Jim Letourneau's Blog

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Avoiding the Next Bre-Ex

Mining is a risky business at the best of time and the recent events in Eritrea are a good example. People remain skeptical of mining stocks because of the made-in-Canada Bre-Ex scandal. This type of scandal, born in the early stages of a bull market, can get amazingly out of hand during the "irrational exuberance" of a late stage bull market. The are not exposed until money stops piling into the sector. They become symbols of the speculative excess and the ensuing plummets.

They provide shorthand way of saying it is dangerous to buy at the peak of a bull market. More recent examples include Enron/Arthur Andersen, Worldcom, and Nortel. Mining has remained relatively scandal-free of late because there wasn't any money for unethical operators to steal (white collar crime is basically stealing without the use of force, isn't it?)

Here are some words of wisdom on how to avoid the next Bre-Ex.

Dr. Kieth M. Barron

David Morgan