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e Losses Raise Investor Anxiety
Junior resource stocks have had their worst beating in many years. Most are down 50% or more. It is a very difficult time for investors in these stocks. There are many explanations, but whatever the reasons, there are few buyers and many sellers. When good news is released by a company, it becomes a liquidity event and everyone lines up to sell the stock because there are buyers available. Bucking this trend is proving very difficult.
Investors are frightened, resulting in stock lows and fears last seen in the aftermath of the credit crunch of 2008 when many juniors crumbled and collapsed. Many companies are most apprehensive about their future as junior exploration companies rely on repeated visits to the market to raise funding for the next round of explorations, and there is little appetite in the markets these days to invest in any junior company. Company that are short of cash are worried about their future capability to stay in business. Those companies with little cash on hand, are being forced to turn over their properties to larger companies with the alternative being to lose the property entirely.
Out of this Doom and Gloom, There are Opportunities
First consider the illogical behavior of the stock market. Stocks rise or fall with little relationship to value. We have discussed this lack of relationship of stock price to vale many times, and the conclusion is always the same. Those that buy when stocks are low, do well in the market. Those that buy after the market has risen to dizzying heights, and buy because everyone else is buying, lose their shirts.
It is funny how quickly the psyche of investors can change. The same stock, with the same assets, with the same potential, can be worth $10.00 one month and the next month, no-one wants it at $0.10.
Emotions Drive Stock Market Values
Consider in 2008 when stocks fell so violently and so dramatically, that there were almost no buyers for them. Those few who had the intestinal fortitude to buy these beaten down stocks did very well indeed in the years 2009 through 2011.
It was similar to going into your local department store, and seeing all of the merchandise on the shelves marked down to 10% of what it was selling the day before. A major shopping spree took place for those that understood that these cycles always occur. These cycles of emotional desire to buy what is hot, and to sell what is not, are related to the business cycles that we refer to so often.
If you want a bargain, and if you want to buy low, and later sell high, the bargains are now waiting to be plucked. How jealous everyone will be that you had the good luck to buy when prices were so cheap.
Consider Some Facts
Commodity prices remain high and within a normal range of the high that they reached in the last cycle, yet the shares of the junior companies that own the un-mined deposits of these metals in the ground, are severely depressed. There is not a correlation.
There has been no dramatic slowdown anywhere in the world. The US continues to drag itself out of the mire with ever reducing unemployment and ever increasing car sales. Japan teeters near the fiscal cliff in the same manner that it has done for many years now, but the country has survived earthquakes and tsunami’s and still is the 2d or 3rd largest (depends how you calculate) economy in the world. China, in spite of predictions of a great bust, has proven itself to be resilient and if there is a slowdown, demand from the millions of new middle class consumers remains strong.
The US fiscal cliff is a gamesmanship political fight, with the ideologies of the two parties at odds with each other. This is not a fiscal cliff and it will produce no depression. What most people fail to understand is that this type of political infighting has gone on since the birth of the Republic, and this is nothing new. In her biography, “Team Of Rivals: The Political Genius of Abraham Lincoln,” Doris Kearns Goodwin recounts similar bitter politic fighting going to Abraham Lincoln.
The Fiscal Cliff will be remembered with laughter in the same vein that Y2000 is remembered as a humorous anecdote.
Producing Minerals From the Ground
The miners and producers of metals are making near record margins. Costs have moderated a bit, profit margins are high. Miners should be enjoying this success, but instead are mired in this emotion of pessimism.
The very fact that every mine can see at current world prices, all of their output, shows how robust the demand is, and how valuable these junior minors are.
But fear has taken over the TSX Venture and the last time that happened, it was the greatest buying opportunity of our lifetime. So it is now. In 2003, gold traded at $230 per ounze. Today it trades at $1,650 /oz, roughly an 8x increase in price. Yet the stock price of companies that own gold in the ground is dropping.
In 2003, oil traded at $30/bl. Today it trades close to $100/bvl – a 3x increase. Copper traded at less than $1.00 whereas today it trades around $3.00.
The value is there for the picking. This is an opportunity to buy these stocks.
Whats-Hot-or-Not Periodically we publish our stock picks. Stocks that we like are “Hot” and listed below. Stocks not considered hot are removed. Whats-Hot-or-Not Buy EMED Mining $0.175 (EMED on AIM; EMD on TSX) EMED Mining is a European Mining story. It has various projects in Europe, but the flagship is a copper deposit in Spain. [...]
Ucore Rare Metals Inc We have previously written about Ucore and it has one of our favorite picks for some time. Today an article was published in www.mining.com that highlights Ucore and Matamec Explorations Inc. For the largest part, this article mirrors our opinion on the rare earth sector. Buy When the Price is Low, [...]
What is Hot In every cycle, people jump on the bandwagon. Whatever is hot, becomes the darling of the day. In the last few years, it has been rare earth metals. Light rare earth and heavy rare earth metals, and any other deposit that may contain these metals, which in most cases is uranium. What [...]
Gold’s Breakout Commentators have filled the news recently commenting on the breakout in the price of gold. Gold broke out of its reducing triangle and following the Ernmor trap, started a strong move to higher levels. Expressions on the part of gold bugs led to predictions by many of $2,000 and $2,500 price levels per [...]
