The “risk on, risk off” dynamic has governed global markets since stocks’ recovery began in March 2009.

Since those dark days in the wake of the Financial Crisis of 2008-2009, “risk on” has been the dominant mode. Investors have made bets in stocks and other assets, and the general direction of most has definitely been up. In fact, the past three and half years have been among the best times ever to buy and hold stocks.

Despite the gains we’ve seen, however, investors’ fear of a reprise of the 2008 crash has never been far from the surface. And whenever bad news has crept in for the global economy—whether it be lagging US jobs numbers, continued European turmoil or decelerating growth in Asia—the mood has shifted back to risk off.

The chief beneficiaries have been US Treasury securities, still considered the world’s safe haven of last resort. The losers, meanwhile, have been basically everything else.

Metals and mining stocks, however, have been particularly punished when the mood has shifted from “risk on” to “risk off.” For these assets, demand and prices depend heavily on the level of economic growth, making them among the first investments sold when the news sours and investors cut their risk.

Unfortunately for our Metals and Mining Portfolio, the news in 2012 has been far from ideal for growth. Most of our holdings began the year in good shape heading higher, but quickly headed south in spring, reaching a nadir in late May.

Now after a mild recovery, most are giving ground again, as concerns about a “fiscal cliff” in the US and weakness elsewhere percolate. As a result, almost all of our positions are showing losses from initial entry points.

The good news is all of these stocks still reflect solid underlying businesses, just as they were when we initially recommended them. They possess the ways and means to become more valuable over the next several years by increasing their output and reserves.

The current red ink we have now is because we bought when investor interest in mining stocks was greater than it is now. As long as these companies stay healthy as businesses, interest will eventually rise again and their stock prices will recover.

The question is whether it’s worth holding them until that happens. Is recovery imminent, or should we take a loss now with the idea of either coming back in 30 days to comply with the “wash rule” on taxation? Or should we simply move into an alternative?

Executing a sale for a loss means we can reduce taxes paid on another more successful investment. That’s balanced against the commission we’ll pay, and the possibility the stock will recover before we can get back in or move to other alternative.

Our view is, it makes sense to take some losses now, so we can keep the strongest positions open. Here’s our take on each of these Portfolio companies, starting with those we’re keeping. Note that this month’s spotlighted stock is a new addition: Goldcorp (NYSE: GG).

Metal Buys With Mettle

BHP Billiton (ASX: BHP, NYSE: BHP) — The world’s biggest mining company has been pulling back on some of its more aggressive expansion plans, as copper and iron ore prices have weakened. But its ability to ramp up output of these and other vital resources from reserves in Australia (the closest supplier to China) is a huge advantage, as is its sector-strongest balance sheet. Five dividend increases in six quarters pays us to wait with this stock, which is probably the safest in the portfolio. Our buy target for BHP Billiton is USD40 for the ordinary shares and USD80 for the American Depositary Receipt (ADR), which is worth two ordinary shares.

Freeport-McMoRan Copper and Gold (NYSE: FCX) — This stock follows copper prices, as do its earnings. And the third quarter wasn’t particularly pretty for either. Net income slipped 22 percent, as copper sales dropped, costs rose and selling prices fell. Gold output fell in half, due to problems at the Grasberg mine in Indonesia. The company, however, continues to forecast massive production growth over the next five years, particularly for copper. Enhanced production will drive value, although over the near term the latest news from China will hold a lot of sway. Buy Freeport-McMoRan Copper and Gold up to USD42.

Glencore International (London: GLEN, OTC: GLNCY) — Our decision to flip Xstrata (London: XTA, OTC: XSRAY) for would-be acquirer Glencore has cost us. The acquirer was forced to pony up to complete the deal, resulting in a higher price for Xstrata and a lower one for Glencore. The good news is, this setback should prove only temporary, as the combined company utilizes its synergies in marketing and production to lever up profit.

The pair now have court approval for the shareholder vote that was held October 1. That leaves just China and the European Union to approve the deal, with a decision likely sometime in November. Glencore is still the safer play, as regulatory rejection would almost certainly send Xstrata lower. Glencore International remains a buy up to USD14.50 through the ADR GLNCY.

