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SideShowMel0329 (43.00)

Looking for advice on my gold short ANV

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March 16, 2010 – Comments (15) | RELATED TICKERS: ANV , GG , AUY

I have short positions in ANV (short at $5.04 and $7.58)


It's been steadily rising over the last year without any signs of slowing down. Fundamentally, I think gold is overbought and is due for a correction over the next 2-3 years. However, even if gold remains at today's prices, is ANV still a good investment? It's at 230x P/E, a 9x current ratio, and a horrific 2008 to overcome where they booked -1.49 EPS for the year.

I understand that their Hycroft mine is producing at expected rates now, according to this quote from their recent earnings statement: For the first two months of 2010, the mine has produced approximately 15,300 ounces of gold and approximately 36,300 ounces of silver, indicating the mine has now achieved expected production rates.

Opinions? Should I bite the bullet and get out while I can? Or will we see a dip below $10 sometime in the future?

15 Comments – Post Your Own

#1) On March 16, 2010 at 12:53 PM, silverminer (30.99) wrote:

Fundamentally, you're wrong about the fundamentals.

You'll have no sympathy from me for money lost to short positions on gold and/or gold miners. I've made my opinions on such activity abundantly clear over the past several years.

I don't issue trading advice, so how/when to unwind is your call. Just consider yourself the recipient of this Fool's unchanged outlook that gold is on its way to $2,000 and higher before this 9-year secular bull market can even begin to think about reversing course.

TMFSinch

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#2) On March 16, 2010 at 1:29 PM, silverminer (30.99) wrote:

This is an interesting piece from the CAPS blogs archives...

http://caps.fool.com/Blogs/ViewPost.aspx?source=isesitlnk0000001&bpid=125546&mrr=0.14

From January 2009, by SideShowMel0329:

"When the Gold bubble pops, I'll be laughing"

Here's another doozie from the same month:

http://caps.fool.com/Blogs/ViewPost.aspx?source=isesitlnk0000001&bpid=131819&mrr=0.50

Official Gold Predictions:

1. Gold will not be above $1000/oz for at least another 7 years.

2. By the end of 2009, gold will drop down to $600/oz (the highest we'll see gold this year is $920/oz)

3. Gold will underperform the S&P by at least 30% over the next 5 years

4. I don't see gold outperforming the S&P any time soon (on a year-to-year basis). I'd say wait until 2018 before giving gold a longterm outperform thump on CAPS

5. Just like the housing and tech bubbles, the gold bubble will pop and decline rapidly, probably when the S&P starts to recover (early-mid 2010)

 

Here's another from May 2009:

http://caps.fool.com/Blogs/ViewPost.aspx?source=isesitlnk0000001&bpid=191992&mrr=0.33

And this was my response at the time:

If you're overall bearish on gold, then you need to reconsider. :) Against the mountain of evidence in support of gold's inevitable rise that I and others here have assembled, you'll have to bring more than just an unsupported sentiment to the table before trying to steer Fools down what I consider to be the most dangerous path imagineable.

Shorting gold, as I explain here, is simply not recommended. If you don't agree about the fundamental drivers of the precious metals bull market, then stay away from it... but shorting it is a whole different can of beans... worse yet when you try to draw in other Fools.

Speedy is right, gold will rise going forward no matter which of the two scenarios play out... if the stimulus and fiscal interventions miraculously work (fat chance), then gold will rise on the back of rip-roaring inflation. If the deterioration of the U.S. / European economies continues, then gold will rise on the flight to safety and later bolstered by stagflation.

 

One might consider it reasonable to question one's fundamental outlook on a sector after missing by such a dramatic margin for such an extended period of time. I take no sadistic pleasure in your unfortunate trades, but rather take this opportunity for the benefit of fellow Fools to illustrate the dangers inherent in shorting gold in the midst of a multi-year bull market event that continues to ride a growing wave of supporting fundamental drivers. If your experience serves as a warning to other Fools about the dangers of shorting precious metals during the largest sovereign fiscal interventions in human history, then your loss will have served a larger purpose.

 

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#3) On March 16, 2010 at 2:09 PM, Starfirenv (< 20) wrote:

Sideshow- Hope you're listening to the Strongman. There are many "influences" on the PM's and various scenarios that could play out but none that would point me towards any short positions. I agree with  2k/oz in the not too distant future. If it were me, I would salvage the remainder, take it to your local coin shop and buy as much "junk" silver coin as possible and just sit on it. Could come in real handy and/or appreciate handsomely. Buy at or below spot. I like APMEX for lack of local availability.
I expect silver (my fave PM) to multi bag (no pun intended) this year. Regards

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#4) On March 16, 2010 at 3:24 PM, silverminer (30.99) wrote:

Darn it all ... I just can't help myself. I think it's important for the record to be clear, and SideShow's musings about a gold bubble were rather emblematic of the mainstream reluctance to embrace gold's bullish outlook throughout this historic advance. The gold bashing I encountered in 2005 while I was doing much of my buying (below $500 gold) was structuraly identical to the gold bashing that persists today. In each case, it is demonstrably misinformed under the circumstances.

