Hi Paul. GLG, GG and NEM PR.
Sold another lg position Friday and used part of cash yesterday to bump up NEM PR pos another 20%.
It's my most recent position and fills an important slot in my portfolio. As a professional investor, this is my day job and I don't have another income to either cover my mistakes or provide support for my family. Therefore, some capital has to be allocated for income producing investments.
However, as we all know, the last year has significantly changed the landscape of alternatives for that. The past
week, dramatically so. Without beating the subject to death, here's a few of the avenues that won't accomplish the
income objective with the required safety of principal.
a. Recent rapid decline in ST interest rates result in significantly reduced income from MM funds.
b. Bonds are suffering capital losses dues to debasement of the $ by the fed. Therefore they present risk of
capital loss that could easily be greater than any income received !
c. Foreign currency bonds not much better. As CBs aggressively increase money supply worldwide, bond market
vigilantes will also hit those bond markets. Result, de facto competitive devaluations vs gold by all major currencies
and capital losses in their respective bond markets.
d. O & G royalty trusts still declining both in price and in their monthly div distributions. Double jeopardy !!
Time to think outside the box? YOU BET<G> But the available securities of the Gold sector are somewhat
different than those in oil & gas and other sectors.
Because this is relatively more conservative $ than the part of my portfolio deployed solely for cap gains, I like the
investment grade quality of big cap Newmont Mining than the more speculative gold stocks I'd use. But need more
income than the sm div NEM common will provide.
NEM PR provides more than 2 1/2 times the current yield of the best MM Funds and many times that of NEM
common. But it's capital appreciation is verry limited till much higher gold prices make the conversion factor a factor
in adding significantly to the preferred's price.
And adding NEM call options with 4 to 8 month expiration (representing current principal value in NEM common
= to my current pur in the preferred) I'm striking a balance between income and cap gains that I wouldn't otherwise
have with by owning only 1,200 shs of NEM common OR 600 shs of the NEM preferred alone.
As each of you is likely to have different requirements for income vs capital gains per $ invested, you can vary the
mixture of the preferred and options to suit your own needs.
Like most preferreds, the NEM $3.25 convertible preferred doesn't trade a lot of volume. But, methinks it hit a
few radar screens last week when it broke out to a new 52 wk hi on 3x av daily volume.
IMO, that also augurs well for the common going forward.
Isopatch |
