WALL STREET STOCK FORECASTER
250 Liston Rd., Ste. 700, Buffalo, NY 14223.
Monthly, 1 year, $99.
Newmont still a buy despite lawsuit risk
Patrick McKeough: "Newmont Mining Corp. (NYSE NEM $42, WSSF Rating: Average) may have to pay $133.6 million to the Indonesian government, which has accused the company of pouring toxic material from one of its mines into a nearby bay. Newmont shut the mine down in 2002.
This lawsuit is equal to 30% of Newmont's 2004 profits of $1.00 a share ($443.3 million). However, residents near the mine recently dropped a similar suit against Newmont due to the lack of evidence.
Newmont's stock got as high as $50 in November 2004. It has drifted down lately due to concerns that the lower U.S. dollar and rising mining costs could cut its profit growth. But the long-term outlook for gold is still positive.
Newmont is a buy, but only for aggressive investors."
INSIIDE TRACK
P.O. Box 2252, Naperville, IL 60567.
Monthly, 1 year, $179. www.insiidetrack.com.
Long-term outlook for Gold and Silver remains bullish
Erik Hadik: "Gold & Silver - Long-term uptrends in Gold & Silver are consolidating. The most synergetic time frame in 2005 for Gold comes into play in early October and for Silver in early November. If these metals are able to reverse their weekly trends back to down in the month of April, it should usher in a decline that extends into the 4th quarter of 2005. The long-term trend - and the outlook into 2007/2008 remains bullish. So, any declines should be viewed in that perspective. Lows possible in Oct./Nov. 2005.
Interest Rates - (opposite of Bond direction) - Long-term neutral-to-down trend bottoming. Bonds should see a decline (interest rate rise) into June 2005.
Dollar - Long-term trend down and projected to continue into Aug./Sep. 2006. A 3-6 month rebound is expected."
UTILITY FORECASTER
1750 Old Meadow Rd, Ste. 301, McLean, VA 22102.
Monthly, 1 year, $129.
KeySpan Energy: A great total-return buy
Roger Conrad: "In the late 1990s, CEO Robert Catell forged KeySpan Energy (NYSE KSE $39.55) by merging the old Brooklyn Union Gas with a part of Long Island Lighting and two New England-based gas utilities. The plan was to match solid gas distribution assets with high-potential energy investments, ranging from appliance services to oil and gas production.
Like other empire builders, KeySpan's plans have hit a few snags, including alleged fraud and pressure from credit raters to cut debt rapidly. The utility, however, has consistently earned steady cash flows and paid a strong dividend. Today it's in better shape than ever, thanks to Catell's conservative approach and willingness to learn from mistakes.
2004 earnings surged 20 percent as the company gained gas customers from heating oil providers, padding ultra-solid margins. Meanwhile, the company scored on niches generating electricity for power-constrained New York City and producing oil and gas in Appalachia. Sales of non-core assets - such as Canadian midstream assets - have cut debt.
The 2.3 percent dividend increase in 2004 was the first in several years and portends more ahead. The Long Island Power Authority has the right to buy 4000 Megawatts (MW) of KeySpan's plants.
Even if it does, the ute will still have capacity, including a 500 MW plant for New York. And it can cut debt further.
KeySpan shares have been overvalued until recently. For those who don't own it, though, it's a great total return buy below 40."
INTERINVEST REVIEW & OUTLOOK
P.O. Box 51462, Boston, MA 02205.
Monthly, 1 year, $125.
Buy shares of companies with attractive fundamentals
Dr. Hans Black: "Over the past few months, the trading pattern of rallies followed by corrections followed by deeper corrections, seems to be on target for the moment. As we have stated consistently since last Fall, we believe the precious metals markets are in need of a rest and that the bullish extremes of October/November 2004 need to be corrected. Although it is never easy to time the extent of these kinds of market setbacks, we believe the path of least resistance will be strongly upwards and that the current period of lackluster trading will likely be followed by significantly higher prices. While there is always a risk many others are in our camp waiting to buy below $400 an ounce, we still feel that eventually we will get there.
For the moment, we would continue to advocate picking up shares of companies that have attractive fundamentals for the longer term. We continue to like Newmont, Placer Dome, Eldorado, Cambior, Orvana and Southwestern Resources, but would only advocate additional buying once gold bullion dips below $400."
THE TURNAROUND LETTER
225 Friend St., Ste. 801, Boston, MA 02114.
Monthly, 1 year, $195.
George Putnam, III: "USEC (NYSE USU) is up sharply over the last few months as high energy prices have generated a lot investor enthusiasm for uranium stocks. We're not sure how sustainable this enthusiasm is - for uranium in general and for USEC in particular - and so we recommend selling the stock now."
Stock Trader's ALMANAC INVESTOR NEWSLETTER
79 Main St., Ste. 3, Nyack, NY 10960.
Monthly, 1 year, $295.
Natural Resources: Intermission, not the final curtain
Robert Cardwell: "Oil made another historic high ($58.55 basis the nearby future) before correcting rather sharply. Helping inspire the high was a report from Goldman Sachs discussing the potential for a "super spike" in oil to as high as $105 a barrel, with natural gas reaching $13 per mcf. The comments we saw about this projection ranged from skeptical to derisory - which leads us to conclude that it is not yet time for a contrary-opinion stance against oil.
