The market is throwing away resource stocks amid panic on Wall Street.”You’d think the world will never again need gold, silver, platinum, oil, natural gas, uranium, copper, lead or zinc,” says Russell McDougal at Investor’s Daily Edge.

The old adage “the time to buy is when blood is running in the streets” remains true, however.

Russell says the stock shakeout provides a great opportunity for savvy investors. He recommends buying up quality resource stocks now and holding them for long-term profits.

This from Russell:

Currency debasement has been this year’s major theme. The bailouts are at historic levels. Banks are failing and will continue to do so. Debt is beyond imagination. The dollar based financial system is more fragile by the day. How has this played out?

- The dollar has risen more than ten percent.

- Commodities have fallen across the board.

- Resource stocks have been decimated.

They are no longer just giving away resource stocks they are throwing them away in a complete panic. You’d think the world will never again need gold, silver, platinum, oil, natural gas, uranium, copper, lead or zinc. Let’s look at the mindless carnage:

As you can see, the PHLX Gold and Silver Index (XAU) has been trashed. The smaller companies have received a much bigger beating.

The shares are supposed to show leverage to the respective commodities. Even with the recent decline in the price of gold, gold stocks are trading at the lowest level in relationship to the price of gold over the last 25 years! All resource stocks have been punished. Why has this happened?

First of all, we don’t have honest markets. They are manipulated on an ongoing basis, especially during election seasons. Sad but true. Numerous experts believe the dollar rebound and the commodity take down were artificially induced. Sadly, this possibility has every appearance of being the present American Orwellian nightmare.

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The current global financial and economic chaos is causing extreme stress to many players. Some hedge funds are failing and others are unwinding all of their leveraged positions. Even the hapless dollar has been the temporary beneficiary. “Hot money” is on the run. There is a mass exodus from all things resource. There is no appetite for speculation.

You have likely just witnessed a classic washout bottom. Stocks were down 10-20 percent on a given day. Some were down 50 percent last week. Are the gold, silver, oil, natural gas and uranium plays over? Were they just another bubble as presently described? I don’t believe it for one second. These are real markets with continuing favorable supply and demand fundamentals. Only a widespread global depression is likely to end the bull. Gold, silver and commodities in general are historic safe havens during times of monetary abuse.Let’s look at three possible scenarios as to how resource stocks should perform from this point forward:

- This has just been an especially nasty and forced correction during a typically weak summer. Seasonal changes will bring forth the usual turn around.

- This market is DOA for a continued period of time. Much like the late 1990’s after the Bre-X scandal.

- Commodities are no longer needed.

Possibility three is absurd on its face. Remember, junior explorers are the lifeblood of the resource sector. The present sell off in commodity related stocks is also nonsensical. That leaves us with the first two options.

Will we quickly turn back upwards? Smart money is gleefully now back in the sector buying with both hands. You can pick up selective stocks cheaper than company cash positions. Positions were being sold because they had to be sold per liquidity demands, not because someone actually wanted to sell them. That’s the way of many funds. Markets are made up of fearful sellers and happy buyers.

I would be shocked if this market returns to former highs immediately. Too much damage has been brought forth. A blend between our first two options is more realistic. That’s not all bad.

Markets can be totally irrational at times. They can be irrational for extended periods of time. Patient positioning for the long run can lead to extraordinary profits. Crisis can bring about opportunity. There was no appetite for resource speculation after the 1997 Bre-X gold scandal. That was the market’s decision, though it made little sense to me at the time.

I bought and I bought and I bought for a couple of years there. Few others were interested and I accumulated a lot of quality shares that no one else wanted. These positions were the absolute foundation for my investing success in the early 2000’s. Yes, you can get your hat handed to you in this niche, but you can also make exceptional profits over time. Documented gains fell in the 20X, 50X and even one 100X category. The worst-case scenario, it looks like another similar opportunity is being presented.

The time to buy is when blood is running in the streets.

What am I saying? The market rules in the end. Manipulations always fail, sometimes spectacularly. Those of us heavily involved in resources have been handed a lot of lemons as of late. That’s the bad news and that is the good news. I am holding my resource positions. The very highest quality companies with the most staying power will come out of this shake out period looking like gold.

Source: Now They’re Throwing Away Resource Stocks