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Gold/Mining/Energy : Naxos Resources (NAXOF)

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To: RRG who wrote (3949)	9/10/1997 12:32:00 PM
From: Henry Volquardsen	of 20681

RRG, Thanks for pointing out WSJ article. One of the things I feel strongly about in both business and investing is that it is important that one clearly understand what you believe will happen and then design your actions to express those views in as simple and straight forward a way as possible. Don't try to accomplish to many goals in one task. This may sound like an obvious statement but I believe many people are guilty of violating this concept. I'll use an off topic example to illustrate; a friend called a few days ago for advice regarding a piece of land his father-in-law owned in Germany. He could take a mortgage in marks or borrow in Swiss francs and take advantage of lower Swiss rates and take advantage of a weakening of Swiss francs vs Deutsche marks. My strong advice was to design his transactions simply. Borrow in marks and think of other transactions to take advantage of interest rate differentials and currency weakness. That way if his views changed or he wanted to change his financing structure he wouldn't have to rethink other issues. The reason I went through that long winded example was that the article reminded me that being a "gold bug" should have nothing to do with owning gold stocks. You don't have to be a "wheat bug" to own Archer Daniels Midland. Owning gold stocks is about finding companies that can get the gold out of the ground cheaper than they can sell it. If you are a gold bug you should own gold. Gold mines are extractive enterprises and should be invested in for their ability to that cheaply. I am not a gold bug nor do I believe in the coming of the next great inflation. My views are the opposite. I invest in resource companies for their ability to find something cheaply that they can sell for a profit. I react to the news of high cost gold mines be shuttered the way an owner of a semi conducter factory would respond to news that high cost DRAM production was being shuttered. This is good news as it will help reduce the supply overhang that is depressing the price of the good I wish to sell. All in all a very good article. BTW it has occurred to me while writing this that I may be coming off preachy. Not my intent. Its a slow afternoon and I thought some of you might be interest in a little free lance investment philosophy <GGG>

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