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-- Posted Tuesday, 28 December 2010 | Digg This Article | | Source: GoldSeek.com
Oprah�s line not only took me back to 1976 and Rocky, but also brought fond memories of contestants on the The Price Is Right hyperventilating after winning a set of saucepans or a telescope. Once the excitement had abated, 78% were probably on their way to getting a passport for the first time, and I dare not speculate as to how many knew �where the bloody hell are we�. Once the Masterchef bubble had finally deflated, we could all retreat from our feeble attempts at a guava snow egg and focus on what Oprah�s visit and publicity could bring to this fantastic country of ours. At times it all looked as sanitised as surgery and more rehearsed than a Wiggles performance, but credit where credit is due, we haven�t had this much publicity since they flew Tiger out to win a golf tournament. (No Dad joke inserted here) I have travelled to America on numerous occasions and am planning another trip hopefully in 2011 or 2012 tops. The last occasion I went through security at LAX (was at the pointy end of the GFC) when asked my profession, I was then prompted for a stock tip. Like Bud Fox on Wall Street sheepishly mentioning Bluestar Airlines for the first time to Gordon Gecko, out I came with Yukon-Nevada Gold Corp TSX code YNG. I wasn�t in a position to give a direct tip of sorts but I did re-iterate that I was in contact with someone who knew the story quite well and suggested I take a much closer look. Needless to say YNG was being belted into next year, and around 4c CDN it was only for the true contrarians or perhaps someone who thought that having an Australian in a pink business shirt mention the company deserved a punt of the eyes wide shut variety. As I was penning this article I went back to take a look at YNG and saw the last price at 82c with a year high of 95c. An accidental twenty bagger if there ever was one, all thanks to the GFC and capitalism albeit briefly staring into the abyss. I didn�t buy any either, however from that trip my now 2yr old son scored himself a Les Paul Slash model signed by the man himself. Here I am shaking my head at those going to extremes to even catch a glimpse of Oprah, yet I lined up for hours outside that music store like a smitten school girl to get my guitars signed. I kept telling my clients not to be like that 14yr old at a Justin Beiber concert, yet instead of buying myself a blue Subaru WRX with gold rims as a pre-midlife crisis gift, in June/July this year I ended up following Pearl Jam through Ireland, London, Germany and Spain. Despite their economic woes the Irish were fantastic hosts, the Germans efficient as always, and during the Hyde Park concert you could have copped a bottle in the back of the head at any moment. I fulfilled my ambition to fly in an A380 (could have been a nasty move in hindsight), but the major take away from the trip was just how much I loved the whole �vibe� surrounding Sans Sebastian, Spain. Here we were surrounded by people who appeared to be enjoying life at their own leisurely pace, yet I was undergoing mild anxiety attacks from not being able to spend more time in internet cafes watching the speculative market continue to capitulate. Pearl Jam was playing a festival in Bilbao and the thought of a breaking up a European holiday with some beach time made perfect sense. We were that affected by our visit that only a week a week ago my other half came out with, �If it all hits the fan we can sell everything and move to Sans Sebastian�. This was my Shawshank moment, a ten second period where I felt as free as �Red� as he strolled along the beach towards his old friend Andy Dufresne. Anyway reality hit shortly thereafter, just like visit Sans Sebastian and Tourism Spain websites are about to crash under the weight of enquiries no doubt as a result of this article. When Oprah decided to shout her loyal audience a trip to Australia security experts no doubt went into overdrive but realistically our biggest threat may well have been the Chasers reuniting for one last crack at a slot on CNN. Poor Chelsea Handler (the anti-celebrity type) was probably afforded some aeroguard on her trip to Australia, yet she has probably pissed off more people than I have had shrimps on the barbie. Pulling power and the big dollar is what it is all about, and the second half of the year for the Australian speculative market has been no different. The late Rene Rivkin was one of our more well known investors and market commentators and when his newsletter issued a buy recommendation at the heights of its powers it certainly had an �Oprah� style effect. Hundreds of buy orders would overlap the pre-market and those not aware of the reasons for it would often jump those buyers and so on, and so on. After Rene passed away there has been a gap waiting to be filled and post GFC we are now seeing a powerful resurgence in stock recommendations where previously little known companies are seeing their share prices move in multiples. Just like someone baking cup cakes in their kitchen in Chicago dreaming of their own Oprah endorsement, there must be hundreds of ASX listed juniors hoping for their own transformation and escape from obscurity. If it wasn�t for the inevitable Christmas slowdown and some heavy flooding of exploration areas in the Eastern States, some of our juniors could have found themselves selling their own versions of bath salts and Mothers day gifts on a global scale. The rare earths sector was sheer madness for a brief period and felt strikingly similar to what ultimately drove some uranium juniors to unsustainable levels. Anything to do with sampling or the intention to sample was met with massive volumes and share price spikes, but just like in any period that starts to become frothy you start hearing that �This time it�s different� These four words are right up there with, �Half price handbag sale� or for those with toddlers, �The latest Disney-Pixar film� when it comes to labelling them �the most expensive four words in history�. Without a serious correction in the Dow Jones and/or a total collapse in the gold price or Chinese growth, the Australian speculative market appears to have the potential to go off the richter in early 2011. Already I am seeing the dangerous combination of complacency and the devaluation of the dollar. I am not taking about cross rates but simply when a speculator starts to lose respect for their profits and events such as the