Date: Fri Sep 26 2003 15:07
trotsky (philbond@Sinclair) ID#377387:
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since Sinclair is a very high profile figure in the gold investment business, he should not be beyond criticism. the points fp42 made about the derivatives are valid - Sinclair DID make up those numbers as he went along. 330 was passed, and nothing happend, and the same goes for 354. both figures were cited by Sinclair as being triggers for some sort of melt-down. not surprisingly, he doesn't talk about them anymore.
that said, i would agree that Sinclair offers valuable advice as well. one mustn't forget that he actually made 100ds of millions in the gold biz, and that is imo reason enough to go and read what he has to say. he often makes good points, and his t/a advice isn't too bad either. however, he's certainly not all-knowing, and i sometimes really wonder about certain of his musings.
btw., although he betrayed some ignorance regarding the derivatives story, he also made a very worthwhile point about the daisy chain that has built up over the years...namely that the risk inherent in these instruments has become virtually unquantifiable. the systemic risk is indeed dependent on the weakest links in the chain, and no-one really knows for sure who or where they actually are. it's an accident waiting to happen, but gold derivatives are such a tiny percentage of the total notionals in this game that it's highly doubtful that that's where TS will HTF. nevertheless, i agree with him that the gold miners should be very careful about locking in prices for more than a year out. their risk is not so much that the PoG maight go a lot higher, but rather that a devaluation of fiat may well drive production costs much higher concurrently. imagine e.g. a crisis similar to the 70's - not a HUGE crisis, but certainly a time during which fiat money lost a great deal of value. say the PoG goes to some fantastic price, like $1,000 and at the same time average production costs go to something like $750/oz.
an unhedged miner would enjoy a healthy $250 margin...but e.g. Barrick with its 16 million oz. sold forward at $340 would go belly-up, no ifs and buts about it. so he's right about that point: the miners should re-assess their position vis-a-vis hedging very carefully. |
