Forum Archive Index - February 2003

[Travis Morien <travismorien@yahoo.com>]

--- "tennyson@caverock.net.nz"
<tennyson@caverock.net.nz> wrote:

> Those that are piling into gold *are* the suckers. 
> They are going in 
> there principally because someone on the internet
> said it is good 
> thing to do, and they do not understand the
> fundamentals behind it.  
> Give them a slightly more searching question and it
> becomes clear 
> they do not understand the dynamics of the gold
> market, and how it 
> relates to investment from New Zealand.  I'm not
> suggesting that I 
> understand it.  Indeed, I was hoping to be
> enlightened by some of 
> these 'experts'.
> 
> But then I am not investing in gold or gold shares.


I attended a seminar the other day put on for
financial planners where the speaker happened to be
the manager of one of Australia's biggest and best
resources managed funds.

During his talk he mentioned repeatedly the ridiculous
prices being paid for many gold stocks, particularly
those on the Australian market.  According to their
analysis many of these mines were priced at such high
levels that they seem already to have factored into
the share price this massive continued bull market
everyone is predicting.

His claim was that clearly there is a bubble in gold
stocks, amateur speculators with absolutely no idea of
the concept of intrinsic value are buying gold stocks
at whatever price they can get them believing that
they can only go higher because gold seems to be going
higher.

He backed up his argument with several detailed
valuations which included a sensitivity analysis of
mine profits vs gold appreciation and it appears that
very few people are going to get out of this with
their skins intact if gold fails to double in price.

It is much like the tech boom of the late 90s.  "The
Internet is where all commerce will be in the future
and therefore no price is to high to pay for Yahoo!"
is much the same as "gold is in a bull market,
supposedly central banks are going to get short
squeezed so everyone should buy gold stocks".

He did give several examples of stocks with very
compelling valuations, but I'm not at liberty to tell
you which ones they are... 8P

Travis
www.travismorien.com


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