3 "Sweet Spot" Gold Miners Best Bought & Held : ABX, AUQ, BRD, GDX, GLD, MFN

To say that gold and gold mining stocks have been tricky to trade in 2011, would be an understatement. When gold prices soared from $1505 per ounce to $1860 between July and August, above and beyond the already-hot pace at the time, most everyone on the sidelines finally started to pile in.

Of course, the timing of those entries ended up being impeccably bad, as gold wound up hitting lows around $1650 per ounce, a month later, an 11% tumble after the 23% run up; it's doled out a partial recovery, in the meantime.

While the volatile swings have led to sheer misery for a lot of folks who have decided to start dabbling with the likes of the SPDR Gold Trust (NYSE:GLD) and the Market Vectors Gold Miners ETF (NYSE:GDX), that pain has also offered a valuable lesson for traders and investors of all experience levels. That is, even when you're talking about gold stocks, the wisest course of action is to find a quality name, buy it, and leave it alone; let time do the work for you, to score the big gain.

It can be easier said than done, when you're talking about the most precious of all metals. However, it is doable and it's equally possible to sleep at night, while doing so. The trick is to find the names that aren't so popular, or heavily-watched, that the trade is crowded, like Barrick Gold Corporation (NYSE:ABX) may be, yet aren't so small and unproductive that they may not be around a year from now.

With that as the backdrop, here are three mid-sized gold names that are solid opportunities, but stocks you're not going to have to fight or overpay for.

MineFinders Corp. Ltd. (AMEX:MFN)
At a market cap of $1.2 billion, MineFinders Corp. is in that proverbial sweet spot where few are familiar with it, but it's solid enough to stay afloat through turbulence. More than anything though, MFN is attractive because it's profitably producing gold.

One of the key criticisms of MineFinders is that it's a one-trick pony; that it only has one mine, its Dolores site in Northern Mexico. It's not an unfair worry, but it's also not the whole story. Two other sites are currently being developed: La Bolsa and La Virginia. Given its long-term success with just Dolores, investors can have faith that the other two will bear commensurate fruit, and do so for a few years.

Brigus Gold Corp. (AMEX:BRD)
Brigus Gold Corp. is tiny, at only $273 million, and worse, it's not profitable, so it definitely falls on the speculative side of the spectrum, even by gold-mining stock standards. It is producing, though, and ramping that production up. What makes this name so curious is that it's actually danced with profitability in recent quarters, not that a miner has to be profitable for the stock to go higher. Tacking on the potential of the Goldfields development project in northern Saskatchewan, which could be worth a total of $300 million to Brigus, may well get it over that hump.

AuRico Gold Inc. (NYSE:AUQ)
This Toronto-based gold miner has also focused its development in Mexico, though the recent acquisition of Northgate Minerals gives the miner five operating mines and one more very close to reaching production, by the end of Q1, 2012. The immediate impact that the acquisition will have on the books is still unclear, as AuRico was profitable, but bought a marginally unprofitable company. Based on its consistent profitability, odds are strong that AuRico Gold will be able to cultivate profits from Northgate's assets.

The Bottom Line
While it might be tempting to buy and sell as prices rise, some stocks benefit more from a little patience. Gold has the ability for a great payoff, if you can get in at a decent price and hang in, to watch it climb.

Bloomberg Business Week - 31 October 2011

Each issue of BusinessWeek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Business Week's timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.


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James Turk - Silver Formation Projects Spike to $60 - $75 Level

After the explosive upside activity in the gold and silver markets last week, today King World News interviewed James Turk out of Spain to get his take on where the metals are headed from here. When asked about the action in gold and silver, Turk responded, “I like today’s action very much, Eric. Given that gold rose over $100 last week, some correction was expected. The important point, though, is that gold quickly bounced off support at $1,700. I’m encouraged by that action. We may test the $1,700 level one or two times more before heading higher.” (more)

George Soros: I Give The Europe Debt Deal Between One Day And Three Months

George Soros has said that he thinks the Eurozone deal will only last a short time, from one day to three months.

Veteran investor George Soros has attacked the lack of leadership at the top of the eurozone and said that the new Brussels “deal” to solve the debt crisis will only last between “one day and three months”.

Soros makes a number of telling points. The first being that for all the talk of the “50% haircuts” the actual level of Greek debt is only being cut by 20%. This is because it is only private sector holders of the Greek debt that are being asked to take the haircut. Given that so much of the debt is held by public sector organisations, the total cut in the debt level simply isn’t sufficient to deal with the problem.

Yes, as Soros says, the markets have bounced upon the announcement of the deal but this is because almost any deal, news of any deal, would be better than the vacuum and bumbling that preceded it. However, Greece is still insolvent and increased austerity simply isn’t going to make it solvent again.

