Gold and Silver Mining Stocks Offer the Best Value of any Sector in the Stock Market By Far and By a Wide Margin

smartknowledgeu's picture

Today, gold and silver mining stocks offer the best value by far of any sector in any stock market anywhere in the world. Due to the recent massive volatility that bankers have introduced into the PM stock sector, and the fact that commercial investment advisers worldwide have erroneously re-educated millions of people with the concept that volatility equals risk, the majority of people worldwide will miss a massive opportunity in gold and silver mining stocks over the next several years due to their misguided belief that gold and silver mining stocks cannot escape the throes of banker manipulation.


There has been much acceptance of the theory that Central Banks and bankers perpetually manipulate gold and silver spot prices through the gold/silver futures markets due to strong circumstantial, non free-market evidence such as gold/silver futures prices being significantly higher in Asian futures markets versus Western futures markets for long stretches of time as well as out-and-out flagrant behavior such as the irrational raising of initial and maintenance margins on silver futures five times in nine working days into falling prices instead of into rising prices. For those not aware of the multitude of schemes Central Banks execute to suppress gold and silver futures prices, please refer to this article, JS Kim Uncovers Four Parallel Markets for Gold, when during the Wall Street collapse of 2008, bullion banks (controlled by Central Banks) routinely knocked the gold futures price down by $10, $20, $30 and sometimes even $40 an ounce usually right at market open of the NY COMEX at a time when gold was trading at less than $900 an ounce and such movements reflected 2%+ to 3%+ waterfall movements downward in price (comparatively speaking today, such percent movements would consist of $40 to $50 an ounce movements downward.


Since then, bullion banks have executed this scheme over and over, pulling bids at the market open of the NY COMEX to cause a waterfall decline in gold futures prices in a matter of a few minutes. Throw in for good measure that you can check all US holidays when the COMEX is closed for the past five years and you can find nary a day when gold is not higher or at least about even, simply for the reason that the NY Comex is closed and the Western banking cartel is non-operational in the gold/silver markets on these days. If this circumstantial evidence, literally the tip of the iceberg in the mountain of circumstantial evidence of banker price suppression schemes against gold and silver futures, is insufficient to convince the most stubborn of skeptics, then consider former US Federal Reserve Chairman Alan Greenspan’s statement in 1966 that:

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.”


Would not statists that support the doctrine of seizing centralized control over economic planning and monetary policy, not covertly and actively suppress the price of gold, if the most famous Central Banker himself stated that they possess “an almost hysterical antagonism” towards gold? Today, nearly half a century later, banker propaganda and re-education campaigns regarding gold and silver have been so successful that Greenspan’s accusation that many defenders of the laissez-faire doctrine fail to recognize that gold and economic freedom are inseparable still stands true. I’ve read numerous essays by those that argue for less government interference in business and monetary affairs and for stronger free markets but yet vehemently deny that bankers ever interfere in gold and silvers futures markets through active price suppression schemes.


However, as I’ve written extensively about this topic for six years at my investment blog and will address this topic further in two books I will release by year’s end, I do not want to stray from the main topic of this essay: Gold and silver mining shares offer tremendous value and tremendous upside right now due to the fact that bankers have worked very diligently to suppress the price of gold and silver mining shares for the past 12 months. I’ve always been surprised over the years by the lack of accusations from the CEOs of the mining world that one of the primary reasons, if not the primary reason, for the underperformance of their share prices in recent years are banker price suppression schemes enacted against the PM shares. I realize that many industry analysts refrain from making this accusation due to the fact that they are being afraid of labeled by their peers or superiors as “loony, conspiracy theorists” but who cares if someone at the CFTC or some top PM analyst at Goldman Sachs or Citigroup calls you a “loony”. Due to macro and micro-economic predictions that have the track record equivalency of Ben Bernanke, most of these guys have as much credibility as a talking dolphin, so to be discredited in an ad hominem attack by any of these guys should truly pose no worry. However, nearly all mainstream gold/silver analysts appear to still engage themselves in censoring the truth due to concerns of being ostracized by the mainstream financial industry. As far as I’m concerned, being ostracized by the criminal mainstream financial industry, in my opinion, should present one with the mark of credibility.


