AXXel’s Precious Metals Update 12.4.03
AXXel’s
Precious Metals Group
December 4, 2003
Update of the September 3, 2002 and January 9th, 2003 Reports
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Here PRECIOUS METALS: Has been a horror story for about two decades. There was a time when this writer bought gold for clients, through Deak Pererra in New York and arranged for transport of about ½ of it to banks in Austria. Today is not that environment.
NOTE: UPDATED INFORMATION IS IN BOLD AND HIGHLIGHTED
But it was Chairman Paul Volcker, appointed during the Carter administration, that finally taught Congress [and a few presidents] that if they continued to spend that the Fed was not willing to go along with such fiscal irresponsibility particularly after Vietnam. And that he would raise rates… to 15%, to 20% to …do you want to try for 50%? He was chairman of the Board of Governors of the Federal Reserve System in 1979. He pursued a restrictive monetary policy to combat inflation. He won that battle and that lesson WAS learned by government. It was a turning point in terms of my view of economics that with a strong Fed we would eventually curb governmental spending and that, in turn, eliminated the need for gold and other precious metals in client portfolios and it was SOLD. Indeed, it was August of 1981 when the Dow was at 888 that I published my “DOW 3,000” button-here it is…interest rates were 20%.
Dow 3,000 button, August 1981 [Dow Jones Industrial Average 888]
The FED did ease and put money back into the system in 1982, interest rates fell sharply, and the Great Recovery began. But it was Volcker, and only Volcker, that engineered the Dow 3,000, indeed the Dow 10,000 and eliminated the then need for gold because rationality had returned to the economic scene in the U.S.
Paul [bad glasses, good economics]
But that was two decades ago and we have had gold production facilities closed and above ground stocks reduced. Add to that the current international climate where we continue to purchase crude supplies from the very people intent on killing us. Have we learned our lesson there? Of course not. Did we learn our lesson in 1973 with gas lines three time around the block…am I glad I had a diesel car and could pull right up to the pump in those days, or what?
This is a problem that a Volcker, a Greenspan cannot fix. This problem takes leadership and that is something we are very short of and hence the need for precious metals in portfolios and perhaps some physical gold as well.
What would it take to eliminate the need for precious metals again? How about a gas-guzzler tax at the pump? If your car gets under 20 MPG as mine does, YOU have to cough up another $5.00/gal. If your car gets under 30 MPG you only have to cough up an additional $3.00/gal. If your car gets 50 MPG you get a 50-cent credit at the pump and if your car gets 75 MPG you get your gas ½ off.
Fantasy? Of course. Such a program would take leadership. It would take a president getting in front of a crisis for a change and promoting such an idea and yet giving the American people, let’s say, five years, before it takes hold…that would be enough time to change buying habits.
· Once done: we would eliminate our balance of payments.
· Interest rates would go to zero and you would have to pay banks just to hold your $$$
· Our defense situation would eliminate our dependence upon unstable sources of crude
· Middle eastern countries that hate us would become poorer and less able to aggravate AXXel and you.
· And we would still be able to get to the Piggly Wiggly in the same time as it takes as now in just about the same level of comfort
· And there would be fewer Ford Excursions, Chevy Tahoes to crash into your kids killing them whilst the drivers of those beasts sit high up wondering why you did not get out of their way on I-95.
Volcker was succeeded as Federal Reserve Board chairman by Alan Greenspan in 1987. One might read his book: The World's Money and the Threat to American Leadership (1992)
NOW ON TO THE STOCKS:
December 4, 2003: Now we have $400/oz and we can expect some consolidation from current levels in most stocks. Let’s update the numbers.
January 8th, 2003 UPDATE: After a steady rise above $300 an ounce last year, gold sped to a six-year high of $350 an ounce this week after a relentless 22-year slide. On Tuesday it had eased to $347. We think that the move for gold is not yet over…it has, after all, taken a decade and a half off from the high at $850/oz. Further, we think the gold and silver stocks are measurably behind the metals in terms of price and hence our very bullish stance.
Newmont Mining [NEM-28.85] the leader in the group and very undervalued. In the interest of FD, my family does own this issue]. After a nice move in the first quarter, NEM has been consolidating that $18 to $32 move and it now appears that the consolidation is finished. STRONG BUY. Here is the recent news: “Newmont Mining Swings to 2nd-Quarter Profit, Sees Gold Prices Rising
January 8th, 2003 UPDATE: [NEM-27.96] they were correct in their assumption of increasing prices for gold. So are we. Strong buy, still. The stock has a superior double bottom at the low $20 range and we think it can attack the 30’s and perhaps the $40’s.
UPDATE December 4, 2003: $49.70 and we can expect some very minor consolidation here and would use that as a buying opportunity. Newmont Mining Corporation Holding Company Formerly known as Newmont Mining Corporation. The Group's principal activities are to explore and produce gold and acquire and develop gold properties worldwide. The Group produces gold from operations in Nevada, California, Peru, Indonesia, Mexico and Uzbekistan. It also produces copper concentrates from a copper/gold deposit in Indonesia.
NEM chart courtesy of Clearstation.com
Barrick Gold Corp. [ABX-15.50] very similar in terms of the development of the price of this stock. The base is mid teens and there we are again. STRONG BUY. Here is the news link: biz.yahoo.com.
