Regarding Gold-related stocks

[DemonD]

I am wondering about playing the coming gold/commodities hyperinflation scenario by buying shares in gold companies. (I am generally more comfortable with companies as opposed to mutual funds because I feel I have more control over what exactly I'm buying.)

Am I an anti-bug? I'm not sure about that, but the idea of buying gold bullion or gold coins and storing them in a safe or deposit box, or even buying gold and having it held by an institution just is very unappealing to me.

I am personally very pro-stock-ownership. To a certain extent I feel that taking my money and putting it into a large, steady, dividend paying large cap such as Altria or Johnson and Johnson is safer, in the long run, than putting it into a savings account. To this extent, I'd rather entrust my dollars to a steady gold-related company with a management that I can find confidence in as opposed to holding gold myself (in other words, I have more confidence in others to preserve or create my wealth through gold than I do myself).

I've got a list of gold mining and related companies that I'm watching, and I'm not looking for advice on specific companies (nor am I looking for advice on why I shouldn't buy gold companies and invest in a different way)

However, I'm not able to find historic stock prices of any gold-related company from the 1970's and the 1980's to see if those securities popped up with the gold bubble from that time period.

Is anyone planning on going this route? And subsequently, can anyone point out information about gold-related share prices from the 1980 era?

thanks

[EJ]

Re: Regarding Gold-related stocks

I am wondering about playing the coming gold/commodities hyperinflation scenario by buying shares in gold companies. (I am generally more comfortable with companies as opposed to mutual funds because I feel I have more control over what exactly I'm buying.)

Am I an anti-bug? I'm not sure about that, but the idea of buying gold bullion or gold coins and storing them in a safe or deposit box, or even buying gold and having it held by an institution just is very unappealing to me.

I am personally very pro-stock-ownership. To a certain extent I feel that taking my money and putting it into a large, steady, dividend paying large cap such as Altria or Johnson and Johnson is safer, in the long run, than putting it into a savings account. To this extent, I'd rather entrust my dollars to a steady gold-related company with a management that I can find confidence in as opposed to holding gold myself (in other words, I have more confidence in others to preserve or create my wealth through gold than I do myself).

I've got a list of gold mining and related companies that I'm watching, and I'm not looking for advice on specific companies (nor am I looking for advice on why I shouldn't buy gold companies and invest in a different way)

However, I'm not able to find historic stock prices of any gold-related company from the 1970's and the 1980's to see if those securities popped up with the gold bubble from that time period.

Is anyone planning on going this route? And subsequently, can anyone point out information about gold-related share prices from the 1980 era?

thanks

I'd estimate about 1% of the hardcore gold owners, who represent something like 5% of all investors, imbue ownership of physical gold with its reputation as the investment of pedanticts, doom-mongers, conspiracy theoriests, and crackpots. This vocal gold owning minority are–paradoxically–the #1 reason physical gold is as unpopular as it is as an investment with the other 95% of investors.

Having researched and owned gold mining company stocks over the years, I can attest to the idea, demonstrated in several studies, that it's almost impossible to make money in the stocks of PM mining companies. There are various problems, notably that they tend to be some of the worst managed companies on earth. Jim Rogers covers this in his Hot Commodities book, and we touch in it in our interview with him. However, even though some of these studies are relatively recent, the tendency to mines to be poorly managed is not news. A saying, often attributed to Mark Twain, defines a mine as “a hole in the ground with a liar at the top.”

I've done okay with gold stocks, but I'd have a hard time proving that my success was not simply due to luck in picking the right companies at the right time, whereas when you buy the stuff, as Rogers recommends, you are buying into a macro supply/demand trend. Looking back, I'd have been better of in a risk-adjusted basis off owning more of the stuff than from owning the stocks I bought.

When I was buying gold in 1999 - 2001, I had no choice but to buy physical. It's an expensive way to own it, although there are some advantages. Now there are two gold ETFs that you can buy right from your brokerage account. We touch on gold ETFs in our book americasbubbleeconomy.

Just an opinion, not investment advice, ala the usual disclaimer. Maybe others here feel otherwise and have had better experiences with mining stocks than I have.

[jk]

gold: metal v mines; physical v paper

many observers have said that newmont has the smartest management around, having acquired pierre lassonde along with franco-nevada. management smart enough to make a huge investment in canadian oil sands years ago in order to hedge their energy consumption. but not smart enough to avoid getting a mine nationalized in uzbekistan, or to avoid pollution accusations in indonesia, or to avoid having production curtailed by ecological concerns in nevada. some say all the bad news is in the stock, and i just added a little to my position, but caveat emptor.

still, this also sheds light on the difference between gold and gold mines. the worse it is for the mining industry, the more valuable is gold that's already out of the earth.

richard russell made an interesting point recently, recommending physical instead of paper [etf or futures] gold. he said that most people have trouble holding on during the wild ride that gold can bring. people tend to get shaken out in the big corrections. buying physical makes it much more of a hassle to sell, first you have wait for nightfall, start digging in the backyard, and so on.

i know that i got shaken out of part of my pm position when gold plunged along with everything else in july 2001. i swore afterward that i wouldn't let that happen again, so i am white-knuckling it through the current sell-off, holding on to my current positions.

