FDR and the psychology of optimismNobody has criticized my bullish posts of the last 48 hours, so maybe I’ll criticize them myself. I can easily see someone arguing against the extreme optimism implied in any discussion of how fast / how far our share price / buyout prospects will progress.
As we await possible big drilling news tomorrow, or Friday morning before the Vancouver mining conference opens, I’ll talk about the key aspect I left out of my breakout scenario analysis. Optimism needs some kind of basis in reality, and in any hypothesis or theory with which one is trying to work.
Daugaard asked a highly relevant question today regarding the speed of our drilling efforts. My response to him (see the “Fine-tuning” thread) went beyond a straight, simple reply and right on to the topic of buyout timing.
Was this reasonable? If I am to contribute positively to what we are all doing here reading these bull boards, I have got to regularly keep tying my arguments back to those facts upon which we can all agree.
Good, economic gold deposits get bought out. Check. The price per ounce of said buyouts is relatively well-known, at least in terms of a bounded range. Check. The speed and size of such buyouts will vary directly with the gold price level and gold price (upward) momentum. Check.
What we cannot predict is the order and speed of the good drill results achieved along the road to that buyout. And therefore, we cannot predict the exact path our share price will take toward that final accepted offer. Simple 45-degree angle? Exponential function? Great Bear style leap followed by 17 months of sideways motion before the final 50% burst of gain? A combination of all 3? Something entirely different?
And the idea that some extra-aggressive trader(s) might hit the market with a big buy order will look less risky depending on whether the observer considers there to be any doubt of a buyout for FDR. To the extent the buyout is in question, sure, piling in to a stock, driving its price up fast, is a good way to ultimately vaporize some of one’s capital.
But if the only question is whether one’s buying is nudging the share price off its intended trajectory by a few degrees for a couple of weeks or months, the risk greatly diminishes. Relative to the possible upside gain, it nearly disappears.
And that, I suspect, is what will finally tempt someone to start pushing our stock price. Betting on a tech stock with uncertain margins or rapidly evolving competition is one thing. But betting on the appeal of proven gold deposits to a hungry major is hardly a bet at all.
Sure, the same stock can be risky or safe depending on its share price. Which is why we collectively spend time chewing over the possible size of our gold deposit at Antino.
We’ve done our homework well, I have little doubt. Time for the mid-term exam.