the hedge was NOT irrelevant, it was 25% of yearly production at 20 bucks. The fact that they hedged at all was relevant as they prided themselves on being non hedged producers, and basically threw shareholders under the bus that believed them. It was a massive misstep. I publicly stated that PAAS was my biggest position near 11 dollars and I sold immediately at 13,60 when the hedge was announced. I was not the only one as the shareprice massively underperformed the SIL index. I took advantage and shorted PAAS vs index and banked 8%. I am now long PAAS at 11.35.
I agree that the hedge was largely irrelevant. It wasn't big enough to make a huge difference. It was only about 2 months production anyway. With or without that hedge, if silver prices rose, PAAS's receipts would rise. Now, if they had sold 2 year's production, that would have been different. As you said, PAAS is going to move with silver, not on its own.
I also agree, the story right now is about keeping the mining cost under the sales price. PAAS has some low cost mines, so it's certainly possible. I wouldn't mind seeing them sell more of the higher cost mines, such as Peru or Bolivia. The one thing that could make those mines profitable again would be for zinc and lead to go back over $1.
It would require serious help from silver price to see upward stock movement indicated in your message. All those remarks about “good value” with different share pricing are/were relative, i.e. it might be a good value at good silver price and when silver price is bad then…
This hedge, also mentioned in your message, caused certain shift in assessment (mostly, this message board assessment) of this stock. It provided kind of wrong reasoning that all problems were related to the hedge and now, when hedge is not here anymore, everything is fine. It is not correct. Firstly, hedge was not the main reason of stock problems and, secondly, the main reasons (low silver price and high mining cost) are still around.
Shortly speaking PAAS has no chance to outperform the sector as long as cost problem is not addressed. So far company seemingly hoped that silver price recovers miraculously making cost problem obsolete and it doesn’t work. It means that company should make serious operational steps to improve cost situation; that’s the best and, likely, the only way to improve share pricing.
Get the meaningless $10 billion taper out of the way tomorrow, and we can FOCUS on Uncle Sam default in 4 weeks, and WW3 about to begin.
Sentiment: Strong Buy
I remember when some guy whose name I forget on cnbc said paas was undervalued at 15. And later some other guy on cnbc said he's getting into paas, as it is a good value, and that was at 12.5. And this hedge rebuy catastrophic news is getting old and tired. Once the accumulation of shares starts, watch out. It'll be a slow start and accelerate all week. Watch!
Sentiment: Strong Buy
Gold prices just made a multi-week low, while gold/mining stocks and silver did not... CLASSIC POSITIVE DIVERGENCE YOU SEE AT AN IMPORTANT BOTTOM, JUST LIKE ACTIVITY SEVERAL MONTHS AGO!
Sentiment: Strong Buy
You will be in big trouble soon! Hard to believe but as bad as it may seem it will get worse!!! Get out be patient or you will be the patient!
Sentiment: Strong Sell
If we use the old standard of measuring inflation it's running closer to 9% so rates are way under. As economic activity increases and rates begin to rise fears of inflation will cause the purchase of gold as a hedge.
I'm sorry if I wasn't clear on that. I didn't mean that higher rates lead to a strong economy. I meant that the Fed is more likely to raise rates only when the economy is strong. The 70's were a unique time because the Fed at that time let inflation get out of hand before they tried to raise rates to stop it. If rates are 10%, but inflation is 12%, the interest rate is actually low, negative in fact. While interest rates rose in the 70's they stayed under the inflation rate, so the real interest rate remained negative, and inflation (and gold prices) kept growing.
It was not until after 1980 when the Fed finally raised interest rates above the inflation rate. At that point there was another recession. The high real rates did finally kill inflation, though, as well as gold prices and the stock market, which bottomed in 1982 in real terms.
In my opinion, higher rates do not necessarily point to stronger economy. Look back at history (70-80s gold story). Volcker started raising rates in late 70s, but it didn’t help economy for some time and gold continued going up. It took Reagan election to change market dynamics in both respects: stronger economy and weaker gold.
