<<...asset value of underground reserves...>>
I do agree, and in fact its has been my long-held contention that mining shares behave as though they are options on the metal, that the asset value would push stocks up despite temporary Y2K-induced production disruptions
What nags at my feeble grey matter is that the USD is today the preferred repository of monetary wealth, not gold, for the boomer and later generations. Why won't they just buy Treasuries (as we here pros are doing today?
Further bothersome thoughts. In 1986-87 I said, and wrote, that we would have a decade of recovery in metals pricing and metals/mining shares pricing because of the end of boom/bust management of both the monetary/economic scene and the mining industry itself.
That recovery in average earnings, plus reduced volatility of earnings, which led to an upward valuation of mining company earnings, is now old news. Its over. The decade of up-rating metals/mining shares that made it easy to make money is ended. Risk is rising due to the rise in metals production, the ending of shortages, e.g. copper, and resultant rise in metals price volatility so the Reward/Risk ratio is, overall, turning against metals investing. For this reason professional managers are reducing exposure to the mining/metals segment.
The best place to view a stampeeding herd is from the side - not the front - and the herd of pro money managers is stampeeding out of speculative, illiquid juniors.
OK - to some degree pros with a charter to invest in metals will buy major, SA and NA gold mines with money raised from selling juniors. I just don't see it being a bull market, rather, the best of a bad market.
But then, in a bad market preservation of capital becomes paramount, not making money and major SA and NA golds may again fulfill that role. I just don't see making major gains when the CBs will have to defend their credit currencies against any flight to gold. Don't bet against the forces that can print unlimited amounts of money.
RH |