 

Here's another gem from the archives:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=253146&t=01009085231004627924

SideShowMel - September 2009

The headline:

Is there anyone still long on gold? If so, you're more irrational than the bankers on wall street.

And then this classic dismissive Keynesian rant:

"And you're even more ridiculous if you are long on gold miners. Overpriced metal, especially gold, is the new trap of the decade. No longer are we looking at hollow tech companies soaring ahead with 1000% gains. Now, we're faced with a new breed of irrationality. Led by Peter Schiff, Jim whatever-his-last-name-is, and the rest of the looney crowd, these blind group of followers are so caught up in their Austrian (I hate using that term because it disgraces a decent country with an irrational economic ideal) economic theories that they believe they are the only humans on Earth who still hold an ounce of sanity."

 

And from March 2009:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=160102&t=01009085231004627924

"Those of you who bought gold at $900/oz, you WILL FEEL THE BITE."

Here was part of my response at the time:

"For those that really study gold, now that $900 failed, next support levels are $880, $850, and $800. I don't believe that $800 can be breached here, but even if it were my confidence in the longer-term trend would remain utterly unshaken. This is a buying opportunity, and the promise of even better buying opportnities coming up has me jumping for joy."

 

 

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#5) On March 16, 2010 at 4:05 PM, leohaas (31.85) wrote:

OK, SideShow got the fundamentals wrong.

But more to the point: how good, or bad, and investment is ANV? Anyone?

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#6) On March 16, 2010 at 5:41 PM, silverminer (30.99) wrote:

Although the fact that I am only one person has forced me to ignore some names in the pm mining sector for no reason other than that they never grabbed a sufficient morsel of my attention, and despite the fact that ANV is one of those companies I've never owned nor regularly followed, my cursory look this afternoon suggests a company with solid prospects for further growth based upon sizeable exploration potential throughout Nevada and positive indications for an aggressive expansion of the Hycroft mine.

Although there are likely some 30 or more companies I would recommend before this one, I certainly can find no reason to expect a significant decline in these shares. With 117m oz of silver joining those 5.9m oz of gold, shares actually look pretty inexpensive to me despite the expectations for costs in the $400s for 2010.

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#7) On March 16, 2010 at 7:09 PM, megalong (< 20) wrote:

"The gold bashing I encountered in 2005 while I was doing much of my buying (below $500 gold) was structuraly identical to the gold bashing that persists today."

Ignoring price, the arguments for and against CSCO were structurally (syntactically?) identical at $79 in 2000 and $13 in 2001.

The lesson: price matters more than "structure".

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#8) On March 16, 2010 at 7:56 PM, TMFKopp (98.25) wrote:

silverminer:

"One might consider it reasonable to question one's fundamental outlook on a sector after missing by such a dramatic margin for such an extended period of time."

Questioning is always a healthy thing to do. However, it sounds like you're referring to one year as "such an extended period of time." In the view of a long-term investor a year is hardly an extended period of time. 

Similar to megalong's comment, you would have looked like a pretty big doofus for a while by getting bearish on the Nasdaq in 1999, but you would have done well to ignore those suggesting that you were missing the boat.

As for gold in particular, I'm not a fan, but I steer clear and avoid making calls in either direction. But the point is that the market doesn't always correct within convenient timeframes.

Of course, when it comes to shorting, as Keynes put it: "The market can stay irrational longer than you can stay solvent."

Matt

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#9) On March 16, 2010 at 8:00 PM, TMFHousel (91.88) wrote:

"Here's another gem from the archives: SideShowMel - September 2009."

Come on Chris. That was all of six months ago, and gold has barely budged since. Just because someone disagrees with you doesn't mean they're "demonstrably misinformed." Really.  

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#10) On March 16, 2010 at 10:10 PM, silverminer (30.99) wrote:

TMFKopp

Hi matt, short plays are rarely long-term in nature, so the timeframe appropriate to determine the effectiveness of a short play is necesaarily shorter than the potentially extended time horizon required to determine the profitability of a long-term buy-and-hold. I would hope that anyone short a gold miner from January 2009 to today would indeed be questioning their underlying hypothesis with intense scrutiny.

