It is charts like this that make the viewer question a near term case for silver (and yes, I know the CoT is wildly bullish). SLW is an excellent company and a great way to invest in silver, assuming one is bullish. This chart is however, not bullish with the price below the neckline.
Edit (5:18) Upon seeing the silver and gold reversals, I actually bought this one today along with RGLD in my conservative account. Edit (2:19 on 10/19) Trade closed unsuccessfully. Tough market, cash good.
http://www.biiwii.blogspot.com
http://www.biiwii.com
Edit (5:18) Upon seeing the silver and gold reversals, I actually bought this one today along with RGLD in my conservative account. Edit (2:19 on 10/19) Trade closed unsuccessfully. Tough market, cash good.
http://www.biiwii.blogspot.com
http://www.biiwii.com
The mining shares are a true enigma. They go down hard when gold falls, go down hard when the general equity market declines and rise anemically when either one of the aforementioned rises. I realize there is value there and this may be "they" frustrate the holders of these stocks to "bail-out" but it sure is one frustrating situation.
ReplyDeleteGold and silver producers are the only companies that almost all 1) screw shareholders by diluting shares, 2) mismanage horribly, 3) have a yearly production that tends towards zero as you look into the future due to finite mine life (so you can't price them the way you can a manufacturer), 4) fail to reap the benefits of a rising gold price, 5) be expected even in a commodity bull scenario to lose profits to rising costs e.g. sulphuric acid or diesel.
ReplyDeleteI think it's Rick Rule that points that out in a recent Gold Report interview. Very astute. No wonder people would rather hold the gold ETF than any mining shares. How many miners actually demonstrate over time that they provide a leverage to increasing gold prices?
Plus yeah, people think of gold miners as high-beta risk-on. GT would say that's an incorrect belief given gold's absolute price increase and its rise relative to other commodities. But until a gold miner comes along whose balance sheet actually reflects Gary's $GOLD:$CCI chart, there's no reason to buy it. You may as well just long-gold-short-CCI.
You are absolutely correct. That is why the gold miner case is most often not a good one from an 'investment' standpoint. It is why this blog highlighted them as 'at risk' in the run up to 2007/2008 and the 'crown of thorns' that HUI sported (H&S topping pattern).
ReplyDeleteGold had spent years under performing broad commodities into that top and yet the share prices kept rising right along with broad commodities. In other words, gold stocks kept rising as the inputs to their bottom line costs kept rising faster. Ludicrous.
Today we have the opposite situation, as gold miner fundamentals are improving out of the 2008 disaster w/ gold out performing everything. THE GOLD MINER CASE IS DEPENDENT ON ECONOMIC CONTRACTION AND EVEN DEFLATIONARY PRESSURES. End of story.
This is why most gold bugs get frustrated and leave the casino. Their logic is faulty. Gold miners being taken down while the 'real' price of gold goes up is opportunity. This condition had not been in play since the early days of the bull out of 2000.
It is in play now.
But yeh, many of these are some of the most screwed up companies out there. That is why management is so important. See IKN's post on JAG for example. http://incakolanews.blogspot.com/2011/10/jaguar-mining-jag-jagto-tristeza-nao.html
I bought this piece of crap off the bottom and now hope I get out with profits still intact to some degree. Went against one of my own rules regarding management.
But the point is, gold stock leverage - at least as applies to the well run ones - is and has been coming back into play since 2008.