Subscribe Now   -   Standard: only $199 per year   or   Premium: only $299 per year  -   Click Here

11/06/2011
Ramblings

Reasons to avoid gold & silver stocks:

1. Political Risk. Market regulations, taxation, royalties, nationalization, etc.

2. Stock Market Risk. Markets freeze up and stop trading.

3. Financial Market Risk. Loans and financing become difficult to obtain.

I agree with those points. I think we are facing a cataclysmic event (most likely to begin in the financial markets). I expect the markets to freeze up at some point and all hell to break loose. When that happens the ability for miners/explorers to raise money is going to be severely hampered.

So, yes, the risk of investing in precious metals stocks is huge and getting bigger every day. I'm taking a huge risk with my exposure today. I'm just praying that the markets hold together until 2014. If they go down in 2012 or 2013, I'm going to take a big hit.

But I know (I expect) the carnage that's coming and hope to be mostly physical by the end of 2013. I'm betting that we will get a rush into the metals and into the mining stocks soon. I know its a bet and not an investment. I know the risk I am taking.

I have diversified into many different countries. I think that Canada, Brazil, and hopefully Mexico will be okay. As long as Mexico does not nationalize their mines or raise royalties too high, I think mining will do well for a while. As for Canada, I think that demand for gold is not going away anytime soon. I think we will get a mania in Canadian mining stocks at some point. As long as markets trade, these stocks have a good chance.

I think that many precious metals stocks will get blindsided by political factors. And that it is hard to know which ones will get hit, or if the entire industry will get blindsided (this could happen to the US markets).

My doomsayer expectation with the US dollar's demise and US national debt default is spot on. However, the fall out and timing is hard to predict. I just know we're in a countdown to a collapse. What will be the fallout, and how will miners get exposed? That's hard to say, but it will likely be negative to the overall industry.

I think physical silver right now is an excellent investment (I've been buying the dips). Silver will do amazingly well as silver runs to $150 and beyond. But once silver gets to $75, the stocks are going to look very enticing and the metal not so much. When silver hits $75 the upside is only going to look like a double. But what will miners look like at $75 silver? I'm using silver as an example, but the same goes for gold.

If you look at the risk/reward profiles of investments today, I see the following. Any S&P stock (other than food, energy, or precious metals) is extremely risky. Any bond (including corporate, municipal, state, and federal) is extremely risky. I don't think people understand the risk they are taking with their investments today.

The best risk/reward profile is physical silver, followed by physical gold.

The next best is gold and silver miners (producers). There is more risk of course than physical, but the rewards could be amazing. The total market capitalization of gold miners is worth close to Microsoft ($220 billion). The total market cap for silver miners is worth close to Starbucks ($33 billion). Why the low valuations in silver and gold miners? No one wants to invest in miners today. That could change, and likely will.

After that is energy. I think oil is going to $200 soon, and natural gas to $15 (currently $3.50).

After that is food. With higher oil prices, you get higher food prices.

Invest accordingly, but know that physical metal is really the only safe investment.

We use cookies on this website. By using this site, you agree that we may store and access cookies on your device. Find out more here.     ×