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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: marcos who wrote (61812)	10/22/2008 2:45:59 AM
From: pogohere	1 Recommendation Read Replies (3) of 78409

Extremely well put and reflects my portfolio as well, in re declines. Your observation about the flight to US$: "on top of this, the hunting and gathering of cash has become real hard" "we didn't realise that there could be a lag for the effect to work though, with meanwhile the US dollar as 'safe haven'[!] " reflects the most important aspect of this that I totally missed: the velocity of $US slowed to a crawl: i.e., the credit collapse rendered cash crucial as so many entities had to cover for all sorts of reasons, some because they were highly leveraged in toxic financial waste and some because they were vulnerable to the kind of crunch described by Coxe, as you noted. The US$ became a "safe haven" in spite of its fundamentals because as Bob Hoye has pointed out, it's the reserve currency. I can see now that when credit dries up everybody has to rush into and hold onto the lowest common denominator. Under the circumstances, the standard response is to sell gold as the US$ rises (apart from those who sold simply to raise cash). So down it goes at a time that clearly favors it in what is now clearly the long run. Whenever that is. And that will be when the velocity of the US$ speeds up and takes off as those who then have it see it losing purchasing power at an exponential rate and look to get rid of it (invest in something else) as fast as possible. I missed the velocity aspect of this completely. Marc Faber makes the point (http://www.cnbc.com/id/15840232?video=897838309&play=1 ) that the Chinese are fudging their stats as badly as the US authorities ever did and their export and infrastructure slowdown will affect commodity prices going forward for a spell (that's a technical term I use that means "I don't know for how long.") I favor gold and energy as what I'll call velocity/inflation plays, with an emphasis on companies that have cash, cash flow, no debt, no unwieldy hedges and management that can think straight and avoid all unnecessary risks.

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