While there are certainly plenty of bulls around, there are still quite a few bears. What's more, even the bulls are not entirely convinced. The Goldman analysts look for a long decline after their big spike, as demand is reduced and the price brings on increased supply. The big question is how much supply is available at any price.
Among the apparent skeptics about oil prices have been the major oil companies themselves. At current prices, and with bountiful cash flow, you might expect them to be drilling up a storm. But last year they spent more money buying back stock and reducing debt than in exploration. Maybe it will take still higher prices to prompt an all-out effort to find more oil and gas - or perhaps the geologists just can't find enough large and promising targets to drill at any price.
There are a few things we know. U.S. oil production peaked in 1970 and has declined steadily save for a temporary boost due to Alaska's North Slope. Domestic natural gas production has been more or less flat for 15 years and is now declining. We probably are past the peak, since a major increase in drilling for gas has not been able to boost production. Global oil output is bound to top out as well; the only question is when.
Surprisingly, the volume of world oil discoveries peaked in 1960. Production has been sustained by drawing down the huge fields found decades ago and finding smaller deposits that don't last as long. Even the large discoveries in West Africa and Central Asia during recent years don't equal the fields uncovered in the good old days.
We've been following energy stocks - and the commentary - for quite a while now. The analysts and investors who think petroleum is in a bubble seem to believe so simply because prices are up a lot and have always come down before. The minority who think oil will go higher and stay high tend to base their argument on facts and figures. The few who have thoroughly studied the world's oil fields and projected their rates of decline against the production ramp of new fields, who have analyzed historic trends for discovery and development, are almost all in the oil scarcity camp as far as we can determine. Let's remember that in 1956, King Hubbert predicted that U.S. oil production would peak in the early 1970's. He was laughed at when he published his projection, but he called it exactly right. His successors are using the same methods to analyze the global production outlook.
Some, like Kenneth S. Deffeyes, former oil man and colleague of Hubbert, former Princeton professor, and author of Beyond Oil: The View from Hubbert's Peak, believes that right now the world is producing more oil than it ever will again. Almost all close students of the situation think that output will turn down sometime in the next few years. Now think back to Economics 101 and the fact that price is set at the margin. In a situation of scarcity, it will be the bidder for the last barrel who determines the world price.
This is potentially very bullish for anyone who controls oil and gas, and bearish for most others. While we really hesitate to invoke the term, paradigms do - though rarely - shift. Whether you believe in the petro-peak or not, it will pay to watch very carefully as things develop. It could be quite important to your investing future.
We are maintaining our longstanding bullish posture on oil and gas stocks, but with a fair amount of caution. Even if the bulls are absolutely right, there will be wild gyrations along the way. We'll take some profits when enthusiasm waxes high (as we have already) and buy back on the corrections. We'll also continue to emphasize companies with discovery potential or undervalued assets, whose stocks should do well even if oil doesn't.
In the last four weeks, crude oil has been up and down and oil stocks overall are flat to down. But our energy issues are mostly ahead for the period, thanks in part to their having growth potential independent of oil and gas prices.
There are at least four reasons for holding metals stocks:
- The "ultimate store of value" argument, particularly in the case of precious metals (insurance against financial crisis).
- A hedge against dollar depreciation, whether through inflation or decline versus other currencies.
- Currently, and likely for at least several years, the fundamentals are favorable due to capacity shortages and escalating demand from China and elsewhere.
- If you pick right, the potential for exploration success.
We've had fairly good success with our junior mining stocks through selection and timing. Right now copper continues to press its highs and other industrial metals are still strong, but the precious metals have been correcting and consolidating since the first of the year. With the trade deficit reaching another new high, further dollar depreciation is a good bet. Most mining stocks are down and some substantially so. It looks like a good time to accumulate."
Editor's Note: Robert Cardwell is Director of Equity Research at the Hirsch Organization publishers of the Stock Trader's Almanac.
THE CHARTIST
P.O. Box 758, Seal Beach, CA 90740.
Monthly, 1 year, $175.
Peabody Energy projects worldwide
coal demand to grow by 60% by 2030
Dan Sullivan: "Peabody Energy Corp. (BTU) carrying the title of world's largest coal company comes with expectations, and Peabody Energy is working hard to fulfill them. Specifically, Peabody posted record revenues, and earnings in the fourth quarter of 2004. And, newly acquired mines and new sales agreements will enable Peabody to target even higher results in 2005.
Additionally, the company anticipates U.S. coal demand to reach record levels in 2005, projecting the economy to grow at a rate of 3 to 4%, thus spurring electricity generation. Current customer stockpiles are 10 to 15% below five-year averages and coal-fueled electricity generation is expected to increase to record levels.
Long-term, Peabody projects worldwide coal demand to grow 60% by 2030, with the strong economies of China, India and the United States accounted for 90% of that growth. Currently, Peabody products fuel more than 10% of all U.S. electricity and 3% of worldwide electricity.
This low-cost energy provider posted 2004 sales of 227.2 million tons - an industry record - and $3.6 billion in revenues. 2004 net income rose to $175.4 million as compared to $31.3 million the prior year. Full-year increased 36% to $559.2 million. 2004 revenues rose 29% to $3.6 billion. The cause for the increase was attributed to higher volumes, pricing increases and the benefits of new operations. Revenues also include $335 million in contributors from operations acquired in Colorado and Australia during the year."
