Gold miners collapsed in teh great depression but eventually they were worth millions: homestake?
What Did Smart Money Do In the 1929 Crash and Aftermath?
During the same bear market period smart-money moved from the plunging equity markets (i.e. financial assets) to hard asset investments, like Homestake Mining - which is used heretofore as a surrogate for all gold stocks.
The stock price of this gold mining company soared relentlessly upward during the entire bear market. Homestake Mining stock rose continuously from $80 in October 1929 to $495 per share in December 1935 - which represents a total return of 519% (excluding cash dividends) during the devastating bear market period.
Contemplate and appreciate the monumental difference in investment returns during a serious bear market. Smart-money invested $10,000 in Homestake Mining (hard assets) in late 1929 - which increased in value to almost $62,000 by December 1935. This represents a compound rate of return of 35% per year in appreciation alone!
It is meaningful to note that in late 1929 the value of Homestake Mining was about $80 per share. Moreover, during the next six years Homestake Mining paid out a total of $128 in cash dividends. In fact the 1935 dividend alone reached $56 per share. That's almost a 70% dividend yield payout (basis 1929) in only one year! Indeed, hard asset investments (gold mining shares) were islands of economic refuge during the grueling years of the Great Depression.
Unfortunately, those innocent souls who remained invested in stocks - and had a buy and hold strategy - saw their initial $10,000 investment slowly dwindle to only $3,600 by late 1935. This represented a devastating capital loss of almost two-thirds of their investment savings. T H A T'S R I G H T! The hapless naive investor with a buy and hold strategy in financial assets lost the greater part of his original stake. Pathetically, he could ill-afford to risk - let alone lose - his precious capital during the many long despairing years of the Great Depression.
One does not have to be a Ph.D. in higher mathematics to understand the 1929-1935 comparative investment results stated below.
I too studied this many years ago. I'm in pysical gold and miners. Not only Homestake (Barrick) during the great depression but during the 70's the miners gains where legendary. Even after gold peaked the miners topped out 6 months later if memory serves me correct. Studying it years ago I remember seeing long periods where the miners did nothing followed by explosive moves higher. Hopefully this is one of those times. I remember thinking to myself if I could have held on to miners in the 70's through extreme corrections and years of dormancy because the greatest gains came later in the speculative frenzy. It's why I'm still holding as embarrasing as it may feel now.