The true good investment in a financial crisis?
What we have seen in the last year is that junior companies, which need financing to survive or at least advance their properties, have been totally mauled to almost unrecognizable condition, and many are on life support. In these markets, the crisis seems to have been seen a mile away, and people were panicing before the general market had a clue what was going on. I think that things have come full circle now in terms of where people should invest.
Right now, many juniors have good assets, and are trading for absolute peanuts. This is absurd. Why? Because if we are entering a recession, the entities worse his should be producers, who see their earnings drop substantially. If you base value on PE ratio, and earnings drop by 50% or more, you are looking at absolute devastation of your share price if the situation is more than temporary. We are at the stage of this crisis where company earnings are going to hit. Meanwhile, we have people fleeing to bonds and cash. Does this make sense? Governments are in the process of bailing out the financial entities in this crisis, at enormous cost to their balance sheets. The value of their bonds and their currency will be seriously devalued. No question. At some point, people will even reconsider lending to governments like the US.
The best investment of all, outside of gold, has to be companies that have valuable assets that are lying dormant. If these companies can keep their burn ratio low, these assets, like food stored in a cold cellar, will be worth much, much more when this crisis is over. I have been trying to get this story out to people with True North Gems. They sampled 10,000 carats a tonne ruby early in the year, have ruby along a 130 m trend and to more than 140 m depth open at strike and depth, and a revelation has come out that a 190 carat gem quality stone of immense value was confiscated from smugglers who had taken it from their property. And the stock... trading for peanuts -- a fraction of what it was a few months ago, and all because of this financing crisis. If they just get the cash they need and stay put for a year or two, the company will be worth ten times more. It is all absurd.
Anyway, spread the word. Gold is key to survival in this crisis, and companies with assets in the ground, assuming they survive the financing issues, are the ones that are going to preserve wealth when the crisis is over. |
