Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Barrick Gold Corporation (USA) (ABX), Newmont Mining Corp (NEM): Golden Dividend Ideas From A Bear

Page 1 of 2

Fund manager and market statistician John Hussman sees bad things on the horizon. He’s been buying gold shares in Hussman Strategic Total Return Fund this year. At the start of the year, his three largest gold positions were Newmont Mining Corp (NYSE:NEM), Barrick Gold Corporation (USA) (NYSE:ABX), and Agnico Eagle Mines Ltd (USA) (NYSE:AEM).

Barrick Gold Corporation (USA) (NYSE:ABX)

Where we Stand

Every week Hussman writes a commentary about what he is seeing in the market. He is not a prognosticator, he is more of a statistician and historian. He looks at what has happened in the past and tries to see how today rhymes with that history using various math based-measures and techniques.

Here is what he sees: “Matching the valuations of the 2007 peak would require another 8% advance in the S&P 500. A return to historically normal valuations would imply a 48% market decline – the average cyclical bear market in a secular bear market period has typically represented a decline closer to 38%.” Getting to a “secular low,” meanwhile, would require a 75% drop.

Translation: the market could move a little higher or it could fall a lot lower.

While Hussman uses hedging in his funds to protect against such adverse outcomes, he has also been buying gold in his bond fund. Gold will likely be a refuge in any sell off and more so if we see uncontrolled inflation.

The Largest Holding

A continued drop in the price of gold is likely the biggest concern facing Newmont Mining Corp (NYSE:NEM) today. That said, older mines and rising production costs are longer-term negatives to keep in mind.

The longer a gold mine is worked, the less gold it produces. Worse, the ore quality tends to get worse and worse as time goes on, too. This pair of issues leads to lower production and increased costs at the same time.

Newmont Mining Corp (NYSE:NEM) has been investing in new projects to replace its reserves, but these mines have generally been more costly to operate than hoped, including a big project in Australia. Although the company’s domestic operations have been performing well, the cost and reserve issues mean that higher gold prices are the most likely near-term performance catalyst.

The company’s dividend is tied to gold. While the yield is around 4.5% today, the recent drop in gold prices could lead to a dividend cut. That said, if Hussman is correct about the size of an upcoming market drop, higher gold prices, and dividend increases, could be on the way.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!