14 bagger from here - detailed analyis, page-33

Hi Elzephyrus,

For diversification I'd choose BSM if you already have gold exposure through EVG.

Nothing wrong with DRA, but as Plough says it is a higher cost producer and thus exposed if gold falls.

I too see that bond interest rates are rising in the US if the bond markets continue the way they are.

Some believe that this is the start of the bursting of the Bond Bubble and money will move out of this asset class and into equities and commodities.

I don't think the bond interest rate increase is a sign of demand for bonds and people wanting to put money into them. Instead, it is the reverse - people are selling bonds at lower and lower prices, thus pushing up the yield.

They are getting out of bonds because they are becoming more risk tolerant and keen to get money back into the 'real economy' in the form of equities and commodities.

I think the US Government via the Fed will do everything possible to keep official interest rates as low as possible for three reasons:

1. Govt has a lot of debt that, with increasing interest rates will significantly worsen the deficit

2. We are currently witnessing 'currency wars' as countries try to export their way out of recession. Rising interest rates will strengthen the USD which is the last thing the US Govt and the Fed want - whether they publicly say it or not

3. Rising interest rates will kill the tentative bottoming and possible recovery of the housing market which, with 70% domestic consumption driving the US economy, is not what the Fed or Govt want.

Thus, IMO whilst bond rates are rising I think it is due to people heading for the exits and the will keep the Official Cash Rate low and the US dollar weak - QE3? Just my thoughts.

Anyway, IMO EVG is a good place to be as it is the in the lowest cost quartile and then BSM for industrial metal exposure and portfolio diversification. As Plough says, there may be opportunities to pick up BSM a little cheaper though.

Cheers
John