The Favourable Lie

Don Coxe has finally got it. I knew he would.

http://www.bellwebcasting.ca/audience/index.asp?eventid=70081727

The asset pricing model is completely broken.

I once posted the following video in optimistic anticipation of the onset of production but could not imagine in the least how long it would take before financial reports began to make sense. Its been almost a year and a huge imposition on shareholders and investors in GBN.V. In the meanwhile, we still see information that is curiously not forthcoming.

But market conditions are adverse in the extreme against gold mining shares. Since Bre-X set the tone for many years to come. Gold mining shares, which haven't obtained market darling status are struggling along, scavenging the markets for gullible shareholders willing to put up with massive dilution on a scale not formerly seen in the markets.

To be sure, the sell-side broker probably could not imagine 15 years ago it would take this long to kneecap some mining companies that were trading on the markets prior to the Bre-X debacle. So you have an investment formula that might actually see some returns, but I wouldn't ignore fundamentals like geology.

To say that reserves in the ground value a company may be stretching the truth, money ill spent that could obviously be spent on development. Yet the market has a wide-on for low grade disseminated gold deposits with very high up front costs, with no guarantee should one tiny flake of gold be missing from 100m of rock.

Don Coxe is right. With the decline in the banks, you have the inverse in the gold related assets. The housing bubble is about to pop in Canada, so the mining shares are about to get some very strong consideration. But they have to pay dividends. This is the challenge.

You buy your shares the moment the crocodile blows up, and you get on with your golf. Its THAT dangerous.

http://www.youtube.com/watch?v=XLYsdkmaHXw

One could argue that GBN.V shares bottomed against gold in late 2008, depending on your point of view, of course the RSI has come of that extreme. Nobody could have anticipated that a major buying opportunity would have been presented again at the juncture in the markets. The share price isn't up with $1900/oz. + gold? Gold prices will have to be higher, obviously.

Or the company can pay the kind of dividends not seen in 70 years.

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