Thursday, November 6, 2014
IKN on First Majestic
I wasn't mentioning this stock since it was one of his private newsletter picks, but I remember a month or so ago writing several posts that encouraged nobody-in-particular to strongly reconsider their long positions in silver miners generally.
A 50% collapse later:
IKN - First Majestic: should I cut my losses, drink away my sorrows, and curl up in a fetal position?
I was reading through the Yamana board at Stockhouse and saw that there is still a horde of goldbugs out there who've so far skirted insolvency, and are now doubling down on Yamana. Which means the slaughter must continue until all the goldbugs are exterminated.
Not so much on the FR board.
Nevertheless, according to the less insane lunatics on the FR board, First Majestic has been buying back shares and holding back silver from market.
That would be like playing chicken with an oncoming locomotive: does FR have enough money and income to survive a two-year downturn in the silver price? How about a six month downturn?
I think that's what the market is asking. They see First Majestic playing chicken with a locomotive, and so the market is now betting on the locomotive to win.
If the above is true, I don't know why anyone in their right mind would hold FR. It can go to zero. The only reason you would hold FR is because you know silver is going back up to a price where FR can make a profit, and you know when.
But you don't know. That's why you don't double down on a loser - especially one that's going out of its way to kill itself.
Buy silver exposure when silver is going up. Not when you think it might go up: buy when it has already begun going up.