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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: yard_man who wrote (169438)5/31/2002 5:32:26 PM
From: Knighty Tin  Read Replies (1) of 436258
 
Tip, this isn't my theory, but here's the way I heard it explained. If ASA is at a premium or discount, it represents a proxy for the SA miners vs. POG. If the miners were priced based upon their asset value, then ASA would have no discount or premium. There are two immediate problems with that: 1. What about all the platinum and diamonds in the fund? 2. What about the fund expenses? So, I was skeptical.

However, it has been a decent proxy for the relationship. Effectively, a discount on ASA has meant the miners at a premium and a premium on ASA has meant the metal at a premium. So, it has been a minor indicator for when to buy which asset. For example, the 10 year avg. is less than a 4% premium. So the stocks and the metal have been pretty fairly valued for most of the decade. The current discount would say that the miners were a bit pricey relative to the gold.

BTW, ASA's branching out into North American miners may have thrown a wrench into the thing. Time will tell.
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