Wall Street’s Attack On Mining Shares

About five years ago, Jim Sinclair (a pioneer in our industry) made a major push for all gold share owners to take delivery of their certificates. I received 100 calls that day! Recently, Jeff Berwick, of the Resource Investor, echoed Sinclair’s crusade.  In a way, Jim and Jeff are correct, but think twice before you get your street name certificates delivered.  A lot of bad things happen when you do this.

1. You will no longer view the instant value of your account
2. You will become a full time bookkeeper (cost basis, name changes, stock splits)
3. You will physically have to mail and insure all certificates
4. An active account would be impossible to manage.  Most of my clients have 25 different companies in their portfolios
5. Most brokerage firms will not take an order to sell unless they have a deliverable stock in hand…the risk is too great
6. You will not be able to offset a buy and a sell on the same day
7. You will have to compile all your tax papers yourself
8. You create a security issue.  I have had two clients who had gold and stock certificates stolen in break-ins
9. You still have $250,000 insurance for cash in each account at your brokerage firm and $500,000 in insurance for stock positions.  If the insurance fails, the only thing you want to own is food and guns.  Our world-wide governments will never stop printing money.

FINRA started a major push five years ago to discourage small cap transactions of all kinds. As a result, most of Wall Street does not want your business because of the pressure. One of my old clients tried to average down in his account last week and the broker said he was taking too much risk and would not take the order.  The stock was up 30% one week later.

The market cap of all gold stocks in the world is about 1/2 the market cap of Coca-Cola.  Take out the top 20 gold stocks and I don’t see a lot of cash value for lending.  The Northern Miner each week lists the largest short positions on the gold shares and is great reference material.  The MF Global lending failure was because of their big cap Dow stocks, Exon, Apple, IBM, etc.  These are the shares that you need to have delivered to you.  Do your own due diligence.  Deal with a Canadian resource friendly brokerage firm who will handle Rule 144 paper.  These accounts are full reporting but it would be tough for the Feds to get their paws on it.

Rich Radez

Chairman, Chicago Resource Expo