A recent interview with Hugh Hendry really got us thinking about some of the issues we had discussed in an earlier blog titled “Pick your Poison”. In this interview, Mr. Hendry was asked whether he preferred the purchase of Gold bullion as opposed to the purchase of some of the Gold producers. He stated that one would have to be “insane” to purchase gold equities as the risk increased exponentially with gold equities as the price of gold rises. These risks include: increased taxation, partial or full nationalization, etc.. We hardily agree, however we do not agree that categorically one should always own the underlying commodity rather than the associated equity. Clearly there are times when the equity presents some deep value situation, either due to sector specific or company specific market pressure. Therefore, while Mr. Hendry is probably right over the longer term, a full analysis of the underlying commodity versus the producer equity is warranted when taking a shorter duration position.