THE PERSONAL CAPITALIST
6911 S 66th E Ave., Ste. 301, Tulsa, OK 74133.
1 year, 24 issues, $195.
Hydrogen economy a reality, Gold price rally later in year
Sean Christian: "Despite the increased worry levels, however, we remain hopefully bullish. There are a number of elements in place that can still push the market higher. The potential for a move to 12,000 remains in the cards for late 2005 or early 2006. We could see a major move higher starting in August.
Oil companies are creating lots of profits, but there is a slump in exploration and discovery rates. At the same time, there are rising development costs. The number of major oil discoveries declines every year. So, we seem to be "living off of inventory." We are concerned with reserve replacement and see a shift from acquisition to exploration. We rate our energy stocks a "Strong Hold" (XOM, XTO, CRT, PKD, WMB). Refining capacity is weak. There has not been a refinery built since the late 1970s. We had 324 refineries in 1981 and only 155 now. In the present environment, our strong focus on alternative energy sources, especially fuel cells continues. Plug Power (Nasdag PLUG) and Hydrogenics Corp. (Nasdaq HYGS) look particularly good. Plug Power is the first company to bring a reliable, economically viable product to market that can be manufactured in mass quantities. Hydrogenics is the most diverse fuel cell company and is well capitalized. We see the passing of an energy bill as a powerful catalyst for the fuel cell market. We urge you to look at company websites and study these two companies carefully. We see the coming hydrogen economy as a reality and want to be "riding the right horses" as the story unfolds. Buy HYGS and PLUG.
CDE, ABX, FCX, and NEM represent 8.31% of our total portfolio. FCX is our best performer, up 91% while CDE is the worst, down 88%. NEM is up 15% and ABX down 2.6%. Rising productions costs and a stronger U.S. dollar pinched gold-mining companies in the first quarter, but most analysts remain optimistic that gold prices will rally later in the year. Commodity prices remain high and relatively stable; the stocks, however, in this space appear to be nervous and volatile with investor's eyes on oil, inflation, interest rates, and the dollar. We look for FCX and ABX to be leaders as gold goes higher. Copper is at a 16-year high, aiding FCX. Eventually silver will rise, and CDE should do better. We will hold all our shares."
The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.
Commodities close to a peak
George Dagnino: "Commodities are close to a peak. I am not saying they are going to decline. I am saying they are unlikely to make much progress from this point on in the current business cycle. They might move even higher in the next business cycle - it is too early to call.
Commodities are likely to stabilize because I am firmly convinced business activity will continue to slow down.
Crude oil is spiking and is going to hurt the average consumer. It will reinforce the slowdown.
Gold, which is a good leading indicator of commodities and inflation, is still at the same levels as in early 2004.
Utilities remain strong and are likely to continue to outperform the market. We are recommending Edison International (NYSE EIX) a holding company that, through its subsidiaries, operates in three business segments: an electric utility operation segment, a non-utility power generation segment and a financial services provider segment.
Edison Capital has investments in energy and infrastructure projects worldwide and in affordable housing projects located throughout the united States. EME is an independent power producer engaged in the business of owning or leasing, operating and selling energy and capacity from electric power generation facilities, and also conducts price risk management and energy trading activities in power markets."
INVESTOR'S DIGEST of Canada
133 Richmond St. W., Toronto, ON M5H 3M8.
1 year, 24 issues, $137.
Best Buys: Crystallex Int'l and Corriente Resources
Michael Popovich: "Crystallex International Corp. (TSX KRY, $4.25, 800-738-1577, www.crystallex.com) hasn't made a penny of profit in almost two years. But Catherine Gignac, a mining analyst with Toronto's Wellington West Capital Markets, isn't particularly concerned.
She says that because the Toronto-based junior miner has been putting all its effort into developing its gold fields in Venezuela's Bolivar state, its losses mean very little.
And Crystallex's strong commitment may be justified. With its Las Cristinas property in Bolivar, the company is sitting on one of the world's largest undeveloped gold deposits, Ms. Gignac notes. She calls it the company's key asset.
At gold's current price of US$427 an ounce, Las Cristina's proven and probable reserves - 12.8 million ounces - would be worth roughly $5.5 billion.
And although Crystallex has yet to build a mill at the site, it plans to start construction immediately after Venezuela gives its final OK - something it expects to do near the end of May.
Once in operation, Las Cristinas is expected to yield 490,000 ounces a year at a total cash operating cost of US$190 an ounce.
Over the first five years of operation, average annual output is expected to reach 549,000 ounces at a total cash cost of US$153 an ounce. Production is expected to start in mid-2006.
In the meantime, Crystallex has already spent US$100 million on equipment and supplies for the site. And its operating team is already on board. Ms. Gignac views both developments as signs the company is serious.
Development Plan the Most Promising
"Of the small group of mid-tier North American gold producers, Crystallex has the most promising development plan and the best growth profile," she says, adding that there's additional gold at Las Cristinas that hasn't yet been factored into the company's plan.
For Ms. Gignac, Crystallex is a best buy - albeit, a speculative one - with a 12-month target price of $7 a share.
Ms. Gignac does admit that while Venezuela supports outside development, such support is contingent on a company paying taxes and creating jobs for Venezuelans. She also concedes that Venezuela continues to be saddled with both high interest rates and high levels of unemployment.
For 2004, Crystallex's net loss narrowed to US$60.7 million, or $0.35 a share, from $61.5 million, or $0.52 a share, for 2003. Revenues, however, were higher, zooming 78.8 per cent to $20.2 million.