When I first started publicly speaking about the banker executed price suppression schemes against gold and silver futures prices six years ago, bankers tried to discredit and call me crazy back then, but now, six years later, such explanations for inexplicable movements downward in gold/silver futures markets when physical supply/demand fundamentals demand upward price movements are at times, even accepted by the mainstream media, or at a minimum, now reported by them instead of being ignored by them. These are huge steps forward in dispensing the red pill of truth to skeptics regarding the true reasons behind volatile price movements downward in the gold and silver markets. Furthermore, whenever I presented factual evidence of the manipulation in gold markets, most banking analysts that disagreed with me countered my arguments with simple ad hominem attacks that never once provided a solid refutation of, nor a credible argument against the evidence I presented, circumstantial and factual (in the form of Central Bank documents that specifically addressed their desire to suppress gold prices). I believe the same three stages of truth as described by German philosopher Shopenhauer, will also manifest itself in regard to PM mining shares just as they have manifested/are about to manifest with gold/silver prices: (1) First, truth is ridiculed; (2) Second, truth is violently opposed; and (3) Third, truth is accepted as self-evident. Finally, if people so widely accept now that bankers are interfering in suppressing much higher free-market prices from operating in gold and silver futures markets, is it really that much of a deductive leap to assume that they would also be interfering in suppressing free-market prices in gold and silver mining shares?


As is the case with the behavior of gold/silver futures markets, numerous illogical anomalies that manifest themselves with regularity in the gold/silver mining shares first made me suspect that bankers were routinely interfering with the prices of gold and silver mining shares. To illustrate my point, let’s look at the performance of a couple of flagship gold and silver mining shares versus the performance of some flagship retail and financial shares.



From the chart above, you can see that the mining shares either significantly outperformed or astoundingly outperformed non-mining industry companies with a similar market cap size in simple financial metrics except for share price appreciation in the last year, a category in which they astoundingly underperformed their competitors. I am not. In the case above, I have only provided a very basic example to illustrate how drastically undervalued share prices of producing gold and silver companies are right now. I fully realize that I am not comparing apples to oranges, but I merely wanted to illustrate how companies’ share prices with healthy earnings and revenues outside of the mining sector act, since bankers have targeted gold and silver mining shares as a sector for price suppression schemes. Thus, I had to look outside of the PM sector to provide examples of what should be happening with the PM mining share prices. And I only call the other company “competitors” of the mining stocks because the goal of commercial investment industry analysts is to prevent you from buying the most undervalued stocks in the entire market and to keep you invested in overvalued and overpriced stocks. After all, when gold and silver mining stocks finally get going in their next upleg, which may be very soon, investors will naturally want to also invest in physical gold and physical silver and thus dump the broad stock market index portfolios they may currently maintain. So in essence mining stocks are competitors of the retail and tech stocks though most would say they are not.


Furthermore, most would argue that substantially lower prices in the price component of PEG ratios are justified for the mining sector due to the typical volatility of mining shares, but this past year, this argument only serves to support my thesis regarding the fact that mining shares are the most undervalued sector and the most underappreciated sector in the market right now. Sectors that are viewed as volatile typically are expected to have lower share prices to compensate for the added risk of holding shares in that sector. However, this year, given that the broad stock market index of the S&P 500 has traveled an incredible 1,230+ points up and down since May 1st but has remained relatively unchanged in value, extra volatility of mining shares over components of broad stock market indexes does not justify lower share prices of the mining stocks. Furthermore, because banker attacks on gold and silver mining shares, whether achieved by indirect take downs of gold/silver futures prices and/or direct sell-offs of the shares during times of low volume trading, are responsible for the added volatility of PM shares, arguing that the volatility of the sector justifies lower PM share prices also loses credibility.


Even if we disregard this admittedly circumstantial argument, if we compare the trading ranges at which these four stocks traded at during most of the past 12 months, the volatility comparisons do not justify the huge differences in the PEG ratios of the past 12 months between the PM stocks and the stocks that trade on the broader stock market index. Chipotle traded between a range of $270 and $340, or a 25.93% spread for most of the year while Silver Wheaton traded in a range between $30 and $40 a share, or a spread of 33% most of the year, though both stocks traded both higher and lower than these ranges for short periods of time. Though this is but a comparison of two stocks out of hundreds of mining stocks and a couple thousand NYSE stocks, and though some may argue that Chipotle is overvalued at its current share price and PEG, many PM mining stocks across the board are flush with huge cash reserves, soaring revenues, double digit earnings growth for several consecutive quarters, but yet have experienced stagnant or even negative share price growth over the past 12 months. Again I am only comparing Chipotle to Silver Wheaton to highlight the massively manipulated state of flagship gold and silver mining companies and how company share prices that are not manipulated may behave in light of outstanding earnings over the past 12 months, and not because I believe a direct comparison is the most apropos one.


