Cave In

"Endangered dirt. That's a new one."
--Riley Hale (Broken Arrow)

Started positions in gold miners (NEM, GDX) a little over a month ago. Since then, they've been a house of pain. Down about 25%.

Technically, daily charts are washed out. But on a monthly basis, hard to make the case for severely oversold. On the bullish side, it's possible that many miners are tracing out mammoth reverse head and shoulders patterns (shoulders more like double shoulders). If this pattern is valid, then the second right shoulder is currently being traced out.

Many continue to talk about how cheap miners like NEM are. Perhaps, but my valuation work finds NEM generating about $1 billion in FCF annually over past three years. I might be willing to pay $15 billion for that. However, NEM's enterprise value is ~$25 billion. Implication: have to factor in signif FCF growth to justify the current price tag. Not exactly a conservative approach...

One noteworthy positive is NEM's near 3% yield--a nice little oasis in today's yield desert.

Have noted in past posts that I'm become less enamored with the bullion ETF's due to 're-hypothecation' issues. Mining shares are an attractive alternative, as property rights are better defined. As such, I may add more mining shares shortly.

position in CEF, GDX, NEM