Levy Harkins Moves Into Gold Miners

If you caught the hour-long Jim Grant-fest on Bloomberg TV's Taking Stock program that I've blogged about, you saw Michael Harkins. He's a partner in the New York-based firm Levy Harkins, and has contributed to Grant's Interest Rate Observer and (I'm sure) appeared at Grant's conferences.

Harkins and his partner write this in their partnership letter last month:

In our last letter to you, we said we knew better things to own than gold bricks.  Then we almost instantly began buying gold mining stocks.  We don’t mean to be perverse, things just work out that way sometimes.  We have been buying an exchange traded fund that owns shares in the largest gold mining shares because the shares have severely lagged the rapidly rising price of gold.  You need no reminders from us as to why we think inflation is likely; letter after letter is full of our exhortations on that score. But for the first time in living memory, gold stocks are cheap on an honest to goodness earnings multiple basis, and if gold goes higher, they will really look cheap.  Note, this is not a tracking fund, which can expose long term investors like us with terrible tracking errors.  The trust owns the underlying shares themselves, and gets us instantly diversified, so we don’t accidentally own the mine that has the cave in.

I suspect, though I don't know, they may be talking about the Market Vectors Gold Miner ETF (GDX), which is one of my plays in the gold mining sector.

What they say at the end about diversification is true -- that's why I bought GDX as well as Newmont (NEM), Goldcorp (GG) and Agnico-Eagle (AEM).

If someone wants to not risk buying a few individual gold mining companies, GDX is a way to go. Another would be to invest in the Tocqueville Gold Fund, which is actively managed.

And on a related note, news broke overnight that two Aussie gold miners -- Newcrest and Lihir -- were merging. If the merger goes through, the new entity will be one of the largest gold miners in the world. Interestingly, Lihir has until June 8 to field competing offers, rumored to be from the likes of Newmont and Barrack. We may be on the verge of a new wave of consolidation in the mining industry.

Comments

[Philbert]

So apparently, you can buy Chou Funds now: http://alphafound.wordpress.com/2010/03/30/francis-chou-fires-another-shot-at-competitors/