Shencker Bull/Bear Debate

Jason Schencker takes the position of the gold bull in a gold bull/bear debate. One of the announcers even ventures to say that "gold is just not real. " The rude surprise comes in during the debate where he loudly discourages investment in the gold mining sector due to the risks and recommends buying the commodity instead.

The truth about the industrial metals is that they have either grossly underperformed or met with their inflationary trends, but have not provided a return beyond inflation, thus their Net Present Value in the miners producing industrial minerals is in fact declining, primarily due to a loss of purchasing power in common currency.

Its true. Gold mines make absolutely terrible investments, unless they become micro-bubbles within the massive derivatives bubble. Considering currencies, a Canadian or Autralian gold miner may make a great currency hedge against the U.S. dollar.

Gold mines made unbelievably great speculative vehicles during the roaring 20's, much like the tech stocks did during the Nasdaq bubble. But once the stock market blew out in 1929, their share prices were fixed by the exchanges. Prior to the devaluation in 1935, they made good returns through dividends. After the devaluation the wild speculation never returned for the smaller outfits, even though their returns improved drastically. And they continued to pay out much improved dividends despite the equity loss. Only gold companies such as Homestake or Dome continued on with no fixed par value.

The irony in the market is that Aapl shares (or Google) are providing share price returns the same way Homestake or Dome might have during the depression era. Aapl has the benefit of massively reduced costs through essentially slave labour. And yet, they pay no dividends.

One thing that investors in junior gold mining companies might expect is that should they show a great balance sheet, they make a prime investment acquisition for ETFs, who are always on the lookout for grossly undervalued equity assets. Balance sheet. Not arcane geological minutae.

http://www.bloomberg.com/video/87505984/

(Note: I'm getting an unusual amount of interruptions in this type of video from Bloomberg)

-F6