Bobby,
Just reviewed A Goldmine Of Information. Very busy site. Quite frankly, subject matter is too deep for me. People are very interesting, as is the subject matter.
I think of myself as just a simple man with a little common sense. So, bear this in mind as I stumble through my commentary regarding subjects discussed at the other website.
About the economy. I think Greenspan is doing a good job for the economy has grown at a desirable rate over the past few years. There is too much speculation on a day by day basis regarding his adjustment of interest rates. I very sincerely believe that markets have been overreacting everytime an economic report is issued. It is obvious the markets fear Greenspan. However, they have yet to learn that he isn't impulsive in his decision making and is looking for intermediate term trends rather than near term reports. My thinking is this, interest rates have only one direction to go----UP. It's just a matter of timing. It will take a consistent trend of reports to do the trick and I feel a period of three months trend would justify his actions. If the current trend holds, look for an adjustment of rates in early November, right after elections.
My thoughts about the value of gold and where prices are headed is similar thinking....only one direction to go and that is UP. The problem here however, is in the timing and more important----what will activate forward movement. Price has moved in a very narrow range for a long perod of time. If I were a commodity player, I would be buying contracts @ $380 and selling most @ $395. With a small balance remaining, I would enter a stop-loss @ $390 and look for riding the wave over $400 on the upside. I would repeat this tactic over and over until the upside move occurs. I believe the limited movement of gold prices to the upside is a result of forward selling or hedgeing by the producers themselves, with objective of locking in profits.
Will tightening of interst rates effect junior mining and petroleum companies? Of course they will, especially those carrying more than average debt. I will focus comments at oil & gas firms, a subject I know more about. Junior's grow via reinvestment of cash flow and, financing through either bank debt or, equity offerings. As money gets more expensive, institutions are hesitant to provide capital to sustain rates of growth desired by producers. At the current time, banks usually will provide capital equal to coming 18 months cash flow. Tightening will reduce the time factor in cash flow. Investor interest will decrease and new equity offerings will grow out of favor. In addition, shareholder dilution will be more pronounced. It boils down to operating within belt tightening and internal cash flow controls which in turn will slow growth of the company in comparison to that experienced in near past. By the way, these companies practice forward selling or hedgeing of commodity prices also. Those that exercised this option going into this year are getting burned. Even without the problem with Iraqi, companies really under estimated the prices of both oil and natural gas this year.
One of the reasons I really like Canadian oils now, is that the economies of US and Canada will
(in my opinion) be headed in different directions over next 12 months. Canadian oil companies will be effected on the positve side of the economic factor.
Bobby, that's all I want to touch upon regarding your other topic. I hope you keep enough energy reserved to participate with your commentary here.
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