[DemonD]

Re: Regarding Gold-related stocks

JK - cool, I've added Newmont to my watch list.
EJ - I understand your standpoint on gold. Mark Twain is one of the greatest pop icons in American history, and I love him for entertainment purposes, but should I take investment advice from him? Remember, he also said, "Golf is a good walk spoiled." And I'm not sure I even want to think how much golf has exploded as in industry from his time to our time. For me, it is easier for me to do due diligence on 10, 20, 30, or even more gold and PM related stocks and to own shares in those companies than it is to own physical gold. My only (minor) concern is that if a currency crisis happens and brokerages start going out of business, my shares in those companies may beceome vaporware. I would be more concerned with being responsible for holding actual gold in my possession.

JK (and everyone else) - is there any info or charts out there on the share price of gold related companies from the 1970's? Yahoo only has Newmont's price history from 1983.

I'm reminded of another quote attributed to Mark Twain (and/or Benjamin Disraeli): "There are three kinds of lies: lies, damn lies, and statistics."

I saw somewhere else an addition to this: "There are lies, damn lies, statistics, and Russian statistics."

[Jim Nickerson]

Re: Regarding Gold-related stocks

JK - cool, I've added Newmont to my watch list.
EJ - I understand your standpoint on gold. Mark Twain is one of the greatest pop icons in American history, and I love him for entertainment purposes, but should I take investment advice from him? Remember, he also said, "Golf is a good walk spoiled." And I'm not sure I even want to think how much golf has exploded as in industry from his time to our time. For me, it is easier for me to do due diligence on 10, 20, 30, or even more gold and PM related stocks and to own shares in those companies than it is to own physical gold. My only (minor) concern is that if a currency crisis happens and brokerages start going out of business, my shares in those companies may beceome vaporware. I would be more concerned with being responsible for holding actual gold in my possession.

JK (and everyone else) - is there any info or charts out there on the share price of gold related companies from the 1970's? Yahoo only has Newmont's price history from 1983.

I'm reminded of another quote attributed to Mark Twain (and/or Benjamin Disraeli): "There are three kinds of lies: lies, damn lies, and statistics."

I saw somewhere else an addition to this: "There are lies, damn lies, statistics, and Russian statistics."

Demon,

I guess you are familiar with bigcharts.com. Sometimes when you use the Interactive Chart option after putting in your symbol, and under Time select All Data, the data goes back quite while. I just did IBM and it goes back to 1970, but you cannot isolate time frames with Interactive Charts as you can when you use Java Charts, which at the most only give 10 years data.

There are a couple of sites that offer some opinions (there may be thousands of others) that I follow. One is http://www.buythebottom.com/ which charts COT data I believe it is for Commercial vs. large traders. The guy behind it is James West who makes brief comments as they relate to the charts that he puts up each weekend. His comments are located by clicking on the "Weekly Update" banner on the left side of where the indices are listed. Right now his charts for the week are up, but his comments might take til Monday or Tuesday to be posted.

The other fellow is Clive Maund who posts about every two weeks on safehaven.com http://www.safehaven.com/archive-137.htm for his archives. He just put up a note Thursday 10/12 on gold and silver.

To me besides whatever the physical nuisance of holding real gold, the long capital gains on gold are 28% if held personally, that to me is a significant negative.

[idianov]

Re: Regarding Gold-related stocks

The shares of pure gold mining companies have very high P/E ratios. It seems the gold companies make very little money even with gold prices in the $600 dollar range.

They enjoy quick rise when gold goes up and they drop 40-50% like rocks during brutal corrections. The corrections usually go 6 months, so it takes exquisite timing and discipline to enter and exit your positions to make some change. The mining is a risky business, so the stock may drop in a blink of an eye if the company has any production problems.

IMO, owning ETF shares that track bullion price (GLD or CEF) are less risky for investment. But with some spare cash, the gold mining sector is the playground for speculation and rollercoaster rides.

Go to www.bigcharts.com for full historic price of any stock.

[jk]

Re: Regarding Gold-related stocks

The shares of pure gold mining companies have very high P/E ratios. It seems the gold companies make very little money even with gold prices in the $600 dollar range.

They enjoy quick rise when gold goes up and they drop 40-50% like rocks during brutal corrections. The corrections usually go 6 months, so it takes exquisite timing and discipline to enter and exit your positions to make some change. The mining is a risky business, so the stock may drop in a blink of an eye if the company has any production problems.

mining companies with high costs of recovery actually give you more leverage to the gold price. relatively small changes in gold price will have enormous impact on profits in these situations. companies with low cost of recovery essentially allow you to buy oz in the ground. there is still a little leverage in that low grade ores become more economic as the gold price rises.