Although Las Cristinas is Crystallex's main mining site, the firm has smaller gold-producing properties nearby at both Tomi and La Victoria.
Ore from both Tomi and La Victoria is processed at the company's Revemin mill, a conventional carbon-in-leach mill with a daily capacity of 1.4 tonnes.
Ms. Gignac likes a junior gold play like Crystallex. She also likes a junior copper outfit like Vancouver's Corriente Resources Inc. (TSX CTQ, $2.52, 604-687-0449 www.corriente.com).
For starters, Corriente's Mirador site in Ecuador could be producing 25,000 tonnes of copper a day by the beginning of 2008 (75,000 tonnes a day by 2011. And the worldwide outlook for copper is strong, Ms. Gignac notes.
In fact Mirador's value goes up by about 19 per cent for every 10 per cent rise in the price of copper.
And although most mid-size copper producers have only limited growth opportunity, Corriente offers the potential for near-term production and long-term growth, the analyst adds.
For Ms Gignac, Corriente is also a best buy, although once again a speculative one. Her 12-month target price is $5 a share.
Ms. Gignac notes that although Corriente's technical management has operating experience, the company itself does not have any mines in operation. She also says there are no major metal mines now run by foreign companies in Ecuador.
For the three months ended Sept. 30, Corriente's net loss narrowed to approximately $425,000, or $0.01 a share, from $453,000, or $0.01 a share, for the similar period in 2003. The company's deficit, however, edged up 2.9 per cent to $46.5 million.
But for the nine months ended Sept. 30, the company's net loss widened 78 per cent to $1.1 million, or $0.03 a share."
WORLD GOLD
45 Victoria Rd., South Woodford, London E18 1LJ, United Kingdom.
1 year, 12 issues, $660, www.worldgold.net.
Paul Burton: "Writing weekly about worldwide exploration for World Gold's new sister publication World Gold Explorer provides, as one might guess, an excellent idea of 'hot spots' and trends in the gold industry. Certain company names and regions keep cropping up.
Of course their visibility may not simply be a function of the exploration activity levels of those companies, but can also be a direct result of the promotional activities of the investor relations manager in keeping up a regular flow of press releases, an essential part of keeping the stock in the public eye.
Companies operating in Nevada are generating as much paper as they are good drill results and, of course, for this very reason, World Gold last month ran a Special Focus on exploration activity over the Carlin and Cortez trends.
But the country that seems to be dominating the feature headlines is China.
The growth of its domestic mining industry to become the fourth largest producing country is well documented and its credentials as a geologically prospective region, have been recognized for some time. Now with an increasingly liberalized economy, junior explorers, in particular, are being attracted in their doves. To have a Chinese component, or to be a pure Chinese play, is considered de rigeur for many ambitious juniors.
Probably leading the pack is Sino Gold, which recently had the Project Development Permit for its Jinfeng gold project issued, a major step forward.
Sino came to prominence with its ASX listing three years ago, and a number of Australians and Canadians have taken their cue from the Sydney-based company.
They are all some way behind, as Sino can boast a production profile that stretches back 5 years and it's currently constructing its second gold mine. Sino's track record and its long involvement in the legislative system in China, give it a distinct competitive edge in securing and developing gold projects.
Those following are trying various methods to shorten the timeline needed to cement relationships and gain trust. Clearly this cannot be achieved from an office in Perth or Vancouver so the model is to link up with someone on the ground in China who knows the ropes.
In addition to forming joint ventures with provincial 'brigades' a number of exploration companies are recruiting local immigrants. Canadian nationals of Chinese origin are now one of the most sought after commodities.
There is a view in London that if you want to list and grow on AIM, you need to install a dignitary on your board of directors. For 'Lord Somebody' in London, read "Mr Wang, ex Bureau of Land & Resources' in Toronto or Sydney.
In actual fact, although a Chinese director may be the one who identifies prospects and undertakes any negotiations with current owners, it is the joint venture route with a local mining business that is favoured and encouraged by the Chinese authorities.
For example, TSX Venture company Jinshan Gold Mines is developing the 217 gold project where it has earned a 55% interest from its Chinese joint-venture partner, Jinshan is also earning an 80% interest in the QCZ project, in joint venture with the Liaoing Non-Ferrous Geological Exploration Institute.
Australian Leyshon Resources Ltd is undertaking a diamond drilling programme in joint venture with the Heilongjian Bureau of geology and Mineral Resources in the Chinese cooperative company, Black Dragon Mining Co. Ltd (Leyshon 70%) at the Zheng Guang property in Heilongiang.
In Qinghai Province, in the northwest, Inter-Citic and its joint venture partner, the Qinghai Geological Survey Institute, have commenced a filed programme at the Dachang project, a large gold-mineralised system that has been worked by artisanal miners for the past two hundred years.
Oxiana Ltd. has a joint venture with the Yunnan Geological and Mineral Resources Bureau covering an early stage gold project.
So the joint venture business model has been adopted by both the Canadians and the Australians.
But a little word of warning for unwary investors. There is an expression, "on a slow boat to China," which is apposite here. The current rush may be reduced to a crawl as foreign explorers learn how difficult it can be to negotiate the intricacies of the Chinese way of doing business.
