Dividend Inc

South African Gold Stocks: No Margin of Safety

Greetings JudeJin,

As I have said in my prior commentary on gold, I bought gold and silver bullion in 1996 in anticipation of the conditions that we're experiencing right now. I don't have to worry about actually participating in rise in the commodity. I've been in it when gold was below $400 an ounce.

Additionally, on my blog I have listed many dividend paying stocks that beat out gold and silver stocks from the period of 1970 to 1980. I specifically compared quality dividend paying stocks to gold and silver stocks during a gold bull market to show that you don't need to follow the crowd and take on excessive risk in order to benefit from high inflation periods.

I'll give you an example of what I'm talking about. On a total return basis, Sysco Foods (SYY) crushed Newmont Mining (NEM) and Couer D'Alene (CDE) from the period of 1970 to 1982. 1982 being the very beginning of the bull market in stocks. From the period of 1972 to 1980, SYY matched the performance of gold and silver stocks.

There are so many stocks that fit this pattern during a gold bull market that you don't need to be in gold and silver stocks to benefit from inflationary periods (link to article at: dividendinc.blogspot.c....) Remember, gold and silver stocks are supposed to exceed by a wide margin the performance of the actual metal. Therefore, it would almost seem stunning that there are many companies that beat gold and silver stocks during the biggest gold bull market in history.

Finally, my discussion about being compensated for the wait demonstrates clarity on the matter of risk/reward. I address a matter that needs to be raised whenever considering any investment "opportunity." Not addressing this issue of compensation ignores the risk that an investor faces. While you call my focus on dividends obsessive, I call it a calculated approach. We're probably talking about the same thing...assessment of risk.

In a shameless self-promoting fashion, I ask that you please poke around my blog and review the points that I have previously made. I'm hopeful that you'll find convincing evidence on the points that I have made and maybe something of value.

Thanks for reading my article.

-Touc


On Sep 15 02:13 AM JudeJin wrote:

> "While I understand that the value of gold and silver mining companies
> is miniscule compared to say J.P. Morgan, there is the issue of compensation
> during the time that you wait for the industry to be recognized for
> its true value. This is where I'm interested in the dividend for
> gold and silver companies. Simply being "low priced" isn't enough
> to get me to throw caution to the wind."
>
> so i guess you do believe in the value in the gold/silver mines.
> but your obssessive concern with dividends prevents you from buying
> them right now.
>
> i predict that they'll start to pay handsome dividends several years
> down the road when the gold price is much higher and their stock
> prices are much higher too. if you insists on seeing dividends before
> buying, you'll probably miss the whole show. i guess you'll insist
> that you'd rather miss it than violate your principles.
>
> investing is not about principles. it is about risk and return.<br/>
>
> currently, the upside in gold/silver mines is far outweighing the
> downside.
>
>

South African Gold Stocks: No Margin of Safety

Sorry Lindy77,

I guess I should have said that I only wanted individual mining companies. Partnerships, Trust and the like are not as compelling to me. Thanks for the insight however.

regards,

Touc

South African Gold Stocks: No Margin of Safety

Greetings All,

The matter of hedging doesn't seem to answer the question of "where have all the dividends gone."

AEM and NEM have had a long standing position of not hedging their gold position. In fact, there are many gold companies that don't hedge and haven't hedged ever. By the rational used above, AEM and NEM should at least pay some kind of dividend of note. No dividend to speak of is present among the any gold stocks, either South African or non-hedging. This leaves the hedging argument out in the cold.

While I understand that the value of gold and silver mining companies is miniscule compared to say J.P. Morgan, there is the issue of compensation during the time that you wait for the industry to be recognized for its true value. This is where I'm interested in the dividend for gold and silver companies. Simply being "low priced" isn't enough to get me to throw caution to the wind.

Suffice to say, the market cap of gold and silver industry during the late 1960's was relatively small compared to the overall market cap of all stocks traded at the time. I mean, if you take any specialized industry make the argument that the market cap of the industry is smaller than Google then you'd be right every time. The matter of market cap of the gold industry has been argued since 1990 but has resulted in little evidence of the price increases.

Thanks for reading my article.

Gold - Not the Safe Haven People Think it Is

Hey Jeffee,

I got a good laugh at your comment. Man, I have stories from all three that would have you laughing 'til you cried.

Thanks.

-Touc

Gold - Not the Safe Haven People Think it Is

One more time...Sorry about the errors.

dividendinc.blogspot.c...


-Touc

Gold - Not the Safe Haven People Think it Is

Sorry about the first link. Try the following link for the 200 years of the price of gold in America. Click on the chart for a better view.

dividendinc.blogspot.c...

