Chris, There are many ways to play the inflation in money and credit. Puts on Treasuries, though I use them, are not necessarily the most profitable way, just one of the safest. Since the first thing printing extra money does is causes spreads to widen between the best credits and lesser credits, which has been going on fairly strongly for the last year and a half. In fact, the possibility that banks and the securities markets were going to totally cut off junk borrowers was one of the reasons Greenspan cut rates again. His cut didn't work, as the spreads are still wide. So, shorting a junk fund may be a good idea and a paired trade, long a high quality fund and short a junk could work very well.
Also, bank puts should eventually work again for big money. No matter how much they try to avoid it, banks are stuck with junk bonds and less than prime mortgages. As those assets decline, it causes problems with the banks' capital ratios. As every bank in the world courts the same few dozen prime borrowers, spreads get squeezed, as the prime borrowers have great bargaining power. So the choice is lend to prime borrowers and see your profit margins disappear or lend to lesser credits and watch your capital decline. That is part of the reasoning behind my puts on FTU.
Newmont and Barrick are two of the world's best managed cos. Homestake isn't in their class. I prefer NEM because they have a technology edge with bacteria that mines for them. This is in the development stage, but everything else being equal, it could greatly lower NEM's cost over time.
|
