Tuesday, September 6, 2011

BB Fantasy Portfolio - First 100% Stock Gain

You can see my first two posts on the portfolio for background here:

Bullion Baron's Fantasy Portfolio - Day 1
Bullion Baron's Fantasy Portfolio - Update

This is a quote from a someone who I believe is a regular reader of this blog (they post on a forum that I frequent):

"They say markets are all about greed and fear, but I don't think you really even need greed. It's fear of losing your money that keeps you out of the market, and fear of missing out that sees you get back in..."

In many ways this is very true and it's this very battle that Gold stocks face in the current environment.

The Gold stocks are being pulled down by the fear that has gripped investors as they flee the stock markets worrying of a greater collapse as debt concerns in Europe escalate and recession looks likely in many western countries (US, Australia and elsewhere).

On the other hand Gold has climbed higher and higher sending the profits that many of the producers make into the stratosphere. The fear of missing out on the Gold stock revaluation hasn't yet hit the market, so many of them linger at price levels that would be more in line with a Gold spot price of $1200. When (I guess for now that still has to be 'if') Gold stocks re-rate I suspect the fear of missing out is going to be as intense as during the recent parabolic spikes in the metals themselves. We could very well see a breathtaking rallies in the miners next.

That is if we don't see financial Armageddon first.

One must remember that we are investing/trading in dangerous times. Where governments and central banks will intervene in the markets (as the Swiss National Bank just did tonight with the Swiss Franc). Many times I have wondered whether it would be best to just ride this bull market out in physical or equivalent and to just forget about the precious metal equities. It shore would make things a whole lot easier.

Here is an update on the portfolio for the end of day:


The portfolio is showing that the first 100% gain on one of the purchased securities has been made, that being BSROA (option for BSR, 11c strike, exp November 2013). You will recall that in the last portfolio update I suggested a 300% return would be possible:
Further reading and I like what I see. 2-3 quarters worth of cash, a new shallow high grade resource which they intend on expanding, further drill results pending (some of which contain VISIBLE GOLD in the drill core), large tenement which is surrounded by other multi-million ounce Gold deposits... I went with the options as there is a reasonable length of time until expiry (15 months) and I think there is easily room for the BSR share price to appreciate to around the 14c level over the short to medium term which would likely provide around a 300% return on the options. Options are high risk, but they can provide some amazing leverage. The position taken for the portfolio is therefor very small and will not be increased.
This is the return I will be aiming for, but at 200% profit (around .048) I will look to sell 1/3 of my BSROA holding to free carry the final 2/3.

I have added more stocks today and yesterday as per my tweets as I took the positions. You can follow me on twitter here: http://twitter.com/#!/bullionbaron

I don't have time for a full explanation of all the positions I have taken and some of them are not held by me in my personal account, but most have sufficient cash and are in the process of aggressive drilling campaigns or expecting news such as resource upgrades or various mining approvals.

Today MTE saw a capital raising at 75c. I thought this was a reasonable achievement given the current state of the market. They will now be funded until further details regarding a possible JV is announced later in the year.

MSR had an interesting day after releasing promising drilling results, they traded strongly higher up to 27.5c, but fell back down to close the day at 22c (no change from previous days close).

Overall the portfolio is sitting at +2.33% one week after having been announced and started.

And now we see what US trading will bring after the Labor Day weekend and following very turbulent trading in the European markets on Monday... how will Gold stocks perform now that Gold made a brand new record high only hours ago?


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