As a long-term buy and hold investor who remained resolutely long through a brutal 18 month correction in this 9-year secular bull market for precious metals, I agree entirely that such a brief period can potentially say little about the fundamental factors at play. If there is anyone out there prepared to suggest that I am 180 degrees reversed from the truth in my interpretation of the major chapters of this bull market... and that the move above $1,000 is an anamalous spike within a new bear market for gold that will take the metal back to $600, then I am more than ready for that debate. :)

Your point is well taken, but unless someone is prepared to suggest that SideShowMel's interpretation of gold market fundamentals back in January 2009 was correct, then the point is moot.

TMFHousel

Are you suggesting that SideShowMel's fundamental analysis of the outlook for gold prices was correct when he called for $600 gold by the end of 2009? It's one thing to be on the wrong side of a nine-year bull market ... but if you so err while branding those in the opposing camp as "irrational" and "ridiculous", then you'd better be prepared for a little restatement of the archival record when you come to the community for advice about unwinding the corresponding trade. You're right, though, that being on the wrong side of a trade doesn't necessarily mean that a trader is demonstrably misinformed ... it just so happens that in this case he was demonstrably misinformed about the continuing persistence of a bull market for gold.

As I stated above, my sole purpose for posting all of the above was to illustrate for Fools the serious dangers inherent in shorting gold in this environment of continuing fiscal crisis. I have been warning people against shorting gold for as many years as I've been online sharing my knowledge of gold and silver markets, and this blogger's request for advice on an underwater short position required a restatement of that warning. I wish nothing but the best for SideShowMel and for every fellow Fool ... it's why I'm here.

I'm not a jerk. I'm not here to insult or belittle anyone, and although you seem to view me as someone how can't handle people disagreeing with me [a conclusion I'm drawing from a number of your comments], I assure you that such a perception is undeserved. To the contrary, I delight in the intelligent debates that characterize this community. That said, I have worked extremely hard over the past several years to build a well-informed and exhaustively researched set of interpretations of the fundamental factors at play supporting further price gains in gold and silver.

I would love for someone to come to me with a similarly prepared countering case, and I would LOVE for them to convince me that I am 100% wrong. I would like nothing more than to declare the end of this bull market and sound the all clear for the USD, the fiscal solvency of our nation, the sustainability of a recovery, etc., etc. Although you may think I have some egotistical need to be right,, or that I sit here basking in self-righteousness, I assure you that nothing could be further from the truth. If you knew me better as a person you would understand that I would much rather be wrong about all of this than right. As I've stated countless times, I would much rather lose every penny I've invested and be ridiculed right off this site than to witness what I fear is ahead for our nation's economy and currency.

I just don't think I am, and I've accumulated a strong body of evidence to support my case. I expect those holding a vastly different outlook to come to the debating table similarly prepared. As you might see in the original blog posts linked above, again, that was not the case here.

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#11) On March 16, 2010 at 10:28 PM, portefeuille (99.66) wrote:

stupid shiny metal.

 

(hehe)

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#12) On June 21, 2010 at 4:43 PM, goldminingXpert (29.37) wrote:

ANV is a pathetic company. Gold could go to $2,000/oz and ANV is still WAY overvalued. Too bad this thread didn't discuss the company ... he asked for help, not a slugfest.

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#13) On June 21, 2010 at 4:59 PM, XMFSinchiruna (27.35) wrote:

goldminingXpert

I don't care which company is involved, shorting gold or gold miners in this environment of continually mounting macroeconomic drivers of higher gold prices is pure insanity in my opinion. I think my advice for how he could have best preserved his capital was certainly implicit in my reply, but in case it wasn't clear: "shorting gold or gold miners is the single riskiest activity I can conceive of in the present macroeconomic environment". How's that for help. :)

Sinch

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#14) On June 22, 2010 at 3:44 PM, goldminingXpert (29.37) wrote:

There's still some gold companies such as SA, NG, ANV and GRS that you can safely short if you long a good miner and make it a pair trade. The price of gold could not rise high enough to cancel out the increased costs of oil and labour for, let's say, SA's gigantic gold out of a frozen tundra nonsense... meanwhile real good miners like Troy, Jaguar or Fortuna will keep rising in that scenario.

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#15) On July 27, 2010 at 1:49 PM, SideShowMel0329 (43.00) wrote:

Looks like ANV's trends are reversing...I'm still holding strong, looking for sub $10 prices, maybe even sub $7

I refuse to buy anything gold related until the price of gold drops from its highs, at least 30%

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