Patience is indeed a virtue. There is a Chinese saying that is particularly appropriate for foreign mining investors: "Yi cun guang yin yi cun jin" - An ounce of time is equal to an ounce of gold!"
It takes time to deal with the authorities at different levels.
The mentality of officialdom, which has to be dealt with, is still very much in the 'planned economy' mode and although executives in state mineral departments may talk of reform and a transition to market economy, their rhetoric belies an unwillingness to leave the comfort zone of bureaucracy. "You don't understand Chinese systems" is the oft quoted line.
There is a well-established process for applying for exploration licenses and permitting for mineral exploitation.
In principle, the permitting system is no different from any other country where the State owns the mineral rights. In practice it is complicated by the need to comply with regulations at several levels - state, prefecture etc.
The procedures adhere to a strict rulebook and there is little willingness to deviate or show initiative. Reluctance to deviate from the norm, to think beyond the prescription of the rule book, is a problem that frustrates many Western companies.
Although, for these reasons, this editorial advises caution when dealing with juniors investigating China, the rewards could well be commensurate with the higher risk.
The potential to find and exploit gold deposits is probably higher than any other region. Land mass, geology, number of occurrences and the undercapitalized and under-explored nature of the country make China an irresistible target for the brave - and the patient."
THE DINES LETTER
P.O. Box 22, Belvedere, CA 94920.
1 year, 17 issues, $195. www.dinesletter.com.
Higher uranium prices a certainty.
Uranium stocks will make new highs
James Dines: "Curry" come from a south Indian word simply meaning "sauce, relish for rice." It's used to spice food. Accordingly, an appropriately-sized portion of uranium stocks in portfolios could likewise spice up portfolios.
Uranium metal has recently leaped to another new high at $23.50, but our uranium average (DIURANIA) has nonetheless moved down. It is not entirely unusual for a commodity to move one way and its corresponding stock the other way because the Mass Psychology of stock traders sometimes differs from that of commodity traders. Previously, when DIURANIA dropped while the uranium metal rose, uranium stocks eventually recovered and made new highs, which would be a reasonable expectation yet again.
In other words, we led you into the uranium-mining shares based on value; we were so confident of higher uranium prices that we figured it would drag the corresponding stocks higher no matter what. Indeed, uranium metal prices have soared mightily, but will its Uptrend continue?
The Uranium Participation Corp, managed by Denison Mines (DEN.TO), is a pure commodity play, planning to buy and hold perhaps over $60-million worth of U(O(, an idea similar to other exchange-traded gold funds such as Central Gold Trust (GTU.UN-TSX) that enable investors to own gold bullion. The impact of this new buying on an already-scarce uranium market could drive uranium prices sharply higher. With around 22-million pounds of uranium traded in 2003, and 18-million pounds in 2004, it is notable that more than 9-million pounds were traded in the spot market in the first quarter alone this year, and Denison's new buying might trigger uranium's buying panic that we have been expecting for several years.
Our strategy was to play "The Coming Booms in China and India" via the commodities markets, especially energy, as a pinpoint common denominator. We then figured that, while oil and coal would have their cyclical ups and downs, uranium was in too much of a scarcity mode to experience that cycle. That is why we ourselves are substantially invested in uranium stocks in our Supervised Lists.
We still believe that this strategy is sound: a uranium shortage not only means higher prices, but possible unavailability would send uranium prices even higher than that. The entire uranium industry is tiny - under $10 billion (US) - so there is plenty of room to upvalue uranium stocks, with not much comparable room on the downside. If you hold a uranium stock that is below what you paid, buying more to average down might be a good idea.
This is the Order of Battle we have come up with as a possible path to profit, and it is the basis of our recommendation to hold uraniums calmly and patiently, at least for the short term, although maybe longer.
It might be easy for others to predict the future, but for us it is deucedly difficult. Nonetheless, we first foresaw a Consolidation in the uraniums in our Interim Warning Bulletin of 8 Mar 05, and we are grateful that we sounded a warning as soon as we detected the onrushing Consolidation. Those who bought uraniums right before the Consolidation that sprung onto the scene from out of nowhere were just unlucky.
While we are always appreciative when getting the direction of a market move right, it is more challenging by an order of magnitude than forecasting direction to predict the extent of the Consolidation, how high, low, or long lasting. The good news is, by studying Consolidations intensely - even while others see the market as "boring" or "doing nothing" - one can begin to sense its resolution, whether it's destined to end up or down. But, to us, higher uranium prices into the currently-foreseeable future is a virtual certainty. The whole market is in a Consolidation now, which probably brought in some profit taking by the fearful and, while detecting the Bottom Formation of a Consolidation is extremely difficult, we do expect uranium-mining shares to turn up and make new highs because of soaring uranium metal prices. Nobody could see around corners every time, but that is why we are still bullish on uranium now and we have the courage to call that shot."
ECONOMIC ADVICE
3910 NE 26TH Ave., Lighthouse Point, FL 33064.
Monthly, 1 year, $129.
Favors South African Golds
James Rapholz: "I own dozens of inexpensive gold stocks. I'm a strong believer in the theory that when the wind blows even the turkeys fly and for those of you who have never seen $500 gold, you've got a lessen in store! However, right now, I'm very interested in South African gold stocks.
