LAKE SHORE GOLD CORP 6.25 PCT DEBS T.LSG.DB

What s wrong with mining shares ?

[TRRG]

While I think the low sentiment in PMs is utterly wrong, I don't think it's wrong with the mining shares. They do not nearly represent the value of physical PMs. First off they are paper, and they have counterparty risk. Then, miners are simply losers that make the worst decisions possible all the time. They put on hedges at market lows, and eliminate hedges at market tops. What they also do here, at a major market low, with PM prices near or below production costs, is not restrict production so that shortages develop and that the price could rise, but to actually try to produce more. They are currently actually cutting back on exploration to boost production in the present. So not only do they decide to ruin their business for the present, they also choose to ruin their business in the long run. What do you think OPEC would do if oil dropped to 50$? They would tell us "okay, you don't want to pay for our product? Then good luck getting any, because at these prices you're not getting any". And ta-da, shortages would soon develop and the price would have to rise. Miners for me have the same status as bullion banks - ripoffs and criminals. At worst they are dumb victims, but some are definitely willing participants in the PM price manipulation scheme. They will supply as much physical as needed to aid the paper manipulation scheme. Also the great majority of them do not know how to run their businesses. They cannot control production costs, and they continually get ripped off by local governments. Miners will probably rise from around these levels, and they might even develop into a mania at some point (probably a short period of time) when they will outperform the physical. So holding a small percentage of your PM portfolio in them might be recommended. But you might just as well buy Bitcoin and hope it increases yet another 10fold because of sufficient inflow of greater fool funds.