-- Posted Monday, 13 July 2009 | | Source: GoldSeek.com
By: Tony Locantro
After 18 months of the GFC, repeats of repeats of Two and a Half Men there is a welcome change occurring in the junior mining companies on the ASX. Finally we are seeing recognition on the scoreboard for exploration hits but there is also just a hint of near-ology starting to appear. The “fear of missing out” to a bubble is like pouring petrol on a fire, and although it is early days the signs are there that “normality” or a touch of greed may be returning. A junior explorer struggling to find a buyer a few months ago around 6c has motored to $1.50 and change and managed to attract a leading full feature in a Saturday edition of the West Australian.
The odds of winning Oz Lotto in Australia are 1 in 45 million, yet if you start with $10,000 and take Mr T’s advice and “Get some nuts” two ten-baggers will get you there if you are prepared to do the research.
I realise that this scenario is perfect world gibberish, however there is no reason why those who are able to do the opposite of what their emotions are telling them to can over the longer-term turn $10,000 into a million and defy the odds.
Market and general observations
Ø Major bubble in Share Purchase Plans in larger stocks. This has been fuelled by newsletter writers and an avalanche of speculators scurrying to buy a marketable parcel and in a company they would not have bought in a fit. People are writing cheques in the belief that they will attain a sure thing and in some cases they are. I feel that by taking a $600/$1,000 profit they are doing themselves no favours in the long-term as stress/anxiety will increase by phoning their brokers anxiously waiting for the stock to be issued so they can sell before others. Just another way to become paranoid and a short-term trader where risk/reward becomes distorted. Doesn’t matter how intoxicated they are the ham and cheese hero will leave that 7/11 microwave 15 seconds early everytime. Needless to say I have resisted this bubble but am enjoying watching the herd mentality from the sidelines as selling at the top of a speculative bubble requires the running of the crazy bulls.
Ø Are 5 star Ancap safety ratings being thrown out like heart foundation ticks? I admit I am a victim of having a car with multiple air bags, reverse sensor/camera and traction control but to be honest during the early days of ownership you are tempted to drive the damn thing into a tree at moderate speed just to see how it all works.
Ø Here comes the sports betting bubble! We are now being flooded with offers of higher odds, options, and guarantees you every multiple (orgasm variety, IPods’ and giftcards excluded). I guess the Government needs another “poor tax” and here it is. It is quite alright though because as long as you advise people to “Gamble Responsibly” it’s all good. Again risk/reward gets thrown out, and proof of this was that astute person who put $800,000 on Federer to win $8,000. My partner has a saying, “Injuries smidgeries” and I guess he had an inside running that Rogers hamstring was doing just fine if not a little sore. I don’t care if he is playing John Daly there are only three sure things in life after all.
Ø I must say it was pleasing to see that no one tried to cash in after the death of Michael Jackson. Just goes to show how appreciating talent has the sheer power to override the lure of a quick buck. EBay must still be perplexed at the decline in listing fees…
Message to Saul Hudson (Slash), I really appreciate you signing those limited edition Les Paul’s over to me but please lead a long and happy life, I don’t want to be seen as a hypocrite in future! Lucky I flew Asiana and Qantas home because we all know “United breaks guitars”
Ø YouTube stardom is still highly sought after. The battle to be a celebrity is on again and actors with substance, talent and ability who have worked hard to achieve success such as Paris Hilton must be quaking in their Rodeo Drive boots.
Ø Obama has been a major coup for the lithium sector in particular and am certainly grateful for his stance on geothermal which could see a return of the speculative fervor that lifted some juniors a few years ago. If the most powerful person on the planet is providing a plethora of clues as to where all the printed money is going to go, why wouldn’t you listen?
Ø Speaking of Obama now he is talking about $25bn to assist Africans in become self sufficient. Perhaps a prelude to another agricultural bubble of sorts? Might be another area worthy of research. Could be a major windfall for those who take the lead and position themselves accordingly. I don’t know about paying $1.6m to have a 3hr lunch with Warren Buffett when I am getting all the information I need from the person who will be responsible for triggering the rallies for nada.
Ø Although Human Nature are doing covers and not releasing their own material they haven’t changed. Investors are still paranoid with many believing that everyone that sells a stock has inside knowledge that the company is going under, and that every large cross trade is a company executive selling to a sucker. We are now at the stage where 2c off a 50c stocks automatically implies that the high-grade gold is sub-economic, there is a massive stockpile of Coke Zero in Siberia so the price is going to fall, and Neverland is indeed haunted. I mean how many times do I have to threaten to grow my hair back so I can painfully pull it out?
Ø The tipping circuit is alive and well. I was recently tipped a stock I owned 13 years ago when it was the opposite sex, wore citrus shirts and digged stone wash. Perhaps they built the pyramids because there was no Judd Apatow/Seth Rogen movies in 500BC?
Ø 3c-4c stocks are the new black. When share prices were not permanently in manic depressive mode you could accumulate a genuine company run by good people who weren’t promoters at 12c shortly after a 20c IPO. This is not the model with curves that you would like to sleep with but was often an ideal ten-bagger candidate. The GFC and the alien paranoia super highway means that you can buy these companies for under 5c and by the truckload. Therefore my formula for wealth which should ensure I become a Nobel laureate of economics is
BUY QUALITY (BQ) – BUY LOW (BL) – BUY LOTS (BLS) then wait for human nature to take over. Only when stocks become expensive and fast moving to do they become desirable. A bit like a plasma selling to an LCD!
