RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Manipulations or NOT ? touareg
I think that your approach regarding the juniors is fairly sound.
As I have mentioned before, I do very little trading of my junior miners.
Juniors tend to move on company specific issues, such as drill results.
Producers provide instant gratification and will rally based on the POG.
I think it is prudent for those who want to fully participate in the gold bull, to have both in their portfolios.
I am long about 50% juniors and 50% producers.
The producers are usually liquid and lend themselves to controlling risk via stop loss orders to scale out of adversity.
Many juniors are very thinly traded and don't lend themselves to that strategy.
However, there is an ETF called GDXJ which represents an index of juniors and can be used to hedge risk.
GDXJ is very liquid and has 62 stocks held within and some of them are terrible.
However, it provides a liquid vehicle that can be shorted to hedge against long juniors that we hold in our personal portfolios.
To control risk in my juniors, I compute the aggregate capitalization of my juniors and short that total in the GDXJ.
I short when key chart support is broken in gold and/or the GDXJ and usually scale into the short in 2 or 3 tranches.
I cover the short (scale out) when the gold and the GDXJ find chart support.
This way I can control risk, on the large number of juniors that I am long, in an easy way.
Regarding juniors, as we have both discovered, it is wise to have at least 10 or so because most will not be successful regardless of how great they look in the exploration and development stages.
Mining is about the worst and highest risk business in the world.
We never want to be long miners in a secular bear market.
Rick Rule, who has been a major player in this field for decades, points out that out of 10 promising juniors, 1 or 2 may end up as 10 baggers, 3 or 4 will go bust, and the rest will be mediocre.
So having a minimum number of juniors is important.
Here is another thing that Rule discovered.
At the cyclical peak in gold in 2011, he sold some of his juniors to lighten up.
But, he kept complete positions of some of his best ones, because he figured that they would do well, even in a down cycle.
He discovered that his most promising juniors were crushed along with the mediocre ones.
What happens is that when a sector is out of favor, just about every member of that sector will be sold in a down cycle, the good and the bad.
We may have 5 years or more left in the secular gold bull.
And we may have one or two cyclical bears to survive along the way.
A modest amount of trading can help sidestep some of the declines and enhance overall performance.
Even legendary goldbug Harry Schultz recommends trading mining stocks, rather than buy and hold, even in a secular bull.
And, when the final peak is reached, no one is going to ring a bell and tell us “game over”.
It is never too early to start thinking about the end game
We are going to have to make a judgment, at some point, to cash in our chips in the miners, even if we keep sizable positions in gold bullion and move to cash.
We will need to learn how to identify overextended, overvalued markets in gold and silver.
We don't want to be like the folks back in 1980 who didn't sell into the parabolic price spikes in gold and silver and regretted it in the following months and years.
goldguy