-Touc

Gold - Not the Safe Haven People Think it Is

Greetings Philman,

While you make good points about other countries throughout history I will at least provide you with at least one source that I'm working from specifically from American history. While I don't know history very well, I do know there are many quality sources and yours may differ from mine.

If you get the chance please view the following chart:
3.bp.blogspot.com/_pRR...

note: you may need to cut and past the link. Enjoy.

Touc

Gold - Not the Safe Haven People Think it Is

Hi Matt,

Please reference my November 17 article regarding gold during the gold bull market of the 1970's at dividendinc.blogspot.c.... That article applies to all three categories: Majors, Juniors, and exploration.

Hello Henal,

I agree with you that perception is reality however in the case of gold in the last year perception hasn't provided enough fuel to help gold and gold stocks go above the old highs. This is the reason that I've introduce the history component to see if there were some answers there.


Greetings Paultaut,

I think there is a grammatical error on my part regarding the XAU. What was meant to be said was, "...the long term trend higher that started in the 2000 as reflected in the XAU..." I can see where I wasn't clear. Thanks for heads up.


-Touc

Gold - Not the Safe Haven People Think it Is

Greetings GMiki,

I would like to respond to when you said, "I wonder why you harp on this subject. I think it's very unhelpful of you since you're really not an expert in this area."

When I first produced my article on gold, respondents said I was taking "facts" and misconstruing them while at the same time lacking any kind of literary skills. I was challenged on my true understanding of gold and economics and the current monetary crisis. All this despite the fact that I have solid facts and source citations for anyone to dispute the claims that I make.

I wrote the second article as an attempt to answer the critics with further evidence on the topic of silver since the history on gold wasn't satifactory. When I provided that information, I was accused of not knowing what I was talking about and that I should crawl under the cardboard box that I came from. This despite the facts about the price of silver throughout history has not been hidden by government propping as with gold.

Finally, my third article was an attempt to answer my critics claims that "this time is different." This time is different because we're on the verge of a currency crisis or realignment a la 1929. I specfically gathered the data from the period of 1924 to 1933 to further illuminated the situation on gold and silver stocks during a deflationary/currency crisis. I was as broad as I could be with my selections. In fact, I left out examples that were even more extreme than what I presented. Clearly I cannot satisfy the appetite of those not willing to take in the facts as they are.

Unfortunately GMiki, I cannot go to your blog to get the full breadth of your explanation of the reason gold is the place to be. However, I am fully aware of the good points that most gold bugs have issued; the problems in the economy as well as the currency situation. As a person who has held actual physical gold and silver since 1996, I can tell you that I, more than anyone else, have a vested interest in the price of gold and silver going up. In fact, I said that when gold turns so too does the general market. What's wrong with that possibility?

I have read and studied the markets on gold and silver for quite some time. I'm sure the classic retort to that last remark is that, "I need to go back and study history again 'cause I sure didn't learn anything." However, I only generated those articles to help gold and silver investors. If gold bugs will only take in what I'm saying then they'd realized I'm trying to offer a perspective based on the numbers and the facts. If I'm constantly contested on this matter I become more inspired to dig deeper which further irates decent people like you.

I am now inspired to show the South African gold and silver stocks traded on the London Stock Exchange prior to 1800 to further demonstrate the issue that needs to be voiced. I want gold and silver to go up. But what is the point of going blindly into the sector without clarity. I don't mind if gold bugs don't care about the facts, but I'd rather offer information that is useful when considering how much money to invest in gold and silver rather than stuck with a bill of goods (though it is clear there is much debate, or none, about the usefulness of what I have presented.)

Now let's look at your point about me not being an expert. True, I'm no expert but the data is solid. Yet, no one was satisfied with my claims and demanded that I come clean on my lack of knowledge of people like James Dines, Richard Russell and the Aden sisters. This is despite the fact that I have subscribed to Russell and Dines since 1995. Now, the true gold bug would say,"obviously, I haven't learned anything from those experts therefore my subscriptions must have been a waste of money." However, look at the performance of a person like Dines who is clearly an expert in gold. Dines has been wrong by a country mile. Look at the quotes that I have pulled from Dines during prior bear markets in gold. Is it not surprising as to the reasons why he would question himself? Doesn't it make you wonder what the reasons are that someone, who is an expert in the area of gold and silver, would openly wonder how they could have gotten it so wrong? Well, I wondered and did a little digging. That digging lead to the "research" that I attempted to present on my blog.

Thanks for taking the time to read my post GMiki.

regards,

Touc