honest and say we really don’t know how this is going to play out in terms of a continuation of the deflation rate, a period we’ve had of credit deflation, or in fact inflation coming back because of the increase in the money supply.

Dr. Alper: Could you also say a few words about your own background and what you’ve done and are doing?

Mr. Day: Sure. I’m British and a London School of Economics graduate. I’ve lived in the U.S. now for over 30 years. I write a newsletter; I’ve done that since the early ‘80’s, and I also manage money. The money management firm we’ve had since 1991. We manage global accounts; all equities, conservative and aggressive. But, we also have some dedicated resource accounts.

Dr. Alper: Where are you looking to put your money these days?

Mr. Day: I’m very, very bullish on the commodity complex, generally. But again, with the caveat long term. I think we have to differentiate --- obviously, there’s a big difference among the various commodities. But in addition to that, I think we have to distinguish between the near term and the longer term. We also have to distinguish between what has high potential and what has high risk.

Now, I tend to think that in the near term, gold, at $916 as we speak, is probably the one with the best potential and the lowest risk. We can talk a little more about gold if you want. But, I think some of the base metals are probably going to take a little bit of a while before they have sustained moves. I tend to think that the rally that we’ve seen in the base metals over the last six to eight weeks, depending on which metal, are probably a little ahead of themselves. Look at copper, for example; a lot of the copper move seems to be Chinese restocking from very low inventory levels. Obviously, that’s a one off; it doesn’t carry on forever. Your inventories are run down, you restock, you build them up and then you don’t need to restock anymore. So, I think they’re ahead of themselves. We’ll probably see a bit of a pull back. It seems to me that with many of the base metals, you really need some economic recovery around the world before the base metals will see a sustained move up.

Now having said that, it was very impressive the way the major mining companies responded very, very quickly for the large part to the lower demand and lower prices, in terms of cutting back production. I thought that was very impressive this time compared with previous cycles. Part of that of course is because things are more concentrated now, so Freeport, which is so dominant in copper, can decide what to do a lot quicker. It has more flexibility. So, the response has been very quick and I think that certainly puts a floor under the prices. And in the longer term, the big story to me is simply the supply story for most commodities we simply do not have enough large scale deposits that are economic in friendly jurisdictions that we can see to meet the demand over the next several years. So when demand comes back, I don’t think the response will be very quick on the supply side.

Dr. Alper: And that will allow the prices to move up and ---?

Mr. Day: Correct, absolutely. You look at copper for example. I would think that copper will probably be one of the first to move. Look at copper production now. What is it, three out of seven of the top producers are more than 70 years old? Four out of seven at the top in terms of number of pounds of reserves are more than 80 years old. These are old mines and they’re getting mature and they have problems. They get deeper, they get more expensive and so on. And, we’re not seeing a lot of new mines to take their place.

Dr. Alper: Besides copper, what other base metals do you think are worth watching?

Mr. Day: I think nickel is probably relatively attractive, but I’m not buying it now. I’m buying gold, although I think gold at this point has some near term risk. But, I’m buying gold. We’re accumulating uranium. I think uranium looks good. Most of the base metals I would wait on, and oil and gas we would wait on. Agriculture we’re buying as well. So, I think gold and agriculture will be the first two to have a sustained move higher.

Dr. Alper: What do you think of the PGM’s?

Mr. Day: I have to be honest. I don’t really follow the PGM’s. I’ve always found them very difficult to analyze because you’ve got so few producers and so few consumers. Obviously, the state of the auto industry doesn’t help PGM’s.

Dr. Alper: What about silver?

Mr. Day: I’m very, very bullish on silver. Most people don’t realize, of course, that most silver production is by-product silver; it’s not primary silver. And so, silver production on a global basis responds more to base metal prices and demand than it does to silver production and demand. So, I think as we cut back some of the base metal production, silver production will inevitably be cut as well, because it’s a by-product. And of course, silver is seen as a poor man’s gold. You know, when gold moves over $1,000 I think we’ll see silver attract some investors again.

Dr. Alper: I appreciate your thoughts and I appreciate you sharing them with my readers. Do you have any other things you’d like to say before we ---?

Mr. Day: Oh, gosh; that’s a big question, isn’t it? I think it’s time to focus on the protection of capital more than the big capital gains. That’s not an original thought, but I think it is a time for looking at that. But at the same time, for someone with a long term view, a three to five year horizon, I think this is a time to be looking for opportunities to build positions; no question about that.

Dr. Alper: Okay. Now, to protect your capital, what thoughts do you have there?

Mr. Day: Well, I think you always have to look at the risk. Obviously, any time you look at something there’s a potential and there’s a risk. And I think investors all too often only look at the potential and they kind of forget about the risk. So I think if we focus a little more on the downside. We’ll do a little better over the long term because I think the economic outlook is still very, very murky; very, very weak. I’m extremely cautious about the U.S. economy at the moment.

Dr. Alper: Thank you. I appreciate you taking the time to impart your wisdom and understanding. It’s a difficult time and people need a lot of help with their investment srtategies.

Mr. Day: Right.

Dr. Alper: Because there’re dangers in holding onto cash and dangers in investing.

Mr. Day: There’s danger in everything right now. You’re absolutely right.