That history above shows that market/economy carry lot of psychological factors. It may indicate that upcoming tapering and/or increase in rates do not necessarily mean weaker gold. Market always presents set of possible scenarios and investors got to navigate them and change course expediently.
Re: "One common factor is economic distress: gold goes up when people doubt their economic future. Conversely, gold goes down when people are getting confident about economics."
Exactly, and interest rates do the converse. The more uncertain the economy, the lower interest rates go. Blame it on the Fed, or, blame it on the fact that when the economic future is uncertain, no one wants to borrow, and people do want to pay back what they already owe. Thus, there doesn't need to be a cause and effect for the relationship "interest rates up, gold down" to hold true.
you have your opinion, I have mine. I am long. I assume you are short. That is the market my friend. We will see who is correct.
I was short PAAS until they recenty said they will cover their hedge and believe gold is going to 2000 and silver to 32 within a year
I agree, $50 next year and possibly $100US an ounce for silver in 2015-16. Based simply on M-1 money supply numbers and aggregate base money supply numbers all over the world, gold and silver remain "undervalued" and underpriced historically. The FED's money base including Treasury holdings have grown 300% the last five years, for example, while gold/silver have less than doubled in price. And this explosion in funny money is taking place in Japan, China and Europe, India the Middle East AT THE SAME TIME. The U.S. has yet to even start to come to grips with $200 TRILLION in unfunded liabilities from our turn to socialism the last 30-50 years, and "derivative" contract notational values in the financial world globally are doubling every 5 years the last 20-30 years. Sound, hard asset monies like gold and silver continue to see supply rises of just 2% annually. At some point we will get another big run higher, especially if money printing doubles down again in the next recession. PAAS could be a $50 or $100 stock in 2-3 years.
Sentiment: Strong Buy
From its low-close on June 27 of $18.59 (Comex front-month basis) through its high-close on August 27 of $24.70, silver jumped 32.8% in just 42 trading days.
Based on all of the fundamental and technical data, if silver put in a definitive bottom in late June and it is poised to resume its long-term bull market trend. I would further opine that it is likely that we'll see silver (and gold) hit a new all-time high in price before we get another big correction like the one the metals just went through.
The inflation-adjusted all-time high for silver is $140/oz.
This number is derived by compounding silver's high of $50 in 1980 using the Government-reported CPI rate. Silver should hit $100/oz before the next major price correction. I see both technical and fundamental factors which will drive this type of move in price and those factors are available upon the asking. Just request via reply.
Sentiment: Strong Buy
Market is big, even gold market. It is always possible to identify both group of people buying physical metal and group of people selling physical metal. Moreover, today’s buyer can and do become tomorrow’s seller. Also, any transaction has both buyer and seller, i.e. market always finds equilibrium.
In general, gold price goes up, not just because rural Indian folks buy it; they always did it, when gold went up and when gold went down. Gold price depends on many factors, some of them are more visible and some less. One common factor is economic distress: gold goes up when people doubt their economic future. Conversely, gold goes down when people are getting confident about economics.
Get the #$%$..K out!!! This thing is going to the 8$ range. Its hard to believe but drama in the mentals hasnt even started.
If you want to be really realistic about it?
A lot of hedge funds and banks here controlling much of the financial assets are owned and operated by individuals and groups living here. So yes it does have some effect in terms of what these institutions do with their money. Short term anyway.
There there are the algorithms running all the trades. Their job, as it turns out, is to lead the market and influence the direction or exagerate direction of market flow. This is the very short term. This is why they can cause gold to sell off or spike within microseconds of some fed data releasing. This is not a human pressing a button. This is a human programming an algo and the algo takes that action, and other algos are programmed to respond to a price movement also. If down big means you sell too to prevent loss. If big mmove up means you buy and sell higher.
So no, long run, the realities still dictate the market. Speculators and algos make the price movements more exagerated. Ultimately the fed influence is almost none to the commodities. Unless they tell their banks to engage in heavy selling in the paper market. But paper market isnt a game of numbers like stocks. You have to deliver the metal. If there is a fundamental group consistently asking for the physical metal, low prices cannot last.