Besides the totally illogical performance of Barrick Gold and Silver Wheaton above when considering their PEG ratios and their massively positive earnings growth over the last year, I have witnessed numerous anomalies over the past decade that convince me beyond a shadow of doubt that bankers manipulate the prices of gold and silver mining stocks downward on a persistent and consistent basis to prevent the masses from understanding that ownership of physical gold and physical silver will liberate them from our current morally bankrupt, illegitimate and unconstitutional monetary and banking system. For example, during dozens of options expiration days over the past five years in particular, I have witnessed uptrends in the price of numerous mining stocks stall and shed 3% to 4% from the previous day’s market close on literally no negative news other than the fact that it was OpEx day. And usually the prices of mining stocks, on days when this happens, gap down significantly on market open. Then, the following Monday after OpEx day is finished, the uptrend in mining shares will resume. Yes, one can call this behavior coincidental but anyone that does so would be dismissing the laws of probabilities and calling for a new mathematical paradigm to apply only on OpEx days. The percent chance that attributes such regular and repeated price action behavior that occurs only on OpEx days to the probabilities of “random noise” would likely come in at less than a fraction of 1%.


For the first time I can recall in recent times, the CEO of a major PM mining company finally spoke out about the ridiculous and likely intervention of the banking cartel in suppressing the price of not only PM futures but PM share prices. Keith Neumeyer, the CEO of First Majestic mining, recently voiced his opinions behind the downward price volatility not only of gold/silver futures but of gold/silver mining shares: “I don’t think supply and demand has anything to do with the price [of silver], unfortunately. The world we live in today is a paper environment where silver is priced by financial circumstances. Banks, traders and investors around the world move markets to where they want them to be. Governments and commercials—big banks like HSBC and JP Morgan—all have a piece of the action. They alternately work together or sometimes against each other. All these forces price the metal. That’s one reason we’re seeing the volatility that we’re seeing today.” Dramatic silver volatility “has to do with the financial instruments that we trade in and with the fact that silver trades a billion ounces per day on the COMEX alone when there are 26 to 30 million ounces of silver available for delivery. With that kind of leverage, you just don’t have a proper market… The governments, regulators and bullion banks have let the silver market get more and more leveraged. We’ve seen a lot of wealth destruction as a result of this leverage and we’re going to see a lot more until, finally, the governments decide to change the system.” With these scathing comments about the casino like nature of banker-rigged gold and silver markets, Neumeyer hit the nail squarely on its head.


Unfortunately, governments, because they are partners with the bankers in this system of cronyism, will never voluntarily change the system. Thus, here is the billion dollar question if one understands the tremendous illicit activity of bankers in rigging gold/silver PM shares much lower than their free market prices: Why would you want to buy into these shares even if they are remarkably undervalued right now given massive banker desire to control and suppress their share prices? After all, all of this banker rigging convinced a few gold/silver technical analysts just two weeks ago to predict imminent collapses in the silver price to $20 an ounce in light of how bankers were “painting the charts” in gold and silver to keep investors fearful of these sectors. In fact, a look at the BPGDM (Gold Miners Bullish Percent Index) right now shows that bullish sentiment towards gold/silver stocks is practically non-existent though we are at a crossroads when people should be buying PM shares because of their current tremendous upside. So other than the fact that gold and silver mining shares offer great value right now, is there a reason to realistically believe that gold and silver mining shares will win their battle against banker initiated share price take downs any time soon? To answer this question, let me tell recall a couple of stories that will frame our current situation of negative sentiment about gold/silver mining shares in the proper perspective.



