Past year I bought several mining stocks listed in Canada. These mining companies mainly have mines in Mexico, Canada and some elsewhere. What happens if there is a major currency collapse or hyperinflation in Canada, USA or Mexico or all three? Will the mining stocks hold their value of true worth if PMs go sky high as they generally do in this environment? What happens? Some likely scenarios appreciated.
For Canadian and Mexican miners as they trade is US dollars, they will jump in value (locals piling on to get into US dollars trading firms), as long as there isn't Capitol control like Venezuelan oil industry, which lead to stripping of cash to pay for dumb national security/welfare projects. Though for the poor it was good and could still be good for them, (this amounts to financial rapping of the middle class and the rich) US miners well there will have to start trading in yuan as no one would except hyper inflated US dollars. If all the three gets Hyper inflation, well, many will start trading in different reserve currency, be it Yuan or something else.
The mining stocks I bought are all in CAD (TSX.V), not in USD. But some of the stocks I got can be bought from both but I decided to buy them from TSX because I think a USD currency collapse is more likely if the turning away from trading in USD continues growing. What happens if CAD dollar collapses but PMs continue holding strong worth? How can mining stocks show their true worth if the currency they are traded in collapses?
I'd expect it to all come out in the wash SR. CAD currency collapse but PMs hold in USD means that PMs in CAD would skyrocket. That would improve the profit margins of the Canadian miners selling PMs in CAD, thus add to share price valuation and market capitalization in CAD, add to wage increase pressure in CAD as wages try to keep up with the inflation implications of currency collapse. The most interesting part of this scenario is if the company has any debt and whether that debt is denominated in CAD. If so, the debt would potentially get wiped in a CAD currency collapse. All up, I think gold shares is a good place to be invested during a currency collapse as long as you can cope with some volatility and there aren't institutions failing and holdings being confiscated. Do you have the physical share certificates in your possession?
most likely the miners got taken over anyway there is not a need for exit strategy, what happen to your cheque money by the time you get access to it :lol:
Don't think so. Just the "buy confirmations" and statements Comsec sends me every month about my portfolio ( international) holdings. I never got nothing in paper directly from the mining companies. Is that what you mean?
Yes. I am no expert on legal matters like this, but it may be that Commsec presents to you a counterparty risk if CBA went under in a financial crisis and they are "holding your shares on your behalf" you could end up in the "unsecured creditor" basket. Considering this is the type of financial disaster scenario you are hedging against, it's worth looking into. Have a read of this one I just plucked from google :- http://www.investopedia.com/ask/answers/06/stockcertificate.asp At the end of the day, when the dust settles you probably want there to be physical evidence of your share ownership that doesn't depend on, or involve, any financial institution.
Hyper Inflation won't happen overnight, ie it will take a long long long time, so unless you ignore all the warnings you are safe.
Hyperinflation might not happen overnight, but debt default can be very sudden and it can take down both currencies AND financial institutions.
Sovereign Debt default, doesn't usually occur to countries with Aaa to A rating even countries will th BBB rating is pretty safe.
True enough. Skyrockets disaster scenario might only be a slim chance of happening, but the point is he wants to protect himself in that scenario so at the risk of being an enabler for his paranoia, I think the analysis and advice I've given him is valid. As the saying goes - Just because you're paranoid doesn't mean they're not out to get you
Yep! Started this thread because I thinking of buying more mining shares and just wanted to know where I stand with them and a currency collapse. Changed my mind now on buying more mining shares. Instead I went to Goldstackers today and bought some more kilo silver bars and dropped them off at Guardian Vaults. GS were selling new Baird & Co 1kg bars for $8 less then low premium bars. A bargain on my fav bar!
There is ALWAYS warning signs, you just need to know where to look. Following the libor - OIS spread is the simplest way to detect financial stress in a country or the CDS 5 year spread along with sovereign bond yields rising.
