Interesting that he "read my mind" exactly on the juniors, glad this Veneroso item got posted, it's essential thinking.
In our view the large cap gold shares are fully valued to overvalued on a net asset value basis. More importantly, we regard many of them as wasting assets. Production is depleting their reserves and many of them cannot find new deposits to replace their production. The junior golds have deposits and they are valued cheaply by the marketplace. Because the juniors are cash constrained their deposits tend to have large growth potential. At some point the majors will move to acquire the juniors. That is what we are hoping for. But so far the majors have been restrained. When they eventually do move the juniors will be revalued upward en masse. We are ever watchful for this eventual positive development.
He's really very close to my general view on the large rather off side anti-USD trade that's developed. However, I think we have several examples of what it might look like, the best is energy. The break from 55 to 41 has completely removed the fund and specs. In fact my guess is they are actually short now.
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The energy stocks going into the intermediate oil price peak were in an uptrend, but never got frothy. In this break they have corrected, but not in a big way. And in fact when you look at money flow and accumulation-distribution charts you see positive actions on many names.
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stockcharts.com[l,a]daclniay[pd20,2!b50][vc60][iUc20!Lf]&pref=G
I think the junior sector (and there really aren't too many "real companies", could be counted on about three hands) has exhibited the same pattern. Therefore, if POG were to break down in the manner of oil, the aspect to watch is the big munch somewhere. I would be astonished for there weren't a few, it's the last change the majors have for a blue light special. That would in a perverse way make the recent price weakness in juniors a false breakdown. A case could then be made that they would rally even if POG went below 400 in a speculator driven liquidation. Also contributing to the stronger relative strength of juniors versus POG, the funds don't hold juniors, nothing to sell. I think they recent choppy action has already removed most of the Johnny come lately crowd and issued paper that came in late 03. |