A couple of years ago, in April of 2009, I spoke in Asia to a group of investors at a time when bankers had knocked gold back down from the psychologically important $1,000 an ounce level for the fourth time in the about a period of 18 months. Back then, gold was trading at about $870 an ounce. The investors that attended my conference asked me back then why in the world they should buy gold at $870 if banker manipulation was one of the primary reasons responsible for the failure of gold to breach $1,000 an oz four consecutive times. Furthermore, they inquired, why couldn’t the bankers manipulate gold back down to $500 an oz if they could successfully prevent gold from breaching $1,000 on four consecutive occasions? I remember informing the investors that the banker manipulation schemes could only succeed short-term and that the bankers would fail long-term. Just as Central Banks' endless rounds of QE will spectacularly fail long-term and only serve to kick the can of global economic failure down the road, the Central Banks' price suppression schemes against gold and silver only kick the inevitable rises in gold and silver prices down the road as well. In addition, I informed my highly skeptical audience that the law of diminishing returns would apply to banker manipulation schemes that work against free market forces, and that each subsequent application of manipulation against free market forces would last a shorter time, as is evident in the chart above. Though there was a large gap of time between the second and third times that gold approached $1,000 an ounce after getting knocked backwards, the time in between the third and fourth time and the fourth and fifth time gold approached $1,000 an ounce was much more condensed. So those that remained skeptical and had more faith in banker amorality than in the belief they could defeat these banker manipulation schemes lost out on a 100% gain in the price of gold that has occurred between then and today.



If we look at the chart of the mining shares I presented above, the same pattern with the mining stocks that afflicted gold prices a couple of years ago is evident. The HUI Gold Bugs Amex has been turned back from the 600-610 level four consecutive times (with one false breakout in early September 2011) and each time bankers have rebuffed the index from this level, it has taken less and less time for the index to rebound to this level again as with the bankers’ attempt to defend the $1,000 an oz price level with gold. Though you may not recall, I remember many people being incredibly frustrated with the price action in gold from 2008 and 2009 and with some people selling all their gold as a result of the bankers’ intervention to control the price of gold, an action that ironically was the exact end goal of the bankers’ manipulation game. Today, despite the fact that we have history as a guide and the cliché that history always repeats itself, for some reason, I have seen many people become incredibly frustrated with the bankers’ rebuke of the attempts of gold and silver mining shares to climb higher and as I witnessed in 2009, I have seen people make the big mistake of dumping all of their gold and silver mining shares in the past couple of months due to frustration. In fact, after I scripted this article, Don’t Miss Out on One of the Best Investments of a Lifetime…Yet Again, on August 8, 2011 in which I advocated the HUI at 531.78 as a good low-risk, high-reward entry point to purchase some gold mining stocks, I received some comments that literally called me an “idiot” for writing this article after the HUI hit a low at market close of 502.92 in early October, even though this represented less than a 5.5% drop from the level I advocated buying mining stocks that past August.


As one can hardly legitimately call anyone an idiot for making a call that leads to a temporary 5% drop, I can easily guess the novice investor mistake that this irate person committed. Just as is the case today, as was the case on August 8, 2011, hardly any investors ever make a move when gold/silver assets are dirt-cheap. Instead they fall victim to the game of banker manipulation, and refuse to buy gold and silver assets when they present solid value as they fear a gold/silver crash. Consequently, they wait for significant rebounds before ever investing in gold/silver despite golden fundamentals at much lower prices that point to the strong possibility of much higher prices in the future. Even if much higher prices are followed by another round of manipulation and lower prices, interim volatility is irrelevant, as long as your decisions to enter gold/silver markets at the right time and prices are solid. I can only fathom that this person finally made the move to buy mining stocks after the HUI hit a short-term top of 635.04 one month after I advocated the buying of gold mining stocks. Thus, one month later, instead of being able to sit through a very manageable 5% drop, this investor likely panic-sold out of gold mining stocks after taking a 26% hit to his gold mining stock portfolio in little over a month. Though my call that PM stocks would be the best in class from that point forward to the end of this year has not yet come to fruition, I strongly believe that my long-term prediction about PM stocks moving much higher from that point forward will still prove correct, and that only the time frame of my prediction will be pushed out by several months. That is why I always provide timely guidance to my clients that distinguishes between the times we need to move into, or remain in cash, and the times we need to remain patient and fully committed. Furthermore, as all markets are dynamic and need to be analyzed weekly, and sometimes daily, any intelligent investor would realize that changes in short-term outlooks are apt to occur in such volatile environments (that I often discuss with my members but not in public forums). As I illustrated in my example above, timing can easily be the difference between easily waiting through a minor 5% correction or being stuck with a 26% loss after one month.


