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Minyan Mailbag: Metals

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Good luck Lisa!

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.



Prof. McGuirk,


I have a reasonably big position (for me) in Silver Wheaton (SLW-T on TSE). I'm comfortable with the long term risk / reward on bullion silver. My dilemma is that I can't find anything wrong with this stock and it looks "cheap" to me.

From bitter past experiences I'm afraid I'm missing something BIG and BAD! I'd appreciate any comments---negative or positive.

Thanks,

George



Hi George,

I share your pain, believe me!

I think the whole sector is "cheap" with Amex Gold Bugs Index (HUI) now sub 180... I don't get it either. Gold is less than 5% from its 30 year high, yet stocks are some 30% (HUI) below last year's 260ish. Something must give, either gold way lower or the stocks rally. My idea is that the stocks are so undervalued that there will soon be more corporate / takeover activity with big guys buying small guys to replace assets being currently exploited. Reserve replenishment will be key to the big guys.

Some of the mid-tiers like Golden Star (GSS), Meridian (MDG), Bema (BGO), IAMGOLD (IAG) would look quite inexpensive today, I would think, especially to a Newmont (NEM), Barrick (ABX), Placer Dome (PDG), GoldCorp (GG) type. Just guessing but this looks like a great opportunity for fast movers with deep pockets.

I will be doing the "streak" in the next 48 hrs as per the bet I had made a year back. Photographic evidence will be provided.

This equity capitulation is killing me on a reval basis, but what can we do??!!! I think we will be back above 200 very quickly, but my opinion is largely irrelevant now. I said we wouldn't see below 180 - we did - I'm wrong.

Do we see 150, maybe, but I can't see it for the life of me - unless gold is back at 360.

I don't have a problem with SLW but prefer Pan American (PAAS) / Silver Standard Resources (SSRI) as a silver exposure, just fyi and not advice.

I will be back writing again next week but will probably put something out before the weekend, it all depends on immigration. We will know whether Lisa is allowed to stay or must leave, within a week or so. Until then, life is a bit up in the air and we are trying to make the most of it while we can.


Cheers,

Prof. McGuirk




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