162 THE BiG DROP
gold mining stocks — for two reasons. Number one, stocks are
very idiosyncratic. Gold is generic — it’s an element, but min-
ing stocks are not.
Miners are anywhere from extremely well run companies
to complete frauds. You can make money in the well-aligned
companies and you can lose your shirt in the frauds. There are
bad mining companies out there so you have to be very careful.
Having said that, if you’re equipped to do the proper due
diligence, it may be the right time to look at some high qual-
ity gold mining stocks. I would suggest looking at some of
the larger players. The reason is because they’ve been beaten
down so much. When you’re down ninety percent, one of two
things is going to happen. You’re either going to go to zero, or
you’re going to bounce back big.
You’ve got to watch out for the companies that will go to
zero. There is a predatory aspect to it, too. Many investors may
say, “Gee, these stocks are down so far, why not buy them?”
The answer is: Why not wait until they go bankrupt and
buy the assets even cheaper? That’s the shark mentality. But
you have to do the research, do the diligence, read the balance
sheets and know what you’re doing as an analyst.