The short-term corrections of the HUI Gold Bugs index from the 600-610 level on four consecutive occasions has led to bullish sentiment being nearly non-existent for gold mining shares right now (and you could easily make the point that bullish sentiment in silver mining shares is even worse right now). Just as most investors committed the huge mistake of judging gold’s upside in 2009 as non-existent due to banker price suppression schemes, people are making the very same mistake in judging the upside of mining shares right now as non-existent. The banker price suppression scheme against gold and silver mining shares will fail, and I believe that the fifth approach of the HUI to the 600-610 level will be the time that the HUI breaks above this level for good and heads much higher. The last time I saw an opportunity better than our current one in the mining shares, I informed my clients to double down on their positions in Silver Wheaton at $3.45 a share in November of 2008. Today with Silver Wheaton trading at $33.52 a share, those that acted during a time when sentiment regarding PM shares was at an all-time low, have been rewarded with a 872% gain in little more than three years. Though I don’t expect mining shares to gain 872% in 3 years again, no doubt there may be more than a handful that return several hundred percent in gains in the next three years.


We must not let our fear of bankers’ amorality and their desire to suppress our freedom scare us away from buying assets that will free us from their illegitimate and unconstitutional monetary system. If one remains too fearful to buy gold and silver mining shares due to banker introduced volatility into this sector, consider at a minimum, purchases of physical gold and physical silver to replace your fiat paper currencies and to replace your paper silver SLV and paper gold GLD ETFs. Also consider that the global broad stock market indexes have been no less volatile than mining shares this year with MUCH greater risk as banks have manipulated broad stock market indexes higher and mining share indexes lower. And what if I’m wrong about mining shares heading much higher from this point forward? The aforementioned Keith Neumeyer, CEO of First Majestic Silver, provides perhaps the best answer to have faith that history will repeat itself with the mining stocks share prices eventually moving higher into their free market, non downward-manipulated prices:

“If I’m wrong (about free market forces winning the battle in gold/silver markets in the future), the banks will run the world, even more so than they do today, 10 or 20 years from now. God forbid that we ever get there because that’s a one currency, one government world that would absolutely be a disaster for the human race. There would be no freedoms at all to move or to invest. It would be like having shackles on our ankles. There is a movement to go in that direction, unfortunately. There are a number of very wealthy people that want to see that. I hope that we can find the politicians to prevent that type of world from coming to pass.”



About the author: JS Kim is the Managing Director, Chief Investment Strategist & Founder of SmartKnowledgeU, a fiercely independent investment research and consulting firm that has been providing contrarian, independent investment guidance to clients in 33 different countries since 2006. Despite the struggles of PM mining shares in 2011, his Crisis Investment Opportunities newsletter, since inception in June, 2007 to the end of September 2011 has yielded a cumulative +162.40% gain versus the -36.20% loss of the ASX200 and the -25.70% loss of the S&P 500 over the same investment period. Follow us here on twitter.




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FranSix's picture

The risk in mining stocks is that you might have to sit on a loss for quite some time.  You have to be right in your assumptions here, but you also have to make money.

In owning bullion, you can dismiss any loss you might have sat on and point to asset price appreciation as if it were your own virtuous circle.

But the mining stocks are part of the gold markets.  At one time you could not dissuade anyone that the larger miners were part of the gold price manipulation conspiracy.  They survived the gold price collapse and Bre-X by hedging.  It was a welcome sight to see that shareholders could cower self-aggrandized CEOs of these big gold companies into writing down their hedge books.

The smaller miners survived through the same era and consolidated properties.  But you either had massive share dilution or grade dilution or both.  It would be a welcome sight if shareholders could cower these self-aggrandized CEOs of these small cap companies into providing a dividend return for their shareholders, as it was during the depression era.

JustZaFakz's picture

A great article.  Loved it.  I was disappointed, though, that it didn't show itself to be current thinking by referencing that the world is full of PIS-r*.  PIS-r* has more power to affect the dynamics of precious metals miners than do templates based on modelling the past.  Because of PIS-r,  we have little by which to guage mining companies for the immediate future. If the warring talk heats up in the middle east, or if another PIS-r* war indeed becomes a reality, the first thing we'll see is $300 a barrel oil and THAT WILL CRUSH precious metals miners and many other producers.  I'd say that oil, ethanol-biofuel companies, [dirt cheap right now], would be a great place to park one's money.  If no NEW war, you'd likely still get some stock price appreciation between now and then.  Can't say the same for gold mining companies which are basically stalled out and losing their safe-haven status.   If oil does go to $300 a barrel, oil companies and biofuels / ethanols will likely be a far, far better place to have parked your money.   

