-- Posted Thursday, 18 June 2009 | | Source: GoldSeek.com
The recent 2009 World Resource Investment Conference was moved to the new Vancouver Convention Centre in Vancouver BC, constructed in advance of the 2010 Winter Olympics. The fresh venue for the conference did not seem to carry the enthusiasm equal to the new venue or previous conferences at the neighboring waterfront convention center.
The number of companies attending the conference seemed to be lower than normal, most likely due to belt tightening. There also appeared to be an absence of "mini-bubbles" that seemed to accompany conferences in past years over molybdenum, uranium or potash. This would appear to be due to the reticence of investors to replace their risk aversion with greed, or lack of cash and/or leverage, to fuel momentum in fashionable investments. A lack of speculative spirit seemed to haunt the event.
We found this to be surprising, considering both gold and silver prices were close to their 52-week high. While this may be expected due to seasonality in precious metal demand, enthusiasm for a store of value didn't appear to be measuring up to flagging confidence in the U.S. Dollar and other world currencies. Interestingly, one might assume that a nuclear North Korea with intercontinental delivery systems capable of crossing the Pacific might generate anxiety, pushing investors toward a safe haven.
In many ways it appears that the market is in the process of completing its revaluation of equities thrashed during 2008 and the dead cat bounce in the first quarter of 2009. This bounce followed a near collapse of financial markets and tax loss selling fueled by an increase in the monetary base, increased inflationary expectations and stocks at prices that were too cheap not to buy. The "smart money" is now back, and now that the easy gains have been made, investors simply don't know how to proceed.
This confusion appears to extend beyond the conference. Last year the "safe" place to be was out of the market, and now with the latest bounce, investors appear unsure. Clearly there are initiatives to stimulate the U.S. and world economy through fiscal policy, but very little has actually been spent. The banking industry appears back from the brink but there is questionable evidence that borrowers or lenders are willing to take risks with an uncertain future. The unemployment rate in the U.S. is now above Canada and the U.K., and even that of Europe for the first time in decades. With U.S. Administration's promises of 600,000 jobs in the U.S., investors are at risk of suffering both "job illusion" and "money illusion"; in other words, stagflation. Even though the money supply may have increased, the reduction in the velocity of money is holding back economic growth and inflation and propping up the U.S. Dollar.
Investment Themes Return to Cash Flow, Discovering Ounces and Consolidation
Stock picking based on cash flow, resources and takeover potential appears to be regaining traction as investment themes. We see the lowest equity prices in years providing an opportunity for investors in some of the companies we visited with at the conference.
Mike Niehuser is the founder of Beacon Rock Research, LLC , which produces research for an institutional audience and focuses on precious, base and industrial metals, and substitutes, oil and gas, alternative energy, as well as communications and human resources. Mike is also on the faculty of the Pacific Coast Banking School and was nominated to BrainstormNW magazine's list of the region's top financial professionals in 2007.
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-- Posted Thursday, 18 June 2009 | Digg This Article
| Source: GoldSeek.com