The South African stocks have been a poor investment up until now because their money, the rand has been relentlessly strong to this point. In part, because the central bank has refused to cut interest rates as dramatically as the economic fundamentals would seem to mandate. Short rates in South Africa are 7.5%, yet inflation in that country is well under 4%. This hasn't escaped the carry-trade speculators, who have exploited this unique opportunity to get 7.5% without stretching out on the maturity spectrum while getting a strong currency to boot, this, of course, has only intensified the upward pressure on the currency.
But, the rand is now, finally, beginning to reverse as it becomes clear that the central bank will be more aggressive and the speculators begin to pack up and head for home.
This should help alleviate the intense profit squeeze that the strength in the rand has had on the South African mining stocks.
My favorite South African mining stock is Gold Fields Ltd. (NYSE, GFI $12). Those of you who have been with me a long time are well aware of the fact that I never advise jumping into an investment with haste are going to be surprised to read the following. If you have any interest in this stock - jump all over it before the story is out on the rand. I look for Gold Fields, Ltd. To be a $20 stock by year's end.
My second favorite South African Gold Stock is American South African ASA Ltd. (NYSE ASA $41). I don't think it will gain as much in price (percentage wise that is) as Gold Fields. But, if you're looking for safety - it is considered the Newmont Mining of South African stocks. ASA Ltd. is a closed end mutual fund (it trades just like a common stock) that is invested mostly in South African mining shares. If you like diversification and safety - this is an excellent investment for anyone choosing to invest in the South African gold shares."
FINANCIAL INSIGHTS
P.O. Box 793-Z, Oakhurst, NJ 07755.
Monthly, 1 year, $225.
Uranium shares relatively overvalued
Dr. Richard Appel: "I believe that it is important to address what appears to be a temporary overvaluation of the uranium stock sector. While I believe that uranium is in the relatively early stages of a major Bull Market, I feel that uranium stock shave gotten too far ahead of uranium's price. Most of the stocks in this sector have corrected during the past month. While they may continue higher for a time, I believe that they have become relatively overvalued. For this reason, I feel that it is prudent to take some profits.
Uranium may move higher in the near term. However, it is likely that you will still be able to later replace any sales, and add new positions, at lower prices than those currently offered. To my mind, the downside risk is temporarily greater than the upside reward.
I have found a few uranium companies that I believe have exceptional potential and desire to feature them. However, I feel that it may be too early and that we may be offered future entry points at still lower price levels. I will remain vigilant of the uranium stock sector's path and feature these companies when I feel the time is right."
EMERGING GROWTH STOCKS
102 - 2020 Comox St., Vancouver, BC V6G 1R9.
1 year, 8-10 issues, US$119, C$149. E-mail updates.
Senior Golds - Start getting positioned
Louis Paquette: "Start accumulating senior golds. The stocks are still "working off" the tremendous run of over performance relative to gold in 2003, but the good news is, if the charts continue the same pattern they have been following since the beginning of this bull market, then it appears this consolidation period may be close to ending. We are now also officially entering the seasonally low period for gold prices, hence the time to start quietly accumulating at the bid.
Could prices get even cheaper between now and August? You bet they can. We should expect retests moving forward.
My suggestion is to use weak spots from this point forward to start place stinker bids on the bigger named core gold stocks as they hit or approach support levels. Core gold stock picks include Newmont Mining (NEM), IMA Exploration (IMXPF), Goldcorp (GG), Endeavour Mining (TSX: EDV), European Minerals (TSX-V: EPM) and Silver Wheaton Warrants (TSX: SLW.WT)
My position on energy and base metals remains basically the same as before. While we believe in the secular long term commodity cycle, I do have concerns about the non-precious metal commodities. They could stay strong if the global economy remains robust. High prices could also be their own demise by contributing to economic recession. Gold on the other hand, IMO could do well under various scenarios, even if it has drastically under perform the metals and energy sectors by a long shot this past 18 months or so. I would go as far as to suggest that while gold stocks have "paid the price" for the tremendous run-up in prices to late 2003, energy and base metals may be at where gold was when it peaked out nearly a year and a half ago. From it's low in 1999, the TSX Energy Index is up roughly five times in value. Just as the HUI was when it reached it's highs too. I would just be more cautious with these, holding out for only very special situations, whereas I fell more positive about the gold sector right now.
The fundamentals continue to appear to be negative for the Dollar with new records being set trade and budget deficits in the U.S. So my fears may be for not. It's just with so much of the movement in commodities prices related to the fall of the U.S. Dollar, this needed to be mentioned. Overall, given the continued supply/demand deficit of roughly 1,500 tonnes of gold a year and numerous other factors, we still like gold."
Editor's Note: This would be an excellent time to subscribe to a truly independent newsletter with no ties to IR firms or brokerage house. Paquette provides market commentary, stock picks and coverage of the gold sectors. His latest newsletter provides support levels for his senior core gold stocks. In the May issue, Paquette will start picking new junior exploration stocks, as they tend to bottom later than the more liquid seniors. Visit www.emerginggrowthstocks.ca.
THE GRANDICH LETTER
P.O. Box 243, Perrineville, NJ 08535.
www.Grandich.com
Gold and Uranium have best
chance to rise for balance of '05
Peter Grandich: "IMF sales. U.S. Dollar rally. Higher U.S. interest rates. These are just some of the latest reasons given for gold to go down (and stay down). The number of bearish gold advisors has greatly increased but gold has so far failed to meet their bearish forecasts.
I've said it before and will keep on saying it until I see otherwise: it's a question of "when?" not "if?" gold hits $500 an ounce.
