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goldminingXpert (30.95)

Staying the course in commodities?

Recs

10

September 09, 2008 – Comments (11) | RELATED TICKERS: AUY , GG , GLD

Don't. You could pull a Bush and end up driving off a cliff. All key bull market trendlines have been busted. The dollar is flying higher, silver is in the dumps, base metals are even worse, even gold is steadily losing ground towards $750. Your average miner is down 50% or so. The junior miners appear to be heading for bankruptcy en masse. Feel free to buy some call options on some of these names as a swing for the fence idea, but don't hold onto these names forever. A stock like Taseko has fallen from $6 to $2 this year. The company is solid, but you got to use stops... a 70% loss is unacceptable--you need a triple to regain your original capital. You can't buy and hold something like this... this is a fine time to nibble, but say you buy a Coeur D'Alene Mines at $1.48.... it's down from $5, but it may very well go to zero. CDE isn't necessarily cheap now. The P/E is still 26... and that is a past P/E based off much better silver prices. CDE could very well be a zero. If you buy, you gotta set a stop at $1.25 and take your money and live for another day should CDE head to a bankruptcy court. It is quite probably that 50-70% of the mining juniors go bankrupt and leave shareholders with squat as this mining bubble collapses.

Miners to nibble on here (no particular order of quality... due your own research on these. Set your stops 10-20% below current market price in case gold makes its move to $600 immediately rather than dead cat bouncing first.) TGB, AUY, JAG, IAG, and EGO. GG is the long-cap stock to play... GG is eventually going to $8 a share... but in the near-term GG could get back to as high as the low 30's before resuming it's collapse. If you're going to take one option play, I'd take the Sept 25's on GG or the AUY Sept 8's.

11 Comments – Post Your Own

#1) On September 09, 2008 at 7:02 PM, RVAspeculator (62.69) wrote:

You have been right on this one goldmining..  got to give you your due.  Lucky for me my market shorts have been offsetting my losses in the commodity longs.

I would be doing so much better… especially in CAPS if I just had the short positions on.

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#2) On September 09, 2008 at 7:56 PM, DemonDoug (98.84) wrote:

What about just going long on AUY?

BTW I think we are damn close if not right at the bottom on commodities.  I believe it is possilbe the Fed will cut rates at it's next FOMC meeting.

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#3) On September 09, 2008 at 8:08 PM, goldminingXpert (30.95) wrote:

I said feel free to be nibbling on a list of stocks including AUY... I will be buying a mix of AUY and GG calls tomorrow, leaning towards more AUY than GG... but straight stock is good too if that's your thing. Set a stop though, if gold goes straight down to $650 on wave 5 here, then AUY's a $5 stock, and obviously we don't want to ride it that far. You want as much cash on hand for the capitulation bottom... I'm preparing a list on miners under $2 to buy once the bottom is in... with the intention of getting 500% returns on several of those names. It isn't time yet... waiting for a prominent gold bull such as the Financial Sense people for instance to turn bearish. Then you load your boat so full that it will barely float with mining shares.

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#4) On September 09, 2008 at 8:08 PM, goldminingXpert (30.95) wrote:

I said feel free to be nibbling on a list of stocks including AUY... I will be buying a mix of AUY and GG calls tomorrow, leaning towards more AUY than GG... but straight stock is good too if that's your thing. Set a stop though, if gold goes straight down to $650 on wave 5 here, then AUY's a $5 stock, and obviously we don't want to ride it that far. You want as much cash on hand for the capitulation bottom... I'm preparing a list on miners under $2 to buy once the bottom is in... with the intention of getting 500% returns on several of those names. It isn't time yet... waiting for a prominent gold bull such as the Financial Sense people for instance to turn bearish. Then you load your boat so full that it will barely float with mining shares.

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#5) On September 09, 2008 at 8:21 PM, goldminingXpert (30.95) wrote:

I said feel free to be nibbling on a list of stocks including AUY... I will be buying a mix of AUY and GG calls tomorrow, leaning towards more AUY than GG... but straight stock is good too if that's your thing. Set a stop though, if gold goes straight down to $650 on wave 5 here, then AUY's a $5 stock, and obviously we don't want to ride it that far. You want as much cash on hand for the capitulation bottom... I'm preparing a list on miners under $2 to buy once the bottom is in... with the intention of getting 500% returns on several of those names. It isn't time yet... waiting for a prominent gold bull such as the Financial Sense people for instance to turn bearish. Then you load your boat so full that it will barely float with mining shares.