New Gold (AMEX: NGO) — This gold mining company operates four producing mines, two in the US, one in Mexico and one in Australia. It also owns a 30 percent interest in the El Morro mine it’s developing with Goldcorp (NYSE: GG). Output rose 8 percent in the second quarter of 2012 and the company made progress resolving lingering issues. Profitability in the gold mining industry is considerable, with the yellow metal selling for nearly $1,650 an ounce. This stock will follow gold up and down but ultimately should attain much higher ground. Our buy target for New Gold is USD12.50.

Newcrest Mining (ASX: NCM, OTC: NCMGY) — This gold and copper miner has come a long way back from its lows of earlier this year, although not enough yet to recover the combined impact of production problems in New Guinea and volatile gold prices. The company has, however, put itself squarely on track to take production up 25 percent to 2.3 mill ion – 2.5 million ounces for 2012-2013, focusing on expansion at the Lihir mine (New Guinea) and Cadia Valley in Australia. The company also reported lower mining costs in Australia, reversing recent increases. And most importantly, its results met guidance. Newcrest Mining is a buy up to USD30, under its ADR symbol NCMGY.

Rio Tinto (ASX: RIO, NYSEL RIO) — As one of the world’s largest diversified metals and minerals producers, Rio has many levers to pull to boost production and profits in coming years. Going further, deeper and ever-more dangerous does have its challenges, as the imprisonment of a company lawyer on alleged corruption and money-laundering charges this week attests. And company earnings are not immune from weakening metals prices. But there’s very little risk from the current market to the stock’s dividend of better than 3 percent, or to the company’s long-term strategy of expanding output and production of key resources. Consequently, this is a great time to pick up shares of Rio Tinto, up to our buy target of USD60.

Teck Resources (TSX: TCK/B, NYSE: TCK) — This Canada-based diversified resource producer surprised many analysts by announcing stronger-than-expected third quarter earnings this week. Profit still dropped from the prior year on lower prices for iron ore and coking or “metallurgical” coal used in manufacturing steel. But the company did stay in good shape to boost output and reserves when better conditions return. Meanwhile, the company pays as modest dividend of 2.5 percent while we wait. Our buy target for Teck Resources is USD40.

Vale (NYSE: VALE) — This Brazilian resource giant’s stock has also been in a tailspin for most of this year. Third-quarter profits announced this week were 66 percent lower, reflecting the cost of settling a royalty dispute but also a failure to increase iron ore production and weak commodity prices in general. The company responded by selling $1.2 billion in assets and scaling back on expansion projects. Neither was popular with investors, and it also continues to face Brazilian tax claims for “overdue royalties.”

On the other side of the coin, however, is a now-low share price and one of the richest and most diverse resource reserves in the world. The stock is still well off its November 2008 lows but well below the USD30-USD35 trading range it held for much of 2010. This one will take patience but a comeback is a matter of time. Buy Vale up to USD25.

Cutting Our Losses

As for sales, we’re taking small losses in lithium producer Sociedad Quimica y Minera (CI: SQM/B, NYSE: SQM); Korean steel giant Posco (KS: 005490, NYSE: PKX); platinum group metals (PGM) outfit Stillwater Mining (NYSE: SWC); rare earths producer Molycorp (NYSE: MCP); and coking coal company Mongolian Mining Corp (Hong Kong 975, OTC: MOGLF).

It’s not that we don’t like these companies for the long haul, or the market for what they produce. Lithium and rare earths, for example, are in heavy demand and these companies represent one of the few ways to play them outside of China.

Coking coal is valuable as ever for making steel, and demand and prices will rally as China stabilizes. So will the market for steel itself, benefitting the likes of Posco. Finally, PGMs are rare as ever and South African labor troubles threaten to take a large portion of current global output off the market.

All of these companies are very good at what they do. They’re also armed with balance sheets strong enough to weather the current weakness in global commodity markets, and the possibility things will get worse before they get better.

Weak markets for mining stocks and the initial recovery phase when things do turn up, however, favor giants that produce several materials. We’re willing to overlook that in the case of gold miners, because that market moves to its own drummer.

But until there’s some sign of improvement in metals markets that has legs, we’ll stick with the best of the biggest.