Someone asked Jim if he had $100,000 to spend right now and the choices were physical metal, top tier producers, or junior mining companies, which would he chose. He said he would go with the juniors, providing that the junior is a company with both good property, and good management. He said it is unbelievable the number of depressed investors who write to him daily regarding the poor porformance of the gold stocks relative to the price of gold. The greatest complaints, naturally, are about the juniors. He still states that this is due to “black box trading” of ratio spreads. Traders go long the majors (or trade a derivative of this transaction rather than actually take long positions) and short the juniors. They make money as long as the ratio is intact and there is good momentum. Fortunately for us, the momentum is stalling. The majors are losing appreciation momentum, and the juniors are not going down much these days. Apparently he believes that the black boxes have already, or will be, recognizing this shift, and this ratio-spread trade isn’t going to work anymore. He expects a shift in momentum where the majors will level off or pull back and the juniors will advance in price.

Jim said he has noticed, in some stocks, multi-million share bids which are usually on “reaction days” where they can slip in and scoop up blocks of shares at reasonable prices. But will these traders be able to cover the shorts so easily? I don’t think so. Jim noted that with many juniors, they don’t gradually increase in price, they pop. And when one pops, often others pop at the same time or soon after. He thinks the shorts are going to have a tough time unwinding their positions, but I don’t know whether he’s saying that the shorts’ attemps to get out will create violent upward spikes, or whether it means it will take them a month of daily price increases to eventually dig their way out. Some of you understand these matters much better than I do, so feel free to comment and speculate. I am curious to know how this may play out. I know he is amused at the fact that the host of people who have taken possession of their share certificates has just made the shorts’ scramble to cover much more difficult.

As we at the tent have been saying, the imbalance between the price of gold and the share prices is completely illogical, and can’t last indefinitely. We should soon be reaching the stage where the beach ball can’t be held under water any longer, and it is going to explode upward. I think it is already happening.

That’s the end of my report. It has been very useful in organizing my own recollections and opinions on what he said. Again, I want to thank everyone who said they enjoyed hearing about the meeting. I’m delighted to know you have found my notes helpful.