This is a direct quote from Jim Sinclair that he made at his web site today. See the chart link below that will illustrate why this will happen.
<img src="http://i186.photobucket.com/albums/x317/thoma4124/PerformanceSpredDifferentialBetween.jpg" alt="Photobucket - Video and Image Hosting"><br><br>
03/03/08 This chart illustrates the difference in performance returns between junior gold companies and senior unhedged gold producing companies. One should note the differential between returns has widened to extreme levels that have not been evident since gold bullion hit rock bottom in 2001. Jim Sinclair mentions the fact that much of this differential is due to hedge funds shorting the juniors and going long the seniors. One should note that the performance figures for the juniors has leveled out and is no longer declining. Jim mentions that the hedge funds are only interested in the momentum of the spread between the performance of the juniors and the seniors, not the market itself. Once we begin to see that the spread is no longer widening out (momentum diminishing), the hedge funds will no longer be seeking profits by shorting the juniors and going long the seniors. It is at that point we can begin to see the gap in performance returns narrow and see juniors start to outperform the seniors. This event, IMO, could happen at anytime.
Personally, I am taking profits in senior gold stocks at the present time and re-allocating those funds to junior gold stocks. My first installment was today, where I added to add my already substantial stock holdings in Victoria Resources.
