Interview With Rob McEwen

Rob McEwan is the financier and CEO who took Goldcorp from being a closed-end fund to a major producer in its own right. Much of Goldcorp's share growth came in the 1990s, when gold itself was still falling. He has something to say about junior exploration stocks, for which he created an index. Much of what he said had to do with their potential, but he had some words that spoke to their volatility:

...Shareholders have to approach [these stocks] cautiously and they shouldn’t put all their money in one stock. An exploration company can promise you one thing. They can’t promise you a discovery, but they can promise they will spend all the money they have on exploration. Once they have a discovery, it has to be large enough to raise more capital, or to sell or joint venture with a larger company.... Anyone who goes into the market thinking it will go up forever should get out now. People have to be thinking about how to grow their capital and individual investors have to diversify their risk. Major producers’ share prices will increase with the price of gold, but they won’t deliver the dramatic growth of a junior with a discovery.

He had this to say about gold being in a bubble:

Absolutely not, I believe the gold price will climb significantly higher from the current level. Look back 20 years at the price of many asset classes and you will appreciate the enormous price inflation we have experienced. In 1985, in order to get on Forbes’ list of the 1000 richest people in America you needed to have $150 million. At that time, Warren Buffett was one of the 14 billionaires on the list. I saw that list a year ago and there were something like 990 billionaires and, basically, you needed to have $1 billion to be on the list. How was so much wealth created? It was financed by debt. A long period of low interest rates has encouraged very speculative investments financed by high levels of debt. Today we’re seeing the unwinding of financial asset inflation that has happened over the past 10 or 20 years. Areas that are susceptible to further declines are in real estate, so called collectible assets, derivatives, the debt market, and the dollar.

HRM: So, despite inflation, gold is not yet in a bubble in your view?

Rob McEwen: No. We’ve got a long way to go before that happens. If you think about the tech bubble, a few hundred companies became thousands. They all had stories and were looking to make a zillion dollars or be taken over for such an amount. Today, there are a lot of exploration companies [and] as gold goes up there will be more exploration companies and stories and more investor confusion about where to invest. One indicator is the attendance at the annual Prospectors and Developers Association show just held in March in Toronto. It was the largest ever.

Part of the entire interview discusses McEwan's latest venture, U.S. Gold.