*PIS-r:  Pakistan, Iran, Syria - Russia with a little "r" since we know Putin wants to re-establish Russia as a powerhouse, but we don't yet have clear markers to the extent of his likely Russian-lead eco-politico block.   

rosiescenario's picture

If you know mining and are willing and able to do your homework (and by that I mean going to the mine) then it is hard to beat grossly under valued pm mining stocks.


Just to refute some gross generalizations posted above, I have a 250% gain on one silver miner and a 500% gain on another and both of these companies are still grossly under valued based upon their mining costs and proven reserves. Both of these companies have net margins in excess of 40%.


If you do not know mining then do not buy mining the metal, but don't just grandly dismiss mining stocks as a bad idea. I have been investing in miners for 40 years and would not be around today if one could not make money buying and selling them.


What the author failed to stress is that there is going to be a wave of buyouts coming in the pm miners. They are loaded with cash and the bigger ones will buy the smaller ones that have proven economic reserves because that is a far cheaper way for them to expand than by doing greefield prospecting. Once a few buyouts happen, then we will see some pretty great moves in this sector.

gmrpeabody's picture

"(and by that I mean going to the mine)"

Surely you jest! If one could afford to visit all the mines AND be given liberty to the assays, then I posit that one probably already has enough money and influence to not have to visit the mines.

FranSix's picture

Its not hard.  You buy a ticket and you go to the shareholder's annual meeting, or you got to a mining conference.

You get to meet the swindlers face to face, and will have had a stomach's fill and you spleen will be incredulous in your first couple of tries.

Its part of the education.  If you're serious enough about making returns, you can actually head out to the mine.



mogul rider's picture

Buying ounce sint he ground is a direct attack on the Evil empire.

El Viejo's picture

Uh, is anyone paying attention to the cantalevered S&P vs raw industrials?

This looks eerily similar to end of 2008 only worse.

Eventually, with recessions looming everywhere the S&P is coming down.


The Deleuzian's picture

The trouble with the minors is twofold...When the metals move down, the minors generally move down...When equities move down, the minors generally follow equities...Still waiting for the decoupling or massive outperformance of metals over equities...Quite simply...Minors are caught in a box!!

apberusdisvet's picture

As the end game approaches, there is no question that mines will be nationalized or expropiated.  Does anyone really think otherwise?  Just look at the recent actions by many mining countries to keep production in house and deny exports and the reports that the uber wealthy are trying to acquire tons directly from producers.  And and, has everyone forgotten that one of Obama's first Executive Orders was to give the FEDS total control of the resources of millions of acres of Western US land?

PulauHantu29's picture

My favorites are FCX and GG.


Good luck!

buffettwanab's picture

Instead of Printing $ they actually dig it out of the ground.

I prefer $ilver for its many utilities aside from being true

exchange worthy metal.

Buying quality shares that pay dividends and carry good balance

sheets provides great down side protection.

I would not consider Barrick to be one of my picks.

thanks ZH.

eddiebe's picture

At some point in time the same folks that are putting the boot on the neck of the Seniors and especially the Juniors will pump these same stocks and then those of us that are holding the shit sanwich now will be in for an epic moonshot hard to imagine here and now.

The trick will be to sell incrementally and know what to buy with all those FRN's.

fonzanoon's picture

I used to agree completely with this eddiebe. But I think what you may be missing is if your epic moonshot actually happened they would change the rules and you would still lose. I admire your optomism however and hope you are right. I tend to agree with Gordon.

Sometimes I think it's a sin
When I feel like I'm winnin' when I'm losin' again.

mick_richfield's picture

Something fundamental that I do not understand about what seems to be the majority opinion at ZH ( and among my acquaintances ) is -- how can we talk about the relative value of different sectors of the stock market -- even post-paradigm-shift sectors like precious metals mining -- when we know that the market itself is not protected by the rule of law?

You guys who are still in the market -- why are you still there? Of course these companies will be nationalized.  Of course your accounts will be stolen. 

It's one thing to play a crooked game because "it's the only game in town" -- but this is more like playing a crooked game in a saloon that is obviously on fire.