GFC are all but forgotten. In September and October 2008 for many the aim was being able to find enough buyers on the screen at any price level to free up some capital regardless of the loss. Too many inexperienced gambling types are now making easy profits and are now out in force recruiting even greater fools during the family festive season. For some financial oblivion could be only a burnt sausage and desperate pleas to take the leftovers home away. Often when the selling gets too easy, many set at or near the bottom become concerned that they are giving their stock away to the so-called �smart money� and they often retreat and set even higher and more ridiculous price targets. It is all part of the process of being sucked in, yet no matter how many times history repeats itself very few in fact learn from it. SPECULATIVE MARKET OBSERVATIONS � Interest is slowly building in the shale gas sector following some exploration success in the Cooper Basin South Australia. Unlike the Australian cricket team who could do with some rain, the area has been hit hard and the drilling momentum has been affected although there is certainly some smoke here. I am starting to see reference and comparisons to US companies and this could fuel this sector further in 2011. � Despite the intensity of the rare earths inspired rallies abating slightly, our largest rare earths company is still capped around $2.7bn and I would expect further project acquisitions by the juniors in 2011. � Silver is finally starting to attract some attention, however apart from a handful of focussed juniors there isn�t much a sector here in Australia. This is one area where there is considerable scope for IPO�s and project acquisitions in South America. � West African gold explorers/emerging producers continue to attract significant attention and were the scene of a bubble some of our local juniors were hoping for as the spot price continued to climb. Sector comparisons are continually highlighting the undervalued and I see no signs of this trend changing, however in many cases the easy upside has already been won and the hot money may start to look elsewhere for more attractive risk/reward propositions. The sector has attracted institutional investors and resource funds so development and eventual M@A activity could keep things chugging along. � Mongolia has already been touted as the next �West Africa� and in some cases the re-ratings across some juniors are starting to show similarities to their African counterparts. Chile, Peru and Argentina appears to be undergoing a resurgence of their own, and as always there are considerable profits to be made if you are a �first mover� in one of these geological hotspots. � The Australian geothermal sector continues to languish, however a number of our juniors are moving offshore and are now starting to find some friends as the Government here appears to have dropped the ball for now. I still believe that another �oil price shock� could be the catalyst for another attempt at a major alternative energy bubble. � There are still a number of junior gold companies with viable projects in mining friendly countries trading at ridiculously low EV�s relative to those in more exotic locations. These are the pre fame Susan Boyles standing at the bar all waiting to be discovered, but in a more buoyant speculative market not even waxing and a makeover will do the trick just yet. � There are still numerous �cheap real estate� opportunities as I like to call them in the base metals arena in particular. Despite coppers rampant run and the promising outlook for zinc many juniors with excellent resources are not that far of shell value. Already we have seen some low ball takeover bids for some of these and I would expect that trend to intensify in 2011 as it is far cheaper to buy resources and production than to drill it out and go through more red tape than a Twigley number. � Major uranium exploration programs are set to commence in early 2011, with Cameco in particular teaming up with a number of our juniors in some of the more promising areas. Perhaps there isn�t enough space between now and the bursting of the 2007/2008 bubble, however we may see some of the Canadian overflow and a re-rating of sorts for some of the more serious participants. � There is one trend that remains constant in all market conditions and this relates to the �elephant hunters� out there looking for the next Degrussa, Merlin, Hillside, Prominent Hill or Ernest Henry. Once conditions dry out I would expect a number of IOCG targets to be hit hard. Only recently we saw the successful ASX listing of a junior with access to what has been to now a largely undrilled belt in NSW Australia of all places. Despite all the noise and market gyrations history has shown that if you drill into an exciting mineral discovery the market will reward you and this is where in quieter conditions you can easily pick up the future 10 to 50 baggers if you are lucky. � The strategy of selling the USD and buying gold is becoming oh so popular and is almost taken for granted these days. I am not saying we have an iceberg dead ahead just yet, but something to consider for those who like to go against the herd and are focussed on risk and reward. In my twelve years as a client adviser in speculative resource companies it became obvious that �value contrarian� investing was the most successful strategy over the medium to longer-term. The challenge for speculators is to be able to buy them before those far more famous and with more pulling power catch onto them and send them into the mainstream. Portfolio returns should not be based on the �Will Ferrell� model, however as he recently said, �I am living the American dream without even trying� Tony Locantro tlocantro@iinet.net.au 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. 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. About the Author: From November 1998 to November 2010 I was a client adviser for a major stockbroking/investment firm in Perth ,Australia. During this time I have written a numerous financial articles, educational papers and exams for the finance industry and in 2001 I wrote The Green Room, A guide to speculating on the Australian Stock Market (no longer available). I have now formed Locantro Asset Management and will continue to be a passionate supporter of the Australian junior resource industry.
-- Posted Tuesday, 28 December 2010 | Digg This Article | Source: GoldSeek.com
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