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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers
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To: loantech who wrote (4605)1/11/2006 9:38:51 AM
From: Lhn5  Read Replies (1) of 78416
 
I find the below response very naive and dangerous. A serious financial accident will be followed by a giant sucking sound...that sound will be all the liquidity sucked out of the equity market. Gold equities in the short to mid term would be at very high risk in this situation I think.

<<Dear Jim:

A number of analysts are suggesting a serious financial accident will result in a stock market meltdown. What do you think will happen to gold stocks in this environment? My impression from 1987 is that they also went down. Many people reference the crash of 1929 and Homestake. However, there were very few alternatives then and we did have a gold standard. Is it better to own gold itself in a crash. I think my question would be relevant to many people in your audience.

Sincerely,

CIGA G M:

Dear GM:

The important concept to hold is that a serious decline in general equities has most times to do with lower earnings expecations. First, we need to see the equity disaster pundits proved correct. So far, there is a lot of egg on many faces in that department. If you accepting the premise of a serious decline in general equities the formula is: Lower earnings = lower Federal receipts = a growing Federal Budget deficit in the hands of managers that have no policy in place to offset this impact. What this adds up to is a lower US dollar which equals higher gold and gold shares.

Comparisons to 1987 are made when gold and gold shares were simply performing in a counter trend rally in the 22 year bear market for gold and gold shares. So, the comparison is invalid.

Regards,

Jim>>
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