The Global Resource Difference

Over the years, we’ve taken numerous calls from prospective clients asking why they should use a full service brokerage firm such as ours instead of their discount broker to buy and sell resource stocks.

Here are what we believe to be important reasons to choose Global:

1) Industry Specialization

It took Rick Rule 25 years of total dedication to develop his base of knowledge and contacts within the industry to be good at what he does.

Global is staffed with people who have education and field experience in the resource industry. When you call a registered account representative at a major brokerage firm, you likely will be speaking to a salesperson. When you contact a discount brokerage firm, you likely will be speaking to an order taker. When you call Global, you likely will be speaking to a geologist or engineer. That can make a huge difference in whether you make money, lose money, or even do the trade.

2) Research

We believe that the greatest use of our resources and benefit to our clients is identifying unique opportunities within the industry.

Research at Global is driven by fundamental analysis. Our focus is on natural resource companies with a market capitalization below $250 million, located both in the U.S. and internationally, that typically are too small to attract research coverage from traditional brokerage firms. Within this “niche” we dedicate significant corporate resources in order to provide our clients with what we believe is a distinct competitive advantage: hard knowledge and the ability to identify unique opportunities, wherever in the world they may be found.

These opportunities may include those where the risk/reward ratios are high, for example junior exploration companies, or those that are attempting to develop a prospective resource deposit. They also may include more established companies in lower profile segments of the resource industry, such as water, forestry, and uranium.

Due to the explosive capital gains potential, the junior resource sector has a reputation for attracting more than its fair share of unsavory characters. Unfortunately, the actions of a few have tainted the image of the entire sector. Without question, junior exploration companies are a highly speculative group and are not suitable for most investors. However, we believe that our solid understanding of the sector, and proprietary knowledge of corporate managements operating in the sector (the good, and the bad), is a critical factor in our ability to steer our clients into the sound companies with a very real potential for success.

The foundation of our research effort revolves around knowledge of the people who run these companies, understanding their business models, evaluating results, and monitoring finances. The vast majority of brokerage firms in the U.S. do not have the in-house expertise to do this. At Global, we employ an exploration geologist, a mining engineer, and an oil and gas expert who all work together to evaluate investment opportunities. Rick Rule, the owner of the company, has dedicated his entire life to all aspects of the industry. We don’t pretend to know everything about every company in the industry, but we strive to know more than anyone else.

All of our registered representatives are members of investment teams that have full and ready access to the research developed at Global. This means that the best of our collective research is always available to you with a quick, toll-free call. We believe this is a logical division of labor and assures you will always receive the very best information and service.

3) Investment Education

We take the time to explain to our clients the research methodologies that we employ, the mechanics of the markets, and buying/selling strategies.

We recognize that most of our clients are educated and employed in fields other than natural resource investing. They can’t be expected to spend eight hours a day teaching themselves about investing, since they have jobs to perform and families for which to care. Nevertheless, buying securities without an understanding of general investment concepts and strategies is simply gambling with your savings. In the long run, we believe that making you a more sophisticated investor will greatly improve your returns and simplify our lives.

4) Transaction Costs

The complexity and hidden costs of foreign trades are the reasons we’ve established direct relationships with firms that trade directly on foreign exchanges.

Because the resource business operates in an international arena, investors need access to international markets, especially in Canada and Australia. Not only do they need access, they need fair execution of their trades. Many U.S. brokerage firms claim they are capable of trading foreign securities. While technically true, that service is offered at a steep price to clients, often times unbeknownst to them.

Here’s what you have to watch out for:

Market makers - Most U.S. brokerage firms don’t trade directly on foreign exchanges. Instead, they use U.S. market makers to execute those trades for them. Essentially, a market maker is a broker’s broker. And those market makers don’t work for free. They charge a fee for their service, which is buried in the execution price. Your broker then adds a commission to the trade. So effectively, you are paying two commissions, one to your broker and one to the market maker through a marked up/down price. At Global, we have relationships with firms that trade directly on the foreign exchanges, so we can avoid the market makers. Bypassing the market maker means bypassing their mark-up, and that mark-up can be considerable.

Exchange Rates – When buying or selling foreign securities, funds must be converted to and from the U.S. dollar and the currency in which the foreign stock trades. Investors in the U.S. don’t see this conversion occurring as their trades are usually reported in U.S. dollars. However, behind the transaction, dollars are being bought and sold, and the exchange rates employed in those currency transactions can differ dramatically from one brokerage firm to the next. We have heard of transactions executed at other firms where exchange rates were adjusted by as much as ten percent. At Global, most foreign currency is exchanged at the spot rate charged by the banks at the time of the trade without any mark-up.

Transparency – U.S. over-the-counter markets, where U.S. market makers execute most of their trades in foreign securities, are much less transparent than the Canadian or Australian markets. Often times they are much less liquid as well. On a given day, a stock that trades 100,000 shares on the Toronto Exchange may only trade 5,000 shares in the OTC market. The market maker is not required to post your bid/offer, you can’t see anything except the best bid/offer, and even that may only be an indication of interest, not firm. The Bulletin Board and OTC markets can be a dangerous place to transact trades. By contrast, the Canadian and Australian Exchanges visibly post all bids and offers. Everybody can see which firm is bidding, for how much, and at what price. If given a choice between the foreign market and the Bulletin Board, we believe that in most instances you will obtain a better execution in the foreign market. That’s another reason we’ve established relationships with traders on the foreign exchanges.