The crisis simply is not solved.

He makes another intriguing point as well: the deal does not trigger CDS payments. But for some banks the CDS payment would be better than taking a 50% haircut. So it will be in those banks’ interests to not tender their debt for the haircut but to hold out and wait for a credit event. And the more banks that hold out the more likely a credit event becomes…..

Another way of putting this is that the Fat Lady hasn’t sung so it’s not over yet.

Bonds Beat Stocks Over Past 30 Years, First Time That's Happened Since Civil War

If we need any evidence the past thirty years, especially the past twelve or so, have been horrid for investors, this Bloomberg article notes that (government) bond returns have actually beaten stock returns over thirty years. Ouch. They say stocks win out in the 'long run' but for the average person's life span, you don't want to go out forty years to get a superior return. Obviously this is very atypical - it's the first time it has happened since the Civil War time frame!

To be fair, yields were very high on government bonds in the early 80s/late 70s as Paul Volcker was fighting off inflation so the starting point for prices was quite low in a relative sense (prices low, yields high), but it's still an amazing statistic.

Just more evidence we should never stop QE'ing - QE for 30 years and more artificial returns will make us all mad money!

• The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.
• Fixed-income investments advanced 6.25 percent this year, almost triple the 2.18 percent rise in the Standard & Poor’s 500 Index through last week, according to Bank of America Merrill Lynch indexes. Debt markets are on track to return 7.63 percent this year, the most since 2002, the data show. Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.
• The combination of a core U.S. inflation rate that has averaged 1.5 percent this year, the Federal Reserve’s decision to keep its target interest rate for overnight loans between banks near zero through 2013, slower economic growth and the highest savings rate since the global credit crisis have made bonds the best assets to own this year. Not only have bonds knocked stocks from their perch as the dominant long-term investment, their returns proved everyone from Bill Gross to Meredith Whitney and Nassim Nicholas Taleb wrong.
• “The generation-long outperformance of bonds over stocks has been the biggest investment theme that everyone has just gotten plain wrong,” Bianco said in an Oct. 26 telephone interview. “It’s such an ingrained idea in everyone’s head that such low yields should be shunned in favor of stocks, that no one wants to disrupt the idea, never mind the fact that it has been off.”
• Stocks had risen more than bonds over every 30-year period from 1861, according to Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, until the period ending in Sept 30. The last time was in 1861, leading into the Civil War, when the U.S was moving from farm to factory, according to Siegel, author of the 1994 book “Stocks for the Long Run,” in a telephone interview Oct. 25.
• U.S. government debt is up 7.23 percent this year, according to Bank of America Merrill Lynch’s U.S Master Treasury index. Municipal securities have returned 8.17 percent, corporate notes have gained 6.24 percent and mortgage bonds have risen 5.11 percent. The S&P GSCI index of 24 commodities has returned 0.25 percent.

Trader: The MF Global Bankruptcy ‘Decimated’ The Floor Of The CME Today

There was a lot of confusion this morning about what kind of impact the bankruptcy of futures dealer MF Global would have on trading operations.

One place the impact was felt big: The floor of the Chicago Mercantile Exchange.

We caught up by phone with Eric "The Wolfman" Wilkinson, the independent floor trader who many know because he stands near Rick Santelli on CNBC.

He explained to us what happened.

The gist: MF Global is the clearing firm for a huge chunk of the traders on the floor of the exchange. That means, essentially, that they guarantee that all trades get paid out, a role that the Chicago Board of Trade used to play directly, but which was outsourced to third parties as part of the CBOT’s move towards being publicly held. Importantly, MF is/was the clearing firm for many sub-firms, which means that many traders ultimately were having their trades cleared through MF Global, even if they didn’t know it.

ANYONE who somehow has their trades cleared through them was unable to trade today, and that means that any trader who had open positions is just sitting there watching the market move, while they find a new firm.

Theoretically this shouldn’t take too long, in some cases traders could be back up and running tomorrow if the paperwork of going to a new firm can be done fast enough.

Bottom line though: The screwup that caused the big disruption was not necessarily the collapse of MF Global itself, but the fact that many firms that dealt with MF Global assumed that everything would be fine, like it would have been when the CBOT was a partnership.

Silver Guru Eric Sprott Talks Shop Concerning Silver Shortages

Occupy your Money, Buy physical silver Bullion. In this vid, Patrick MontesDeOca chats with Eric Sprott in this exclusive interview that took place at the Silver Summit in Spokane, Washington the week of October 17, 2011. Mr. Sprott speaks in riveting detail about the Silver Market and it’s outlook through this year and next, in this not-to-be-missed interview.