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

To: Douglas M. Benedict who wrote (34845)	6/27/2005 12:23:42 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 110194

FWIW, i think it's a very good holding (my largest personally) but i don't think it's a hedge. a hedge is operationally related, like when LUV buys jet-fuel futures to lock in current prices. gold miners could likewise buy the energy futures to directly offset their energy price-increase exposure. by contrast oil sands are an investment, or speculation if you like, on how a given oil sand operator will do (and furthermore on how other investors vote that it does in the stock market)--many steps removed from the direct operational hedging opportunities available through futures. to the extent that NEM holds oil sands, they are a holding company. saying it is an "effective hedge" is like saying drinking Drano is an "effective form of birth control". dismiss as semantics if you like. i thought a couple years ago of a possible scenario where gold miners could find themselves between a rock and a hard place: rising energy prices could increase operating expenses even as a broader (gold-benefitting) inflationary environment doesn't develop as per goldbug expectations. thus hurting operating margins. i just don't want to see a gold company (or any other) try to take over COS at the current cheap price.