Friday, March 15, 2013
All of that said, the miners are cheap by any backward, forward or relative measure. Their businesses are enviable - despite rising costs, poor management and shooting themselves in the foot - insofar as costs remain low by comparison with what they sell their product for. And they are hated. Lowly-leveraged. And under-owned. All this while their natural admirers (who I have known to mock) are hoarding last-year's coins, bars and ingots. The investment non-sequitir, of course, is that the so-called great rotation into stuff, is ignoring this gold mining stuff. Now I understand the overcapacity in iron ore, and other non-ferrous things, on top of concern about the condition of their largest consumer. Yet, the market cannot have it both ways: bidding up stuff for debasement fear on hand, and avoiding it for the opposite fear on the other. Puzzling. Yet, if it be stagflation that emerges as our nemesis, it would seem to me that the spreads between certain heavy industrial cash-flow yielding assets on one-hand, and gold mining concerns on the other, would - in the medium term - be unsustainable. For you don't have to love gold to like gold miners: just not HATE (note the upper case emphasis) it.
Posted by Bud Fox at 12:33 PM