These shorting numbers are incredible and I think this is it. These fund bozos have gone to the trough one too many times on this particular trade. There already has been a capitulation and a big rally is in the air. Many bear markets end with a whimper, and this one is no exception. What's left to sell? Everything has been leased out, shorted, hedged, converted, you name it. I think some of the institutions behind these trades: Goldman, Bankamerica, and JP Morgan are already under financial stress, even before this move.
The move will be quick and dramatic, leaving most at the station. I think the producers that didn't learn the lessons of ASL and Cambior, are going to get wiped out, adding to the fire, and the big hedgers will leave billions on the table.
IMO the best way to play are with advanced staged exploration deposits and lightly hedged small producers with lower costs (in the top quartile: under $190 cash cost). Huge leverage off of very nominal valuations.
Names: Arizona Star, Birim, Cumberland, Dundee Precious Metals, Francisco Gold, Gold Reserve, Great Basin, Iamgold, Glamis, Madison Ent, Meridian, Minefinders, Moydow, Nevsun, Rio Narcea, Solitario, Tan Range, TVX, Nevada Pacific, Metallica, Tenke. Add only Franco-Nevada among bigger names.
There may be some hesitation initially in these stock prices, because there isn't a following, but don't count on it. It takes little to move 'em, and the larger producers will be scrambling for new reserves.
BTW, I've been picking up some Canadian natural gas producers. They have moved, but not nearly enough, and this NG thing is NOT TEMPORARY. They are cleaning up, most will have off the map fourth quarters and 2001's, and they trade typically at about two or three times cash flow based on $5.00 - $6.00 NG levels. I think we will see a couple spikes to 15-20 before long. Avoid the hedgers. |