Ø Most market participants still have no interest in getting educated and this is fantastic as in order to make money and conquer the opposite sex (more on this later) you need an unlevel playing field. You can end up with the alphabet after your name in 10 years or you could read/watch the following,
The Great American Bubble Machine Matt Taibbi’s great article published in Rolling Stone magazine of all places.
The Devil Take The Hindmost E.Chancellor (Fantastic book)
One Up On Wall Street P.Lynch (ditto)
The Winning Investment Habits of Warren Buffett and George Soros M Teir
Wall Street (Even if you have seen it 30x it is probably worth another look)
Ø Leaders are still winning. How come that guy was able to swap a red paper clip for a house, or that computer geek able to sell 1m pixels for a dollar each and probably bag the super model at the same time. Because they had the courage to do something out there and be the first. This is why a small number of uranium, potash and lithium stocks were able to enjoy massive spikes due to the first mover advantage. Again I try to instill into my clients that you have to buy and sell when you don’t really want to!
Ø Early 2009 has clearly shown that there is significant cash on the sidelines waiting to join the party. We had stocks 5-10 bag simply on a chart pattern or in some cases re-financing massive debts i.e. being placed on life support. Markets do return to the norm so if you can buy a 12c company for 3c isn’t 4x your money the reward for doing this early? I am continually told that this mini correction is different and some stocks will never rise again. These are the same people who will probably try and sell me a foolproof sports betting program developed by Nobel prize winners.
Ø There are companies out there with JORC resources that are likely to be economic that you can buy the whole shooting match for shell value and cash in the bank. Again it’s a product of manic depressive pricing that history has shown will eventually revert back to the norm. In this group there are stocks under 10c that you can easily imagine re-rating to 50c without any exploration upside factored in whatsoever. The problem many speculators are having at the moment is that their portfolios are choc a bloc with underperformers that have outstanding fundamentals. Selling an underpriced stock to buy another underpriced stock to me seems like diworsification so until something moves the wish list grows. So unless you find a corn chip that resembles are B grade celebrity, no ticki no laundry!
Back to the exploration bit……….
The pleasing aspect is that the market is not discriminating between copper, zinc, nickel and gold. A high-grade discovery of something that holds together will often turn into a mine so an economic discovery of whoopee cushions at depth should still provide an economic return. (As long as they are close to a port and /or a flea market).
I tend to be attracted to the higher risk targets as opposed to shallow RAB drilling which I use as the clues to buy a company prior to an RC program. Recently one of these reported that their rock sequence was not mineralised and the stock dropped a few cents and I was under attack due to the fact it wasn’t 10x higher. The risk/reward on this company is outstanding because not only have they developed a smorgasbord of new targets they also have taken a massive view on geothermal and put their money where their mouth is. These are not the type of stocks your butcher will tell you to buy as they rarely attract any attention until they drill into a mine and the herd will pay $1.50 for something that will be selling at 45c in 8 months time because they got bored during the pre-feasibility study. Again why would you bother speculating on this sector when you couldn’t be bothered reading the cycle on how an explorer graduates into a producer?
A fringe benefit perhaps?
The potential for an exploration boom has certainly got me thinking about what we really desire in life. I must admit during my wilder single days I approached a girl in the bar and used the following pick up line or similar, “Can I buy you a drink courtesy of a little gold stock called Eagle Mining. I am out celebrating and have no one to share this with” I must admit I ended up with a sore head and kebab sauce stains down my shirt instead of hitting a home run but what why compete with those on YouTube who had managed to stuff up singing nose hairs whilst blindfolded and got a million hits when you can at least demonstrate you have some substance.
Here’s to the derivative and superficial life we lead, because in the end everything seems to revert back to sex. The right speculation can see you win the equivalent of first division lotto, indulge in Indian takeout once a month and enable you to pay for Green Day tickets which in turn assists in the process of getting you know what? For some achieving this dream requires 1m hits on YouTube, the paparazzi and a cheap spread in a men’s magazine.
Those looking for the holy grail in my articles along with a sure fire list of ten baggers are going to be sorely disappointed. I will leave you though with a quote that Bruno is most welcome to overuse on his next round of press engagements,
“At ze start of ze biell market we has all ze paper ands they has all ze monies. At ze end of ze biell market we has all the money and they has all ze paper” Hello…..
Tony Locantro
Personal Disclosure: I have personal holdings in speculative shares in gold, silver, base metals and industrial sectors and may at times liquidate or increase these holdings as I see fit. My clients have considerable investments in a number of companies and may Disclaimer: The opinions contained in this article are purely my own and any prior to any investment decision you should contact a licensed financial adviser. Speculative shares are volatile, should be considered high risk and can result in significant financial losses. I earn fees from trading and raising funds for junior resource companies.
About the Author: I am an advisor to hundreds of small to medium investors in the speculative sector of the market and have been since November 1998. In 2001 I wrote "The Green Room" A Guide to Speculating on the Australian Stock Market (down to my last 10 copies or so) and have run a number of presentations. I am currently writing my second book and it should be published once I stop spending all night watching suggested YouTube clips and gouging myself on corn chips and wonka bars.
If you are interested in becoming a client my email is tldk2@bigpond.com
-- Posted Monday, 13 July 2009 | Digg This Article
| Source: GoldSeek.com