To me besides whatever the physical nuisance of holding real gold, the long capital gains on gold are 28% if held personally, that to me is a significant negative.

tax issues- stocks are better in their tax treatment. metal and the etf's gld and slv are treated as collectibles and so subject to full tax. thus it would be better to hold them in a non-taxable account. use cef, the central fund of canada, as a way to hold [paper] metal in a taxable account. cef holds gold and silver metal in a repository in canada, as well as holding a little cash. because cef is actually a closed end mutual fund it gets preferential tax treatment.

[olydog]

Re: Regarding Gold-related stocks

tax issues- stocks are better in their tax treatment. metal and the etf's gld and slv are treated as collectibles and so subject to full tax. thus it would be better to hold them in a non-taxable account. use cef, the central fund of canada, as a way to hold [paper] metal in a taxable account. cef holds gold and silver metal in a repository in canada, as well as holding a little cash. because cef is actually a closed end mutual fund it gets preferential tax treatment.

I'm thinking of shifting some IRA funds to gold and letting them sit for many years. (Use of funds outside an IRA are not available at this time.) I am a somewhat lazy investor who is definitely NOT comfortable with the risks and work involved (outlined in this thread) about holding stocks in individual gold mining companies. Any thoughts on the ups-sides and down-sides of investing in an ETF through an IRA? I'm looking at GLD and IAU.

[Jim Nickerson]

Re: Regarding Gold-related stocks

I'm thinking of shifting some IRA funds to gold and letting them sit for many years. (Use of funds outside an IRA are not available at this time.) I am a somewhat lazy investor who is definitely NOT comfortable with the risks and work involved (outlined in this thread) about holding stocks in individual gold mining companies. Any thoughts on the ups-sides and down-sides of investing in an ETF through an IRA? I'm looking at GLD and IAU.

Well, if you buy into the the bullish case for precious metals, then you should own some and the IRA is the way to buy GLD and SLV, GLD trades many times more shares daily than IAU, and I do not know any difference otherwise between the two. I doubt one will outperform the other over a long time, no reason for one to do better.

[BK]

Re: Regarding Gold-related stocks - TGLDX vs GLD

Any fans of TGLDX out there? Seems its performance very similar to GLD - Anyone follow or own TGLDX - seems like a good alternative for non-retirement money?

[jk]

Re: Regarding Gold-related stocks - TGLDX vs GLD

Any fans of TGLDX out there? Seems its performance very similar to GLD - Anyone follow or own TGLDX - seems like a good alternative for non-retirement money?

i own some tgldx - it's a relatively conservative and well managed fund. although it has tracked gld this year, it has far outperformed gld over the long haul. check out this chart and use the slider to see it over the period since 1999.



http://stockcharts.com/charts/perfor...html?GLD,tgldx

[WDCRob]

Re: Regarding Gold-related stocks - TGLDX vs GLD

If anyone is so inclined...

I've started following some of the ETFs and other metals-related stocks/funds you all mention above. I've noticed in the past month that SLV tracks GLD directionally virtually every day, but that it is also virtually always a bigger move (% terms).

Is silver generally more volatile? If so, would that trend continue under some of the iTulip doomsday scenarios? If not, is there any obvious reason why this specific pair of ETFs should behave that way?

[jk]

Re: Regarding Gold-related stocks

when pm's aren't running, silver is an industrial metal. as gold becomes monetized again, silver comes along and progressively is viewed as an asset instead of an industrial commodity, and it is indeed higher volatility. in a precious metals bull market silver acts like higher beta gold.

[PeterM]

Re: Regarding Gold-related stocks - TGLDX vs GLD

Have been reading a lot last months on gold as I am entertaining the idea to build a small position.

A lot of sites provide info written by hard-core gold bugs, unfortunately often rather biased.
One of the sources that helped me to put gold and stock issues in perspective is Bill Cara. Over the last days he discussed some companies in detail.

Just scroll down on the following link http://www.billcara.com/

Generally an anti-spin approach with a lot of more detailed info than provided by other sites.

[fightthepower]

Re: Regarding Gold-related stocks - TGLDX vs GLD

Have been reading a lot last months on gold as I am entertaining the idea to build a small position.

A lot of sites provide info written by hard-core gold bugs, unfortunately often rather biased.
One of the sources that helped me to put gold and stock issues in perspective is Bill Cara. Over the last days he discussed some companies in detail.

Just scroll down on the following link http://www.billcara.com/

Generally an anti-spin approach with a lot of more detailed info than provided by other sites.

I have a core holding of CEF and U.S. Global Investors WrldPrecMineral. I have traded in and out of various gold and silver stocks beyond that. I will sell my CEF when gold trades on par with the DOW Ind or when I can buy a house with it for cash.