Direxion Daily Gold Miners Be (DUST)

[Sgreg]

The problem is however that buying the miner sector is absolutely NOT a hedge against the market. Almost everyone thinks it is but it isn't. Gold, actual gold, is the hedge, not mining stocks. Miners drop as hard as bank stocks when there are market crashes. Why people don't know this I have no idea.

In 2008 we all know what happened with the market. Big crash. People should look at the performance of ABX, it was horrendous. People should look at the performance of GDX at that time too, it was horrendous. A precious metals mutual fund that I have owned in the past which is USAGX. It is like GDX but better. Anyway that did horrendous.

The market crash before the 2008 one was 2000-2002. Again poor performance by mining stocks.

I just don't understand why people who want to avoid the market and put their money elsewhere then choose to keep it in the market. When people buy mining stocks they are still buying stocks. How in their mind is that avoiding the market? They are still in the market. Mining stocks are a horrendous hedge against a market crash. It is shown in charts plain as day.

How can this be, someone might ask. Well as it turns out miners are loaded with debt. If the financial system is cracking who can service their debt. Miners have bad balance sheets so if banks are in serious trouble how does a miner have the money to get the gold out of the ground? If banks die or are even troubled then everything banks service also become in serious trouble. Some say miners have big reserves, well they also have huge debt. This has to be considered. Companies with weak balance sheets like miners are some of the first stocks people dump when there is an actual market crash.

People who are loading up in mining stocks because they think a market crash is coming are simply betting against themselves and don't even realize it. All they have to do is open their eyes and look at the charts but for some reason they don't. Owning actual gold and owning mining stocks are two different things. Miners are very dependent on banks and loans/notes etc etc. Gold isn't dependent on those things. Miners are a horrendous "hedge" against market crashes.