Beware of Mine Stocks

[mrdirp]

I'm not saying I agree with this dude but it is something to ponder..esp after watching srlm/cde over the past 2 days...

from Colorado Gold

Don's Column (Mon, Wed, Fri



Beware of Mining Stocks

This is merely my opinion, but a similar one appeared on Kitco. Look here, why is it that mine stocks have gone up three, four, or even ten times faster than the actual metals they supposedly mine? Why should mine stocks, many of which have never mined a single ounce, and most of which have p/e ratios in the stratosphere, and pay no dividends at all, be worth ten times as much as the gold? Physical gold is the result of proven mines, as is physical silver. Physical is the product of all the mines that are WORKING, not those with "proven reserves," or other such mumbo jumbo. Lies, lies, lies probably. Remember the NASDAQ? There was no earthly reason for it to go to 5200, but it did, merely on momentum. Everyone was doing it! Remember what happened to the dot coms, simply because they had no profits, and p/e ratios were sky high? Crash, is what it was known as. Why shouldn't mine stocks go down to at least the price of gold and silver? Why should a mine, which has no mill, smelter, profits, or much of anything, be worth so much? THEY AREN'T. So, you've made a pile on your mine stocks? Great! Now think about why they are as high as they are with no dividends, high p/e ratios, and in many times, not mining a damned thing? There is no earthly reason for it, and I honestly believe that mine stocks are in the same bracket as the NASDAQ was at 5,000. Why not take your PROFITS, and buy physical? I can see no reason why they should not go down. If you have faith in them, keep them, but just stop and THINK about why they are so much higher, and have gone up so much faster than physical. Give me or yourself a good reason, and don't sell. Otherwise, you should think and do what everyone should have done when the NASDAQ went above 5,000. These are MERELY MY OPINIONS. IF I AM WRONG, SORRY, but I have a right to my opinions, just as does everyone else. Richard Russell says the point in owning a stock is the DIVIDENDS they pay, not whether they are going up for no reason. I whole heartedly agree!

Oh Yes, if your answer is that it may cost less than spot to dig the gold, remember, it isn't what it costs to "dig" it, but one must also add the costs of milling, smelting, transporting, manufacturing, etc, which can be astronomical. Do not be fooled by the figures of how much it costs to "mine," but the rest also needs to be considered before one gets a gold bar or coin..

[IrishGold]

Thanks for posting that mrdirp. I usually post Don Stotts column here every Monday, Wednesday and Friday, but he was on vacation up until last Monday and I forgot all about getting his column posted. I'll see that it gets done tomorrow!

[100k]

Isn't it funny that Richard Russell recommends CDE as a stock to buy and forget about. I respect Stott but this is bullshit. He recommends selling shares after two blistering down days? There may be some heat but more savvy gold and silver people than he believe we are going higher before we retrace seriously. Oh and doesn't this guy sell metals? Oh.

[mrdirp]

Isn't it funny that Richard Russell recommends CDE as a stock to buy and forget about. I respect Stott but this is bullshit. He recommends selling shares after two blistering down days? There may be some heat but more savvy gold and silver people than he believe we are going higher before we retrace seriously. Oh and doesn't this guy sell metals? Oh.

I pondered that fact too...that he sells metals...maybe he's just trying to say there are safer plays out there...I'd rather own one of his gold coins than some friggin mine stock flooded out pouring acid drainage in to the watershed...I'm not a total jacka** though...if I want one of his coins then I need a high flyer to buy them..

[mrdirp]

this is common where I live

[100k]

Well actually the bigger the wall of worry we climb the bigger the profits. Everybody with any sense is scared $hitless of the shares now. Well almost everybody.

[100k]

That's a shame man. Nice country. Too bad they f-ck it up like that. No other way?

[AgAuGal]

Isn't it funny that Richard Russell recommends CDE as a stock to buy and forget about. I respect Stott but this is bullshit. He recommends selling shares after two blistering down days? There may be some heat but more savvy gold and silver people than he believe we are going higher before we retrace seriously. Oh and doesn't this guy sell metals? Oh.

Have to disagree with your observation on Don S. He is not just now saying stay away from the mining stocks after two down days. He has recommended staying away from them for some time - primarily (if I'm not misinterpreting him) because stock is just another paper mechanism. He hates anything paper - always recommends physical. Pesonally I think he offers more depth than just pumping physical because that's his business. Mind you I do not always agree with him and I am in mining stocks but he makes some very good points and I may regret in the long run that I didn't listen. He has been around the block so I have to give him his propers. Like with all gurus and posters - listen to their aurguments then do as you please.

[Outrider]

Have to disagree with your observation on Don S. He is not just now saying stay away from the mining stocks after two down days. He has recommended staying away from them for some time - primarily (if I'm not misinterpreting him) because stock is just another paper mechanism. He hates anything paper - always recommends physical. Pesonally I think he offers more depth than just pumping physical because that's his business. Mind you I do not always agree with him and I am in mining stocks but he makes some very good points and I may regret in the long run that I didn't listen. He has been around the block so I have to give him his propers. Like with all gurus and posters - listen to their aurguments then do as you please.
It seems to me sometimes that there are two kinds of opinion vis a vis physical and shares. Certainly shares rule! Take the cash (gold/silver)!!! But I like the way Jason Hommel thinks - use the green toilet paper to buy the real thing. After all, how many times do we have to be screwed by the brokers, funds, CEOs ( who are bailing big time) before we realize we are dealing with too many crooks right from the top down.

That's why I think we need to plan a 'war' of movement. I'm not talking about trading per se but not to sit on a pile of paper too long. As wise men posting here have said, "It ain't yours until it's in your hand."

