THC: Global economic growth was propped up by extension of excessive amount of debt. Many Asian investor/developers were playing musical chairs, knowing they were over-leveraged, but selling this to pay for that. Kinda like a Ponzi scheme. The chairs are now all gone, the music stopped. Debt must be paid back but assets bought with, and intended to service that debt, are not performing. Investor/developers' cash flows are now vastly diminished. Hence, majority of remaining cash flow will be devoted to servicing debt (some wil, of course, be hidden away so jewelry will be selling like hotcakes in Zeurich). Hence, much less money will be available for life's little necessities like villas, Porsches, etc., so world consumption will wind down. Corporate earnings will diminish while perceived risk has risen. With Reward/Risk ratio diminished, equities must diminish in price to rebalance R/R ratio. Econ 101/Securities Valuation 101.
CDE does have fairly good leverage as measured by oz. of silver reserve per share but not as good as PAA, even with no credit for Dukat (Russia) resource. PAA also has plenty of cash, providing it doesn't get flushed down a Russian outhouse. PAA is focused on silver while CDE is focused on gold. Silver is a live issue, gold is dead as a doornail. Finally, PAA management is the more aggressive of the two.
KISS - play options on PAA or, better yet, play options on COMEX silver futures.
RH |
