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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Live2Sail who wrote (150096)	9/25/2008 12:53:26 AM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 306849

I'm pretty doubtful the mining stocks will perform well if we have a sudden deflationary collapse. I'm very certain we'll see most paper assets (ex-government bonds) collapse in such a scenario. Especially other debt instruments (which we are already seeing) and stocks. Gold will benefit from a movement out of paper towards liquid-yet-non-obligated assets. Basically a flight to safety and away from dollar-denominated assets. Oil doesn't quite meet this because you must rely on futures markets functioning and on reliable counterparties to get paid. Gold (and I'm speaking of bullion only) can be held away from the interlocking chain of promises that our financial edifice is built on. That is it's one relatively unique characteristic that puts it at the top of the heap, or at least as a viable alternative when all the others crash. It won't be a pretty world when it happens, but it's a last line of defense. A financial free safety, as it were.

To: Live2Sail who wrote (150096)	9/25/2008 10:29:53 AM
From: bull_dozer	Respond to of 306849

This time it may be different (or history might repeat again) but this is what happened during the great depression. "Gold Stocks did well during the Great Crash and aftermath… indeed exceedingly well. Please note that from August through October 1929 Homestake Mining did decline in value, but no where near the percent plunge in the general stock market. And by yearend Homestake was again creeping up in price. For the first few months of 1930 the gold mining industry proxy was relatively flat. However, from mid-year on Homestake began to increase in value as the DOW and DJUA rapidly and relentlessly melted away. During the next five years the Gold Mining Industry's surrogate soared in value - while stock prices were decimated by the Great Depression. It is relevant to observe that Homestake's price appreciation was not a market anomaly, but was consistent with its growing annual earnings per share and increasing cash dividend payout. While nearly all industries revenues and earnings dwindled, the gold mining industry thrived. Homestake's E.P.S. increased from $4.19 in 1929 to $32.43 in 1935. During the six desolate years of the Great Depression, the gold mining industry's proxy enjoyed an E.P.S. growth rate of 41% COMPOUNDED ANNUALLY. Furthermore, while the banks paid a paltry 1% in "earned" interest on the meager savings of those few hapless souls who still had money, Homestake share holders were indeed enriching themselves. The 1929 cash dividend of $7.00 increased to a cash payout of $56 PER SHARE BY 1935. Consider for a moment the awesome investment significance of it. Had an investor the foresight and guts to buy a share of Homestake in the throes of the 1929 Crash, he would have gotten it for about $80. During the next six years while stock values worldwide were melting away - and preciously few companies were able to pay even a declining trend of dividends - Homestake soared relentlessly to $495 a share by yearend 1935 - THAT'S NEARLY 520% CAPITAL APPRECIATION (34% compounded yearly increased value). And during the six depression years of international economic suffering, Homestake paid out $128 in cash dividends. In 1935 alone, the gold mining proxy paid a $56 cash dividend per share - which represented 70% of the 1929 Crash Price of the stock!" gold-eagle.com