Why do you stay?  Is it an article of faith?  An addiction?


eddiebe's picture

At all times throughout history the shit has been and is about to hit the fan. Granted, the situation globally is becoming more dire, but this could and probably will just drag on and on and morph into more of the same for the rest of our and our childrens lives. The more 'things' change, the more they stay the same. Markets will have their ups and downs, but they will operate.

mick_richfield's picture

Ah, OK.  An article of faith, then.

fonzanoon's picture

All this analysis is informative and probably accurate. That being said if you want to either lose money or watch the value of your investment stay put while the metal you thought you were leveraging increases you should own mining stocks. Anyone on here can now jump on their pedestal and share their trading success and how they time these stocks and rabble rabble rabble. If you want to own gold just buy gold. Stop f'ing around with these manipulated shit sandwiches.

oddjob's picture

Selling puts on mining stocks and using the proceeds to buy physical is just about the most rewarding trade out there. Having a zero cost basis for any physical pm's in your possession really throws a wrench in the system, for somebody else.

LeBalance's picture





real allocated ownership of metal is in your hand.

paper? Paper? PAPER? /are we laughing yet?/

LawsofPhysics's picture

About four years late to the party are we?

Smiddywesson's picture

One simple insight I gleaned from the article is that the banksters have been much more successful in suppressing mining stock prices than physical prices, so any interruption of that suppression scheme should result in a greater price appreciation in the stocks than in physical. 

Smiddywesson's picture

I don't think confiscation of PMs is in the cards, but nationalization of these companies is a possibility, especially in countries that are late to the party and don't have huge gold reserves.  In other words, be careful where those mining stocks have their assets, and don't put all your eggs in one basket.

Saxxon's picture

Only if the mine is in Canada or the U.S.

Sudden Debt's picture

What a load of crap. Mining stocks carry way to much risk.

I won't touch them.


theMAXILOPEZpsycho's picture

they'll sore once the bullion is no longer avaliable

FranSix's picture

The failure of MF Global should tell you that gold is not necessarily available on the futures markets for delivery at the appointed time.  The surest way to obtain gold is to head down to the coin dealer and buy coins or bars with cash, not stand for delivery with options.

The next surest way to obtain gold is to mine it out of the ground.  It doesn't just appear magically in the futures markets, it comes from Johnson Mathey or some other refiner.  Doré bars are provided by the miner.

Fuh Querada's picture

@ sudden debt

You are correct insofar as the mining stocks are at least as volatile as the underlying metals, and are subject to political risks in the countries where the mines are located.

However, if you stick to the major producers and avoid the juniors they are a useful diversification in my opinion.  You are buying gold or silver in the ground or close to the surface, no storage costs for your metal, less risk of forgery or non-delivery by ETFs like GLD, SLV, and probably less likelihood of  confiscation by desperate governments.

Wasn't there a Dutch pension fund that was prohibited to invest in physical gold?

You can minimize risk by a small investment in a widely diversified fund like Tocqueville (also available in EUR), or royalty streams like Franco Nevada, Royal Gold or Silver Wheaton. Dividends are an additional plus.

i-dog's picture

Agreed ... but he covers that at the end of the article.

Pennies in front of the steam roller (or silver nuggets in front of the steam roller), for those who are stupid enough to be holding paper during the current time of extreme market danger - unless they can afford to lose it. Beware the Celente Put.

Fuh Querada's picture

Good post. The crux is whether fundamentals will be allowed to establish themselves. Could be so - the big banks are accumulating physical metals every time they crash the paper market (and can the record mint coin sales be accounted for only by private individuals?) why not the shares too? A big hedge fund move into the mining stock sector beyond a few isolated cases up to now (Greenlight) would be difficult for the banks to short, but the question is if and when that will happen. One scenario that hasn't been played through yet is to what extent the mining shares afford protection in a physical gold confiscation scenario.

eddiebe's picture

Very comprehensivearticle,Mr. Kim is no doubt correct in his assumptions. He adds a very strong and frightful caveat at the end of the article, which at least in terms of fear about gold and it's stocks being suppressed in perpetuity I would like to refute.

The reason being: The banksters and mega manipulators themselves don't trust each other and know much better than most investors and hedgies etc. the true value of gold, and are no doubt hoarding it and accumulating it. The secret to success here is patience and plenty of intestinal fortitude.