Pointless to buy PM miners stock?

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#1 Mon, Jul 11, 2011 - 12:34pm
FalseParadigm
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Pointless to buy PM miners stock?

Have a question I'd like you all to take a stab at.

Does buying stock in any of the gold or silver mining companies differ at all from buying an ETF?

Here's my thought process.

Like buying an ETF, buying mining shares essentially gives you a piece of paper that says you own part of a company that produces a precious metal. When the final run on the dollar finally begins, panicked gold and silver buying will lead to a huge increase in gold and silver prices and thus, mining stocks will rise as well. But I think the key question is, does it really matter?

First question: How desperate will the US government get when the world dumps our currency? I'd say pretty damn desperate. Raiding people's 401Ks, pensions, etc. is only phase one. In the age of digital everything, what's stopping them from raiding your Ameritrade account? 

Second question: Even if the US government doesn't resort to that, you better believe that they'll hike taxes on pretty much everything. Yeah, your mining companies might have done well, but selling them will only mean you receive worthless FRNs that will be taxed like crazy. You're then left with worthless paper that nobody wants.

Is there really any reason to buy ANY paper (including PM miners)? Seems like physical is the only solution.

Thoughts? Am I missing something here?

Edited by: FalseParadigm on Nov 8, 2014 - 5:09am
Mon, Jul 11, 2011 - 12:51pm
funthea
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Well, it's all just a game

Well, it's all just a game until the music stops.

Profits and losses can made along the way, but in the end it is simply what did you pull from the system and convert to physical PM's at the precise moment of optimum return. That is the final equation, in this chapter of the story anyway, that each must struggle to time.

Good luck with that.

Mon, Jul 11, 2011 - 2:34pm
FogHorn LegHorn
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Well said funthea

@severinslade the theory goes that some quality minors ,juniors for instance provide much more leverage to the upward price movement of pms.as much as 5x+.the trick is picking good ones.Eric O and others here can point you in the right direction if your interested.

Wed, Jul 13, 2011 - 7:18pm
Jasper Puddlemaker
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SeverinSlade wrote: Is there

SeverinSlade wrote:

Is there really any reason to buy ANY paper (including PM miners)? Seems like physical is the only solution.

Thoughts? Am I missing something here?

Leverage. Holding physical and holding miners is done for different reasons. Some of us have done extremely well over the years by being involved in the junior exploration and junior producer areas (much better than if we had held physical alone).

Another reason to hold miners is for insurance. It sounds crazy to most people now, but there was a time when Americans held the miners because they could not legally own the metals. So, I hold them for leverage and for diversification.

Sat, Jul 16, 2011 - 12:22am (Reply to #4)
TheGoodDoctor
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Jasper is wise. When it is

Jasper is wise. When it is realized that there is nothing to hold value but silver and gold miners and physical (well and a few other hard assets) the pig pile will be on. But as was said above there won't be enough shares or physical to go around when the music stops. And as to what Jasper said that is when we can cash in some of our insurance.

“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.” Norm Franz
Sat, Jul 16, 2011 - 12:53am
donpaulo
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Until I reach my physical

Until I reach my physical holding core position, then miners are outside the scope of my diligence.

I have nearly reached my updated goal and decided to diversify into energy rather than putting more of my fiat into metals.

Should I reach my core position goals and attain my energy diversification ratios I will then start looking at miners and or perhaps biotech, Ag and emerging market funds.

Sat, Jul 16, 2011 - 6:05am
Randal45
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future miner action

here are some comments about silver miners in the future:

https://www.silverbearcafe.com/private/07.11/shift.html

I always wondered if there would come a time when the miners skip the conversion from real to fiat.

taken from the article:

8. Miners will no longer seek to rush to push more real metal into the paper markets

If they do sell their metal they will most likely sell it in Asia where there will be a huge demand for the metal. These miners will also see that like OPEC or DeBeers, there is great power in restricting output of their product. Most silver is merely a byproduct of mining other metals. Smart miners would be wise to sell their zinc or other metals and keep their silver byproduct as profit. This silver would grow in value and not be taxed. Since they never sell it, there is no tax on its increasing value. This increasing value would be monetized through the appreciation of their stock price as their balance sheet becomes more and more attractive. (Somewhere, someone is smiling at this thought…)

Sat, Jul 16, 2011 - 6:39am
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Leverage was exactly the

Leverage was exactly the right answer. Compare it to a whip. Your physical precious metals are the handle and the mines are the end of the whip. As gold and silver rise, the end of the whip will move 10 to 20's more than the owning just physical. That's how Rick Rule became a killionaire, and Doug Casey in the '70's.

Now there are the big mining companies like Barrick which some of said that the EE have their mits into. Or smaller mines like Silver Wheaton that you are making a play because they own metals. Then their are the junior and exploratory, they are the ones that can go up exponentially and create life changing scenario's. The problem is that a very small percent of them will hit the jackpot so you must pick the best of the best. Brent Cook says something like 1%. The other kind of play are mines who go into business for the sole purpose of creating value with the intention of being bought out in a year or two.

I don't believe a SHTF scenario is happening tomorrow and even in that scenario I believe there will still be a need for resource mining. There is still ALOT of money to be made with ALOT of risk. So if you are just beginning, you need a good resource broker to help you pick the best of the best and lots of patience. Sometimes it takes a junior two years to create any value but if and when it does.....BINGO. If holding physical metals makes you loose sleep, it's not the game for you

Mon, Jul 18, 2011 - 10:27am (Reply to #8)
Jasper Puddlemaker
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Green Lantern wrote: I don't

Green Lantern wrote:

I don't believe a SHTF scenario is happening tomorrow and even in that scenario I believe there will still be a need for resource mining...So if you are just beginning, you need a good resource broker to help you pick the best of the best and lots of patience.

+1.

In this day of cheap online commissions it can be hard to justify paying the commissions at a full service brokerage. That is what I used to think. Not anymore. Even though I always have subscriptions current for at least 3 newsletters that focus on the juniors, I have found that a good full service brokerage (in my case the folks in Carlsbad) is invaluable. It is a cost of doing business that easily pays for itself if you chose the right people.

Mon, Jul 18, 2011 - 1:45pm (Reply to #9)
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Jasper Puddlemaker

Jasper Puddlemaker wrote:

+1.

In this day of cheap online commissions it can be hard to justify paying the commissions at a full service brokerage. That is what I used to think. Not anymore. Even though I always have subscriptions current for at least 3 newsletters that focus on the juniors, I have found that a good full service brokerage (in my case the folks in Carlsbad) is invaluable. It is a cost of doing business that easily pays for itself if you chose the right people.

Exactly! But you are getting much more than the service of a brokerage house which is doing more than facilitating the trade. These folks have geologists flying out in helicopters surveying the ground and meeting with management. They also know the management as well as often participate in the financing. So that means, they are in as deep or deeper than you. As long as you get a broker that understands your risk tolerance and works with you, then spending $90 or $100 a trade is bubkus compared to the profit you stand to make.

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