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Gold/Mining/Energy : Silver prices -- Ignore unavailable to you. Want to Upgrade?

To: Don S.Boller who wrote (239)	12/10/1997 7:46:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 8010

Commodities are different from stocks. Except for gold, commodities are consumed. Silver is also something of an exception because so much of it is recycled in photo and x-ray processing. Even gold is consumed when people hoard it as store for value or buy it as jewelry, and in smaller amounts in dentistry and for other commercial purposes. Holding the stock of an emerging technology company that has a lock on a fundamental process is quite different. Microsoft, from the beginning of personal computers, was able to make disk drives operate. Long before the stock went public I remember being told at a Radio Shack store, "Microsoft makes all the systems." Futures on commodities are radically different from stocks. As has been proved time and again, the really big money in stocks is made by holding for the long term and not trading. This is impossible with futures. In the long term, new sources will be found and production will increase, so rolling over a futures contract is a nearly guaranteed way of losing money in the long run. On the other hand a company that produces a scarce commodity, is well-capitalized, and is successful in acquiring new and ever cheaper sources of the commodity, can be held as a long-term investment. PAASF is such a company. I think that anyone who is fortunate enough to make a short-term profit in silver futures trading, and who believes that silver prices will remain strong, would be much better off in a silver mining company. In any case, pyramiding futures contracts is just gambling, much like doubling up on a roulette table. It is possible, though, that someone with a sense of timing could hold some silver contracts and roll them over during the next couple of years and if they had the discipline to quit at the right time might make a lot of money. But most people will do something wrong. Millions of people who invest conservatively in stocks, especially when stock prices are low (as they certainly are not now) can make money at the same time. Only a very few people ever make money trading futures. Most either go completely broke or recognize their problem and quit. The actual producers and suppliers of commodities who use future or forward contracts for hedging know much more about the business than private investors can ever know. Right this minute, for example, with gold selling for around $285 an ounce, Barrick (ABX) is selling a lot of its output for over $400 an ounce because it has hedged. Someone else is paying that extra $120 or so.