Metals futures

[GuttersnipeXL]

I was thinking this might be a good area to invest some of my money. Is anyone involved with this? What kind of experiences have you had? Good or bad. Where is a good place to research, besides the newspaper.

[eribrav]

i'm bullish on the metals myself, especially silver. I don't have any futures trading experience, so I have avoided using that as my investment vehicle.

Depending on how much you have to invest, you might consider actually buying some precious metals and holding them yourself.

You also can buy stocks of the metal producers, and get a leveraged play on the underlying metals that way. There are also funds like CEF that will track a metals basket (I think CEF holds silver and gold). There is also supposed to be a gold based ETF in the near future, where you can invest and essentialy hold a quantity of gold.

Whatever you do, don't get suckered into making a leveraged bet with futures. Even though you can make a big bet with only a little money up front, that greatly increases your risks. It's likely you will get blown out of your position and miss a later rally.

Good luck.

[Rodney]

Buy the stocks or funds, not the futures. If you guess wrong on gold stocks, you can lose some. If you guess wrong on gold futures, you can lose it all.

[beerman]

If you think that Metals are going up in the future, I would say dump all of your money into WHT on AMEX. It's a great company, yet the price has dipped recently with the POGold.

Limited risk on the down side w/ Huge possible return.

[eribrav]

What makes WHT so great? As opposed to say NEM or PAAS? Just curious.

[Rodney]

Stocks, agreed. I looked at some precious metal stocks three or four years ago, but didn't go into them. I'm sorry now. Futures can become worthless if you guess wrong or things turn out differently than expected. With stocks, you can lose or not gain, but unless the metals market completely collapses you'll still have something.

I looked at silver prices the other day for the first time in a few years (siince my wife stopped buying silver jewelry findings, whose prices change based on the metal market), and I was shocked to see that they'd near doubled, to eight bucks. Silver hasn't been at eight since the 70s, when the Hunt brothers briefly ran it up above 50 in an extremely ill-considered move to corner the world silver market. Silver is primarily an industrial metal. Apparently China and, to a degree India, is sucking up silver in its economic boom for use in production equipment, chemical processes, and so on.

What am I saying? If things go south in China -- their economic bubble bursts, we have a recession -- silver prices may drop. Gold, however, is more of a hedge investment against inflation, and if inflation comes back that will support the gold prices -- although the current price of gold, up $100 an ounce over a couple of years ago, may already reflect the weakness of the dollar and anticipation of higher interest rates and inflation in the U.S.

I have no particular idea of where to get more info than the newspaper, but I would recommend trolling google news regularly for articles and columns on precious metals in the world's papers. You can get a lot of good info by reading the perspectives from Singapore, Hong Kong, the Middle East, India, and other places where they really care about gold.

[eribrav]

The guy who is making me money in precious metals is Bill Fleckenstein. He runs a hedge fund and writes a daily newsletter on the web. It's a pay site, but well worth it. You can check and see if they have a free trial offer.

www.fleckensteincapital.com

[beerman]

eribrav- I would have to say management. WHTs growth through expansion hasn't been reflected in the price. It's EPS is almost guaranteed to grow much, much faster than the others due to their low production costs. Right now EPS per Q is around .05 compared to .35 for NEM. NEM's EPS is 7 times higher, yet the stock price is 16 times higher... If you project earnings for the next couple years based on current production increases, things get interesting.

Secondly, the merger with IAG is very good news, yet the market has reacted with caution. Take some time to project growth of the new company and then discount this valuation for the merger exchange rate. Yum.

With POG possibly hitting 500 within a year, percentage return from this stock, currently.... $2.93... (hey, up over 3% since my last post) will be quite a bit higher than the others.

[eribrav]

Thanks beerman. That was a great, informative reply and you've got me thinking further about it now.

[beerman]

Also, erbrav,

Check out the stochastic indicators on when to buy and sell these metal stocks. The market seems to overreact to the POG fluctuations, and the stochastic should help guage the dips and spikes...... mmmmm... Guage..... must go to the other board for a sec....