January 8th, 2003 UPDATE: $15.41 very much behind the metal in terms of price. Strong buy, still.
UPDATE December 4, 2003: $ 22.70 + 46.5% the recent press releases tell the very positive story: barrick.com. We still consider this stock very undervalued and continue to recommend it as a strong buy.
TVX Gold [TVX-13.24] holding better than NEM or ABX but also with more air beneath. The VTAR numbers are quite positive and we rate a “STRONG BUY.” The company has moved to the profit column. January 8th, 2003 UPDATE: $15.11 the bottoms were at ten and there were about three of them. Strong buy, so kiss goodbye to the teens in our opinion…no guarantees, mate.
UPDATE December 4, 2003: Buyout by Kinross completed. You should own Kinross now. [KGC-8.91] = Buy. The Group's principal activities are mining and processing of gold and silver ore and the exploration for and acquisition of gold-bearing properties, principally in the Americas, Russia, Australia and Africa.
Echo Bay Mines [ECO-$0.95] not the quality, but not the price either…still in the base with spikes to $1.25 plus…capable of attacking that number. Company still has major problems. See news: biz.yahoo.com. There are much better choices. January 8th, 2003 UPDATE: $1.21 and now on top of the base. Buy.
Buyout by Kinross completed. You should own Kinross now. [KGC-8.91] = Buy. The Group's principal activities are mining and processing of gold and silver ore and the exploration for and acquisition of gold-bearing properties, principally in the Americas, Russia, Australia and Africa.
Kinross [KGC-8.91] with a strong base at the $8 level, we consider this one of the most undervalued particularly in view of the acquisition of Echo Bay Mines and TVX Gold. Strong Buy.
KGC chart courtesy of Clearstation.com
Ashanti Goldfields Corp [ASL-4.97] an African miner and with the risks associated with the continent. Here is the link for news: biz.yahoo.com. ASL appears quite positive and we rate as “Buy.” January 8th, 2003 UPDATE: $6.15 and we upgrade to “strong buy.”
UPDATE December 4, 2003: $14.00, + 181% buyout by Anglogold in process. U ASL in the market. Hold Anglo Gold [AU-48.65].
Anglogold, Ltd [AU-22.37] and a bargain in the group. Strong Buy. And the links for news and balance sheet. January 8th, 2003 UPDATE: $34.95 and a bargain it was. We see no reason to back off. Strong buys, still
UPDATE December 4, 2003: $48.65, + 117%, the base on AU is still far from extended and although the stock could see a break of $5 we believe such a break is an opportunity to add to positions. See chart that follows.
AU chart courtesy of Clearstation.com
Durban Roodepoort Deep [DROOY-2.53] a new recommendation – this is not a low cost producer, but that is reflected in its price. It is in the base and we will buy here. [Note: the writer’s family holds a position in this stock and it may be sold, added to or optioned without any notification to anyone].
SILVER
Coeur d’Alene Mines [CDE-2.01] an exceptionally strong issue with a move that saw the stock lift from the base at 70 cents to $2.25. That move is consolidated and now we have very low speculative levels pushing toward that recent high. Again in FD, I own this issue. The company is restructuring debt, increasing production and lowering costs per ounce. STRONG BUY. January 8th, 2003 UPDATE: $1.99 and a wild ride for sure but with much improved prospects and balance sheet. Strong Buy. [FD-I own this issue-FYI].
UPDATE December 4, 2003: $5.28 + 163% - we expect a minor break of five and consider that break an opportunity to buy and increase positions.
CDE chart courtesy of Clearstation.com
Apex Silver Mines, Ltd. [SIL-13.85] not exactly the same power as CDE, but nearly so. BUY. January 8th, 2003 UPDATE: $15.50. The base remains solid indeed and we upgrade to “strong buy.”
UPDATE December 4, 2003: $17.95, +26% acceptable performance but we will downgrade to “buy.”
Pan American Silver Corp. [PAAS-6.75] revenues up, losses less, production up…Accumulate. January 8th, 2003 UPDATE: $8.22 again with an outstanding base and a crash pattern in July we now think we can get the opposite, a “mirror” move but now to the upside and that takes us to the teens as an objective. Upgrade to “strong buy.”
UPDATE December 4, 2003: $13.08 + 93% and no change of opinion. Strong Buy.
Hecla [HL-4.03] but ahead of itself with the move 70 cents to $5.00. Hold. January 8th, 2003 UPDATE: $5.18 and a recent announcement of a stock offering will likely keep a lid on the stock until the offering is complete, but then some expected press of the highs and that takes us to double digits with some patience. Have the patience. Buy any downside breaks. Strong Buy.
UPDATE December 4, 2003: $8.08 + 100% with a break of $8.00 very likely, this stock is consolidating the strong advance off the base at the $6.00 level. Our rating remains “strong buy.”
HL chart courtesy of Clearstation.com
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Investment decisions should not be based solely on our proprietary indicators, which are intended as an adjunct to your additional analysis. Please accept these comments as market commentary. We do not intend these comments to replace detailed fundamental analysis. We urge you to accomplish that additional research via your contacts on the Internet or through a trusted financial advisor. If you want additional information on any of the securities discussed within, we will give it upon your request.
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AXXel’s Precious Metals Update 12.4.03 |
