People how use ratios like this lack the ability to use a
calculator and their advice is extremely hazardous to your health.
What if I told you Most Gold Miners are more expensive in
relation to Gold than they were in the year 2000?
You would think I was smoking some really good weed. You
would be wrong.
Let’s look at Barrick for example.
Looking at their annual report for the year 2000 we can see
that they had 356 Million shares outstanding. In addition they had about 0.5
Billion in Net Debt (Total Liabilities minus Current assets). The definition of
Net debt is not perfect but works for back of the napkin calculations here to refute
the bullshit. Taking a stock price of around $14 back then gave them a Market Cap of about
$5,000 Million or $5.0 Billion. Adding the debt we get an Enterprise Value of $5.5
Billion.
So When Gold was $250 an ounce, taking the “Barrick
Enterprise Value-Gold ” ratio we get a
ratio of 5,500 Million / $250 or $22 Million.Again Many traders have been caught off guard with this latest move, in my view you ain't seen nothing yet...The 10 year T speaks loud and clear.
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