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The Value Trap

By: Erik Swarts | Sunday, January 27, 2013
Trapped Whale

If you have followed me on Twitter over the past six months you know that one of my standing refrains throughout the weeks has been that the precious metals miners are still one of the larger value traps of this market cycle. And similar to the financials in the tail end of the previous cycle - it has ensnared some rather large whales in its net. From the sophisticated palettes of Einhorn to Gundlach, the extraordinary valuations of the miners - relative to gold, have been too attractive to simply pass up for these marque money managers.

Generally speaking, I have maintained a bearish perspective on the miners - despite valuations, for the simple reason I believe(d) weakness in the precious metals complex was and is ongoing.

Banks:SPX

Gold/Silver Miners:Gold

Gold versus BKX:SPX

Perhaps it may be come sooner than I anticipate, but similar to the financials trading through 2008 into the first half of 2009 - cheap - can get a whole lot cheaper.

BKX:SPX

 

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

Copyright © 2011-2014 Erik Swarts