I also continue to believe that the first half of 2005 should be much better for most other metals than the second half. I believe gold and uranium now have the best chances to rise for the balance of 2005."
A few of the stocks that Grandich currently favors include: Anooraq Resources (TSX-V: ARQ), Cornerstone Capital Resources (TSX-V: CGP), Formation Capital (TSE FCO), Freegold Ventures (TSE ITF), GLR Resources (TSE GRS), Northern Dynasty Minerals (TSX-V: NDM), Pacific Northwest Capital (TSE PFN) and Taseko Mines (TSE TKO). Grandich is compensated by the above companies.
THE INVESTOR'S EDGE
774 Mays Blvd., Ste. 10, Incline Village, NV 89451.
Monthly, 1 year, $149. E-subscriptions, $99.
What to buy in a down market?
Joseph Shaefer: "Let me count the opportunities! There are bear market funds. There are contra-bond funds that go up when bonds go down. (Bonds go down, of course, when interest rates go up.) You can buy natural resource and commodity funds.
Add to these about a gazillion gold funds, all of which move counter to the market. Remember, gold funds typically do well when the dollar is weakening and inflation is rising, as they are right now.
Then there are all convertible securities and energy trusts that pay a variable rate of return based upon their success as defensive issues.
Plus, you can buy energy stocks, timber stocks, and base and precious metals stocks. Finally, you can short the overpriced, over-hyped darlings of the day. We don't often short but every now and then it's just too juicy to pass up.
I am ready to recommend four mutual funds. We're going to keep our contra-cyclical stocks like BHP Billiton (BHP) and Plum Creek Timber (PCL). We're going to keep some of our energy holdings, though I believe there is speculative excess built in to many of them now that everyone has decided (two years after we recommended them!) that oil is, in fact, going to stay high forever.
Four funds I recommend to you are: Profunds Rising rate Opportunity (RRPIX). This fund has been a serious loser ever since inception in 2002, losing 31% (12% a year) since it was formed. That's because rates have gone down, down, down during that time. But I believe this worm is about to turn. And when it does, RRPIX's strategy of seeking investment results that correspond to 125% of the inverse of the daily price movement of the most recently issued 30-year U.S. Treasury Bond will pay off big. Our risk is minimal - long rates would have to decline for us to see a loss. If I'm wrong and rates don't rise we'll see a break-even. But if I'm right and long rates rise, we'll be making money when everyone else is losing - and we'll be there to buy when they panic-sell fine companies at much lower prices.
The second fund I recommend to you I first recommended, and placed in the Growth and Value Portfolio, in January. It is the Pimco Commodity Real Return Fund (PCRDX). (There are "A", "B", "C", "D", "R" and "I" classes of this fund. You want the "D" shares, PCRDX.) PCRDX uses a small derivatives position to mimic the performance of the Dow Jones-AIG Commodity Index, which tracks oil, gas precious metals and other non-energy commodities.
The final two recommendations are for the two gold and precious metals funds I believe are the best positioned to take advantage of the declining dollar and rising interest rates, Scudder Gold & Precious Metals (SCGDX) and Tocquecville Gold (TGLDX). Please note that if you call Scudder, they will tell you this fund is closed to new investors. If your use a mutual fund marketplace at a discount broker, however, some will comply with this directive and some others will assume you are an existing holder. It doesn't really matter, since I don't think you can go wrong with either fund.
I will also be seeking out open- and closed-end funds and common and preferred stocks that have the ability to raise their dividends in the weak market I see for at least the new few months.
So where are the travesties for 2005 and 2006? Well, let's think about the industries that have attracted the most legitimate capital. That would be financial services and energy. If I had to guess, I'd say that there will be more scam in the energy area than in any other. One that I'm looking at now is KFX, Inc. (KFX), whose alleged principal activities are to develop and deliver various technology and service solutions to the electric power generation industry, to improve air quality, and to enhance the output of coal, gas and oil-fired electric utility boilers. KFX supposedly has a patented technology that uses heat and pressure to physically and chemically transform high-moisture, low-energy value coal and other organic feedstock into a low-moisture, high-energy solid clean fuel. I'm not sure about all that, but one thing they do generate is press releases. I'm wary of any firm more interested in good press and a high stock price than in running their business."
DELIBERATIONS on World Markets
P.O. Box 40097, Tucson, AZ 85717.
1 year, 18 issues, $225.
Avoiding South African shares
Ian McAvity: "Like gold stocks 15 months ago, I must say that I may be premature hence I'm thinking of reducing exposure to oil - not eliminating it.
Short term, a rally over $54 would recover more than half the last dip, which may imply it's not over yet.
Bullish sentiment for Gold has remained remarkably tenacious, which is an ongoing worry. The major South African shares I will continue to avoid because of the strong Rand, and erratic policy indications voiced by assorted government officials. I don't need to compound life with that much added political risk in such a volatile arena."
THE ADEN FORECAST
P.O. Box 790260, St. Louis, MO 63179.
Monthly, 1 year, $195.
Copper: A barometer
Gold shares in a buying area
Pamela and Mary Anne Aden: "Of all the metals, copper is the bellwether metal for global economic activity. Copper rises during periods of economic growth, especially in the U.S. and China, because it's used extensively in construction, automobiles and appliances. Conversely, we'll see copper fall during economic slowdowns.