Gold’s Amazing Run to $1,900 In August 2011, gold broke out to new highs of over $1,900 per ounce. What a ride from November 2008 when gold rose from above $700 to August 2011 with gold at $1,900. Gold remained in an unbroken channel moving ever higher, until near the end of its run, it [...]
Want to be at the Mercy of Armed Bandits? Choose Safe Countries for Investing. Avoid Unnecessary Risk
Scary Stories from South America Cymorfund www.cymorfund.com has long advocated a policy for investors of avoiding political risk. The investment community often uses the same metrics to value the shares of exploration and production of resources companies in different parts of the world. This is so very wrong, yet it continues. Why Safety from Political [...]
Lawrence Cyna: Look for value in a depressed market Lawrence Cyna, CEO and Fund Manager of Cymor Strategic Growth Funds www.cymorfund.com , doesn’t lose any sleep over the current state of the markets. He takes it all in stride because he’s seen it before and knows he will likely see it again. In this exclusive [...]
In my last two blogs, I discussed how the world was not coming to an end. I discussed how the stock market reacts by moving to the extreme up or the extreme down, depending on the current mood. I discussed how the supposedly incomprehensible debt could be dealt with, and I gave the example of [...]
The Stock Markets Compared to 2008 We are in a sustained downtrend for junior commodity stocks. Some juniors have lost 50% of value and some have lost 80% of value. The Wall of Worry continues and this fear that pervades is driving stock prices lower. Many are comparing the current period to the dramatic falls [...]
In the last blog, I suggested that the next topic would be the effect of shale gas on productivity and economic expansion in the USA, and prosperity in the Middle East and in third world oil producing countries. However, that blog is slightly delayed in order to discuss some current market issues. Why Stocks Sometimes [...]
Commodities and Precious Metals In recent blogs, I discussed how a feature of the new economic cycle now starting, is the remarkable need in the world for base metal and for precious metals. I discussed how the ‘doom and gloom’ crowd was urging people to buy precious metals to save themselves from the impending collapse. [...]
Commodities and Precious Metals Recently, I discussed how the next economic cycle is now starting. A feature of this new cycle is the remarkable need in the world for base metal and for precious metals. I discussed how the ‘doom and gloom’ crowd was urging people to buy precious metals to save themselves from the [...]
We Point Out the Obvious – The Next Economic Cycle is Starting We have repeatedly advised readers to look at the history of economic cycles since the dawn of the industrial revolution. There have been repeated cycles that all mirror each other, and as long as we are around, these cycles will continue. A Brief [...]
The Price of Gold – Current Expectations There are many pundits that believe that gold will continue its relentless drive upward. Expectations range from a projection of $2,100 by December 31, 2012 to $5,000 per ounce. If one listens to these expectations, it sounds inevitable that gold will continue it’s rise to unprecedented heights. Comparison [...]
Headlines Recently Talked About an Oversupply of Iron Ore Over the last several years, the search for iron ore intensified, and because of demand from China and Eastern countries, there was great interest in new deposits prospected in Canada and elsewhere. Recently headlines had two themes. Firstly, the sheer number of new refineries and steel [...]
Gold is in the $1,700 per oz range currently. There is a divided view on whether it will rise to $5,000 an ounce, or fall to $500 an ounce. The Fear and The Media The most widely held view over recent years, is that because Western societies have printed money (thanks to Alan Greenspan – [...]
In parts I & II of this blog, we discussed the debt crisis in Europe, the historical effect of similar crises in the past, and the probable effect this time. In this final installment, we look at other obvious disturbing signs that are being ignored in the discussions, and we arrive at our conclusion. Looking [...]
In the previous blog, we had both a historical perspective on the effect of a nation’s debt default, and some perspective on the effect if a country defaults. Now we look at Europe’s difficulties. The European Debt Crisis I agree that Europe has troubles. If you travel through the southern European countries, you see lots [...]
The Experts are Not so Expert. Trust Your Instinct Instead. Research Verifies the Absence of Experts.
Who Are the Experts? It is a basic human need to seek comfort in the advice of those that ‘know better’ – someone more knowledgeable. To this end, people are always seeking the advice of experts on every field. This human need has spawned countless experts anxious to pontificate on financial matters. I have remarked [...]
The Current Value of Gold and Silver As I write this, the current price of gold is $1,646 and the current price of silver is $31.35. These values are significantly below recent highs for both metals, and in each case technical analysis shows that the the value of both metals has broken below support and [...]
Gold & Silver What we seem to be experiencing currently, is quite a pull back in all sectors, but precious metals gold and silver have fallen more than most. Gold has shown weakness recently and then quite a fall in the last week, resulting in a price of $1,650 per oz currently – a far [...]
We review many writers daily and it seems that everyone is predicting a further massive rise in the value of gold. The view seems to be almost universal. Mr Market Remember that when everyone is sure about some direction in the market, Mr. Market waits for his OPPORTUNITY to take everyone’s wealth away and teach [...]
An Incredible Rise, Followed by a Fall in Price What always amazes is how something can rise 400% in value which is really quite astonishing, and then when it retreats a bit, the headlines are all about the percentage fall. I suggest the reader examines the comparison of where silver is now, compared to where [...]
A Reminder of the Seasonality of Stocks Over the past weeks, we have seen a gradual lowering of the major stock market indexes. People are watching this weaknesses and comparing it to a number of factors that they are hearing in the news. Observers link this weakness to bad news. The market moves of its [...]« Previous Entries