To:John Barendrecht who wrote (314) From: Keith Zhang Tuesday, Jul 8, 1997 2:15 PM Respond to of 80033
Does CB have silver reserves too? To my knowledge there is none. Silver may be dumped for no good reasons.
To:Lorne Larson who wrote (303) From: Abner Hosmer Tuesday, Jul 8, 1997 2:50 PM Respond to of 80033
Lorne- Thanks for your generous comments. The creation of this thread may have been timely, but the credit for keeping it alive and moving goes to John Barendrecht. I have been too busy trying to hang onto my tail in this wild market. Thanks for all of your effort John! These sure are interesting times that we are living in. For anyone who has been invested in gold or gold stocks, I'm sure this past 18 months has been a time that they will never forget. I suspect I'm not the only one who has been getting a quick course in gambling, trading, and investing, depending on what you prefer to name your poison.
18 months ago, knowledgable people in the field ,(I'll cite Peter Munk , CEO of Barrick, as one example), were talking of a new paradigm in gold, of prices settling in the $400+ range. We have gotten a new paradigm, alright, but it is not the one that many had expected. It will be interesting to see how far we can go. I think that there still remains some considerable risk. A look at the XAU monthly chart indicates that there may be plenty of room left on the downside.
In the broader market, I think that the best of the earnings gains are behind us. I think much of momentum we have been seeing can be atttributed to the rounds of downsizing and cost-cutting that we have gone through. These have reached their limit. Companies now find themselves competing for both skilled and unskilled workers, and they also find themselves unable to raise prices in this competitive and deflationary environment. This means shrinking profit margins. At the generous multiples that many stocks are trading at, even the blue chips, this could spell rough water ahead. If at some point the "new" generation of investors experiences anything close to what gold investors have in the last 18 months, the realization of risk will come as a very rude awakening.
It is interesting to see how the demand for ever-higher returns on investments now seems to have broken out like a plague even amongst the worlds central bankers. No use for gold anymore. Doesn't pay enough. There exists other higher-yielding "safe" investments that must be taken advantage of, to satisfy at once the ever-increasing thirst for more govt. spending and the resistance to higher taxes. No trick, no stone may be left unturned. Pitch the gold over the side. Have we witnessed the death of risk in the economies, the financial markets, the currencies, and the monetary systems that govern capital flows worldwide, or are the central bankers also caught up in an unrealistic craze for ever higher returns? Are financial assets an ever-expanding reserve to be drawn from upon demand, does such a thing as a contraction no longer exist?
I think in the end we may find out that we can't live without the barbarous yellow metal, after all. With that in mind, I have done a bit of surfing amidst that sector that has been most beaten down, the junior golds. I have followed 2 criteria. First, the companies must have excellent properties, and second, they must have either plenty of cash, or the sponsorship of a major. While I may not have bought at the bottom, I expect there to be a rather vicious round of consolidations if the weakness in gold persists, and with this in mind I have devoted about 25% of my capital to companies that have prospective properties and have also been beaten down sufficiently to benefit from an improvement in the POG. At the same time, I am keeping most of my powder dry.
I'd be very interested if anyone would care to share their comments on this or their own strategy for benefitting from the current market conditions.
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