By SD Contributor SRSrocco:
I have seen a few comments stating that I don’t believe in the gold & silver miners. This is not quite the truth. I don’t believe in the OVERALL MINING INDUSTRY going forward… especially by the next 5-10 years.
However, certain miners will be great stores of wealth as the $trillions of investment dollars tries to find a home in REAL ASSETS and not the fake IOU’s that now total more than $85 trillion globally.
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To invest in miners in the future… YOU HAVE TO GET SMART. There are too many misled investors throwing money at miners that are not performing well. For example, Silver Standard’s total cost of production is now running close to $29-30 an ounce. With that kind of cost structure, there is NO PROFIT whatsoever.
If we take a look at the chart below, we can see that when we compare SILVER STANDARD over the price of SILVER, we can see just how poorly it has performed since 2011:
When silver started to take off in 2011, so did all silver miners stock prices. However, we can see that Silver Standard has grossly under performed the price of silver. In late 2011, you could by one share of Silver Standard for the same price of an ounce of silver. Today, you buy nearly 3 shares of Silver Standard for an ounce of silver.
What you want to happen is for the stock price to trade MORE than the price of silver… not LESS. If Silver Standard had low costs and was making large profits, you would have seen the ratio go from 1.0 to 1.5+ or higher… NOT LOWER. Back in Nov 2011, the price of silver as about $26 an ounce… so was the stock price of Silver Standard. Today silver is trading at $29, but Silver Standard is in the $10 range.
One more thing. I miss old Bob Chapman and his International Forecaster Newsletter. However, Bob only pushed two stocks…. Agnico-Eagle & Silver Standard. I never knew why he told investors to buy Silver Standard. Here we can see that you would have been much better owning the physical metal than the stock.
These are the FUNDAMENTALS BABY.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_silv.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_gold.gif)
Even quality gold and silver mining stocks are loathed these days, mostly for good reasons. Almost everyone is very negative about them. This won’t last for long imo. When gold and silver will start their next leg up it’s probably better to be in the quality PM stocks than the metal itself.
Sentiment in gold and silver are at extreme lows, however the mining stocks are even worse… if that is possible. Jim Willie just came out with a new article in which he continues to believe the mining stocks will continue to be bad investments.
While I agree with Jim, at some point in time, all the naked shorting and manipulation of the shares will cease to exist. There are over $85 trillion in global conventional assets under management. We are already hearing about the Japanese pensio funds moving into gold… this is just the beginning. There just isn’t that much bullion gold or silver to go around.
So, the funds will have to move into the miners. However, there is still risk in these stocks. We don’t know what mines will be nationalized.
But, I really believe there will be a big move into these stocks within the next 1-2 years. You just have to be smart about what stocks to own.
My estimate is that at least Canadian, US, Mexican, Chinese, Swedish mines won’t be nationalised since the big money, banks & hedge funds & pension funds etc, will pour into them instead of shorting them. These entities are very close to governments and their direct and indirect interests. These governments know very well that they can make the most money when they allow some form of free enterprise to exist. Raising taxes may be the case, but even with that they will be careful because they understand they will chase out BIG, BIG investment money easily. To be honest, I think goverments perhaps will take stakes in PM mining companies and promote PM mining activities as part of their formal policies. They are not as short sighted and crazy as Chavez, Morales and some other destructive fanatics.
Actually, I just read the new piece of Jim Willie. I appreciate him but have one problem with him; he has big opinion on everything but many times doesn’t fine tune.
On the miners he is simply very wrong. The miners outperformed the POG and the POS hugely in 2009 and 2010. After December 2010 they’ve started hugely underperforming the POG and the POS. Of course, it’s true, one has to be a smart, disciplined trader regarding the PM mining stocks. Then big opportunity arises, as at least history points out.
I tested the waters recently on Mining Stocks and got out again a couple of weeks ago. I just wanted know how trading worked as I see in the distant future at some point we will need to part with some of our PM’s and I want to be prepared to move quickly to move my wealth. Keep Stacking
I just can’t put any trust into a paper market, not right now.