Demand for copper has been high as increased demand from China amid low stockpiles, continues. Copper is holding near 16-year highs and its major trend will remain up above $1.34.
Overall, higher commodity prices are inflationary and it hurts many companies, which is bad for the stock market. You need to look no further than the CRB Commodity index, which is now flirting with its 1980 peak. Uranium is another example of the surging resource rise.
Gold shares have been disappointing over the past year. In spite of this sluggishness, gold shares are still in a four-year major uptrend, and in fact they're now near an intermediate oversold area. This is saying that gold shares are in a good, possibly great buying area."
PERSONAL FINANCE
1750 Old Meadow Rd., Ste. 301, McLean, VA 22102.
1 year, 24 issues, $97.
Shrugging Off Rates' Rise
Roger Conrad: "Interest rates returned to the upside in the first quarter of 2005, bringing rough sledding for income investors. The Income Portfolio wasn't wholly immune as several picks took hits.
Happily, though, our weighted basket of diversified stocks, preferred shares, bond funds and cash held its own, dropping half a percentage point (or -1.4 percent unweighted).
The keys were balance and low duration. The 17 stocks (25 percent of the portfolio) averaged a loss of about 1.5 percent for the quarter. That relatively flat number, however, masks a wide divergence as gains from less rate-sensitive shares offset losses from the more sensitive.
Thanks to the rise in oil and gas prices, energy stocks were the big winners. ChevronTexaco (NYSE CVX) had the biggest gain, despite a shortfall in reserves, which the ongoing merger with Unocal should resolve. Dominion Resources (NYSE D), TEPPCO Partners (NYSE TPP) and BP (NYSE BP) also scored solid gains. Buy below these prices: ChevronTexaco (60), Dominion (72), TEPPCO (40) and BP (65).
Energy strength offset a sharp pull-back in rate sensitive real estate investment trusts (REITS) Boston Properties (NYSE BXP), New Plan Excel (NYSE NXL) and Prologis (NYSE PLD), as well as closed-end fund Flaherty & Crumrine Preferred Income Fund (NYSE PFD).
All four of these were on watch for much of the quarter due to high prices and the likelihood of a correction. More downside is possible, so only buy Boston on a dip to 58, New Plan below 25, Prologis below 34 and Flaherty up to 16.
Our low duration open-end bond funds (40 percent of the portfolio) lost an average of about 1 percent. That was mostly T. Rowe Price Int'l Bond (RPIBX), which gave ground to the strengthening US dollar but remains a great hedge against a resumption of dollar weakness.
The remaining bond funds, NTHEX, VFIIX, VWITX, VFICX, are protected against further rate hikes as cash. That gives us a lot of confidence no matter what the rest of 2005 brings."
J. Taylor's GOLD & TECHNOLOGY STOCKS
P.O. Box 770871, Woodside, NY 11377.
Monthly, 1 year, $123. www.miningstocks.com.
Golden Phoenix Minerals Rated: Buy
Jay Taylor: "On April 20, Golden Phoenix Minerals (OTCBB GPXM $0.12) put out what I consider to be the first good news since this company's recent management shakeup. The company announced that it has secured a long-term lease on a 20-acre mill site adjacent to its Ashdown gold/molybdenum joint venture in Northwestern Nevada. In doing so, Golden Phoenix boosts Ashdown's molybdenum processing capacity from 10,000 tons to 120,000 tons per year, and it lengthens the mill's initial operating period to five years.
The newly acquired property will host Ashdown's molybdenum processing facility, replacing a smaller six-acre parcel previously chosen as the site for a pilot mill. Acquisition of the larger parcel paves the way for converting Ashdown's "pilot mill test facility" into a "small-scale mill facility." Under State of Nevada guidelines, a small-scale mill is allowed to process 12 times the tonnage of a comparable pilot mill.
According to CEO Kenneth Ripley, the switch to the small scale classification guarantees operations for quite a few years to come, and by scaling up the mill capacity now rather than later as was previously planned, the company will go straight into long-term, full-time mining this summer without any delays to the previous short-term production plans. Also most of the basic infrastructure including roads, power, and water is already in place. And, while the previous location would have required the company to haul the ore four miles, the new site allows for a downhill haul of less than one mile. These factors, as well as scaling up, should reduce unit production costs in what should be a highly profitable molybdenum operation, especially as long as molybdenum prices remain extremely high as they are now. To be sure, there will be some minor permitting changes, but according to management, they should be small compared to the benefits the company expects to realize.
On this news, GPXM shares rose 27.8% to $0.142 with 1.12 million shares trading hands. This is the first good news we have had from this very disappointing company. Therefore, I am going to change our recommendation from "hold" to "buy" once again. 775-853-4919; Fax: 775-853-5010 and/or www.golden-phoenix.com."
SILVER INVESTOR NEWSLETTER
21307 Buckeye Ln., Colbert, WA 99005.
Monthly, 1 year, $99. www.Silver-Investor.com
Are the Gold Forces Running Out of Ammunition
David Morgan: "India has recently come up with a plan where citizens can turn in their gold and receive a paper certificate from their bank. How wonderful. Was this plan hatched on Wall Street? Reuters reported that most in India think giving up gold ornaments in exchange for a certificate is the last thing they would ever consider. There are thousands of Indian households who would be reluctant to give up their gold to take part in a savings scheme introduced by the government in its budget for financial year starting April 2005. Are the gold forces running out of ammunition?"
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