<<Metals Pricing in Y2K Crisis Con't>>
"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"
OK, I am glad to have your support on this one....
"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?"
Some Y2K books have mentioned buying bonds.....this is something on people's minds.
However, if we stay within the context of Y2K.....this problem "supposedly" may cause problems with the international banking and financial systems.....it seems a substantial portion of "worried money" may move into metals for safety. As you know in recent years it has been thought as very "foolish investment policy" to have money in metals....so most people don't hold any metals or metal stocks......if people in the major market economies decide that they want to move even just 5% of their money into metals.....that would be a lot of money moving into a very small market!!!! Even if they move most of their equity money into bonds and just a small percentage into metals, then metals will be "golden".
"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."
OK, that sounds reasonable....but
1. This may be a stupid questions but is the "reduced volatility of earnings" related to forward selling by mining cos? If so, does this not mean that a significant (any ideas of how much) portion of future production is spoken for and cannot come onto the market to meet the potential demand from a Y2K rush to metals? If I'm way off base, pls let me know.
2. The decade long-trends you describe are somewhat different from the short term potential Y2K mania I hope to focus on......while you may be 100% correct, I am betting on a much "larger mania".
Which Stocks to Play?
1. During a rush to safety, it seems that many would pick major companies with large reserves....the juniors may not be ideal.
2. SA gold cos seem to have ridiculously low market caps when compared with their reserves...many are profitable and pay good dividends. Is it possible that the apartheid issue, divestment from SA have pushed these to amazing value levels? I may be wrong, but I recently started buying DROOY and RANGY. Comments & advice welcome.
"Don't bet against the forces that can print unlimited amounts of money."
Would running the printing presses at full speed increase confidence? Sounds good for metals!
As an aside, do you have an opinion on the follow "alarmist" theories?
1. CBs have leased out huge amounts of their metals, creating an oversupply & artificially pushing down prices.....when they need to call it back, it will move in the opposite direction.
2. Saudis & other oil producing nations want gold for their oil, not paper money......oil is a real asset that will eventually disappear from their lands. If they are left only holding paper money with which to support future generations, there is too much risk....so they will start demanding gold as part of the payment.....theory by "ANOTHER".
Any comments welcome!
THC |
