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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (2928)	12/6/2003 9:50:32 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

well, i bought quite a bit of Newmont at under $25 a year ago and recently sold at $45. i am not at all surprised it hit 50, but i will be even less surprised to see it trade under 30 again. i think that article was a bit more balanced than you give it credit for. even talk about NEM being expensive because it sells at 2.8x NAV he explained that the historical NAV range is 1 to 3x NAV, so 2.8x sounds expensive. here's how i see it...a year ago i made two very large sector bets: gold miners and energy. the miners did fantastic, so i said KACHING to the miners. the energy stocks attenuated overall portfolio percentage gains, although they basically held their mud. energy prices have been stronger than expected, as has POG. however, the miners, as derivative plays on POG, have vastly outperformed. in contrast, energy stocks, as derivative plays on fossil fuel prices, have not done nearly as well (except for off-the-beaten track stuff). the energy stocks trade at low historical multiples of their commodity price; gold miners do not. energy stocks are also cheap compared to the market on conventional ratios such as PE; miners are not. therefore, from my perspective, it is logical for me to underweight the miners and overweight energy, as a portfolio allocation. in effect, this has meant selling off all my gold miners (except a small amount of DROOY i recently bought) while maintaining a large energy-stock allocation. It's cheap compared when you look at where gold's heading, which is what no one understands. well, any derivative commodity play is going to oscillate relative to the commodity price. that's where i think looking at current NAV ratio against its historical ratio gives an idea about sentiment. as i see it, current NAV ratios on gold miners REQUIRE POG to rise significantly in order to make sense (imo). in contrast, as i see it, current ratios of energy stock prices relative to the relevant commodity prices do not REQUIRE significant price rises in the commodities; but rather assume price DECLINES, imo. thus to me, it is a simple risk/reward calculation. a classic contrarian setup, imo. but good luck with your golds.