Thursday, July 14, 2011

On the subject of analysts....

Analysts.... Are they clever or something?

I admit it takes a lot of effort to find a junior that's about to go into production, do the math to figure out the value underlying the stock price, determine what's a good buy, what'll perform well. And probably takes talent too, or at least a bit of book-learning and math skills. But certainly effort.

And hey, it's almost magic the way other analysts manage to pick winning explorecos - they don't even have a deposit, they're just boring holes in rock to see what comes up. How do those analysts manage to pick the explorecos that pop on good results?

Wow. that analyst is real smrt. You want to buy him a t-shirt like this:

So... how did your analyst do last year?

Here's a chart. To crush his soul.

For all the difficulty in making a call like "I think this particular gold miner should go up by 30% this year because cash flow NAV ore value per ton yadda yadda", you have to admit it would have been easier to just say "I think gold's going up." No?

Well, if you'd simply bought GLD, last year, you'd have made 28%.

If you'd bought the mature gold miners, GDX, you'd have made 32%. A bit of leverage there, I guess.

Buying the Canadian 2x gold miners ETF, HGU, would have only made you 31%.. but it's a 2x long, so obviously you aren't supposed to buy and hold it. But if you did, you'd still have made 31%. Weeird.

Simply buying and holding GDXJ, the junior miners, would have made you 54%.

Now, maybe you don't hang around the reputable analysts... maybe instead you're part of the Cult of Sprott. Okay, fine. The silverbugs damn well insisted silver was going up, right? That was their main thesis, right?

So why should you have bought a silver miner? Any silver miner? If you had been so strongly convinced silver was going up from there, you could have just bought SLV and made 80% last year. How's your silver miners portfolio compare widdat, cheese?

Or if you were really really certain silver was going up, you could have bought the 2x Canadian ETF HZU, and despite the evils of leveraged ETFs you could still have made 174%.

Do you know any analyst that beat GDXJ? Any silverbug whose 2010 numbers were better than SLV? Hm? And this is the predictable shit. No Peru no Fukushima no South Africa bullshit. Simplified thesis. Minimal risk. Is gold going up, yes, then buy it.

And how about you? If you're one of the people I've been running into every single day on Stockhouse, you've probably been very vocal about your certainty that gold and silver are going up. Okay, but is that so? How was your performance in calendar 2010? Would you have done better simply by buying GDXJ and/or SLV?

Now, this post isn't me ranting at analysts, just in case you thought it was. I do, honestly, appreciate them. But it seems kinda strange that if you just take the general case of the analyst's thesis - "gold's going up", "junior gold miners are going up", or "silver is going up hooray for Sprott hooray for ZeroHedge buy more silver rounds on the internet at a 40% premium woot woot" - and buy an ETF based on that, you're likely to perform almost as well as if you bought that fellow's particular stock recommendations.


  1. holding only one investment, say GDXJ would make things so much easier, but would not allow all the mental games that preoccupy us so

  2. Very true.

    Of course that's not a good thing, but it is still true.