As for taxes the big (smart) guys come up with paper losses to help cover the debt. You might include in your survival net of friends a good tax guy. Ya think? Only the slow and sick get eaten. We have to be smart about more than ozs. in the ground. If we don't want to get skinned. Remember, "they" have left plenty of loop holes for themselves. We need to find a few and slip in behind 'em. Also remember please, this is always a movin' target. Again, good slick help is "worth its weight in gold."

Pinchin' off a bit and sockin' it away into some 'other' hard asset, etc. might be just the ticket. If some of the house of cards falls real estate might come back as a fine investment. Rentals, small stores, "cash" busineses, etc. Gotta be quick and slick. "Travel light, move fast, and have sharp teeth." It ain't all about PMs.

Outrider

[Scorpio]

Don is a crusty old survivor over 70 years old. Well set in his ways, and virtually seen it all. Very few espouse as he does, and I hold nothing against him for it.

He doesn't need the money anymore, he does it 'cause he loves it.

As for his reasons to sell stocks, he has been fervently against stocks if you go back and read his edits from years gone by. He has been consistent, but what else would you expect from a dealer?

His opinion however, is just that. There is a legitimate reason stocks have went up higher and farther than physical. It is because of quantity. If PM prices rise, a corresponding exponetial increase will show up in stocks because of leverage. If you have 1 ounce of gold, you have 1 ounce of gold, maybe at a higher price.
The leverage provided by stocks is this: as the of physical rises to a 1M ounce producer, the shareholders get their portion of that 1M per year production, not one ounce. If these ounces overall grow in value with physical, the potential for very large dividend payments from the profits is very real. Many persons in the 80 bull made more off dividends than they originally paid for the stock.

Stocks get you leverage, physical gets you safety. Each person has to decide on the level of risk for them.

Don is Don, and of course the rise of the Jr's would blow his mind if you have ever had a discussion with the man.

Scorpio

[Silver Shadow]

Stocks get you leverage, physical gets you safety. Each person has to decide on the level of risk for them.

Scorpio

I think that really says it all.

[90%RealMoney]

I think everyone here knows that the day will come, when Don Stott is proved absolutely right. As Scorpio said, Don has seen it all in his lifetime. I think he knows what is coming, and is continuously warning us all of it. Kind of like the boy who cried wolf with a twist. He sees the wolf coming from afar, tries repeatedly to warn the others, yet no one listens, because they don't believe the wolf even exists. I'll say one thing, at least he is consistent with his opinions and beliefs. That says alot to me, when the average analyst in the media is constantly changing their views to suit the present conditions.

[seb]

Four things come to mind after reading the former posts, as well as much of the stuff i always read abouts mining stocks:

1) To a certain degree when we buy shares we shoot oursleves in the foot. Its just another way to divert money from where the money should go (the real stuff). No wonder there is no real investing demand in physical silver, where do you think this money is going? Just watch the silver shares going ballistic, that's where. The more silver shares i buy, the more the POS will take time to start the liftoff sequence. So why am I doing it? GREED. not good.

Why would i bet on a proxy if i can bet on the real thing? Grrrrrrrrrrrrrreed!

2) Ironic that on a board called GOLD IS MONEY, so many people propose another way to invest wealth in yet another PAPER ASSET.

Speaking of Russell, he was saying a few months ago that most mining company are run by crooks and/or their books are muddy at best. Got shares?

I know, I know, I read Hommel too, and at least mining shares are backed by metal in the ground (if you consider the projected reserves, on paper, to be real), but so was the $ at the begining... I mean if I own shares, that means that I still have trust ( in the people who run these companies, in the market, in the value of what I bought, that there will hopefully be a sucker that will buy my shares at the top). I am personally way past trust, we are well into a huge BEAR MARKET in trust, and it's got a long way to go. (lol). PM are about to go to the moon, trust is about to go out the window and here I am with my paper slip. shit.

TO PUT IT SIMPLY, IF I OWN SHARES, I TRUST PEOPLE WHO TRUST A SYSTEM I DON'T TRUST. With physical all I have to trust is myself (that I won't forget where I put it!)

3) Leverage is a nice word brought up by Wall Street (like "productivity" for unemployement) to describe only one thing: SPECULATION. Now, are we talking about investing or gambling here? NOT TO FORGET: LEVERAGE WORKS BOTH WAYS!!!

4) And this is the one that gets me going, the proof that if people are asking for a spanking, that's probably because they deserve it!

check this out:

- I suspect a majority of the people on this board believe to some extent or another in the ongoing manipulation in PM, thanks to GATA and Butler.

-This manipulation, which is a perfect example of corruption and cynical self-interest is probably criminal. It sure did hurt a lot of people, specially PM investors, both in the physical metal and SHAREHOLDERS.

- This manipulation could have never kept on going for so long without the COMPLICITY of the producers (ie. hedging, forward sales). This means MINING COMPANIES have been in bed with Wall-Street for the better part of the manipulation to screw us over.

- Now that the $ (and the economy) is about to be handed its pink slip, the PM prices are going up no matter what and the manipulators are losing grip.

SO WHAT DO WE DO? WE BUY BACK SHARES OF MINING COMPANIES!

HELLLLOOOOOO? These guys must be laughing so hard right now their golden teeth must be coming off!

What's the next move? buy AIG, JPM and Scottia Mocatta?

Man, crime does pay! I have to remeber this.

anyways, my 0.02 fiat Dolares worth!

seb

p.s. my bias is of course a TEOTWAWKI one. can't wait.

[100k]

90% Real Money Stott may or may not be right about that but that time ain't nowhere in sight. If I remember correctly back in 1980 when gold and silver topped around January 20 ASA topped in the 55 area. We had a serious break in the metals and a rally into September when gold topped around 720. At that time ASA ran to 90. The shares achieved much higher prices on the secondary rally than at the tops in the metals. Something to think about.