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#6) On September 09, 2008 at 8:25 PM, goldminingXpert (30.95) wrote:

I said feel free to be nibbling on a list of stocks including AUY... I will be buying a mix of AUY and GG calls tomorrow, leaning towards more AUY than GG... but straight stock is good too if that's your thing. Set a stop though, if gold goes straight down to $650 on wave 5 here, then AUY's a $5 stock, and obviously we don't want to ride it that far. You want as much cash on hand for the capitulation bottom... I'm preparing a list on miners under $2 to buy once the bottom is in... with the intention of getting 500% returns on several of those names. It isn't time yet... waiting for a prominent gold bull such as the Financial Sense people for instance to turn bearish. Then you load your boat so full that it will barely float with mining shares.

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#7) On September 09, 2008 at 10:35 PM, nuf2bdangrus (< 20) wrote:

I own GSS.  I'm down 50% on a very small position.  Jan 30 calls on ABX are almost worthless in 3 weeks.  I wish I went deeper ITM, but 30 has been long support.  October 5 calls on LMC a lottery ticket at this point.  I may take what's left, how little it is, and go a year back, so I at least have something. WIll I get luck with my RF and PRSP puts to offset them?

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#8) On September 10, 2008 at 12:29 AM, Tastylunch (29.93) wrote:

a 70% loss is unacceptable

Dang skippy, it pay to be nimble especially in Bear markets. You can't fight the tape in Bears. The market needs little reason to go against your trades when the VIX is poppin.

I'll let my CAPS losses run ad infinitum for fun, but in real life 8-10% and bang I'm out. In real life you can't let winners turn into losers...

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#9) On September 11, 2008 at 12:17 AM, masokotanga (99.69) wrote:

I don't invest in commodity stocks in real life. Too crazy for me. Luckily I got out of PBR in the 60's in CAPS. Oil above $140 just felt like a bubble to me. I kept my green thumb on BVN too long. I believed we were in for stagflation and didn't see the dollar rally coming. My only remaining commodity picks are SLT and RIO, which I still see as outperforming over the next 5 years, though maybe not the next 5 months.

 I real life, I usually only invest in companies with a high level of value added and pricing power. The closest thing I have to a commodity stock is HOGS, but pork isn't cyclical like most commodities. I don't use stops, since I deal in small caps that can drop 10% in one day on no news just because of a lack of liquidity, and then rally 15% the next day (I've seen this happen many times). 

I am a buy-and-hold-until-fair-value-is-reached investor, but if I got into commodities, it might make sense to take the IBD momo approach (use trailing stops, cut your losses quickly, follow the trend, blah, blah, blah). Then again, Jim Rogers hasn't sold any of his oil.

I've never had a 70% loss in real life, but I know that Buffett had a 50% loss on his Washington Post holdings 2 years in, and we all know how that turned out (100 bagger).

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#10) On September 11, 2008 at 11:41 AM, MLGtrader (99.70) wrote:

So, GMX, if we do get a permanent snapback in commodities, when would you buy in if at all?  Keep in mind that commodities are still the only sector that has strong earnings.  When I say commodities, I don't just mean gold and silver.  I don't hold companies in either of those sectors, but I do hold POT and IPI.  I also think oil companies are a strong play now.  With OPEC fighting for $100 dollar oil, the commodities scene could turn into something like the financials scene.  When things get too extreme, the gov helps out.

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#11) On September 11, 2008 at 4:47 PM, goldminingXpert (30.95) wrote:

I mostly trade gold miners... and they don't have earnings. GG has a 38 P/E AFTER losing half its value... Yamana has a 26 p/e after losing 60% of its value. And the P/E was based off this high if not higher metal prices. I did buy a bit of DIG (the 2x oil stocks ETF) as those companies are much more solid. Gold is my industry, and there is no particular reason to get excited here (I bought some GDX calls today, but they are a trade with a tight stop, not a long-term hold.)

I wouldn't touch much other than oil and maybe ag here... steel is toast, don't need it in a depression. Materials stocks will stay in the dumps until the economy turns, and we're still in the 2nd inning or so of the great depression of 2008-11. 

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