Date: Thu Apr 28 2005 11:21
trotsky (sign of the times) ID#248269:
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GFI beats expectations by 7 cents - which is rather a lot, since expectations were for 19 cents/share on average, and they came in with 26 cents. so expectations were exceeded by about 35%. not only that, the company also reports that the ongoing June quarter will see yet another set of strong results.
the stock, naturally, is down. imagine if , say , YHOO beat expectations by 35%. would it be down?
this is bear market action, i.e. proof that the bear market isn't over just yet.
nevertheless, the pm sector is imo very close to at least a short to medium term low - since gold timers are just as bearish as they were at the 20 year lows in 2000, positioning data show individual investors have abandoned the sector, and money flows ( per my measure of them ) strongly diverge from both the price action and the bearish consensus.
it's highly likely that the coming recovery will be erratic and counterintuitively coincident with a decline in the PoG. it seems to me though that there's a good chance that it will gather momentum at a later stage, as the 'conundrum' resolves itself with the FOMC taking back its rate hikes.
i'm very confident that the US real estate bubble is ending right here, or rather, has already ended. homebuilders have accumulated their by far largest inventory in history, creating the biggest inventory/sales ratio imbalance ever ( WAY above previous highs in this ratio ) - and they have financed this inventory with debt, and have negative cash flows in spite of their ostensibly stellar earnings. this is TYPICAL of the end phase of a housing boom, indeed, it's a phenomeonon that can be observed in all kinds of booms. for instance, the telecom companies paid fortunes for fibreglass networks ( of which now 98% haven't even been switched on, while the 2% that are up and running do so at 10% capacity ) and cellular licenses right at the top of the telco/internet investment cycle.
the housing bubble's fate is important for gold stocks, since its demise will be the trigger for the coming interest rate trend reversal ( from flattening to steepening of the yield curve ) .
the fact that unexpected positive news fail to have a positive effect on the share prices of gold producers is bearish on the face of it, but it's also likely a late cycle symptom - in this particular case the down cycle in the SA gold mining subsector. note that in spite of continued Rand strength, ALL the SA producers, including HMY, have positive margins in the current quarter - for the first time in 6 consecutive quarters in HMY's case ( not to mention DROOY - by closing down the NW operation, its group-wide margin has jumped to its best level in years ) .
these stocks have led the entire sector down after leading it up in 2000-2002. their coming turnaround will therefore be an important signal for the sector as a whole - in spite of the decline in the PoG that is likely in the cards. |
