Jack: I have been in FCX.B last year, but sold in February, when gold went above $400/ounce. It was an OK trade, but not grand. I am no longer in these convertible (or for that mater the silver backed convertible) because they seem to always be at quite a discount to the metal. Gold will have to break drastically up (much above $420) before a premium will develop. My original play was a safe/good return/hedging play. I was hoping that with the "impending" move in gold (when we had the few scares and higher interest rate and decline of the dollar in 1995) a premium will develop so I could have a double whammy, increase due to gold going up and an additional increase due to the conv. going from a discount of about 10% to a premium of 15%. All that happened was the small increase in gold (less than 10%) and a minute reduction in the discount (from 10% to 5%). I simply got tired and decided to go back into the techs in February. In retrospective, this was quite a good move.
It is quite possible that come next January, I will be looking back at the FCX.B. The reason I am not particularly interested in the silver backed conv. is that my view on silver is even more bearish than on gold. The main demand for silver is photography (both consumer and industrial), and I do not see this segment of the market growing at the rate of the world GDP growth rate. Gold, however, has both industrial and "store of value" uses and these may grow faster than silver demand. Of course, the current silver/gold pricing would indicate that silver should be well above $5/ounce, using historical standards, but I think these historical standards are just that, history.
Zeev |
